TECH TRANSFER:

HOW IT’S DONE IN

NEW YORK STATE

With an enormous state push and inflow of funds to the uni­versities of New York State as well as the creation of Centers of Excellence, a hot topic is the transfer of technology from edu­cational institutions into the commercial arena. What’s going on with tech transfer at our institutions? Below are descriptions of tech transfer and licensing models at different institutions throughout the state. The summaries are fol­lowed by commentaries from two New York State–based experts who regularly deal with business around tech transfer — an IP attorney and a venture capitalist.

CORNELL UNIVERSITY

Scott Macfarlane is a Senior Licensing Associate, Physical Sciences, at Cornell Research Foundation (CRF) — the tech­nology transfer office of Cornell University. At Cornell, research faculty and staff are integrally

related to the tech transfer process. Not only do they cre­ate new technology and help promote it (through journal papers, proposals and presenta­tions at conferences), but they also help protect it by working closely with patent attorneys. They are the individuals who often identify companies most likely to be interested in licens­ing their technology. Inventors receive a share of any net profit earned on their technology.

CRF encourages entrepre­neurially minded inventors to start companies around their technologies. It then works closely with them to help them get their new venture off the ground. Licensing agreements as well as work with start-ups represents the beginning of a long-term relationship with CRF, particularly for new ven­tures, where nurturing is need­ed along the challenging road to commercial success.

Cornell averages four start-ups each year using their licensed technology. About half of them locate in upstate New York. While Cornell doesn’t have a university incubator, it does have extensive contacts in the community that can help start-ups find facilities and profes­sional assistance.

ROCKEFELLER UNIVERSITY

With Nobel laureates making up about 10 % of a 76-person faculty, Rockefeller University is a different kind of institution, says Kathleen Denis, Associate Vice President of Technology Transfer. Because their atten‑

tions are focused on other pur­suits, most don’t have time, or the desire, to start a company. They are already at the top and have no desire to leave the insti­tution for a business role.

Rockefeller starts about one company a year, by looking for professional management (preferably serial entrepreneurs; sometimes they find these man­agers through VCs). The likeli­hood of success is far greater with this kind of beginning.

Do they lose value in the process? Sure. But “a small piece of pie that tastes good is better than nothing,” says Denis. Their tech transfer office is small (only two profes­sionals). But in the three fiscal years Denis has been there, the tech transfer function at the university has been at excess net revenues.

Philosophically, Denis is at Rockefeller to promote and sup-port the research enterprise by creating relationships with the private sector to develop, pro­tect, transfer, and commercialize research results for the public benefit. This has different meanings to different faculty members. For instance, Denis’s office helped find a CEO (Sharon Mates) to work with a faculty member (Paul Greengard) to begin Intracellular Therapies, Inc., a

start-up company at the Audubon Incubator.

Tech transfer at Rockefeller tends to be very traditional and conservative. Currently over 100 traditional licenses are evenly split between exclusive and non-exclusive. A 70/3 0 ratio of small/large companies receives licenses.

Rockefeller will use collabora­tive research funds to take a technology forward, usually for two or three years, with a

licensee. Faculty are encour­aged to take positions on a com­pany’s Scientific Advisory Board but are not allowed to take fidu­ciary or director or officer posi­tions and still do research at the university that overlaps that of the company.

COLUMBIA UNIVERSITY

Technology commercialization at Columbia often begins with the licensing officers performing significant outreach to the facul­ty to better understand their research programs and identify inventions that have potential value — both from an economic and societal standpoint, accord­ing to Michael Cleare, Executive Director of Science and Technology Ventures, Columbia’s tech transfer office.

Licensing to start-up compa­nies is an important element of Columbia’s strategy and an

increasingly attractive option for their moving technologies into the commercial sector. Cleare believes that in the cur-rent climate, where larger com­panies are less interested in ear­lier-stage technologies of the sort that typically result from academic research programs, a focused, well-managed start-up can quickly add significant value to an early-stage tech­nology by moving it past proof-of-concept.

