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									  Working Together,
  Creating Knowledge
   The University-Industry Research
   Collaboration Initiative

Co-Chairs’ Foreword

              evelopments during the past decade       for American society, this act and subsequent
              highlight the reality that we are        public policies have encouraged a marked
              living in a time of truly historic       upsurge in university-industry research collabora-
              transformation–one that is rooted in     tions. These partnerships have contributed to
the rise of a knowledge society based largely on       America’s resurgent competitiveness in the global
the collaborative generation and use of informa-       economy while promoting economic growth at
tion. With the end of the Cold War, the emer-          regional and national levels—effectively leverag-
gence of globalization, and the evolution of the       ing, rather than replacing, the more extensive fed-
Internet and the “new economy,” the creation,          eral and state support of fundamental research on
application, and free flow of new knowledge have        the nation’s campuses.
never been more important drivers of change.                 Yet if the opportunities for and benefits from
Enabling this transformation is an explosion of        conducting university-industry research collabo-
scientific and technological advances across dis-       rations have soared, so have concerns about their
parate fields.This progress is opening an exciting      effects and implications.The rising number, per-
era of basic exploration that also promises to         vasiveness, variety, and importance of these part-
address age-old human problems of disease,             nerships have heightened their impact while
poverty, and international security, as well as        raising the stakes involved. As universities pursue
growing concerns about our global environment.         additional funding sources and companies seek
In the long run, only more scientific and tech-         continued competitive advantage––and as both
nologically driven innovation can provide the          try to keep up with the accelerating pace of
new, more powerful tools required to help ensure       change––these partnerships have become an
a better future for all.                               increasingly critical means toward achieving key
      Fostering collaborative partnerships in scien-   objectives.Yet they also threaten to distort the tra-
tific research has emerged as a critical imperative     ditional role of universities as arbiters of knowl-
to sustaining this innovation. The increasing          edge and guarantors of objectivity in the public
volume and accelerating pace of knowledge cre-         interest. As our economy evolves and its growth
ation has transformed the research process to the      occurs at a more regional level by new,
point where no one scientist, institution, or even     knowledge-fueled businesses and industries in a
nation can sufficiently conduct wholly inde-            more entrepreneurial environment, the impacts
pendent research programs; rising costs, driven by     of collaboration extend well beyond the direct
increasingly complex research, make resource-          partners. Underlying changes in science and tech-
sharing an imperative. Changes in the nature of        nology raise new problems and hurdles. From
innovation largely depend on multidisciplinary         ownership of and access to intellectual property
approaches and use tools from a range of seem-         to potential conflicts of interest in a world where
ingly unrelated fields.                                 once-clear lines now seem blurred, these issues
      Although collaboration among all parties         have swelled in prominence and importance.
involved in the research process is critical, the
relationship between academic investigators and
industry researchers has emerged as a particularly
central driver in the decades since the passage of
the Bayh-Dole Act of 1980. Intended to encour-
age the application of publicly funded research
findings to produce economic and social benefits

                                                                                                          BUSINESS–HIGHER EDUCATION FORUM 3
                                         Co-Chairs’ Foreword

     Some research collaborations have experi-                 ciations such as the Council on Governmental
enced serious, high-profile difficulties, with par-              Relations, to public policy groups including the
ticipants voicing frustration over complex issues              Council on Competitiveness. We also reached
that impede advancing research and realizing its               outside the Forum’s membership to involve lead-
benefits. Certain observers have voiced concerns                ing research universities and innovation-driven
about the broader implications of university-                  companies.We conducted our work using a vari-
industry partnerships, suggesting that they be cur-            ety of tools, including surveys and workshops on
tailed to avoid the destruction of core missions,              specific issues, participation in external meetings,
particularly on the academic side.                             case studies of actual partnerships and institutions,
     Two years ago, the Business-Higher                        and periodic deliberations of the RCI Task Force
Education Forum decided to undertake a                         and the full Forum membership.
detailed assessment of the opportunities and chal-                   This report represents a synthesis of the
lenges facing university-industry research collab-             work and findings that have occurred during this
orations. Our goals were to understand better the              initiative. Given both the scope of issues involved
issues involved, to highlight best practices and les-          and speed of ongoing developments, it is neces-
sons learned, and to provide practical guidance to             sarily incomplete—indeed, since the beginning
those involved in such partnerships––particularly              of this two-year effort, the prominence and
the new, inexperienced practitioners who are                   urgency of these issues has increased.We also real-
now entering into research collaborations. Our                 istically appreciate that this initiative has identified
underlying premise was that thoughtful, balanced,              concerns and has stemmed thinking in critical
and useful guidance would increase the number                  areas that will require further work, and that not
and quality of research collaborations. We                     all problems can be resolved in all partner rela-
approached this assessment knowing that other                  tionships.Yet it is our hope that beyond giving
parties already have focused substantial attention             practical guidance and insights, this report also
on this topic; in fact, the Forum itself played an             will provide a foundation and framework for sus-
important role in the early development of think-              taining an ongoing dialogue among academia,
ing in this field. Given the opportunities and                  industry, and government. This dialogue must
challenges now facing these critical research part-            occur if we are to ensure a balanced, pragmatic
nerships, the Forum’s Research Collaboration                   approach toward establishing and conducting
Initiative (RCI) provided a unique venue for                   university-industry research collaborations. Such
pulling together many perspectives and synthe-                 a continued dialogue and approach will allow our
sizing these views into a common voice. At the                 nation and the world to realize the promise of
same time, we sought to increase mutual under-                 innovation through the benefits that these part-
standing across sectors by enabling study partici-             nerships can offer, without undermining the basic
pants to hear how others view these issues.                    strengths or compromising the core missions and
     With these goals in mind, we sought to col-               values of the parties involved.
laborate with those active in this field, from                        On behalf of the RCI Task Force and the
research-driven federal agencies and the National              Forum Membership, we would like to thank the
Academies of Science and Engineering, to asso-                 Office of Naval Research, along with the Kellogg
                                                               and Hewlett Foundations for their financial sup-
                                                               port of this effort. Our gratitude also goes to the
                                                               American Council on Education and the
                                                               National Alliance of Business for providing staff,
                                                               office, and logistical support to the RCI. Special

4 Working Together, Creating Knowledge
                                                     Co-Chairs’ Foreword

thanks go to the U.S. government officials and        group discussions, letters, e-mails, and phone con-
agencies who participated in our discussions, and    versations. Our thanks go to John Yochelson and
in particular to Senator Joseph Lieberman (CT),      Debbie Van Opstal of the Council on
Congressman Vernon Ehlers (MI), Rita Colwell,        Competitiveness for their continued collabora-
director of the National Science Foundation,         tion on this project, as well as to Cornelius Pings,
Arthur Bienenstock of the White House Office          former president of the Association of American
of Science and Technology Policy, and Maria          Universities (AAU), for serving as our special
Freire of the National Institutes of Health for      project advisor. In addition to assistance by other
sharing their thoughts on this critical topic with   members of our staffs, Steve Yoder of Pfizer Inc
the Forum membership. We also appreciate the         and George Leventhal of the AAU provided
time and invaluable contributions of the many        important oversight and assistance to the project
people whose voluntary participation made this       from its inception. Finally, we owe a special
effort possible. Those who participated in panel     thanks to RCI Project Director Mike
discussions at Forum meetings and who gra-           Champness for his leadership and continued ded-
ciously agreed to be interviewed are listed in       ication in organizing, conducting, and complet-
Appendix A, Panel Participants and Interview         ing this initiative, along with report editor Bruce
Subjects. However, many others, both within          Agnew and Forum staff Jerry Murphy, Judy
organizations and as individuals, contributed        Irwin, Mary Bolleddu, Sarah Louie, and Dale
important thoughts and observations during           Vanderwall for their support of RCI’s activities.

                                                     Co-Chairs of the
                                                     Research Collaboration Initiative

                                                     Nils Hasselmo
                                                     Association of American Universities

                                                     Hank McKinnell
                                                     Chairman of the Board and CEO
                                                     Pfizer Inc

                                                                                                       BUSINESS–HIGHER EDUCATION FORUM 5
RCI Task Force Members

                                          TALBOT D’ALEMBERTE, President, Florida
JOHN H. BIGGS, Chairman, President and    State University
Chief Executive Officer,TIAA-CREF

                                          JOHN DIBIAGGIO, President,Tufts University
President, University of North Carolina

                                          MICHAEL J. EMMI, Chairman and Chief
                                          Executive Officer, Systems & Computer
CHARLES M. CHAMBERS, President and        Technology Corp.
Chief Executive Officer, Lawrence Tech

                                          S. MALCOLM GILLIS, President, Rice
PAUL W. CHELLGREN, Chairman of the
Board and Chief Executive Officer,
Ashland Inc.
                                          WILLIAM H. GRAVES, Chairman and
                                          Founder, Eduprise

Chief Executive Officer, Ribozyme
Pharmaceuticals, Inc.                     NILS HASSELMO, President,Association of
                                          American Universities

The University of Iowa                    STANLEY O. IKENBERRY, President,
                                          American Council on Education

W. DON CORNWELL, Chairman and Chief
Executive Officer, Granite Broadcasting    ROBERT A. INGRAM, Chief Operating
Corporation                               Officer, & President, Pharmaceutical
                                          Operations, GlaxoSmithKline

SCOTT S. COWEN, President,Tulane
University                                ROBERT T. JONES, President and Chief
                                          Executive Officer, National Alliance of Business

6 Working Together, Creating Knowledge
WILLIAM E. KIR  WAN, II, President,           CORNELIUS J. PINGS, President Emeritus,
The Ohio State University                     Association of American Universities

PETER LIKENS, President,The University of     CHARLES B. REED, Chancellor,
Arizona                                       The California State University

DIANA MACARTHUR, Chair and Chief              JAMES C. RENICK, Chancellor, North
Executive Officer, Dynamac Corporation         Carolina Agricultural and Technical State

C. PETER MAGRATH, President, National
Association of State Universities and Land-   SEAN C. RUSH, General Manager, Global
Grant Colleges                                Education Industries, IBM

EDWARD A. MALLOY, C.S.C., President,          EDWARD T. SHONSEY, President and Chief
University of Notre Dame                      Executive Officer, Syngenta Seeds, Inc.

JOHN W. MCCARTER JR., President,              BETTY L. SIEGEL, President, Kennesaw State
The Field Museum                              University

HENRY A. MCKINNELL, President,                L. DENNIS SMITH, President, University of
Chairman of the Board, and Chief Executive    Nebraska
Officer, Pfizer Inc

                                              CHARLES T.WETHINGTON JR.,
J. DENNIS O’CONNOR, Under Secretary for       President, University of Kentucky
Science,The Smithsonian Institution

                                              MARK S.WRIGHTON, Chancellor,
MANUEL T. PACHECO, President, University      Washington University in St. Louis
of Missouri System

                                                                                           BUSINESS–HIGHER EDUCATION FORUM 7
Table of Contents
Co-Chairs’ Foreword ………………………………………………………………………………3
    RCI Task Force Members ……………………………………………………………………6

Executive Summary………………………………………………………………………………11

Chapter One
  Introduction ……………………………………………………………………………………19
     University-Industry Interactions………………………………………………………………21
     Why Collaborations Are Important …………………………………………………………21
     What the RCI Is and Is Not Studying ………………………………………………………24

Chapter Two
  Two Cultures: Barriers to University-Industry Research Collaborations…………………………27
    University Barriers ……………………………………………………………………………27
    Corporate Barriers ……………………………………………………………………………29
    Maintaining a Balance …………………………………………………………………………30
    SPOTLIGHT: Washington University–Monsanto: Two Decades of Success …………………32

Chapter Three
  Conflicts of Interest and Commitment …………………………………………………………35
    Conflicts of Interest and Commitment ………………………………………………………35
    Conflict Prevention and Control ……………………………………………………………38
    SPOTLIGHT: Berkeley-Novartis:A Rough Road to Success ………………………………44

Chapter Four
  Negotiating Agreements …………………………………………………………………………47
    Laying the Groundwork ………………………………………………………………………47
    Contracts ……………………………………………………………………………………48
    Confidentiality ………………………………………………………………………………50
    Publication Delays ……………………………………………………………………………52
    Indirect Costs …………………………………………………………………………………53
    Intellectual Property …………………………………………………………………………55
    Licensing Terms ………………………………………………………………………………57
    Background Rights …………………………………………………………………………60
    Research Tools ………………………………………………………………………………63
    SPOTLIGHT: Biolex, Inc.:What a Technology-Transfer Office Can—and Can’t—Do ……68

Chapter Five
  University Best Practices: Building a Research Collaboration Team ……………………………71
    Organizing for Success ………………………………………………………………………71
    Motivating Faculty ……………………………………………………………………………73
    Protecting Students …………………………………………………………………………74
    Marketing the University ……………………………………………………………………74
    Management and Support Assistance …………………………………………………………75
    University Structure and Leadership …………………………………………………………78
    SPOTLIGHT: Office of Naval Research:A Government–Academia–Industry Collaboration…80

Chapter Six
  Corporate Best Practices: Making Collaborations a Core Competency …………………………83
    Leadership and Vision…………………………………………………………………………83
    Managing Research Collaborations …………………………………………………………87
    SPOTLIGHT: Ribozyme Pharmaceuticals, Inc.:The View from a Smaller Company ………93

  A. Panel Participants and Interview Subjects ……………………………………………………97
  B. University Research Expenditures and Licensing Income Tables ……………………………106

                                                                                     BUSINESS–HIGHER EDUCATION FORUM 9
10 Working Together, Creating Knowledge
Executive Summary

              his paper analyzes several of the         the research and can help reduce its costs.
              critical issues facing research collab-   Furthermore, many scientific advances are now
              orations between industry and uni-        occurring at the intersection of traditional fields.
              versities and offers suggestions to       Industry-sponsored research also allows the uni-
make these collaborations more effective. It is not     versity to obtain financial support for its educa-
intended to provide an exhaustive analysis of           tional and research missions, although the
every issue confronting these collaborations, but       licensing of university technologies has not
it should be useful to inexperienced as well as         proven to be a substitute for federal research
experienced practitioners in both sectors.              funding.
      Universities and companies in the United
States have worked together to advance the fron-        Barriers to University-Corporate Research
tiers of knowledge and incorporate that knowl-          Collaborations
edge into new products, processes, and services               Corporations and universities are not natu-
since the Morrill Act of 1862 established the           ral partners. Their cultures and their missions
land-grant college system. For many years, how-         differ. Companies’ underlying goals—and the
ever, the results of university research were not       prime responsibilities of top management—are
always expeditiously transferred to private com-        to make a profit and build value for shareholders
panies capable of translating advances into new         by serving customers. Universities’ traditional
products and services for customers.                    missions are to develop new knowledge and edu-
      The Bayh-Dole Act of 1980 was passed to           cate the next generation.
rectify this situation. Since the Act’s passage, the          For the university, four factors can prevent
commercial environment has markedly changed.            research collaborations with industry from being
Today, the extraordinarily successful growth of         established or successfully accomplished: the
the “new economy” has transformed the way               practical difficulties of negotiating and managing
business is performed and economic growth is            a collaboration; possible deleterious effects on
generated, placing even more emphasis on the            faculty and students; possible impact on the mis-
pursuit, development, and integration of new            sion, reputation, and financing of the university;
knowledge. In 1998, corporations sponsored              and state or local officials’ expectations of univer-
nearly $2 billion in research at universities, or       sity contributions to regional economic develop-
about 9 percent of all research performed at U.S.       ment. Hurdles that companies must overcome to
colleges and universities. Many local and state         foster greater numbers of collaborations include
governments are also pursuing the economic              respecting the value of research collaborations;
development benefits of industry-university part-        incorporating university research into product
nerships. At the same time, concerns have been          development; and management barriers.
raised that these partnerships may threaten the
integrity, objectivity, and core mission of aca-
demic research.
      Research collaborations can offer direct
benefits for university and company participants.
Even when potential partners have the resources
and knowledge to accomplish individual goals,
working with outside experts can greatly
improve the quality and comprehensiveness of

                                                                                                         BUSINESS–HIGHER EDUCATION FORUM 11
                                          Executive Summary

     Some university leaders (and many faculty)                     Institutional conflicts of interest, also called
are concerned that collaborations with industry               conflicts of mission, are a newly emerging source
could threaten the essence of what it means to be             of concern. Some universities invest in start-up
an academic institution. While universities must              firms or accept equity in lieu of royalties on
compete to attract collaboration partners, they               university-held patents, raising concerns that they
must also guard against devolving into contract               might become beholden to a company in which
research organizations, indebted to their sponsors            they have a financial stake. Ultimately, developing
and dependent upon revenues from sponsored                    multiple funding sources can help protect univer-
research and licensing fees.                                  sities from becoming indebted to any one entity.
                                                                    Most current conflict-of-interest policies at
Conflicts of Interest and Commitment                           U.S. universities follow the patterns of federal
      The evolution of science—particularly bio-              regulations, although they significantly vary in
medical science—over the past two decades has                 the depth of the disclosures they require and in
dramatically increased the possibility of conflicts            their thresholds for examining potential con-
of interest on the part of university researchers.            flicts. Strategies for managing a conflict usually
Therefore, virtually all research universities now            depend on the details of each case. Options can
have policies aimed at monitoring and managing                include divesting troublesome assets, ending con-
such relationships to prevent abuses, and many                sulting arrangements, withdrawing the researcher
entities are asking whether these policies should             from the project, independent review, and dis-
be updated.                                                   closing significant financial assets in any pub-
      The mere appearance of a conflict of interest            lished report on the research. A useful strategy
does not constitute wrongdoing, and conflict of                for preventing potential conflicts involves ongo-
interest does not automatically lead to scientific             ing education, aimed both at faculty members
misbehavior. The purpose of conflict-of-interest               and at graduate students who hope to become
policies is to prevent or control situations that             practicing scientists.
might lead to inadvertent and unacceptable bias,                    Clinical trials are a special case, because lives
to suspicions of wrongdoing, or to actual wrong-              are at stake.While many procedures exist to safe-
doing. At the same time, because our national                 guard these trials, the array of protections is now
innovation system demands close cooperation to                being reassessed in many areas. Conflict-of-
succeed, potential conflicts can never be fully                interest policy is only one element of the human-
eliminated and must be managed.                               subject protections that surround clinical trials,
      Financial conflicts of interest arise when sci-          but it is a particularly important element. Clinical
entists’ private financial interests and their                 trials depend on the willingness of patients to
research converge in a way that might call into               take part in those trials, which in turn, depends
question their ability to make unbiased decisions             on the patients’ trust in the clinical researchers
related to their work. Perceptions of a conflict of            who are running the trials.
interest can damage the research enterprise by                      As university officials, researchers, and the
weakening public trust—a particular concern for               companies with which they collaborate study
research universities, which heavily depend on                these conflict-of-interest issues, they should rec-
federal research funding.                                     ognize several basic principles:The core values of
      Conflicts of commitment are generally                    academic freedom must be maintained; industry
defined as anything that might interfere with a                funding cannot, and should not, be viewed as a
faculty member’s full-time duties. Many univer-               substitute for adequate, long-term public financ-
sities have formal policies limiting the amount of            ing of basic scientific research; universities and
time that a faculty member can spend engaged in               companies should seek transparency, clarity, and
outside activities.                                           consistency in identifying actual and potential

12 Working Together, Creating Knowledge
                                                      Executive Summary

conflicts of interest; and all research participants   fidentiality are particularly acute in the case of stu-
should continue their adherence to the scientific      dents, and universities differ in their ability to
method in order to preserve public support for        manage this process. Ultimately, responsibility for
academic research.                                    maintaining confidentiality lies with both sides.
                                                           Reasonable publication delays to secure
Negotiating Agreements                                intellectual property protection are usually
     Of the many ingredients in a successful          acceptable to universities. Since much university
negotiation between companies and universities,       research is actually performed by graduate stu-
mutual trust is perhaps the most important.           dents, it also is important to keep their academic
Negotiations generally proceed more quickly and       needs in mind.The “standard” publication delay
easily when both sides are familiar with each         is 60 to 90 days, but universities report that they
other’s needs and desires and don’t worry that        are under increasing pressure to extend such
their partner may try to take advantage of them.      delays. The advent of the Internet and e-mail
Involving experienced people in the negotiation       may significantly alter the terms and conditions
can also smooth and expedite the process. A           of publications.
master contract can be an effective way to avoid
plowing the same ground when two long-time            Indirect Costs
partners negotiate agreements covering individ-            Now called Facilities and Administrative
ual projects. Model agreements can also speed the     (F&A) costs, indirect costs are the university’s
negotiation process, although they are difficult to    research costs over and above researchers’ salaries
develop and implement because business prac-          and the costs of new materials. A July 2000
tices in different industry sectors—and even          RAND Corporation report concluded that, over
within the same company—demand disparate              the past decade, universities had only been recov-
agreements.                                           ering between 70 and 90 percent of their federal
                                                      F&A costs. Despite this, universities often face
Confidentiality                                        pressure from both companies and faculty to
     The ability of faculty researchers to discuss    charge less than their federal rate.
their work with colleagues and to publish their            Universities contend they have little flexibil-
results is a cornerstone of the academic enterprise   ity because the federal government is pressuring
and supports the creation of new scientific knowl-     them to charge all customers the same rate.
edge. Nothing should be done to put this at risk.     Nevertheless, a university may negotiate with a
At the same time, companies have a legitimate         company on indirect costs when, for instance, a
need—and fiduciary responsibility to their share-      company joins a university research center, or
holders—to protect the value of their investments.    when the modest size of the research project
     Companies recognize that universities are        allows the university to use standardized con-
not the best places to try to keep secrets.To that    tracts, and thus save on administrative costs.
end, various strategies are used to protect confi-
dential information. Individual researchers may
be asked to sign confidentiality agreements, while
sometimes institutional signatures are used. The
challenges and consequences of maintaining con-

                                                                                                         BUSINESS–HIGHER EDUCATION FORUM 13
                                          Executive Summary

Intellectual Property                                              Universities have a number of problems
      The most nettlesome area of negotiations is             with providing background rights. Many faculty
usually the ownership, value, and use of the intel-           members strongly believe that the intellectual
lectual property arising from the sponsored effort.           property of one faculty member should not be
When federal funding is involved, the Bayh-Dole               mortgaged for the benefit of another, or even to
Act vests ownership with the university, not with             permit the institution to get sponsored-research
any corporate participants. In other cases, compa-            funding. Merely identifying intellectual property
nies often want ownership so that they might                  that might be relevant is both time-consuming
manufacture, use, and sell products that emanate              and expensive.Agreements on background rights
from the research. Universities often desire own-             usually include provisions that the university offer
ership to allow their faculties and graduating stu-           a good faith or reasonable effort to find potential
dents to continue to work in the area, meet joint             conflicts, although these phrases can be open to
sponsorship obligations, ensure commercializa-                legal interpretation. For these and other reasons,
tion, meet federal tax regulations, and license the           universities rarely sign binding agreements on
technology on a non-exclusive basis. In most                  background rights. Until now, there have been
cases, it is possible to construct arrangements that          few instances in which background rights have
can serve the commercialization needs of compa-               become a major problem, but the issue may have
nies while still vesting intellectual property own-           a chilling effect in the future.
ership with the university.This situation does not
necessarily hold true in the case of copyrights.              Research Tools
      When collaboration negotiations are com-                      Research tools can be highly complex enti-
bined with a contentious licensing negotiation,               ties that themselves require research to develop,
they can be much more arduous.Therefore, col-                 and access to publicly funded research tools is
laboration partners often try to resolve commer-              becoming one of the most contentious areas of
cialization terms quickly or, if that is not possible,        university-industry relationships. The issue is
to defer the negotiation of licensing royalty rates           whether these research tools will be licensed
until the research is complete.                               broadly or exclusively to one company, frequently
                                                              a faculty start-up. The friction generated by this
Background Rights                                             conflict poses a serious risk of souring the rela-
     Background rights are the licensing rights               tionship between universities and companies that
provided to an industry partner by a university               would like to see these tools licensed broadly.
for “background intellectual property”—intellec-                    In December 1999, the National Institutes of
tual property developed by the university using               Health issued a set of guidelines for universities
funds from other sponsors, including the federal              that develop tools with the help of federal fund-
government. Companies seek rights to use these                ing. The guidelines discouraged patenting unless
inventions to complete their intellectual property            patent protection was necessary to attract invest-
portfolios so that they have sufficient licensing              ment needed for full development, urged that
rights to commercialize the results of the spon-              tools be licensed with as few encumbrances as
sored research.                                               possible, and argued against reach-through
                                                              royalties—a practice in which the owner of a
                                                              research tool seeks royalties on any product that
                                                              might be developed through its use. Tool devel-
                                                              opers—often emerging biotechnology firms—
                                                              argue that reach-through royalties are an
                                                              alternative to charging high up-front user fees or
                                                              restricting access.

14 Working Together, Creating Knowledge
                                                         Executive Summary

Best Practices for Universities                                Communication is perhaps the most critical
      The success of university research collabora-      management issue in collaboration. Exchanges
tions with industry sponsors depends above all on        between corporate and university partners should
the interest and enthusiasm that faculty scientists      be clear and direct.They should also be frequent.
bring to the joint research effort. But university       Meeting company deadline expectations is a
administrations can promote collaborations by            recurring challenge.Although university adminis-
motivating their faculties to take part and by cre-      trative offices provide some help, ultimate respon-
ating a customer-friendly environment for                sibility for managing the university’s participation
would-be corporate partners.                             in the collaboration lies with the researcher.
      The administrative components of a suc-                  Traditional university hiring, tenure, and
cessful program go by different names on differ-         promotion practices do not always make
ent campuses, and their duties are sometimes             allowances for industry-sponsored projects, and
combined at smaller universities. But they carry         faculty who take part may risk weakening their
out the same missions wherever they appear.              academic career prospects. Universities should
These key offices are: the Office of Sponsored             consider giving appropriate credit to university
Programs or Office of Research Administration,            researchers who collaborate with industry.
to establish and manage collaborations; the Office
of Technology Transfer or Office of Technology            Best Practices for Industry
Licensing, to decide when to seek patents and to               Industry support for collaborations with
negotiate patent-licensing agreements; the Office         universities has to start at the top—with a com-
of Development, responsible for university fund          pany’s top executives. A research collaboration
raising; and the Office of Corporate Relations,           must meet business objectives, be specified in
which oversees the overall management of the             financial terms, and ultimately be accountable to
university’s relations with industry.                    the firm’s stockholders. For this reason, the
      University researchers operate as independ-        company—not the university researcher—will
ent contractors in selecting and accomplishing           often select research priorities.
their research goals. Motivating and helping                   Some companies have established internal
researchers locate potential collaboration partners      matching-fund programs to encourage a culture
require a sophisticated understanding not only of        change toward external research. A supportive
how researchers operate but also of individual           corporate culture also is important in deciding
researchers’ focus areas, and of the companies that      whether to engage in a specific collaboration.
share their research interests. When technology-         Establishing and maintaining an effective collab-
transfer, sponsored programs, or corporate rela-         oration are time-consuming, and company deci-
tions officials are knowledgeable about faculty           sion makers should recognize that effective
research interests, they can play a key role in pre-     collaborations require the substantive involve-
screening companies with which faculty might             ment of key personnel.
wish to collaborate. Deans, department chairs,                 Most university and industry research coor-
and vice presidents of research are well-                dinators understand what type of research could
positioned to coordinate these efforts.                  be mutually beneficial. It should be ethical, pub-
      Finding new partners may be a promising            lishable, basic, or slightly applied, and it should
tactic for universities that want to increase their      pair university expertise with company interests.
industry collaborations.A corporate relations office      University scientists’ curiosity-driven basic
can be particularly well-suited to the task of mar-      research often opens lines of inquiry that—
keting the niche strengths of the university. The        although still fundamental in nature—can help
university president can play a constructive role in     lead to therapies and technologies of value to
fostering greater numbers of collaborations.             society. Well-matched projects are usually non-
Proposing a well-thought-out plan, and providing         proprietary and often have a longer lifespan than
specific ways in which the company can work               is typical in a corporate research lab.
with the institution, can be an effective sales pitch.

                                                                                                          BUSINESS–HIGHER EDUCATION FORUM 15
                                              Executive Summary

      The first and most important issue is estab-                      To ensure success, a university-industry col-
lishing a research agenda that the company wants                  laboration needs an “end-user champion”—
to support and the faculty member wants to per-                   someone within the sponsoring company who is
form. Managing a partnership requires scientists                  dedicated to making the partnership work. This
in both the university and the company to draw                    person must have the support of senior company
heavily on their team-management skills and puts                  research officials—and ultimately the CEO—to
a premium on clear communication, openness,                       pursue external research opportunities.
and forthrightness. It heavily relies on the strength                  Universities and their corporate partners
of personal relationships. When the partners are                  must always keep in mind that research collabo-
making roughly equal financial and/or intellec-                    ration is not an end in itself. It is a means by
tual contributions, decision making is almost                     which academic and industry scientists can
always by consensus.                                              advance their research and companies can quickly
      Tying university research to company sched-                 move new products into the marketplace—
ules is essential to a successful collaboration.The               serving the interests of both participants, the pur-
company, the university, and the researcher should                suit of new knowledge, and society at large.
pay close attention to any timelines before agree-
ing to a project. At the same time, integrating
research results into a company’s strategic                       SUMMARY OF RECOMMENDATIONS
processes poses a major challenge.
      The involvement of graduate students can                    Negotiating Agreements
both enhance and impede a collaborative                             • When a university-industry research rela-
industry-university research project. At the same                     tionship is of sufficient magnitude, collabora-
time, graduate students and occasionally under-                       tion partners should consider negotiating
graduates are almost always going to be involved                      master contracts. Universities also should
in university-industry collaborations.The biggest                     consider developing model agreements for
challenges posed by student involvement arise                         single research projects and ensure that the
during negotiation of confidentiality and intel-                       terms do not unduly disadvantage small and
lectual property terms. In most cases, however, a                     medium-sized companies.
university-industry collaboration gives the com-                    • Confidentiality agreements, when necessary,
pany a chance to evaluate graduate students on                        should be signed by the company, the uni-
the job as potential employees.                                       versity, and the researchers involved. The
      Frequent turnover of company project man-                       company and the university must take
agers is the most disruptive personnel change that                    responsibility for safeguarding confidential
affects collaborative teams. However, personnel                       information. Publication delays to protect
changes are a part of corporate life, so researchers                  intellectual-property rights should generally
must expect changes to take place and should                          be no longer than 60 to 90 days. Any publi-
plan accordingly.                                                     cation delays should be carefully monitored
                                                                      both to preserve academic freedom and to
                                                                      protect against any early disclosure that might
                                                                      invalidate patent claims.
                                                                    • Indirect costs are a legitimate expense of per-
                                                                      forming university research. In most cases,
                                                                      companies should expect to pay at least the
                                                                      negotiated       federal      Facilities   and
                                                                      Administrative charge for the research they
                                                                      sponsor in universities.
                                                                    • Although ownership and control of intellec-
                                                                      tual property resulting from a collaboration
                                                                      must be decided by the collaboration part-

16 The University-Industry Research Collaboration Initiative
                                                       Executive Summary

    ners, it usually will be appropriate for the         • Universities should coordinate the efforts of
    university to retain ownership. Both parties           the various offices that support university
    should remain flexible during negotiations,             researchers in their work with companies
    and the key measure should be whether the              and, where appropriate, should consider co-
    corporate partner has the ability to commer-           locating them. The university campus presi-
    cialize the fruits of the research to the bene-        dent should establish a cooperative tone
    fit of the public. Universities should update           toward university-industry research collabo-
    their copyright policies to allow industry             rations and should align incentives to
    sponsors to be granted licensing terms on a            encourage teamwork and promote research
    basis similar to that provided with patents.           collaborations.
  • Collaboration partners should avoid engaging
    in contentious licensing negotiations during       Best Practices for Industry
    a collaboration negotiation, while preserving        • Companies should encourage internal cham-
    the ability of the university and its faculty to       pions of research collaborations to identify
    share in the benefits of successes. Should the          potential university partners based on shared
    partners agree to preset a royalty rate or             research priorities. To expedite this process,
    range, the university should be mindful of             companies should make it as easy as possible
    federal tax regulations governing commer-              for potential university partners to commu-
    cialization terms for sponsored research that          nicate with the company research organiza-
    takes place in buildings or uses equipment             tion, and should consider establishing a
    funded by tax-exempt bonds.                            central coordinating unit for this purpose.
  • Companies have legitimate reasons for
    requesting background rights to sponsored
    projects and, as part of their due diligence,       Recommendation:
    should assist universities in locating potential    Companies should strive to integrate university research collaborations into
    conflicts. Universities have legitimate reasons      their product and service development process where appropriate. They
    for not providing background rights, but they       should involve their business units in this process, manage the collaborations
    should make a strong effort to do so when           appropriately, and plan for the turnover of key company personnel. Wherever
    appropriate and feasible. Universities should       possible, the company should involve students in the collaboration. The com-
    closely consult with faculty and confirm that        pany should modify its personnel evaluation systems as necessary to reward
    all contractual obligations can be met before       the establishment of internal and external interdisciplinary teams. To achieve
    signing binding agreements.                         results, company leaders must make a long-term commitment.

