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The Tech-Transfer Debate
Converting academic research into commercial dollars is fattening many a university treasury. But could it compromise the institution’s principles? Yale scholars and administrators are of many minds.
April 1993
by Bruce Fellman
Nobody goes into academia for the money. Indeed, most
academic disciplines have traditionally dismissed any motivation other than
“discovery-for-discovery’s-sake” as inappropriate or worse. But the ongoing
revolutions in such areas as biotechnology, computers, and electronics, coupled
with changes in federal laws that make it possible for universities—and
individual scientists—to cash in on research findings, are changing the
relationship between profit and the professoriate.
And that’s as it should be, says
Thomas H. Brown, professor of cellular and molecular physiology. “When I was a
graduate student at Stanford more than 20 years ago,” he says, “I liked the
idea that the university should be separate from the commercial sector, but
anyone who holds that view today is living in the dark ages.” Adds Brown, who
also serves as director of Yale’s Center for Theoretical and Applied
Neuroscience (CTAN), an interdisciplinary effort funded with state, University,
federal, and corporate money to undertake and commercialize neuroscience
research: “For both practical and idealistic reasons, industry and academia
should be closely integrated.”
There are, to be sure, rewards. At
places like the Massachusetts Institute of Technology and Stanford, the
practice of transferring “pure” research to commercial use is long-standing and
fruitful, having helped spawn both the Route 128 “High-Tech Highway” outside
Boston and “Silicon Valley” in California, adding significantly to the
university coffers in the process.
Yale’s Sidney Altman, a professor
of biology and winner of the Nobel Prize, applauds the concept of
“tech-transfer” and insists that, if handled properly, there’s “nothing
inherently evil involved that will undermine the basic purpose of a
university.” Others are not so sure. “There’s a temptation for a university to
jump right in to show how practical we can be,” notes Jaroslav Pelikan, a
Sterling Professor of History with a long-standing interest in the
tech-transfer issue. “I’m concerned that we in the academic community are
increasingly involving ourselves and our institutions in commercial endeavors
without considering the intellectual, moral, and legal problems. This is not
the kind of thing one should blunder into.”
Pelikan has a point. Conflicts of
interest, conflicts of commitment, dishonesty, secrecy, product liability
suits, even the loss of tax-exempt status—these are only some of the pitfalls
that may accompany academic forays into commercialization. “As we move more
into this area, the problems are bound to increase,” notes Robert H. Szczarba,
Yale’s deputy provost for physical sciences and engineering, “but I think we
can handle them.” In attempting to do so, Szczarba’s office, which investigates
possible infractions, is currently in the process of drafting a comprehensive
policy to deal with conflicts of interest.
While not in a league with MIT or
Stanford, Yale has already had considerable experience in tech-transfer. The
Office of Cooperative Research (OCR) recently celebrated its tenth anniversary
arranging matches between academic discoveries and companies that might exploit
them in the marketplace. Among the cooperative ventures set up by individual
faculty members is Neurogen, a Branford-based biotechnology corporation involved
in translating basic neuroscience research into novel therapies for psychiatric
disorders. Another is MCG International, of New Haven, which manufactures the
phonocardiograph, a device to monitor the heart. A third is Scientific
Computing Associates, a New Haven-based firm whose software products, like
those of other Yale spin-off companies, are based on discoveries made in the
professors' laboratories. From Science Hill to the School of Medicine, an
increasingly large amount of research support comes from corporations,
particularly such pharmaceutical giants as Lederle Laboratories and Miles.
Yale’s most ambitious effort to
stimulate such relationships remains Science Park, the 80-acre complex just
north of the Yale campus where CTAN has its headquarters. Established in 1982
on the site of the old Olin Corporation and U.S. Repeating Arms factories,
Science Park in large part was created and developed by Yale as a home for
science-hungry firms that could benefit from close proximity to the University.
That effort is now being supplemented by plans for a biotechnology park to be
located near the School of Medicine, Yale–New Haven Hospital, and the Hospital
of Saint Raphael. The goal is to take advantage of what Medical School dean
Gerald Burrow terms a “tremendous reservoir of untapped talent.”
Burrow seems like an ideal agent to
broker such opportunities. While serving as the vice chancellor for health
sciences at the University of California at San Diego in the 1980s, he helped
build a flourishing community of biotechnology companies, many of them
spin-offs created to exploit UCSD discoveries. “The science base was there,
just as it is in New Haven, but there was much more of an entrepreneurial
attitude on the West Coast than we find here.”
