[From CASE Reports, Volume 12,3, 1997]

Yale, UConn Enter Aggressive New Era

Technology Transfer Comes of Age on Connecticut Campuses


Technology transfer is not a new concept. Since the 1940s, it has been practiced in research institutions across the country, yielding products ranging from fluoridated toothpaste to high-speed modems.

In the past decade, efforts to commercialize new technologies have grown at an unprecedented pace. Universities are moving an increasing number of innovations from the laboratory to the marketplace, and in the process, enhancing the nation's economy and the quality of life of its citizens. Consider the following statistics:

  • In 1980, 25 institutions of higher learning were involved in technology transfer; by 1992, that number had climbed to 200. The number of patents issued also jumped--from an average 250 a year to 1,500.
  • Licensing agreements add more than $21 billion to the nation's economy each year. They support over 180,000 jobs, and spawn scores of businesses as well; in 1995 alone, 223 new companies were created nationwide.
  • Today, not only are more scientific advances finding their way to the consumer, they're doing so in a faster, more cost-effective way. The time required to convert inventions into new products has dropped from roughly seven to six years. The investment per patent application has also gone down: between 1991 and 1995, it decreased 18%, from $8.5 to $7.2 million.

    What spurred these changes? The single, most influential factor was the Bayh-Dole Act, which was passed in 1980. This landmark legislation gave schools, hospitals, and other research organizations the right to own any discoveries they made under federally funded programs; previously, these discoveries belonged to the government. The ruling provided an incentive for researchers to market their findings, and for industries to invest their dollars in them.

    Almost immediately, the Bayh-Dole Act pumped new life into technology transfer. Institutions coast to coast either started programs, or, like Yale University and the University of Connecticut, stepped up existing activities. Both schools had prior experience patenting and licensing inventions, though on a very limited scale. To oversee their new efforts, they established new offices, along with new guidelines for teaming with business.

    Yale: A Productive Start

    Yale launched its Office of Cooperative Research (OCR) in 1982. Its first director and chief architect was Robert Bickerton, a business executive with a doctorate in pharmacology.

    Armed with a modest budget and a staff of one, Dr. Bickerton set out to attain three goals: increase the volume of Yale's inventions, promote new technologies within New Haven's Science Park, and expand the school's interface with the private sector.

    All these objectives were successfully met the first year, when the OCR reported 25 invention disclosures--four times the highest number since 1954; of these, 11 became patent applications, and 10 turned into license agreements. Additionally, royalty income totaled over $100,000, topping the total for the previous three decades combined.

    Yale's endeavors, under Dr. Bickerton's leadership, continued to yield increasing results. In 1995, the year before Dr. Bickerton left office; OCR posted 95 invention disclosures, 29 patent applications, 20 patent issuances, and 18 license agreements. Royalty income stood at $2.7 million, and private research dollars--nearly nonexistent in 1982--totaled almost $16 million; further, the number of Yale faculty consulting for industry had soared.

    Putting Procedures in Place

    To achieve this success, the OCR had to first lay the groundwork for Yale's operations. This entailed structuring the technology transfer process, which the office did with a five-step approach:

    1. Researchers who make a breakthrough fill out an "invention disclosure" form.
    2. The form is forwarded to the OCR for a thorough review.
    3. The OCR determines whether the disclosure is truly novel, and if so, whether it can be patented.
    4. If the invention seems to have commercial value, OCR tests the waters. It completes a non-confidential write-up, which is circulated among select companies.
    5. Companies that show interest in the new technology sign a confidentiality agreement. This allows the OCR to discuss the innovation in detail, and to spell out the development options.

    While Yale's procedures are fairly standard, they differ somewhat from those of other schools, notes Dr. Bickerton. Letting the marketplace decide, for example, if a discovery is "product-worthy" is not a common practice. "Schools such as Columbia and MIT patent everything," he says. "Yale, on the other hand, waits to see if an invention has utility. Because of budget constraints, we feel we should be selective; consequently, we have a very high ratio of patents licensed to patents applied for."

    Yale also tries to make its inventions available to the widest possible audience. When several firms want to exploit the same technology, the OCR steers them toward non-exclusive or co-exclusive licensing arrangements. If they opt for exclusive agreements only, Yale seeks out the best candidate, basing the decision not on a competitive bid but rather on an assessment of the prospect's resources, degree of interest, and marketing capability. "The largest company doesn't automatically win," explains Dr. Bickerton. "We may choose a smaller business--even though it lacks the financial power--because we feel its survival hinges on our contract. Incentive is an important ingredient."

