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Christopher Newfield for the Advisory Group on University-Industry Relations University of California, Santa Barbara
White Paper on Industry-University Relations Table of Contents
PART I. INDUSTRY RELATIONS BEFORE THE BAYH-DOLE ACT (1980) 1. The Industrial Roots of Basic Research 2. Basic Research and University Independence 3. “Applied” on the Rise PART II: THE NEW POLICY ENVIRONMENT 4. The Patent Watershed 5. Open Research in Proprietary Markets 6. Regularizing Tech Transfer 7. The Post-Cold War Environment PART III: THE STRUCTURE OF CURRENT POLICY 8. The Tech Transfer Process 9. Research Partnerships 10. Sponsored Research 11. Consulting Relationships 12. Spin-Off Companies and Equity Positions 13. Managing Conflicts of Interest and Commitment 14. Limits to Commercialization PART IV: SUMMARY OF FINDINGS NOTES 38 48 55 57 61 69 75 80 84 15 20 25 31 4 7 10
In recent years, relations between the university and industry have started to receive serious public attention. Some commentators have been enthusiastic about them, believing that university-industry partnerships benefits research, the economy, and the consumer all at the same time. Others have argued that industry’s bottom-line values and management techniques damage both curiosity-driven research and the teaching of students. While some liken universities to businesses, others liken them to churches, comparing the presence of corporate logos in student centers to putting Calvin Klein briefs on the statue of Jesus.1
This paper describes a central aspect of university-industry relations -- the varied and complex process whereby the university’s basic research enters the commercial marketplace. The most important form of this process is known as “technology transfer,” a term that refers to the transference of research findings to goods that are made available to the general public via the for-profit activities of private industry. In “tech transfer,” as it is frequently called, a scientific discovery is developed into a saleable and useful product. This long and complex process includes the funding of research, the discovery or invention; the disclosure of the invention to university officials; record keeping, communication, and the evaluation of the invention for patenting potential; patent prosecution; negotiation and drafting of license agreements with industry; product development; production, marketing, and sales; and the management of active licenses. This paper considers three other, closely related aspects
of industry-university relations: research partnerships, faculty consulting, and start-up companies founded by university personnel.
The American version of capitalism assigns virtually all product development and sales to private enterprise. The movement from a university invention to an available product will therefore always involve relationships between the university and industry. This is how the investigation of <enzyme> behavior will yield, after eight to twelve years, the Hepatitis-B vaccine, or how research on electrical conduction in polyacetelyne produces the conducting polymers used in cell phone displays.2 University-industry relations offer many public benefits, and in any case they are inevitable. But these facts neither resolve the conflicts that arise nor determine the best forms for these relationships to take. And while most people assume that industry can look after itself, there is much concern about the protection of the public’s and the university’s interest. In its partnerships with industry, how can the university serve the general public as well as its specific business partners? And how can it preserve its distinctive features in the process?
This paper explores these questions in the following stages. It reviews the history of university-industry relations and describes how the way watershed changes in patent law, initiated by the “Bayh-Dole Act” of 1980, changed the university’s role in bringing discoveries to market. It then examines current procedures for managing university-industry relations in the University of California, providing an overview of five major types of university-industry interaction. It offers a series of provisional findings and suggests areas of concern and further rearch.
PART I: A SHORT HISTORY OF INDUSTRY RELATIONS
1. The Industrial Roots of “Basic Research”
While the American college has generally centered on liberal arts education, the American university has not. Its first federal funding emerged from the Morrill Act of 1862, which allowed “scientific and classical studies” while defining the “leading object” as teaching “such branches of learning as are related to agriculture and the mechanic arts.”3 It’s worth noting that “science” was initially classified with classical studies as somewhat to one side of the applied learning on which land-grant universities were to focus. The public university was to focus especially on knowledge with a clear economic payoff. The research university could generally afford teaching but had a much harder time funding research. State funds were never enough, and the scramble for extramural funds has been a constant of university life. “Before World War I, American universities were largely on their own when it came to finding patrons to support their research aspirations. After the war, the large general-purpose foundations led the way in providing voluntary philanthropic support explicitly for university research.”4 These foundations were generally private, and often worked closely with industry. Universities worked to increase their own financial resources during this period, and enjoyed much success. “During the first two decades of the twentieth century, [research universities’] regular incomes expanded by a factor of five, and they used this economic muscle to enhance their institutional resources and their capacity for research.”5 But even this rapid growth was not enough to allow universities to fund
their own research; to the contrary, research was among other things a way to attract external funding.6 The composition of external funding has changed over time but its importance has remained steady or increased. Industry had started to fund university research as early as 1900, and its financial presence increased consistently after that. One leading historian of university research discovered that “cooperation between universities and industry became the urgent message of the science-based industries, the engineering profession, and technicalschool educators from roughly 1906 on.”7 Another has noted that "an examination of corporate donations to individual research universities during the interwar years . . . reveals that they were commonplace by the early 1920’s and became more frequent as the decade progressed."8 Industry was most interested in sponsoring research in particular specialties with tangible benefits: "while American business in general could not be convinced of its vested interest in pure science, individual firms made thousands of investments in specific aspects of university science.”9 University-industry ties took a variety of forms. Among the earliest were research institutes, which were affiliated with universities but were funded largely with industry support. The first and most important of these was the Mellon Institute at the University of Pittsburgh, established in 1913.10 Another kind of tie was the “Industrial Fellowship” system, instituted at the University of Kansas in 1907. Under this plan, “a member of the chemistry staff [of the university] was appointed for a two-year period to work exclusively on a problem defined by the sponsoring company, which would underwrite the cost. Any discoveries made during the fellowship period became the property of the company, and all patents were assigned to it.”11
As the years passed, an infrastructure was developed to support a range of university-industry collaborations. In the first decades of the century, academic scientists, lead by “Vannevar Bush and his MIT colleagues, created models for academic consultation (the one-fifth rule), patenting, and firm formation.”12 The ties between industry and universities are particularly venerable in engineering. MIT, for example, established its department of electrical engineering in 1884. Three years later, Thomas Edison “donated materials, machines, and dynamos for departmental instruction, and additional equipment was secured from Westinghouse.”13 University-industry interactions became increasingly common as MIT and similar institutions saw their graduates staff university and industrial laboratories, making it more likely that each side would recognize mutual interests. In 1907, MIT’s electrical engineering department established the Visiting and Advisory Committee, whose membership included representatives of GE, AT&T, Westinghouse, Chicago Edison, Boston Edison, and similar firms. A 1910 departmental brochure described the department as ready to undertake both basic research and “some of the more distinctively commercial investigations under the patronage or support of the great manufacturing or other commercial companies.”14 In 1920, the EE department instituted its Technology Plan, “whereby industry could take advantage of the resources of the Institute in exchange for a standard fee.” Under the Plan, MIT “was obliged to function as a clearinghouse of information for industry, providing ready access to both technical knowledge and the possessors of that knowledge.”15 In most cases, the university was reaching out to industry as industry’s junior research partner. Industry has generally performed the large majority of the country’s total research and development. Even at the height of the Cold War boom in the federal
funding of universities, industry conducted about 70% of R&D (this figure is from 1960). Some significant portion of industry’s R&D was long-term and could be defined as “basic.” In the 1990s, the NSF estimated that universities accounted for about 61% of the basic research performed within the United States in 1995.16 This is a high proportion, but it still leaves industry in the position of providing over one-third even of basic research.17 It’s safe to conclude that business predominance in scientific research is a venerable American tradition.
2. Basic Research and University Independence
The current belief that the university offers a church-like haven for “pure” or “basic” research was reinforced during the boom in federal funding after World War II. The era’s sacred text was Vannevar Bush’s Science: the Endless Frontier (1945), a work that called for the creation of a National Research Foundation. Bush wrote that what we now call basic research is “the exploration of the unknown and is necessarily speculative. It is inhibited by conventional approaches, traditions, and standards. It cannot be satisfactorily conducted in an atmosphere where it is gauged and tested by operating or production standards.” Basic research was clearly distinct from applied research, by which Bush meant the “application of existing scientific knowledge to practical problems” with possible economic consequences. In identifying the proper environment for basic research, Bush looked to institutions that received public funding. “It is only the colleges, universities, and a few research institutes,” he wrote, “that devote most of their research efforts to expanding the frontiers of knowledge.”18 University research offered a clear contrast to “most
research in industry and in Government,” in which the discovery process was directed by specific military, social, or commercial goals. Bush valued both applied and basic research, but he wanted to keep them separate and give each the most effective possible environment. Internal cash flow could support applied research in industry, but government revenues should support basic research in universities. In the 1950s, many universities moved to specify and regulate their distinctive mission, and the University of California was among these. The cornerstone of this effort was University Regulation No. 4. Established in June 1958 and widely viewed as “the major policy framework for UC industry relations,” it affirmed a clear distinction between basic and applied research while identifying the university as the privileged setting for the former.19 Basic research was defined, first, as seeking new knowledge. “University participation in tests and investigations shall be limited to activities which lead to the extension of knowledge or to increased effectiveness in teaching. Routine tasks of a commonplace type will not be undertaken.”20 New knowledge was the terrain of the University and the application of existing knowledge was not. The second feature was the open publication of results. “It is longstanding University policy that freedom to publish or disseminate results is a major criterion of the appropriateness of a sponsored project, and particularly of a research project.”21 The University’s Contracts and Grants manual offered examples of commercial restrictions on publication that would be unacceptable in university research, and these included “assigning the final decision as to what may be published to the extramural fund source.” Although limited exceptions were granted for a “reasonable interval of time,” basic research placed its results squarely in the public domain. Basic research, in
other words, might eventually lead to proprietary products, but the knowledge itself would remain public. These two features were associated with a general principle that was often implicit but nonetheless pervasive. This principle was that the University would remain independent of all particular interests, be they financial, political, familial, or personal. The University could only perform research and public service if it could offer impartial evidence and analysis on all the subjects with which it was concerned. Its staff and faculty could not remain impartial if their self-interest influenced the research at hand. As conflicts of interest arose, University officials tried to make this principle more explicit. By the late 1970s, UC President David Saxon felt called upon to note that “Universities serve all kinds and manners of interests, but the central truth is that, by serving each of these interests, the University serves the interest of all and is the handmaiden of none.”22 The research university was to serve the entirety of the public interest, and it would do so by safeguarding its independence.
3. “Applied” on the Rise
On the eve of World War II, the federal research role had been quite small. “The total federal funding for research and development in 1940 was a mere $74 million, of which agriculture accounted for 40 percent. The rest, chiefly for military research, was carried out in government and industrial laboratories.”23 The war, and then the Cold War, changed everything. The NSF’s budget grew from $100,000 in 1951 to $100,000,000 ten years later, that is, by a factor of 1000. Measured in constant 1992 dollars, overall federal funding to universities grew from $738 million in 1953 to nearly
14 billion in 1998, an increase of nearly twenty fold.24 Federal funding transformed the infrastructure of scientific and technological research, and was arguably the single most important factor in producing American leadership in science and technology in the post-war years. Historians agree that the post-war boom in federal spending changed the American research university. But this story shouldn’t eclipse the subtler fact that in critical ways, federal funding raised the same issues as industry funding. Academic investigators sought both competitively and had to show the same entrepreneurial energy some had used in courting business. Administrators had the same concerns for keep the university in charge of its destiny.25 Security and secrecy were major concerns around much unclassified as well as classified defense research. Furthermore, much federal funding derived from “mission agencies” like the Department of Energy and the Department of Defense, which sought specific technological capacities rather than basic research findings. The NSF was explicitly devoted to fundamental science, but its
expenditures stayed in the range of 14-16% of the federal total for most of the post-war period.26 The DOD accounted for 80% of academic research in the 1950s, still contributed nearly 50% of the total in 1970, and declined to about 10% of the total only in 1999.27 It is true, certainly, that an undetermined but probably quite large proportion of DOD, DOE, NASA, and similar “mission” funding wound up in basic research.28 Nonetheless, most federal funding sought to apply “basic” research.29 In addition, basic research did not seem ideally suited to the critical problems of the 1970s. The profitability of large-scale routine production had been in decline for years, and business was increasingly interested in high technology as a new source of higher profit margins. The 1970s recession was attributed in large part to a decline in
economic competitiveness; this may have meant a deficit in basic science, but it more obviously meant a deficit in commercial applications. Furthermore, conceptual separation between basic and applied research was somewhat artificial. Basic and applied research were in practice continually mixed together; personal motives were similar in basic and applied fields, as could be told with a comparison of astronomers with chemical engineers. Basic research yielded breakthrough knowledge, but so might applied work that addressed a production problem. Applied research was frequently as challenging and exciting as basic research. The craft labor behind each was similar. Though the operations and outcomes of university and industrial systems were different, the experience and motives of the intellectual craftwork were the same.30 Universities began to take more official notice that much industrial research was as good as the university’s and that some was better. Industrial R&D not only continued to greatly overshadow university research in dollar terms, but was showing dynamism, innovation and in some cases conceptual leadership; much of it was anything but “routine.” Industries based on semiconductor technology, for example, were conducting research and offering scientific opportunities that were hard to duplicate at most research universities. Commercial biotechnology was on the scientific cutting-edge. Intellectual as well as financial reasons led academic fields that were historically close to industry to deepen their ties, and areas of science with little previous commercial contact developed subfields with commercial potential. Educational leaders could also observe a connection between industry partnerships and academic success. Many standout universities, ones that enjoyed both financial wealth and academic prestige, were those that had synthesized government and industry funds in systems of interlocking science and engineering departments,
specialized research centers, university-sponsored business parks, faculty-led start-ups and spins-offs, and far-flung capital networks, all aiming at warp-speed transformations of basic science into valuable technology. As the decade worn on, university administrators were again focusing on relations with industry, relations that had been veiled by Cold War federal funding. Universities had a parallel need to find additional revenue streams: public funding for education had become more uncertain even as educational expenses steadily increased. They acknowledged that industry contact enhanced future job prospects for students at a time when employment was becoming increasingly difficult.31 They heard top faculty threatening to leave either for industry or for a university with more flexible corporate connections (U-I 1982). In 1980, UC’s president David Saxon, concerned that the University could lose its best professors and graduate students to industry, inaugurated a University-Industry Relations Project designed to improve the relationship. Let’s recall some of the main themes of the story thus far: the university’s intellectual independence had always coexisted with dependence on extramural funding. Creating equitable relationships with outside funders, whether business or industry, was a central task of university administration. Federal funding offered many of the same opportunities and risks that industry funding had -- opportunity for a new scale and intensity of research, and risks of reduced autonomy. Universities developed their identity as the special site of basic research even as their funders and researchers mingled these. Federal funding was not, in short, inherentlymore conducive to the university’s independence than was industry funding. In relations between the university and industry, the attraction was generally mutual.