Best Practices for Universities
  • Research collaborations must be based on the
    willingness and enthusiastic participation of
    individual faculty members. A university can
    assist faculty in finding new collaboration
    partners, but should do so based on faculty
    interest, the research strengths of the univer-
    sity, and industry research opportunities.
    Hiring, tenure, and promotion processes
    should give appropriate credit to university
    researchers who collaborate with industry.

                                                                                                          BUSINESS–HIGHER EDUCATION FORUM 17
We seek cooperative research
relationships with industry not
simply to generate royalty revenue
and stimulate economic growth,
but to create relationships with
industry that will help faculty in
pursuing their own research and in

training graduate students.1
—Richard Atkinson, president of the University of California

                niversities and companies in the               The results of this research, however, were
                United States have worked together       not always expeditiously transferred to private
                to advance the frontiers of knowl-       companies capable of translating advances into
                edge and incorporate that knowl-         new products and services for customers. A sig-
edge into new products, processes, and services          nificant problem was that each federal agency had
since the Morrill Act of 1862 established the            its own policies regarding patent ownership and
land-grant college system. The land-grant col-           the licensing of federally sponsored research per-
leges gave rise to agricultural extension offices,        formed in universities.
designed to bring new agricultural methods and                 The Bayh-Dole Act of 1980 was passed to
technologies to farm operations, and                     overcome this difficulty. In addition to setting a
business–academia cooperation expanded early in          uniform federal invention policy, the act permit-
the 20th century with close relationships                ted universities to retain ownership of patents
between companies and engineering schools.               generated through federally funded research and
     Prior to World War II, most of the best uni-        encouraged universities to work with industry to
versity research was performed in European uni-          commercialize university inventions.5 As one
versities, and much of the best fundamental              measure of success, the Association of University
research was performed in corporate research lab-        Technology Managers estimates that university
oratories. During the war, however, the federal          licenses helped generate more than $40 billion in
government began to provide significant funds for         economic activity in 1999.6
university research, and afterward,Vannevar Bush,              Since the passage of the Bayh-Dole Act, the
science advisor to both Presidents Franklin D.           commercial environment has changed markedly.
Roosevelt and Harry S Truman, urged that the             Beginning in the early to mid-1980s, the United
government should continue investing in univer-          States became increasingly concerned about its
sity research. Bush’s report, Science: The Endless       international economic competitiveness. Today,
Frontier,2 led eventually to the establishment of the    the extraordinarily successful growth of the new
National Science Foundation in 1950.                     economy has transformed the way business is
     Not until the Soviet Union launched the first        performed and the means by which economic
Earth satellite, Sputnik, in 1957 did the level of       growth is generated, placing even more emphasis
federal funding for university research begin to         on the pursuit, development, and integration of
match the rhetoric. From 1960 to 1966, driven            new knowledge. As national leaders in the per-
largely by the space program, federal nondefense         formance of advanced research, universities are
research spending grew from approximately $6 bil-        collaborating with companies to advance both
lion to nearly $35 billion* a year,3 a sizable portion   parties’ common research agendas. Federal
of which was spent on university research. After         Reserve Chairman Alan Greenspan recently
peaking in 1966, federal funding for nondefense          noted, “In a global environment in which
research to this day has never dropped below             prospects for economic growth now depend
$20 billion annually,4 while substantially declining     importantly on a country’s capacity to develop
as a percentage of overall federal spending.             and apply new technologies, our universities are
                                                         envied around the world.The payoffs—in terms
                                                         of the flow of expertise, new products and start-
                                                         up companies, for example—have been impres-

*Figures are in constant FY98 dollars.

                                                                                                         BUSINESS–HIGHER EDUCATION FORUM 19
                                                                                          CHAPTER 1

      The rate of growth of industry-sponsored                                                                                    Federal programs requiring collaboration
research at the nation’s universities also has been                                                                         and cost-sharing also are encouraging universities
impressive. Industry research spending at colleges                                                                          and companies to work together more closely.10
and universities in 1997 was more than seven                                                                                Many federal programs now include industrial
times greater (in constant dollars) than in 1970.                                                                           cost-sharing and collaboration—for example, the
During that period, industry spending on its own                                                                            Advanced Technology Program of the National
research and development (R&D) more than                                                                                    Institute of Standards and Technology, the dual
tripled, federal funding of R&D at colleges and                                                                             use programs of the Department of Defense, and
universities more than doubled, and federal fund-                                                                           the Technology Reinvestment Program of the
                                                                                                                                                                                              In 1998,
ing of government-conducted R&D stayed rela-                                                                                Department of Commerce. James MacBain,
tively constant.                                                                                                            director for research relations at the University of          corporations
      In 1998, corporations accounted for nearly                                                                            Michigan College of Engineering, observed that              accounted for
$2 billion in sponsored research at universities, or                                                                        the federally funded centers that include indus-
                                                                                                                                                                                    nearly $2 billion in
about 9 percent of all research performed at U.S.                                                                           trial liaison groups are “changing the way we do
colleges and universities.The federal government                                                                            business.”11                                           sponsored research
sponsored well over $13.5 billion in university                                                                                   These closer research ties between academia        at universities, or
research that year.8 That same year, industry spent                                                                         and industry, and the connection between inno-            about 9 percent
a total of $145 billion on its own R&D, more                                                                                vative research and regional economic develop-
than $100 billion of which went to development                                                                              ment, have led many communities to promote                  of all research
activities. The remainder—a little less than                                                                                academic research as a key component of their                performed at
$40 billion—was spent on basic and applied                                                                                  economic development strategies. Elected officials        U.S. colleges and
research,9 a more likely area for university                                                                                increasingly expect universities and community
involvement. The Industrial Research Institute                                                                              colleges to participate in regional economic devel-
projects that industry funding of university                                                                                opment plans.
research will more than double over the next 10

Industry support for academic R&D has grown, but it is still dwarfed by federal support

                                                                  Industry                     Federal Government



               Billions 1992 dollars in billions
              Constantof constant 1992 dollars






                                                             8      0        2      4      6      8      0      2         4      6      8      0      2      4      6      8
                                                          196    197    197      197    197    197    198    198      198     198    198    199    199    199    199    199

                                                   Source: Association of American Universities, National Science Foundation.

20 Working Together, Creating Knowledge

UNIVERSITY-INDUSTRY INTERACTIONS                          in an area of interest to the industry partner, and
Research relationships are a subset of many dif-          collaborations that are highly focused and applied
ferent interactions between universities and com-         [collaborations], i.e., clinical trials.”13 Large clinical
panies.The Council on Governmental Relations              trials are so focused on the testing of already-
has listed six research mechanisms through which          developed technology that some practitioners
universities and companies can work together:             barely consider them collaborations at all, and
   • Sponsored research: The most frequent form           some do not consider them to be research.
     of research relationship, which involves com-              Often, however, the distinction between
     panies directly funding university research.         basic and applied research is less stark. University
   • Collaborative research: University-industry          scientists’ curiosity-driven basic research fre-
     research partnerships that are encouraged            quently opens lines of inquiry that, although still
     through partial federal funding.                     fundamental in nature, are aimed at helping
   • Consortia: Groups of companies and universi-         develop valuable new therapies and technologies.
     ties engaged in various research efforts of          Thus, much research that might be considered
     common group interest.                               “applied”—because it has a specific target—
   • Technology licensing: Licensing of university        involves original investigations along paths that
     patents (usually stemming from federally             branch out from basic studies and are quite
     funded research) to companies for commer-            appropriate to a university’s mission.
   • Start-up companies: Usually involving univer-
     sity faculty, they often obtain licensing agree-     WHY COLLABORATIONS ARE
     ments to access university technologies.             IMPORTANT
   • Exchange of research materials: Used to expe-        Research collaboration is not an end in itself. It
     dite the performance of research and accom-          is a means by which academic and industry sci-
     plished       through      material      transfer    entists can advance their own research and com-
     agreements.12                                        panies can move new products more quickly
                                                          into the marketplace—serving the interests of
      Of these six mechanisms, only the first three        both sides, the pursuit of new knowledge, and
are fully collaborative in nature; the others involve     society at large.
the licensing of already-completed research for                Even when potential partners do have the
commercialization purposes. Interestingly, it is          resources and knowledge to accomplish individ-
the licensing of university technology that is usu-       ual goals, working with outside experts can
ally referred to as technology transfer; but true tech-   greatly improve the quality and comprehensive-
nology transfer is accomplished through all of            ness of the research and can help to reduce its
these mechanisms, as well as through the use of           costs. “Joint technology development simply
faculty consultants and extension services. Even          yields results neither group could have achieved
continuing education and graduate and under-              alone,” said Randolph Guschl, director of corpo-
graduate education can be considered a form of            rate technology transfer at DuPont Central
technology transfer, and the hiring of students by        Research and Development. Or, as Hank
companies has long been considered one of the             McKinnell, chairman of the board and CEO of
most important forms of technology transfer.              Pfizer Inc, observed, “All of us are smarter than
       Within the area of research collaborations,        any of us.”15
there are additional distinctions based on the type            Furthermore, many scientific advances are
of research performed. Ralph Christoffersen, pres-        now occurring at the interfaces between tradi-
ident and chief executive officer of Ribozyme              tional fields, heightening the rationale for collab-
Pharmaceuticals Inc., pointed to one significant           orations.16 “One principle that has become very
distinction: “[It is important to] distinguish            evident from recent progress in molecular and
between collaborations that are research collabora-       cellular biology is that many of the most exciting
tions, i.e., basic research carried out at a university   discoveries involve teamwork requiring comple-

                                                                                                                 BUSINESS–HIGHER EDUCATION FORUM 21
                                          CHAPTER 1

mentary sets of technical skills,” wrote Nobel lau-       • To expand precompetitive research, both
reate Michael Smith of the University of British            with universities and with other companies.
Columbia.17 Universities are well positioned to           • To leverage internal research capabilities.19
contribute to this kind of interdisciplinary
research. University researchers can tap many                University research can be useful to a com-
other funding, scientific, and humanities                pany even if it does not lead directly to new
resources, on their campuses and elsewhere, that        products. “Many [of our] research and develop-
companies do not offer.                                 ment activities have been accelerated very sub-
     Another benefit that can flow from research          stantially by the information flow that has come                      Many state
collaborations is exchange of personnel. Just as        about through the interface with outside parties,”                 governments
one of the benefits to companies of research col-        said Theodore Tabor, former manager of external
laborations can be the recruitment of students,         research at Dow Chemical Company. “It                             recognize that
the partners may find university participants            enhances our own core competencies, and that                  university-industry
going to work for corporate sponsors and vice           has led to new business and technology platforms        collaborations can play a
versa. During 20 years of collaboration between         by opening up entirely new fields for [us] to
                                                                                                                 central role in economic
Washington University in St. Louis and the              pursue. Whether we use that technology right
former Monsanto Company (now Pharmacia                  now or not, it’s often very, very important to us.”20    development efforts, by
Corporation), each has “lost” employees to the                                                                          spinning off new
other, and several researchers have moved from          University Benefits
the university to key positions in other compa-               For universities, working with companies
nies. Such exchanges provide each organization          allows them to gain access to external sources of               start-ups and by
with valuable insights about the other’s proce-         expertise and funding. The 1995 Industrial                       attracting other
dures and afford students the opportunity to learn      Research Institute report identified these motives
                                                                                                                     R&D companies to
from faculty with real-world experience. Michael        for universities to enter cooperative research
Montague, director of research operations at            agreements with companies:                                    high-tech corridors
Pharmacia Corporation, said that the greatest              • To obtain financial support for the univer-              around universities.
benefit of that company’s relationship with the               sity’s educational and research mission.
university was the move of Philip Needleman                • To fulfill the university’s service mission.
from the university’s faculty to the company.18            • To broaden the experience of students and
Prior to the Pharmacia-Monsanto merger,                      faculty.
Needleman was Monsanto’s chief scientist.                  • To identify significant, interesting, and rele-
                                                             vant problems.
Industry Benefits                                           • To enhance regional economic development.
For companies, another major benefit of research            • To increase employment opportunities for
collaborations is the opportunity to leverage                students.21
research resources to gain access to external
sources of expertise in a cost-effective fashion. In         University faculty members benefit from the
a 1995 report, the Industrial Research Institute        opportunity to be involved in exciting new busi-
cited the following motives for industry to pursue      nesses and the challenges of market-relevant areas
cooperative research agreements with universities:      of research. Many university researchers also find
   • To access expertise not available in corporate     that corporate sponsorship imposes a smaller
     laboratories.                                      administrative burden than the voluminous grant
   • To aid in the renewal and expansion of a           applications required by the federal government.
     company’s technology.                              The additional visibility that research collabora-
   • To gain access to students as potential            tions bring can also lead to peer recognition and,
     employees.                                         in some cases, future consulting opportunities.
   • To use the university as a means of facilitating
     the expansion of external contacts for the
     industrial laboratory.

22 Working Together, Creating Knowledge

      Collaborations also provide university stu-
dents with support during their education, oppor-
tunities for internships or employment afterward,
and specific research knowledge along with real-
world experience.This prepares them more effec-
tively for their future careers and can be a
recruitment draw for students and junior faculty.
      In the 1980s, faculty entrepreneurs began to
appear in large numbers in universities. They
were interested both in cutting-edge science and
in working with new or existing companies to
develop their discoveries. Since their arrival,
these faculty entrepreneurs have trained a whole
generation of graduate students to seek entrepre-
neurial opportunities. Often, these newly minted
researchers will “interview” a university’s tech-
nology transfer office when they are being con-
sidered for faculty positions.22
      Research collaborations also can elevate the
university’s prestige and create valuable connec-
tions between the university and its surrounding                                                              Photograph Copyright University of Notre Dame
community. Carolyn Sanzone, assistant vice
chancellor for strategic technology alliances at      Financial Situation
the University of Massachusetts, said the payoffs          As it became increasingly difficult for uni-              University of Notre Dame
include identifying corporate advocates for the       versity faculty to secure federal research funding in            Professor Hsueeh-Chia
university in state-sponsored economic develop-       the early 1990s, industry-sponsored research col-
                                                                                                                           Chang, standing left,
ment efforts and establishing advisory councils       laborations supplemented the number of research
to create a local atmosphere that encourages col-     opportunities available to university faculty and                     Associate Professor
laborations. In addition to the direct benefit for     students. From the financial perspective of the                       David T. Leighton Jr.,
collaborations, these groups can enhance com-         university and faculty, when the sponsor pays its                standing right, graduate
petitiveness for federal funding opportunities.23     share of the university’s indirect costs, funding
                                                      from industry-sponsored research is identical to                      student Jason Keith,
      In addition, many state governments recog-
nize that university-industry collaborations can      that from federally sponsored research.                        kneeling, and undergrad-
play a central role in economic development                In addition, universities have an opportunity                    uate researcher Eric
efforts, by spinning off new high-technology start-   to create new revenue sources by licensing the
                                                                                                                       Sherer have developed
ups and by attracting other R&D companies to          technologies they develop. Universities receive
high-tech corridors around universities. Within       more than three times as much revenue from                        an automotive catalytic
the past few years, at least 21 states have commit-   corporate-sponsored research as they do from                         converter that ignites
ted or have been considering research and tech-       licensing income.25 But licensing revenue is
                                                                                                                               faster than current
nology initiatives totaling $7.7 billion to enhance   uncommitted income that the university can use
university research and to lure new high-tech         to support its research and education mission in                                         models.
investment, according to Rich Bendis 24, president    any way it chooses.
of the Kansas Technology Enterprise Corporation,           For all but a handful of institutions, however,
a state-sponsored agency that promotes new high-      income from research licenses amounts to a very
technology investment in Kansas.                      small percentage of the support they receive from
                                                      federal, industry, foundation, and state and local
                                                      government sources. In 1998, U.S. universities’

                                                                                                        BUSINESS–HIGHER EDUCATION FORUM 23
                                          CHAPTER 1

licensing income averaged 2.7 percent of their         WHAT THE RCI IS AND IS NOT STUDYING
total research sponsorship from all sources.                 This report focuses primarily on sponsored-
Research hospitals’ licensing income averaged          research relationships involving individual uni-
5.9 percent of their total research sponsorship.26     versity and company researchers working
“License income is not a substitute for federal        together. Understanding the mechanisms of indi-
funding of research,” said Lori Pressman, chair of     vidual sponsored-research arrangements provides
the Survey, Statistics, and Metrics Committee at       a critical foundation for understanding the issues
the Association of University Technology               raised by more complex collaborative arrange-
Managers.27 In fact, Louis Tornatzky, senior fellow,   ments. Furthermore, these individual relation-
Southern Technology Council, reported in 2000          ships are the most common and yet the most
that “less than 50 percent of universities realize     pressing. The report addresses important aspects
enough royalty income to cover the costs of run-       of other mechanisms, particularly technology
ning their technology-transfer office.”28               licensing, to varying degrees, because they can
      Licensing revenue is not inconsequential, of     affect the overall research relationship and the
course. The University of California system, the       establishment of research collaborations.
top recipient of such revenue in 1999, earned                Although this report is designed for inexpe-
more than $80 million from its patent portfolio        rienced practitioners on both sides, it should be
that year, 95 percent of which was generated           useful to experienced partners as well. It does not
from biomedical-related patents.29 Such income,        assume that the experience level of potential
however, often depends on a single “blockbuster”       partners is always the same. “The relationship is
patent, and it can be highly inconsistent.“In 1996     not necessarily symmetrical,” said Nils Hasselmo,
we had about $20 million from our intellectual         president of the Association of American
properties,” reported George Rupp, president of        Universities. “It’s not inexperienced universities
Columbia University. He expected intellectual          negotiating with inexperienced companies, but it
property earnings to grow to $75 million in 2000       may well be very experienced companies nego-
“and then suddenly [to] drop to $49 million just       tiating with inexperienced universities or very
on the basis of one ‘home run’ [discovery] going       experienced universities negotiating with inex-
into the public domain.”30                             perienced companies.”33
      For most institutions, success at generating           Because of budgetary and time constraints,
licensing revenue is a function of size and            this report does not address many closely related
serendipity. According to a survey by the              topics. It does not consider how research collab-
Association of University Technology Managers,         orations contribute to regional economic devel-
eight of the top 15 universities generated more        opment, or influence the university curriculum,
than $9 million of research-related licensing          or affect faculty tenure and career development.
income in 1999. The remaining seven universi-          It does not discuss the technique (adopted by
ties generated less than $9 million. Of 124 other      some universities) of establishing university-
universities that responded to the survey, seven       affiliated, nonprofit research foundations as a
received more than $9 million, while 117               home for some university business collaborations,
received less.The success of the high earners was      because this report focuses on collaborations
largely due to a small number of blockbuster           involving university researchers in their official
patents or copyrights.31 “Our success with Taxol       capacity. This report does not explore in depth
[the anti-cancer drug] shows it’s better to be         the particular circumstances that may face small
lucky than good,” said Sandy D’Alemberte, pres-        companies and small universities—or even com-
ident of Florida State University.32 The unpre-        munity colleges—that do not have extensive
dictability of licensing income is another reason      research-administrative staffs. (However, the chal-
why it cannot substitute for long-term federal         lenge of simultaneously maintaining institutions’
support of research funding, even at universities      core academic values and corporations’ bottom-
where the amount of licensing revenue is com-          line fiscal prudence is the same, whether a col-
paratively high.                                       laboration involves just one research project or a

24 Working Together, Creating Knowledge

multimillion dollar partnership.) Nor does the              university sectors. Rather than touching upon all
report discuss national security and international          these areas only briefly, we opted to study the
competitive implications or any antitrust con-              areas we selected in sufficient depth to analyze
cerns that may arise from the increasing similar-           them thoroughly within the time we had allotted
ity between research in the corporate and                   for this particular initiative.

   Richard Atkinson, “The Future Arrives First in           18
                                                               Michael Montague, interview by Beth Starbuck,
California,” Issues in Science and Technology 16,           Calyx, Inc., Case Study Final Report, 7 September
(Winter 1999/2000), 45–51.                                  2000, 9.
  Vannevar Bush, Science:The Endless Frontier               19
                                                               Industrial Research Institute, A Report on Enhancing
(Washington, DC: United States Government                   Industry-University Cooperative Research Agreements
Printing Office, 1945).                                      (Washington, DC, 1995), 1.
  American Association for the Advancement of               20
                                                               Theodore E.Tabor, remarks at “Making Collaborations
Science, Trends in Non-defense R&D by Function, FY          a Corporate Core Competency” teleconference, 15
1960–99 (Washington, DC:AAAS, 2000), based on               October 1999, 35.
historical tables in the Budget of the United States        21
                                                               Industrial Research Institute, A Report on Enhancing
Government, FY 1999.                                        Industry-University Cooperative Research Agreements
   Ibid.                                                    (Washington, DC, 1995), 1.
   Council on Governmental Relations, Review of             22
                                                               Louis Tornatzky, Paul Waugaman, and Denis Gray,
University-Industry Research Relationships (Washington,     Industry-University Technology Transfer: Models of
DC: CGR, 1995), 1.                                          Alternative Practice, Policy, and Program (1999), 10.
  Association of University Technology Managers,            23
                                                               Carolyn Sanzone, interview by Beth Starbuck,
AUTM Licensing Survey: FY 1999, Survey Summary              Calyx, Inc., Case Study Final Report, 7 September
(Washington, DC:AUTM, 2000), 1.                             2000, 33.
  Alan Greenspan, remarks at the National                   24
                                                               Rich Bendis, president, Kansas Technology
Governors’Association summer meeting, State                 Enterprise Corporation. KTEC News, January–
College, PA, 11 July 2000.                                  February 2001.
  Association of University Technology Managers,            25
                                                               Association of University Technology Managers,
AUTM Licensing Survey: FY 1998, 1999                        AUTM Licensing Survey: FY 1998, Survey Summary
(Washington, DC:AUTM, 2000), 71.                            (Washington, DC:AUTM, 1999), 36, 71.
   Industrial Research Institute, Industrial Research and   26
                                                               Analysis of Association of University Technology
Development Facts (Washington, DC: IRI, 2000), 4.           Managers Licensing Survey: FY 1998, 36–37.
    Case Study Final Report, Lakeville, MN, 7               27
                                                               Lori Pressman,Association of University
September 2000, 4.                                          Technology Managers, conversation with Mike
    James C. MacBain, interview by Beth Starbuck,           Champness, 5 January 2001.
Calyx, Inc., Case Study Final Report, 7 September           28
                                                               Louis Tornatzky, Building State Economies by
2000, 35.                                                   Promoting University-Industry Technology Transfer, for the
    Council on Governmental Relations, Review of            National Governors’Association, 2000.
University-Industry Research Relationships (Washington,     29
                                                               University of California Technology Transfer
DC: Council on Governmental Relations,                      Program, Annual Report, 1999 (UCTTP, 2000), 15.
September 1995), 7–9.                                       30
                                                               George Rupp, proceedings of A Dialog on
    Ralph Christoffersen, letter to Project Director,       University Stewardship: New Responsibilities and
15 July 2000.                                               Opportunities, Government-University-Industry
    Randolph Guschl,“Technology Transfer:Too Many           Research Roundtable (1999), 23.
Options?” Chemtech (July 1997): 7.                          31
                                                               Analysis of AUTM Licensing Survey FY 1999,
    Hank McKinnell, remarks at Business–Higher              35–39.
Education Forum summer 2000 meeting, Mystic, CT,            32
                                                               Sandy D’Alemberte, remarks at the Business–
29 June 2000.                                               Higher Education Forum summer 2000 meeting,
    Rita Colwell remarks at Business–Higher                 Mystic, CT, 29 June 2000.
Education Forum winter 2000 meeting,Tuscon,AZ,              33
                                                               Nils Hasselmo, remarks at meeting to review the
11 February 2000.                                           updated RCI interim report, 30 August 2000, 8.
    Michael Smith,“Perspectives,” Northwest Science and
Technology (Spring 1999): 50.

                                                                                                                   BUSINESS–HIGHER EDUCATION FORUM 25
         orporations and universities are not natural
partners; their cultures and their missions differ. Established
corporations are hierarchical, with clear chains of command;
they are not democracies. Universities are organized more
loosely, with significant authority dispersed among individ-
ual schools and departments. Universities aren’t democra-
cies, either, but similar to medieval feudal states, they have
multiple power centers. Companies’ underlying goals—and
the prime responsibilities of top management—are to make
a profit and build value for shareholders by serving cus-
tomers, whereas universities’ traditional missions are to
develop new knowledge and educate the next generation.
These differences must be understood and accommodated if
university-corporate research collaborations are to succeed.

Barriers to University-Industry
Research Collaborations
UNIVERSITY BARRIERS                                    Preserving Academic Freedom
     On the university side, four factors can pre-           Some critics question whether it is appro-
vent research collaborations with industry from        priate for universities to perform industry-
being successfully established: the practical diffi-    sponsored research. They warn that the propri-
culties of negotiating and managing a collabora-       etary nature of some sponsored work, manifested
tion; possible deleterious effects on faculty and      in confidentiality restrictions and delays in publi-
students; possible impact on the missions, repu-       cation requested by industry partners, counters
tation, and financing of the university; and state      the university’s traditional ideal––an atmosphere
or local officials’ expectations of the contribu-       of free and open inquiry. Critics also suggest that
tion a university can make to regional economic        involvement in industry research collaborations
development.                                           may unduly influence tenure and promotion
     Among the potential practical barriers are        decisions.“Will faculty whose research has poten-
university officials’ lack of understanding of how      tial commercial value be given favored treatment
companies operate, the differing time horizons of      over their colleagues whose research does not?”
the two sectors, and institutional reward              asked Robert Rosenzweig, former president of
structures—such as tenure criteria—that do not         the Association of American Universities.3
take account of faculty participation in collabora-          Opportunities for faculty members to
tions.1 In addition, many universities are not         acquire equity in companies supporting their
organized in a way that fosters collaborations.        research can cloud their reputations as independ-
They lack structures to find compatible collabo-        ent and unbiased truth-seekers and call into ques-
ration partners, manage collaborations, and coor-      tion their professional commitments to protect
dinate university support services.                    the well-being of both their institutions and their
     Finally, some university faculty members and      students. More subtle is the question of how
officials remain skeptical of the idea that research    corporate-sponsored research is designed or
collaborations should be a permanent addition to       selected for funding. Might research collabora-
the menu of research options. “In the view of          tions unduly influence the research agenda of the
more traditional academic administrators and           university, pushing the focus from fundamental to
faculty . . . industry involvement in university       applied research? Richard Florida of Carnegie
research is viewed as a temporary instrumentality      Mellon University investigated this concern and
or aberration, not as a permanent shift in how         found mixed results:
research should get done,”2 said Louis Tornatzky          • Studies by Diane Rahm and Robert Morgan
of Batelle Memorial Institute, and the Southern             at Washington University in St. Louis found a
Technology Council.                                         small association between greater faculty
                                                            involvement with industry and more applied
Handling Conflicts of Interest and                           research.4
Commitment                                                • Statistics from the National Science
     The financial incentives and opportunities              Foundation show that the amount of basic
presented by collaborative research, particularly           research performed in academia has remained
the quest to find a major breakthrough that could            relatively stable since 1980.5
bring wealth to faculty researchers, also raise dif-      • Diana Hicks and Kimberly Hamilton of CHI
ficult issues of conflicts of interest and conflicts of        Research categorized research according to
commitment. These conflicts are discussed in                 the journal in which it appears, and found
chapter three.                                              that the percentage of basic research being

                                                                                                        BUSINESS–HIGHER EDUCATION FORUM 27
                                               CHAPTER 2

     performed in universities was unchanged                         can or should provide rights to use background
     from 1981 to 1995.6                                             intellectual property.
                                                                           Dissemination of research results can be a
      These findings would seem to contradict the                     particular area of friction. Companies character-
concern that industry support overwhelms the                         istically want to keep valuable data out of the
university research agenda. In addition, Hicks and                   hands of their competitors; university scientists
Hamilton also reported that the number of times                      want to publish quickly. Most collaboration
that other papers cite university-industry papers is                 agreements permit companies to delay submis-
higher than the number of citations of single-                       sion of a university researcher’s paper for 60 to 90
university papers, indicating that university                        days, in order to prepare and file patent applica-
researchers actually may be able to enhance their                    tions, and this restriction is now widely accepted.
scientific impact by collaborating with industry                      But companies also are concerned about less
partners.7     Similarly, a national survey of                       formal disclosures such as discussions among fac-
researchers found that academic researchers who                      ulty researchers, and they worry that proprietary
received a portion of their funding from industry                    corporate information shared with a university
published more often, in equally prestigious jour-                   scientist in a collaborative project might leak to
nals, and were involved in more academic service                     the public—or to competitors.
activities, than their peers who did not receive
industry support.8                                                   Monitoring the Impact on Students
                                                                           The potential impact on students is a hidden
Maintaining Intellectual Property and                                consequence of university-industry collabora-
Confidentiality                                                       tions. Universities and faculty must ensure that
     Intellectual property issues—the ownership                      collaborative research efforts do not hinder stu-
and use of patents resulting from the collabora-                     dents’ academic work by inappropriately involv-
tion—often are the first hurdle encountered by                        ing them in confidential research or imposing
potential collaboration partners. Some companies                     restrictions on publication. For example, it is not
express concern that universities are trying to                      unusual for a student involved in an industry-
patent more intellectual property than necessary,                    sponsored project to take six months longer to
particularly in the area of research tools.                          earn a Ph.D. than would be the case in a purely
Differences also arise over whether the university                   academic research effort.9 As a result, it is impor-

University-industry collaborative papers are more likely to be highly cited
                                                                                                                            Between 1981 and 1992, 3.3
                                                                                                                            of every 1,000 papers pub-
                             University-Industry                                                                            lished by university-industry
                                                                                                                            collaborations were among
                                                                                                                            the 1,000 most cited in other
                                                                                                                            scientific publications over the
                        More than 1 University
                                                                                                                            next four years. By contrast,
                                                                                                                            2.2 of every 1,000 multi-
                                                                                                                            university papers, and only
                                                                                                                            1.7 of every 1,000 single-
                                                                                                                            university papers, landed
                               Single University
                                                                                                                            among the top-cited
                                                   0           1                   2        3             4

