Re-Engineering the University-Industry Partnership

1. Re-Engineering the University-Industry Partnership From the University-Industry Congress to the University-Industry Demonstration Partnership Albert JohnsonCorningOctober 12, 2006

2. The current state of affairs… • In the nexus between Government, Universities and Industry, two of the three links work reasonably well. However, much could be done to improve the link between Academia and Industry. • Relations between Industry and Universities often flounder on the issue of Intellectual Property, and academic institutions are often accused of being an impediment to commercialization, despite the existence of the Bayh-Dole Act. • To really transfer effectively academic innovation into commercializable products, one must work on making the weak link stronger.

3. Objectives of the University-Industry Congress (2003-2006) • Convene a “congress” of delegates from industries, universities, and government to explore the principles that should govern industry/university collaboration and identify an array of strategies for translating those into research agreements. • Hold a “summit” of national leaders of industry, university and government at the National Academies to develop and endorse principles/strategies for research agreements that will foster the creation and commercialization of new knowledge.

4. University-Industry Congress Five Major Meetings: • First Congress – San Francisco in August 2003 • Second Congress – Washington, D.C. in October 2004 • Third Congress – Washington, D.C. in February 2005 • Fourth Congress – Washington, D.C. in June 2005 • Fifth Congress – Washington, D.C. in October 2005 Balanced Membership: • Universities: public, private, S M L • Industries: various sectors, S M L • Government: OSTP and Commerce plus NSF and NIH Sponsors: • Kauffman Foundation • Sloan Foundation, Wallace Coulter Foundation • Boeing, Extrude Hone (now Ex One), Hewlett-Packard, Microsoft

5. Summit held in Washington DC on April 25, 2006 at the National Academies (approx. 170 registered attendees representing 32 companies, 47 universities, and several nonprofit/foundation/government) National Academies’ Keck Bldg. ... in Washington, DC

6. University-Industry Demonstration Partnership Founders Circle Members (6) • Ex One • Hewlett Packard • Kauffman Foundation • National Science Foundation • Pfizer • University of Illinois at Urbana-Champaign Industry Members (10) • Alfred E. Mann Foundation for Biomedical Engineering (regular member exception) • Corning • Dow Chemical Company • Essilor • Glaxo-Smith-Kline • IBM • Intel • Minerals Technologies Inc. • Monsanto Company • Praxair, Inc

7. University Members (30) Arizona State University Boston University Brandeis University Carnegie Mellon University Georgia Institute of Technology Georgetown University Medical Center Iowa State University Keck Graduate Institute New Jersey Institute of Technology North Carolina State University Ohio State University Pennsylvania State University Purdue University Rice University Syracuse University University of California, Berkeley University of California, Davis University of California Los Angeles University of Iowa University of Kansas University of Maryland University of Minnesota University of North Texas University of Notre Dame University of Oklahoma University of Oregon University of Tennessee University of Texas at Austin University of Wisconsin Washington State University Wright State University Convening Authority Government-University-Industry Research Roundtable of the National Academies University-Industry Demonstration Partnership

8. Main problem Congress tried to address • Negotiation of sponsored research agreements (particularly over intellectual property) is a barrier to industry-university research collaboration in the United States. • Takes longer • Increases transactional costs • Little/no benefit results • Advantages to work overseas

9. > 30 DAYS 90 100 90 80 Time to complete agreement 80 70 % of agreements completed 70 60 60 50 %Percentage of Total Frequency 50 40 40 30 30 20 20 10 10 0 0 <1 1-10 10-20 20-50 50-75 75-100 100-125 125-150 150-175 175-200 200-225 225-250 250-275 275-300 300-325 325-350 350-375 375-400 400-425 425-450 450-475 475-500 500-525 Days to Completion 1½ years and counting! Time-to-agreement too long!(university view)

10. Time-to-agreement too long! (industry view) 80 Negotiation 70 153 days on average from T2-T7 60 50 Days 40 SOW 30 Dow Approval Other Party Approval RA Draft 20 Distributed 10 Review 0 T1 T2 T3 T4 T5 T6 T7