    In addition to the procedures, OCR drafts the legal documents that accompany them. While much of the language is standardized, clauses for the financial terms and due diligence--which outline timeframes for developing products--are usually customized. Royalties, for example, follow ballpark figures and certain rules of thumb; yet the bottom line is: they're always negotiated.

    Yale's own royalty policy is "pretty straightforward," says Dr. Bickerton. Here's how the monies are divided:

  • The first $100,000 in net royalties (income after the patent application is paid) is split evenly-- 50/50--between the inventor and the university.
  • With amounts over $200,000, the breakout is 30% for the inventor and 70% for the university, for as long as the innovation generates income.
  • "Some schools give their portion to the department that originates the technology," notes Dr. Bickerton. "Yale, however, shares it with the university at large."

    Building on Past Success

    In 1996, Gregory Gardiner, a former teacher and industry scientist, took the helm at the OCR. Dr. Gardiner, who holds a doctorate in physical chemistry, has focused on boosting Yale's efforts on all counts: by 1998, for example, the school will join the nation's top five for earnings in licensing revenues. "Where we go from here," he says, "lies in finding follow-ups to Zerit and the Lyme vaccine."

    Both discoveries are Yale's most prestigious to date. Zerit, a treatment for AIDS, was licensed through the OCR to Bristol-Myers in 1988, and appeared on the market two years ago. The Lyme vaccine is currently in the laboratories at SmithKline Beecham, where staff are preparing to register it with the federal Food and Drug Administration.

    Like all new drugs, Zerit was a matter of luck, avows Dr. Gardiner. "A product can look great entering the clinical trials," he notes. "But no one can predict its outcome. Statistically, only 1 in 20 drugs tested reaches the market; with skill, you can probably raise that to 1 in 10." The Lyme vaccine is another story, he says. "It's an example of opportunity favoring the prepared mind. Yale first described the disease, discovered how it was transmitted, and developed the antigens... We were positioned to take action before anyone else."

    Other fields in which Yale researchers have made or are currently making patentable breakthroughs include:

  • External Guide Sequence (EGS) oligozymes, which may help identify molecular targets for new drug therapies
  • Electrospray mass spectrometry, which allows accurate measurement of molecular weight of macromolecules
  • Parallel processor computing
  • Venture Capital: The New Direction

    Essentially, there are two ways to commercialize technologies. One is to frame licensing agreements with existing companies, which is, to date, how Yale has conducted most of its business.

    The other avenue is to form new companies. The university has gone this route as well, though to a lesser extent: in the past ten years, it has spun off 35 new ventures. Twenty-five of these are in Connecticut, concentrated in New Haven's Science Park. Twenty are in the biomedical/pharmaceutical field.

    "In putting together a company, you need a broad technological base--you can't rely on one idea that could crash and burn tomorrow," says Dr. Gardiner. "When you have only one product, licensing is best." Licensing is generally less complex, in terms of the legalities, and tends to provide a steadier, though smaller, stream of income than start-ups.

    Although Yale has helped launch new businesses, it has never founded, or co-founded, a firm on its own. "We're beginning to do that now," states Dr. Gardiner. "In fact, we just accepted a funding offer on one opportunity, and expect to finalize a couple of others by summer's end."

    In the future, Yale will consider more creative strategies and adopt a more entrepreneurial attitude for marketing innovations. "We clearly were not aggressive in the past," Dr. Gardiner says. "However, I don't think we've been hurt by being on the sidelines; it's allowed us to watch and learn from others."

    The University of Connecticut: Spurred by an Outside Source

    At the University of Connecticut (UConn), technology transfer began to accelerate a decade ago. The catalyst was University Technology Corporation (UTC), at the time a new North Carolina firm trying to establish a business managing schools' inventions. UTC selected five universities, including UConn, and presented each with an annual grant of $100,000 to seed its operations.

    UConn opened its Technology Transfer Office (TTO) in 1987. Located in Storrs, the two-person venture was directed by Charles Goodwin, a former faculty member at John Hopkins University and manager in the biotechnology industry. The TTO coordinated activities on UConn's main campus, along with those at the Farmington health center.

