chuckstaben Uncategorized

Indemnification and risk in research contracts

Early in my presidency, we found ourselves unable to contract with a major regional industry because they would not accept indemnification of all risks.  Now, in many ways, that was far too conservative on their part, but also too demanding on our part. 

The research we were considering was basic research on semiconductor chip design.  I asked that General Counsel develop the worst possible risk scenario they could imagine.  The scenario was that a method we developed might be used, in part, to make a chip for a critical application like a self-driving car.  If such a chip failed, resulting in a traffic death, the claimant might argue that we were responsible for the failure.  I found this possibility so remote as to be laughable…I frankly was more worried that the company would never use our technology and seek help elsewhere!

Now, my attitude would be very different if were developing the formulation for an infant vitamin to be immediately put into a major market.  My point is that universities must, at times (if allowed by Boards and state laws) accept some risk.  And, while remaining careful about the nature of those risks…a president can use discretion and judgement and should do so to establish and sustain research relationships.

chuckstaben Uncategorized

Intellectual property

The Bayh-Dole Act of 1980 had a najor legal and psychological effect on universities with respect to intellectual property (IP).  Prior to that act, intellectual property that resulted from federal funding (NIH, DoD, NSF) often was the property of the government, but the Act moved ownership to the university.  Universities became much more aware of IP, and frankly, much more possessive.  Unfortunately, that possessiveness has, in many cases inhibited interactions between universities and industries that I believe can be mutually beneficial, much more so than owning IP that often has limited value.

There are several examples of universities with extremely valuable intellectual property:  Lyrica has earned Northwestern over $1.3B, Carnegie-Mellon’s disk drive noise reduction technology has earned $750M, Google earned Stanford $336M, and Gatorade has made the University of Florida over $280M, to name a few.  Blockbusters like these are the exception, however, not the rule.

AUTM’s (Association of University Technology Managers) latest report shows 7625 US patents issued to US universities in 2018 and over $2.9 billion in licensing income.  Nevertheless, the bulk of that licensing income came from a very small number of “blockbusters” like Lyrica and Gatorade.  Typically, only the top 20 or so licensing offices actually generate income in excess of costs and most patents generate no income at all.  The unfortunately naïve perception of many boards is the opposite…that the university has a great deal of valuable intellectual property and that we are letting it just walk out the door.

Though it is difficult to predict a blockbuster, and one should certainly try to protect discoveries that may yield them, I believe that the larger “pot of gold” and the greater societal impact is to have by less restrictive, less grabby IP policies.  Industries supported over $5 billion in sponsored research at US universities last year-almost twice the licensing income.  Additionally, engaging ones’ university with industry has payoffs in workforce development, engagement of professors with state-of-the-art industrial work and facilities, and often brings economic development capital.

So, what is a reasonable model?  I believe that for most research contracts with industry, an “agree to assign” or “first option” is reasonable.  Industries are much more likely to sign such contracts, allowing them to support your faculty and students and move projects forward.  Yes, you might lose some licensing revenue, but ensuring the success of a local industry will bring you a strong supporter.

As a practical matter, when I arrived at the University of Idaho, we were at a 5 year logjam in contracting with a local industry over restrictive IP attitudes.  After liberalizing our policy, we not only got a sizable grant, but the company endowed a chair ($2M), and engaged with us to now found a center to sponsor ongoing research, with a further $1.5M donation in support of the Center.

Bottom line…industry is usually better than universities at commercializing intellectual property-our strength is usually in basic research.  Consider liberalizing your IP policy in most cases, and I suspect you will see more industrial grants and greater interaction.  Remember, our job is to generate knowledge and to disseminate it-we spend money to generate knowledge…not generate knowledge to make money.