PART II. THE NEW POLICY ENVIRONMENT
4. The Patent Watershed
The culmination of the 1970s discussions of university-industry relations was a striking change in the proprietorship of federally funded research. Up through the 1970s, patentable inventions and processes developed in part through federal funds remained in the possession of the federal government. Universities that had conducted the research could negotiate intellectual property agreements (IPAs) with the federal agency. But title was the federal government’s to license or transfer and not the university’s or the individual researcher’s. Different federal agencies had different patent policies. IPAs were negotiated on a case-by-case basis and with a variety of outcomes. The government held patent rights as the trustee of the public, and research funded by the public would remain in the public domain to be licensed for public benefit. Statutory law also required that the government prevent any one contractor from getting a preferred position. 32 Industry was not satisfied with this situation, but the same was true of many academics. One of the major participants in the 1970s discussions, Richard C. Atkinson, describes the motive behind changing in patent law. It was clear to us in the late seventies that the process of transforming ideas into applications was not working as well as it should. We assembled a number of working groups at NSF to see what could be done to improve matters. A particularly thorny issue was the federal policy requiring that patents generated from government-supported research at universities reside with the government. This was a clear impediment to transfer. What is the incentive to
move ideas into the marketplace if government reaps the rewards? But could the federal government actually give up intellectual property rights? No one knew for sure, but we began to draft legislation in the late seventies. By 1982, Congress had passed the Bayh-Dole Act, which transferred patent rights to universities.33 The Bayh-Dole Patent and Trademark Amendments Act of 1980 established a uniform invention policy for all agencies and universities. It gave the institutions that conducted federally-funded research the right to patent and license the results. It explicitly encouraged the commercialization of federally-supported university research.34 As Atkinson and others envisioned, universities now had direct financial incentives to patent and license research findings. In subsequent years, the federal judiciary strengthened the legal position of patent-holders and thus the securability of financial returns.35 In 1983, the act’s provisions were extended by Ronald Reagan’s executive order from universities and small businesses to large corporations.36 Bayh-Dole was passed over vehement objections from some quarters. In his congressional testimony, Ralph Nader argued that easier corporate access to university research would damage academic and democratic values. “The corporate model concentrates power, restricts the production and application of knowledge, and increases uniform behavior, self-censorship and when needed—outright suppression.”37 Interestingly, Admiral Hyman Rickover, spearhead of the nuclear navy and veteran of decades of industry contracting, felt much the same way.38 Pro or con, most observers regard the Bayh Dole Act as the beginning of a new era in university-industry relations. The Act did not initiate relations with industry, as we have seen. It did not initiate the research university’s interest in industry sponsorship or patent revenues, for the university’s preexisting experiences with
industry, catalyzed by a changing economic climate, were more the cause of the BayhDole Act than its effect. Nonetheless, the Act is often credited with greatly expanding university-industry relations, and with shifting the balance of power in favor of industry. We will have to distinguish several simultaneous trends in order to identify Bayh-Dole’s actual effects. Bayh-Dole encouraged a general reversal of policies that had allowed patents to remain in the hands of the government or the inventor. UC regularized its ownership of patent rights to the research results of all its employees; UC policy will be discussed in detail below. Columbia’s new policy, effective July 1, 1981, the same day Bayh-Dole became effective, retained all rights of patent ownership for research conducted with its resources and to share some royalties with the individual inventors. Stanford, interestingly, did not retain patent title on its personnel’s inventions until 1994. In that year, however, its policy became similar to UC and Columbia’s in its retention of patent ownership by the university.39 In short, research that was supported with federal money and by faculty and graduate student labor became the property of the host university. Corporations had long claimed title to its employees’ inventions. On this point, Bayh-Dole moved universities closer to the corporate model. A second outcome followed from the first. Universities now had direct financial incentives to see “basic” research overlap with applied, science turn into technology, and the discovery process lead to commercial products. As we’ve seen, the 1970s university had already become more likely to describe industry partnership as public service. With Bayh-Dole, they could justify these partnerships as financial prudence and, in addition, entrepreneurship. Although universities continued to have
institutional, intellectual, and cultural stakes in their difference from business, they also had stakes in closer ties with it. These stakes could not be measured only in dollar revenues. A deeper cultural shift was taking place, one that was changing definitions of administrative foresight, leadership, and prowess. Industry partnership became the measure of all these things. It was slowly but inexorably becoming harder for administrators, even at public universities, to say that they were truly advancing the institution if they was not involved in fundraising and partnering with the private sector. The university had an interest in making money through these partnerships. It also wanted to be seen as interested in making money, as interested in doing whatever it took to become a player.40 This second outcome led directly to a third. As we have seen, the post-war research university had distinguished itself through three conceptual contrasts, and we have seen that the contrast between basic and applied research, and that between service to society and service to industry, become increasingly qualified in the 1970s. The Bayh-Dole Act posed a challenge to the third contrast, that between open and proprietary research results. This was a supremely sensitive issue. The value of open publication came as close to being a universal belief as any feature of higher education. It was arguably the university’s single most important feature to a wide range of social opinion that included academics, students, administrators, legislators, industry managers, and the general public. Truth, enlightenment, progress, functionality -- however one defined the value of knowledge, open publication of results was the one sure way to achieve it. Virtually all researchers saw it as the heart and soul of scientific knowledge, and virtually all administrators recognized it as a preeminent public virtue.
The university’s open publication of impartial research became even more important as industry seemed to respond to the crises of the 1970s by going farther down the other, proprietary road. Technology secrets appeared increasingly to define the margin between success and failure, and secrecy became an even more important part of company policy. Industry also continued the 1960s trend of the marketing of everything,, which meant selecting, pitching, manipulating, and spinning information that was often presented as independent research (“3 out of 5 doctors recommend Bayer to their patients”). Marketing intensified in socially sensitive industries like pharmaceuticals that required the recovery of high development costs. As advertizing for everything from Alka-Seltzer to cigarettes became increasingly sophisticated, ubiquitous, and intimate with its targets, the university seemed an increasingly distinctive safe haven of accurate data and impartial analysis.41 The stakes were raised further by 1970s revelations that industry had distorted or suppressed studies of the negative health effects of pesticides, leaded fuel, automobile gas tanks, waste disposal, among others. Public skepticism only increased in the 1980s with controversies about AIDS research, Bhopal, and similar disasters. In a world of pseudo-research, wall-towall product hype, soaring medical costs, and constant economic anxiety, the public could use a university that remained above the fray, uncompromised by financial and other self-interests, beholden to no great power, always ready to tell the truth.
5. Open Research in Proprietary Markets
The Report of the University-Industry Relations Project, UC’s major statement in the immediate wake of Bayh-Dole, recognized the value of openness. It noted “the special need of the University of California, a major public research university, to maintain its
public trust. Also,” it continued, “the University has a social responsibility to assure a diversity of research activities and to continue its tradition of independence from undue influence by a single source.”42 The Report’s fourth recommendation reads as follows: Maintaining an open and collegial environment for teaching and research is a fundamental principle of the University. The University’s publication policy, I.e., freedom to publish and to disseminate research results, is also fundamental. Limited periods of delaying publication are permissible only to permit filing of patent applications or to enable the sponsor to comment. Campuses, the Academic Senate or faculty in fields where openness may be strained should take steps to see that norms that assure an environment of openness are upheld. The University should continue its consistent and forceful application of publication policy.43 Openness, the report claimed, must remain central to the University’s operation. The 1982 UC report seeks a reconciliation of open and proprietary systems. The Report’s first and foremost recommendation is that “The University community should take a positive stance in expanding involvement with industry.”44 It also recommended that mechanisms be established to maintain “an open and collegial environment,” including “freedom to publish and to disseminate research results” (recommendation 4).45 The University’s patent policy was front and center in the task of synthesizing diverse priorities. These included achieving “reasonable revenues” for the University, the development of inventions for the marketplace, “maintaining good relations with industry,” and “protecting against the use of public funds for private gain.”46 The University founded its attempted harmonization on the belief that none of these goals
actually contradicted any others. It assumed, for example, that it could prevent public money from subsidizing private profit even as it licensed publicly-funded inventions. It assumed that its patent policy could protect open publication while offering firms proprietary knowledge. How could the University do these competing things at once? First, its patent policy “required every employee to agree to disclose inventions arising from University research and to assign patents to The Regents.”47 The University would act as a trustee for the public by preventing, for example, individual employees from arranging side deals for their intellectual property with private companies. Second, the University would license its inventions non-exclusively. The only exceptions would be “firms that have funded the total cost of research leading to the invention.” These firms could expect an exclusive license, but only if they also satisfied a further condition of “due diligence in development and payment of royalties.”48 If the research rested entirely on private money then it could result in private gain. But if public money were involved, then the public’s interest would be protected by allowing open access to the patent and blocking strict proprietary use. Third, the Report defined patent application as open publication. “Because patent applications, with some national security exceptions, are public, the University’s patent policy contributes to the dissemination of research results.”49 The University would tolerate short delays in publication “that permit a sponsor to comment or to permit filing of patent applications,” but it would not allow a private sponsor to obtain long delay in or the suppression of publication.50 While a private firm would might own the license to manufacture a product based on an invention, the knowledge, the
art, the principles, the science underlying the invention would be public information. In this sense, open publication and proprietary could be made compatible. But fourth, and perhaps most crucially, the Report changed the definition and scope of “openness.” A central paragraph is worth citing at length. One problem of some immediacy is that the licensing of tangible research products may depend on maintaining some degree of secrecy, i.e., not making materials available to all upon request. Tangible research products refer to cell lines, plasmids, mechanical structural drawings, etc., which are either not patentable or have not yet been patented. Firms, in exchange for research support, are often interested in having access to this type of product through licensing arrangements including the expectation of the University protecting the know-how associated with the tangible research product. The position taken by the CRIP committee [the Committee on Rights to Intellectual Property], we believe, is a sensible one. It would permit licensing of tangible research products, but only under the condition that such agreements include provisions clearly stating that the results of the research project are publishable and that there are no restraints on publication or exchange of information among those participating in the research process. The assumption of the CRIP recommendation is that a restriction on dissemination of tangible research products is not the same as restricting publication because detailed information on the tangible research product is not usually included in scholarly publications nor presented at professional meetings. However, the CRIP committee makes it clear that the University cannot take responsibility to prevent disclosure of such information.51
Here the Report accepts the fact that proprietary use requires restrictions on open publication. It suggests that the publication of the results of sponsored research are sufficiently open if it occurs “among those participating in the research process,” which on its face at least excludes the public. The Report champions open publication
while restricting the relevance of openness to the point that it is compatible with secrecy about aspects of research with potential market value. One could imagine cases where the content of publication would be utterly unaffected, and other were it would. At the very least, the university was demonstrating its willingness to tailor open publication to fit patenting prospects. There is no doubt that the 1982 UC Report’s authors wish to keep the University distinct from and independent of industry. There is also no doubt that this distinction continued to rest on three contrasts -- basic v. applied, public v. commercial service, open v. proprietary knowledge -- which had been oversimplified in theory and were hard to disentangle in practice. We can fully credit the good intentions of the Report’s authors, and their devotion to the University’s special role, and their belief in public service, and still note that the project of disentangling commercial from non-commercial functions had ground to a halt. The University community would continue to define itself in terms of these contrasts, and invoke basic research, public service, and open publication as its watchwords. At the industry interface, the participants in universityindustry collaborations accepted that the contrasts were outmoded or untenable. The lines would be drawn on a case-by-case basis. This meant that industry was a partner in defining the functional meaning of terms like “basic” research and “open” publication, and was in effect a partner in defining the university’s basic identity. This is alarming for those who feel that curiosity-driven research thrives in very special, protected circumstances. But as we evaluate the current situation, we should
recall that the protection provided by the concept of basic research funded by the public was in large part an illusion. Present and future protections are emerging from the current entanglements of public with private, open with proprietary, basic with applied research. They will make use of the forms of independent discretion that, ironically, also seem so problematic.
6. Regularizing Tech Transfer
In the twenty years that have elapsed since the passage of the Bayh-Dole patenting act, technology transfer has become increasingly central to science policy and general university administration. University science has come to seem distinctive less in kind than in degree. The research university not longer defines itself, even in the abstract, by placing itself and industry on opposite sides of a dichotomy. Many research universities have replaced fixed distinctions with administrative decentralization and enlarged discretion in defining boundaries and limits. UC’s 1982 Report set the stage for this new era. It concluded that “research activity must be appropriate to the mission and character of the University” while adding that “there is no hard and fast definition of appropriateness.” This meant that “the regular faculty have a central and continuous role in deciding on the appropriateness of research within an administrative structure that assures review of these decisions” (recommendation 3).52 In putting decisions in the hands of faculty, the report also claimed that “the major policy framework for UC industry relations,” Regulation No. 4, was “in part out of date and needs revising.” Twenty years later this revision is still in the offing, as several academic generations continue to conclude that
Regulation No. 4’s framework, including the distinction between public and commercial service, may be too restrictive. Other Report recommendations follow suit. Industry partnerships require speed and responsiveness. Thus patent administration should in part be moved to individual campuses, “and the Chancellor’s authority [on each campus] should be expanded to provide for increased flexibility and effectiveness in negotiations with industry sponsors (recommendation 5).53 The University should pursue “innovative organizational approaches to industry,” with the proviso that the University, including the Chancellors and President, be a “major participant” in designing these approaches (recommendation 7). The University should “assist federal, state and local officials in developing the necessary tax incentives,” that is, tax flexibility, that would subsidize high-tech research (recommendation 8). Each campus should develop ways of supporting faculty efforts to partner with industry that are suited to particular circumstances; these might vary from school to school on one campus (recommendation 10). The University should develop a “handbook on University-industry relations,” one that describes relevant University policies. The handbook should also “make clear that no bias against cooperation with industrial firms and associations exists” (recommendation 11). This can be taken to mean that no particular policy should be read as presenting a fixed, a priori barrier to a reasonable partnership. Discretion was also enlarged around the sensitive issue of financial conflict of interest. A faculty member might be “conducting research which is funded by a firm in which he or she has substantial financial involvement.”54 The question of secrecy emerged here again: there was a danger that, “as a result of service to the competitive advantage of the firm, the faculty member would suppress information or material
normally available to colleagues and students, thereby undermining the integrity of the teaching and research process.”55 A conflict of interest might also lead a faculty member to “improperly remove patentable inventions or licensable tangible research products from the University to the firm.” University supplies, equipment, and staff time might be siphoned off to the faculty member’s firm, or the faculty member might subordinate his or her University responsibilities to the “needs of the firm.”56 Any of these would represent a significant loss to the University and the public that supports it. The State of California, faced with similar issues for employees that handle contracting, vending, and other relations with outside parties, addressed them by prohibiting any employee participation “in the making of a decision if there exists for him or her a foreseeable financial gain.”57 The relevant legislation, the California Political Reform Act of 1974, required all public official “to reveal all sources of income that might come in conflict with their responsibilities as elected or appointed governments servants.” But the Act specifically exempted “decisions on the selection of teaching and other program materials and decisions about research. (the Academic Freedom exemption) [sic].”58 The Report used the exemption to allow faculty to make university decisions about firms in which they have a financial interest. The University required disclosure of these interests, but did not prohibit them.59 When the University rejected a prohibition on faculty having a financial interest in the outcome of their research, they had a major intellectual reason. The Report noted that faculty with financial interests in a research program may be exactly those faculty “uniquely qualified” to pursue it. But the University had another reason as well. It was worried that such a prohibition would induce good faculty -- and faculty with good industry connections -- to jump ship either for a more lenient university or for industry
itself. The Report warned that if “appropriate modes of relationships that reasonably accommodate the incentives of the situation are not found, academia may lose a generation of people to industry.”60 It advocated the development of university research centers and other means “to accommodate the pressures and incentives.” In lieu of a prohibition on commercial research, the Report recommended two mechanisms for regulating the faculty’s relations with industry. The first was that industry-sponsored research be peer-reviewed by official committees composed of other faculty on each campus (recommendation 6).61 Industry relations would be allowed in every case that did not violate university standards as interpreted by one’s colleagues. This was a mechanism of professional self-policing with a rationale similar to those of the American Medical Association and similar professions. The second alternative to prohibition was to class many forms of relations with industry as faculty consulting. Many of these relations already were consulting relations, and other relations -- service on corporate boards, off-campus collaboration with industry scientists, and so on -- could be placed under this heading.62 Regulation No 4. gave the University had a much smaller burden of enforcement with the consulting relationships of its individual faculty. Faculty could not “solicit” employment of their services by outside parties, nor could such employment “interfere with their University duties.”63 But the Regulation’s core requirements that activities “lead to the extension of knowledge or increased effectiveness in teaching” and that they never be “of a purely commercial character” applied only to activities where the university was an official participant.64 When the contracting party was an individual faculty member, arranging the disposition of his, personal time, commercial activity was allowed.