Columbia believes two charac­teristics distinguish them in the tech transfer arena: First, their staff is particularly talented at

identifying valuable nuggets that can be turned into commercial­izable technologies. Second, they work hard to be innovative in the kind of deals they do and in exploiting new models for getting technology into the mar­ketplace. This includes active programs for creating and sup-porting start-up companies, for establishing institutional-level commercialization partnerships (such as bundling of IP from multiple sources), and for tak­ing advantage of federal and state technology-based economic development programs.

Faculty share in the financial benefits of licensed technology, receiving personal income as well as funding for their univer­sity research. This is required by law for technologies created using federal funds. The law also requires that all funds not distributed as per­sonal income to inventors be reinvested in the univer­sity’s research and educa­tion enterprise.

Adjacent to Columbia University Medical Center is the Audubon Business and Technology Center, an incuba­tor that has been a valuable out-let for Columbia technologies. Although it’s open to the entire biotech community and designed to be a resource for the entire region, about one-third of the companies that have occu­pied the incubator since it opened were commercializing Columbia technology.

NEW YORK UNIVERSITY According to Abram Goldfinger, Executive Director, Industrial Liaison/Technology Transfer, NYU actively pursues relationships with industry to promote the development of university technology into pro d - ucts that can benefit the public. Under the NYU Patent Policy, faculty inventions are owned by the university, which handles patenting and licensing through its Office of Industrial Liaison.

Faculty whose technology has been licensed receive a share of any income, and the remainder is used to support the universi­ty’s research and education mis­sions. The university has a small seed development fund for promising technologies, prior to licensing.

In recent years, 25 companies have been spun out of the uni­versity in biotechnology, soft-ware, nanotechnology and med­ical devices, of which 12 have gone public or been acquired. Typically, faculty do not join

the start-up company as employ­ees (they cannot stay at the uni­versity and work at the compa‑

ny at the same time), but often consult with the company or serve on the company’s Scientific Advisory Board, an arrangement that helps to promote the effective trans­fer of technology.

RESEARCH FOUNDATION OF THE STATE UNIVERSITY OF NEW YORK

Cathy Kaszluga, Vice President, Corporate Communications, The Research Foundation of the State University of New York, says the Foundation’s technology transfer model has evolved from an industry standard process that covers identifying and pro­tecting SUNY intellectual capi­tal and marketing faculty inven­tions to creating partnerships with industry to further research, commercialize tech­nologies, and generate royalty revenue.

The Research Foundation’s Technology Transfer Process includes these stages: research, invention, pre-disclosure, evalu­ation, patent/copyright protec­tion, marketing, business devel­opment, licensing, commercial­ization, and royalty revenue. What makes the Research Foundation’s process unique is its team of technology transfer officers, located at five strategic centers within SUNY’s 64-cam­pus system. They have the expe­rience and authority to develop flexible and creative approaches to university-industry partner-ships, and provide faculty inventors with the opportunity to work with companies as innovator, collaborator, or

teacher. The technology transfer team also nurtures both faculty inventors and their technologies via various campus-based sup-port networks that include major research partnerships, technology incubators (the Advanced Biotechnology Incubator at Downstate Medical Center; Broad Hollow

Bioscience Park, at Farmingdale; East Campus at Albany; Long Island High Technology Incubator at Stony Brook; and University at Buffalo Technology Incubator), and funding options.

SUNY faculty inventors receive 40 percent of the gross royalty revenues obtained by the Research Foundation, with mul­tiple inventors splitting the rev­enues. The scientist’s campus receives the remaining royalties, which typically provide support for additional research.

In fiscal year 2003, the Research Foundation was awarded 51 U.S. patents, execut­ed 33 new licensing and option agreements, received 234 inven­tion disclosures, filed 174 patent applications and generated

$13.6 million in royalties.

SUNY is the 13th largest patent producer among all public and private universities, just behind Columbia University, Harvard University, and Cornell University.

RENSSELAER POLYTECHNIC INSTITUTE Charles Rancourt is the Director of the Office of Technology Commercialization at RPI. Their tech transfer pro-gram is still in start-up mode, with a relatively young office

(they were established in the late 1990s). Even in this short period of time, they have seen a large growth in the number of disclosures coming into their offices. Rancourt and team are working their way to getting their hands around the contents of RPI’s portfolio and have

directed their focus in the past two years on licensing.

