1. Technology Transfer between Public Research and Industry – Laws, Models and Policy Options Thomas Gering

2. Technology Transfer between Public Research and Industry – Laws, Models and Policy Options The views and opinions expressed in this presentation are those of the author and they do not represent the position of the European Joint Research Center or the European Community at large

3. Intellectual Asset Management in the Public Research Enterprise Maximizing Public Good (social return) or maximizing financial (private) return Internationally, the leaders in tech transfer have managed to create revenues of up to 5 % of their research expenditure > There are in fact social returns that should be weighed in the overall analysis

4. Intellectual asset management by PROs Technology Pool Coop. R&D mature companies LicensingStart-Up Companies Link to Venture Capital Non-excl. Who owns what? Quasi-excl. Field of Use Exclusive Joint Venture Equity

5. Which way should Public Research Organisations PROs (incl. universities) go ? Historically, little co-operative R&D in the US More focus on licensing and start-ups (beginning in about the mid 1980s); an effect of Bayh-Dole In Europe much more interest in project based co-operation with the private sector > one example is the European Framework Research Programmes However, limited IP and licensing infrastructure at European PROs In recent years, both sides are trying to adopt some of the features of the other model

6. Which way should Public Research Organisations PROs (incl. universities) go ? Historically, little co-operative R&D in the US Throughout most of the 1960s and 1970s, the business community was the source of 3% of total research performed in universities. By the mid 1980s this had risen to 6 % and in the 1990s to 7 % Source: Wendy H. Schacht, CRS Report for Congress; R&D Partnerships and IP, Implications for US Policy, December 2000

7. Which way should Public Research Organisations PROs (incl. universities) go ? The preferred mechanism of German industrial support for academic research is a research contract with clearly defined deliverables. In the US, most industrial funding of academic R&D takes the form of grants, more open-ended arrangements without specifically defined research deliverables……... Source: Technology Transfer Systems in the United States and Germany, Lessons and Perspectives, German American Academic Council Foundation, National Academy of Sciences 1997

8. Which way should Public Research Organisations PROs (incl. universities) go ? ….the panel judges university-industry research interaction in Germany to be more heavily oriented toward short-term, incremental problem solving than university- industry linkages in the United States. Source: Technology Transfer Systems in the United States and Germany, Lessons and Perspectives, German American Academic Council Foundation, National Academy of Sciences 1997

9. Which way should Public Research Organisations PROs (incl. universities) go ? Some European Research Universities now receive up to 40 percent of their research budgets from private sources on a project contract basis Example: RWTH Aachen Total budget (excl. hospital): 367 Mio Research Budget: 142,5 Mio Source: RWTH Drittmittelreport 2003

10. Which way should Public Research Organisations PROs (incl. universities) go ? This particular university currently lists as assignee (or co- assignee) on 42 patents Hits: 42 (Total hits: 42) 2DE000020313514U1 [DE] Chirurgische Haltevorrichtung DE000020313514U1 3DE000019850026A1 [DE] Verfahren und Vorrichtung zur Herstellung texturierter Garne aus... DE000019850026A1 4DE000019813887A1 [DE] Verfahren und Vorrichtung zur Herstellung von Nähnähten DE000019813887A1 5DE000019750523A1 [DE] Verfahren zur Herstellung verrippter Bauteile nach der Gasinjektionstechnik... DE000019750523A1 6DE000019715630C2 [DE] Vorrichtung und Verfahren zur Bestimmung rheologischer Werkstoffdaten DE000019715630C2 Source: DEPATISnet, German Patent Office

11. Which way should Public Research Organisations PROs (incl. universities) go ? Chirurgische Haltevorrichtung ApplicantPAAesculap AG & Co. KG, 78532 Tuttlingen, DE ; RWTH Aachen, 52062 Aachen, DE InventorIN Application dateAD26.08.2003 Application numberAN20313514 Country of applicationACDE Publication datePUB15.01.2004 Priority dataPRC IPC main classICMA61B 19/00A61B 19/00 IPC subclassICSF16M 11/12 ; F16M 11/14 F16M 11/12F16M 11/14 IPC additional information on descriptionICAA61B 1/00 ; A61B 17/16A61B 1/00A61B 17/16 Source: DEPATISnet, German Patent Office

12. Intellectual asset management – Which focus at RWTH? Technology Pool Coop. R&D mature companies LicensingStart-Up Companies Link to Venture Capital Non-excl. Who owns what? Quasi-excl. Field of Use Exclusive Joint Venture Equity

13. Which way should Public Research Organisations PROs (incl. universities) go ? RWTH chose Collaborative Research almost as its only path to commercialisation RWTH is claiming involvement in over 200 start-up companies since 1995 but they never held equity or any IP that was important to these start-ups > no IP, no licenses Source: RWTH Drittmittelreport 2003