11. Inconsistency a headache: Terms and conditions all over the map Character of Terms 20 Assignment & Right To Practice 10 0 0 10 20 Deadline & Right of First Refusal

12. Universities are also impeded by current IP practices • 95-97% of all research projects result in NO licensable intellectual property. • Sponsored research office spends disproportionately more on staffing (about 5x more, per dollar received) to manage industry-funded research agreements, compared to government-funded research agreements. • Long time to agreement can result in complete loss of project. If wait is too long • Source of funding disappears (change in management, new fiscal year...) • Technology of interest becomes outmoded (6 month cycle time for IT) • Funding spent on legal fees outweighs project cost (at this point, most companies will walk away) • Sponsor unlikely to return for another project • Faculty become discouraged • Students move on

13. Evidence that U.S. industry is moving sponsored research overseas • Half of IRI survey respondents admit to sponsoring research overseas as a result of difficulty in IP negotiations with U.S. universities • Volume of industry sponsored research growing overseas: in 2003, MIT at $81.5M, Tsinghua at $79.7M • Hewlett-Packard congressional testimony (9/17/02)

14. Two financial reasons why it is important to solve this problem Industry Sponsored Research (Millions of $) Net Licensing Income (Millions of $)

15. U.S. R&D source of funds: 1953-2002 SOURCE: National Science Board, Science and Engineering Indicators-2004

16. Focused On: Challenges becoming successes Building trust and teamwork Defining and prioritizing the issues Finding a “common cause” Developing flexibility Building on existing efforts: Working Together, Creating Knowledge (BHEF) Responsible Partnering (EIRMA) Issues: Understanding core missions that are fundamentally distinct and occasionally opposed Understanding each party’s bottom line Moving science into commerce Old questions, new solutions Moving from “policy” to “reason” University-Industry Congress

17. Framework led to three guiding principles • A successful university-industry collaboration should support the mission of each partner. Any effort in conflict with the mission of either partner will ultimately fail. • Institutional practices and national resources should focus on fostering appropriate long-term partnerships between universities and industry. • Universities and industry should focus on the benefits to each party that will result from collaborations by streamlining negotiations to ensure timely conduct of the research and the development of the research findings.

18. This sounds like apple pie, but each principle is deeper than it looks. For example... • A successful university-industry collaboration should support the mission of each partner. Any effort in conflict with the mission of either partner will ultimately fail. • This explains why universities can sometimes give away IP in highly applied projects but not in fundamental research (reverse is true for companies). • Because companies must return a profit to shareholders, their IP arrangements must reflect their business models. These differ drastically between companies, a reason why no “one size fits all” agreement will ever work across companies, while master agreements for a specific company (or division within) often will work.

19. Results of the Congress are fourfold • A set of guiding principles for University-Industry partnerships • A collection of living studies (case examples) of how institutions have used innovative ideas for resolving problems that commonly arise in U-I agreements • Preparations to launch the test phase of a U-I demonstration partnership (UIDP), a new forum for developing solutions to difficult IP problems. • Development of a new software tool for creating intellectual property agreements. This turbo-negotiations approach takes into account the needs and contributions of the parties in guiding the negotiators through the process of building an agreement.

20. The launching of the UIDP will allow institutional beta-testing of new approaches to contracts • Working groups will be focused on designing institutional experiments. • There will be a broad information-sharing forum on latest news, best practices, etc. • UIDP is modeled on the 20-year success of the Federal Demonstration Partnership in driving institutional change on a national level.

21. First project of proposed UIDP: TurboNegotiator • Interview tool aimed at guiding both sides to come to agreement on nature of project. • Answers to interview questions allow project to be plotted in n-dimensional “project space.” • Depending on location in project space, software suggests potential applicable clauses. • Each clause can be clicked on for more information on history, use, pros and cons for industry/university... great depth of expertise.

22. One origin of IP disputes: Industry and University do not begin with same mental concept of project • “TurboNegotiator” model would have up-front interview instrument that allows each partner to examine underlying assumptions regarding the type of project they are working with. • Identifying underlying mismatched expectations before the start of legal negotiations prevents much wasted time.