Which is not to say Yale has not
been trying. “In the last ten years we’ve done quite a bit,” says Robert K.
Bickerton, director of the Office of Cooperative Research since its inception
in 1982. Bickerton explains that when OCR was started—in response to the
recommendations of a committee convened in 1980 by President Giamatti—“Yale
wasn’t even in the rankings of interacting with industry and industrial
research support. Today, we’re in the top 20. There’s been a dramatic increase
in industrial contact, and while it’s true that in the past the doors were
closed, they’re now wide open.”
A recent OCR report summarizing its
first decade confirms Bickerton’s optimistic assessment. The number of
“invention disclosures”—statements that announce potentially patentable
technologies or processes—averaged about two per year before the OCR set up
shop. Last year, there were ’8. Most of these were generated by the Medical
School in biotechnology, and Bickerton expects an increased number of
disclosures this year. The number of patents issued on Yale inventions was
minuscule before 1982; it now stands at ’6. Many of those are producing
significant revenues—more than $5.5 million over the ten-year period—through
13’ licensing arrangements. Finally, research support from industry, which had
been less than $800,000 annually before OCR’s inception, last year reached $14
million.
The numbers paint a different
picture of an office—and a University—that was characterized by one disgruntled
researcher as “not doing a damned thing” in the tech-transfer arena. In fact,
Yale stacks up rather well against such institutions as the universities of
Pennsylvania and Minnesota, both of which have research budgets comparable to
Yale’s and generate similar royalty incomes. Yale does considerably better than
Princeton, Brown, and Dartmouth, but it is outpaced by Harvard, Cornell, and
Columbia, which, in an OCR survey that covered the 1990-91 academic year,
garnered $2.4 million, $1.8 million, and $11.4 million respectively. In that
same period, MIT’s licenses brought in $4.6 million while Stanford’s generated
$25.3 million.
One reason for the income
difference between Yale and these universities was the solid performance of a
large number of small efforts, what Lita Nelsen, director of MIT’s Technology
Licensing Office calls “lots of cats and dogs and upstanding citizens.” MIT,
for example, had nearly three times the number of licenses in effect as did
Yale during the survey period. But in most cases, what separates the best
moneymakers from the rest is the “big hit: “ the multimillion-dollar-a-year
patent.
MIT, which had benefited for years
from patents on synthetic penicillin and magnetic core computer memory, no
longer has a seven-figure winner. Harvard, however, reaped 60 percent of its
$4.3-million licensing and trademark revenues last year from just three
inventions: a gene sequencer, software that enables computers to simulate
molecules, and a heart-imaging technology. At Columbia, a group of
biotechnology patents accounted for the major share of licensing revenues that
in the last fiscal year reached $20 million. Stanford also reaped the majority
of its licensing revenues from patents for biotechnology processes.
Yale’s Donald Engelman, a biologist
and professor of molecular biophysics and biochemistry, suggests that the
University’s absence from the big-winners' circle may have more to do with
timing and luck than the quality of its research. “We’ve had our opportunities,
and we are desperately underexploiting them,” he says. A technique patented by
geneticist David Ward, a professor of molecular biophysics and biochemistry, is
often cited as an example of “one that got away.” In the late 1970s, Ward
discovered a method to investigate important biochemical reactions without the
use of radioactive isotopes. He now believes that Yale could have earned
considerably more money than it has on the method, but he admits that at the
time it seemed to lack major income-producing potential. Of course, when
problems with the disposal of low-level radioactive waste cropped up in the
1980s, Ward’s non-radioactive techniques were soon in demand, and might have
produced a financial bonanza, but he and the University were stuck with a
17-year contract at terms that were suddenly less than attractive.
Complaints persist on the Yale
campus about licensing arrangements that weren’t all they might have been, and
there are persistent rumblings that an organization with a $225-million
research budget must have come up with something of major commercial importance.
Whatever the reason, the University
has yet to enjoy a mega-success, but that may soon change, for among the many
discoveries that are making the transition from the laboratory to industry, at
least one appears to have genuine blockbuster potential. In the course of
routine investigations of the antiviral activity of a number of compounds,
William Prusoff and his longtime collaborator, T. S. Lin, both senior research
scientists in pharmacology, came upon a substance that is effective against HIV,
the virus that causes AIDS.