This opened things up for both the University and the researcher. The University could limit itself to enforcing requirements that the individual fulfill his or her university obligations and disclose outside relationships. The University need only, in other words, enforce the contract between the faculty member and itself. The contract between the faculty member and a commercial firm could then be regarded as a private matter. This in turn opened up possibilities for the individual, whose right to privacy and to engage in contracts would take precedent over institutional statutes and practices as long as they did not affect the university directly. The Report thus notes that “It is the policy of the University to separate an employee’s university and private interests.”65 It argues that both intellectual and financial motives are in play, observing in passing that “the perceived opportunities to make money are great and involve not only the sale of products but more likely the speculative returns to an equity investment and the salary possibilities.”66 The Report puts the financial opportunities in the context of the pressure on the University “to accommodate the pressures and incentives.” It puts individual financial opportunities in the context of the University’s own. The ensuing recommendation states that the University should pursue “innovative organizational approaches to industry funding,” ones that would lead to “a framework in which the University as an institution is a major participant.” Consulting offers a situation in which the work and the legal responsibilities devolve to the faculty entrepreneur, who is compensated in the form of financial returns, which in turn may flow to the university that has in a sense ridden the faculty’s coattails into an industry relationship. The post-Bayh-Dole framework for university-industry relations rested on several basic features. First, the university would systematically deny any taint about
industrial connections in general, and would instead encourage its faculty to seek them. Second, conflicts of interest would be handled not by categorical or statutory distinctions but by peer-review. Third, financial and other personal investments were generally thought to require disclosure but not prohibition. Specific policies varied from campus to campus and university to university, but few banned a scientist from participating in a study where he had stakes in the outcome.67 Fourth, some forms of faculty relations with industry were defined as belonging to the employee’s nonuniversity time, and were protected on grounds of privacy: the university neither prevented nor endorsed them. In short, the university would protect its integrity and pursue a wide range of industry relations. No type of industry relation would be categorically ruled out, and each would be given a hearing by faculty and administrators on its own terms. At the same time, the university would continue to insist on its distinct identity and mission, a distinction that rested on traditional features: its devotion to basic research, the open publication of results, and public service.
7. The Post-Cold War Environment
By the 1990s, the Bayh-Dole framework was firmly in place, but it was also ambiguous. Did it mean that the university would compete with business or become more like one? Did it mean nothing would change very much? Would the university remain independent and sustain a distinctive mission? Several features of the 1990s climate shaped the possibilities. The first of these consisted of a series of public scandals that damaged the university’s reputation for impartial public service. Some of these occurred outside of
science - the “culture wars” that began over the alleged decline of “Western civ” offerings at Stanford suggested to some citizens that universities were becoming hotbeds of political advocacy. Stanford was also in quite visible trouble for a more serious reason: the federal government claimed that Stanford had overcharged it for indirect cost recovery, the fees universities charge federal contractors for the “indirect” costs -- building maintenance, staff salaries, utility bills, legal fees, etc. -- involved with conducting federally funded research. Taxpayers were regaled with stories about the government being charged for yacht rentals and floral arrangements at fundraising dinners. The federal government ultimately claimed in 1992 that various universities had overcharged it by $350 million.68 The general implication was that some of the nation’s most respected universities were siphoning off public money for private gain. The second feature of the 1990s climate was the end of the Cold War. The Cold War had directly induced the federal funding boom in the 1950s; many naturally assumed its end would mean a bust. This view was reinforced by widespread layoffs in the early 1990s in defense-related industries, particularly areospace. In fact, aggregate federal R&D funding, except for a bad year or two, continued to rise substantially.69 But the defense portion of that funding did not. While the health sciences and other non-military research did well in the 1990s, funding for fields that were especially dependent on DOD stagnated or declined. In general, science and technology intensified their search for funding that could at least partially substitute for the federal sources that everyone assumed were uncertain. A third feature was what came to be called the “new economy.” Business was increasingly focused on technological revolution, on increased competition, on the shareholder demand for very high rates of growth. It came to assume that success
depended on “killer apps” -- the breakthrough products that consumers had never seen before but knew would transform their lives.70 This pursuit of the new was reflected in the “new Democrats” Clinton and Gore, who sought to replace military with economic competition as the center of federal policy. Their 1992 presidential campaign called for greater emphasis on applied technology: “The absence of a coherent technology policy is one of the key reasons why America is trailing some of its major competitors in translating its strength in basic research into commercial success.”71 Similarly, the Senate Appropriations Subcommittee that dealt with the NSF suggested in that year that the agency “take a more activist role in transferring the results of basic research from the academic community into the marketplace.”72 this widespread preoccupation with the new meant that tech transfer was moving toward the center of federal science policy. Confirming the trend, the Clinton-Gore administration introduced its major policy statement on science revised by revising Vannevar Bush’s title, Science: the Endless Frontier. It was now”Science: the Endless Resource.”73 Some observer felt that the concern with commercial technology was eclipsing basic science. Commercialization seemed irreversible since it offered large economic benefits: This shift complemented a fourth feature of the 1990s, which was the decline in basic, long-term research in industry. An earlier generation of very large corporations had established labs that were justifiably famous for their basic research - AT&T’s Bell Labs, Xerox’s PARC, GE Labs, Fairchild Semiconductor, among others. From the mid1980s on, each of these large operations was dismantled. Xerox’s PARC laboratories, credited with inventing the mouse, the graphical interface, and any number of other now-everyday features of our technological lives, was sold off in 2002. Though business’s overall R&D expenditures continued to rise,74 they reflected less “R” and
more “D” -- funds were shifted from fundamental science to product development. In a age of deregulating monopolies (AT&T), white-collar downsizing, and increased shareholder demand for high earnings, R&D came to be seen as a discretionary cost that could be cut with little damage to immediate operations. Many companies acted on their doubts about science’s real bottom-line value.75 Even those who recognized that their survival depended on superb R&D (Genentech, Intel, Apple, etc.) were not so inclined to set up large, central laboratories dedicated to “blue sky” research. By the end of the decade, even high-tech industry stressed product research. One of Silicon Valley’s most thoughtful consultants, Geoffrey Moore, argued that Lou Gerstner helped resurrect IBM in the 1990s by telling his labs to “stop focusing on the technologies of the future and start generating technologies for the present.” Industry now must “manage R&D for shareholder value.” This means that its “continuous innovations,” the ones that “differentiate its offers in the marketplace,” should be “located in the divisions that make the products, not in the central labs.”76 Moore notes that centralized labs still make important contributions. But “the shareholder payoff from such work is very long term indeed, and there is some probability that the work could be outsourced to universities and kept off the balance sheet altogether.”77 This explains a fifth feature of the decade, which was strong industry support for the basic research mission in universities. has become a component in this business strategy. Testifying before the Commission on the Future of the National Science Foundation in 1992, John McTague, vice-president for technical affairs at Ford Motor Co., claimed that industry would get the best boost to its “competitive edge in emerging technologies” if the NSF would “continue to play a leading role in supporting ‘nonobvious research areas.’”78 Similarly, Dupont recommended continuation of “the
current trend” that would allow “industry [to] rely more heavily on universities to conduct basic research.”79 Applied technology routinely emerged from basic research, and industry wanted the university to preserve its differences from industry that supported it.80 Finally, the decade offered many spectacles of economic rejuvenation and technology innovation through the proliferation of start-up companies. After BayhDole, universities seemed particularly good at spawning start-ups, having generated about 2500 since 1980, or about 300 per year on average.81 Start-ups seemed ideally suited to incubate inventions that were still several steps away from successful commercialization. They could convene the most appropriate, specialized expertise, could operate in the academic and commercial worlds simultaneously, and could shoulder risks that large, public companies were unwilling to take. Start-ups became emblems of the harmony of technological innovation and large financial returns. They attracted the best scientific talent who offered the highest chance of technological success because of great intellectual and financial rewards. The enormous personal wealth generated by some start-ups seemed the normal return for the unique skills, enormous effort, breakthrough products, and high individual risk that characterized the start-up environment. These six features mingled together to produce a general consensus about the university’s economic place. The university and industry would be partners rather than competitors. The university would not “go into business,” nor would it reduce its commitments to basic scientific research; to the contrary, it was now “the only social institution remaining with the mission to carry on basic, long-term research,” and thus its uniqueness was more important - and more economically valuable - than ever.82 The
university and industry would divide up the “value-chain” and take opposite ends of it, thereby preserving their informal non-competition agreement while enacting an efficient division of labor: the university would conduct the fundamental science, which it would transfer to industry, which would then develop the products. The university would not stand in the way of the profit motive, even for its own personnel, since that had come to seem so intrinsic to transferring technology to the public. The university had financial and cultural incentives to develop industry partnerships: it could enhance its revenue streams and overcome its image as a hidebound bureaucracy. The university could also improve its image with the public. Having defined service to industry as service to society, successful industry partnerships, some thought, might restore some of the luster that had been lost. Recent years have seen a bumper crop in images of peaceful symbiosis between basic and applied research, the lamb of science lying down with the lion of commercial technology.83
PART III. THE STRUCTURE OF CURRENT POLICY
8. The Tech Transfer Process
The university wanted to develop industry relations while maintaining its independence, and much of industry wanted this too. But how would relations between independent yet cooperating entities be articulated and accomplished? And how would universities manage the inevitable complications? In the last two decades, universities have gradually developed systematic guidelines for working with industry. The University of California’s history offers one representative case. The first major type of industry collaboration is technology transfer. Technology transfer is the process whereby inventions created by university employees and facilities are disclosed to the university; in some cases, the inventions are patented and licensed by the university to private firms with the intention of developing a product for the marketplace. Tech transfer is a constantly growing component of university research activity. UC reports that “At the present time, the University has over 2,000 inventions that have commercial value and are available for licensing. These inventions span many fields including health care and biotechnology, chemicals and advanced materials, computers, electronics and engineering, and more. The University currently has over 600 active licenses in place and employs over 60 licensing professionals who are skilled at working with industry to arrive at approaches to commercializing the University technology that meet the needs of both the University and its industrial partners.”84
The actual practices guiding the process can best be illustrated by examining the stages of the process in their approximate order. UC’s tech transfer procedures are grounded in several unchanging principles, including the old cornerstone Regulation No. 4.85 Current policy reaffirms its principle of freedom of inquiry.86 For example, the University’s Guidelines on University-Industry Relations (1989) began by insisting that, “in pursuing relationships with industry the University must keep the pubic trust and maintain institutional independence and integrity to permit faculty and students to pursue learning and research freely.”87 In turn, freedom of inquiry rests on the traditional principle of open publication, (though it allows publication delays of “normally . . . no more than 60 to 90 days).”88 Freedom of inquiry is also seen to rest on professional peer-review. The Guidelines invoked the Faculty Code of Conduct in noting that “the exercise of [faculty] self-discipline and judgment, not external factors, should determine the content and timing of publication.” There remains a general university consensus that open publication and peer review are essential defining features of the university environment, and will in all relationships be non-negotiable. UC policy is also governed by California state law. One law is of particular importance -- the Political Reform Act of 1974. The Act “prohibits University employees from participating in University decisions when personal financial interests may be affected by those decisions.”89 The Act makes exceptions for decisions undertaken in the course of research and teaching, but such decisions are subject to independent review. The ban on influencing one’s financial interests applies fully to other business situations that affect faculty, such as the funding of start-up companies, and will be considered more fully below.
In addition to these general principles, the tech transfer process aims to enhance the university’s public service. Its goal is to make academic knowledge available to the general public in useful form: “The major purposes of licensing to industry the use of technology resulting from University research are: 1) to provide a mechanism for transferring, disclosing, and disseminating the results of University research to the public for the public benefit; and 2) to meet obligations to research sponsors. Licensing also provides a financial return to support further research and education.” 90 Tech transfer is also used as a way of recruiting and rewarding desirable faculty: US economic theory grants a large role to financial self-interest in shaping human behavior.91 So far, however, the search for revenues cannot justify tech transfer: licensing fees, on a nationwide basis, cover only 40% of the process’s legal fees.92 Universities conduct tech transfer largely for the public, for the political community, for industry, and for their faculty. The tech transfer process itself begins when a university investigator determines that research results constitute an invention. An invention is “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvements thereof."93 The inventor(s) consist of “those individual(s) who furnish an idea, not the employer or the person who pays for the development of the idea”; the inventor is further defined as the “one who first conceives of the invention in sufficient detail that someone skilled in the art could reproduce the invention.”94 Novelty, usefulness, and “non-obviousness” are all features of a genuine invention. An inventor is the source of the idea for the invention rather than the one who funded or conducted the work on the idea. At the same time, the invention consists of two parts: the idea and the “reduction to practice,” which involves the
testing and operation of the invention.95 Both parts will be important in the tech transfer process. The first step in the tech transfer process occurs when the inventor or inventors submit a “disclosure of an invention” to the university administration. This disclosure is a relatively elaborate act in itself, as it requires the detailing of the state of the art prior to the invention; the essential features of the invention with a precision sufficient to allow someone else in the field to reproduce it; and a discussion of the invention’s novelty, advantages, optimal use, and possible modifications. The disclosure seeks, among other things, to distinguish the invention from all existing inventions that it may resemble. The disclosure of an invention is not exclusively technical. The research that led to the invention may have involved a number of parties and funding sources. The presence of some of these sources may involve special legal obligations or proprietary materials, that is, materials that they own or license. As the Office of Technology Transfer (OTT) puts it, “funding and use of proprietary resources and materials often carries patent obligations,” the inventor must disclose “all outside agencies, organizations, or companies that actually provided any supply, or expense funding to any inventor for the research that led to the conception or first actual reduction to practice of the invention.”96 A second crucial disclosure, then, is of the inventor’s funding ties and use of proprietary materials. Financial disclosure will play a large role later on in the transfer process. A third aspect of the initial disclosure is equally important. The inventor must disclosure past or present publication of the invention, whether it took or will take the form of an article, an oral description to a colleague, a demonstration to visitors, or
something similar. Publication directly affects the invention’s patent prospects. The United States Patent Office allows one year from publication to patent filing, and the clock starts at first public mention. Most foreign countries have an even more severe requirement: “public disclosure, in any manner, before the date a formal patent application is actually filed in a national patent office, automatically destroys patent rights.” In general, the success of patent applications depends on their presentation of a discovery that is “non-obvious” to someone “practiced in the art” in question. If some part of a discovery is made public prior to its patent filing, it can become part of the discovery’s prior art. The patent can then be denied on the ground that it fails to describe something new in relation to the prior art. Because an ill-timed public disclosure can undermine the patenting of an invention, a successful patent filing depends in some part on the secrecy of its research, and the university is often required to enforce this secrecy. Thus the university treats the disclosure of the invention confidentially, and asks the inventor not to disclose the invention to any sponsor. The university and the inventor then collaborate to “plan the further communications regarding the invention so that U.S. and foreign patent rights will not be compromised.”97 The disclosure phase of tech transfer is complex in itself, involving as it does the explication of the substantive, technical aspects of the invention as well as its financial and publishing history. But this is still only the first stage of the process. The second stage involves the evaluation of the invention. This evaluation is conducted by the patent coordinator and related university administrators. This evaluation covers every aspect of the invention’s potential. It assesses the invention’s technical merits, its conceptual significance, its place in its field, and its patentability. The evaluation considers the potential public value of the invention, that is, whether the invention
address a recognizable public need in such areas as health, information management, agriculture, and environmental support, among many others. The evaluation weighs the invention’s commercial potential, since commercialization has become one if not the major route to public access. The evaluation also considers the invention’s overall history of development, meaning the external sponsorships, research partnerships, consulting arrangements, visiting researchers, material transfer agreements, industry gifts, any of which may give additional parties some claim to the invention. Though the preliminary evaluation generally occurs within thirty days, it considers the whole network of participants, institutions, and activities on which virtually every invention depends. This evaluation may turn up a variety of conflicts among the participants in an invention, and we will return to this point later. But assuming that the invention is relatively unencumbered with prior obligations, the administrators who have conducted the evaluation can come to several conclusions. The most common is that the invention is not commercializable. As many as 80% of disclosed inventions fall into this category.98 In this case, the university must still disclose the invention to any federal funding agency that covered a portion of research costs, and must do so within two months of the disclosure by the inventor. When the university’s LPs decide not to pursue patenting and commercialization, patent rights for inventions supported with federal funding normally revert to the federal government.99 The licensing office decides to proceed with the patenting process for somewhere between 20 and 50 percent of disclosed inventions. The university has one year from the time at which the invention is published or publicly used. This process takes about two years and costs at least $10,000 for the US patent, and considerably more for foreign
filings. The university hires a patent attorney to write the applications and coordinates the collaboration between the inventor and the staff involved with the filing. The university, the attorneys, and the inventor must respond to questions and other “office actions” coming from the patent examiner who works for the US Patent and Trademark Office (PTO). Most university filings result in an issued patent. In FY 2000, the PTO issued 384 patents to inventors in the UC system, as compared to 152 to MIT and 108 to Cal Tech.100 As part of the patenting process, the inventor signs a “Patent Acknowledgement,” which assigns the invention’s title to the university. The university becomes the legal owner of the patent, and aside for exceptional circumstances retains title to the patent throughout any process that brings the invention to market. This ownership is required by the Bayh-Dole Act, which transferred patent ownership of federally-funded inventions from the federal government to the non-profit organizations where the invention process took place. The university must assign the government a “non-exclusive, non-transferable, irrevocable, paid-up right to practice or have practiced the invention on behalf of the U.S. throughout the world.”101 The government can recover title in extreme cases -- a public health crisis, for example, or a military emergency. As part of its retention of patent title, the university retains the right to practice the invention for research purposes. The effect of the Bayh-Dole legislation was to make the university a trustee for public ownership while giving it a financial incentive to manage the complex and expensive process of commercializing inventions for public use. In nearly all cases where the university elects to file a patent application, the university retains ownership
of the intellectual property (IP) created or developed by its employees.102 It then seeks industry partners to commercialize the patent. Commercialization takes a major step forward in the next phase of the tech transfer process, which is licensing the product. At this point, the University Licensing Office contacts private firms to determine their interest in developing the invention into a commercial product. The Licensing Office supervises a process that itself can become complicated, involving lengthy searches for appropriate companies, the writing of Secrecy Agreements and other protections to govern demonstrations of the invention to interested parties, and the negotiation of licensing terms. The university negotiates one of two general kinds of licenses. It may offer an exclusive license with a company, meaning that no other company will have the right to use that patent. An exclusive license is most commonly given to a sponsor who has borne all of the costs of developing the invention. It is often deemed appropriate in fields such as pharmaceuticals, where companies seek shelter from competition in part because of the very high costs of bringing a new drug to market. Since an exclusive license could potentially be used to restrain the use of the invention, and since the purpose of licensing is public availability, the Bayh-Dole Act requires that a company that has obtained an exclusive license must “substantially manufacture that product in the U.S.”103 The university must monitor the manufacturing process to insure that the company has made a good faith effort to put the product on the shelf. The university may also negotiate non-exclusive licenses, in which case more than one company will have access to the patent and may commercialize in competition with one another.104 Nationwide, university licensing activity is divided almost equally between exclusive
and non-exclusive licenses. Licenses to start-up companies, however, are 90% exclusive.105 In all cases, the federal government maintains pressure toward public use through its retention of “march-in rights,” which allows it to take control of the patent when public use is endangered or other serious problems arise. The use of these right is very rare. The university generally retains title to the invention. The university also retains the right to practice the invention for the purposes of research; the University of California retains this right on behalf of other US universities as well. The purpose of this right is to make sure that licensing obligations do not impair further research and publication. Once the university has licensed its invention to a particular company, that company undertakes the commercialization process. The university normally has no input into this process, although it does monitor the progress of holders of exclusive licenses. The industry relationship takes the form of a handoff of the technology from the university to the firm, which performs all of the work involved in bringing the product to market. The university receives royalties on the sale of the product based on the invention. The amount of these royalties are negotiated on a case-by-case basis, and the negotiations take into account the industry standard, projected costs of development, the licensee’s contribution to the invention, potential market size, and similar factors. University royalties average 3% of (gross?) sales, depending on many factors.106 Universities have established formulae for dividing the royalties they earn. They generally deduct monies owed to external parties for services and preexisting obligations, and then give a share to the inventor. The University of California gives
35% of net royalties to the inventor,107 15% to the inventor’s campus or laboratory for research purposes, and retains 50% for its own use. Where there are two or more inventors, the inventors split the royalties equally. Participants regard the tech transfer process as a win-win situation. Inventors see their inventions become useful products and the public gets access to them. The university, industry, and the inventors are all compensated financially, and the university puts most of its revenues back into research. Because private firms can generate profits by participating in the tech transfer process, they may increase their support of basic research in its formative stages. Universities have incentives to make the process more efficient, and the public can expect faster development of breakthrough products for its use.