Two key features distinguish RPI’s Office of Technology Commercialization. The first is their three-stage evaluation process. “Evaluating a case is critical in this business,” says Rancourt. In stage one they ensure that the proper due dili­gence is done so they know that there are no obligations under existing research agreements, that they’ve complied with all federal regulatory requirements, and that they have full disclo­sure. In stage two, they focus on the abilities associated with the disclosure such as patentability and looking for the marketplace “fit.” In stage three, they proceed with the patent application. At this stage, more in-depth license development work is done and a deeper understanding of the markets is gained so that proper value/valuation is assigned to the intellectual property — “then we can be very intelligent

when it comes to the licensing.” The second distinguishing fea­ture is the move toward bundling technologies that are developed at RPI. The Office has made matches in three or four cases so far, and it’s taken them to another level of depth. Bundling requires extra work, but Rancourt says that makes a stronger case.

This fall RPI will expand their focus into the life sciences when they open the Biotechnology and Interdisciplinary Studies Center, which reflects the con­vergence of nanotechnology, engineering and physical sci­ences with biotechnology.

RPI has the oldest university-based incubator in the country, and the Office of Technology Commercialization is located in one of the incubator buildings.

Academic technology transfer offices (TTOs) face a problem of commercial technological fore-casting not unlike that faced by venture capital organizations (VCOs). The VCO asks, “Should we invest in this technology?” The TTO asks, “Should we patent this technology?” Alternatively stated, the VCO asks, “Does this technology have any commercial potential?” whereas the TTO must ask, “Will this technology have any commercial potential?” Often, a patent on a technology is the condition precedent for venture capital interest, not to mention organizing a business to bring

the technology to market and licensing other businesses as participants in this process. The decision of the TTO is the seminal event in the life cycle of a technology. Whether or not to patent a technology is itself a formidable decision, but making this decision on behalf of a mul­tidisciplinary academic institu­tion whose faculty is conducting research in dozens, if not hun­dreds, of technological frontiers can be overwhelming.

The process of evaluation faced by a TTO is not one of determining patentability, but of determining candidacy for patentability. In effect, every TT office is engaged in making the decision to retain a patent attorney to answer the patentability question as a threshold issue, and then retain­ing the patent attorney to draft a patent application if the patentability question is answered favorably. Selecting candidates for patentability requires time and expertise not only in each technology that is disclosed to a TTO, but in the potential market for the technol­ogy. Given the budgetary con­straints on all TTOs, time and expertise are always in short supply; and each TTO must develop an optimal method for allocating both.

One approach used by many TTOs is to seek a provisional patent application on every research disclosure of a technol­ogy having some commercial potential. In principle, filing a provisional patent application gives the TTO an additional twelve months within which to

conduct a more thorough evalu­ation of the technology’s com­mercial potential. If the tech­nology is subsequently deemed sound, the provisional patent application may be replaced with a nonprovisional patent application that enjoys the legal priority of the filing date of the provisional application, provid­ed that the nonprovisional patent application is filed with-in the twelve-month grace peri­od. If the technology is subse­quently deemed unsound, the provisional application automat­ically expires at the end of the twelve-month period. A provi­sional patent application typical­ly involves an attorney’s fee that is a fraction of the fee charged for a nonprovisional application. The fee for filing a provisional patent application thus may be regarded as the cost of an intel­lectual property “option” on the disclosed technology

As appealing as this option may appear, and quite aside from the significant legal disad­vantages to filing a provisional patent application, the perceived benefit of filing a provisional patent application rapidly becomes illusory. If most disclo­sures received from research faculty receive a provisional patent application, the net effect of the process is that the twelve-month deferral period collapses on itself, as the provisional patent applications backing up in the decision pipeline proceed to expiration.

Nevertheless, filing a provi­sional application is often neces­sitated by another challenge to TTOs that arises from the slow,

if not resistant, adaptation of academic culture to the world of technology transfer. Meeting this challenge calls for an aca­demic paradigm shift that has become the burden of TTOs to effect. While many faculty researchers have embraced the tech transfer revolution, and enthusiastically comply with the disclosure polices promulgated by TTOs, others remain unaware of the significance of tech transfer to their academic institutions, and yet others resist and defy its legal, scientif­ic and commercial principles.