Source: Diana Hicks and Kimberly Hamilton, CHI Research Inc., Haddon Heights, NJ

28 Working Together, Creating Knowledge
                                                         Two Cultures: Barriers to University-Industry Research Collaborations

tant for all parties (especially the students) to have   tax, known as UBIT.Although university research
realistic expectations of the commitment neces-          is specifically excluded from UBIT, product test-
sary to accomplish the effort.10                         ing is not. Certain restrictions also apply to the
      More importantly, faculty advisors must be         use of buildings and/or equipment that were
sure they do not pressure a student into a thesis        financed by tax-exempt bonds.14
topic that reflects the priorities of a corporate
research sponsor rather than the student’s best          Encouraging Economic Development
interest. Faculty also must guard against a situation          Elected officials are increasingly interested in
in which a Ph.D. candidate finds that his or her          using university research, as well as community
thesis research is unpublishable because it is           colleges, to help spur regional economic growth.
wrapped in corporate secrecy constraints.                Unfortunately, they are not always familiar with
      Although companies have long sought to             the university research process or the seminal role
meet and potentially hire students through               of individual faculty members in selecting
                                                                                                                            Universities and
research, the increasing relevance of collabora-         research targets. When economic development
tions to corporate research strategies may tie the       becomes a top priority, these officials may try to              faculty must ensure
efforts of the students more closely than ever to        force universities into industry collaborations that              that collaborative
corporate research policies. Moreover, collabora-        are inappropriate or premature—prompting                        research efforts do
tions might adversely affect the academic sched-         resistance on the university side and making col-
ules of students, and faculty-owned companies            laborations more difficult. Conversely, some state              not hinder students’
might hire students as consultants, blurring the         officials are suspicious of industry ties and have                   academic work
distinction between student and employee.11              tried to restrain research collaborations lest they              by inappropriately
                                                         become corporate giveaways. “Legislatures in
                                                                                                                           involving them in
Dealing with Financial Challenges                        many states had made it very difficult for public
      Industry research funding carries other risks      universities to transfer technology because they              confidential research
for universities. Research departments that attract      feared that they would be vulnerable to charges of                     or imposing
substantial sponsored-research revenue may elude         using state money to enrich the private sector,”
                                                                                                                              restrictions on
the supervision and evaluation of centralized fac-       said Malcolm Gillis, president of Rice University,
ulty.12 State legislatures may cut support for pub-      at a government-university-industry forum in                            publication.
licly funded universities that also draw significant      1999.15
industry funding, on the assumption that the uni-
versities can get along with less state funding.And      CORPORATE BARRIERS
universities may face pressure to shift internal              Although many of the university barriers to
resources to support industry work.13 This cost          establishing effective research collaborations
shifting could have a significant effect upon the         involve fundamental university missions, corpora-
financial and organizational structures of a uni-         tions do not face this concern. None of the
versity. If corporate interests were to shape a uni-     potential barriers to corporate involvement in
versity’s budget, to whatever extent, the university     collaborations questions the role and mission of
would lose some of its independence and risk             the company itself.
becoming captive to those interests.The financial
opportunities of research collaborations also            Respecting the Value of Research
might tempt universities to allocate so much of          Collaborations
their internal resources to attracting and manag-             At the most basic level, the establishment of
ing collaborations that they fund other depart-          a productive collaboration requires that potential
ments insufficiently.                                     partners understand and appreciate the value each
      Maintaining the university’s tax-exempt            brings to the relationship. Company officials,
status also is a major concern. Income derived           however, are not always predisposed to see uni-
from a regular trade or business that is not sub-        versities as a source of relevant ideas. Many do
stantially related to the university’s tax-exempt        not believe that university researchers have valu-
function is subject to unrelated business income         able insights. They contend instead that such

                                                                                                           BUSINESS–HIGHER EDUCATION FORUM 29
                                          CHAPTER 2

insights are gained only through direct, “real-         Overcoming Management Barriers
world” experience in specific areas of applica-               The level of corporate support for research
tion—that is, in business. In addition, corporate       collaborations depends on factors such as cost,
R&D vice presidents are sometimes biased                time to complete, and the risk of losing control of
against collaborations. These executives are used       proprietary information. Other management bar-
to operating independently, and they often view         riers include lack of understanding of how uni-
university research as an expense without a             versities operate, inability to appreciate the
return.Thus, external research collaborations usu-      different time horizons of the two sectors, and an
ally require an internal champion to rally support      incompatible institutional reward structure for
within the company.                                     researchers who participate in collaborations.18
      Competition among different parts of the               Frequent turnover of industrial program
company can also work against research collabo-         managers, whether because of merger activity or
rations. In 1997, Christopher Galvin, chief execu-      company promotions and reassignments, also can
tive officer of Motorola, ordered an end to fierce        be a problem in long-term collaborations.19 And
intracompany struggles over funding. In a Wall          in some cases, companies may need help navi-
Street Journal interview, Galvin said that a culture    gating the internal bureaucracy of a university
of “warring tribes” had made Motorola “unable to        partner.
collaborate successfully inside or outside of the            Some companies do not have the necessary
company.”16 Randolph Guschl, director of cor-           tools or processes to make collaborations work
porate technology transfer at DuPont Central            effectively.This can be particularly true for small-
Research, wrote in 1997: “Many scientists and           and medium-sized companies, which often do
managers do not want to work with others; they          not have the personnel to manage, or the money
prefer to work alone.This cultural issue is proba-      to fund, outside relationships of much magnitude
bly the biggest barrier we’ve come up against.At        and complexity.
DuPont, we had to work out this problem inter-
nally before we could reach out and follow up on
the good leads.This is a never-ending challenge.”17     MAINTAINING A BALANCE
                                                             Some university leaders (and many faculty)
Incorporating University Research into                  are concerned that collaborations with industry
Product Development                                     could threaten the essence of what it means to be
      Integrating university research into the          an academic institution. Because industry funds
product development process is a complex task.          the sponsored research, universities need to com-
It is difficult enough to keep internal research rel-    pete to attract collaboration partners.At the same
evant to business needs, but the challenge is mag-      time, they have to guard against devolving into
nified in a collaboration with an outside                contract research organizations, indebted to their
organization that lacks experience in keeping           sponsors and dependent on revenues from spon-
research relevant to specific goals and has no           sored research and licensing fees.
direct incentive to do so. If companies are not              “You don’t want your faculty members con-
able to integrate outside research results into their   structing their research program to maximize the
product or service development processes, the           transfer of results out into the marketplace,”
utility of external collaborations will be limited      observed Cornelius Pings, former president of the
and support from corporate management tepid.            Association of American Universities. “They
                                                        ought to be pursuing fundamental knowledge for
                                                        the sake of knowledge.”20

30 Working Together, Creating Knowledge
                                                              Two Cultures: Barriers to University-Industry Research Collaborations

1                                                             12
  Overcoming Barriers to Collaborative Research: Report of       Robert Berdahl, University of California at
a Workshop, Government-University-Industry                    Berkeley, proceedings of A Dialog on University
Research Roundtable (Irvine, CA: National Academy             Stewardship: New Responsibilities and Opportunities,
Press, 1999), 8–9.                                            Government-University-Industry Research
  Louis Tornatzky, Paul Waugaman, and Denis Gray,             Roundtable, National Academy Press, 1999, 24.
Industry-University Technology Transfer: Models of               George Rupp, proceedings of A Dialog on University
Alternative Practice, Policy, and Program (August 1999), 9.   Stewardship: New Responsibilities and Opportunities,
  Robert Rosenzweig,“Universities Change, Core                Government-University-Industry Research
Values Should Not,” Issues in Science and Technology          Roundtable, National Academy Press, 1999, 22.
(Winter 1999).                                                   Mark Crowell, presentation at Association of Univ-
  Richard Florida,“The Role of the University:                ersity Technology Managers convention, workshop
Leveraging Talent, Not Technology,” Issues in Science         C-7, 27 February 1998.
and Technology (Summer 1999).                                    Malcolm Gillis, proceedings of A Dialog on University
  Ibid.                                                       Stewardship: New Responsibilities and Opportunities,
  Diana Hicks and Kimberly Hamilton,“Does                     Government-University-Industry Research
University-Industry Collaboration Adversely Affect            Roundtable, National Academy Press, 1999, 27.
University Research?” Issues in Science and Technology           Gene Allen and Rick Jarman, Collaborative R&D:
(Summer 1999).                                                Manufacturing’s New Tool (New York, NY: John Wiley
  Ibid.                                                       and Sons, 1999), 10.
8                                                             17
  Steven Stralser, Faculty attitudes and perceptions about       Randolph Guschl,“Technology Transfer:Too Many
technology transfer, unpublished dissertation, University     Options?” Chemtech (July 1997): 8.
of Michigan, Center for the Study of Higher and                  Overcoming Barriers to Collaborative Research, 8–9.
Postsecondary Education,Ann Arbor, MI, 1997, as                  Pramod Khargonekar, interview by Beth Starbuck,
cited in Industry-University Technology Transfer: Models of   Calyx, Inc., Case Study Final Report, 7 September
Alternative Practice, Policy, and Program, by Louis           2000, 37.
Tornatzky, Paul Waugaman, and Denis Gray                         Cornelius Pings, remarks at meeting to review the
(August 1999) 23.                                             updated RCI interim report,Washington, DC,
  Pramod Khargonekar, University of Michigan, inter-          30 August 2000, 56.
view by Beth Starbuck, Calyx, Inc., Case Study Final
Report, 7 September 2000, 36.
   Robert L. Carman, interview by Beth Starbuck,
Calyx, Inc., Case Study Final Report, 7 September
2000, 19.
   Overcoming Barriers to Collaborative Research, 10.

                                                                                                                   BUSINESS–HIGHER EDUCATION FORUM 31

Washington University–Monsanto:
Two Decades of Success

O         ne of the oldest and most successful university-
          industry collaborations is the 20-year pact between
Monsanto Co. (now Pharmacia Corporation) and
                                                                    scientists from each side to discuss ideas, and later took 20
                                                                    scientists from each side on a weekend retreat to forge a
                                                                    detailed plan.
Washington University in St. Louis. Since 1981, this agree-               “One of the things we wanted to make certain was that
ment has provided the Washington University Medical                 nobody could accuse us of diverting the essential elements
School with more than $100 million in research funding, pro-        of our research to corporate science,” Kipnis says. “The cor-
duced 180 to 190 patents, and even fostered some per-               poration was very agreeable to that.”
sonnel trades—including most prominently Philip                           At first, Schneiderman and Kipnis swore the group to
Needleman, who left the faculty to join Monsanto in 1989            secrecy. “Academic communities are like firewood” once
and who is now Pharmacia’s chief scientific officer.                rumors start, Kipnis explains. But once an agreement had
       Although Monsanto merged with Pharmacia-Upjohn               been worked out, they went public. They made presenta-
to create Pharmacia Corporation in 2000, the future of the          tions to both company and faculty scientists, complete with
Washington University collaboration apparently was never            overheads detailing the 20-page contract, and put it up to a
in serious doubt. The partners renewed the pact for another         faculty vote. Faculty members unanimously voted “yes.”
five years, at $5 million a year, beginning in January 2001.        Schneiderman and Kipnis mailed copies of the contract to
A similar agreement, totaling $15 million over seven years,         The New York Times and The Washington Post. They
has been worked out between the university and the new              explained the pact at a public hearing of a House science
agricultural sciences subsidiary that Pharmacia established         subcommittee chaired by then Representative Al Gore. “And
after the merger.                                                   we have never had any negative reaction,” Kipnis says.
       Originally, the collaboration was the brainchild of                “We wanted no secrecy,” says Kipnis. “We wanted
Howard Schneiderman, a former dean at Case Western                  everything above board, which tends to be unusual some-
Reserve University and the University of California at Irvine       times in university-corporate relationships. I think you get in
who had come to Monsanto to build a life-sciences depart-           more trouble by keeping secrets.”
ment. Noting that Monsanto’s St. Louis headquarters was                   Initially, Monsanto provided $2 million per year, a figure
virtually next door to the nation’s third largest research med-     that grew to $9 million by 1988. In the meantime, partly
ical school, Schneiderman approached his corporate CEO              because of the arrangement’s success, Monsanto expanded
and Washington University officials with the idea of a              its pharmaceutical business by acquiring G.D. Searle & Co.
research partnership; officials on both ends told him to see        in 1985. Then the medical school decided that no single cor-
what he could work out.                                             poration should fund more than 5 percent of the school’s
       “Howard and I hit it off very well,” recalls David Kipnis,   research budget, and Monsanto gradually scaled its contri-
then head of the medical school’s department of medicine,           bution back to $5 million annually. Presently, the medical
who worked with Schneiderman to shape the collaboration.            school’s total research budget is about $230 million per year.
“We spent three or four months dreaming of what we would                  Each year, the company identifies research areas in
like.” Then Schneiderman and Kipnis brought in four senior          which it is interested and issues a “request for applications”

32 The University-Industry Research Collaboration Initiative
modeled after the Request for Applications (RFAs) issued by        entists attend company seminars. Both sign agreements not
the National Institutes of Health. Medical school researchers      to release information until it is published or patented.
who are interested submit short, 10-page grant applications,               The Monsanto–Pharmacia arrangement hasn’t
which are reviewed by boards of senior scientists from both        scared other companies away from collaborations with
the company and the university. During the two decades of          Washington University. Chancellor Mark Wrighton says
this collaboration, the company and university boards have         other corporate research support to the university totals
had “a correlation coefficient greater than 0.85,” says Kipnis—    about $20 million per year.
a level of agreement that surprises even him.                              What’s the secret of making such a collaboration
       Every three years, a panel of outside scientists reviews    work? A top priority, Wrighton says, is that the people
the research conducted under the agreement; until recently         involved on each side “articulate to each other what their
Nobel Prize-winning molecular biologist Daniel Nathans of          goals are.” A company and a university have different goals,
The Johns Hopkins University School of Medicine led this           and each must be able to “credibly and demonstrably ben-
panel. The panel routinely asks graduate students—without          efit from the relationship in the sense of achieving a goal.”
any faculty members present—whether they felt that corpo-          In addition, he says, “make sure that there are good and
rate funding had distorted their research. Most students don’t     open lines of communication with the people who are
even realize that corporate funding was involved.                  responsible for the program.” And keep in mind: It’s not just
       “From the very beginning,” Kipnis says, “we said            about the money.
that the company’s supposed to develop drugs. We                           “There’s a lot more to these relationships than money,”
develop ideas and develop basic science, and we ought              Wrighton says. “Major corporations hire our graduates. They
not to mix the two. That’s something that has been care-           have people enrolled in our continuing education programs,
fully adhered to.”                                                 in our MBA programs. They have influence over the deci-
       The medical school also tracks how the grants are dis-      sions of other companies—not directly, but through the vis-
tributed, and it is pleased with the result. Generally, about 40   ibility of such a relationship and how they speak about it.”
percent of the money has gone to young assistant profes-                   He offers the same advice to other companies that
sors, about 35 percent to associate professors, and about          might be interested in such an arrangement with any uni-
25 percent to the most senior researchers, and almost every        versity. “It’s not merely about how much money, but what are
department is represented.                                         the other elements of the partnership that bring them bene-
       In return, the company gets the right of first refusal to   fits? Is it routine and good access to the people of the uni-
license and develop any discovery that it helped fund.             versity? To networking opportunities that bring them
Company researchers also gain access to an academic                together with exciting people?”
environment that enables them to discuss ideas and explore                 “I think it’s more than just a simple contract,” says
new developments with a far broader group of scientists            Wrighton. “It’s a partnership.”
than any single company could support. Company scientists
attend Washington University seminars, and university sci-

                                                                                                                               BUSINESS–HIGHER EDUCATION FORUM 33
    Objectivity lies at the heart of science,
    and it must not be compromised in
    any way, by financial considerations,
    nor in the pursuit of fame, nor for the
    desire to produce an important insight
    into the processes of life.1

    —Ruth Kirschstein,
    acting director of the National Institutes of Health
Conflicts of Interest and Commitment

             he evolution of science—particularly       members of the Business-Higher Education
             biomedical science—during the past         Forum—are reexamining whether existing poli-
             two decades has dramatically increased     cies should be updated.
             the possibility of conflicts of interest         When discussing conflict of interest, it is
on the part of university researchers. University       important to be clear just what is—and isn’t—
scientists are more likely than ever before to par-     being talked about. Potential conflicts arise in
ticipate in joint research projects with their indus-   many forms. Furthermore, the mere appearance of
try counterparts, or to be funded by industry. Basic    a conflict of interest is not wrongdoing, and con-
research, traditionally the province of academia,       flict of interest does not automatically lead to
and applied research aimed at developing a prod-        scientific misbehavior. The purpose of conflict-
uct are no longer separated by rigid boundaries.        of-interest policies in many parts of society—in
The time it takes to transform a basic-science dis-     universities, in corporations, in government, and
covery, such as the shape of a protein, into a com-     in the courts—is to prevent or control situations
mercial product—in other words, to bring a              that might lead to inadvertent and unacceptable
discovery from the laboratory to the bedside—has        bias, to suspicions of wrongdoing, or to actual
narrowed, at least in some cases.And the stunning       wrongdoing. At the same time, because our
growth of the biotechnology industry has been           national innovation system demands close coop-
based on moving academic-research discoveries—          eration to succeed, we can never fully eliminate
and often the academic researchers, too—off             potential conflicts––and we must manage them
campus and into entrepreneurial start-up compa-         carefully.
nies earlier in the discovery process.
     “It has usually been the case that [university]    Financial Conflicts of Interest
researchers have hoped for a favorable outcome                Financial conflicts of interest arise when sci-
from their work, followed by wide recognition,”         entists’ private financial interests and their
observed Ruth Kirschstein, acting director of the       research converge in a way that might question
National Institutes of Health (NIH), at a               their ability to make unbiased decisions related to
government-sponsored conference on conflict of           their work. Although a conflict does not equal
interest in clinical research in August 2000.“It is     misbehavior, even the appearance of a conflict can
only recently that immediate—and quite possibly         raise doubts as to whether a researcher allows per-
substantial—financial gain became a possibility.”        sonal or financial gains to influence professional
                                                        decisions.2 Thus, even the perception of a conflict
                                                        of interest can damage the research enterprise by
CONFLICTS OF INTEREST AND                               weakening public trust—a particular concern for
COMMITMENT                                              research universities, which depend heavily on
      With growing interactions and closer ties         federal research funding.
between industry practitioners and university sci-            “Public trust is what fuels public support for
entists, it should be no surprise that there are        medical research,” said Jordan J. Cohen, president
increasing opportunities for ties that are, or may      of the Association of American Medical Colleges,
seem to be, too close. Therefore, virtually all         at a recent meeting of the association. “We risk
research-performing universities now have poli-         great peril if we fail to respond to the growing
cies aimed at monitoring and managing such              perception that financial conflicts of interest have
relationships to prevent abuses. Government,            gotten out of control.”3 On the industry side,
industry, and university officials—including             this concern is shared by innovation-based com-

                                                                                                         BUSINESS–HIGHER EDUCATION FORUM 35
                                          CHAPTER 3

panies that rely in part on using unbiased basic        Conflicts of Commitment
research in the public domain––research that                  Conflicts of commitment are generally
must be supported by adequate public funding.           defined as anything that might interfere with a
                                                        faculty members’ full-time duties; such duties
Intellectual Conflicts of Interest                       include teaching, research, time with students,
      Intellectual conflicts of interest are pervasive   and service obligations to the university. Many
and unavoidable—in science as in any other pro-         universities have formal policies limiting the
fession. Scientists are human: They want their          amount of time that a faculty member can spend
hypotheses to be proved right. They want their          in outside activities such as consulting—for
discoveries to be recognized as significant. And         example, setting a maximum of one day per
they don’t enjoy admitting that in some earlier         week. Often these restrictions are part of a uni-
hypothesis, they were wrong. This type of overt         versity’s conflict-of-interest policy.While conflicts
conflict of interest is not easily hidden. In addi-      of commitment are less ambiguous, more easily
tion, longstanding scientific practices—including        quantified, and more straightforward to police
peer review and the long-held practice of repli-        than financial conflicts of interest, they still can be
cating experimental results before fully accepting      difficult to detect and monitor. It is not simply a
them—defend scientists against the possibility of       matter of a university setting its own standard of
biased experiments that stem from their own             allowable time for outside activities and then
hopes that results will look a certain way.             enforcing it.“What you have to watch for are fac-
      “Conflicts of interest and commitment are          ulty who teach a course or two, and then go off
ubiquitous in academic life and indeed in all pro-      to worry about a company,” said Steve Koonin,
fessional life, and conflicting pressures are inherent   provost and vice president of the California
in the academic milieu,” said David Korn, senior        Institute of Technology.4
vice president for biomedical and health sciences
of the Association of American Medical Colleges,        Institutional Conflicts of Interest
at the conference on conflict of interest sponsored           Institutional conflicts of interest, also called
by the U.S. Department of Health and Human              conflicts of mission, are a newly emerging source
Services (HHS) in August 2000. “For example,            of concern, at least in some quarters.“Like indi-
[there is pressure] for faculty advancement, obtain-    viduals, institutions have financial interests in the
ing sponsored-research funding, winning the             outcomes of research—with the same problems,”
acclaim of one’s professional peers, competing for      said Kirschstein at the August 2000 conference.
prestigious research prizes, and even the desire to          Some universities invest in start-up entre-
alleviate human pain and suffering. All may be          preneurial firms based on faculty members’ dis-
more powerful in influencing faculty behavior            coveries, or accept equity in new companies in
than the prospect for material enrichment.”             lieu of royalties on university-held patents. Might
      “These intellectual conflicts tend to be           they become beholden to an emerging company
amorphous and are not of much concern to the            in which they have a financial stake? Could they
public,” Korn added. “But they are widely rec-          be tempted to tilt their research agenda to help
ognized within the academy. Institutional poli-         such a company, or to make themselves seem
cies and procedures, as well as scientific review        more valuable to a major source of sponsored-
procedures, have long been in place to try to           research funds? These questions are only now
manage them.”                                           beginning to be explored.
                                                             A university with a stake in a corporation
                                                        also might be tempted to offer favorable licensing
                                                        terms for university-owned technologies, or if a
                                                        large investment were involved, it could find its

36 Working Together, Creating Knowledge
                                                                                                                                  Policies of 235 Medical Schools and Other Research Institutions on Disclosure and Management of Conflicts of Interest
                                                                                                                  Item*                                                    Institutions with policies   Item*                                                      Institutions with policies
                                                                                                                                                                                   that address item                                                                       that address item
                                                                                                                                                                                      no.     (%)                                                                             no.     (%)
                                                                                                                  Type of conflict                                                                       How disclosure should be managed
                                                                                                                  Income                                                             215      (91)      Divestment of interest                                                  146          (62)
                                                                                                                  Equity interest                                                    218      (93)      Withdrawal of investigator from project                                 143          (61)
                                                                                                                  Intellectual property                                              171      (73)      Disclosure to IRB                                                         0
                                                                                                                  Finder’s fees                                                        2       (1)      Disclosure to funding agency or sponsor                                 102          (43)
                                                                                                                  Fiduciary interest only                                            134      (57)      Disclosure to research subjects                                           0
                                                                                                                  Appearance of conflict                                              156      (66)      Disclosure to journals                                                    5            (2)
                                                                                                                  Support of the research                                             79      (34)      Disclosure to collaborating researchers                                   2            (1)
                                                                                                                  Other in-kind support                                              104      (44)      Modification of research plan                                            139           (59)
                                                                                                                  Policy meets federal guidelines                                    215      (91)      Monitoring of project                                                   156           (66)
                                                                                                                  Policy exceeds federal guidelines                                   20       (9)      Additional peer review                                                   16            (7)
                                                                                                                                                                                                        Public disclosure                                                       139           (59)

                                     Source: McCrary et al., New England Journal of Medicine, 30 November 2000.
                                                                                                                  Person (or entity) with interest requiring initial disclosure                         Mandatory management method                                               1          (<1)
                                                                                                                  Investigator                                                       235     (100)      Discretionary management method                                         234         (>99)
                                                                                                                  Spouse or partner                                                  210      (89)
                                                                                                                  Minor or dependent child                                           208      (89)      Penalty for nondisclosure
                                                                                                                  Another household member                                            75      (32)      Termination                                                             109          (46)
                                                                                                                  Adult child                                                         53      (23)      Suspension                                                               47          (20)
                                                                                                                  Parent                                                              51      (22)      Salary modification                                                       29          (12)
                                                                                                                  Grandchild                                                          15       (6)      Nonfinancial modification (e.g., research space)                           29          (12)
                                                                                                                  Another relative                                                    36      (15)      Reprimand                                                                65          (28)
                                                                                                                  Family (unspecified)                                                  5       (2)      Disqualification from future grant applications                           44          (19)
                                                                                                                  Trust                                                               15       (6)      Notification of funding agency, journal, or both of nondisclosure         98          (42)
                                                                                                                                                                                                        Removal of investigator from project                                     11           (5)
                                                                                                                                                                                                                                                                                                     Conflicts of Interest and Commitment

                                                                                                                  Party to which initial disclosure must be made                                        Unspecified or nonspecific penalty                                        108          (46)
                                                                                                                  Party within institution                                           235     (100)      Mandatory penalty                                                         0
                                                                                                                  IRB                                                                  3        (1)     Discretionary penalty                                                   235         (100)
                                                                                                                  Funding agency or sponsor                                           18        (8)
                                                                                                                  Research subjects                                                    3        (1)     *The items are not mutually exclusive. IRB denotes institutional review board.
                                                                                                                  Journals                                                            16        (7)     One institution applied criteria that were stricter than the federal guidelines
                                                                                                                  Collaborating researchers                                            1      (<1)      to clinical research, but applied the federal criteria to basic-science research.
                                                                                                                                                                                                        This institution was considered to have exceeded the federal guidelines.
                                                                                                                  When disclosure is required
                                                                                                                  Annually or semiannually                                           193      (82)
                                                                                                                  On material change creating new potential for conflicts             178      (76)
                                                                                                                  When conflict is anticipated                                        133      (57)
                                                                                                                  On application for funding                                         149      (63)
                                                                                                                  On award of funding                                                 20       (9)

                                          CHAPTER 3

own financial resources inextricably linked with         neutrality and objectivity is vital to the university.
that company’s prospects. Questions also may            Similarly, companies working with universities
arise about how the university manages its equity,      desire high-quality, unbiased results to help make
because selling a large stake in a young firm could      what are often very important, expensive, and
significantly depress the company’s stock.               risky investment decisions for their own R&D
     University officers and government officials         programs. These companies cannot afford to
are just beginning to grapple with this question.       undercut their own credibility by associating with
No comprehensive data exist to document how             biased researchers.
widespread university equity holdings are in
companies that have been—or might be—                   Disclosure of Financial Ties                                 “It is important that
affected by the universities’ own actions. But               Today, virtually all U.S. research-performing
                                                                                                                          we are not so
Kirschstein emphasized, at a December 2000              universities have conflict-of-interest policies, most
meeting of NIH’s Advisory Committee to the              of which follow the pattern of a 1995 federal                burdensome in our
Director, that the issue will get more attention.5      government regulation covering federally funded          regulatory development
     Ultimately, developing separate funding            research institutions. The federal regulation                  . . . that we force
sources can help protect universities from becom-       requires researchers to disclose to university
ing indebted to any one entity, observed Richard        conflict-of-interest offices or committees any             conflicts underground.”
Atkinson, president of the University of                “significant” financial ties with companies that
California.“My own view is that one of the best         might be affected by such research. Then, these               –Kenneth Trevett,
ways to protect the independence of university          offices (or committees) must “manage, reduce or
                                                                                                                         Schepens Eye
research is to encourage a variety of funding           eliminate” any conflict.7
sources: state government, federal agencies, pri-            The federal regulation suggests that a rea-              Research Institute
vate corporations, foundations, and individuals.”6      sonable threshold for disclosure is $10,000 in
                                                        annual income, or $10,000 in equity holdings, or
                                                        5 percent ownership of a particular company.
CONFLICT PREVENTION AND CONTROL                         Researchers’ financial disclosures generally are
     Public concern over conflict of interest in         confidential and are not passed on to the federal
research, particularly in clinical research involving   funding agency, where they might be subject to
human patients, escalated following the                 public release under the federal Freedom of
September 1999 death of Jesse Gelsinger, a teen-        Information Act. Some disclosures by scientists at
aged patient in a gene-therapy clinical trial at the    state universities, however, are publicly available
University of Pennsylvania. Now, universities,          under state freedom of information laws.
medical schools, and companies that sponsor                  Most university policies follow this model,
university-based research are reexamining their         but they vary significantly in the depth of the dis-
policies to assess their effectiveness and to adopt     closures they require from researchers and in their
more uniform standards.                                 thresholds for examining potential conflicts,
     Research free from vested interests is the         according to several articles published in scien-
hallmark of university-based scientific investiga-       tific journals in late 2000.8,9 Requirements for
tion.An important reason that companies wish to         researchers evaluating drugs or medical devices in
work with universities is to add legitimacy to the      clinical trials with human volunteers generally are
research results that the company might not             more demanding than the rules for laboratory
achieve on its own. Maintaining a reputation for        researchers—but again, they vary significantly
                                                        among the nation’s top medical schools.10
                                                             Determining the appropriate threshold for
                                                        disclosure—even if the disclosures are to be kept
                                                        confidential in university offices—is no easy task.

38 Working Together, Creating Knowledge
                                                      Conflicts of Interest and Commitment

“It is important that we are not so burdensome        misbehavior whenever it is uncovered. Further, it
in our regulatory development . . . that we force     is important to keep in mind that research
conflicts underground,” said Kenneth Trevett of        misconduct—such as intentionally counterfeiting
Schepens Eye Research Institute. “This is a real      or distorting data—is a separate issue, and univer-
issue, and when you get into issues where people      sities and the federal government have established
feel as though their privacy interests are unrea-     separate regulations and procedures to investigate
sonably jeopardized, you are going to force some      misconduct charges and to punish proven
of these conflicts underground.”                       misconduct.