9. Research Partnerships
A second major form of university-industry relation is partnership between academic and industry researchers. In most of these cases, researchers from different organizations identify areas of common scientific interest, and are brought together by a desire to pool their financial and intellectual resources. Partnerships will most often appear in a field with large research and commercial potential that is nonetheless in its early stages. Because the research is not very far along, it will require a long-term investment in work whose outcome is largely unknown. Given a long horizon and an uncertain outcome, most private firms will regard this research as risky, and will be unable to use conventional financial accounting to justify a substantial investment. In addition, basic research in advanced fields is usually very expensive. Firms may also lack the highly
specialized personnel that would allow them to pursue the research successfully. Partnerships offer industry a kind of all-in-one solution. Rather than construct their own facilities they can use existing ones. Rather than hiring new, permanent expertise, they can save money by collaborating with existing university faculty, staff, and students. Some estimates suggest that university partnerships cost industry as little as ten cents for every dollar they would have spent constructing their own facilities. Industry saves money, increases its flexibility, and participates in the most advanced research. On its side, the university has complementary interests. Universities have built research infrastructures and can offer long-horizon environments. Yet they are typically unable to fund research internally and must continuously seek outside funds. They are also looking for advanced expertise that will extend that of their own personnel. They have an interest in developing relationships with firms that are doing pathbreaking research and that may employ their program’s graduates. Universities also regard the public use of inventions as central to their public service, and look for potential future partners in commercializing them.. Research partnerships follow the same basic guidelines that apply to all research activity. The work must contribute to new knowledge, protect the educational needs of students, and otherwise conform to the university’s academic mission. The partnership must support the open publication of scientific results (beyond a precisely defined delay for sponsor review), and allow the university to retain patent rights to all inventions produced with the participation of university facilities or personnel. The industry partner must also indemnify the university for any unsatisfactory research results (industry is indemnified in turn).
A good example of such a partnership is one recently established between the UC Santa Barbara Materials Research Laboratory and the Mitsubishi Chemical Corp’s US subsidiary. Several of Mitsubishi’s main divisions concentrate on functional
materials and plastic-based products, and the company has been interested in developing these product lines: as specialty-use materials based on proprietary technology, they offer high profit margins.108 UCSB has approximately 100 faculty working in materials-related areas, and a number of them, including a recent Nobelist, have done pioneering research in functional materials. In 2001, UCSB and MCC cofounded a separate research unit called the Mitsubishi Center for Advanced Materials (MC-CAM). MC-CAM will focus on the two organization’s interest in “functional soft materials.” As described by the center’s founding director, Chemical Engineering professor Glenn Fredrickson, “these materials are 'functional' because they do something of value, such as a sensor responding to a stimulus in its environment. And the materials are 'soft' in that they have at least one organic component, meaning the presence of the element carbon as in a plastic (polymer) or biomaterial. Materials that are physically soft tend to be easy to process and to exhibit transport and diffusion properties that are controllable and therefore highly useful."109 Within this larger domain, MC-CAM is focusing on several specific research areas of mutual interest. Photonic band-gap materials, for example, could form a transistor for the switching of particles of light or photons much as semiconducting materials can comprise switches for electron flow. Like most research partnerships, MC-CAM describes itself as a synergistic alliance between distinct organizations. "As a College of Engineering,” says Matthew
Tirrell, UCSB dean of Engineering, “we certainly want to influence technology. At some point we can't carry our research developments further into the technological arena; so industrial partners, with whom there is a good technical match, enable research results to be put into practice. And I think that is what we have found in Mitsubishi Chemical."110 The research funded by Mitsubishi would break new scientific ground, and might have been financially impossible for the UCSB faculty without Mitsubishi’s support. At the same time, the products developed by Mitsuibishi from any MC-CAM invention would be new, and perhaps unprecedented, additions to their product line.111 The partnership is structured to maintain clear boundaries between two cooperative entities. Mitsubishi is the sole external sponsor of MC-CAM, in part to avoid potential conflicts with additional sponsors. It contributes $2 million per year over a five-year period to support research. In the first year, the money supported approximately 14 “seed” projects; the most promising of these will receive additional funding in future years.112 Some of the overhead charges on Mitsubishi Chemical’s grant will be used to make permanent improvements in university facilities. In exchange, Mitsubishi Chemical receives the right to negotiate an exclusive license for all inventions generated by MC-CAM research, for which it will pay a royalty to UC. The amount of the royalty will be negotiated at the time of the licensing agreement. Mitsubishi also has the right to negotiate a royalty-free non-exclusive license on the Center’s inventions. In either case, UC will retain ownership of any patents generated by MC-CAM research. The University of California is contributing additional funding to MC-CAM through one of several programs designed to “leverage” private sponsorship by providing matching funds. In this case, the UC-SMART program will provide an
additional $1.7 million over four years to fund four separate projects.113 UCSB makes available its Materials Research Laboratory (MRL) facilities and personnel. Many research personnel move back and forth between MRL projects, which are largely funded by federal agencies, and MC-CAM projects, which are funded by Mitsubishi Chemical. MC-CAM shares with MRL the costs of maintaining and improving the equipment infrastructure, and shares the salaries of a number of staff support and administrative personnel. The partnership does not alter the standard division of labor and of roles between the university and industry. Though a single company is funding all of the center’s research on a university campus, the center conducts basic research in keeping with the university’s mission to operate at the frontiers of knowledge and to do no “routine testing” or similar work. The company has 30 days to review the results of the research prior to open publication, but does not restrict the publication of research. At a later stage, Mitsubishi will take patented inventions through all the additional stages of product development that bring an invention to market. In spite of the “firewall” between the firm and the university and their various funds, the partnership involves a great deal of contact between them. MC-CAM is housed entirely in the MRL facility, and its projects use the university’s infrastructure: this is a source of attractive R&D economies for Mitsubishi. MC-CAM’s governing board consists of three UCSB and three Mitsubishi representatives. A ten member research committee is evenly divided between Mitsuibishi and UCSB personnel. Some faculty and staff (but neither graduate students nor postdocs) will find themselves working on MC-CAM and non-MC-CAM projects at the same time, and moving back and forth between them. In some similar cases, this kind of arrangement has raised
concerns that a private firm like Mitsubishi could use a partnership to siphon taxpayerfunded intellectual property out of the university’s pockets and into its own. Universities are aware that many faculty are involved in several major research programs at the same time, and that each of these many have multiple sponsors, each of whom many claim intellectual property rights. The University of California’s OTT attempts to head off such conflicts by asking researchers to develop carefully defined “Statements of Work” for each research project.114 It is “critical,” notes OTT, “that the Statements of Work be carefully and narrowly written for each research project so that they do not overlap.” MC-CAM has an obvious interest in avoiding conflict over intellectual property and other issues, including the fair treatment of graduate students. The Mitsubishi partnership treats graduate students in the same way as do federally-funded projects. It also maintains a sharp distinction between Mitsubishi and non-Mitsubishi projects and funding sources. “While faculty sometimes run a dozen contracts at one time and mix some of the funding together,” Fredrickson notes, “that is not possible here. We insist on a clear standard of separation.”115 The statement of research for an individual project is appended to the MC-CAM research agreement when the Steering Committee funds that project. The Center’s overall scope of research changes as projects come and go. In each case, the university researcher must affirm that the project is “intellectually distinct” from other research endeavors in his/her laboratory. Fredrickson states that MC-CAM operates along classic academic lines. “We run our labs openly. We publish everything.” He acknowledges that some MC-CAM research is more sharply defined than other projects. But he observes that an investigator’s MC-CAM project will usually be only
one among others in that investigator’s overall research program. While they must maintain “compartmentalization” among different grants, Fredrickson concludes, investigators usually see MC-CAM projects as broadening their research horizons into new and unusual areas as well as offering additional opportunities for doctoral and postdoctoral students. Research partnerships of this kind generally use university facilities and personnel to advance projects designed in large part by (or in close cooperation with) industry. Universities insist that such research conform to traditional university standards of free inquiry into unsolved problems whose results are disseminated through open publication. Research conducted in partnership with industry must rest on the same principles as federally-sponsored research.
10. Sponsored Research
Industry may sponsor university research in much the same way that federal agencies do. Industry sponsorship remains under 10% of the total research funding at most universities, including the University of California. Industry sponsorship thus occurs in a university environment dominated by federal and other public agencies, which means that the regulations governing research continue to be driven by federal and state policy.116 Research sponsored by industry must fit with the university’s educational mission: again, it must seek new knowledge, must be freely published, must respect the educational commitments of graduate students, and must in general give university commitments its highest priority.
Industry sponsorship does not in any way alter universities’ commitment to the pursuit of truth, and to academic freedom as the essential condition of that pursuit. The University of California’ s Academic Personnel Manual, for example, reiterates that “The teaching and research environment should continue to promote the free exchange of ideas, information, and materials among students and faculty in all of their forums— classrooms, laboratories, meetings, and anywhere in the University.”117 Federal granting agencies also expect and enforce “objectivity in research,” to note the title of one salient federal regulation.118 Agencies and universities are especially concerned with one potential impairment of objectivity, and that occurs when an investigator has a “substantial” financial interest in the outcome of the research she or he is conducting. This interest may take the form of a consulting agreement with one of the sponsors of the research. It may take the form of equity ownership in the sponsor. It may take the form of a loan or gift from an industry sponsor. It may take the form of holding intellectual property affected by the research, or a management position in a sponsoring entity. The University of California defines any financial involvement over $10,000 to be “substantial,” although it follows federal and state thresholds for disclosure that are significantly lower.119 The University of California holds that such conflicts are common in modern research universities, and that they can be reviewed and managed.120 In some cases, the sponsored research is disallowed. The opportunities and conflicts that arise in research sponsored by industry are similar to those that have been covered with research partnerships, and the strategies for protecting the university’s mission are much the same. We will return to some of these issues when we consider conflicts of interest below.
11. Consulting Relationships
The fourth type of university-industry relation is faculty consulting. In one way, consulting is the opposite of the research partnership, as it generally takes place off campus and outside of ordinary university obligations. In another way, they form a continuum, since consulting can lead to research partnerships and sponsorships, and vice versa. Generally speaking, consulting is professional activity undertaken with an outside party that does not use university facilities or personnel. The university has a more ambiguous relation to consulting than to other forms of industry partnership. Consulting does not involve the university as an institution so much as it involves the faculty member as an individual. The university thus seeks to reconcile three features of consulting. It regards consulting as central to professional development, public service, and research itself, and approves it on these grounds.121 Second, it holds that consulting generally takes place in the employee’s private time, and is on its face the employee’s private business. But third, it insists that consulting must remain secondary to the employee’s university obligations, and conform to the university’s standard’s for academic conduct. While affirming the value of consulting and the employee’s right to engage in it, University of California regulations are designed to reduce its impact on the University’s operations. The founding regulation is straightforward: “No one in the service of the University shall devote to private purposes any portion of time due to the University nor shall any outside employment interfere with the performance of University duties.”122 The University here asserts its right to define the interface
between private activity and university employment. The Academic Personnel Manual section develops this thought. Teaching and research or creative work activity are clearly the primary activities of the faculty and receive the largest commitment of effort and energy. A faculty member is obligated to have a significant presence on campus, to meet classes, to keep office hours, to hold examinations as scheduled, to be accessible to students and staff, to be available to interact with University colleagues, and to share service responsibilities throughout every quarter or semester of active duty. 123 The university seeks to insure that university business remains the faculty member’s primary focus. It seeks to avoid what it calls “conflict of commitment” between a faculty member’s campus and outside obligations. To this end, the University of California requires that all consulting contracts include language that states: “This consulting agreement is subordinate to the terms of my employment with the UC Regents, including the UC patent policy attached hereto.”124 The University also restricts the proportion of time he or she may spend on outside work. Faculty may engage in consulting for a total of 39 days during the length of each year’s appointment. If they are on an academic-year appointment, they may consult for 39 days through the nine-month school year. During the summer, their consulting days are unrestricted. The 39-day total means an average of one day per week during the term of the university appointment.125 The University also classifies consulting into three categories, which it treats quite differently.