14. Which way should Public Research Organisations PROs (incl. universities) go ? – Some Data on the US Research budget of 200-400 Mio $ Columbia University (407.4 Mio $ sponsored research) 191 US patents filed in FY 2002 55 new licenses/options in FY 2002 155.6 Mio $ gross license income 60 US patents issued 8 start-up companies formed Source: AUTM Licensing Survey 2002

15. Which way should Public Research Organisations PROs (incl. universities) go ? – Some Data on the US University of Florida (369.25 Mio $ sponsored research 207 US patents filed in FY 2002 59 new licenses / options executed 31.6 Mio $ gross license income 62 US patents issued that year 5 start-up companies formed Source: AUTM Licensing Survey 2002

16. Which way should Public Research Organisations PROs (incl. universities) go ? – Some aggregate US Data Gross license income received: 1.337 billion $ 10,866 licenses yielding income Invention disclosures received: 15,573 Total US applications filed: 12,929 New US applications filed: 7,741 US Patents issued: 3,673 Start-up companies formed since 1980: 4,320; still operational: 2,741 Source: AUTM Licensing Survey 2002

17. Intellectual Property Licensing by PROs in Germany Fraunhofer, and to a lesser extent Helmholtz and the universities, focus heavily on collaborative R&D IP positions regularly compromised as a consequence Only Max-Planck (Garching Innovation GmbH) and Fraunhofer Patent Center achieved maturity (major revenues, involvement in litigation, management of big portfolios) in IP licensing With the abolishment of the Professor´s privilege in 2002, 18 regional IP licensing companies were founded with federal sponsorship These companies each work with a number of universities in the regions These programmes have remained marginal so far Both industry as well as some public research organisations are trying to undermine these activities by the universities

18. Patent applications of German PROs Source: Turning Science into Business, OECD, 2003

19. Which way should Public Research Organisations PROs (incl. universities) go ? No University licensing data available in Germany Reason: Up to 2002, licensing was mainly done by the individual inventors because of the Professor´s privilege However, our 1996 study for the Federal Ministry of Science showed that 60 % of the inventions were assigned to industry partners – in most cases without or with minimal compensation Source: Becher, Gering, Lang, Schmoch: Patentwesen an Hochschulen, BMBF 1996

20. Which way should Public Research Organisations PROs (incl. universities) go ? - UK Commercialisation activities in the university sector have substantially increased in the last five years Many universities only created technology transfer offices in the late 1990s Staff numbers are still rising by almost 25 % per annum Internationally, the UK lags behind the US in its expertise in technology transfer, although the UK is ahead of much of the rest of Europe Lack of clarity over IP in research collaborations A minimum of annual investment in research needed in order to justify a technology transfer office; only 25 % of UK universities seem to have such critical mass, yet 80% are now running their own offices > Still struggling with restructuring after BTG disappeared as the sole solution in 1985 Source: The Lambert Review of Business-University Interaction, Dezember 2003

21. Which way should Public Research Organisations PROs (incl. universities) go ? – Other notable models Chalmers University in Gothenburg, Sweden Privatized the whole university; now operates as an AB Technology transfer is a huge operation being responsible for all contract research, an incubator, a technology park, etc. But Sweden lived under a Professor´s privilege system which is still very much defining the mindset Private IP exploitation company in the incubator University of Twente, the Netherlands Probably the European University concentrating most on spin-off creation very early on (1980s) But again, IAM on behalf of the University is not at center stage in this effort

22. Which way should Public Research Organisations PROs (incl. universities) go ? – Legal basis - USA Bayh-Dole Act P.L. 96-517 as amended Stephenson Wydler Technology Innovation Act P.L. 96-418 Bayh-Dole: Doing away with 26 different regulations used by public US research funding bodies For the first time, a uniform policy was implemented that provided the contractor with the opportunity to elect to retain title to inventions

23. Which way should Public Research Organisations PROs (incl. universities) go ? – Legal basis - USA …to replace the existing melange of 26 different agency policies on vesting of patent rights in government funded research….with a single, uniform national policy designed to cut down on bureaucracy and encourage private industry to utilize government funded inventions through the commitment of the risk capital necessary to develop such inventions to the point of commercial application. Source: House Committee on the Judiciary, 1980

24. Which way should Public Research Organisations PROs (incl. universities) go ? – Legal basis - USA If contractor retains title, obligation to exploit arises; reporting requirements Although there was university patenting before Bayh-Dole (IPAs), patenting and certainly licensing rose by about 20 times in the last 20 years Government has march-in rights and can require a non-exclusive license for its own purposes Just giving ownership to industry contractors does not necessarily stimulate use in the markets