Conflict Management                                    Education
      Strategies for managing a conflict usually             A useful strategy for preventing potential
depend on the details of each case, and the           conflicts of interest involves ongoing education,
options are wide-ranging.Among the techniques         aimed both at faculty members and at graduate
that have been used by institutions such as           students who hope to become practicing scien-
Washington University in St. Louis and Johns          tists. For more than a decade, universities that
Hopkins University in Baltimore––and that are         receive research training grants from the NIH
offered as possible strategies in the federal rule—   have been required to train graduate students in
are:                                                  the responsible conduct of research, including
   • Divesting troublesome assets.                    conflicts of interest.13 In December 2000, the
   • Ending consulting arrangements.                  HHS proposed expanding this training require-
                                                                                                                  Successful strategies
   • Withdrawing the researcher from the project.     ment to cover researchers themselves.14
   • Designating another researcher to oversee              As a result, many universities offer—and              should encourage the
     the project.                                     require attendance at—special courses on ethical              practice of objective
   • Monitoring of the research by independent        principles of research and on institutional policies
                                                                                                                           science in an
     reviewers.                                       in such areas as conflict of interest and miscon-
   • Disclosing significant financial assets in any     duct. For example, Stanford University provides             environment of open-
     published report on the research.                an online guide called “Getting Started in                  ness and trust, guard
                                                      Research at Stanford” for researchers new to the
                                                                                                                   against unintentional
      “There are some arrangements that carry         campus.15 The web site includes information on
unmanageable conflicts or too high a level of          research policies and regulations, information                bias and error, and,
risk,” said Julie Gottlieb at Johns Hopkins           about funding opportunities, resources for                       of course, punish
University.“These are rejected, forcing the inves-    researchers, and information about university               scientific misbehavior
tigator to choose between the financial interest       offices and individuals who can answer questions
and the research project.”12                          about the research process. The University of                       whenever it is
      Successful strategies should encourage the      Maryland College Park offers the “Sponsored                            uncovered.
practice of objective science in an environment       Projects Management Program,”16 a series of
of openness and trust, guard against unintentional    minicourses for faculty and staff that addresses
bias and error, and, of course, punish scientific      specific aspects of contract and grant administra-
                                                      tion, including the university’s conflict-of-interest

                                                                                                       BUSINESS–HIGHER EDUCATION FORUM 39
                                          CHAPTER 3

Clinical Trials                                          patients’ trust in the clinical researchers who are
      Clinical trials are a special case in which sci-   running the trial. A recent editorial in The New
entists test the safety and effectiveness of drugs,      England Journal of Medicine by Greg Koski, direc-
vaccines, or medical devices in human volunteer          tor of the Office for Human Research
patients. Lives are at stake, not just the validity of   Protections at the HHS, and Jeffrey Drazen, the
laboratory science, and an elaborate structure           journal’s editor-in-chief, warned that if clinical
already exists to protect human research subjects        researchers’ motives become suspect, they may
in clinical trials. For example, at universities and     lose that trust.17
medical schools that receive any federal funding,              U.S. medical schools already have conflict-
Institutional Review Boards (IRBs)—which                 of-interest policies that, generally, are more strin-
include lay members of the community as well as          gent than institutions’ policies covering laboratory
scientists—must review and approve the plan for          research.18,19,20 But these standards, too, vary
any clinical trial before it can get underway.Trial      among institutions. In late 2000, Joseph B.
participants must give informed consent to the           Martin, dean of the Harvard Medical School, and
experimental treatment, and one task of an IRB           Dennis L. Kasper, executive dean for academic
is to ensure that the informed-consent forms are         programs, assembled a meeting of leaders of the
understandable and comprehensive. Approval of            nation’s top medical schools to begin reviewing
the U.S. Food and Drug Administration (FDA) is           and coordinating their policies.
required before even an early-stage experimental               The FDA offers an additional defense against
drug can be given to a human patient. Many clin-         the possibility that a conflict of interest might bias
ical trials require appointment of independent           the results of a trial.When clinical-trial results are
data and safety monitoring committees to halt the        submitted as part of an application to market a
experiment if unexpected risks appear.                   new drug (or for approval of a new use for an
      This array of protections, however, is now         existing drug), the agency requires the researchers
being reassessed in the federal government, in           to disclose whether they have a significant finan-
university medical schools and in industry—a             cial interest in the company. The agency may
reassessment that gained impetus following the           ignore the trial’s results if it sees a conflict of inter-
gene-therapy trial death of Jesse Gelsinger in           est. Clinical trials are expensive; the FDA rule
1999.                                                    gives companies a significant reason to avoid such
      Conflict-of-interest policy is only one ele-        situations.
ment of the human-subject protections that sur-                Neither the FDA nor institutional policies
round clinical trials, but it is a particularly          question companies’ reimbursements to physi-
important element. Clinical trials, which are vital      cians or their institutions covering expenses for
to the development of new therapies, depend first         conducting trials. Such payments are an unavoid-
on the willingness of patients to take part in those     able reality in the highly expensive and risky
trials. That willingness, in turn, depends on the        process of medical product innovation.The ques-
                                                         tions fall to the companies that are developing
                                                         new medicines and devices; they must have the
                                                         trials performed to understand the new thera-
                                                         peutics’ properties and to obtain sufficient evi-
                                                         dence to win regulatory approval for clinical use
                                                         and marketing.

40 Working Together, Creating Knowledge
                                                                                                                                                              CONFLICT-OF-INTEREST POLICIES FOR INVESTIGATORS IN CLINICAL TRIALS

                                                                                                                           Conflict-of-Interest Policies at the Ten medical schools receiving the largest amount of funding from the National Institutes of Health

                                                                                                                           Variable                                                                                                                 Medical School
                                                                                                                                                                                  A              B              C              D               E              F              G              H             I      J     TOTAL
                                                                                                            Interest that must be disclosed
                                                                                                               Stock                                                             Yes            Yes            Yes1           Yes2            Yes            Yes2           Yes            Yes3          Yes2   Yes     10
                                                                                                               Stock option                                                      Yes            Yes            Yes            Yes2            Yes            Yes2           Yes            Yes3          Yes2   Yes     10
                                                                                                               Income                                                            Yes            Yes            Yes4           Yes4            Yes            Yes4           Yes            Yes           Yes4   Yes     10
                                                                                                               Loan or gift                                                      Yes            Yes            Yes                            Yes            Yes4                          Yes           Yes4   Yes      8
                                                                                                               Decision-making position                                          Yes            Yes            Yes                            Yes                                          Yes           Yes    Yes      7

                                     Source: Lo et al. New England Journal of Medicine, 30 November 2000.
                                                                                                            Person with interest requiring disclosure
                                                                                                               Faculty member                                                    Yes            Yes            Yes            Yes             Yes            Yes            Yes            Yes           Yes    Yes     10
                                                                                                               Immediate family                                                  Yes            Yes            Yes            Yes             Yes            Yes            Yes            Yes           Yes    Yes     10
                                                                                                               Selected research staff                                                                                                        Yes                           Yes            Yes                           3
                                                                                                               All research staff                                                               Yes                                                          Yes                                         Yes    Yes      4
                                                                                                                                                                                                                    5              5
                                                                                                               Trainees                                                                                        Yes            Yes                                                                        Yes6   Yes7     4

                                                                                                            Party to which disclosure must be made
                                                                                                               University official or committee                                   Yes            Yes            Yes            Yes             Yes            Yes            Yes            Yes           Yes    Yes     10
                                                                                                               Institutional review board                                                                      Yes            Yes             Yes            Yes            Yes            Yes                           6
                                                                                                               Research subjects                                                                                                              Yes                                          Yes                           2
                                                                                                               Professional community (in publications                           Yes            Yes                                                                                                      Yes    Yes      4
                                                                                                                                                                                                                                                                                                                               Conflicts of Interest and Commitment

                                                                                                               or presentations)

                                                                                                            Prohibited interest
                                                                                                               Stock                                                             Yes            Yes            Yes1           Yes2                                                                                       4
                                                                                                               Stock options                                                     Yes            Yes            Yes            Yes2                                                                                       4
                                                                                                               Consulting fee                                                    Yes                           Yes4           Yes4                                                                                       3
                                                                                                               Decision-making position                                          Yes                                                                                                                                     1
                                                                                                              Disclosure was required only if the financial interest exceeded $10,000 per year for a publicly funded study, or $20,000 for a privately funded study.
                                                                                                              Disclosure was required only if the financial interest exceeded $10,000 per year or 5 percent ownership.
                                                                                                              Disclosure was required only if the financial interest exceeded $10,000 per year or 5 percent ownership for a federally funded study, or $1,000 per year for a nonfederally funded study.
                                                                                                              Disclosure was required only if the financial interest exceeded $10,000 per year.
                                                                                                              The disclosure requirement applied only to research fellows.
                                                                                                              The disclosure requirement applied to research fellows and students.
                                                                                                              The disclosure requirement applied only to students.

                                          CHAPTER 3

Principles to Consider                                   • Universities and companies should seek
      This report makes no pretense of offering            transparency, clarity, and consistency in iden-
answers to all the questions that arise over               tifying actual and potential conflicts of inter-
conflict-of-interest concerns, nor of proposing a           est and in establishing procedures for
model policy for U.S. universities and medical             managing or eliminating them.
schools. Almost certainly, one size will not fit all.     • All participants in the research process should
But as university officials, researchers and the            continue their adherence to the scientific
companies with which they collaborate study the            method, and to other safeguards against bias,
issue, they would be wise to recognize several             in order to preserve public support for aca-
basic principles:                                          demic research and to maintain public will-
   • Policies should preserve the core value of            ingness to participate in clinical research.
     academic freedom of discourse, while recog-
     nizing the distinct but complementary roles            Conflicts of interest, or at least potential con-
     of academia and industry. Academia, indus-        flicts of interest, never will be entirely removed
     try, and society all would lose if universities   from our modern and increasingly complex soci-
     neglected fundamental basic research and          ety. The goal for universities and companies
     became arms of commerce.                          should be to recognize and pragmatically manage
   • Universities should seek diverse funding          conflict-of-interest issues in a way that preserves
     sources for their research. Industry funding      the core values of academia and fosters the ben-
     cannot, and should not, substitute for ade-       efits of innovation for all society.
     quate, long-term public financing of basic
     scientific research.

42 Working Together, Creating Knowledge
                                                           Conflicts of Interest and Commitment

1                                                          11
  Ruth L. Kirschstein, National Institutes of Health,         Kenneth Trevett, conference on Human Subject
Conference on Human Subject Protection and                 Protection and Financial Conflicts of Interest,
Financial Conflicts of Interest, 15 August 2000.            15 August 2000: 52. The full transcript is available at
The full transcript is available at                        http://www.aspe.hhs.gov/sp/coi/8-15.htm.
http://www.aspe.hhs.gov/sp/coi/8-15.htm.                      Julie Gottlieb,The Johns Hopkins University,
  Adapted from the Faculty Policy on Conflict of            conference on Human Subject Protection and
Commitment and Interest of Stanford University.            Financial Conflicts of Interest, 15 August 2000: 51.
The full policy is available at                            The full transcript is available at
http://www.stanford.edu/dept/DoR/rph/4-1.html.             http://www.aspe.hhs.gov/sp/coi/8-15.htm.
3                                                          13
  Katherine S. Mangan,“Medical Schools are Urged              http://grants.nih.gov/grants/guide/notice-files
to Develop a Strategy on Potential Conflicts of             /not92-236.html.
Interest,” Chronicle of Higher Education                       http://ori.hhs.gov/html/programs/finalpolicy.asp.
(30 October 2000).                                            Getting Started in Research at Stanford: An On-line
  The Research Corporation, Enterprise U, 1997             Guide for New Faculty and Other Researchers, Stanford
Annual Report, 12.                                         University web site.The site can be viewed at
  Bruce Agnew,“NIH raises the heat on universities to      http://www.stanford.edu/dept/DoR/newfac.html.
share research tools more freely; Director’s Advisory         Certificate in Sponsored Projects Management,
Committee also hears reports on budget, conflict of         University of Maryland. Information on this pro-
interest,” Washington Fax (11 December 2000).              gram can be viewed at
  Richard Atkinson,“The Future Arrives First in            http://www.umresearch.umd.edu/ORAA/
California,” Issues in Science and Technology 16           certification/index.html.
(Winter 1999/2000): 45–51.                                    Jeffrey M. Drazen and Greg Koski,“To Protect
  “Objectivity in Research,” 42 CFR 50, and                Those Who Serve,” New England Journal of Medicine
45 CFR 94; Federal Register, 11 July 1995, 20              (30 November 2000): 1643.
FR 35810–35823.                                               S.Van McCrary, Cheryl B.Anderson, Jalena
  S.Van McCrary, Cheryl B.Anderson, Jalena                 Jakovljevic, et al.,“A national survey of policies on
Jakovljevic, et al.,“A national survey of policies on      disclosure of conflicts of interest in biomedical
disclosure of conflicts of interest in biomedical           research,” New England Journal of Medicine
research,” New England Journal of Medicine                 (30 November 2000): 1621.
(30 November 2000): 1621.                                     Bernard Lo, Leslie E.Wolf, and Abiona Berkeley,
  Mildred K. Cho, Ryo Shohare,Anna Schissel, and           “Conflict-of-interest policies for investigators in
Drummond Rennie,“Policies on faculty conflicts of           clinical trials,” New England Journal of Medicine
interests at U.S. universities,” Journal of the American   (30 November 2000): 1616.
Medical Association (1 November 2000).                        Mildred K. Cho, Ryo Shohare,Anna Schissel, and
   Bernard Lo, Leslie E.Wolf, and Abiona Berkeley,         Drummond Rennie,“Policies on faculty conflicts of
“Conflict-of-interest policies for investigators in         interests at U.S. universities,” Journal of the American
clinical trials,” New England Journal of Medicine          Medical Association (1 November 2000): 2203.
(30 November 2000): 1616.

                                                                                                                  BUSINESS–HIGHER EDUCATION FORUM 43

A Rough Road to Success

T          he plant-sciences research partnership between
           the Swiss pharmaceutical firm Novartis AG and the
University of California at Berkeley offers a dramatic demon-
                                                                Nature pointed to the Berkeley-Novartis agreement as a sign
                                                                that the university-industrial complex may be “out of control.”
                                                                       Rausser is quick to point out that the Nature editorial
stration of how touchy such arrangements can be—even in         and other critics misstate some of the contract’s terms. But
a state where university-industry collaborations helped         the controversy has not subsided.
create Silicon Valley and the U.S. biotechnology industry.             “If you were to ask many of the faculty in the college,
       When officials of Berkeley’s College of Natural          there is a lingering resentment about the process that was
Resources announced Novartis’ five-year, $25 million pact       involved in generating this agreement,” says Richard
to fund research in the college’s Department of Plant and       Malkin, who became interim dean when Rausser stepped
Microbial Biology—in return for an option on about 30 per-      down in July 2000. “One of the things I am trying to do is to
cent of the department’s research discoveries—they              sort of defuse this situation. It’s very difficult, in the sense
expected to hear cheers from funding-starved scientists.        that it exists. The people [who] disagreed continue to
Instead, the November 1998 agreement became a poster            disagree.”
boy for opponents of sponsored-research arrangements.                  Under the November 23, 1998, pact, the Novartis
       Many faculty members complained that the university      Agricultural Discovery Institute in La Jolla, California—
hadn’t consulted them about the prospect of such a part-        recently renamed Syngenta—offers $5 million a year to fund
nership. Opposition was particularly fierce among the three-    nontargeted research in the Department of Plant and
quarters of the faculty who worked in other college             Microbial Biology. One-third of the Novartis money goes
departments and among opponents of genetically modified         toward infrastructure, including new research facilities, and
crops. At the press conference announcing the deal, one         other indirect costs. Faculty scientists write brief, one- or two-
anti-biotechnology protester threw a pie at then Dean           page proposals describing the research they want to
Gordon Rausser, one of the architects of the agreement.         conduct—a procedure aimed at spurring curiosity-driven,
Rausser ducked.                                                 investigator-initiated projects. A research committee made
       Even some advocates of university-industry scientific    up of three department researchers and two Novartis offi-
collaborations were uneasy about the prospect of one com-       cials reviews the proposals and awards funding.
pany’s buying access to the research output of a whole col-            So far, all department researchers who choose to take
lege department. They were not reassured by Berkeley            part have won grants ranging from $60,000 to $200,000 per
officials’ calling the agreement an “experiment.”               year. Only two of the 31 faculty members in the department—
       “What if the experiment were to succeed?” asked          25 full-time and six adjunct professors—have opted out.
Robert Rosenzweig, former president of the Association of              “Novartis is not driving the research agenda,” says
American Universities, in a Spring 1999 article in National     Malkin.
Crosstalk. “What would be the next part of the university to
be sold to a corporation?” In a January 11, 2001, editorial,

44 The University-Industry Research Collaboration Initiative
       In return, Novartis gets a first look at virtually all dis-          For example, Rausser says, faculty members are free
coveries produced by department scientists, including inven-         to set their own research goals and to publish their results.
tions that Novartis didn’t fund, and a 90-day option to declare      The university owns any patents. Novartis can request publi-
that it wants to negotiate licenses. (However, Novartis can          cation delays for patent-filing of up to 90 days. If Novartis asks
claim only about 30 percent of the discovery-disclosures it          Berkeley to file for a patent, the company pays the costs.
sees. The percentage depends on how much of the depart-              Novartis knows that Berkeley scientists conduct fundamental,
ment’s total research budget Novartis provides, which cur-           not applied research. And university oversight mechanisms
rently is about 30 percent.) Critics say that Berkeley has           are in place to ensure that the Novartis money enhances,
given Novartis control of the faculty’s most promising inven-        rather than crowds out, curiosity-driven basic research.
tions. Rausser says Novartis’ rights are “minimal.”                         Only one of the original goals hasn’t been met,
       “We weren’t giving up anything,” Rausser says. Most           Rausser says. Faculty members had hoped to join forces
university patents, he notes, involve proof of concept, and at       with a company that held complementary intellectual prop-
that early stage of the discovery process, “no one knows             erty which they could use in their own research. Novartis
what’s going to be commercially successful.”                         does, in fact, own plant-genetics databases that Berkeley
       Roughly two years into the agreement, Berkeley has            scientists would like to access. But in the final contract nego-
shown “several” invention disclosures to Novartis, and the           tiations, the company demanded the right to reopen the
company has signed options to negotiate licenses on two of           question of patent ownership on discoveries that were made
them, according to Carol Mimura of Berkeley’s Office of              with the help of these databases. As a result, few of the
Technology Transfer. If Novartis doesn’t pursue a license on         Berkeley scientists have tapped into them.
an invention—or if the company and the university can’t                     Rausser notes that the college structured the main
agree on a licensing fee—the university is free to offer it to       terms of the deal and negotiated with four companies
other companies.                                                     before choosing Novartis. He insists that the process was,
       Mimura says Novartis won’t get a special break in             in fact, “transparent.” He frequently briefed committees of
license-fee negotiations just because it provides a large share      the Academic Senate during the course of a year as the
of the plant and microbial biology department’s research             contract evolved. A week before the contract was final,
budget. “We won’t do a lenient deal with them,” she says.            Rausser recalls, at a lunch with 35 Academic Senate mem-
       Rausser stayed on as dean one year longer than he             bers, Berkeley Chancellor Robert Berdahl asked if anyone
had originally planned, at the request of university leaders         thought he shouldn’t sign it. Not one person objected,
and College of Natural Resources department chairs, and he           Rausser says.
says the pact “has worked very well.” It has lived up to most               Research conducted under the pact will be reviewed
of the principles that faculty leaders considered important          by a committee of outside researchers at the contract’s mid-
when they decided to seek a sponsored-research agree-                point—that is, later in 2001. “The university wants to learn
ment, he says.                                                       from this experiment,” Rausser says. Perhaps the outside
                                                                     reviewers will help Berkeley, the College of Natural
                                                                     Resources, and the critics finally agree on just how good a
                                                                     deal the Berkeley-Novartis contract really is.

                                                                                                                                    BUSINESS–HIGHER EDUCATION FORUM 45
        egotiations between companies and universities
form the crux of research collaborations; in this phase
participants move from talking about working together to
actually making it happen. Because no two universities and
no two companies are alike, no two negotiations between
different partners can be identical. But the concerns
profiled in this chapter usually are the first ones voiced by
frustrated partners, even if they are not necessarily the
first problems that need to be solved.
Negotiating Agreements

LAYING THE GROUNDWORK                                       Employees who have dual backgrounds in
      Of the many ingredients in a successful          both universities and corporations bring unique
negotiation, mutual trust is perhaps the most          skills to the negotiation process. This value is
important. Negotiations generally proceed more         becoming more widely recognized; universities
quickly and easily when both sides know each           are beginning to consistently seek individuals
other’s needs and desires and do not worry that        with corporate backgrounds, and vice versa, to
their partner may try to take advantage of them.       fill negotiator positions. The benefits are already
Ned Siegel of Pharmacia Corporation identified          apparent, particularly when the negotiations
interpersonal communication and rapport as the         involve detailed technical issues.“When you have
first critical factor in a successful collaboration—    real technology-transfer professionals on both
and shared scientific interest as a close second.1      sides who understand these issues, they often
      This familiarity comes naturally in situations   aren’t a problem,” said Randolph Guschl, director
where the partners have long-standing ties. “We        of corporate technology transfer at DuPont
try our best to make sure that we meet and get to      Central Research.4
know and develop good working relationships                  Some professional societies have instituted
with the vice president for research at the univer-    programs to provide their members with profes-
sities we partner with,” observed Theodore Tabor,      sional development opportunities as negotiators.
manager of external research for Dow Chemical          Nevertheless, the ultimate responsibility for train-
Company. “We have found this to be beneficial           ing and developing technology-transfer profes-
because we can discuss the philosophy each part-       sionals lies with each government, university, and
ner brings to our relationship.A lot of times, prob-   corporate office, said Edward Pagani, director of
lems can disappear pretty quickly if you develop       strategic alliances at Pfizer Global Research &
these kinds of relationships and a true, sound         Development. “Corporations and not-for-profit
understanding of one another’s position.”2             groups must invest time and money in training
                                                       and retaining technology-transfer professionals
Training and Experience                                and creating a rewarding environment for them
     Not surprisingly, getting experienced people      to develop their skills.”5 Establishing and reward-
involved in the negotiation can smooth and             ing high-performance expectations will encour-
expedite the process. Nothing slows discussions,       age more new personnel to take advantage of
or raises frustration levels, more than having an      upcoming professional development courses,
inexperienced negotiator who tries to insert           seminars, and conferences.
unrealistic provisions into an agreement. The
growth of collaborations during the past few           Importance of Speed in a Negotiation
years has created new positions for negotiators—            Inexperience and turnover of involved staff
particularly on the university side—many of            also can affect how expeditiously collaboration
which are filled by people with minimal experi-         negotiations are concluded.“We negotiated with
ence and little training.“There are problems not       one company that changed their counsel several
only in the research disciplines, but also in the      times,” observed John Schneider, assistant vice
areas of technology-transfer personnel, intellec-      president for industry research at Purdue
tual property portfolio managers, negotiators, and     University. “It took us four years to negotiate that
properly trained legal talent,” pointed out Bill       agreement.”6 Internal bureaucracy can take a toll.
Decker, associate vice president for research at the   “We were finding that we weren’t acting very
University of Iowa.3                                   businesslike in the way that we interacted with

                                                                                                        BUSINESS–HIGHER EDUCATION FORUM 47
                                          CHAPTER 4

industry,” observed Mark Crowell, associate vice        CONTRACTS
chancellor for technology transfer and industry
research at North Carolina State University (NC         Master Contracts
State). Now, he continued,“We have streamlined               For two partners that have already
the process.We can essentially get comments back        collaborated—and therefore, who already under-
to a company on an agreement in a day.”7                stand each other’s cultural differences and organi-
      Wrangling over the terms of the agreement         zational preferences—a master contract can be an
can consume a lot of time. Every industrial and         effective way to avoid plowing the same ground
research sector has a clock that ticks at a different   when they negotiate agreements covering indi-
rate. For instance, the information technology          vidual research projects. Partners also can use
industry moves much quicker than industry. Emil         master contracts to formalize the relationship in
Sarpa, manager of external research at Sun              strategic partnerships—arrangements under
Microsystems, said that taking six to nine weeks        which a corporation sponsors a large number of
to reach a negotiated agreement with a university       projects at a particular institution.While the con-
is too long. To streamline the process, he often        tents of master contracts vary, they usually contain
uses a mini-agreement with three to six months’         provisions regarding intellectual property owner-
funding to start a project while the negotiations       ship, confidentiality, publication delays, and the
with the university proceed.8 His company has           process of researchers applying, and getting
backed out of negotiations at a time when they          approval, for funding of individual projects under
had become overly prolonged because the indus-          the overall agreement. These provisions allow
trial cutting edge was moving faster than the           negotiations on a specific project to focus on the
lawyers doing the negotiating.9 Negotiation             scope of work, the time period, and the budget.
delays also have been known to frustrate univer-             Because a master contract will cover many
sity faculty members, causing them to take intel-       topics, partners need to establish a relationship of
lectual property “out the back door” by working         sufficient magnitude to justify the time and
directly with companies.10 “The key is to not get       expense of negotiating it. Master contracts gener-
bogged down in excessive details at the early           ally work well when a large company sponsors
stages of negotiation,” observed James Merz, vice       many recurring projects at a single university, and
president for graduate studies and research at          the research being performed adapts well to
Notre Dame University. “It is much better to            boilerplate provisions.12 The major limitation of
develop a partnership with high levels of trust,        master contracts is that they do not always trans-
structure a broad agreement regarding intellec-         fer well between different divisions of the same
tual property, and work out the details if valuable     company, or between different research projects at
intellectual property results.This may be a bit ide-    a university.13 In describing the situation at
alistic but so far we have had some success.”11         Washington University in St. Louis, which has a
                                                        diverse research environment, Ted Cicero, vice
                                                        chancellor for research, observed, “Defining the
                                                        scope that will be covered by a particular master
                                                        contract can be very, very difficult.When you have
                                                        longstanding relationships . . . trying to carve out
                                                        other areas of research that would be amenable to
                                                        a master contract is sometimes quite difficult.”14
                                                             Many universities are pleased with the results
                                                        of master contracts.15 Purdue University has a
                                                        dozen master contracts with companies both
                                                        large and small.16 The University of North
                                                        Carolina,Washington University in St. Louis, and
                                                        the University of California, Berkeley, have simi-
                                                        lar master contracts with, respectively,

48 Working Together, Creating Knowledge
                                                         Negotiating Agreements

GlaxoSmithKline (formerly Glaxo Wellcome),               Model Agreements
Pharmacia Corp. (formerly Monsanto Co.), and                  Model agreements are another approach
Novartis. A master contract for the Center for           used to speed the negotiation process. These
Innovative Product Development at the                    agreements are challenging to develop and
Massachusetts Institute of Technology (MIT),             implement because business practices in different
though written for a consortium, is another              industry sectors demand disparate agreements,
example of an effective master contract.17 Each is       and because different companies in the same
a model that other practitioners could use in            industry, and even different divisions within those
developing their own master contracts, although          companies, may present opposing views about                 To be effective, a model
care must be taken. “Model contracts vary                how a collaboration should be structured and              agreement should include
because of individual institutional policies and         used. In addition, the sheer number of complex               basic, agreeable terms
state policies,” observed Lynne Chronister, direc-       provisions in even simple collaboration contracts
tor of sponsored projects at the University of                                                                      that are designed to lead
                                                         makes finding common ground extremely diffi-
Utah.“They’re not directly transferable from one         cult.“Model research agreements have attempted                  to quick consensus.
institution to another.”18                               to present uniform provisions, but the exceptions
      The long-term effect of such agreements            outnumber the rules,” said Louis Tornatzky, senior
upon the willingness of other companies to spon-         fellow, Southern Technology Council.21
sor work at those campuses remains unknown. It                Over the years,many partners have attempted
is an issue with which Washington University in          to develop model agreements. One of the first was
St. Louis still struggles, even many years after         an eight-page report prepared jointly in 1988 by
having established its relationship with Monsanto        the Government-University-Industry Research
(now Pharmacia). “I continually fight a percep-           Roundtable and the Industrial Research Institute,
tion that much of our research is funded by              called Simplified and Standardized Model Agreements for
Pharmacia and therefore other companies need             University-Industry Cooperative Research.22 Neither it
not get involved in funding our activities. Nothing      nor any of the other efforts have succeeded in fos-
could be further from the truth,” said Cicero.           tering a widely effective model agreement. Most
“While the Pharmacia funding is very important           collaboration partners now believe that the pri-
to us in both the biomedical and now the plant           mary value of a model agreement is as an initial
sciences areas, it accounts for only a fraction of the   point of departure for negotiating a specific
research that is funded by industry.”19                  agreement between two parties, rather than as the
      MIT, which has strategic arrangements              final agreement for all arrangements.23 “Every
with many companies, closely monitors this               single company we’ve signed a model agreement
type of situation. “Companies that engage with           with has negotiated slight variations in the terms
us at the partnership level should not be the sole       to suit their needs and the activities that are going
company in their industry or sector to have a            on,” said Carolyn Sanzone, assistant vice chancel-
presence at MIT,” wrote Charles Vest, president          lor for strategic technology alliances at the
of MIT.“So far, this has not emerged as a prob-          University of Massachusetts.24
lem. Indeed, in some instances our partners have              To be effective, a model agreement should
actively worked to engage other companies in             include basic, agreeable terms that are designed to
the research efforts.”20                                 lead to quick consensus. While a model agree-
                                                         ment should not be offered as a “take-it-or-leave-
                                                         it” proposal, prospective partners should know
                                                         that requesting changes could lengthen the time
                                                         it will take to negotiate a deal and may affect the
                                                         university’s willingness to participate in the
                                                         sponsored-research effort.“A standard agreement
                                                         should constitute your best offer and should cover
                                                         your basic needs,” said NC State’s Mark Crowell.
                                                         “To ensure this, you should periodically review

                                                                                                            BUSINESS–HIGHER EDUCATION FORUM 49
                                          CHAPTER 4

and update your standard agreements to prevent         CONFIDENTIALITY
‘language creep.’”25                                         The ability of faculty researchers to discuss
     For experienced universities, three variations    their work with colleagues and to publish their
of model agreements are beginning to emerge.           results is a cornerstone of the academic enterprise
“One is a very simple standard model agreement         and forms the basis of how new scientific knowl-
for single research projects, whether they’re          edge is created. Companies and researchers
$10,000 or $100,000,” said Karen Hersey, senior        should do nothing to put this at risk.At the same
counsel, intellectual property at MIT.“Second are      time, companies have a legitimate need—and                    The ability of faculty
the master contracts for those companies that          fiduciary responsibility to their shareholders—to            researchers to discuss
would like to fund multiple tasks over a period of     protect the value of their investments.
time.The last are our strategic partnerships, which          Companies recognize that universities are not     their work with colleagues
are usually five-year agreements with the compa-        the best places to try to keep secrets. By carefully    and to publish their results
nies committing about $20 million.”26                  monitoring the information provided to univer-              is a cornerstone of the
     Large companies are overwhelmingly more           sity researchers, and by not sharing “crown jewels,”
likely than small ones to enter into strategic                                                                  academic enterprise and
                                                       companies can limit the exposure of key tech-
arrangements or sign master contracts with uni-        nologies to possible compromise.“We try to avoid           forms the basis of how
versities. Small companies’ involvement with uni-      disclosing anything that’s confidential,” said Pfizer’s    new scientific knowledge
versities usually is limited to a single research      Pagani.“There’s no way to monitor whether con-
project, often of modest cost. Because universities                                                                            is created.
                                                       fidentiality is maintained, and there may not be a
may find it difficult to expend a great deal of          suitable remedy if our confidential information is
effort negotiating a sponsorship agreement when        inappropriately disclosed. The wise thing is, you
the financial return is modest, smaller companies       only give what you have to, and if it’s important
without their own legal staffs may need to pay         to do it, you balance the benefit/risk ratio.”27
special attention to model agreements.                       This does not mean that university
                                                       researchers (and under the proper circumstances,
 Recommendation:                                       their students) can never access confidential com-
                                                       pany data. Sometimes it is vital to do so.“In those
 When a university-industry research relationship is
                                                       cases where we’re doing engineering research, we
 of sufficient magnitude, collaboration partners       really have to understand what the company’s
 should consider negotiating master contracts.         problem is,” said Purdue’s Schneider.“In order to
 Universities also should consider developing model    work on the research problem, I’ve got to know
                                                       some trade secrets, and in that case we do have to
 agreements for single research projects and should
                                                       enter into confidential relationships.”28
 ensure that the terms do not unduly disadvantage            The strategic agreement between the
 small- and medium-sized companies.                    University of California, Berkeley, and Novartis
                                                       requires individual researchers to sign confiden-
                                                       tiality agreements before they can gain access to
                                                       Novartis’ proprietary databases.29            Other
                                                       university-corporate arrangements use the same
                                                       approach. “A lot of universities don’t like to
                                                       include company confidential information in the
                                                       research agreement because they say it is so hard
                                                       for them to police it with faculty and students,”
                                                       observed Dow Chemical’s Tabor. “They say that
                                                       if there’s going to be confidential information
                                                       exchanged, the agreements should not be with
                                                       the university but with the individuals.”30