Prusoff, who had earlier discovered
a drug that worked against the herpes virus, explained that the new compound,
dubbed D4T, is being developed in collaboration with the Bristol-Myers Squibb
Company of Wallingford. “It’s at least as effective as AZT and far superior to DDI
[two drugs commonly in use against HIV], but D4T is considerably less toxic,”
says Prusoff, citing the results of recent clinical trials conducted by the
drug company.
With the number of HIV-infected
individuals climbing into the millions, the market for a compound that
effectively combats viral activity and has fewer side effects—DT4 is not an AIDS
cure—is huge, researchers and industry analysts agree. And while Prusoff
acknowledges the profit potential—Yale, as patent holder, and the inventors
split the royalties equally—he says that personal gain never motivated his
research. “Basically, what drives me is an interest in finding compounds that
have biological activity,” he says. “But it’s always a hope that you’ll discover
something of use to society.”
Mark A. Reed, a professor of
electrical engineering, may also have “something of use” on his hands. Reed's
work developing techniques and devices to move electrons around in novel ways
may enable computer makers to create the next generation of computer chips.
Even though manufacturers can currently pack a mind-boggling 64 million
transistors on a chip the size of one’s little fingernail, the
information-processing devices required in the next century will need to be faster
and more powerful. There is, however, a limit to what can be done with
conventional technology, and so in about ten years, says Reed, “we’re going to
be in serious trouble. We could pack up and go home, or we can try a radically
new approach.”
Reed, who came to Yale from a
research stint with Texas Instruments, is a scientific radical whose work is
tempered by corporate realities. “I’m fascinated with the basic physics
involved, but I also want to make devices with good properties, like operating
at room temperature, that can be easily manufactured,” he explains. “This is
high-risk research, but if we win, there’s a huge payoff.”
A vaccine against Lyme disease, the
development of custom-tailored bacteria that clean up oil spills, anticancer
drugs and therapies, bioengineered genes to combat disease—these are among the
numerous examples of Yale discoveries that are making a kind of leap of faith
from the basic research for which universities are known to the terra incognita
of commerce.
There is, however, considerable
disagreement over the best method for accomplishing the transfer. OCR director
Bickerton takes a fairly low-key approach, which is about his only option,
given the office’s small budget ($2’6,000) and staff (three professionals and
one administrator). The process begins when a researcher, armed with the
proverbial “better idea,” comes to Bickerton’s office to fill out an invention
disclosure form. This is evaluated internally, and if there’s consensus that
the idea has merit, the OCR contacts potential licensees and sends them
information, which remains confidential to protect the interests—the ability to
patent the invention, in particular— of both Yale and the inventor. (On the
rare occasions when an evaluation suggests minimal interest, the inventor is
free to pursue commercial possibilities on his or her own.)
Some faculty members grumble that
the process is “too reactive,” because it relies on researchers to come to the OCR,
rather than vice versa. “We need a marriage broker with chutzpah,” says Stephen
Wardlaw, a clinical professor of laboratory medicine who holds more than 150
U.S. and foreign patents for a variety of medical techniques and equipment.
But an informal survey of several
other major universities reveals a similar approach. “We rely very heavily on
word of mouth to reach faculty,” says MIT’s Lita Nelsen, “and basically,
everyone’s happy.” Of course, the size of Nelsen’s operation, with an annual
budget of $5 million and a 20-member staff, also has something to do with its
success, as does the presence of professional engineers who “speak the language
and know what it takes to get a product to market.”
Much of the money at MIT is
consumed by attorney’s fees for patenting discoveries (securing a U.S. patent
can easily cost $10,000; a foreign patent often requires more than $100,000).
Bickerton’s office tries to sidestep that expense by working out a partnership
with the appropriate industry in which company lawyers undertake the legal expenses
of getting a patent in the name of the University and the inventor in return
for exclusive licensing rights.
On a few occasions Yale has put up
its own money to secure a patent, as it did recently for a process invented by
Robert Apfel, the Robert Higgin Professor of Mechanical Engineering, to make
metallic glasses, materials with highly desirable strength and flexibility
characteristics. Deputy provost Szczarba acknowledges that Yale is going to
have to commit more of its resources to tech-transfer in the future. “Per
dollar spent, we’re doing very well, but we’re not doing enough,” Szczarba
says, adding that the administration is currently reviewing its options. “We
have an enormous research plant—we can do better.”