“Category III” activities are those which are part of ordinary professional life. These include serving on a journal’s editorial board or governmental commission, reviewing manuscripts and articles for publishers, giving public lectures on scholarly subjects, and so on. Such activities “ordinarily do not present issues of conflict of commitment. They are accepted as part of the faculty member’s scholarly and creative work. Even if compensated, they are allowable and not counted within the 39/48-day limit.”126 The other two categories cover consulting activities for outside parties as ordinarily understood. “Category II” activities include paid expert testimony in judicial or other proceedings, and consulting services “as an individual.”127 In such cases it is clear that the university remains the faculty member’s full-time, primary employer, and the University does not regard them as posing prima facie conflicts of commitment. Nonetheless, “Category II activities are counted within the 39/48-day time limit and must be reported annually” to university officials. “Category I” consulting is similar to Category II in substance, but occurs under different circumstances. In these cases, the faculty member becomes a salaried employee of another organization, holds a formal position in an organization, or provides consulting services through this separate organization.128 These cases are generally not allowed, for the faculty member would be acting as an employee of another firm to which he or she would have obligations that parallel his or her obligations to the university. The same holds for “administering a grant outside the University that would ordinarily be conducted under the auspices of the University”: in such circumstances, uncertainty arises as to who is the primary employer, and the faculty member’s allegiance is necessarily divided. Category I activities are not
categorically banned, however, and they may still occur with prior approval from the Chancellor or Chancellor’s designee.129 UC has established time limits and categories in order to allow consulting when it is clearly temporary, part-time, and subordinate to the consultant’s university job. It seeks to avoid or at least manage the conflicts of commitment that are likely to arise in an overly-involved consulting job. Consulting requires the management of other kinds of conflict as well. Even when the faculty member consults as an individual, her relationship with the client may involve standard legal obligations. The industry client may require the faculty member to sign a non-disclosure agreement regarding proprietary information, and this can conflict with the open dissemination of information at the university. The industry client may ask the faculty consultant to assign rights to any intellectual property created on the job to the firm, and this can conflict with the University’s (and the federal) requirement that it own title to its employees inventions. Companies may not only require title to inventions developed during the time of the consulting contract, but to future inventions in any way derived from the consulting work. Conflicts can thus exist during the time of contracting and during an indefinite period to follow. University regulations note that the University need not receive title to “those resulting from permissible consulting activities that do not use University research facilities, and do not relate to the employee’s scope of employment.”130 Such dividing lines are not categorical and require interpretation, generally on a case by case basis. The university and its faculty have various ways of managing conflicts of interest, as we will see below. Consulting is a particularly complex challenge. It offers some of the most direct and powerful forms of university-industry collaboration. At the
same time, consultants routinely and systematically pass through the firewalls that separate the university from industry and that demarcate their respective intellectual property.
12. Spin-Off Companies and Equity Positions
Many faculty prefer to consult as individuals and on an occasional basis. Many prefer to conduct research in their university lab with minimal outside influence. But once they invent something, faculty also begin to think about how to put it into general use. That process almost always involves industry and other outside agencies. Inventions are novel by definition, meaning that they are in part unfamiliar even to other practitioners of their field. An inventor may wish to hand her invention over to a company, sign up for royalties, and get back to the lab. But given the extremely advanced or even unprecedented nature of her invention, she may find no established company with the appropriate expertise. (Remember the large number of existing UC patents available for licensing.)131 Inventions are often many difficult steps short of a commercial product; established companies are frequently reluctant to bankroll the development processes of uncertain technologies with unproven markets. These facts mean that the most qualified product development team may be the team that invented the device in the first place. Successful development may require, at the very least, continuous input from the inventors. The inventors may also be in the position of having to start their own company in order to begin the commercialization process. Thus the formation of faculty start-ups has been encouraged by the inevitable gap between basic science and the business environment, and not only by financial selfinterest.
States and other regional agencies favor university spin-off companies. Most legislatures now believe that economic health depends on the formation of high-tech industries in their region. Stanford is widely credited as the “parent” of Silicon Valley, which is held to be a pillar of the California economy. Universities now describe themselves as riding to the rescue of troubled economies with cutting-edge technology. New developments in biotech, computer science, and various areas of engineering are widely seen as the cause of California’s recovery from the recession of the early 1990s.132 As a result, the administrations of public universities like UC are under steady pressure to translate research into new companies and jobs. In recent years, University of California employees have created about 130 spin off companies, 26 of them in FY 2000.133 The University of California has taken equity positions in about 60 of these, a percentage that is close to the nationwide average.134 Of the 2500 biotechnology companies in California, one quarter of them were founded by UC scientists.135 Spin-off companies resemble “Category I” consulting activities as discussed above: the faculty member offers goods and services through an independent organization in which he has a management position, equity ownership, or both. Starting a spin-off company initiates the substantial review procedures that have been discussed above. Faculty and student participants must disclose research sponsorship, gifts, and consulting agreements with any outside party connected to the research. They must disclose any investment in outside parties greater than $2000, and any compensation of more than $500. Because of the significant potential for conflict between a faculty member’s university duties and the nascent company, some
universities require the faculty member to take a one or two year leave of absence. UC, however, does not.136 The review of faculty spin-offs is governed by the basic principle that faculty can have only one full-time job, and that must be with the university.137 Even founders, if they remain UC employees, are generally not allowed to hold “line officer” positions in a firm (President, CEO, Chief Technology Officer, and so on). Academic staff involved in spin-offs must continue to abide by the Political Reform Act principle that they may not participate directly in decisions involving their financial interests. That legislation made no exception for decisions involving start-up companies (in contrast to teaching and research), and the Act’s provisions apply in full force. Company founders must disclose their inventions and their financial stakes. Normally, they are excluded from the process whereby the university makes major decisions affecting the start-up’s future. These decisions include whether to license their own invention to their spin-off company, the terms of the license and royalties, and the form in which the university’s existing costs will be reimbursed. As in other types of industry relations, the University relies on disclosure and review rather than on categorical prohibition. In license negotiations, the University may ask the inventor to serve as an consultant on the function, value, and commercial potential of the invention. University regulations state that “the transfer of University technology to industry is in the public interest, and it is understood that University inventors will sometimes work closely with potential licensees, with the objective of commercializing University inventions.”138 In licensing to a company unconnected to UC personnel, the inventor may serve as a consultant to the licensee or to the UC Appropriate Licensing Office (APO) that in
always in charge of the licensing itself.139 In licensing to a faculty spin-off, a faculty member or her representative may sit “across the table” from her own University administration. In such cases, the University relies on a firewall not between itself and industry but between different parts of itself -- in particular, between licensing and other technology administrators, its academic staff involved in the start-up, and the business and finance offices that handle the financial dealings. Licensing offices decide to license particular patents to faculty spin-offs on a case-by-case basis. In making their decision, they consider the public benefit of the license, the existing rights of sponsors of the research, and conflicts of interest and commitment. In general, they license an invention to a faculty spin-off when established companies will not risk their resources on the invention, or when only the inventors have the “know how” to bring their promising, unique and/or early-stage invention to market.140 Spin-off companies are generally granted exclusive licenses, in part because their fundraising and development process is especially fragile and in need of special protection. Nationwide, 90% of the licenses granted to start-up companies are exclusive.141 Spin-off companies often seek, and are often granted, options to negotiate an exclusive license at some time in the future. For a typical fee of $10,000 or $20,000 per year, the spin-off can maintain a claim on a future negotiation while continuing to evaluate and develop the technology. The spin-off must submit semi-annual reports to the University that demonstrate due diligence in developing the invention, and must also bear patenting and related costs that are part of the tech transfer process. Most spin-off companies are short on capital and cash-flow, and are hardpressed to pay out cash to partners, vendors, employees, or anyone else. Many pay
their own employees, at least in part, in stock options and warrants. Throughout the development period, they need to retain enough capital to support the often arduous and unpredictable process of development, manufacturing, testing, and marketing, all of which take substantial resources. Given the ease with which high-tech costs can overwhelm start-up companies, spin-offs rarely have the cash to pay their university licenser.142 As a result, spin-offs have frequently asked universities to accept some of the patent and other compensation in the form of stock or options. This in effect makes the university an investor and shareholder in a company founded by one of its own employees. Until 1996, UC refused to accept equity in its employees’ firms on the ground that this would show favoritism toward select faculty and companies.143 In that year, UC implemented a new policy, one that allows UC to accept equity in a company “when that company is able to bring the invention to the marketplace (i.e., the company has the means to develop, market, and deliver the invention to the public in a timely manner), but is not reasonably able to provide adequate compensation for licensing in cash.”144 The University has established a number of guidelines to reduce favoritism and bias in decisions involving companies in which it holds equity. It applies the same standards in royalty negotiations, development reports, etc. that it applies to unrelated companies. It requires disclosure of any financial interest the inventors may have in the potential licensee. The APO in charge of the process must submit evidence that the disclosed interests did not affect its decision.145 This office must also submit an analysis of the state of the invention, the expected development process, commercialization and marketing prospects, and the licensee’s capacity to carry out these tasks (staffing,
expertise, etc.).146 The University will generally not accept an equity share of greater than 10% of total equity; the University will thus not acquire a “controlling interest” in the licensee.147 It will not seek or accept a position on the company’s Board of Directors. While an APO on a given campus may negotiate the stock purchase, shareholder’s agreement, and licensing arrangements, the systemwide OTT office must independently approve the rationale for the equity purchase.148 Once the equity has been accepted, it is managed by the University Treasurer’s office at an “arm’s length” from OTT and the licensee.149 OTT and other APOs are prohibited from influencing the Treasurer’s decisions about buying or selling spin-off equity. Prior approval is required if a University investigator is to conduct clinical trials on a product from a company in which the University owns equity.”150 In short, every stage of licensing to spin-offs requires complex documentation that is available for regular review. Any modification of “arm’s length” relationships between different offices in the University and between the University and the spin-off requires prior approval or independent review or both. All decisions about accepting equity, the policy states, must be “based upon the principles of openness, objectivity and fairness in decision-making, and preeminence of the education, research, and public service missions of the University over financial or individual personal gain.”151 When university-industry relations take the form of faculty spin-offs, conflicts of interest cannot be eliminated. Faculty wind up on both sides of the negotiating table, and their financial investments are at stake in most if not all of the scientific and business decisions that they will make. The same is true for conflicts of commitment. There are few tasks more complex, varied, and demanding than starting and sustaining
a new company. It is far from a “one day a week” consulting job, unless the academic staff member takes an entirely passive or “strategic” role. The University of California has a relatively flexible policy towards managing these conflicts. As noted above, UC does not require faculty founders to take leaves of absences from their academic positions while starting their company, as Stanford does. MIT, Harvard, and Columbia prohibit an investigator with a substantial financial interest in a company from undertaking research sponsored by that company in university facilities, and UC does not.152 MIT and Harvard forbid their academic staff from “double dipping,” meaning that they are not allowed to take royalties for their invention and accept founder’s equity in the invention’s spin-off company.153 UC allows this. UC has approved highly conflicted situations where the conflicted are disclosed and managed. Faculty members have founded companies from which they receive stock and payments and in which they hold management positions, remain as full-time faculty members, and undertake the spin-off’s sponsored research in their university laboratories.154 The potential public and scientific benefits of spin-off companies are clear, but so are the unavoidable conflicts. Much of the outcome of this kind of university-industry relation depends on the university’s ability to manage these conflicts. We have discussed some of these techniques already, but will now take a more systematic look at Conflicts of Interest and Commitment.
13. Managing Conflicts of Interest and Commitment
The University has defined a conflict of interest as “a situation in which an employee has the opportunity to influence a University decision that could lead to financial or other personal advantage, or that involves other conflicting official obligations.”155 The University holds that the California Political Reform Act of 1974 “prohibits any University employee from making or participating in the making of a University decision from which personal financial gain is foreseeable.” “Faculty may not engage in any activity that places them in a conflict of interest between their official University activities and any other interests or obligations.” Faculty, in short, must avoid involvement in decisions where their consideration of their own interests may impair their ability to serve the interests of the University and the public. The source of an activity’s sponsorship generally decides whether state or federal law applies to it. If the research is federally sponsored, federal law applies, and federal law requires disclosure of equity interests greater than $10,000 or 5% of a firm’s overall equity. Sponsorship by private firms is generally covered by state law, which defines “substantial” as more than $2000 in equity, $500 of income, $320 as a gift, or a management position of any kind.156 Federal law may also apply to private sponsorship if the research is connected to that sponsored by a federal grant. In any of these cases, all “designated employees” (including all principle investigators) must disclose a financial interest in any non-governmental sponsor of their research.157 This disclosure must take place prior to final acceptance of the contract, grant, or gift. In spite of the overall ban on conflicts of interest, disclosure does not lead to categorical prohibition or exclusion of the individual in question. Disclosure leads instead to a complex and elaborate review process involving a number of parties. It is fair to say that the University of California subscribes in practice to a “checks and
balances” method of review, one in which substantive analysis is spread across a variety of parties whose interests are generally not aligned. All five types of university-industry relations we’ve discussed require the PI to disclose indirect or direct personal financial interests in the sponsors and other parties involved in the activity in question.158 Once an investigator makes a positive disclosure, he or she enters a review process. Most of the elements of the review process have been shaped by the requirements of federal granting agencies, and apply to any non-profit organization that receives federal funds.159 Disclosures involved in licensing are handled somewhat differently from the others, and will be discussed below. Disclosures of financial interests involving consulting clients or sponsors of research are acted upon by the campus Chancellor or his or her appointed delegate, which in nearly all cases means the campus’s Vice Chancellor for Research. The Vice Chancellor, in turn, has appointed an Independent Substantive Review Board, usually called a Conflict of Interest (COI) Committee. Much of the work of review takes place in these campus COI committees. As these committees are generally staffed by faculty from relevant disciplines, they add to the conflict evaluation process an important element of peer-review. COI review is conducted on a case-by-case basis. No UC campus has established fixed criteria for acceptance or rejection of an aspect of a proposed project instigated by a disclosure of financial interest. The question before such committees is not so much whether a conflict exists but how to manage it.160 COI committees can recommend a wide range of actions to the administration. They can recommend denying the entire sponsored project, denying graduate student participation, denying a financial gift, denying the faculty member a line officer position in another company, and so on. Less
drastically, they can recommend supervision of the research, supervision of the use of graduate students, or modifications in research design. COI committees can also recommend that a faculty investigator be forced to end a consulting agreement with a sponsor before the sponsored research begins, or recommend that an inventor quit a company position before the University selects that company as the invention’s licensee.161 COI committees consider financial conflicts but are not limited to these. They also ask whether the project satisfies the university’s requirement that it produce new knowledge out of basic research -- that it not be providing industry with routine services. Third, COI committees examine the status of graduate students in the project. The laboratory work conducted by graduate students are part of their educational training, and cannot be redirected toward commercial ends. A conflict is created if, for example, an investigator uses students who work on his or her federally sponsored university research in his or her spin-off company. The University has declared that
“agreements for research relationships with external parties shall respect the University's primary commitment to the education of its students.”162 The COI committee must decide whether a given use of students in a commercial enterprise can be reconciled with the primacy of the educational mission, or whether to recommend the arrangement’s termination. 163 Fourth, COI committees support the efforts of UC technology administrators to protect the university’s right to use sponsored research results in future research.164 Finally, COI committees scrutinize the sponsor’s right to review research results prior to
publication. They are charged with protecting open publication, and often ask that delay periods of 60 days be reduced to 30.165 COI committees also examine conflicts of commitment.166 As we have seen, the University of California has established a ceiling of 39 allowable consulting days per year (for academic-year appointments). This number, which is equivalent to one day per calendar week, is identical to that of peer institutions such as Stanford and Penn. Consulting is often a commitment that the consultant can manage. Work on a start-up company is harder to control, even when the individual avoids a line officer position, and conflicts of commitment crop up fairly easily. In addition, the University has set no limit on the amount of compensation academic staff may receive for this consulting. In some cases, these amounts are large enough to raise questions about whether the faculty member’s primary commitment remains with the university. Although a major University task force has recommended the consolidation of various conflict regulations, COI review must continue to tailor its resolutions of conflicts to each individual case.167 This is because the University has not written standardized, detailed rules for a large number of specific cases. For example, only one UC campus, UCSF, categorically disqualifies clinical investigators from conducting clinical trials sponsored by a firm in which the investigator has a significant interest. (Such interests do not disqualify a CI either before or after the trial.)168 In UC, this kind of categorical prohibition is rare. Standardized regulations do not exist in part because research by its very nature involves unknown quantities and unforeseen issues, and can be damaged by rigid restraints; the protection of research is one of the primary goals of academic freedom. Standardized regulations also do not exist because individual cases, their contexts, and
their implications vary so much. Finally, standardized regulations do not exist because academic staff have not supported them. The UCSF regulation has stirred a great deal of controversy, has not spread to other campuses, and may be rescinded on that campus. The University’s regulations for conflicts in technology licensing were approved in August 2001, and represent some of the University’s most recent thinking on the subject.169 Their regulatory framework is generally consistent with that covering other types of university-industry relations. When an investigator exceeds state-mandated thresholds for financial interests (or a “personal financial effect”), she must do one of two things.170 She may disqualify herself from influencing or participating in relevant decisions. Or she may decline to disqualify herself from these decisions. In the latter case, personnel in the relevant licensing office (usually a Licensing Professional, or LP) may nonetheless decide that the licensing process will be more successful if the investigator (generally an inventor in such licensing cases) does indeed participate. The University has decided that the relevant statues do allow the participation of an inventor with a disqualifying personal financial interest “so long as there is appropriate intervening substantive review, called a Licensing Decision Review.”171 This is a type of “third party” review conducted inside the University, that is, “another level of review by a non-interested person or persons before a proposed licensing decision goes to the final decision maker for approval.”172 Though the inventor’s role, if approved, should be “kept to a minimum,” the Licensing Decision Review is a mechanism that can allow an inventor to participate in decisions that affect her financial interests, with appropriate review.173
In sum, the University acknowledges the disqualifications that ensue from conflicts of interest and commitment. It thus reserves the right, through various agencies, to modify and terminate relations established by its employees with outside partners. The University also holds that many conflicts cannot be eliminated, and proposes management as an alternative; it believes that the public and scientific benefits of industry relations are worth the trouble and expense that management involves. The University has developed complex regulations and procedures in order to manage these conflicts. It has publicized the general principles and policies of conflict management, and it has kept the substance of the cases that require such management confidential. Its review procedures occur in-house and yet are divided among various offices and personnel. This means that these procedures do not receive much public scrutiny, or scrutiny from the wider University community, but are still subject to a crossfire of scrutiny from selected and yet divergent University parties. A crucial component of this scrutiny is peer review, which is a core element of both academic freedom and scientific procedure. As in those cases, the quality of peer review of various conflicts depends in large part on the level of the participants’ expertise and the care with which they apply it.