50 Working Together, Creating Knowledge
                                                        Negotiating Agreements

Faculty Signatures                                      Universities (AAU). “An example would be the
      Not all universities, however, share this view.   use of the Internet.”36
MIT’s Hersey said she is leery of allowing indi-             When an institution signs an agreement, it is
vidual faculty members to sign nondisclosure            legally binding; but this may not be the case
agreements. She prefers the institution to sign, so     when a faculty member tries to do so on behalf
that the faculty would not have to put personal         of the institution. “Faculty members generally
assets at risk.“Researchers should not be encour-       cannot obligate the university, no matter what
aged to sign unless they have been made very            they sign,” said Cornelius Pings, former president
aware of the risks they are assuming, and unless        of the AAU.37
they understand what it is they are signing,” she            Nevertheless, some companies ask faculty to
said.“These are legal documents and enforceable         sign as individuals.“I ask researchers to sign every-
against the individual. They can also be misused        thing that we send them. Not as a party to the
by industry to muzzle individual investigators.”31      agreement,but to say they at least read it,”observed
DuPont’s Guschl also cautioned,“These are legal         DuPont’s Guschl. “They should understand what
business agreements and a few people are going          obligations they have, whether contractual or just
to get burned unless that’s understood.”32              with respect to being part of a collaboration.”38
      Pfizer prefers institutional signatures,
according to Pagani. “We’re concerned about             Impact on Students
what remedies we may have if [only] a professor              The challenges and consequences of main-
signs the confidentiality agreement. If he or she        taining confidentiality are particularly acute in
breaches it, there’s not a lot we can do.”33            the case of students, and corporate officials say
Sometimes, confidential information must be              that universities differ in their ability to manage
discussed before a project can even be negoti-          this process.“We find a lot of universities have a
ated. In this situation, faculty may sign               very clear understanding of what their graduate
exploratory confidentiality agreements, or provi-        and undergraduate students can and cannot do
sions can be made in a master agreement                 with confidential information,” said Guschl.
between two strategic partners.34                       “Then we find a lot of other universities that
      The corporate partner has more legal reme-        haven’t even discussed these matters internally ...
dies when the university has signed a confiden-          Each university needs to understand their posi-
tiality agreement. This also can cause the              tions in this area and tell us what they are, because
university to be concerned about its overall            usually the university sets the rules.
potential liability. “The university has the deep       Undergraduate research is growing, and there are
pockets, and the argument would be that the fac-        sometimes very different rules about what under-
ulty member is an employee of the institution           graduates can and cannot talk about.”39
and we should be responsible for his or her                  Informal solutions range from requiring fac-
behavior,” observed Cicero of Washington                ulty disclosure of the possession of confidential
University in St. Louis.“This might lead to uni-        information to relying on academic and corporate
versities becoming very reluctant to sign any           researchers to be discreet in their conversations.
confidentiality agreements if they have to make          “We have one lab that has an informal policy of
certifications to a sponsor.”35                          asking where the parents of the undergraduates
      In fact, a university may find itself being sued   work,” observed Richard Stoddard, director of
whether or not it signs a confidentiality agree-         federal relations at Ohio State University.“If it’s a
ment. In any event, the predicament of the uni-         limited industry, and if the parents work for com-
versity being held responsible for faculty actions      pany A and the student is doing research related to
is not unique to the research collaboration set-        company B, the lab is concerned about the stu-
ting. “The extent to which the university is            dent going home and telling mom or dad what
responsible for faculty members’ actions comes          he or she has been doing.”40
up in all kinds of contexts,” said Nils Hasselmo,            It is unlikely, however, that informal solu-
president of the Association of American                tions alone will be sufficient. More fully devel-

                                                                                                          BUSINESS–HIGHER EDUCATION FORUM 51
                                                     CHAPTER 4

oped policies probably will be needed in this area.                             delay of up to 60 additional days for the univer-
“The exchange of proprietary information is                                     sity to file a patent application.The university can
necessary but should be kept to the minimum                                     terminate any publication delay by filing for a
necessary to complete the project,” wrote Notre                                 patent. “Publication delays in the agreement do
Dame’s Merz. “We may need to develop better                                     not delegate content control to Novartis but
ways to monitor the safeguarding of this infor-                                 instead are designed to allow the university to
mation as the scope of industrial research                                      protect its intellectual property rights and, if
increases.”41                                                                   needed, delete any proprietary information pro-
     Ultimately, responsibility for maintaining                                 vided in confidence to the university,” said
confidentiality lies with both sides. The                                        Gordon Rausser, who was dean of Berkeley’s
Washington University Medical School in St.                                     College of Natural Resources when the agree-
Louis has an informal rule that faculty members                                 ment was negotiated.45
are expected to obtain funding from one com-                                          Strict patent rules regarding the existing
pany for each research area, with an exception in                               body of technological knowledge (“prior art”)
the area of clinical research.At Purdue, some fac-                              can strongly influence decisions to disclose
ulty members working with a specific company                                     research results. “If a patent is to be filed, it is
will not bother to submit proposals to others that                              essential that constraints are placed on public pre-
they know might present a conflict. “The com-                                    sentations by faculty and students until after
panies themselves monitor the professors some-                                  patent filing, or the claims in the patent may be
what carefully, [although] some of them are better                              significantly narrowed or even invalidated
than others. So there are mechanisms in both                                    entirely,” observed Ralph Christoffersen, presi-
directions,” Schneider observed.42                                              dent of Ribozyme Pharmaceuticals Inc.* “This
                                                                                means that seminars or other presentations may
                                                                                be delayed or their content carefully controlled.
PUBLICATION DELAYS                                                              Since such actions are potential infringements on
     Universities usually accept reasonable publi-                              academic freedom, the methods used to accom-
cation delays.“Prohibitions and excessive restric-                              plish such controls must be carefully consid-
tions on universities publishing the results of their                           ered.”46 In the Washington University–Pharmacia
research are unacceptable and we should take a                                  relationship, the company reviews research results
hard line on this,” wrote Merz. “On the other                                   before presentations at meetings or in publica-
hand, delays for securing intellectual property                                 tions.The resulting delay occasionally causes dif-
protection are usually OK with industry and                                     ficulties, especially for meeting last-minute
acceptable to us.”43                                                            abstract submission deadlines.47
     Since graduate students actually perform                                         The “standard” acceptable publication delay
much of the university research, it is important to                             is 60 to 90 days.48 Universities report that they
keep their academic needs in mind.“Many grad-                                   are receiving increased pressure to extend publi-
uate students are held in bondage until they can                                cation delays beyond this standard time frame.
get their thesis published and their final exam                                  Timely publication also is one of the key criteria
scheduled,” observed Pings.“There should not be                                 in meeting federal tax regulations regarding unre-
clouds on the content of the thesis or unreason-                                lated business income.
able delays in the release of a thesis and therefore                                  “We have faced substantial pressure to
scheduling of final examinations.”44                                             accept longer publication delays,” wrote Charles
     For example, the Berkeley–Novartis                                         Wethington, president of the University of
arrangement allows for a 30-day review period,                                  Kentucky. “This trend seems most pronounced
without editorial constraint, to enable Novartis                                with clinical trial research agreements, but is also
to determine whether it wants the university to                                 substantial with many engineering research
file for patent protection. Novartis can request a                               agreements.”49 The reason usually cited for the

*Patents in the United States are based on the principle of “first to invent,” while elsewhere in the world the prevailing principle is “first to file.”

52 Working Together, Creating Knowledge
                                                                           Negotiating Agreements

delay of publishing clinical trial results is that                          By the time the original researcher was ready to
multiple sites are involved in the work and the                             depart for a conference, the three had managed to
sponsor does not want publication or disclosure                             coauthor a significant scientific paper and to post
until all studies are completed.50 A 1994 survey                            it on the web. By early the next afternoon, it                            Some companies have
of 210 life science companies conducted by                                  became clear that the response to their work was
                                                                                                                                                              instituted novel
researchers at Massachusetts General Hospital                               enthusiastic.54 Such Internet-based collaboration
found that 58 percent required publication delays                           and publication has become common in the field                             approaches to resolve
of six months or more. The NIH recommends                                   of high-energy physics. It is uncertain whether                           the issue of publication
that universities not accept publication delays of                          this approach will spread to other areas of sci-
                                                                                                                                                       delays, even incurring
more than two months.51                                                     ence, particularly those that present greater com-
      Some companies have instituted novel                                  mercial potential, such as biomedical research.                          additional cost to do so.
approaches to resolve the issue of publication
delays, even incurring additional cost to do so.                             Recommendation:
Pfizer, for example, will provide compounds sim-                              Confidentiality agreements, when necessary,
ilar to the confidential compound under study                                 should be signed by the company, the university,
for simultaneous evaluation by the university.                               and the researchers involved. The company and
“The data collected on the analogues or on a                                 the university must take responsibility for safe-
patented chemical series can be published                                    guarding confidential information. Publication
immediately; the data on the unpatented com-                                 delays to protect intellectual property rights should
pound may be published as soon as the patent                                 generally be no longer than 60 to 90 days. Any
issues or the structure of the compound is made                              publication delays should be monitored carefully
public by Pfizer,” said Pagani. “If this solution is                          both to preserve academic freedom and to protect
acceptable to the university, the research plan is                           against any early disclosure that might invalidate
modified and the budget is increased appropri-                                patent claims.
ately to cover the direct and indirect costs to
conduct the additional research.”52
      Ultimately, the balance between academic                              INDIRECT COSTS
freedom and intellectual property ownership is a                                  Facilities and Administrative (F&A) costs,
delicate one. When one party tries to designate                             also called indirect costs, are those that the uni-
one goal as always taking precedence, trouble can                           versity expends in performing research over and
begin. “We’ve had a recent contract change that                             above researchers’ salaries and new materials
funds research in a number of universities where                            costs. F&A costs cover the costs of maintaining
there is language throughout the contract that                              and operating university facilities, complying
makes protecting patent rights always more                                  with health and safety practices, disposing of haz-
important than academic freedom and publish-                                ardous wastes, providing campus security, and
ing,” said MIT’s Hersey. “This language basically                           accounting for the expenditure of sponsored-
says the most important thing is protecting patent                          research funds. F&A costs also help finance the
rights, no matter how long it takes.”53                                     debt incurred to construct university research
      The advent of the Internet and e-mail may                             facilities, but they do not contribute to reserve
significantly alter the terms and conditions of                              funds to build new facilities.55 F&A costs also
publications. In his book The Elegant Universe,                             cover expenses for heating and cooling, library
Brian Greene, professor of physics and mathe-                               usage, and the salaries of departmental and cen-
matics at Columbia University, describes a frantic                          tral office staff.56
week of effort to meld the work of three                                          The university and the federal government
researchers working on superstring theory.* One                             periodically negotiate the F&A rate based on
researcher posted the original idea on the web,                             documented costs that both independent and
and the next day the other two downloaded it.                               government auditors have reviewed. The rate

*“Superstring theory” is the latest attempt by physicists and mathematicians to develop a unified theory of both large celestial bodies and sub-
atomic particles.This quest for a “unified field theory” eluded Albert Einstein during the last 30 years of his life.

                                                                                                                                            BUSINESS–HIGHER EDUCATION FORUM 53
                                          CHAPTER 4

varies significantly among universities but aver-        dealing with the smaller companies, and espe-
ages about 50 percent of direct costs.57 Within         cially the start-ups, that you run into the real dis-
the total F&A rate, the federal government has          cussions on negotiating your F&A rate.”64
imposed a 26 percent cap on administrative costs;             “We think that it is fair and reasonable to
this cap affects mostly private universities located    pay a university what it actually costs to do the
in large, expensive metropolitan areas.58               work,” wrote Ed Shonsey, president of Novartis
      In July 2000, a RAND Corp. study con-             Seeds.65 In addition, Pfizer’s Pagani noted that
cluded that, during the past decade, universities       paying the full federal F&A rate protects a com-
                                                                                                                 “By paying all direct and
had only been recovering between 70 and 90              pany’s interests. “If we don’t pay it, others can
percent of their federal project F&A costs.59 The       argue that they did, and we can become                      indirect [F&A] costs to
report also said that F&A spending as a percent-        embroiled in disputes about rights in the research        perform the research at
age of total project cost had remained level for at     results,” Pagani said. “By paying all direct and
                                                                                                                   university laboratories,
least a decade, and that university F&A rates gen-      indirect [F&A] costs to perform the research at
erally were slightly lower than at other types of       university laboratories, we minimize or eliminate        we minimize or eliminate
research institutions, such as federal laboratories     claims by others, particularly the federal govern-       claims by others, particu-
and industrial research laboratories.60                 ment under the Bayh-Dole Act.”66                          larly the federal govern-
      Many universities do not include all of their           Universities contend that they have little
allowable costs as part of their negotiated federal     flexibility.“The federal government looks at all of                 ment under the
F&A rate because either they do not wish to pro-        our sponsored-research projects and would take a                  Bayh-Dole Act.”
long the negotiation, they do not want to incur         very dim view if we’re charging other people a
the expense of documenting the cost, or they            different rate than we’re charging the federal gov-
                                                                                                                   –Edward Pagani, director
want to maintain an F&A rate that is competitive        ernment,” said Washington University’s Cicero.“If
with peer institutions. “We’ve actually done an         you’re underpricing contracts to get research                of strategic alliances at
internal calculation to figure out by how much           contracts from industry, that will weigh very              Pfizer Global Research &
the federal F&A rate underpays our costs,” said         heavily against you [when the F&A rate is up for
Washington University’s Cicero. “We found that          renegotiation].”67 Nevertheless, a university may
for each dollar of federal research support we          negotiate with a company on F&A costs when,
receive, it costs the university 25 cents.”61           for instance, a company joins a university research
      When preparing research proposals for             center, or where the modest size of the research
industry, universities appropriately include their      project allows the university to use standardized
F&A costs. Occasionally, a university may try to        contracts, thus saving on administrative costs.This
charge more than the federal F&A rate when the          flexibility can be especially important for smaller
federal cap on administrative costs is lower than       companies that cannot afford to pay the fully
its actual costs.62 But universities often face pres-   burdened rate. “Universities approach this the
sure from both companies and faculty to charge          way companies do, in that the university has to
less than their federal rate. “In most negotiations     decide at what price it wants to do this,” said
with industry, the company research director calls      AAU’s Hasselmo.“There are areas of research the
the university principal investigator (or vice versa)   university wants to pursue and it may be willing
and an amount is agreed upon,” observed Russ            to accept a lower indirect cost rate simply because
Lea, interim associate vice president for research      this is a critical investment and in the total picture
and sponsored programs at the University of             is something it really wants to do.”68
North Carolina.“The principal investigator then               Despite the difficulties faced by universities,
wants the institution to waive a portion of the         some potential corporate sponsors continue to
F&A rate so he or she can perform more                  ask universities to reduce the F&A rate. In the
research.This situation is legion among most cor-       vast majority of cases, the university refuses to do
porate projects.”63                                     so. “I ask the sponsoring divisions to look at the
      As for corporate sponsors, “the larger and        total cost of getting the research performed, put
more sophisticated industries understand indirect       aside the overhead rates, and tell me if they want
cost rates,” observed Hersey. “It’s when you start      to pay this much,” said DuPont’s Guschl.

54 Working Together, Creating Knowledge
                                                        Negotiating Agreements

Sometimes deals “evaporate” because of indirect-        INTELLECTUAL PROPERTY
cost disputes, but often DuPont executives con-              The most nettlesome area of negotiations is
clude that “what matters is what they’re paying         usually the ownership, value, and use of the intel-
and what they’re getting in return,” he says.69         lectual property arising from the sponsored effort.
      Interestingly, negotiations about F&A rates       The opening position during negotiations for
are virtually nonexistent in the area of industry-      both sides customarily begins with assertions that
sponsored clinical trials. Most major medical cen-      each will “own or have access to” intellectual
ters have established non-negotiable F&A rates,         property arising from the collaboration. (When a
which industrial sponsors have come to accept.          specific project includes federal funding as well as
Although no formal agreement exists among the           industry sponsorship, however, federal law
centers regarding a uniform F&A rate, its consis-       requires that the university retain ownership of
tent application (and the fact that it averages         any resulting patents.)73
about half of federal on-campus rates) explains
why both sides seem satisfied with the situation.70      Patent Ownership
      Consider the situation in Iowa. State uni-              Companies usually want to secure patent
versities there have collaborated with Iowa state       ownership in order to manufacture, use, and sell
agencies to adopt consistent F&A policies. The          products that result from the research; however,
rates are non-negotiable, and the verbal agree-         the importance of intellectual property owner-
ment is enforced by peer pressure among the uni-        ship and patents differs among industry sectors.
versities. The allure of removing F&A costs as a        For example, in the information technology
contentious negotiation item has led some uni-          sector, short product life cycles elevate the prior-
versities to talk about trying to use a similar         ity of time-to-market issues over that of patent
model with industry research collaborations on a        protection. Process-intensive industries that pres-
national scale.71                                       ent high risk of development failure, such as the
      A final technique used by some universities        chemical and pharmaceutical industries, often
is simply to present to potential industry sponsors     secure patent protection before investing in costly
fixed-price contracts with the F&A costs inte-           new manufacturing facilities or engaging in
grated into each line item instead of broken out        expensive drug development activities.74
separately.72 This technique removes the F&A                  Universities, on the other hand, are driven by
costs as a visible target and helps focus the cor-      different incentives. They often desire ownership
porate sponsor on weighing the importance of            to allow their faculty to be unencumbered as they
the proposed research against its cost.                 work, publish, and collaborate with colleagues.
                                                        Universities often avoid granting restrictive rights
 Recommendation:                                        to the sponsoring company, because they do not
 Indirect costs are a legitimate expense of perform-    want to preclude students from working in that
 ing university research. In most cases, companies      particular research area after they graduate.75
 should expect to pay at least the negotiated federal         In addition, universities may have to meet
 Facilities and Administrative charge for the           obligations to other research sponsors, including
 research they sponsor in universities.                 the federal government. Universities are
                                                        ethically—and in some cases, legally—responsi-
                                                        ble for ensuring that their discoveries are made
                                                        available for use, potential development, and
                                                        application by society, through commercializa-
                                                        tion, within a reasonable amount of time (rather
                                                        than being shelved for competitive reasons).

                                                                                                         BUSINESS–HIGHER EDUCATION FORUM 55
                                          CHAPTER 4

Patent ownership enables them to monitor the           have a difficult time explaining to the sponsor
development activities of their licensees; it also     why we cannot assure them that we can grant
allows universities to license the technology on a     them all of the rights to copyrighted materials that
nonexclusive basis to more than one company,           they would like because, quite frankly, we’re not
potentially increasing the licensing-revenue           sure we own them,” said MIT’s Hersey.79
stream, and to meet federal tax regulations to pro-          The contrast between the sharply defined
tect the nonprofit status of the university.76          legalities of patents and the ambiguity and inter-
      Universities generally are willing to recog-     nal strife regarding copyrights has led many uni-
nize joint intellectual property ownership if the      versities to update their copyright policies.
university and industry researchers coauthor a         “Universities should be looking at clarifying how
paper or coinvent a product or process, or if fed-     copyrights are handled in a sponsored-research
eral funds or federally sponsored research are         agreement funded by a private company,” said
intermingled with the collaboration. As long as        NC State’s Crowell. “From the standpoint of
both sides remain flexible, it is usually possible to   ownership, the copyright should essentially be
construct arrangements that can serve companies’       treated like a patent, so the university can be in a
commercialization needs while still vesting intel-     position to convey negotiated licensing rights to
lectual property ownership with the university.        the sponsors.”80
In many cases, a nonexclusive license affords the            After a recent update of its copyright policy,
company sufficient access to pursue its commer-         Columbia University now allows researchers to
cialization plans, and the university usually can      retain copyrights for books, monographs, articles,
provide exclusive licenses when needed. “In            and so forth, but declares that the university will
almost every case, we don’t object to the univer-      own the rights when the works are supported
sity owning the intellectual property as long as       directly or commissioned by the university,
we get a nonexclusive license to practice and use      receive more than the normal financial or logis-
it,” observed Pfizer’s Pagani.77                        tical support, or are subject to contractual obliga-
      An effective negotiation remains focused on      tions.81 Columbia will share copyright revenues
the long-term goals of patent ownership and            with the authors just as it shares patent licensing
requires flexibility from both sides. At Dow            revenues with faculty discoverers.
Chemical, for example, the company’s
Cooperative Research staff works to identify
those areas where patents are likely to occur and       Recommendation:
can then tailor the boilerplate agreement with          Although ownership and control of intellectual property resulting from a collab-
the university to fit the situation.78                   oration must be decided by the collaboration partners, it usually will be appro-
                                                        priate for the university to retain ownership. Both parties should remain flexible
Copyrights                                              during negotiations, and the key measure should be whether the corporate part-
     Patents are the predominant mechanism of           ner can commercialize the fruits of the research to the benefit of the public.
intellectual property ownership in most of the          Particularly when federal funds are involved, universities are responsible for
research collaborations studied for this report. But    ensuring that promising discoveries are made available for their potential com-
in some collaborations, such as those involving         mercialization or use within a reasonable time. Universities should update their
educational materials, copyrights (not patents) are     copyright policies to allow industry sponsors to be granted licensing terms sim-
the major form of intellectual property owner-          ilar to those terms provided with patents.
ship. The ownership relationship between the
university and its faculty is very different in the
two cases, and this can have significant implica-
tions for negotiating intellectual property use
agreements with industrial sponsors. Because fac-
ulty often control the copyright on their course
materials, universities cannot license the materials
to industrial sponsors as they do with patents.“We

56 Working Together, Creating Knowledge
                                                                           Negotiating Agreements

LICENSING TERMS                                                            pany to attract venture capital funding. At the
       Because the financial stakes are high, it is not                     same time, investing an equity stake in a faculty
surprising that many collaboration negotiations                            start-up company can lead to potential conflicts
are conducted as if each could result in the next                          that must be monitored closely; therefore, many
blockbuster patent. No university president wants                          public universities are unable or unwilling to use
to be invited to explain to the governing board,                           this approach.When a faculty start-up receives an
or to a state legislative committee, how the latest                        exclusive license for the results of publicly funded
                                                                                                                                                      Collaboration negotia-
Cohen-Boyer patent* managed to slip through.                               research, other companies that may wish to license
But patents with such broad application and high                           the technology cannot do so.This can potentially                          tions can become more
value are uncommon, and their use still does not                           confer a public subsidy for private gain and lies at                                arduous when
consider the substantial downstream costs and risk                         the heart of the dispute over research tools.
                                                                                                                                                            combined with a
of developing and marketing actual products. As
a result of these expectations and countering real-                        Establishing Upfront Fees                                                    contentious licensing
ities, collaboration negotiations can become more                                As an alternative, a university may grant a                                     negotiation.
arduous when combined with a contentious                                   royalty-free license (usually nonexclusive) in
licensing negotiation.                                                     return for an upfront fee, often in the form of
       To avoid combining these negotiations, col-                         support for additional, undirected research.While
laboration partners either try to resolve the issue                        it may be advantageous for the university to do
of commercialization terms quickly (perhaps by                             this, it may not always be in the best interest of
agreeing to a royalty-free license), or if that is not                     the faculty. In 1996, a jury awarded Jerome Singer
possible, defer the negotiation of licensing royalty                       and Lawrence Crooks, two University of
rates until they complete their research. Examples                         California researchers who performed research in
of universities and companies negotiating a firm,                           the area of magnetic resonance imaging, $2.3
nonzero, commercialization royalty rate at the                             million because the university had discounted the
beginning of a collaboration are rare, but they do                         patents it licensed to manufacturers in exchange
exist: In 1999, the Arizona Board of Regents pro-                          for more than $20 million in research funding—
posed changing its intellectual property policies to                       reducing the licensing revenues in which the
institute a windfall provision that would trigger                          researchers would have shared.84
payments based on a mutually agreed-upon net                                     The payment of an upfront fee** can be par-
sales threshold or event.82 “Negotiating rates on a                        ticularly useful in the area of information tech-
hypothetical, unknown invention is risky for both                          nology, where the improbability of blockbuster
parties, and tends to lead to generally unneeded                           patents can lower the financial risk to universities
friction between the parties,” wrote University of                         of accepting upfront payments in lieu of royalties.
Kentucky President Charles Wethington. “It also                            However, not all information technology compa-
substantially complicates negotiations.”83                                 nies will agree to the payment of an upfront fee.
       Universities will sometimes grant royalty-free                      Many prefer to receive a nonexclusive, royalty-
licenses to faculty start-up companies. Since fac-                         free license without further financial considera-
ulty start-ups are chronically short of operating                          tion for any technology that may arise from
funds, the university may grant royalty-free                               research that they sponsor.85
licenses to existing university patents in return for                            Although some information technology
an equity stake in the company. In these cases, the                        companies will not let the lack of a royalty-free,
license is usually exclusive, because an exclusive                         nonexclusive license stop them from sponsoring
license is usually necessary for the start-up com-                         university research, others will. Many information

*Awarded in 1980 to Herbert Boyer of U.C. San Francisco and Stanley Cohen of Stanford, the Cohen-Boyer gene-splicing patent became a
seminal patent for the emerging biotechnology industry. Cohen continued performing research at Stanford, while Boyer later founded
Genentech.The patent was licensed to several hundred biotechnology start-ups and eventually earned U.C. and Stanford almost $200 million
in licensing revenue.
**This upfront fee is not to be confused with the payment universities receive for performing sponsored research.The former is paid in lieu of
downstream royalty income that might arise from the results of the research, while the latter covers the university’s costs (including indirect
costs) for performing the research.

                                                                                                                                            BUSINESS–HIGHER EDUCATION FORUM 57
                                          CHAPTER 4

technology companies have long insisted on get-        of the Council on Governmental Relations. “The
ting nonexclusive, royalty-free licenses to the        majority is willing to defer and agree that [defer-
results of their sponsored-research efforts, and       ral] speeds up the negotiation process.”91
some are becoming even more adamant about                    One method is to specify,in the contract,how
it.86 “My experience has been that many com-           the partners will decide the rate once the research
panies in this field do insist on a nonexclusive,       is complete. “If the concern is assuring that the
royalty-free license up front in the research agree-   university is reasonable, expanded contractual pro-
ment—and many will, in fact, walk if they can’t        visions on how the parties will reach an agreement
get it,” observed NC State’s Mark Crowell.87           could be included,” said University of Kentucky’s
      The forces driving information technology        Wethington.92 He also observed that it would be
companies to insist on nonexclusive, royalty-free      possible to include terms requiring the university
licenses stem from the structure of their industry     to agree to generally acceptable rates.
and the speed at which it moves.“In addition to              Arbitration is another option, but probably
the fact that there probably are fewer ‘block-         not widely adaptable.“I don’t think we’re geared
buster’ patents in this area as compared with          for going through an extensive, true, triple-A
biotechnology or pharmaceuticals, I think the          arbitration proceeding,” said Joyce Brinton, direc-
main reason for this difference is the different       tor of Harvard University’s Office for Technology
way this industry uses patents,” observed              and Trademark Licensing.93 Texas prohibits its
Crowell.“They see patents as ‘chits,’ to be traded     universities from even sending disagreements to
for other patents in cross-licensing arrangements      arbitration.94 Mediation by “a skilled, experi-
with their competitors in order to ensure free-        enced mediator” or nonbinding arbitration
dom to operate. Additionally, given their ten-         “could help assure both parties that subsequent
dency to stockpile licenses under cross-licenses       royalty rates would be commercially reasonable,”
or otherwise, it becomes increasingly difficult to      Wethington suggested.95
define a basis for calculating a royalty—and a                The parties sometimes agree to substitute a
party insisting on a royalty may just find that the     range of royalty rates that would be subject to
company would prefer to do without a certain           future negotiation, depending on the type of
patent, or engineer around it.”88 Gary Weber,          product developed and its success in the market.
assistant vice president for research and director     But this approach is not always popular with uni-
of technology transfer at Pennsylvania State           versities. “In select areas where the invention is
University, said, “The ‘electronic’ companies,         anticipated and market rates are well established,
both software and hardware, maintain that things       it might not be objectionable to set royalty
are changing too fast for anything which has           ranges, but in most instances we believe this
been patented to be of any value to them. If you       approach is harmful,” wrote Wethington.96
had time to patent it, it must be obsolete.”89               To work around this problem, some univer-
                                                       sities and companies with longstanding ties have
Deferring the Royalty Issue                            relied on the strength of their relationships and
     Potential partners sometimes finesse the issue     on artfully constructed language.“Eighty percent
by agreeing to defer setting a royalty rate. “A lot    of the time, I think we get there,” said NC State’s
of companies, including some of the bigger ones,       Crowell, “but there still are problems often
are becoming more comfortable with deferring it        enough to have it register as a concern in my
until the invention is made so that we are not         book.”97 An example of the language sometimes
having to hold up the research process for some-       used by NC State follows:
thing that may never happen,” said MIT’s Hersey.90
No consensus exists, however, on mechanisms to               “Sponsor shall have an option to negotiate an
protect each side’s interests when the decision is     exclusive, royalty-bearing license on terms which are
deferred.“Experience from our membership indi-         based on the value of the technology, which are fair and
cates that few industries actually prefer pre-set      equitable, and which are based on standard industry
royalties,” wrote Kate Phillips, then vice president   practice. Royalty rate shall take into account the follow-

58 Working Together, Creating Knowledge
                                                           Negotiating Agreements

ing factors: (i) extent to which the innovative features   the use of the facilities or equipment it finances
covered by the patents must be combined with the IP        is subject to tax.103 The IRS guideline follows:
rights owned by the sponsor or others; (ii) scope of the
patents and degree of novelty; and (iii) the costs borne     SECTION 5. OPERATING GUIDELINES
by the parties in securing the patents.”98                   FOR RESEARCH AGREEMENTS
      But some companies just say “No” to the                .01 In general. If a research agreement is
idea of deferring the royalty-rate issue.“I believe              described in either section 5.02 or 5.03 of
that most commercial organizations will balk at                  this revenue procedure, the research agree-
the idea due to the significant unknown financial                  ment itself does not result in private busi-
risk associated with the approach,” wrote                        ness use.
Ribozyme’s Christoffersen. “In the case of a                 .02 Corporate-sponsored research. A research
biotechnology company, addition of the risk of                   agreement relating to property used for                  In some cases, fed-
an unknown royalty obligation to all the other                   basic research supported or sponsored by a                eral tax regulations
risks associated with biotechnology research                     sponsor is described in this section 5.02 if            make it impossible to
would probably make the collaboration a ‘non-                    any license or other use of resulting tech-
starter’.”99                                                     nology by the sponsor is permitted only                 set licensing royalties
                                                                 on the same terms as the recipient would               in the initial collabora-
Preserving Tax-Exempt Status                                     permit that use by any unrelated, non-                        tion agreement.
     In some cases, federal tax regulations make it              sponsoring party (that is, the sponsor must
impossible to set licensing royalties in the initial             pay a competitive price for its use), with
collaboration agreement. When the research is                    the price paid for that use determined at
performed in buildings or uses equipment that                    the time the license or other resulting
was financed by tax-exempt bonds—which is                         technology is available for use. Although
often the case in university research—the Internal               the recipient need not permit persons
Revenue Service (IRS) requires that the sponsor                  other than the sponsor to use any license
pay a competitive rate determined at the time                    or other resulting technology, the price
when the discovery “is available for use.”100 These              paid by the sponsor must be no less than
regulations “specifically prohibit the establishing               the price that would be paid by any non-
of a royalty rate or royalty range or royalty cap in             sponsoring party for those same rights.
a research agreement,” said Crowell. “So if you              .03 Cooperative research agreements. A research
have those kinds of bonds that you’re worried                    agreement relating to property used pur-
about, you literally can’t do it without putting                 suant to a joint industry-governmental
that tax status in jeopardy.”101                                 cooperative research arrangement is
     IRS procedure 97-14 “sets forth conditions                  described in this section 5.03 if:
under which a research agreement does not result                 (1) Multiple, unrelated sponsors agree to
in private business use under the Internal                           fund governmentally performed basic
Revenue Code of 1986.”102 A taxpayer’s gross                         research;
income does not include interest on state and                    (2) The research to be performed and the
local bonds, but does include interest on private                    manner in which it is to be performed
activity bonds. In addition, if more than 10 per-                    (for example, selection of the person-
cent of the proceeds of a public bond issue are                      nel to perform the research) is deter-
used for private, nongovernmental use, the bond                      mined by the qualified user;
qualifies as a private bond, and the income from                  (3) Title to any patent or other product
                                                                     incidentally resulting from the basic
                                                                     research lies exclusively with the qual-
                                                                     ified user; and
                                                                 (4) Sponsors are entitled to no more than
                                                                     a nonexclusive, royalty-free license to
                                                                     use the product of any of that research.104