    Initially, a key priority was education--namely, clarifying the true meaning and merits of technology transfer. The office worked hard at spreading the word throughout the university, notes Dr. Goodwin. "At the time, most people didn't know what technology transfer was," he says. "And they certainly weren't aware of its benefits. Many researchers didn't realize, for example, that interacting with industry could secure funding for their projects, or that when UConn made money on an innovation, some of that money flowed back to them."

    How those dollars are distributed was determined, in part, by the TTO. With input from the office, a campus-wide committee drew up the formula for dividing royalties; state law required that at least 20% of the invention-related income (net) go to the researcher. The university now allocates:

    In the past, UConn was very selective about the discoveries it developed. (This stemmed largely from limited resources, says Dr. Goodwin.) UTC lent a hand with those decisions at first, but when the company reorganized in 1989, the TTO took on the task itself. Occasionally, the office seeks the services of Research Corporation Technologies, an outside firm that helps evaluate inventions for UConn and 100 other institutions across the United States.

    Orthodontics to Computer Software

    UConn's inventions span a breadth of disciplines. Materials science, engineering, biomedicine, agriculture, computer technology--all have been fertile sources for advances in recent years.

    A sampling of new products reflects a range of technologies:

  • Dental items--orthodontic wires, retainers, bridges and splints--made from beta-titanium and fiber-reinforced composites.
  • A series of videotapes on AIDS education. The videos, which are being circulated among colleges and the general public, represent a public service, rather than a profit-oriented project.
  • Like Yale, UConn has transferred most of its technologies through established companies. But it has also partnered with new firms. Since the mid 1990s, the university has helped generate one or two businesses a year, nearly all of them headquartered in Connecticut.

    Promoting the state's economy is also the goal of Access Connecticut, a venture capital group that funds company start-ups. UConn has worked with the organization in the past, and at present, is collaborating with the group on a recycling project.

    A Second Surge of Growth

    In the late 1980s, the TTO received 10 to 15 discovery disclosures a year; by 1996, the office was processing up to 45 disclosures, 15 patent issuances, and 8 commercial agreements annually. The university was also reaping over $450,000 in licensing revenue--up from less than $100,000 a decade earlier.

    Although the numbers have increased, they have leveled off in the past few years. "We've done what we can with the resources we have," Dr. Goodwin comments. "Right now, there are too many discoveries for our small office to handle.... I'm convinced that we could accomplish a lot more if there were more of us."

    That's exactly what's being planned. A major restructuring is on the drawing board, one that will expand the TTO, move its headquarters to Farmington, and rename it the Center for Science and Technology Commercialization.

    Les Cutler, chancellor of the UConn Health Center, and president of its health system, will head the new operation. Dr. Goodwin will keep most of his present functions, from supervising patenting procedures to negotiating and writing licensing contracts. An executive director will be hired, and a third professional may be brought on board to round out Dr. Goodwin's areas of expertise.

    UConn will adopt a new philosophy, too, says Dr. Cutler. "Before, technology transfer was a passive process. Now, we'll be extremely proactive--we'll scour the laboratories for inventions, push to get them patented in the fast track, and aggressively search for the right commercial partners."

    The new center has already set ambitious goals. In its first year, according to Dr. Cutler, it hopes to double or triple the current number of invention disclosures. "Annually, we'll strive for 15 to 20 solid patents," he says. "Most will result in licensing arrangements, while two to three--about 10%--probably will evolve into spin-off companies."

    In starting new businesses, UConn, like Yale, will assume a broader role. "We'll do ourselves what companies now do," says Dr. Cutler. "We'll look across other college and university campuses for technologies that are synergistic to ours, then 'bundle' them to create the intellectual power a successful venture demands."

    For the near future, the university has another priority: increasing the space to nurture its innovations. Plans call for a new incubator building in Storrs. The medical center will also construct an 8,000 square-foot facility, and efforts are under way to establish a technology park in Greater Farmington.

    Much thought went into reshaping UConn's technology transfer program, notes Dr. Cutler. "We examined operations throughout the country, then tried to maximize their best practices," he says. "Consequently, we're a little bit of Columbia, a little bit of Iowa State, and a little bit of MIT. That makes us somewhat unique."--Louise Petraitis, Principal, Indelible Ink.

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