Hello!

Thesis: Universities are an effective measure of intellectual property development, yet the current structure of technology transfer prevents many important innovations from exiting the university setting into the real world.

If you haven’t read my Intellectual Property Primer, I’d highly recommend it before reading this article as most of the terminology associated with intellectual property is difficult to understand without a decent background in the field.

Definitions:

• Sponsored Research: Research funding provided by private companies to universities in exchange for certain intellectual property rights or licensing privileges on any resulting inventions.
• Disclosure: The process of documenting an invention or creative work and providing those details to the appropriate office at a university or company for review and potential intellectual property protection.
• Assessment/Triage: The evaluation and prioritization of discoveries and inventions to determine which have the highest commercial potential and are worth protecting.
• Licensing: Allowing external parties access or rights to innovations protected by IP in exchange for financial returns.
• Patenting: Filing a legal application to establish intellectual property rights over an invention or process to exclude others from reproducing without authorization.
• Intellectual Property: Intangible assets that are protected under law, including patents, trademarks, copyrights, and trade secrets.

Technology Transfer 101:

Technology transfer refers to the licensing of intellectual property patents from a university to industrial and commercial entities to generate new products or services. This transfer benefits the university, the inventor, the business, and the United States.

Technology transfer is a form of innovation that is supposed to introduce new products, practices, and processes into the economy. It is the mechanism by which universities ensure that public investment in research enhances economic development and serves the public interest.

When done effectively, these efforts serve the best interests of society, enhance national competitiveness, and affect the economic vibrancy of their local areas.

Technology transfer is typically done in two ways: through licensing patented intellectual property to corporations (universities receive money through cash), and the creation of startup companies (universities receive money through equity in the company).

Technology transfer is a term whose meaning has evolved to include a wider array of duties including corporate engagement, internal development, new company formation, and overall economic development.

Many entities are involved in the enterprise of research and technology transfer.

Universities play a key part in the innovation process. Universities are the seed capital for creating knowledge that fosters this economic growth by creating highly trained human capital and converting research for private-sector consumption. University research funding can support the creation of high-skill industry jobs through innovation, commercialization, and technology transfer.

Between 1996-2020, academic patent licensing contributed $1.9 trillion to the United States economy and supported 6.5 million jobs.

Let’s talk structure.

Technology transfer is traditionally a complex process within universities, existing in many forms (some better than others, but that’s for a future article). It all starts with the invention. If a researcher comes up with a novel product and it turns out to work, great, but the intellectual property (basically their idea and all their work) belongs to the university. So that’s where the technology transfer process starts.

Here’s the current process from a high level that exists within most universities:

Step 1: Invention Disclosure

An invention disclosure is the first step in engaging the technology transfer office to evaluate your invention for commercialization. It is a written description of the invention, supporting data, contributors, and funding sources.

Technology transfer offices rely on confidential invention disclosures for their entire process. They are increasingly stressing the importance of disclosing an invention to the technology transfer office before sharing any research results or publishing. Once the essence of an invention has been publicly disclosed, the potential patent rights to the university are limited.

Technology transfer offices encourage over-disclosure when in doubt because many faculty do not know if their inventions are patentable or have commercial potential.

Only 20% of disclosures are patented.

Step 2: Assessment of Patentability

The technology transfer office is responsible for assessing technology disclosures for potential marketability. This sometimes includes selecting winners and losers when resources are scarce.

The analysis can include:

• An assessment of similar or substitute technologies
• Prior public disclosures and their effect on potential patent protection
• Patentability of the invention
• Protectability and marketability of potential products or services
• Size and growth potential of the relevant market
• Amount of time and money required for further development
• Potential customers
• Companies that might license the technology
• Potential to form a startup company around the technology

Step 3: Patenting

For the technologies that the Technology Transfer Office deems as having potential, the Technology Transfer Office works with legal counsel to prepare provisional, nonprovisional, and international patent applications. This process can take years and takes quite a bit of money to pay lawyers.

If the Technology Transfer Office decides not to pursue patent protection and/or chooses not to actively market the invention, the technology rights may be granted back to the inventor.

Step 4: Marketing and Licensing

Once a technology has been patented, the process is not done. The patented technology needs to be marketed to an existing company or startup. This ensures the technology gets used and royalties are gained for the inventor and university. This step can last years and take thousands of dollars.

Technology Transfer Offices often use the following sources to market or find potential companies to license their technology:

• Inventor - Studies have shown that 70% of licensees in university-based technology transfers are already known to inventors.
• Industry experts
• Technology Transfer staff industry relationships
• Professional consultants or market analysts
• Analysis of complementary technologies
• Industry conferences and events
• Faculty presentations

Some universities even list their licensable technology on their website for public viewing or write small papers (one-pagers) describing the potential uses and licensees of the technology.

Step 5: Licensing

Licensing is a way for patents to be deployed for use in businesses. License agreements describe the rights and responsibilities related to the use and exploitation of intellectual property developed at a university. Licenses generate revenue, as a result of a successful technology transfer.

It’s estimated that only 10% of patents are licensed – meaning 2% of disclosures are licensed

Technology Transfer is like funding a startup.

If this hasn’t been confusing enough, I’ll summarize it here. Disclosure > Assessment > Patent > Marketing > Licensing

And to add insult to injury, universities don’t get paid until they license the technology. So they’re losing money every step of this process until the very end. It’s very similar to the process of funding a startup. Generally, only a very few make it to become massive companies.

So, are universities incentivized to complete this process?

Yes and no. Consider some examples:

• Someone invents a lifesaving cancer drug. Would they patent this? Almost always. There is an extremely large upside (reputation-wise and monetary). Are their chances of being paid back good? Yes.

• Someone invents a new type of biodegradable plastic. Would they patent this? Potentially. There is a decent upside (monetary). Are their chances of being paid back good? Potentially.

• Someone invents a new type of rubber for shoes that is 25% more water resistant. Would they patent this? Probably not. As rubber is already pretty water-resistant, there isn’t a big need in the market for this technology so the upside is low.

So what can we take away from this exercise? Universities generally don’t put time, effort, and money into inventions that they don’t expect to be paid back. To put it more simply, here’s some math:

So, even if a researcher’s invention is amazing and revolutionary, if the university isn’t certain they will be paid back for their efforts, the chances of patenting are slim.

In other words, in pursuit of profit, universities are potentially preventing beneficial technologies from entering the market.

Ok. Now what?

I started this article by stating my thesis, specifically that “the current structure of technology transfer prevents many important innovations from exiting the university setting into the real world.”

Why do I think the current structure of technology transfer is suboptimal?

Three reasons:

1. The current technology transfer process is complex and cumbersome. Many people within the university are severely undereducated on this process (mainly the fact that their invention rights aren’t their own and that even if their invention is good it might not be protected or even leave the university setting).

2. There has been no innovation happening within the technology transfer space within the last 30 years. A study from 1995 cites around 20 problems with the technology transfer process, all of which still exist today.

3. From my research at Penn State, all of the companies I talked to that had gone through the university technology transfer process strongly recommended to not involve the university at all, if possible, when developing a new invention. Is this really the sentiment universities want the broader community to have?

What now? Do we simply give up on this idea of technology transfer and hope that private industry fosters all of the innovation in society?

Stay tuned for part 2: Tech Transfer: University Best Practices

Anywho, that’s all for today.

-Drew Jackson