                                                                                                             BUSINESS–HIGHER EDUCATION FORUM 59
                                          CHAPTER 4

     The IRS regulation was promulgated in
1997. It is designed to ensure that companies do        Recommendation:
not benefit from universities’ tax-exempt status         Collaboration partners should avoid engaging in contentious licensing negoti-
and that universities do not take advantage of that     ations during a collaboration negotiation, while preserving the ability of the
status to generate revenue. Changing the tax            university and its faculty to share in benefits from successes. Should the part-
status of these bonds would disrupt the invest-         ners agree to pre-set a commercialization royalty rate or range, the university
ment expectations of the bondholders and could          should be mindful of federal tax regulations governing commercialization terms
damage the credit rating of the university.105          for sponsored research taking place in buildings or using equipment funded
     It is unclear how aggressively the IRS will        by tax-exempt bonds.
enforce these relatively new regulations. It usually
takes some time for the agency to set up educa-
tional programs and involve district offices.106        BACKGROUND RIGHTS
Universities will be reluctant to push the bound-            Background rights are the licensing rights
aries of this regulation until there is some track     that a university provides to an industry partner
record of how it is being enforced.                    for “background intellectual property”—intellec-
Collaborations with information technology             tual property developed by the university using
firms may be particularly affected.These compa-         funds from other sponsors, including the federal
nies generally insist on nonexclusive, royalty-free    government. Background intellectual property
licenses at the outset. Even though identical terms    may already exist when the sponsored agreement
are available to all participants, the IRS still may   begins, but other researchers, students, or other
deem them unacceptable.                                corporate sponsors also can develop it separately
     Other opportunities for university-industry       as the collaboration proceeds.110 Companies seek
collaborations also could be at risk unless the IRS    rights to use these inventions to complete their
eases its requirements. “The major global busi-        intellectual property portfolios so that they have
nesses that we have would be much more prone           sufficient licensing rights to commercialize the
to work with academia on projects that have a          results of the sponsored research.
stronger commercial component than they do                   Requests for universities to provide back-
now,” said Frank Knoll of Dow Chemical Co.             ground rights began with consortia such as the
“This would really open the door to a lot more         Semiconductor Research Corporation, SRC/
product-related research that is very challenging      SEMATECH (a government-industry manufac-
and very interesting, which I think could be ben-      turing technology collaboration in the semicon-
eficial to many universities. It would open them        ductor industry), and the Electric Power
up to the marketplace and the actual product           Research Institute (EPRI).Their standard agree-
problems more than you see now.”107                    ments require that the university will license to
     The dilemma of tax-exempt status has cap-         the consortia any background rights deemed
tured the attention of corporate CEOs. “We             necessary on a nonexclusive basis.111 Today, indi-
need to be concerned about [this problem],”            vidual companies (particularly in the information
wrote Novartis’ Shonsey. “As a company, we             technology arena) increasingly seek background
have been trying to negotiate [royalty] caps—          rights for the research they sponsor.112, 113
which also apparently presents a problem and                 Universities have a number of problems with
could jeopardize the university tax-exempt             providing background rights. Most important is
status.”108 Ribozyme’s Christoffersen noted,           the effect on faculty members who are not part
“There is a problem with tax exempt bonds and          of the sponsored-research agreement. Because
it needs to be solved.”109                             most universities consider faculty to be co-
                                                       holders of intellectual property, universities
                                                       cannot unilaterally make one faculty member’s
                                                       work “background” to another sponsored-
                                                       research project. To do so would have a chilling
                                                       effect on professorial collegiality and on the will-

60 Working Together, Creating Knowledge
                                                                             Negotiating Agreements

ingness of faculty to work together.114 So central                           extremely time-consuming, and as a practical
is collegiality to the culture of academic freedom                           matter, out of reach for most universities, whose
that providing background rights can be a deal-                              technology-transfer offices are minimally staffed
breaker to many universities.115                                             to begin with,” observed the University of
     The University of Kentucky recently walked                              Kentucky’s Adams.121 The task becomes even
away from a deal with a large industrial sponsor                             more complex because background rights
that demanded not just access to three patents                               requests typically are made at the beginning of the
already held by the university but also rights to                            research program, long before anyone knows the
future inventions that had not yet been invented.                            results and the background rights implications.122
                                                                                                                                                             Universities have a
“These applications involved a variety of inven-                                   Identification of background intellectual
tors, a variety of funding sources, and were                                 property also has become more difficult because                                 number of problems
important to the various researchers’ on-going                               of the increasingly collaborative environment                                  with providing back-
and future research,” said Katherine Adams, asso-                            within the university and the mobility of faculty                               ground rights. Most
ciate general counsel of the university. “We ulti-                           members. “You have multiple authorship papers
mately concluded that we could not work with                                 now, four to six authors on a paper, and you have                             important is the effect
this potential sponsor.”116                                                  to go back five, six, seven years,” said Washington                              on faculty members
     “What the faculty have said is that it is                               University’s Cicero.“You may be dealing with 10                              who are not part of the
inequitable and unfair,” said MIT’s Hersey.“They                             to 15 different individuals who now have scat-
say in the very harshest terms [that] for the intel-                         tered throughout the university. Very often, we
lectual property of one faculty member to be                                 also have postdoctoral fellows and faculty mem-                                         agreement.
mortgaged for the benefit of another, or even for                             bers who are part of a patent at our university but
the benefit of the institution to get sponsored-                              now are at different institutions. Does the burden
research funding, is not the best and highest use                            fall upon me to contact the other institutions if I
of the background intellectual property.”117                                 want background rights, to get the consent of
Former AAU President Pings, who also is a                                    that faculty member?”123
former provost of the University of Southern                                       Agreements on background rights usually
California, said,“I wouldn’t want to be a provost                            include provisions that the parties offer a “good
going before a faculty trying to defend signing                              faith effort”124 or use “reasonable efforts to dis-
away rights of individual faculty members.”118                               close in the field of use”125 in order to identify
     In addition, providing background rights,                               potential background conflicts. These are legal
even to license technology at commercially rea-                              terms whose interpretation will require the
sonable rates, can complicate and even limit                                 involvement of legal counsel and could hold the
researchers’ ability to pursue lines of inquiry or                           university liable for any oversight.“The only way
the university’s ability to license the technology                           you should even begin down that path is to have
to another firm.119 This can affect the ability of                            a full-blown infringement opinion done looking
the university to attract future sponsored                                   at your entire portfolio within a certain area of
research and can dull patent incentives for start-                           technology,” said NC State’s Crowell. “And if
up companies to participate in regional eco-                                 anybody here has ever paid the cost to have an
nomic development plans.120                                                  infringement opinion done, you’re talking about
                                                                             a pretty scary proposition.”126
Patent Searches                                                                    For all these reasons, universities rarely agree
      Merely identifying intellectual property that                          to sign binding agreements on background
might be relevant is both time-consuming and                                 rights.127* “There is an obligation on the part of
expensive.“All of the proposed methods for scru-                             the university to try to know its wares and what
tinizing and including background technology are                             it is holding in a certain area and be prepared to

* A public midwestern university has recently experienced this firsthand.The university agreed to provide a research sponsor the right to negotiate
background rights for a reasonable royalty rate on a nonexclusive basis.The sponsor has since used this clause to prevent the university from
granting an exclusive license for pre-existing technology to a local start-up company.The university and the sponsor disagree on whether the
technology should be considered background technology, and they have not been able to resolve the issue after many months of discussion.

                                                                                                                                                BUSINESS–HIGHER EDUCATION FORUM 61
                                          CHAPTER 4

disclose this,” observed Pings. “But on the other     tial industry partners? University officials do not
hand, in general, industry should not expect uni-     agree on the answer. Tulane officials say no.
versities to sign formal, sweeping background         “[First], there is no assurance that those claims will
rights agreements.They’re probably going to find       issue as a patent in the form written, and second,
that this will not be done.”128                       it provides a hunting license to the work of other
      On the industry side, managers say that they    faculty,” said Tulane President Scott Cowen in a
appreciate the difficulties facing university offi-     recent memorandum.132 But other university offi-
cials and faculty, but they quickly become less       cials say they would consider at least reviewing
sympathetic when other university faculty assert      applications for patents that have been filed but
their rights to profit from the commercialization      have not yet been granted.“The university might
of company-funded research.“Background rights         be willing to take a look at pending patents, which
became important because companies would be           the company can’t know about,” said NC State’s
looking at a situation of unacceptable risk,” said    Crowell. “We may be able to identify university           Concern about the loss
David Peyton, director of technology policy at        efforts that might conceivably generate blocking            of potential collabora-
the National Association of Manufacturers.“They       patents, and then we can decide which rights we          tions, and a desire to be
would go into a project, put their people and         want to make available.”133
their money in, and at the end find this patent              The generic project agreement of the                 good, responsive part-
they didn’t know about that prevents them from        National Center for Manufacturing Sciences               ners to industry, have led
exercising the technologies they thought they         (NCMS) lets each participant decide if and how             many universities to do
were going to be able to exercise.”129                it will contribute background technology to a
      Until now, background rights rarely have                                                                      their best to provide
                                                      project. Participants are not obligated to license
become a major problem. But the inability of          background technology to other participants, but           background rights, but
universities to grant background rights may begin     they are required to make a good-faith effort to         clearly the administrative
to negatively affect collaborations. At a major       identify the existence of any background tech-
                                                                                                                       burden is heavy.
chemical company, some research managers may          nology they may possess.134
rethink their decision to fund research if they             MIT has implemented a specific back-
cannot be assured of obtaining background             ground rights checking procedure to search for
rights.130 As sponsored research and commercial-      potential conflicts; this procedure involves six
ization efforts become more intertwined, the          steps and seven decision points. MIT consults
level of uncertainty increases and companies may      each faculty member before entering into back-
become less enthusiastic about engaging in future     ground rights negotiations.The procedure is used
joint research efforts.                               at the beginning of the sponsored-research effort
                                                      and at well-defined intervals during the course of
Corporate Responsibility                              the research collaboration.135
     Much of the responsibility for addressing              MIT recognizes, however, that it cannot
this problem lies with the corporate partner that     guarantee it will find every related patent.“[There
desires to commercialize the research.                is] always some risk that a ‘surprise’ patent will be
Companies often need to perform a “freedom to         found later to which an industrial sponsor may
practice” assessment or to solicit a full-blown       require rights in order to practice intellectual
patent infringement opinion, which should             property resulting from work they funded,”
identify any potential blocking patents within        observed Lori Pressman, then assistant director of
the university. At Tulane University, officials will   MIT’s Technology Licensing Office.136 She also
discuss any patent rights that such a search by the   pointed out that universities hold only a small
company uncovers—provided these rights are            percentage of all the patents that might poten-
unlicensed at the time.131                            tially block a sponsor’s commercialization plans.
     Identifying possible intellectual property       Other university officials echoed this view. “In
conflicts that might result from ongoing university    over 99 percent of the cases, the university won’t
work is an even more complex issue. Should uni-       be the party that holds background technology,”
versities disclose pending patent claims to poten-    said the University of Kentucky’s Adams,“yet we

62 Working Together, Creating Knowledge
                                                         Negotiating Agreements

talk as if the university that does the work is          RESEARCH TOOLS
going to be the entire limiting factor.”137                   Scientific investigators need reliable tools to
      Concern about the loss of potential collabo-       help them perform their research. Although this
rations, and a desire to be good, responsive part-       definition could include objects such as micro-
ners to industry, have led many universities to do       scopes or magnetic resonance imaging machines,
their best to provide background rights, but clearly     in this context it means laboratory discoveries or
the administrative burden is heavy.“[It moves the        products that are useful in the course of con-
university] from proactively licensing unencum-          ducting additional scientific research. With the
bered intellectual property to correctly identifying     sophistication of modern science, research tools
that which needs to be held in reserve,” said MIT’s      can be highly complex entities that themselves
Pressman. “The continuous surveillance obliga-           require research to develop.An example is strains
tions are an administrative burden.”138                  of mice that are genetically predisposed to con-
      Of course, universities have other good rea-       tract specific forms of disease. Scientists then use
sons to track their intellectual property portfolios:    the mice to understand the disease process and to
   • Ensuring that the technology is licensed            aid in the search for treatment agents.
     appropriately.                                           The research tool itself is rarely a necessary
   • Better managing risk.                               component of the resulting product; for example,
   • Building a broader-based, interdisciplinary         researchers will hone the structure and properties
     research program.                                   of a new aircraft wing using a wind tunnel, but
   • Marketing to potential collaboration partners.      the wind tunnel is no longer needed once they
   • Instituting an organized, proactive program to      have designed the wing.
     license their technology. 139
                                                         Limiting Access to Research Tools
  Recommendation:                                             Access to publicly funded research tools is
  Companies have legitimate reasons for request-         becoming one of the most contentious areas of
  ing background rights to sponsored projects, and       university-industry research relationships. The
  as part of their due diligence they should assist      issue is whether universities will license these
  universities in locating potential conflicts.          research tools broadly or exclusively to one com-
  Universities have legitimate reasons for not pro-      pany, frequently a faculty start-up. This concern
  viding background rights, but they should make a       is not directly related to matters of university-
  strong effort to do so when appropriate and fea-       industry collaborations. The friction generated
  sible. Universities should consult closely with fac-   from this conflict, however, may sour the rela-
  ulty and confirm that all contractual obligations      tionship between companies that would like to
  can be met before signing binding agreements.          see these tools licensed broadly and their univer-
                                                         sity partners. Limiting access can also affect uni-
                                                         versities by impairing the ability of faculty to
                                                         conduct research.140
                                                              At the heart of the research-tool problem, of
                                                         course, is the fact that one person’s research tool
                                                         can be another person’s key strategic product.
                                                         Tool developers, which often later emerge as
                                                         biotechnology firms, claim that without exclu-
                                                         sive licenses, they cannot secure venture capital
                                                         funding, thus stifling innovation.

                                                                                                          BUSINESS–HIGHER EDUCATION FORUM 63
                                          CHAPTER 4

Requesting Reach-Through Royalties                      NIH Actions
      As recently as 20 years ago, academic                   NIH has been concerned for several years
researchers freely shared new research tools such       about the effect of research-tool licensing and
as laboratory reagents and even animal models of        royalty arrangements on the pace of fundamental
disease. But now, because universities and their        biomedical research. In December 1999, the
researchers have learned the value of patenting         agency issued a set of guidelines on research-tool
such discoveries—and because research tools can         access for universities that develop tools with the
be expensive to develop—users of research tools         help of federal funding. The guidelines discour-
often can expect to pay a significant amount for         aged patenting unless patent protection is neces-
their use. During the past few years, both indus-       sary to attract investment needed for full
try and university researchers have complained          development, argued against reach-through roy-
that in some cases, the cost is too high. In fact,      alties, and urged that universities license tools
sometimes the cost may even be indeterminable.          with few encumbrances and at reasonable fees.141
The owner of a research tool, whether a com-            But these guidelines did not have the force of law.
pany or a university, sometimes asks for royalties      One year later, Maria Freire, director of NIH’s
on any product that might eventually be devel-          Office of Technology Transfer, reported that
oped through use of the tool—a concept known            although NIH had made significant progress, sci-
as reach-through royalties. On occasion, universi-      entists still had problems accessing research tools,
ties have asked other universities for such down-       particularly in negotiations between academia
stream rights, even though they themselves would        and industry.142
balk at signing such a deal. In other cases, the dis-
coverers of a patented research tool hold onto it
for their own internal use, to give themselves a        NOTES
competitive advantage. Another significant con-            Ned Siegel, interview by Beth Starbuck, Calyx, Inc.
cern is universities’ exclusive licensing of publicly   Case Study Final Report, 7 September 2000, 25.
                                                          Theodore E.Tabor, remarks during Making
funded research tools to private companies,             Collaborations a Corporate Core Competency teleconfer-
which in turn license the tools to other private        ence, 15 October 1999, 23.
companies and universities, often with reach-           3
                                                          Bill Decker, e-mail to Mary Sue Coleman,
through royalties.                                      forwarded to Project Director, 2 August 2000.
      Companies that use a research tool under-           Randolph Guschl, remarks at meeting to review the
                                                        updated RCI interim report,Washington, DC,
standably object to reach-through royalties
                                                        30 August 2000, 25.
because the tool developer does not share the           5
                                                          Edward Pagani, presentation to Government-
financial risk in getting the product to market,         University-Industry Research Roundtable discussion,
and the contribution of the research tool may           Washington, DC, 17 December, 1999.
have been a small component of the entire prod-           John A. Schneider, conversation with Project
uct development process. Moreover, critics say the      Director, 14 July 2000.
                                                          W. Mark Crowell, remarks during Building an Effective
prospect of royalty-stacking—encumbering a              University Technology Transfer Team teleconference,
potential product such as a new drug with several       17 December 1999, 45.
reach-through royalty obligations—may lead              8
                                                          Emil Sarpa, interview by Beth Starbuck, Calyx, Inc.,
companies to abandon otherwise promising lines          Case Study Final Report, 7 September 2000, 26–27.
of research. But because tool developers are often        Ibid., 6.
                                                           James C. MacBain, interview with Beth Starbuck,
emerging biotechnology firms, they often have
                                                        Calyx, Inc., Case Study Final Report, 7 September
few, if any, other revenue-producing products on        2000, 6, and, conversation with Project Director,
the market.These firms argue that reach-through          28 September 2000.
royalties are an alternative to charging high           11
                                                           James Merz, letter to Ed Malloy, forwarded to Judy
upfront user fees or to restricting access.             Irwin, 21 July 2000.
                                                            Louis Tornatzky, Paul Waugaman, and Denis Gray,
                                                        Industry-University Technology Transfer: Models of
                                                        Alternative Practice, Policy, and Program (August 1999), 12.

64 Working Together, Creating Knowledge
                                                               Negotiating Agreements

   I.J. Petrick and M.M. Reischman,“The Inherent               31
                                                                  Karen Hersey, e-mail to Project Director,
Tensions of Industry-University Master Agreements,”            2 August 2000.
Proceedings of Technology Transfer Society Annual Meeting,     32
                                                                  Randolph Guschl, remarks at meeting to review
1995, as cited in Industry-University Technology Transfer:     the updated RCI interim report,Washington, DC,
Models of Alternative Practice, Policy, and Program, by        30 August 2000, 26.
Louis Tornatzky, Paul Waugaman, and Denis Gray                 33
                                                                  Edward Pagani, conversation with Project Director,
(August 1999), 12.                                             22 June 2000.
   Ted Cicero, remarks at meeting to review the                34
                                                                  John Schneider, remarks during Making Collaborations
updated RCI interim report, 30 August 2000, 9.                 a Corporate Core Competency teleconference,
   Council on Governmental Relations, letter to                15 October 1999, 49.
Project Director, 8 March 2000.                                35
                                                                  Ted Cicero, remarks at meeting to review the
   John Schneider, conversation with Project Director,         updated RCI interim report,Washington, DC,
14 July 2000.                                                  30 August 2000, 33–34
   Gene Allen, remarks at meeting to review the                36
                                                                  Nils Hasselmo, remarks at meeting to review the
updated RCI interim report, 30 August 2000, 5.                 updated RCI interim report,Washington, DC,
   Lynne U. Chronister, remarks at meeting to review           30 August 2000, 34.
the updated RCI interim report,Washington, DC,                 37
                                                                  Cornelius Pings, remarks at meeting to review the
30 August 2000, 8.                                             updated RCI interim report,Washington, DC,
   Ted Cicero, remarks at meeting to review the                30 August 2000, 32.
updated RCI interim report,Washington, DC,                     38
                                                                  Randolph Guschl, remarks at meeting to review
30 August 2000, 9–10.                                          the updated RCI interim report,Washington, DC,
   “Three Questions in Search of Answers,” Report of           30 August 2000, 32.
the President, 1998–1999, Massachusetts Institute of           39
                                                                  Ibid., 26.
Technology.                                                    40
                                                                  Richard Stoddard, remarks at meeting to review
   Louis Tornatzky, Paul Waugaman, and Denis Gray,             the updated RCI interim report,Washington, DC,
Industry-University Technology Transfer: Models of             30 August 2000, 26.
Alternative Practice, Policy, and Program (August 1999), 13.   41
                                                                  James Merz, letter to Rev. Ed Malloy, forwarded to
   Simplified and Standardized Model Agreements for             Judy Irwin, 21 July 2000.
University-Industry Cooperative Research, Government-          42
                                                                  John Schneider, remarks during Making Collaborations
University-Industry Research Roundtable and                    a Corporate Core Competency teleconference,
Industrial Research Roundtable, National Academy               15 October 1999, 56.
Press, 1988.                                                   43
                                                                  James Merz, letter to Rev. Ed Malloy, forwarded to
   Council on Governmental Relations, letter to                Judy Irwin, 21 July 2000.
Project Director, 8 March 2000.                                44
                                                                  Cornelius Pings, remarks at meeting to review the
   Carolyn Sanzone, remarks at meeting to review the           updated RCI interim report,Washington, DC,
updated RCI interim report,Washington, DC,                     30 August 2000, 25.
30 August 2000, 9.                                             45
                                                                  Gordon Rausser, unpublished, letter to the editor of
   W. Mark Crowell, remarks at Business–Higher                 The Atlantic Monthly, 19 May 2000.
Education Forum summer 1999 meeting, Long                      46
                                                                  Ralph Christoffersen, letter to Project Director,
Beach, CA, 19 June 1999.                                       15 July 2000.
   Karen Hersey, remarks at meeting to review the              47
                                                                  Ned Siegel, interview with Calyx, Inc.,
updated RCI interim report,Washington, DC,                     20 July 2000.
30 August 2000, 8.                                             48
                                                                  Council on Governmental Relations, letter to
   Edward Pagani, remarks during Building an Effective         Project Director, 1 August 2000.
University Technology Transfer Team teleconference,            49
                                                                  Charles Wethington, letter to Project Director,
17 December 1999, 51.                                          27 July 2000.
   John Schneider, remarks during Making Collaborations        50
                                                                  Katherine Adams, e-mail to Project Director,
a Corporate Core Competency teleconference,                    18 August 2000.
15 October 1999, 52.                                           51
                                                                  Eyal Press and Jennifer Washburn,“The Kept
   Gordon Rausser, presentation to Business–Higher             University,” The Atlantic Monthly (March 2000).
Education Forum, summer 1999 meeting, Long                     52
                                                                  Edward Pagani, presentation to Government-
Beach, CA.                                                     University-Industry Research Roundtable discussion,
   Theodore Tabor, remarks during Making Collaborations        Washington, DC, 17 December 1999.
a Corporate Core Competency teleconference,                    53
                                                                  Karen Hersey, remarks at meeting to review the
15 October 1999, 48.                                           updated RCI interim report,Washington, DC, 30
                                                               August 2000, 28.
                                                                  Brian Greene, The Elegant Universe (W.W. Norton
                                                               and Company, 1999), 325–329.

                                                                                                                   BUSINESS–HIGHER EDUCATION FORUM 65
                                          CHAPTER 4

55                                                         80
   Council on Governmental Relations, letter to               W. Mark Crowell, remarks at meeting to review the
Project Director, 1 August 2000.                           updated RCI interim report,Washington, DC,
   Charles Goldman, letter to Judy Irwin,                  30 August 2000, 15–16.
31 July 2000.                                                 Preamble to the Columbia University Copyright
   Council on Governmental Relations, letter to            Policy. The full policy is available at
Project Director, 1 August 2000.                           http://www.columbia.edu/cu/provost/docs/
   Russ Lea, e-mail to Project Director,                   copyright.html.
21 September 2000.                                            Al Poskanzer, presentation at Association of
   Charles A. Goldman and T.Williams, Paying for           University Technology Managers 1999 annual meet-
University Research Facilities and Administration          ing,Workshop A-2, San Diego, CA, 4 March 1999.
(Washington, DC: RAND, July 2000), 23.                        Charles Wethington, letter to Project Director,
   Ibid., 8.                                               27 July 2000.
61                                                         84
   Ted Cicero, remarks at meeting to review the               Eyal Press and Jennifer Washburn,“The Kept
updated RCI interim report,Washington, DC,                 University,” The Atlantic Monthly (March 2000).
30 August 2000, 46.                                           Carolyn Sanzone, e-mail to Project Director,
   Russ Lea, e-mail to Project Director,                   3 October 2000.
21 September 2000.                                            Joyce Brinton, e-mail to Project Director,
   Russ Lea, e-mail to Project Director,                   2 October 2000.
19 September 2000.                                            W. Mark Crowell, e-mail to Project Director,
   Karen Hersey, remarks at meeting to review the          2 October 2000.
updated RCI interim report,Washington, DC,                    Ibid.
30 August 2000, 51.                                           Gary Weber, e-mail to Project Director,
   Ed Shonsey, letter to Project Director, 31 July 2000.   2 October 2000.
66                                                         90
   Edward Pagani, presentation to Government-                 Karen Hersey, remarks during Building an Effective
University-Industry Research Roundtable,                   University Technology Transfer Team teleconference,
Washington, DC, 17 December 1999.                          17 December 1999, 46.
67                                                         91
   Ted Cicero, remarks at meeting to review the               Council on Governmental Relations, letter to
updated RCI interim report,Washington, DC,                 Project Director, 1 August 2000.
30 August 2000, 48.                                           Charles Wethington, letter to Project Director,
   Nils Hasselmo, remarks at meeting to review the          27 July 2000.
updated RCI interim report,Washington, DC,                    Joyce Brinton, remarks during Building an Effective
30 August 2000, 49.                                        University Technology Transfer Team teleconference,
   Randolph Guschl, remarks at meeting to review           17 December 1999, 59.
the updated RCI interim report,Washington, DC,                Terry Young, remarks during Building an Effective
30 August 2000, 47.                                        University Technology Transfer Team teleconference,
   Brian Harvey, e-mail to Project Director,               17 December 1999, 58.
10 August 2000.                                               Charles Wethington, letter to Project Director,
   Ibid.                                                   27 July 2000.
72                                                         96
   Russ Lea, e-mail to Project Director,                      Ibid.
19 September 2000.                                            W. Mark Crowell, remarks during Building an Effective
   Council on Governmental Relations, letter to            University Technology Transfer Team teleconference,
Project Director, 1 August 2000.                           17 December 1999, 56.
74                                                         98
   Case Study Final Report, footnote 40,                      W. Mark Crowell, remarks at Business–Higher
7 September 2000, 9.                                       Education Forum summer 1999 meeting, Long
   Ted Cicero, interview by Beth Starbuck, Calyx,          Beach, CA, 19 June 1999.
Inc., Case Study Final Report, 7 September 2000, 7.           Ralph Christoffersen, letter to Project Director,
   Project Director meeting with Council on                15 July 2000.
Governmental Relations Technology Transfer and                 IRS Revenue Procedure 97-14, Tax Exempt Bonds;
Research Ethics Committee,Washington, DC,                  Private Activity Bonds, 1997-5 I.R.B. 20,
16 March 1999.                                             3 February 1997, Sect 1.
77                                                         101
   Edward Pagani, remarks at meeting to review the               .
                                                               W Mark Crowell, remarks during Building an Effective
updated RCI interim report,Washington, DC,                 University Technology Transfer Team teleconference,
30 August 2000, 14.                                        17 December 1999, 50.
78                                                         102
   Frank Knoll, Case Study Final Report, footnote 45,          IRS Revenue Procedure 97-14, Tax Exempt Bonds;
7 September 2000, 11.                                      Private Activity Bonds, 1997-5 I.R.B. 20,
   Karen Hersey, remarks at meeting to review the          3 February 1997, Sect 1.
updated RCI interim report,Washington, DC,                     Ibid., Sect 2.01.
30 August 2000, 14–15.

66 Working Together, Creating Knowledge
                                                            Negotiating Agreements

104                                                         125
    Ibid., Sect 5.                                              Lynne Chronister, remarks at meeting to review
    Karen Hersey and Cornelius Pings, remarks at            the updated RCI interim report,Washington, DC,
meeting to review the updated RCI interim report,           30 August 2000, 18.
Washington, DC, 30 August 2000, 44.                             W. Mark Crowell, remarks at meeting to review
    Karen Hersey, remarks at meeting to review the          the updated RCI interim report,Washington, DC,
updated RCI interim report,Washington, DC,                  30 August 2000, 24.
30 August 2000, 44.                                             Project Director, meeting with Council on
    Frank J. Knoll, remarks at meeting to review the        Governmental Relations Technology Transfer and
updated RCI interim report,Washington, DC,                  Research Ethics Committee,Washington, DC,
30 August 2000, 43.                                         16 March 1999.
108                                                         128
    Ed Shonsey, letter to Project Director, 31 July 2000.       Cornelius Pings, remarks at meeting to review the
    Ralph Christoffersen, conversation with Project         updated RCI interim report,Washington, DC,
Director, 10 August 2000.                                   30 August 2000, 20.
110                                                         129
    Project Director, meeting with Council on                   David Peyton, remarks at meeting to review the
Governmental Relations Technology Transfer and              updated RCI interim report,Washington, DC,
Research Ethics Committee,Washington, DC,                   30 August 2000, 17.
16 March 1999.                                                  Theodore Tabor, remarks during Making Collaborations
    Karen Hersey, conversation with report editor,          a Corporate Core Competency teleconference,
30 March 2001.                                              15 October 1999, 71.
112                                                         131
    Karen Hersey, presentation to Business–Higher               Memo to Judy Irwin, from the office of Scott
Education Forum summer 1999 meeting, Long                   Cowen, 8 August 2000.
Beach, CA, 19 June 1999.                                        Ibid.
113                                                         133
    John Schneider, conversation with Project Director,           .
                                                                W Mark Crowell, remarks during Building an Effective
14 July 2000.                                               University Technology Transfer Team teleconference,
    Project Director, meeting with Council on               17 December 1999, 62.
Governmental Relations Technology Transfer and                  Gene Allen and Rick Jarman, Collaborative R&D:
Research Ethics Committee,Washington, DC,                   Manufacturing’s New Tool (New York, NY: John Wiley
16 March 1999.                                              and Sons, 1999), 195.
115                                                         135
    Cornelius Pings, remarks at Business–Higher                 Ibid.
Education Forum summer 2000 meeting, Mystic, CT,                Lori Pressman, presentation at the Association of
29 June 2000.                                               University Technology Managers convention, work-
    Katherine Adams, e-mail to Project Director,            shop B-5, San Diego, CA, 5 March 1999.
14 December 2000.                                               Katherine Adams, remarks at meeting to review
    Karen Hersey, remarks at meeting to review the          the updated RCI interim report,Washington, DC,
updated RCI interim report,Washington, DC,                  30 August 2000, 24.
30 August 2000, 22.                                             Lori Pressman, presentation at the Association of
    Cornelius Pings, remarks at meeting to review the       University Technology Managers convention, work-
updated RCI interim report,Washington, DC,                  shop B-5, San Diego, CA, 5 March 1999.
30 August 2000, 17.                                             W. Mark Crowell, conversation with Project
    Charles Wethington, letter to Project Director,         Director, 15 August 2000.
27 July 2000.                                                   Project Director, meeting with Council on
    Lori Pressman, Massachusetts Institute of               Governmental Relations Technology Transfer and
Technology, presentation at the Association of              Research Ethics Committee,Washington, DC,
University Technology Managers convention, work-            16 March 1999.
shop B-5, San Diego, CA, 5 March 1999.                          Federal Register Notice 64 FR 72090,
    Katherine Adams, e-mail to Project Director,            http://www.nih.gov/od/ott/RTguide_final.htm.
 August 2000.                                                   Maria Freire, presentation to NIH Advisory
    Charles Wethington, letter to Project Director,         Committee to the Director, 7 December 2000.
27 July 2000.
    Ted Cicero, remarks at meeting to review the
updated RCI interim report,Washington, DC,
30 August 2000, 19.
    Lori Pressman , presentation at the Association of
University Technology Managers convention, work-
shop B-5, San Diego, CA, 5 March 1999.

