Skip to main content

Old-fashioned Tech Transfer

Licensing isn’t the only way for industry to tap into university knowledge.

May 1, 2008


Old-fashioned Tech Transfer

RightNow Technologies of Bozeman, Mont., doesn't license any technology from nearby Montana State University. The 11-year-old, rapidly growing firm developed its products—software programs to manage customer service and sales—in-house, using code written by its own software engineers. But the company depends on MSU nonetheless, as the go-to source for those programmers and other highly skilled workers. Over 20 percent of the company's 700 employees hold MSU degrees, said Chief Operating Officer Susan Carstensen, who herself is an alumna.

It's "highly unlikely" that the firm would be in Bozeman—a small city remote from coastal information technology centers—without the opportunity to hire MSU graduates, she said. "That source of talent is so important, especially in the computer science area. … [T]he Internet removes geography, but you still have to have a great source of human capital."

Research universities play a vital role in promoting innovation in the marketplace and prosperity in their home states and communities. For RightNow and technology companies across the district and nation, much of this knowledge transfer occurs through conduits that existed long before passage of the Bayh-Dole Act of 1980. The most obvious and broadest of these alternative pathways are education and public research, the traditional twin missions of research universities.

University teaching provides industry with a renewable source of human capital—graduates who use their knowledge and skills to create new, commercially viable products, processes and services. "It is often said that the best form of technology transfer is the moving van that transports the Ph.D. from his or her university laboratory to a new job in industry," wrote Massachusetts Institute of Technology professor Richard Lester in a 2005 report on universities' contribution to local economic development.

Often freshly minted baccalaureates, masters and doctorates take jobs in their alma mater's host city or state, enriching the area talent pool. A 2006 survey of graduates from the Twin Cities campus of the University of Minnesota found that over 80 percent of Minnesota resident students who earned a four-year degree were living in the state five years later. It also found that almost half of international students who earned a baccalaureate degree were living in Minnesota.

Companies tap into basic university research through publications in scholarly journals, presentations at conferences and seminars, and informal elbow rubbing with academic researchers. By enhancing understanding of scientific principles underlying technology, basic research increases the efficiency of research and development carried out by industrial labs. The result: more industry-patented inventions, marketable products and corporate revenue flowing through the economy.

Studies of industrial patents have demonstrated that openly published academic research stimulates commercial innovation to a greater degree than university patenting and licensing. Unpublished research by Bhaven Sampat, an economist at Columbia University, shows that this is true even in the pharmaceutical industry, where exclusive licensing is commonplace. In his analysis of drugs approved by the U.S. Food and Drug Administration over the past 25 years, less than 5 percent of the drugs owed their development directly to licensed academic patents. Nearly one-third were based on general university patents or published research.

Other modes of tech transfer that don't necessarily involve licensing and patenting include:

  • Agricultural extension offices, technical assistance programs, small-business assistance centers and other free university programs that help businesses solve problems or improve products and services.
  • Cooperative relationships between universities and industry focused on carrying out applied research or testing infant technologies (although such links raise concerns about the commercialization of university research—more on this below).
  • Consulting to industry by individual faculty members, either for a fee or on a pro bono basis.
  • Public forums such as university-hosted conferences, seminars and alumni events for the exchange of information about new technology and market opportunities.

The ties that bind

When asked about tech transfer, businesses themselves express a strong preference for these alternative, often overlooked channels of tech transfer. In a 2007 University of Minnesota survey of top executives at Minnesota firms, the top three reasons given for seeking assistance from the university were to hire students, participate in continuing education programs and make use of university faculty and research facilities. Licensing technology from the university ranked fifth.

National studies of industry attitudes toward tech transfer have yielded similar results. A 2002 survey of manufacturers found that in most industries, R&D managers considered licensing technology from universities much less important than publications, conferences and informal interaction with university researchers.

Anecdotal evidence supports the idea that many companies sustain advantageous connections with research universities that go far beyond licensing agreements.

Rural Technologies Inc., a veterinary contract research firm in Brookings, S.D., does license university technology—diagnostic reagents invented at South Dakota State University that it sells to research institutions. But that's just one nexus between the company and the university. Eighteen SDSU graduates or faculty members work for the 22-employee company, either as staff or consultants. "A lot of people here at RTI have ties with SDSU," said Chris Mateo, the firm's chief operating officer. "They were students at SDSU, or related in some way to the university. There's a huge common denominator there."

In addition, RTI staffers participate in veterinary science seminars at SDSU and work cheek by jowl with faculty and graduate students on federally funded research projects. One joint project, to develop a method of detecting chronic wasting disease in elk and deer, may yield new diagnostic tools that the company can patent and license to other companies, Mateo said.

Another frequent collaborator with university researchers is S2 Corporation, an early-stage optical communications firm in Bozeman that licenses sensor technology developed at MSU. Often the company shares federal grant funds and lab space with the Spectrum Lab, an MSU research center that strives to commercialize optoelectronic breakthroughs at the university. "We have a separate and very close relationship with MSU that is going on independent of the licensing," said S2 President Kris Merkel.

Now a word from our sponsor

However, such cooperative projects—pathways for tech transfer that have become more prevalent since the 1980s—raise questions about the influence of commercial interests on university research. Research collaborations and other contractual arrangements between university researchers and industry may effectively transfer knowledge to the private sector, but they create the potential for blurring the distinction between public and private research.

University research is mostly government funded because markets tend to underinvest in basic research—fundamental investigations of natural phenomena that cannot be readily converted into intellectual property. Allocating government funds to commercially oriented research valued by industry risks short-changing basic research without adding to the country's store of knowledge. A 2000 study of a federal grant program intended to increase commercial research by small businesses found that such research simply substitutes for research that firms would have otherwise paid for themselves.

What about research projects funded by industry? University faculty and staff involved in the SDSU chronic wasting disease study are paid consultants to RTI, the principal investigator on the U.S. Department of Defense grant that is funding the work. At first blush, industry sponsorship benefits both universities and the taxpayer. Support for applied research by "corporate partners"—last year business contributed over $46 million to research and other programs at the University of Wisconsin-Madison—frees up university funds for basic research.

But caveats apply to sponsored research as well. Corporate funding of university research on early-stage technology is often contingent on the firm getting first crack at licensing any inventions arising from the research. Competitors are barred from making use of key elements of the research in a specified "field of use."

And some economists fear that other types of research-for-hire that involve tire-kicking of industry inventions invite conflicts of interest. Sampat worries, for example, that commercial patronage could unduly influence academic researchers performing clinical trials of new drugs.