One logical next step would be to
follow the example of both Harvard and Johns Hopkins, which created autonomous
venture-capital companies to deal with the kind of discovery that’s gone about
as far as it can go in the basic research laboratory, but not far enough to
excite industry. Such university-supported efforts can nurture work to the
point of demonstrating its commercial potential, after which a company would
take over and, if all went well, bring the discovery to the marketplace.
In the absence of such financial
resources, Bickerton attempts to bring in interested industries “very early in
the product development cycle. We try to get them to underwrite any additional
research that’s needed in return for an exclusive licensing option.” (Another
option, often employed elsewhere but rare at Yale, is to accept an equity
position in lieu of royalty payments. That approach, which carries heavy
financial and conflict-of-interest risks, can be lucrative; MIT recently
realized $10 million when it sold its equity in two companies.)
Yale may not be going the venture
capital route, but it has committed a significant amount of money—$2.1
million—to Science Park, which both University and New Haven officials hope
will yet become an incubator of technology-oriented businesses. The recession
has hampered the project’s prospects, and the endeavor is hamstrung by what
biologist Sidney Altman euphemistically calls its “insalubrious location” in a
rundown part of New Haven. But while the endeavor has had more than its share
of growing pains, Robert Apfel, whose small business is headquartered there, is
as happy with his set-up as he is with the University’s involvement in the
project. “This is a healthy, cooperative effort, and it’s a healthy direction
for Yale,” says the founder of Apfel Enterprises, which Apfel started in 1987 to develop and market a radiation detector based on discoveries he made in his
Yale lab during the 1970s.
Low overhead expenses and access to
University facilities and people are clear pluses, notes Apfel, but another
decided advantage of being in Science Park is the “camaraderie that has
developed among the many struggling entrepreneurs there. We’re all in the same
boat with the same problems, and we tend to get together a lot to share our
expertise.”
The development of this kind of
entrepreneurial and technological critical mass and cross-fertilization was
exactly what Yale hoped to achieve through its involvement with the project.
“Having Science Park succeed is terribly important,” states D. Allen Bromley,
the Henry Ford 2nd Professor of Physics, who recently returned to Yale after
serving as science and technology adviser to President Bush. “It’s very
important for universities in general and Yale in particular to improve their relationship
with the industrial sector.”
In fact, they may have little
choice. Just before leaving office, Bromley and his colleagues prepared a
report titled “Renewing the Promise: Research-Intensive Universities and the
Nation” that set a course for the future direction of research in this country.
While “advancing the frontiers of knowledge” was a “national imperative,” wrote
Bromley, he called for “no net expansion” of research programs. The federal
government, which fueled the fundamental-knowledge boom of the past quarter
century, simply lacks the cash to do more, and so universities will often be
forced to develop closer ties with the private sector to keep the research
machine humming.
Such a relationship might prove
beneficial in an unexpected way, says Bromley. “One of the most depressing
aspects of going to meetings, particularly at the more prestigious
universities, was to hear someone complaining that ‘if I don’t get this grant,
I’ll have to go to industry.’ There’s this idea that industry people are somehow
second-class minds, and in industry, professors are too often characterized as
wild-eyed dreamers who’ve never had to meet a bottom line. We need to kill
those stereotypes and get people working together.”
Yale could certainly benefit, both
from the exchange of ideas between disparate cultures, and, in all likelihood,
financially. The beleaguered New Haven economy would also profit should the
University become the engine that drives a boom of new businesses.
The less-than-starry-eyed reality,
however, is that many more ventures fail than succeed. “We’re realizing that
tech-transfer is a lot more complicated than we thought,” says Vincent T.
Marchesi, the Anthony N. Brady Professor of Pathology and director of the Boyer
Center for Molecular Medicine. Marchesi, whose research in cardiovascular
diseases has widespread commercial possibilities, notes that “university
researchers think they own the franchise for discovery, but pharmaceutical
companies and others like them are getting their own scientists. Everyone's
getting more sophisticated.”
Still, for all the difficulties and
the discomfort, the rewards seem worth the risks. Says professor of cell
biology Spyridon Artavanis-Tsakonas, who has patented engineered genes and formed
a company called Topogenetics to exploit his discoveries: “Tech-transfer may
not be something we'd like to do, but it’s what we should be doing. If we don’t, the
potential for worthwhile applications and huge revenues will slip through our
hands.”  |
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