                                                                                                                 BUSINESS–HIGHER EDUCATION FORUM 67

Biolex Inc.:
What a Technology-Transfer Office Can––and
W                 hen plant molecular biologist Anne-Marie
                  Stomp wanted to launch North Carolina State
University’s first biotechnology spinoff company, the univer-
                                                                              Duckweed has other characteristics that make it sci-
                                                                      entifically and commercially enticing. Similar to yeast or bac-
                                                                      teria, it reproduces swiftly and clonally: Mature plants bud off
sity’s technology-transfer staff did “really a terrific job” for      tiny daughter disks that are genetically exact copies, dou-
her. They were “extraordinarily encouraging,” she recalls.            bling the size of a duckweed mat in two days or less. It has
They offered advice, suggested outside contacts, opened               an exceptionally high protein content, offering potential as a
doors, and best of all, “those guys will always make time for         biological factory for producing medicinal or industrial pro-
you. I could sit down and say, ‘This is what I’m wondering            teins. Some municipal water systems already use duck-
about; am I on the right track?’ You can use them as a                weed for tertiary water treatment—removing phosphates
sounding board. That’s a fantastic resource to have.”                 and nitrogen from partially treated wastewater—raising the
       But Stomp—who launched her company, Biolex Inc.,               prospect of someday combining pollution cleanup with the
in 1998—cautions that a university technology-transfer office         manufacture of high-value proteins, and transforming waste-
can do only so much.                                                  water into a production asset instead of a problem.
       “Their mandate—and I think correctly so—is not actu-                   Stomp, then an associate professor at NC State’s
ally to spin you off,” she says. “That’s not their job. That last     College of Natural Resources, found duckweed because she
step, where you take your little backpack and your little             had gone looking for something very much like it. In the early
machete and you go out into the corporate jungle and start            1990s, she was familiar with research that studied the use of
hacking your way, is a solo trip.”                                    trees for water cleanup by discharging wastewater into forest
       So far at least, Stomp’s solo trip into the corporate          plots, but she believed that an aquatic plant might be better
world is on course. Two years and a few months after it               suited to the job. Certainly, a small, fast-growing plant would
received its first venture capital infusion, Biolex is still in the   be better suited to laboratory research than a stately, slowly
technology development phase, she says. With 37 employ-               maturing tree. “Trying to do genetic engineering and biotech-
ees, it is still living on invested capital—it has received about     nology on trees is very similar to doing genetic research and
$9 million in venture funds—not on earnings. But unlike               biotechnology on whales,” she observes.
most biotechnology start-ups of its age, it already has some                  As she learned about duckweed’s properties, Stomp
paying customers. And “we are deep into conversations with            realized that only one element was needed to turn it into a
a number of major corporations that are very interested in            versatile biotechnology platform—the ability to genetically
our technology.”                                                      engineer it to produce a desired protein or to help
       Biolex’s technology is based on processes that Stomp           researchers identify the protein that was encoded by an
discovered for inserting foreign genes into the smallest flow-        unfamiliar gene. “That was the critical missing link on the
ering plant in the world: lemna, commonly known as duck-              technology that could launch the whole thing,” she says.
weed. Duckweed is a disk-shaped aquatic plant, ranging                Supported by a series of grants from the Environmental
from less than one-fifth to about one-quarter of an inch              Protection Agency, the U.S. Department of Agriculture, and
across, that forms “a beautiful, jade green mat” on water             the National Science Foundation, Stomp set out to develop
surfaces such as ponds and water traps on golf courses. (It           such a method, succeeded, and in 1995 filed for a patent.
is not to be confused with the algae that form pond scum on           The patent was issued in March 2000. NC State now owns
stagnant water. “Nobody calls my plants ‘pond scum,’”                 it, and Biolex has an exclusive license.
Stomp says with a laugh. “Those are fighting words.”)

68 Working Together, Creating Knowledge
       “That idea, that was a three-point shot,” Stomp says.              Charles Moreland, NC State’s vice chancellor for
“That was a keeper, and I knew that I had one.” In science,        research and graduate studies, helped, too. For example, at
she notes, “if you’re really creative, you throw the ball a lot.   the contract-closing for Stomp’s initial round of venture cap-
You’ve got to just be gutsy enough to throw a lot, to get          ital funding, one of her investors suddenly wanted to know
those ones that really hum.”                                       what the indirect cost rate would be on a sponsored-
       Now it was time for Stomp to become a high-tech             research agreement that Stomp planned to work out with
entrepreneur. She had worked with NC State’s technology-           her former lab. She telephoned Moreland. He thought for a
transfer office in the past; she not only had industry funding     moment, and gave her the rate. Stomp recognizes that her
for her earlier forestry research but also had filed several       relationship with the technology-transfer office helped speed
patents on forest pine genetic engineering. So she turned to       up the process. “It can take months to negotiate these
her friends in the technology-transfer office again.               things through the bureaucracy,” she says.
       “They were extraordinarily encouraging,” she says.                 Moreland also quickly agreed with Stomp’s sugges-
“And I had many productive discussions with them because,          tion that she take a leave of absence from the university to
again, as an academic, what did I know about starting a            avoid any appearance of conflict of interest, even though
company?”                                                          there was no precedent for that at NC State. “Charlie is will-
       For the most part, however, NC State officials could        ing to make a decision,” she says. “Some people in the
only listen, advise, make some contacts, and cheer her on.         system won’t, but Charlie will. And that’s a terrific resource.”
Too many academics don’t realize that there’s a limit to what             Biolex started actual operations after receiving its first
a university can do for them, Stomp says.                          capital infusion, $1 million, in October 1998. A year later, the
       “Most academics have a childlike relationship with          company moved from Raleigh, North Carolina, to the small
their administrators. They look to the administrators as if the    town of Pittsboro, about 45 minutes from Research Triangle
administrators are parents and they are but baby birds, so         Park. (Stomp, who grew up in a small town in Connecticut,
they look for the administration to feed them,” she says. But      also is interested in bringing high-tech industry to rural
she warns, “If you interact with the administration that way,      areas.)
the administration really can’t help you, because their job is            Although Stomp is the company’s founder, she didn’t
not to feed you but to facilitate for you.”                        claim the titles of chairman or CEO. Instead, she’s listed as
       Stomp incorporated her company in 1997 and spent            vice president of research and development. She’s a scien-
the next year planning its structure, mapping out its              tist, she explains, not a business manager with lots of expe-
finances, and trolling for venture capital support. “I did lots    rience in running a company.
and lots of listening to people in the private sector, and if it          She seems to have the right instincts, though. “I’m
made sense to me, I gave it a try.”                                always thinking, OK, now we’ve made this technological
       Along the way, NC State was, in fact, able to provide       advance, how do I spin it, package it? Is there a need in the
some tangible support: At the urging of Larry Tombaugh,            marketplace for this kind of technology, and can I find a part-
dean of the College of Natural Resources, the college’s            ner to start making this pull its weight?”
N.C. Forestry Foundation invested $25,000 in Biolex—                      Stomp’s professional insights will ring true to many
Stomp’s very first capital commitment. That’s a small              researchers: “You don’t have to be named the CEO to be
number, but “it really helped. If you have a dollar, you can       the power broker.”
leverage it, you know?”

                                                                                                                                 BUSINESS–HIGHER EDUCATION FORUM 69
        t universities, the success of research collabora-
tions with industry sponsors depends most of all on the
interest and enthusiasm that faculty scientists bring to
the joint research effort. But university administrations
can promote collaborations by motivating their faculties
to take part and by creating a customer-friendly
environment for would-be corporate partners.
University Best Practices: Building a Research
Collaboration Team

ORGANIZING FOR SUCCESS                                  compliance with federal policies and regulations.2
      “There needs to be a total . . . institutional    The sponsored-programs office also usually
strategy for industry partnerships, not the piece-      negotiates the terms of a collaboration agree-
meal approach that is currently being done on a         ment, with assistance from university counsel.
department and college basis,” said an industry              Research administrators traditionally have
official interviewed as part of this study.“This is a    helped faculty members identify funding oppor-
problem . . . at many large universities.”1 In other    tunities and develop proposals. They also run
words, universities must provide the organiza-          interference for faculty to ensure that research
tional support to attract, negotiate, and carry out     projects meet federal obligations. As a result, the
research collaborations with industry—and the           typical sponsored-programs office has earned a
various parts of their administrative structures        reputation for knowing the expertise of univer-
must work together smoothly rather than seizing         sity faculty and is becoming more involved in
up in bureaucracy.                                      developing internal and external cooperative
      The administrative components of a success-       arrangements.3
ful research partnership program go by different             The negotiation of licensing terms is usually
names on different campuses, and smaller univer-        not the responsibility of the sponsored-programs
sities sometimes combine the diverse duties             office. Except at smaller universities, the
involved. But these components accomplish the           technology-transfer office usually handles the
same missions wherever and however they                 license negotiations.4
appear. The key offices (and functions) of effec-
tive collaborations are:                                Office of Technology Transfer or Office of
   • Office of Sponsored Programs or Office of            Technology Licensing
     Research Administration––establishes and                The technology-transfer office manages the
     manages collaborations.                            activities that occur at the end of a collaborative
   • Office of Technology Transfer or Office of           effort. This office decides whether and how
     Technology Licensing––decides when to              patents will be filed on the new technology and,
     seek patents and when to negotiate patent-         with assistance from university counsel, negoti-
     licensing agreements.                              ates the terms of a licensing agreement. As a
   • Office of Development––coordinates univer-          result, the technology-transfer office is best
     sity fund raising.                                 known for helping faculty become wealthy—or
   • Office of Corporate Relations––oversees             for telling them they will not. “It’s very difficult
     management of the university’s relations           to explain to faculty members that their ideas
     with industry.                                     aren’t commercially viable,” observed Ted Cicero,
                                                        vice chancellor for research at Washington
Office of Sponsored Programs or Office of                 University in St. Louis.5
Research Administration                                      As a result of its duty to select companies
     Within the university setting, the sponsored-      that will license university technologies, the
programs office coordinates the upfront activities       technology-transfer office has direct, frequent
required to establish collaborations as well as tasks   contact with industry. Although a step removed
related to their management. Responsibilities           from the actual research, this office is familiar
include obtaining and overseeing external               with the expertise of the university faculty and
research funding, developing collaborative ven-         tracks potential industrial research opportunities.
tures with other organizations, and ensuring            It plays a central role in support of university

                                                                                                         BUSINESS–HIGHER EDUCATION FORUM 71
                                                 CHAPTER 5

researchers. Despite the already-supportive role                          Office of Development
this office plays, faculty members often would                                   The Office of Development is responsible
like to see the technology-transfer office adopt                           for university fund raising. It solicits gifts from
an even more service-oriented focus. Some                                 corporations and foundations, runs major fund-
researchers believe that this office makes it diffi-                        raising campaigns, and solicits donations from
cult for them to commercialize their work, lead-                          alumni. In recent years, as corporations have
ing them to evade university regulations and                              become more selective in their philanthropy,
market their discoveries on their own.                                    development offices have tried to identify
      In terms of revenue, perspectives vary                              common university-industry priorities when
depending on the party involved. University                               they seek contributions.Technology development
presidents frequently want to know how much                               is high on this list, and development offices have                          “Much can be done
revenue the office is generating for the university.                       become more involved in university-industry
                                                                                                                                                   within large influential
Faculty inventors, on the other hand, want to                             research collaborations.
know how much revenue the office is generating                                   “Where a natural match between an institu-                      units without the involve-
for them. And some university faculty members                             tion’s research strengths and corporate priorities                      ment of the [university]
want to know why the university is even pursu-                            can be found, many opportunities exist to gain
ing revenue at all for its academic work.                                 corporate support,” said Carolyn Sanzone, assistant
      Issues such as service to the university and                        vice chancellor for strategic technology alliances                        Correspondingly, the
revenue generation are not looked upon lightly                            of the University of Massachusetts. “The corpo-                        best intentions of presi-
by technology-transfer offices. But these offices                           rate agenda for support to educational institutions                        dents can easily be
usually are very busy and often understaffed, and                         has moved further away from personal interests
staff members do not always possess sufficient                             and affiliations of CEOs and is more likely to be                       undone—particularly in
expertise to deal with the myriad issues that arise.                      managed within the overall corporate structure.”7                     terms of explicit or infor-
“Well-staffed offices generally have one full-time-                                                                                              mal reward systems—at
equivalent position for every $15 million to $25                          Office of Corporate Relations
million of research expenditures,” wrote Louis                                                                                                             the unit level.”
                                                                                As university development offices have
Tornatzky, senior fellow, Southern Technology                             adapted to this new reality, many universities cre-
Council. “Professional staff will usually have                            ated an Office of Corporate Relations to manage                        –Louis Tornatzky, Southern
advanced degrees in a scientific or engineering                            the university’s relationships with industry. At
                                                                                                                                                       Technology Council
discipline and comparable degrees and/or expe-                            some universities—such as Pennsylvania State
rience in business or law.”6 Offices that work                             University, Ohio State University, the Georgia
with faculty entrepreneurs also need staff mem-                           Institute of Technology, and the Massachusetts
bers who are experienced in launching a busi-                             Institute of Technology—it is called the Industrial
ness, perhaps including an individual who has                             Research Relations office.* The corporate-
been involved in a successful technology start-up                         relations office also serves as an advance team for
venture. In addition, a successful technology-                            new relationships and sometimes matches compa-
transfer office requires a significant commitment                           nies with faculty experts. But its role is so new
of resources. Tornatzky suggested that state gov-                         that it does not exist on many university
ernments provide up to five years of financial                              campuses.
support in order to build university technology-
transfer capacity.

*This report will discuss the role of corporate-relations offices in encouraging research collaborations, even though they do not exist at all
universities.Where they do not, the reader should assume the report is referring to the elements of the development offices that have adopted
these responsibilities.

72 Working Together, Creating Knowledge
                                                       University Best Practices: Building a Research Collaboration Team

Administration                                         plants a portion of their university salary, and the
     University administration officials must rein-     amount saved goes to their academic department.
force the efforts of these offices.Those most fre-      Students working on a sponsored-research effort
quently involved in research issues are the vice       generally are considered university employees, but
president for research, deans, department chairs,      they receive lower pay and benefits than a regu-
and their staffs.“Much can be done within large        lar, full-time employee.All, however, can share in
influential units without the involvement of the        licensing revenue should their name be cited on
[university] president,” observed Tornatzky.           a patent or copyright.
“Correspondingly, the best intentions of presi-              Industry collaborations offer researchers new
dents can easily be undone—particularly in terms       funding for their labs and varied research endeav-
of explicit or informal reward systems—at the          ors.12 Researchers who pursue such projects usu-
                                                       ally are interested both in the fundamental                  University researchers
unit level.”9
     Collectively, these university officials are       science of their disciplines and in how to use that         operate as independent
responsible for establishing and implementing          new knowledge. They tend to be skilled at the               contractors in the selec-
university and departmental research policies,         networking and relationship-building necessary
                                                                                                                  tion and accomplishment
allocating resources, and coordinating with other      to find potential partners.
entities on campus. Deans and department chairs              “Many of our research collaborations                  of their research efforts.
often operate by themselves in smaller universities    develop in more ad hoc or informal ways,” wrote             As a result, establishing
and wield considerable influence in larger uni-         Bill Decker, associate vice president for research at
versities. Their positions often give them access      the University of Iowa. “We would not want to
to senior corporate research officials, and their       interfere with that.”13 Lynne Chronister, director          research collaborations
knowledge of the research strengths of the uni-        of sponsored projects of the University of Utah,              requires attracting the
versity, and ability to understand corporate           observed,“We’re very successful with university-
                                                                                                                  interest and involvement
research priorities, enable them to identify fruit-    industry relationships and have almost zero cen-
                                                       tral coordination of any of that . . .And so I think      of individual faculty mem-
ful areas for collaboration. They are well posi-
tioned to coordinate the efforts of the faculty, the   what we have here is something that is very indi-          bers. Neither partner can
sponsored-programs office, the technology-              vidually based.There’s a very strong culture here            sustain a collaboration
transfer office, and the corporate-relations office      and very good policies that promote it, but it’s
                                                       really up to the individual faculty, not even the            without this foundation.
in support of research relationships with industry.
                                                       deans and chairs.”14
                                                             Many faculty members who are most effec-
MOTIVATING FACULTY                                     tive at collaborating are already oversubscribed, so
      University researchers operate as indepen-       encouraging them to do more will probably not
dent contractors in the selection and accomplish-      greatly increase the number of university-industry
ment of their research efforts. As a result, estab-    partnerships.15 Generating and sustaining the
lishing university-industry research collaborations    interest of those who have not yet collaborated
requires attracting the interest and involvement       extensively with industry is the challenge for uni-
of individual faculty members. Neither partner         versity officials.“We would like to engage in more
can sustain a collaboration without this founda-       research collaborations,” wrote the president of a
tion.                                                  private,West Coast university.“The limiting factor
      Faculty members’ level of independence also      is the relatively small number of faculty members
depends on the manner in which they are paid.          interested in attracting industrial sponsors for their
Faculty who are in a research-track position often     research projects.”16
do not draw a university salary. If they do not              Motivating and helping researchers locate
attract outside research funding, such as federal      potential collaboration partners requires a sophis-
grants, they will not get paid.10 Faculty who are      ticated understanding not only of how university
in a tenure-track position draw a university salary,   researchers operate but also of individual
and outside research revenue usually does not          researchers’ focus areas, and of the companies that
supplement their base salary.11 Instead, it sup-       share their research interests. When technology-

                                                                                                          BUSINESS–HIGHER EDUCATION FORUM 73
                                          CHAPTER 5

transfer, sponsored-programs, or corporate-             ects that they began while pursuing their degrees.
relations officials are knowledgeable about faculty            But sponsored research also may pose risks.
research interests, they can play a key role in pre-    Universities should not divert graduate students
screening companies with which faculty might            toward efforts that will not advance their educa-
wish to collaborate.17                                  tion or their thesis research. If students’ work is
      The University of Massachusetts Office of          hemmed in by corporate confidentiality require-
Strategic Technology Alliances looks at faculty as      ments, they may find themselves barred from pre-
clients and goes out of its way to assist them.18 At    senting their work at scientific meetings—or,
Purdue, “we consider our office to be a service          even worse, unable to publish a Ph.D. thesis.
organization,” said John Schneider, assistant vice            University officials and researchers must
president for industry research.“We want to help        make clear to industry research partners that
our faculty through the university’s bureaucracy        graduate students, and sometimes undergraduates,
and facilitate them in developing relationships         who work on industry-sponsored projects are not
with industry. We want them to succeed and to           university employees—even though company-
make it as easy as possible.”19                         funded fellowships may be supporting their
      Once initial interest is generated, the next      research.These young men and women are, first
challenge      is     maintaining     it. George        of all, students, and the university is responsible
Moellenbrock, director of corporate and founda-         for ensuring that their interests are not damaged
tion relations at Pennsylvania State University,        because of participation in sponsored research.
observed that,“It’s not difficult to get them [fac-
ulty] to the table . . . The tricky part is getting
them to keep coming back to the table, [partic-         MARKETING THE UNIVERSITY
ularly when] not everything you put out in front             Most collaboration partners have worked
of a company lands somewhere and moves for-             together before.All of the major partnerships at a
ward.”20 To overcome this, an East-Coast public         private, East-Coast university and 80 to 90 per-
university has instituted a series of roundtables       cent of nonfederal sponsored projects at a public
between research faculty and corporate research         Midwestern university are with existing partners.
officials. At these meetings, the participants can       At a private, West-Coast university, only about
informally discuss common research interests.           one-third of new collaborations are with prior
      Follow-up to these initial informal sessions is   partners, but prior partners account for almost
important. “Faculty members have a lot of other         two-thirds of sponsored research there.22 Thus,
things on their plate, and you need to almost make      finding new partners may be a promising tactic
it happen for them in many ways when these rela-        for universities that want to increase their indus-
tionships start to develop. So we try to jumpstart      try collaborations.
new opportunities through aggressive marketing               Although technology-transfer and spon-
and corporate contacts,” said Sanzone.21                sored-programs offices can promote new collab-
                                                        orations, a corporate-relations office can be
                                                        particularly well suited for this task. The
PROTECTING STUDENTS                                     corporate-relations office is generally more out-
     University-industry collaborations offer           ward oriented, usually has high-level connections,
attractive opportunities to graduate students           and is experienced in marketing the strengths of
working toward master’s or doctoral degrees in          the university.“[Universities] should do a critical
university laboratories. An increasing proportion       self-analysis to identify the specific niche
of students now move on to careers in private           strengths your institution has for the corporate
industry, and sponsored research can give them a        sector in the areas of workforce development,
better understanding of the private-sector envi-        workforce education, and technology develop-
ronment, help them make contacts that might lead        ment,” wrote Sanzone. Local companies are the
to job offers, and perhaps even enable them to          best initial targets, simply because they are nearby.
work in corporate laboratories on promising proj-       But national corporations can be good prospects,

74 Working Together, Creating Knowledge
                                                       University Best Practices: Building a Research Collaboration Team

too, because they share the same concerns.             Berkeley/Novartis agreement resulted from the
“Think locally.Act globally,” Sanzone wrote.23         university staking out its strategic advantage,
      Some industry sectors are more open to col-      taking the central position in the bargaining
laborations than others. Life sciences companies       process, and inverting the typical protocol . . .The
spend a high percentage of their research budgets      research agreement was structured by Berkeley,
on campus. Electronics and computer firms are           and the corporate candidates were asked to com-
also heavy users of university research—particu-       pete among each other to meet its conditions.”28
larly smaller companies. But chemicals and mate-
rials companies tend to spend less than 5 percent
of their research budgets in universities.They try     MANAGEMENT AND SUPPORT
to develop work in house after culling good ideas      ASSISTANCE
from universities.24                                         Successful research collaborations require
      The president of a university can play a con-    myriad support activities above and beyond the             Almost every case study
structive role in fostering greater numbers of col-    work of the researcher.These include negotiating           subject contacted for this
laborations; however, he or she must be well           the contract, providing administrative and finan-          report identified communi-
informed. Industry heads usually know all ele-         cial management assistance, and offering intellec-
                                                                                                                 cation as the most critical
ments of the existing relationship between the         tual property advice. “There needs to be
organizations, and they usually expect university      collaboration ‘teaming,’ using skilled people who           management issue in a
presidents to be equally familiar with the totality    bring their expertise to the enterprise,” said Karen                   collaboration.
of their interactions.25                               Hersey, senior intellectual property counsel at the
      It is not necessary to secure full support for   Massachusetts Institute of Technology. “The
a research initiative from one corporate sponsor.      administrators ‘facilitate’ . . . providing the hands-
Universities can leverage corporate support with       on experience to get the research collaboration
public funding, alumni contributions, or founda-       buttoned down.”29
tion support.They also can use internal resources,           But bureaucratic delays are a deal-killer.
where available, to seed initiatives.The goal is to    North Carolina State University has taken steps
offer the company a winning scenario, not a risky      to coordinate and, where possible, streamline its
investment. As the relationship grows, it can be       relations with industry partners. Charles
leveraged for other contributions, including non-      Moreland, vice chancellor for research and grad-
monetary support. Proposing a well-thought-out         uate studies, has a firm rule: A company should
plan, and providing specific ways in which the          only have to make one call to Moreland’s office
company can work with the institution, can be an       to get what it needs.30
effective sales pitch.26 “An institution that estab-         Almost every case study subject contacted
lishes, promotes, and acts to implement a strate-      for this report identified communication as the
gic plan is almost irresistible to the corporate       most critical management issue in a collabora-
sector,” wrote Sanzone.27                              tion. As in any project involving different scien-
      The $25 million, five-year collaborative          tific disciplines, jargon can be a problem. Ralph
agreement between the University of California         Hutcheson, president of Scientific Materials
at Berkeley and Novartis Seeds grew from just          Corporation (a university-based start-up com-
such a plan. Gordon Rausser, then dean of the          pany) said that early in his collaboration with a
College of Natural Resources, analyzed the             public western university, “clear communication
market needs of firms for which UC Berkeley’s           among the physicists, chemists, [and] chemical
research would be relevant, and then the univer-       and electrical engineers was prevented by disci-
sity sought out potential partners. “Typically, the    plinary jargon.” But the scientists learned to
university and its faculty wait passively until they   communicate across specialty borders, and “after
receive a request for proposals (RFP) from gov-        five years’ practice, the group can now talk across
ernmental agencies or private companies and            the former divides.”31
then generate a response to the other parties’               Exchanges between corporate and university
terms,” Rausser said. “By contrast, the                partners should be clear and direct. They also

                                                                                                          BUSINESS–HIGHER EDUCATION FORUM 75
                                          CHAPTER 5

should be frequent, ideally every week to every         Evaluating and Rewarding Faculty
month informally, with more formal presenta-            Involvement
tions or write-ups every six to twelve months.32              Research collaborations are usually consid-
Timing visits to company sponsors to coincide           ered part of the faculty member’s official duties
with the company’s internal budget process can          and almost always result in research that can be
help secure ongoing support.33                          published. Nevertheless, traditional university
     Good communication helps the participants          hiring, tenure, and promotion processes do not
work out disagreements without resorting to             always allow for industry-sponsored projects, and
legal intervention.“If at all possible, disagreements   faculty who take part may risk weakening their
should be resolved by frank discussions, rather         career prospects. “A promotion packet can con-
than be put on paper with all the legal ramifica-        tain industrial letters of support, but these must
tions,” observed David Kipnis, distinguished uni-       be in addition to the requisite academic support
versity professor of medicine at Washington             letters,” said Pramod Khargonekar, chair of the
University School of Medicine in St. Louis.34 At        Department of Electrical Engineering and
the same time, researchers must know when to            Computer Science at the University of
involve legal counsel. Ron Iacocca, formerly asso-      Michigan, who warns younger faculty against let-       “Too frequently we have
ciate professor, Pennsylvania State University, now     ting their scholarly output drop. “At the level of
                                                                                                                a culture that penalizes
research scientist, Eli Lilly & Co., said that if a     promotion to full professor, industrial collabora-
project required a significant shift in direction, he    tion can have a more positive impact as senior               faculty for working
would seek legal assistance and amend the con-          faculty are viewed with a different value system,”        outside the university.
tract to avoid being legally bound to an outdated       said Khargonekar.38                                                 We need to
agreement.35                                                  Universities should not completely overhaul
     Meeting company-established deadlines is a         their faculty performance measures to require                     change that.”
recurring challenge to universities and                 closer ties with industrial partners. Doing so
researchers.36 Industry officials often complain         would threaten the basic mission of the university    –Dennis Smith, president of
that university researchers lack management             and lead to faculty resentment.Tulane University,
expertise and fail to respect contractual dead-                                                                the University of Nebraska
                                                        for example, believes that hiring and tenure deci-
lines.37 University researchers often say that          sions should be based on merit, institutional
meeting schedules is most difficult when the             needs, and the anticipated productivity of the
project has commercial applicability, which is also     individual, not on the pursuit of industry-
when corporate pressure is the greatest.                sponsored research.39 One reason: Industry inter-
University administrative offices provide some           ests might change.
help in this situation, but responsibility for man-           But some researchers have suggested special
aging the collaboration from the university side        incentives or other compensation for participat-
ultimately is the researcher’s.                         ing in university-industry research collabora-
     But, some forms of research are not                tions,40 and some universities have agreed.“[Our]
amenable to timetables, and university researchers      administration has set up systems to give faculty
and officials should make certain that their cor-        research-proposal credit for participating in mul-
porate partners recognize the difference. For           tidisciplinary proposals,” said John Schneider of
example, clinical researchers can reasonably be         Purdue. “In addition, publication credit for
asked to keep a large clinical trial on schedule        patents is granted.”41 At the Georgia Institute of
(although even here, some factors—such as               Technology, faculty may receive one-third of any
recruitment of patients—are not entirely in their       licensing royalties and may hold equity in start-up
control). But at the other extreme, basic, funda-       companies that have licensed their technology.42
mental research—such as an effort to determine                “Too frequently we have a culture that
the function of a newly discovered protein—             penalizes faculty for working outside the uni-
often cannot be run on a deadline basis.                versity,” observed Dennis Smith, president of the
                                                        University of Nebraska. “We need to change

76 Working Together, Creating Knowledge
                                                        University Best Practices: Building a Research Collaboration Team

                                                             In a case study prepared for this report, the
  Recommendation:                                       administration of a public, Midwestern university
  Research collaborations must be based on the          suggested a “team approach” that would require
  willingness and enthusiastic participation of indi-   faculty, deans, and administrative offices to under-
  vidual faculty members. A university can assist       stand the university’s position and work together
  faculty in finding new collaboration partners but     in negotiations with industry. But Gene Allen,
  should do so based on faculty interest, the           director of collaborative development for MSC
  research strengths of the university, and industry    Software, cautioned, “However the university is
  research opportunities. Hiring, tenure, and pro-      organized, its efforts should be structured to min-
  motion processes should give appropriate credit       imize bureaucracy.”48
  to university researchers who collaborate with
  industry.                                             Measuring Success
                                                              Devising university-wide performance
                                                        measurements that do not force the various
Working as a Team                                       offices to compete for credit can promote better
      Most universities could improve the way           coordination. Ralph Christoffersen, president of          Devising university-wide
their administrative offices work together to pro-       Ribozyme Pharmaceuticals Inc. and a former
                                                                                                                   performance measure-
mote collaborations with industry. “There needs         university president, cautioned against measuring
to be a better integration between the staff work-      the success of research efforts by the amount of          ments that do not force
ing in contracts and grants and in technology           money they generate.“If revenue is not the pri-              the various offices to
transfer,” said Richard Attiyeh of the University of    mary measure of success, then issues such as com-
                                                                                                                   compete for credit can
California. Attiyeh suggests that the dean’s office      petition for fund-raising credit between
could be the central point. “That person, that          corporate-relations offices and technology-                         promote better
office, is uniquely situated to take into account        transfer offices completely disappear.”49                             coordination.
both the administrative imperatives and the aca-              Much of the bureaucratic rivalry within uni-
demic imperatives and integrate those in a mean-        versities over industry collaborations has dissi-
ingful way in this process.”44                          pated in recent years.“I don’t see the competition
      Sanzone suggests that the corporate-relations     between technology-transfer offices and
office must play a major role.To do so, it “needs        corporate-relations offices that much anymore,”
strong and effective linkages with all areas in the     observed Molly Broad, president of the
institution that directly interact with companies,      University of North Carolina System. “Both are
including grants and contracts offices, student          usually working very closely with the appropri-
placement services, offices which deal with ven-         ate deans.”50
dors, etc. In addition, the corporate-relations offi-          At the University of Massachusetts, the per-
cer can be a key player in encouraging new              formance of the Office of Strategic Technology
faculty liaisons across academic disciplines.”45        Alliances is measured in several ways. One is rev-
      At Penn State, the development office com-         enue generated from industry, but others are the
piles a short profile of the various research,           level of university-industry partnerships, the ini-
recruiting, and vending relations it maintains with     tiation of new faculty projects, and whether a
industrial partners.This profile includes informa-       company is visible on campus beyond recruiting
tion about campus visits, interviews, alumni, phi-      efforts. This sort of multifaceted performance
lanthropy, and key contacts.46 “This becomes a          assessment will likely be necessary to gauge the
starting point for us to understand the extent of       performance of other university offices.
a relationship and see where there are gaps . . . and
how we might fill them,” said Moellenbrock.“We
share this knowledge with other offices at the