14. The Limits of Commercialization
While university-industry relations will continue to evolve and develop, they will not grow indefinitely under standard market pressures. We have explored a variety of ways in which university-industry relations are defined, shaped, selected, and managed. At this point, we can identify several factors that will continue to restrict industry partnerships to a limited portion of overall university budgeting and activity.
The first of these involves patent ownership. The Bayh-Dole Act requires that universities retain ownership of the patents on all discoveries made by their employees. Such ownership provides the university with considerable influence over the disposition of an invention. While the university issues exclusive licenses to firms in about half of all cases, the university is likely to do this only for inventions that have an expensive development process ahead of them. Although the economics of high-tech sectors encourages firms to seek “proprietary control of an industry standard,” universities need not grant exclusive licenses in order to benefit a particular company’s desire to maximize its market share.174 To the contrary, the university’s first priority remains the creation and open dissemination of knowledge. It may grant an exclusive license when an invention will fail to attract development capital without it. But it may not do this to serve the business interests of one firm over another. This is true even when the firm in question was founded or developed by one of its own employees. Patent ownership provides the university with leverage to make independent decisions about the fate of inventions. The university is usually free to license an invention non-exclusively in order to spread its knowledge and use as widely as possible. Second, universities are required to seek a “fair consideration of the patent.” This means that they must not offer royalty-free licenses for commercial products except where it is demanded to create equity in unusual circumstances. Universities do retain royalty-free licenses on their patents for purposes of research at their own and all other universities, and offer the same arrangement to industry partners. But for commercial uses, universities retain a share of royalties that represents their contribution to the successful invention (infrastructure, the educational programs that bring students, and so on), and, indirectly, the contribution that represents the public’s share (via taxpayer
The principle here is that all investors receive a fair return on their
investment. The university is in a position to protect contributors who may be at some distance from the commercial stages of the process, and royalties are one way of acknowledging and rewarding the various parts of the system that made the product possible. Third, universities are non-profit organizations that operate under federal requirements. One of the benefits of this status is that universities can issue tax-exempt bonds in order to fund major capital outlays on new facilities and the like. The University of California has built most of its facilities this way, and relies on the taxexempt status of its bonds to insure their successful placement. The Internal Revenue Service has determined that non-profits can accrue no more than ten percent of their overall revenue from business activities that are “unrelated” to their core function, which in the university’s case is education.175 This places an effective cap on the growth on the university’s for-profit licensing activities at ten percent of its budget. Universities with successful licensing programs generally receive royalty income of a fraction of ten percent of their budgets. Tech licensing thus has much room to grow, but no chance of dominating university budgets. Industry relations do of course generate a prestige and excitement that is far greater than its current financial contribution. But the pressure comes primarily from individual researchers, industry, and the political system; the latter has started to expect public universities to spawn lucrative “new economies” in their region or state. The university’s obligations, priorities and interests overlap with these interests, but nonetheless remain distinct from them. Fourth, federal and state law dovetail with university tradition in subordinating financial incentives to intellectual and public interests. Federal agencies isolate financial
from other motivations and require their disclosure. California, like many other states, requires similar disclosure. In many cases, these financial interests disqualify investigators from clinical and other research activities. Even when they do not disqualify the investigators, regulations require that they be managed so that the growth of knowledge and the public interest come first. The university’s elaborate procedures for identifying and managing conflicts of interest and commitment acknowledge the need to clearly limit the influence of financial incentives in university research and teaching. University and industry are destined to remain partners for the foreseeable future. They share the difficult and wonderful collective effort of discovery, invention, and the development of knowledge for use. There is much overlap between their functions, and much division of labor. And yet the university and industry emphasize different ends of the long development process. Jordan Cohen, President of the Association of American Medical Colleges, has offered a useful summary of the situation. The generous public support of scientific research in America’s universities since World War II has been predicated on the expectation that scientific advancements will yield tangible public benefits - a robust economy, strong national security, and a healthy citizenry. Yet, public research support is, for the most part, purposefully limited in scope to basic research, and essentially ceases at the point at which scientific invention enters the pathway of product development. In biomedicine, with rare exceptions, it is the private sector, not academia, that develops diagnostic, therapeutic, and preventative products and brings them to market.176
The unavoidable conclusion is that basic research and product development will continue to depend on each other for the foreseeable future. This partnership, however, does not imply any need to weaken the university’s distinctive identity as a place of unfettered inquiry, education, and public service. Nor does it require any diminishing of the university’s control over its own destiny. A clearer understanding of the university’s unique capabilities, goals, and procedures will help insure many productive partnerships between distinct, equal, and independent institutions.
PART IV: SUMMARY OF FINDINGS (for committee discussion) • the modern research university has been intertwined with business
since its inception after the Civil War. Modern science and engineering have developed simultaneously in industry and in the university through continuous interaction between them. The majority of scientific and technological research has always taken place in industry. Today, investigators, ideas, research materials, and projects move constantly, even effortlessly, back and forth among various research locations, some in industry, some in the university.
Like all research universities, the University of California
categorically favors relations with industry. It defines partnerships with industry as a major form of public service. Serving industry helps the public by helping to create jobs, growth, life- and labor-saving inventions, and the creation of new industries.
Frequent and involved interaction between industry and the
university does not imply a blending of these institutions. The university has been interacting with industry without losing its unique identity and functions. Academic leaders -- and many industry leaders as well -- agree that the university must maintain its independence and its reputation for impartiality in its relations with society’s other institutions.
The university and industry emphasize different ends of the
lengthy pathway from theory, research and invention to the development and manufacture of a product. The university performs most “basic research,” the
vast majority of it inspired by the investigator’s curiosity and imagination. Almost all product development is undertaken by industry.
Since the passage of new patenting rules in 1980, universities have
retained ownership of all patents on the inventions of their employees, and have actively sought to license these to industry. This process of “technology transfer” has become a more important part of scientific activity and administration on university campuses. Although industry funding has increased significantly over the past two decades, it remains under ten percent of total research funding.
Tech transfer involves the university in complex business
negotiations. It has required the expansion of licensing and related administration, and the hiring of ever-more sophisticated personnel. But the prospect of financial returns in these arrangements has not demoted education in favor of business. University policy insists on the categorical priority of educational to financial considerations. Tech transfer and related policies are designed to protect unfettered research, open publication, and public service. Throughout the process, the university acts as a trustee rather than as a profitoriented business partner.
Although financial incentives are a factor in industry relations, the
University does not acknowledge such motives as a source of industry collaborations. Nor is tech transfer driven by the university’s financial interests. Of the over 20,000 active licenses held by universities nationwide, only 0.6% generate income of more than $1 million per year. Nationally, universities
recover only 40% of the costs of the tech transfer process through royalties and other licensing fees. Though tech transfer leaders like University of California operate in the black, the primary financial incentives exist for industry and for individual faculty. These incentives, yoked to pressure for economic results from state legislatures, are major drivers behind intensified industry relations.
Industry relations raise significant conflicts of interest and
commitment for academic staff. University of California regulations require the disclosure of conflicts. Universities operate in accordance with state and federal laws that define conditions under which disclosed financial interests may disqualify investigators from making institutional decisions. Universities often wish to keep the expertise of these investigators in the process, and have found several ways to avoid disqualification. The university favors the management of conflicts through third-party review procedures rather than through disqualification.
The full parameters of conflicts of interest and commitment are not
well understood. Some of the reason is that the specific cases are kept confidential within the university review process. The university may wish to consider the extent to which confidentiality has masked the seriousness of these conflicts, and set up a means of investigating these conflicts systematically. It may wish to examine the extent to which some of these conflicts may create significant liability exposure.
The entrepreneurial approach to scientific research has high status
in the UC system and is continuing to spread. While its benefits are clear, its possible liabilities are not. We do not fully understand the overall impact of university-industry relations on the direction and quality of research. Nor do we have a clear understanding of the impact of recent changes on public opinion. Both of these issues deserve further, systematic study. In the absence of such study, public discourse about “commercial science” may be overly shaped by a future scandal (and possible regulatory crackdowns).
the university has significant leverage to insure that its core values -
- the unfettered exploration and open dissemination of knowledge -- are part of all industry partnerships.
.David F. Noble, “The New University,” speech to the California Faculty Association, 1999. .This latter example refers to UCSB professor Alan Heeger’s Nobel prize research. For a brief
overview, see http://http://www.engineering.ucsb.edu/Announce/nobel/chemistry.html
3 4 5 6 7
.For the Morrill Act text, see http://usinfo.state.gov/usa/infousa/facts/democrac/27.htm .Geiger, vii. .Geiger, 40. .Geiger, vii. .David F. Noble, America by Design: Science, Technology, and the Rise of Corporate Capitalism (New
York: Knopf, 1977), 130.
.Roger L. Geiger, To Advance Knowledge: The Growth of American Universities, 1900-1940 (New
York: Oxford University Press, 1986), 176. Geiger observes that “there are no reliable figures for corporate support before the IRS began tracking these deductions in 1936.”
9 10 11
.Geiger, To Advance Knowledge, 191. .Noble, America by Design, 122-23. .Noble, America by Design, 123. “The purpose of the system . . . Was to enable the universities to
keep abreast of the changes in the industries and to enable the manufacturer to obtain needed expertise.”
.Henry Etzkowitz, “Bridging the Gap: The Evolution of Industry-University Links in the United
States,” in Industrializing Knowledge, ed. Lewis M. Branscomb, Fumio Kodama, and Richard Florida (Cambridge, Mass.: MIT Press, 1999): 203.
13 14 15 16
.Noble, America by Design, 136. .Noble, America by Design, 138. .Noble, America by Design, 143. .NSF 1996. See also Albert H. Teich “The Outlook for Federal Support of University Research,”
in Noll, ed., 89, who reports that corporate R&D overshadows university research: it “performs 70
percent of the nation’s total R&D (supported both with firms’ own funds and under federal contracts and grants), whereas academic institutions perform about 13 percent.
.BHEF 2001 - 40% basic is in industry. .Bush, Science, 6-7. The final version of the NSF rejected many of Bush’s recommendations, and
he was politically locked out of the Truman Administration. Nonetheless, his vision of basic research survived his political decline. See Daniel S. Greenberg, Science, Money,and Politics: Political Triumph and Ethical Erosion(Chicago: University of Chicago Press, 2001), chapter 3; and David M. Hart, Forged Consensus: Science, Technology, and Economic Policy in the United States, 1921-1953 (Princeton: Princeton University Pres, 1998).
.“Report of the University-Industry Relations Project, UCOP 1982, p 3. . Routine tasks include “tests, studies or investigations of purely commercial character, such as
mineral assays” among many examples. The only stated exception is “when it is shown
conclusively that satisfactory facilities for such services do not exist elsewhere” (Regulation No. 4, June 1958; 1982 A5).
.Cited U-I 1982, Appendix A, p. A-9. The Contract and Grant Manual drew from
Regulation No. 4, which granted publication authority to the university on behalf of the public.
“All such research shall be conducted so as to be as generally useful as possible. To this end, the right of publication is reserved by the university” (Regulation No. 4, Sec II para 5, U-I 1982, p. A-6.)
.David Saxon, “Universities and the Common Good,” MS 1979?, Cited U-I 1982, p 15. .R. C. Lewontin, ”The Cold War and the Transformation of the Academy,” The Cold War and the
University: Toward an Intellectual History of the Postwar Years (New York: The New Press, 1997), 13.
.Daniel S. Greenberg, Science, Money, and Politics: Political Triumph and Ethical Erosion (Chicago:
University of Chicago Press, 2001), pp 479-80, Table 1.
example, Clark Kerr, the president of the University of California from 1958
to 1967, celebrated the centrality of the university to the knowledge society while complaining that the university’s “directions have not been set as much by [its] visions of its destiny as by the external environment, including the federal government, the
foundations, the surrounding and sometimes engulfing industry” (Clark Kerr, The Uses of the
University [Cambridge, Mass.: Harvard University Press, 1963], 122).
.Greenberg, Science, 484-85, Table 4. Leslie, Cold War, 1; Greenberg, Science, Table 4: Federal Obligations for Academic R&D, by Agency, 1970-
1999, p. 484-85.
.For example, most of the federal funding in electrical engineering came from the Department of
Defense, and abundant anecdotal evidence suggests that officials at agencies like the Defense Advanced Research Projects Agency were generous and farsighted in their interest in long-term, fundamental science (Umesh Misra on EE, David Harris on DARPA.).
.For an analysis of national security’s impact on some major scientific disciplines, see Stuart W.
Leslie, The Cold War and American Science: The Military-Industrial-Academic Complex at MIT and Stanford (New York: Columbia University Press, 1993). See also Lewontin, op cit.
.A Business-Higher Education Forum report is correct about this: “University scientists’ curiosity-
driven basic research frequently opens lines of inquiry that, although still fundamental in nature, are aimed at helping develop valuable new therapies and technologies. Thus, much research that might be considered ‘applied’ -- because it has a specific target -- involves original investigations long paths that branch out from basic studies and are quite appropriate to a university’s mission” (Working Together, Creating Knowledge: The University-Industry Research Collaboration Initiative, 21).
.U-I 1982, p 10. .Standing Government Patent Policy through the 1970s read in part: “the Government shall
normall acquire or reserve the right to acquire the principal or exclusive rights throughout the world in and to any inventoins made in the course of or under a contract where: (1) A principal purpose of the contract is to create, develop, or imporove products, processes, or methods which are intended for commercial use . . . By the general public at home or abroad, or which will be required for such use by government regulations; or (2) A principal purpose of the contract is for exploration into fields which directly concern the pbulci health, public safety, or public welfare; or (3) The contract is in a field of science or technology in which there has been little significant experience outside of work funded by the Government, or where the Government has been the principal developer of the field, and the retention of
excluisve rights at the time of contrac ting might conver on the contractor a preferred or dominant position . . .” (Background Materials on Government Patent Policies Vol I - Presidential Statements, Executive Orders, and Statutory Provisions, Subcommitte on Domestic and Internal Scientific Planning and Analysis of the Committee on Science and Technology US Houe of Representatives, 94th Cong. August 1976), 27).