25. Which way should Public Research Organisations PROs (incl. universities) go ? – Legal Basis In the EU, concern that different national laws re the ownership and exploitation of IP from PROs, especially at universities, may create barriers to international collaborative research Austria, Denmark, Germany and Norway have recently introduced new legislation to grant universities title to IP resulting from publicly funded research In Finland proposals to the same effect In Japan and Korea, recent reforms in funding regulations to this effect These policy trends echo the landmark US Bayh-Dole Act of 1980 Source: OECD, Turning Science into Business, 2003

26. Which way should Public Research Organisations PROs (incl. universities) go ? – Legal Basis internationally Either there is employer-employee law defining ownership (Germany, Austria) Or there is just common law/case law/individual agreements (US) Or there is some regulation in patent law defining rights of the employee (UK, France) And then there are research sponsorship agreements (do not affect employer-employee relation but define ownership and exploitation framework in projects funded with certain - public – funds) On the European level (research framework programmes) such sponsorship agreements can become extremely complex as these are generally consortium deals involving numerous partners

27. Todays Technology Environment Key Factors

28. The Starting Point: Defining Innovation Invention v. innovation Sustaining v. disruptive innovation (aka incremental v. radical)

29. Characteristics of Disruptive Technology Less profitable in the early years May need long periods of time before market introduction (health care) Need mass market acceptance to achieve full value Cheaper, smaller, simpler, more convenient

30. The Knowledge Economy Protected knowledge now at the core of company valuation Intangibles are now driving market cap Asset Management maintains the lead for up to two decades – sometimes even longer No diminishing returns

31. The Knowledge Economy In certain industries, patents significantly raise the costs incurred by non patent-holders wishing to use the idea or invent around a patent – an estimated 40 % in the pharma sector, 30 % for major new chemicals, and are thus viewed as important. However, in other industries, patents have much smaller impact on the cost associated with the imitation (e.g. in the 7 – 15 % range for electronics) and are considered less successful in protecting investment. Source: Mansfield, Imitation costs and Patents, in The Economics of Technical Change, 1981

32. Technological Change –Technology Push versus Market Pull Entrepreneur Emerging Customer Segments Unsatisfied Existing Needs New Customer Needs New Methods of Manufacture & Distribution Technological Change Higher Productivity & Economic Growth

33. Technology Push: Looking for a Problem

34. Intellectual asset management – Technology Push versus Market Pull Technology Pool Coop. R&D mature companies LicensingStart-Up Companies Link to Venture Capital Non-excl. Who owns what? Quasi-excl. Field of Use Exclusive Joint Venture Equity

35. Speech Recognition – what are the real customer needs? Or as Ozzy said: Radio ON!!

36. Primary Disruptive Technologies for Next Decade Gene Therapy Nanotechnology Wireless Other ??

37. Why are Disruptive Technologies Important?

38. Importance of radical innovation Because it was in disruptive technologies that productivity growth was highest over the last 4 decades ICT Biotech Most of this productivity growth achieved by new players, not by existing companies PROs well suited to drive radical innovation

39. The Technology Transfer Process at PROs

40. How to position a PRO in the market What is the customer base? Are the customers prepared, able and willing to do R&D collaborations? Does this apply to all technology sectors the PRO represents? Or do you have to use a custom approach in different technological fields?

41. Intellectual asset management by PROs Technology Pool Coop. R&D mature companies LicensingStart-Up Companies Link to Venture Capital Non-excl. Who owns what? Quasi-excl. Field of Use Exclusive Joint Venture Equity

42. Local, Regional Customer base Mainly SMEs ? High Tech ? Multinationals ? Incentives available ? Government co- financing ? Taxes ?

43. Local, Regional Customer base What do you do if there is no such thing ? Multinationals ? Engage in company formation and business development ? But that changes the requirements completely !

44. Requirements What is it? Tech commercialization is a parallel process of radical and incremental innovation, the determination of technical and business feasibility, the creation of intellectual assets, and the development of a plan to enter the market. Why do it? To build sustainable companies

45. Requirements You will only be able to attract investors if your Intellectual Asset Management (IAM) approach is effective IP in general, trade secrets and confidential know-how are the building blocks for such an IAM programme That makes the national legal system re ownership and exploitation of PRO results so important > If you cannot manage your assets effectively for the sake of the investor you will have no business !

46. Conclusions Technology Transfer, IP management and licensing by PROs has to be seen in the broader perspective of how the individual, national research and innovation system is structured More collaborative research and research funding by industry will make it more difficult to maintain freedom to operate If freedom to operate exists for PROs, mature programmes require significant lead time and professionalism OECD 2003 (Turning Science into Business): On average, PROs engaged in Intellectual Asset Management need more than seven years to break even US-Policy considerations: Jobs created (more than 300000), 3 billion in taxes generated (1 billion royalties), source:AUTM

47. Thomas Gering Ph.D. Thomas.Gering@iam-corp.net