23. Questions for each partner would focus on basic parameters such as… • Nature of project (fundamental research  applied research) • Nature/extent of contributions and investments from each party • Nature of deliverables/likelihood of a patentable invention

24. 1 Relative Investment 1 = high for University -1 = high for Sponsor 1 = high probability of patent -1 = low probability of patent 1 1 -1 Nature of Research -1 1 = fundamental research -1 = applied research -1 Invention Probability Example of project parameter space

25. Tool will expose the likelihood of valuable IP once both parties have unambiguously agreed on the coordinates of their project in “IP space.” • E.g., IT project in applied research, even with high probability of invention, almost never yields large licensing revenue. • Junior staff bound to templates need deeper knowledge to be flexible. • Instrument should provide multiple options for each situation, and educate user on consequences and implications of each. • Instrument should provide support for decision-making.

26. Example • For example, a costly project for a company with direct impact on its current business, but with little chance of patentable inventions would be given by (-1, -1, -1). • TurboNegotiator output based on this answer would suggest the following terms for inclusion in the agreement: • ALTERNATIVE i: The University shall grant the Company a commercial license on fair and reasonable terms for an up-front payment at the time of execution of the license. Explain pros and cons of this to me (hyperlink). • ALTERNATIVE ii: Company agrees to fully pay or reimburse patent application expenses for those inventions it wants. University shall grant Company on fair and reasonable terms an exclusive commercial license in a field of use in return for consideration to be mutually negotiated but which may include milestone payments, and/or a licensing fee. Explain pros and cons of this to me (hyperlink).

27. TurboNegotiator tool is designed to address common negotiation failure modes • Does not assume a “one-size fits all” solution • Each project is unique – each agreement is unique. Tool designed to get as quickly and painlessly as possible to that unique solution. • Forces “meeting of the minds” up front: each party must identify what s/he wants out of the partnership being negotiated. • Addresses unspoken, differing mental perceptions of same project. Case studies show these are often at the root of an inability to reach agreement.

28. TurboNegotiator tool is designed to address common negotiation failure modes • Distinguishes between situations where treatment of IP is important vs. not important (95-97% of research agreements produce no valuable patents, but most are fought over nonetheless) • Forces the discussion between parties as to whether the IP is worth fighting over in this particular instance. • In the beginning, both parties will need to guess at IP likelihood, and have their guesses agree. In the future, one may be able to have the program predict this, based on historical data culled from sponsored research and licensing offices. • Educational tool for negotiators in trade-offs and IP considerations • Many individuals assigned to negotiate these unique, complex agreements do not have the depth of training required to navigate them. This tool provides on-demand educational material.

29. TurboNegotiator tool is designed to address common negotiation failure modes • Easy-to-use tool would assist broad adoption • Move towards national uniformity in approach. • Tool will generate its own metric of success (time-to-agreement) • Electronic time-to-agreement module would allow institutions to track reduction in processing time as a result of using the tool, and to correlate processing time with characteristics of the project under consideration. • Plan is for UIDP to try to adopt tool currently in use at Georgia Tech. • Nationwide adoption of the same tool everywhere would ultimately allow automated national uploading/compilation of time-to-agreement data, and allow the tracking national trends in IP negotiations.

30. Concluding remarks • For a University to achieve the goal of innovation through commercialization will require working effectively with Industry, and vice versa. • National efforts aimed at supporting better processes for reaching collaborative agreements between Universities and Industry deserve support (UIDP). • Specific tools (e.g., TurboNegotiator) offer novel opportunities to re-examine processes which have not been very effective in the past.

31. For more information • Bob Killoren, President, UIDP killoren.2@osu.edu • Susan Butts, Vice President, UIDP sbbutts@dow.com • Albert Johnson, Representative, UIDPjohnsonal@corning.com To sign up for the University-Industry Demonstration Partnership (UIDP) or obtain a copy of these slides • Merrilea Mayommayo@nas.edu