.Atkinson, 1997, 20. .“The Act’s provisions represented a strong Congressional expression of support for the
negotiation of exclusive licenses between universities and industrial firms for the results of federally funded research” (Mowery, et al., “Effects of the Bayh-Dole Act,” 274).
.Mowery et al. mention two crucial developments in this point. The Supreme Court’s decision in
Diamond v. Chakrabarty (1980) upheld the validity of a broad patent in the new industry of biotechnology, opening the door to patenting the organisms, molecules, and research techniques emerging from biotechnology. And the new Court of Appeals for the Federal Circuit (CAFC), was established in 1982 as the court of appeal for patent cases throughout the federal judiciary, and soon emerged as a strong champion of patentholder rights (274).
.Leonard Minsky, “Dead Souls: The Aftermath of Bayh-Dole,” Campus, Inc.: Corporate Power in the
Ivory Tower (Amherst: Prometheus, 2000), 99.
.Ralph Nader, Congressional testimony (1984), cited in Minsky, “Dead Souls,”97. . In 1982, Rickover testified as follows: ‘In 1980 the Congress reversed this long-standing
government policy by giving universities and small business title to inventions developed at government expense. I testified against that because I recognized what would happen and it has happened. Now patent lobbyists are pressing Congress to extend that giveaway practice to large contractors. This would generate more business for patent lawyers, but, in the process, will promote even greater concentration of economic power in the hands of the large corporations which already get the lion’s share of the governments research and developments budget” (cited in Minsky, “Dead Souls,” 96).
.Mowery et al. .For example, the Report of the University-Industry Relations Project (UC 1982) notes that patent
policy must seek to achieve “effective development of useful inventions by industry,” achieve “reasonable revenues for the University from the licensing of patents,” and maintain “good relations with
industry” (21). Patent policy is also a proof of a state of mind that includes cooperativeness and interest in commercialization.
.On the intensification of advertizing in the 1960s, and its shift in tone towards a collaborative
intimacy with its targets, see Thomas Frank, The Conquest of Cool, (Chicago: University of Chicago Press, 1997).
42 43 44 45 46 47 48 49 50
.”Executive Summary,” U-I 1982, 1. .U-I 1982, p 3, emphasis in original. .U-I 1982, 2. .U-I 1982, 3. .U-I 1982, 21-22. .U-I 1982, 22. .Ibid .Ibid. .Ibid, 21. The longest “standard” delay of publication is 90 days; most university administrators
prefer 30 days.
51 52 53 54
.U-C 1982, 21. .U-I 1982, 2-3. .U-I 1982, 3; emphasis omitted. .U-I 1982, 26. “Significant financial involvement, as defined by the policy, would include a major
equity interest, a position as a paid officer, or a consulting contract.”
55 56 57 58 59
.U-I 1982, 26. .Ibid, 27. .As paraphrased by U-I 1982, 26. .Ibid .The relevant policy at the time of the Report was “Revised University Policy on Disclosure of
Financial Interest in Private Sponsors of Research,” issued by the Office of the President April 8, 1982, and thus almost simultaneous with the Report itself.
.U-I 1982, 28. .Each campus should set up a “mechanism to review research proposals where it is
disclosed that the principal investigator has a substantial financial interest in the sponsoring non-governmental entity” (U-I, 1982, 4).
.The Report identified eight kinds of university-industry interactions (p 9). .Cited U-I 1982, A-5. Standing Order of the Regents 103.1 reiterated that outside employment
could not interfere with University duties and would not be compensated by the University.
.Section I of Regulation No. 4 refers to “Special Services by Members of the Faculty.” Section II
refers to “Services the use of university facilities or conducted through university bureaus or other organizations, and under contracts between such organizations and the regents” (A-5). The contrast between basic and commercial research appears only in Section II.
65 66 67
.U-I 1982, 25. .U-I, 1982, 27-28. .For a brief overview of the situation at several leading schools, see Katherine S. Mangan,
“Harvard Weighs a Change in Conflict-of-Interest Rules,” Chronicle of Higher Education 19 May 2000: A47.
.Goldie Blumenstyk , “Auditors Say Research Universities Charged U.S. $350-Million Too Much
for Indirect Costs,” Chronicle of Higher Education 5 February 1992. The most famous individual case involved overcharges at Stanford, a case serious enough to cause the government to renegotiate Stanford’s overhead charges from 70% to 55%, alienate major donor David Packard, and accelerate the resignation of the university’s president ( Karen Grassmuck, “What Happened at Stanford: Mistakes at Crucial Times in a Battle With the Government Over Research Costs,” Chronicle of Higher Education 15 May 1991). See also Colleen Cordes, “Controversy by Stanford Prompts Critical Review of Entire Indirect-Cost System,” Chronicle of Higher Education 3 April 1991; Cordes, “Colleges Struggle to Answer Questions About Rates for the Overhead Costs of Government-Sponsored Research,” Chronicle of Higher Education 24 April 1991; Corde, “Angry Lawmakers Grill Stanford's Kennedy on Research Costs,” Chronicle of Higher Education 20 March 1991. Skirmishes over indirect costs continued throughout the 1990s. See Paulette V. Walker, “ NYU Pays U.S. Millions to Settle Charges Over Research Costs,”
Chronicle of Higher Education 18 April 1997; and Douglas Lederman, “Research Universities Are Nervous About Inquiries Into Use,” Chronicle of Higher Education 5 June 1998: A27.
.”The grand totals of government money for research and development rising from $71 billion in
1994 to nearly $80 billion in 2000. Basic research, widely, but erroneously, regarded as especially vulnerable to political neglect, passed the $18-billion-dollar mark, an increase of 16 percent in purchasing power between 1993 and 2000” (Greenberg, Science, 436).
.As McGroddy of IBM put it: ”If you look over a period of five years in the information
technology industry, the industry will have doubled in terms of its revenues. And about half of the additional revenue will be from products which basically didn’t exist five years before, didn’t exist at a fairly fundamental level. And much of that revenue from new products will be garnered by companies which didn’t exist five years earlier. So the idea of new products invented by new companies growing into great big businesses is a very important idea which was less evident in an earlier and slower time” (Proceedings UCLA, 109).
.”Technology: The Engine of Economic Growth, A National Technology Policy for America,”
position paper, Clinton-Gore National Campaign Headquarters, September 21, 1992, cited in Greenberg, Science, 375.
.Report of the Senate Appropriations Subcommittee for Departments of Veterans Affairs and
Housing and Urban Development, and Independent Agencies, 102d Cong., 2d ses., July 23, 1992, 157; cited Greenberg, Science, 376. For sample reactions from the scientific community, see pp 371-72.
.Science in the National Interest, Executive Office of the President - Office of Science and
Technology Policy, August 1994), 1.
.Greenberg, Science, 467. .Greenberg writes that “for a long stretch in the late 1980s and early 1990s, industry retreated,
without apology, from the support of basic research, in its own laboratories and in universities, because of disappointing financial returns” Science, 465). See also Robert W. Conn, UCSD Dean of Engineering, “University-Industry Partnering: A New Era Requires New Thinking,” Proceedings UCLA 1997, 68.
.Geoffrey A. Moore, Living on the Fault Line: Managing for Shareholder Value in the Age of the Internet
(New York: HarperBusiness, 2000), 67-68.
77 78 79
.Moore, Fault Line, 69. .Greenberg, Science, 381-82. .Greenberg, Science, 386. Industry was not, however, unanimous: some organizations wanted the
NSF to expand its programs in applied engineering. I have been unable to find prominent figures who suggested basic research had become less important. Some followed the 1992 Clinton campaign’s tendency to focus on the importance of high-tech research for industrial strength, thereby decentering without demoting fundamental science.
.This theme continued through the decade. At UC’s major retreat on university-industry
relations, Niels Christian Nielsen, the Executive Vice-President of the Danish Technological Institute, asked participants to make a clear distinction between “the University entering industry partnerships as if it were a company” and “the University developing its industry partnerships by emphasizing its complementary nature to companies” (Proceedings of the President’s Retreat on the University of California’s Relationships with Industry in Research and Technology Transfer (UCLA Sunset Village, 30-31 January 1997): 85. Similarly, James McGroddy, former Senior Vice President for Science and Technology at IBM, suggested locating university collaborations on “a middle ground that is adjacent to a campus, but is not part of the university, that allows industry to have some people there doing work on proprietary things with the involvement of university people, students and faculty, without violating the spirit of the university itself” (112).
.Carol Mimura, “Faculty Entrepreneurship at the University of California,” Office of Technology
Licensing, UC Berkeley, 2002, unpublished lecture.
.Conn, Proceedings UCLA 1997, 68. .At the NSF, director Walter E. Massey articulated a compromise that “would build on our
traditional mission and exercise new leadership across a broader spectrum of research areas,” which would improve connections between “basic research” and the “user community” (1992, cited Greenberg, Science, 379-80). Looking back from 2001, the Business-Higher Education Forum, a long-term sponsor of university-industry relations, described such relations as having “contributed to America’s resurgent competitiveness in the global economy while promoting economic growth at regional and national levels -- effectively leveraging, rather than replacing, the more extensive federal and state support of
fundamental research on the nation’s campuses” (Working Together, Creating Knowledge: The UniversityIndustry Research Collaboration Initiative, p 3).
.UCOP, “Working with UC,” at http://www.ucop.edu/ott/workuc.html#C. .The
1989 Guidelines on University-Industry Relations reaffirmed Regulation 4 by
encoding it in its guideline on the “Use of University Facilities.” “University facilities and resources,” the document stated, “should be devoted to activities that support teaching and research and that lead to the advancement of knowledge. They should not be used for routine tasks of a commercial character. Unique or special facilities may be made available to outside users on a fee-for-use basis” (Office of the President, University of
California, Guidelines on University-Industry Relations (17 May 1989): Guideline 11).
the Preamble to the University’s 1985 patent policy described
inventions as a side effect of the university’s basic research rather than as the goal itself:
”Within the University, innovative research findings often give rise to patentable inventions as fortuitous byproducts, even though the research was conducted for the primary purpose of gaining new knowledge” (“University of California Patent Policy” (effective 18 November 1985; since superseded)).
One can find widespread agreement about the fundamental importance of academic freedom. David F. Noble, a critic of technology transfer, writes that “the universities are the only institutions we have which are dedicated to the independent inquiry and learning that serve as a reliable depository of disinterested expertise, expertise reflecting a wide diversity of view points” (David F. Noble, “The New University,”
address to the California Teachers Association, 1999).
Richard C. Atkinson, president of the
University of California and a lifetime advocate of tech transfer, agrees: “universities must be dedicated to the search for truth.” We must remember “this tenet, and its two subsidiary operating principles -- academic freedom and open inquiry.” Atkinson continues: for “If we come to be seen as just another special interest group or as
organizations pursuing private gain at public expense, our privileged position will inevitably be jeopardized” (Richard C. Atkinson, “The Future of the Research University,” address at Reinventing the University, Proceedings of a Symposium held at UCLA (6/23/94), available at http://www.ucop.edu/ucophome/pres/comments/rufuture.html.) Similarly, the Business-Higher Education Forum, a long-time sponsor of university-industry ties, argues that universities must enter partnerships without “devolving into contract research organizations, indebted to their sponsors and dependent on revenue from sponsored research and licensing fees” (BHEF, “Working Together, Creating Knowledge,” 30.)
.(Office of the President, University of California, Guidelines on University-Industry Relations (17 May
.(Guidelines 1989, guidelines 1 and 2).
Of the first two 1989 guidelines, one required an
“open academic environment” “governed by the tradition of the free exchange of ideas and timely dissemination of research results,” while the second reiterated the “freedom to publish and disseminate results.” University review agencies usually prefer a 30-day wait. The Business-Higher Education Forum recommends a 60-90 day period; see BHEF,
“Working Together,” 53.
It should be noted that a desire for publication delays almost always accompanies patent potential. The idea behind this delay is that it enables the industry sponsor to file patent claims on any inventions the research may contain. This issue attracted much attention when UC Berkeley’ Department of Plant and Microbial Biology accepted $5 million from Novartis in exchange for prior review of nearly all of the department’s research findings and a first shot at [exclusive] licensing rights (Goldie
Blumenstyk, “A Vilified Corporate Partnership Produces Little Change (Except Better Facilities),” Chronicle of Higher Education 22 June 2001: A24).
The initial review period was 30 days, but “Novartis can
request a delay of up to 60 additional days for the university to file a patent application.”
.UCOP, “Business and Finance Bulletin G-XX: Guidelines On Accepting And Managing Equity
When Licensing University Technology,” at http://www.ucop.edu/ott/equi_c.html
.Guidelines 1989, # 8, at http://www.ucop.edu/raohome/cgmemos/89-20.html. Similarly, UC’s
Patents Policy states that it seeks to “license patents to industry in order to promote the development of inventions toward practical application for use by the general public” (UC Technology Transfer Program statement, at http://www.ucop.edu/ott/ttprog.html#B).
.See Atkinson, op cit., on the need to provide financial incentives in order to move inventions to
market. See also Association of University Technology Managers, “Common Questions and Answers about Technology Transfer,” at http://www.autm.net/index_n4.html.
.Association of University Technology Managers, AUTM Licensing Survey: FY 2000 Survey
Summary, 9, at http://www.autm.net/surveys/2000/summarynoe.pdf.
93 94 95
.UC Office of Technology Transfer, “Patents 101,” at http://www.ucop.edu/ott/pat101.html#B. .Ibid. .There are in fact two kinds of “reduction to practice.” An “actual” reduction to practice involves the successful physical construction of the invention testing its physical embodiment to determine if it performs as contemplated. For example, development and successful testing of a prototype model would constitute a reduction to practice. A “constructive” reduction to practice involves only the formal filing in the U.S. Patent and Trademark Office (PTO) of a patent application describing the invention in sufficient detail that one skilled in the art could reduce it to practice, without its actually having been made or tested.(UCC OTT, “Reduction to Practice,” http://www.ucop.edu/ott/investig/reduct.html)
.Instructions to “Disclosure and Record of Invention Form,” OTT.
97 98 99 100
.UC Technology Transfer Program Overview, http://www.ucop.edu/ott/ttprog.html. .Estimate of Joe Acanfora, Associate Director, UC OTT. . (Can the inventor get title to the invention at this point? - no patent acknowledgement filed) .UCOP, In Touch 2:2 (April/May/June 2002): 1. These figures are based on an Association of
University Technology Managers survey, as noted below.
.http://www.ucop.edu/ott/bayh.html#Current Regulations .On this point, UC Patent Policy reads as follows: In the absence of overriding obligations to outside sponsors of research, the University may release patent rights to the inventor in those circumstances when: (1) the University elects not to file a patent application and the inventor is prepared to do so, or (2) the equity of the situation clearly indicates such release should be given, provided in either case that no further research or development to develop that invention will be conducted involving University support or facilities, and provided further that a shop right is granted to the University.
.Ibid. .UC generally abides by the principles for deciding between non-exclusive from exclusive
licenses as described in the Council on Governmental Relations, “University Technology Transfer Questions and Answers,” at http://infoserv.rttonet.psu.edu/spa/tech.htm. Non-exclusive licenses are favored for basic processes with broad applicability, while exclusive patents are preferred where a large investment is required to bring the patent to market. In addition, the University has established the following categories: 1. “When the Sponsor pays all direct and indirect costs (including an appropriate share of the Principal Investigator's salary) for the research to be undertaken, the Sponsor may be granted a first right to negotiate an exclusive or nonexclusive license for the life of any U.S. patent. Right to sublicense may be granted under an exclusive license only.”
2. “When the Sponsor pays less than all direct and indirect costs in the form of the Sponsor may be granted a first right to negotiate a nonexclusive license for the life of any U.S. patent.” 3. “When the Sponsor pays only salary or stipend in support of a fellowship or research assistantship for an individual, the Sponsor may not be assured of a license but may be considered as a licensee” (“University of California Schedule of Sponsors' Patent Rights,” at http://www.ucop.edu/ott/sosprts.html).