Some academic researchers view the technology transfer paradigm as contrary to the long-honored principle of free exchange of scientific knowl­edge. Others remain invested in the prestige of scientific leader-ship demonstrated by being the first to publish as opposed to being the first to patent. Consequently, it is not uncom­mon for TTOs to be faced with a decision of patentability candi­dacy immediately prior to, coin­cident with, or immediately fol­lowing the publication of the content of a technological dis­closure in a journal, an Internet posting or at a scientific confer­ence.

In the United States such a publication does not necessarily abrogate the right to domestic patent. However, in certain for­eign countries, any prior publi­cation of the subject matter claimed in a patent will abrogate the right to the issuance of a patent in that country. In the global economy that is biotech’s marketplace, foreign patent

rights can’t be ignored. Consequently, when faced with the impending publication of technological know-how that can’t be postponed, TTOs may opt to file a provisional patent application as the most rapid legal mechanism for protecting foreign patent rights — often having only enough time to append a draft of the publica­tion to the forms that must be submitted to the U.S. Patent and Trademark Office.

Technology transfer is big business, and TT offices are faced with the challenge of sus­taining their academic institu­tions in that business. That challenge is defined as two mis­sion-critical goals: assessing a technology at the nascent stage of its technology’s life cycle, and effecting an academic paradigm shift into the business of tech­nology transfer.

Sander Rabin, MD, JD, is a physician-patent attorney prac­ticing patent law in the areas of biotechnology, biomedical devices and medical nanotechnology. He is senior patent counsel to the newly organized Convergent Technology Patent Law Group, and can be reached at srabin1@nycap.rr.com

Seed Investing and
University Technology
Commercialization
by José J. Coronas

The business of taking tech­nologies from the lab to the marketplace is complex, risky and at times aggravating. However, if performed by expe‑

rienced, patient and capable investors, it can generate very high rates of return. Most research universities choose to invest in the technologies devel­oped in their labs by staffing their Technology Transfer Offices with personnel capable

cient commercial value to justify starting a new company. So TTOs must find cost-effective ways to market their inventions to established companies. In general, TTOs are better staffed to secure the IP than they are capable of effectively marketing their technologies. It would be interesting to study what per­centage of universities’ IP is actually licensed and what even smaller percentage generates revenue. This is an area where the 20/80 rule applies. The hope, of course, is that one or two technologies become tremendously valuable and justi­fy the overall investment.

Starting a new company based on significantly valuable IP that involves a unique technology, is relevant to a significant market need, and can be commercial­ized at a reasonable investment. This is an undertaking for com­mitted entrepreneurs who ideal­ly get a lot of help from experi­enced professionals and venture capital investors.

We feel that a seed fund, man-aged by experienced personnel, is one of the most effective vehi­cles for supporting the venture development process. In effect a collaboration or partnership is established among the universi­ty, the technologist (researcher) and the seed fund. Following are some elements of this relation-ship:

The seed fund provides initial capital.

The seed fund management drives business development. The professor

(researcher/entrepreneur) drives technology development.

The university is flexible and supportive.

The initial goal is to develop a complete business plan and advance the technology. Success for this seed phase is being able to raise the next round of financing at an acceptable valuation.

The key message I would like to convey to aspiring entrepre­neurs and university adminis­trators is that technology com­mercialization is a business that requires considerable experience

and expertise seldom found inside universities.

Get help, look to alums and business advisors and, if possible, help create a professionally man-aged seed fund to energize the venture development process.

José J. Coronas is a General Partner with the Trillium Group, a venture capital and venture development firm founded in 1997 by successful business profes­sionals. The firm is dedicated to achieving venture rates of return

on invested capital at acceptable levels of risk.

This article and commentaries serve as an introduction to the intricacies and issues associated with tech transfer. Comments and opinions furthering illu­mination of these issues are welcome and can be sent to: sholtzman@holtzmancom.com. Selected excerpts will appear in the next column. Sandra Holtzman is the President of Holtzman Communications in New York City.