.AUTM, FY2000 Survey Summary, 11. .Carol Mimura, “Faculty Entrepreneurship in the University of California,” Office of Technology
Licensing, UC Berkeley, unpublished presentation, 2001.
.”Net royalties are defined as gross royalties and fees, less the costs of patenting, protecting, and
preserving patent and related property rights, maintaining patents, the licensing of patent and related property rights, and such other costs, taxes, or reimbursements as may be necessary or required by law” (Ibid.)
.Mitsubishi Chemical operated at a loss for the fiscal year ending March 31, 2002. See
http://www.m-kagaku.co.jp/english/investor/index.htm. Recent coverage suggests that the development of functional materials represents a key component in Mitsubishi’s recovery strategy; see Jean-François Tremblay, “Mitsubishi Chemical Reevaluates: Company Reorganizes, Seeks Partners For Petrochemical Business,” Chemical and Engineering News (15 October 2001): 10, at http://pubs.acs.org/cen/topstory/7942/7942notw8.html.
.”Mitsubishi Chemical and UC Santa Barbara Form $15 Million Research Alliance on Advanced
Materials, Solid State Lighting and Displays,” Press release, UCSB Department of Chemical Engineering, n.d., http://www.engineering.ucsb.edu/Announce/mitsubishi.html
.Press Release, op cit. .See their current product line in functional materials at http://www.m-
.MCC has also provided $2.5 million as a .UC-SMART stands for University of California Semiconductor Manufacturing Alliance for
Research and Training.
.OTT materials note that “The
Statement of Work tied to a particular agreement
defines not only the scientific or programmatic scope of the research project, but also defines to which scientific inventions the legally binding licensing rights granted to an industrial sponsor attach. Thus, agreeing to perform overlapping Statements of Work . . . for different partners (research sponsors, material providers, collaborators) runs the high risk of disputes, soured relationships, or litigation” (OTT, “Statement of Work,” http://www.ucop.edu/ott/investig/statement.html).
.Interview with Christopher Newfield, 16 April 2002. .For example, university research funded by the U.S. Public Health Service (including the NIH)
“are governed by the standards for "Objectivity in Research"and which . . . are published in 42 CFR Part 50 and 45 CFR Part 94. This Policy also implements federal requirements contained in the National Science Foundation's ‘Investigator Financial Disclosure Policy.’ Both agencies require the University to maintain an appropriate written policy on conflict of interest disclosure as a condition for receiving federal grants” Similarly, the State of California enforces State Disclosure Requirements: “The California Administrative Code, Title 2, Section 18705, requires disclosure of financial interest in private sponsors of research by all principal investigators on sponsored projects administered by the University. The University [of California] has implemented the State requirement by the University Policy on Disclosure of Financial Interest in Private Sponsors of Research issued April 27, 1984, published as Academic Personnel Manual Policy 028 and utilizing University Form 730-U” (UCOP, “University of California Policy on Disclosure of Financial Interests and Management of Conflicts of Interest Related of Sponsored Projects, (October 1995; rev. October 1997; http://www.ucop.edu/research/disclosure.html).
.APM 028-10 p 2. See http://www.ucop.edu/acadadv/acadpers/apm/apm-028.pdf. The
sample conflict of interest form at the end requires thorough disclosure of financial interests.
.See previous note. .Note also that UC Academic Personnel Manual section 28, which covers financial disclosure,
defines the reporting threshold as $1000. This policy was established in 1984. The figures of $500 and
$2000 trigger various kinds of disclosure thresholds in the University’s Conflict of Interest code; see http://www.ucop.edu/ogc/coi/text.html.
.”Even when . . . high standards have been met, however, conflicts of interest or perceptions of
conflicts may still occur when there is a convergence of an Investigator's private interests with his or her research interests, such that an independent observer might reasonably question whether the Investigator's professional actions or decisions are improperly influenced by considerations of personal financial gain. Such conflicts are common in modern research universities and do not necessarily impugn the character or actions of any individual,” (UCOP, “Policy on Disclosure”).
.UC’s APM section 025-10 reads, in part, as follows: “a faculty member may pursue compensated
outside professional activities that advance or communicate knowledge through interaction with industry, the community, or the public, and through consulting or professional opportunities. Such activities give the individual experience and knowledge valuable to teaching, research, and creative work activity and/or provide a University-related public service.”
Standing Order 103.1b, at http://www.ucop.edu/regents/bylaws/so1031.html. The order for private employment by Officers, faculty members, or other
employees of the University shall be subject to such regulations as the President may establish.”
123 124 125 126 127
.UC APM 025-6. .Mimura, “Faculty Entrepreneurship.” .The figure is the same at Stanford University, though it is stated somewhat differently. .UC APM 025-10 c(1). .The text reads, “Providing consulting services or referrals or engaging in
professional practice where such activities are provided by the faculty member acting as an individual or are provided by the faculty member through his or her single member professional corporation or sole proprietorship. Providing such services through other types of organizations or arrangements (e.g., through a publicly held
corporation) requires prior approval in accordance with APM - 025-10-c(1)” (APM 02510-c(2).
.Sole proprietorships and single member professional corporations are not restricted by Category
I regulations (APM 025-10-(c)1: they are generally allowable. As individual forms of consulting.
.The regulation also notes that “providing professional services through a more complex type of
organization, in which the role of the faculty member might potentially be classified as executive or managerial, is ordinarily allowable in disciplines where the Chancellor has determined that professional practice is generally accepted as being integral to faculty work (e.g., in architecture or law).”
.UCOP, “Consulting with Industry,” http://www.ucop.edu/ott/consult.html .See UC OTT’s searchable page of “Available Technologies” at
.One example of this widespread language: “UC figures prominently in Gov. Gray Davis’ 2003
budget proposal to spark economic growth in California. As a key piece of his statewide economic stimulus package, the governor’s budget calls for funding several UC research centers a year earlier than previously scheduled. The investment in UC education and research that will occur in the completed buildings will be a catalyst for California’s economic growth” (In Touch 2:2, 1).
.The first figure comes from Mimura, “Faculty Entrepreneurship,” and the second from UCOP, In
Touch 2:2. In FY2000, 454 university-based spin-offs were begun in the country as a whole.
In FY 2000, universities took equity stakes in 56% of the spin-off companies
started by their employees (AUTM, 2000 Survey Summary, 15).
.Carol Mimura, “Faculty Entrepreneurship.” .Such a leave was recommended by a task force at the President’s Retreat 1997, and is under
.Mimura, “Faculty Entrepreneurship.” .Business and Finance Bulletin G-XX, sec 3.4.2.
.UC language leaves room for inventor participation when deemed necessary: “The State of
California Political Reform Act of 1974 prohibits University employees from participating in University decisions when personal financial interests may be affected by those decisions. Making a decision or attempting to influence a decision on which business entity will receive a license to a University invention, and the terms of such a license, including acceptance of equity as consideration for the license, are University activities from which you may need to disqualify yourself” (UCOP, “Business and Finance Bulletin G-XX: Guidelines on Accepting and Managing Equity When Licensing University Technology,” Appendix C. Regarding licensing, regulations note that “When an inventor has a disqualifying personal financial interest, it is sometimes determined useful or necessary by the Licensing Professional for the inventor to be involved in the licensing decision-making process as his or her expertise and input may be important to successful licensing and technology transfer. In such cases, the LP may determine that it is beneficial for the inventor--despite the existence of an interest--to work closely with the LP and with potential licensees, or to be directly involved with companies that are potential licensees. An inventor sometimes becomes involved by negotiating "across the table" from the University on behalf of a company in which the inventor has a disqualifying personal financial interest. (University of California Guidelines on Managing Potential Conflicts of Interest In Licensing (August 1, 2001), Sec III. These Guidelines also state that “The inventor’s share of royalty income paid to a University inventor by the University relating to the licensing of his or her invention is not considered to be a disqualifying personal interest of the inventor in the licensee of that invention. (Guidelines 2001, Sec I).
140 141 142
.Mimura, “Faculty Entrepreneurship.” .AUTM, FY 2000 Survey Summary, 11. .The UC Equity Policy lays out the problem: “Technologies disclosed by University faculty,
research scientists, and other staff are offered to potential licensees, often during the early stages of developmental research. These technologies typically require a considerable amount of additional research to prove the value of the technology or to support good patent protection, if appropriate. Therefore, the University seeks licensees able to demonstrate that they currently are adequately financed or that adequate financing will be available, and that they are willing to focus such resources on the
developmental research necessary to advance the technology to a marketable condition. Further, such licensees must be able to meet regulatory requirements for introduction of the technology into the marketplace and to satisfy adequately the market demand for the technology” (“Policy on Accepting Equity when Licensing University Technology,” February 16, 1996, at http://www.ucop.edu/ott/equipol.html).
because of its need to be even handed in its support of faculty
members and in its openness to competing commercial enterprises, the University has not arranged for investment in firms whose products derive from University research, when the principal purpose is to promote faculty inventions. If the University were to be an equity participant in the work of one or more faculty members, it could be seen as favoring those faculty members, and could be in conflict with the University's role to support scholarship and allocate institutional resources in an even-handed manner. Moreover, this kind of relationship with certain companies could preclude or inhibit research sponsorship by other competing companies” (Guidelines 1989, Guideline 13).
.Bulletin G-XX, sec 3.3. .”The ALO must secure disclosure of financial interests from inventors in the potential licensee in
cases where equity is to be accepted. The ALO also must document the licensing file with evidence that information provided by an inventor with a disclosable financial interest did not influence the ALO's decision to accept equity or to select a particular licensee. Finally, in cases where future research support is a condition of the license, the ALO must insure that disclosure and review is conducted by the local independent substantive Review Committee (ISRC),” Bulletin G-XX, sec 3.4.2.
146 147 148
.Bulletin G-XX, sec 22.214.171.124. .Bulletin G-XX, sec 3.10.1. .Mimura, “Faculty Entrepreneurship.”
.In addition, “No consideration shall be given to unpublished University research program
results related to the technology nor to company information uniquely available to the University through its technology transfer program activities,” Bulletin G-XX, sec 5.1.1.
150 151 152
.Bulletin G-XX, sec 3.8.1. .”UC Equity Policy,” http://www.ucop.edu/ott/equi-pol.html . For example, ”Harvard academics cannot conduct research for a company in which they own
more than $20,000 in stock, or from which they receive more than $10,000 in royalties or consulting fees” (Mangan, “Harvard”).
153 154 155
.(is this the correct definition of double-dipping?). .This paragraph is based on Mimura, “Faculty Entrepreneurship.” .Guidelines1989, guideline 4. For a collection of University of California policies regarding conflict
of interest, see http://www.ucop.edu/services/conflictofinterest.html.
.) Section 9 on “Disqualification” reads in part:
No designated employee shall make, participate in making, or in any way attempt to use his or her official position to influence the making of any governmental decision which he or she knows or has reason to know will have a reasonably foreseeable material financial effect, distinguishable from its effect on the public generally, on the official or a member of his or her immediate family or on:
(A) Any business entity in which the designated employee has a direct or indirect investment worth one thousand dollars ($1,000) or more;
(B) Any real property in which the designated employee has a direct or indirect interest worth one thousand dollars ($1,000) or more;
(C) Any source of income, other than gifts and other than loans by a commercial lending institution in the regular course of business on terms available to the public without
regard to official status,
aggregating two hundred fifty dollars ($250) or more in value
provided to, received by or promised to the designated employee within 12 months prior to the time when the decision is made;
(D) Any business entity in which the designated employee is a director, officer, partner, trustee, employee, or holds any position of management; or
(E) Any donor of, or any intermediary or agent for a donor of, a gift or gifts aggregating three hundred dollars ($300) or more in value provided to, received by, or promised to
the designated employee within 12 months prior to the time when the decision is made.
(UCOP, “Conflict of Interest Code Text,” at http://www.ucop.edu/ogc/coi/text.html) Note that this section uses reporting thresholds that were effective prior to January 1, 2001.
.”Principal investigators whose research is funded in whole or in part by nongovernmental
entities are designated employees subject to disclosure requirements developed pursuant to subdivision (c) of Title 2, California Code of Regulations section 18702.4.7 Principal investigators shall disclose in accordance with Disclosure Category 27 in Appendix B of this Code. A principal investigator must disclose whether or not he or she has direct or indirect financial interest in the sponsor of research which is funded in whole or in part (a) through a contract or grant with a non-governmental entity or (b) by a gift from a nongovernmental entity which is earmarked by the donor for a specific principal investigator. Disclosure statements must be filed (a) before final acceptance of such a contract, grant, or gift; (b) when funding is renewed; and (c) within 90 days after expiration in the case of a contract or grant, or after funds have been completely expended in the case of a gift” (“Conflict of Interest Code,” sec 12).
.UC has two major forms for this purpose.
Form 730-U is the “Principal Investigator's
Statement of Economic Interests.” Form TT-100 is the “Inventor Statement Concerning Involvement
in Licensing Decisions.”
the mid-1990s, the National Science Foundation, the US Public Health Service
(including the National Institutes of Health, and the Federal Drug Administration,
issued requirements for the disclosure of the financial interests of all Principal Investigators and Clinical Investigators receiving those agencies’ funds. These required universities to set up procedures for disclosure, persons and offices to review those disclosures and resolve the conflicts, and to provide for enforcement, reporting, and record keeping. For a useful summary, see “Financial Disclosure Policy for Research and Sponsored Projects,”
Almanac 47:21 (2001), The University of Pennsylvania at http://www.upenn.edu/almanac/v47/n21/ORdisclosure.html. Most research universities already had such requirements in place, but also revised these to resolve any discrepancies with the federal regulations.
. (COI does not review all proposals, just those tied to positive 730Us? Is COI involved with
licensing, and if so, only those triggered by positive TT-100s?).
.This paragraph is based on Carol Mimura, “Faculty Entrepreneurship.” .UCOP, “Principles Regarding Rights to Future Research Results
In University Agreements with External Parties,” August 26, 1999; at http://www.ucop.edu/ott/082699a.html.
.(Are such student cases really managed as opposed to prohibited?) .”Agreements with external parties shall ensure the ability of University researchers to utilize the
results of their research to perform future research” (“Rights to Future Research Results.”)
.Much of the previous two paragraphs are based on conversations with Elizabeth Boyd,
Department of Clinical Pharmacology, UC San Francisco.
. (I have conflicting accounts of the place of conflict of commitment in COI proceedings. Does
COI make formal recommendations on these as well? Are there campus variations?)
.For the consolidation and other recommendations, see UCOP, “February 2000 Progress Report
on Priority Action Items Arising from the 1997 President’s Retreat,” at http://www.ucop.edu/ott/retreat/twoyear.html. Significant consolidation of web versions of policy has already occurred, though redundancies and conflicts remain.
. (Is this UCSF Policy 100-27, Disclosure of Financial Interests in Private Sponsors of Research,
currently listed as “under revision”?)
.UCOP, “ University of California Guidelines on Managing Potential Conflicts of Interest in
Licensing” (August 1, 2001), at http://www.ucop.edu/services/conflictofintans.html#g5.
.Reporting thresholds are again defined by the California Political Reform Act (1974), but the
figures reported here are somewhat different: $2000 for investments or real property, $500 for income.
171 172 173
.”Conflicts of Interest in Licensing.” .”Conflicts of Interest in Licensing.” .In an additional limit on disqualification, the 2001 Guidelines also state that “The inventor’s
share of royalty income paid to a University inventor by the University relating to the licensing of his or her invention is not considered to be a disqualifying personal interest of the inventor in the licensee of that invention.”
.Charles H. Ferguson, High Stakes, No Prisoners: A Winner’s Tale of Greed and Glory in the Internet
Wars (New York: Random House-Times Books, 1999), 22. In spite of its sensationalist title, this book yokes unusually strong macroeconomic analysis to first-hand, start-up experience. See also Moore, Fault Line, op cit.
.IRS Revenue Decision 97-14, finding pursuant to the Tax Reform Act of 1986. .Jordan Cohen, “Trust Us to Make A Difference,” speech October 2000, cited in “Protecting
Subjects, Preserving Trust, Promoting Progress– Policy and Guidelines for the Oversight of Individual Financial Interests in Human Subjects Research, AAMC Report, Dec 2001.
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