                                                                                                         BUSINESS–HIGHER EDUCATION FORUM 77
                                          CHAPTER 5

LEADERSHIP                                                Recommendation:
     Participants at the 1997 University of               Universities should coordinate the efforts of the various offices that support uni-
California Presidents Retreat identified four chal-        versity researchers in their work with companies and, where appropriate, should
lenges facing universities in their interactions          consider co-locating them. The president of a university campus should be
with industry. They are:                                  responsible for establishing a cooperative tone toward university-industry
  • Basing decisions on “how to make it work,”            research collaborations and should align incentives to encourage teamwork and
    as opposed to following rules.                        promote research collaborations.
  • Granting greater autonomy (with accounta-
    bility) to decision makers.
  • Ensuring that faculty and administrators
    better understand the principles that should      NOTES
    guide decisions about industry agreements.          Katherine Adams and Richard Schwartz, A Case
                                                      Study of the University of Kentucky, quoting an industry
  • Better communication and teamwork among
                                                      contact (Lexington, KY: 1999), 4.
    university personnel involved in negotiations     2
                                                        The Role of Research Administration, National Council
    with industry.52                                  of University Research Administrators,April 2000, 2.
                                                        Ibid., 6–7.
     Some universities have encouraged team-            Lynne U. Chronister, e-mail to Project Director,
work by co-locating related university offices.        20 September 2000.
                                                        Ted Cicero, interview by Beth Starbuck, Calyx, Inc.,
About 10 years ago, Penn State decided to cluster     Case Study Final Report, 7 September 2000, 46.
the administrative activities that engaged industry   6
                                                        Louis Tornatzky, Building State Economies by Promoting
into one facility. This has fostered cooperation,     University–Industry Technology Transfer, prepared for the
rather than competition, for establishing relation-   National Governors’Association (Washington, DC:
ships with companies and sharing information.53       Batelle Memorial Institute, 2000).
                                                        Carolyn Sanzone, Securing Corporate Support:The
North Carolina State has incorporated its Office
                                                      Business of Corporate Relations (1999).
of Industry Research Relations and Office of           8
                                                        John A. Schneider, conversation with Project
Technology Transfer into a combined Office of          Director, 14 July 2000.
Technology Transfer and Industry Research.              Louis Tornatzky, e-mail to Project Director,
     When faculty and staff express reluctance to     14 August 2000.
work with industry, the university president may         Lynne Chronister, e-mail to Project Director,
                                                      September 2000.
need to build a consensus in support of balanced      11
                                                         OMB Circular A-21,
research collaborations. It will be important that    http://www.whitehouse.gov/OMB/circulars/a021/
he or she understand the issues well enough to be     a021.html.
able to speak the same language as staff collabo-        Memo to Judy Irwin, from the office of Scott
ration experts. Where necessary, the university       Cowen, 8 August 2000.
                                                         Bill Decker, e-mail to Mary Sue Coleman,
president also should develop new procedures
                                                      forwarded to Project Director, 2 August 2000.
and performance measures that encourage team-         14
                                                         Lynne Chronister, remarks during Building an
work.“The arrival of a new chancellor prompted        Effective University Technology Transfer Team teleconfer-
centralization of the research collaboration pro-     ence, 17 December 1999, 21.
grams at our eight schools,” observed Ted Cicero         Case Study Final Report, Lakewood, MN,
of Washington University in St. Louis. “He has        7 September 2000, 30.
                                                         Confidential response to BHEF RCI Survey,
provided very important support.”54                   April 1999.

78 Working Together, Creating Knowledge
                                                            University Best Practices: Building a Research Collaboration Team

17                                                          39
   Case Study Final Report, Lakewood, MN,                      Memo to Judy Irwin, from the office of Scott
7 September 2000, 30.                                       Cowen, 8 August 2000.
18                                                          40
   Carolyn Sanzone, remarks during Building an                 Katherine Adams and Richard Schwartz, A Case
Effective University Technology Transfer Team teleconfer-   Study of the University of Kentucky (Lexington, KY:
ence, 17 December 1999, 16.                                 1999), 4.
19                                                          41
   John A. Schneider, e-mail to Project Director,              John A. Schneider, e-mail to Project Director,
17 July 2000.                                               17 July 2000.
20                                                          42
   George Moellenbrock, remarks during Building an             Louis Tornatzky, case study of Georgia Tech for the
Effective University Technology Transfer Team teleconfer-   Southern Growth Policies Board, 30 July 2000, 14.
ence, 17 December 1999, 19.                                    Dennis Smith, remarks during Business–Higher
   Carolyn Sanzone, remarks during Building an              Education Forum summer 2000 meeting, Mystic, CT,
Effective University Technology Transfer Team teleconfer-   29 June 2000.
ence, 17 December 1999, 20.                                    Richard Attiyeh, Group 8,“Facilitating UC-
   Confidential responses to BHEF RCI Survey,                Industry Relationships, Organization and Structure,”
 April 1999.                                                Proceedings of the President’s Retreat, 1997. The full
   Sanzone, Securing Corporate Support, 1999.               report is available at
   Randolph Guschl, e-mail to Project Director,             http://www.ucop.edu/ott/retreat/tabofcon.html.
29 September 2000.                                             Sanzone, Securing Corporate Support, 1999.
25                                                          46
   Reynold Levy, remarks at Collaborations and                 George Moellenbrock, remarks during Building an
Partnerships Conference, 1999, Duke University,             Effective University Technology Transfer Team teleconfer-
15 November 1999.                                           ence, 17 December 1999, 10.
26                                                          47
   Sanzone, Securing Corporate Support, 1999.                  Ibid.
27                                                          48
   Ibid.                                                       Gene Allen, conversation with Project Director,
   Gordon Rausser, unpublished letter to the editor of      18 July 2000.
The Atlantic Monthly, 19 May 2000.                             Ralph Christoffersen, letter to Project Director,
   Karen Hersey, e-mail to Project Director,                15 July 2000.
2 August 2000.                                                 Molly Broad, comments during Business–Higher
   Charles Moreland, conversation with Project              Education Forum summer 2000 meeting, Mystic, CT,
Director,April 1999.                                        29 June 2000.
31                                                          51
   Ralph L. Hutcheson, interview by Beth Starbuck,             Carolyn Sanzone, interview by Beth Starbuck,
Calyx, Inc., Case Study Final Report,                       Calyx, Inc., Case Study Final Report,
7 September 2000, 9.                                        7 September 2000, 33.
32                                                          52
   Case Study Final Report, Lakewood, MN,                      Scope of Advisory Group 8,“Facilitating UC-
7 September 2000, 3.                                        Industry Relationships, Organization and Structure,”
   Alan Lesser, interview by Beth Starbuck, Calyx,          Proceedings of the President’s Retreat, 1997. This section
Inc., Case Study Final Report, 7 September 2000, 2.         of the report is available at
   David M. Kipnis, interview by Beth Starbuck,             http://www.ucop.edu/ott/retreat/report8.html.
Calyx, Inc., Case Study Final Report,                          Case Study Final Report, 7 September 2000, 29.
7 September 2000, 3–4.                                         Ted Cicero, interview by Beth Starbuck, Calyx, Inc.,
   Ron Iacocca, interview by Beth Starbuck, Calyx,          Case Study Final Report, 7 September 2000, 46.
Inc., Case Study Final Report, 7 September 2000, 31.
   Pramod Khargonekar, interview by Beth Starbuck,
Calyx, Inc. Case Study Final Report,
7 September 2000, 36.
   Diana MacArthur, response to BHEF RCI Survey,
April 1999, 6.
   Pramod Khargonekar, interview by Beth Starbuck,
Calyx, Inc., Case Study Final Report,
7 September 2000, 37.

                                                                                                                    BUSINESS–HIGHER EDUCATION FORUM 79

Office of Naval Research:
A Government-Academia-Industry Collaboration
T         he Power Electronic Building Block (PEBB) program,
          one of the most extensive collaborative research efforts
undertaken by government, academia, and industry, began in
                                                                     ested in a range of concepts including high-energy weapons,
                                                                     hybrid electric engines, communications, and stealth tech-
                                                                     nologies. This “all-electric” ship concept, however, would
1994 under the leadership of the Office of Naval Research            require the very same electronics research that had dimin-
(ONR), and the radical impact of PEBB technology on naval sys-       ished in the 1970s.
tems has sparked new interest in the power electronics field.               At the same time, industry was beginning to tackle power
       Power electronic building blocks—electrical connectors        electronics issues for civilian products. ONR, working with the
that use software to sense what other devices are plugged            Department of Energy’s Partnership for a New Generation
into them—are essential parts of all naval ships, aircraft,          Vehicle program, identified demands for PEBB technology within
ground vehicles, and most weapons and sensors. They act as           the automotive industry. “There was a lot of cross-talk,” says
super-efficient switches, converters, inverters, circuit break-      Rossi. Commercial automakers, in partnership with government,
ers, power supplies, generators, and motor controllers. Their        teamed up with Virginia Polytechnic Institute and State University
use in a high-power electrical system greatly increases the          (Virginia Tech) and began work on the Science and Technology
system’s efficiency while dramatically reducing its size, weight,    Power Electronics program. This government-sponsored pro-
and cost. PEBB technology is the key factor that will enable         gram includes such partners as ONR, the National Science
the “All Electric Concept” for ships, aircraft, and ground vehi-     Foundation, and the state of Virginia.
cles.                                                                       As technological discoveries were spun out of university
       “Research in high-power electrical systems had drib-          laboratories, government laboratories standardized the
bled off in the 1960s and ‘70s,” says Dave Rossi, head of            processes involved to satisfy the engineering requirements of
Industrial and Corporate Programs at ONR. With research              both the Navy and industry partners. Automobile companies
efforts and budgets focused on solid-state electronics for com-      used these standards to move into commercial product devel-
puters, communication systems, and sensors, research for             opment. Then, because military requirements were embed-
generating and transmitting electrical power was almost non-         ded in the systems, the technologies could be spun back to the
existent. The military demands of the 1990s, however, began          Navy, and the systems could be purchased off the shelf at
to pose new requirements for electrical power sources with           commercial prices.
increased efficiency and reduced size, weight, and cost. “The               Examples of these collaborative efforts include Rockwell
military needs shifted,” Rossi says, “and solid-state electron-      International’s PowerFlex-700 motor drive, which will be used
ics for power was in demand.”                                        in shipboard motor controllers, ABB Inc.’s PEBB devices for
       Today, the PEBB program’s mission is to harness the           the international utility market, and high-power applications
potential richness of government-industry-university partner-        such as electromagnetic propulsion in naval platforms.
ships by involving all entities at every stage of the technolog-            To end up with dual-use products, industry had to be drawn
ical innovation process. Currently, ONR devotes more than            into the process early, and the Navy mounted an aggressive out-
$10 million per year to PEBB research through more than 100          reach effort. “We would ask industry, can you use this technol-
contracts and grants involving 200 or more researchers.              ogy?” Rossi says. The answer often was yes, but the technology
Industry partners devote more than $40 million to PEBB               was often too risky for industry to undertake.
research each year, and the amount is growing. Being                        Knowing that the technology would have a commercial
involved with the PEBB program is “a once in a lifetime oppor-       application, the Navy pursued the innovation process in part-
tunity” for researchers, says Terry Ericsen, program officer of      nership with academia. As the technologies advanced, all
the PEBB program.                                                    industry partners and potential suppliers were updated on the
       But building the program wasn’t simple. The partners          outcomes. With the risk diminished, industry became an active
had to overcome several challenges along the way.                    partner, bringing the new discoveries into commercial product
       By the 1990s, the Department of Defense, and in par-          development.
ticular the Navy, needed to quickly and efficiently design and              Eventually, PEBB technology may lead to a tenfold
produce new electronic power platforms. The Navy was inter-          increase in investments by the commercial market, and

80 Working Together, Creating Knowledge
because the technology is so pervasive, its potential prof-                 Benefits of the PEBB program have been tremendous.
itability is enormous. The technology may revolutionize the         “The cost and time savings for the production of new power
business of supplying commercial electrical power. PEBBs            electronic systems are immeasurable,” Rossi says.
could provide a wide range of essential devices that are sig-               In addition, “by bringing industry in at the beginning of
nificantly more efficient and cost-effective than existing power-   the process to determine the commercial viability of a tech-
generating and transmission components. PEBB technology             nology, the Navy was able to secure a buy-in by its industry
also is a crucial part of the Partnership for a New Generation      partners,” Rossi says. “This greatly reduced the government’s
Vehicle’s hybrid electric car initiative.                           development and procurement costs. In the past, a military
        “These products would not have been realized if indus-      subsystem was developed and produced for the customer
try did not have the incentive to build them and universities       with commercial applications as an afterthought.”
were not partners in the research effort,” Ericsen says.                    University research in heavy electrical power technolo-
        Moreover, the Navy couldn’t have funded PEBB devel-         gies also has been reinvigorated.
opment on its own, Rossi says. “If we had to rely upon only                 Periodically, the PEBB program brings in outside experts
government investment, it would be impossible to build these        to conduct reviews and evaluations. “During this review process
systems,” he says.                                                  all the partners are involved,” says Narian Hingorani, former vice
        The PEBB collaboration effort was not always smooth         president of the Electric Power Research Institute. The outside
sailing and did not always enjoy full support from the part-        experts advise the project manager on possible areas of empha-
ners. The challenges included overcoming cultural differ-           sis and suggest improvements or new methods as the technol-
ences, recruiting new partners, and capitalizing on the             ogy advances. “As the stages of technological discovery
dual-use concept.                                                   continue, industry begins to buy in to the process,” Hingorani
        The greatest hurdle was changing cultural perspectives.     adds. “It works very well.”
During the 1980s, the defense industry and government often                 As the PEBB program has matured, ONR has initiated
distrusted one another, and suspicions were exacerbated by          “technology working groups” to move the collaborative
frequent charges of waste, fraud, and abuse. The Navy had           approach even more deeply into the R&D process. The work-
to convince the industry partners that it was an honest broker      ing groups include researchers and technology experts from
in the process. Industry needed assurance the technologies          government, university, and industry, organized around par-
to be developed would indeed be available to the civilian           ticular technologies and open to all who want to participate.
sector. Shifting this cultural perspective took a long time and     These integrated teams have allowed all the partners to meet
depended heavily on open communications among the part-             around the table and build on continued product development.
ners. “Part of the art of collaboration is learning the best way    The technology working groups look at different applications
to interact,” Ericsen says. “The collaborative effort has to be     of the technologies and “solve common problems,” Ericsen
pulled as much as it is driven.”                                    says. The teams collaborate to determine areas of critical
        Another challenge was bringing nontraditional suppliers     technology development, build technology concepts, and
into government collaborations. Companies outside the               begin the standardization process. In addition, research per-
defense sector did not have the long history of government          formed at the university level is guided by requirements and
interaction that the defense sector had. “The commercial            issues developed in the technology working groups.
sector was worried that the military would require them to                  Today, the program has grown to include smaller com-
change their business practices, like using military accounting     panies that participate in the Small Business Innovation
systems,” Rossi says. These issues were worked out by such          Research (SBIR) program, which sets aside a percentage of
steps as changes in procurement requirements.                       all federal research funding for research grants to smaller
        Collaborative efforts such as the PEBB program will not     companies. ONR also has reached out to other government
work across the board. The technologies must have a true            agencies that might benefit from a similar process to share the
dual use to be of interest to the private sector. Of course, mil-   lessons it has learned about making such collaborations work.
itary platforms will not be dual-use, but many of the subsys-       With more than 100 contracts and grants per year, the pro-
tems can comprise dual-use technologies. “At the platform           gram has created a viable model for the inclusion of all part-
level the systems are solidly military in design, but at the sub-   ners—government, academia, and industry—at all levels of
system level the commercial products, with embedded Navy            the innovation process.
requirements, can be used,” says Rossi.

                                                                                                                                   BUSINESS–HIGHER EDUCATION FORUM 81
Technology transfer is people to people.
You have to commit the people to

make it work.

—Hank McKinnell, Chairman and CEO, Pfizer Inc
Corporate Best Practices: Making
Collaborations a Core Competency

LEADERSHIP AND VISION                                 rate management and university faculty ulti-
      While the impetus for initiating specific new    mately must agree on the vision and goals for the
projects typically is driven by the research needs    collaboration.
of company scientists, industry support for col-            The support required from the CEO for any
laborations with universities generally must start    project varies with its complexity and its proxim-
at the top or it will never start at all. In every    ity to meeting specific operational and broader
company, no matter what the product or sector,        strategic goals. “Corporate support for research
the chief executive officer (CEO) and senior           collaborations needs to match the project, with
leadership team establish the priorities and oper-    higher level support required for those projects
ating tone. “The climate is set from the top,”        connected to emerging products and for those
observed Hank McKinnell, chairman of the              requiring a more complex team,” observed
board and CEO of Pfizer Inc.1                          Robert Carman, program manager, advanced
      “Our CEO doesn’t sign off on every collab-      programs in propulsion and power at Boeing
orative project we do,” said Rick Jarman, collab-     Rocketdyne.4 The biomedical partnership agree-
oration manager for Eastman Kodak Co.“At the          ment between Monsanto (now Pharmacia) and
same time, it is important to have support from       Washington University in St. Louis required
the top to create the fertile ground throughout       approval at the CEO and chancellor levels, as did
the company to collaborate effectively.”2 This is     Boeing Co.’s participation in building a wind
particularly true in smaller companies.“In a small    tunnel at the California Institute of Technology.
company, CEO support of collaborative research              Some companies have established internal
is critical,” observed Ralph Hutcheson, president     matching-fund programs to encourage a culture
of Scientific Materials Corporation, a start-up        change toward external research. A chemical
company in Bozeman, Montana.3                         company used this approach in the early stages of
      University presidents and administrations       its research collaboration program.5 “Company
play a more limited role.They have no direct con-     support for collaborations at [our company]
trol over how faculty will perform specific duties,    draws upon the vision of the chief technology
despite the fact that the actions of faculty define    officer,” observed Emil Sarpa, manager of exter-
how effectively the university accomplishes its       nal research at Sun Microsystems. “[It] is institu-
missions of education, research, and service.         tionalized in our decentralized organization by
      This dichotomy has important implications       top-level discussions and by enticing, 50-50
for university-industry research collaborations.      matching fund programs.”6
Private sector companies are results-driven; they           A supportive corporate culture also is
cannot afford to be unfocused when it comes to        important in deciding whether to engage in a
making research investments.A research collabo-       specific collaboration. Establishing and maintain-
ration must meet business objectives, must be         ing an effective collaboration is time-consuming
specified in financial terms, and ultimately must       at many levels of a company, particularly for cor-
be accountable to the firm’s stockholders.             porate research departments. Company decision
      For this reason, the company—not the uni-       makers should recognize that effective collabora-
versity researcher—often will select the research     tions require the substantive involvement of key
priorities. But the interest of the university sci-   personnel. “Technology transfer is people to
entist must be engaged, too, because in most          people,” observed McKinnell. “You have to
cases, university researchers choose their own        commit the people to make it work.”7
research topics. In effect, this means that corpo-

                                                                                                       BUSINESS–HIGHER EDUCATION FORUM 83
                                          CHAPTER 6

Choosing Appropriate Research Topics                  an assay, don’t belong in a university. With the
      The first decision a company must make is        exception of clinical trials of new drugs or med-
whether a prospective research effort is a good       ical devices at academic medical centers, this kind
candidate for outside collaboration. “Technology      of research usually should be performed in an
selection evolves into budgetary discussions that     industrial setting or a contract laboratory.11
lead to eventual winners in the decision on what            Larger companies are more likely to sponsor
technologies will be developed by the company,”       fundamental research on campus.“At least in the
wrote Gene Allen and Rick Jarman in                   larger relationships, companies seem to be backing
Collaborative R&D: Manufacturing’s New Tool. A col-   away from the targeted, focused applied project
laboration is not “an odds-on favorite” to be         and are moving to support more basic, broad-                Most university and
chosen, they said, because of “the shortage of true   based programs,” observed Karen Hersey, senior
                                                                                                             industry research coordi-
believers in collaboration and the natural tendency   intellectual property counsel of the Massachusetts
to take a good, or funded, idea and rush to           Institute of Technology. “They are no longer             nators share an under-
develop it alone,” in order to be first to market.8    interested in just incremental improvements.They        standing of what type of
      Once company officials decide to pursue a        want major new ways to do things. Companies are
                                                                                                             research is mutually ben-
collaborative research program, they must next        looking at us to move them ahead . . . [to] give
determine whether to work with a university, a        them that leg up on the competition.”12                 eficial. It should be ethi-
government laboratory, a partner company, or a              At Boeing Rocketdyne, Carman said that           cal, publishable, basic or
contract research organization.Analyzing the pro-     although nearly all of his basic research is collab-
                                                                                                                slightly applied, and it
posed collaboration’s purposes can help in select-    orative, 20 to 50 percent of the university
ing partners. In an article in the January–February   research that Boeing sponsors is of a more             should pair the expertise
2001 issue of Research Technology Management,         applied nature. “The amount is based on the                     of the university
Beth Starbuck, president of Calyx Inc., described     business phase, with less involvement of a uni-         with the interests of the
six goals that a company might wish to achieve in     versity in the short-term phase.”13
                                                            Smaller companies tend to view somewhat                          company.
a collaboration with a university:
   • Provide a window on the future.                  applied research as appropriate for university col-
   • Complement internal expertise.                   laborations.14 Either a large or small company
   • Augment internal capacity.                       can use its relationship with the university to
   • Track development of potential competing         explore new directions before developing a prod-
     technology.                                      uct or process in house, although small companies
   • Try new analytical techniques.                   may try to use the university to provide all their
   • Identify prospective employees.9                 research needs. Large, technology-driven compa-
                                                      nies often find it cost-effective to work with uni-
     Most university and industry research coor-      versities for long-term (three to five years),
dinators share an understanding of what type of       complementary research projects. Short-term
research is mutually beneficial. It should be ethi-    research needs of large companies generally do
cal, publishable, basic or slightly applied, and it   not match university goals or timeframes.
should pair the expertise of the university           Commodity companies, by and large, rely on in-
with the interests of the company.10 Michael          house research and are not frequent consumers of
Montague, director of research operations for         university research.15
Pharmacia Corp., said that basic research into
new methods, processes, and fundamental
enabling knowledge fits best with the mission of
a university. Slightly more applied research into a
well-defined problem, such as analytical testing of
a new compound, can be a good “starter” project
or summer project for a graduate student,
Montague said. But highly applied projects, such
as synthesis and screening of compounds against

84 Working Together, Creating Knowledge
                                                      Corporate Best Practices: Making Collaborations a Core Competency

      Alan Lesser of the University of                company is then positioned to move and ready
Massachusetts, who also is editor of the Polymer      to hire,” said Carman. “Defining which univer-
Composites Journal, observed that well-matched        sity will be the partner usually results from net-
projects are usually nonproprietary and often         working, publications, consortia, or which
have a longer time horizon than is typical in a       schools known students select.”19
corporate research laboratory.“Both for large and           Company researchers complement this
small technology-driven companies, long-term,         process. They define an area in need of explo-              Ultimately, each collab-
exploratory projects that complement university       ration and draw on personal contacts or profes-               oration partner must
efforts are the best match,” he said.16               sional networks to identify experts. “I then                 seek to meet its own
      Ultimately, each collaboration partner must     introduce myself to the selected faculty member
seek to meet its own needs through the collabo-       and discuss whether their interests might relate to             needs through the
ration.“For collaborations to work, each partici-     our identified problem,” said Ray Edelman, a                          collaboration.
pant needs to benefit from the effort,” Allen and      senior technical fellow at Boeing Rocketdyne.
Jarman wrote. “All parties need to be selfish in       “With most of the advanced technology prob-
this respect.The collaborative program has to be      lems, we need fundamental information to
in line with the development that each organiza-      answer practical questions, although I prefer that
tion would otherwise be pursuing as part of its       a faculty member appreciate the possible applica-
core business,” whether it be product develop-        tion and relevance of the results.”20
ment or research, education, and service.                   Sun Microsystems provides logistical support
                                                      for its matchmakers.21 It identifies potential col-
Finding Partners                                      laborators through the advice of company engi-
      Finding research partners is a multilayered     neers, seminars, visits of the collaboration
process. Strategic planning may identify techno-      coordinator to universities, and university-
logical areas of interest or specific projects that    initiated contacts. Then, its technology sponsors
might be appropriate for university collaboration.    use a template to describe proposed projects to
Often, company researchers who closely follow         potential collaborators, alerting them to the com-
external developments in their fields identify         pany’s interests.22 Beth Starbuck noted that if a
potential projects and likely university partners.    company’s first choice for a faculty partner is
The faculty member and/or institution most            unavailable, it may approach the department’s
suitable for a partnership also can be drawn from     most recent graduate who stayed in academe. It
a company researcher’s professional networks,         also may consider funding a start-up grant to
alumni connections, databases of experts (such as     attract new faculty members to areas of interest.23
the Community of Science or ScienceWise.com),               Unlike others in the information technology
or through a central coordinating office’s            industry, Sun Microsystems does not use RFPs to
experience of campuses. Sometimes, university         solicit proposals from universities.The office of the
researchers propose collaborative research projects   collaboration coordinator screens institutions and
to companies, and some companies use an open          unsolicited proposals, using criteria similar to
RFP format to encourage proposals in areas of         those that Sun Microsystems uses to manage
strategic interest.18                                 internal research projects.The criteria are:
      Boeing Rocketdyne selects potential exter-         • Is the appropriate engineering group willing
nal partners as part of its annual strategic plan-         to be the technical sponsor?
ning process, identifying projects that might lead       • Does the university have the appropriate
to a competitive advantage or to developing                expertise?
potential employees.The strategic plan also may          • Does the university have a reputation for
define technological areas that the company may             negotiating deals expeditiously?
wish to develop, and the planning exercise may           • What are the outcomes from using the tem-
even design programs to support university                 plate?24
exploration in these areas. “When a decision is
made to move into that new technology, the

                                                                                                       BUSINESS–HIGHER EDUCATION FORUM 85
                                          CHAPTER 6

      Universities’ efforts to find compatible cor-          Other companies have a central coordinat-
porate partners provide another avenue for con-        ing office to identify preferred faculty members
necting industry and university researchers. From      and/or institutions and to maintain a list of uni-
the corporate perspective, the number of poten-        versities with which the company has had good
tial university opportunities can be daunting. “A      results.30 Information about the best universities
company cannot try to make every opportunity           and researchers to work with also is shared
happen,” wrote Randolph Guschl, director of            through professional organizations such as the
corporate technology transfer at DuPont Central        External Research Directors’ Network of the
Research. “Too many options are available, and         Industrial Research Institute.31 “The existence of
you must learn to pick the lucrative ones.”25          the central coordinating organization was proba-
      At the same time, the company must give          bly pivotal in making collaboration a core com-           To ensure success, a
the outside world a point of entry into its            petency at [our company],” concluded Frank
research activities.26 Sun Microsystems invites        Knoll of Dow Chemical Co.32
university researchers to e-mail a one-screen                                                                  collaboration needs an
project-proposal abstract to Emil Sarpa, manager       An Internal “Champion”                                  “end-user champion”—
of external research.The company promises that               To ensure success, a university-industry col-
                                                                                                             someone within the spon-
an engineering group will evaluate the concept         laboration needs an “end-user champion”—
and tell the researcher whether Sun is interested.     someone within the sponsoring company who is            soring company who is
Then, negotiations with the researcher and his         dedicated to making the partnership work.33 This       dedicated to making the
or her university will determine project terms         individual must bridge the language gap between
                                                                                                                    partnership work.
and funding.27                                         academia and industry, mesh university and
      DuPont, which is inundated with more than        industry cultures, reconcile the conflicting inter-
1,000 project proposals per year, sorts them ini-      ests inherent in any collaboration, and ensure that
tially by analyzing whether a proposal fits its         the research is integrated into internal company
existing research agenda or provides an opportu-       processes so that it remains relevant.“The cham-
nity to branch into a new area. If DuPont              pion has to be senior enough in the company to
expresses preliminary interest in a proposal, it       be able to get resources committed,” wrote Allen
sends an electronic abstract to a company panel        and Jarman. “The champion should also have
of experts for review. If the project clears that      enough confidence in the personnel and in the
hurdle, it moves to the scientist-to-scientist level   concept being developed to be willing to take
for more detailed study.28 The Sun and DuPont          risks in attempting new business processes and
models stand in marked contrast to the federal         procedures.”34 He or she also must be able to
grant process, which generally requires                draw strong support for the technology from
researchers to submit comprehensive, detailed          company scientists working directly in that field.
grant applications without any indication that         For the end-user champion to spend the time
they might receive funding.                            necessary to accomplish this, senior company
      Companies sometimes pick a few key part-         research officials—and ultimately the CEO—
ners with whom they will work most often.              must value external research.
DuPont has narrowed its list of preferred “tech-
nology partners” to about two dozen, although it
will continue to work with different universities
that are pursuing research areas of interest.
Making the list of preferred institutions requires
effort. “Our partners must accept the fact that
they are competing with others,” wrote
Randolph Guschl. “We are going to work with
people who are easy to deal with, can respond
quickly and honestly, and keep the strategic focus
on the partnership.”29

86 Working Together, Creating Knowledge
                                                      Corporate Best Practices: Making Collaborations a Core Competency

     Management support also can be vital to                Research goals and timetables can be man-
keeping a collaboration afloat through changes in      dated for a company’s internal research or in an
funding priorities. Nothing is more deadly to a       external, applied research contract. But timelines
collaborative program than financial cutbacks:         must be negotiated for an external project involv-
When a company pares research expenses,               ing exploratory research—and both sides must
research contracts with universities can be among     recognize that it cannot be held to a timetable.
the first to be cut.“Commitment from manage-                 The first and most important issue is estab-
ment to honor these programs is essential,            lishing a research agenda that the company wants
because building technology-transfer relation-        to support and the faculty member wants to carry
ships takes a long time,” wrote Randolph Guschl.      out. Ideally, the project will explore a research
“Once the process has been started, it needs con-     pathway that the company perceives as an impor-             Managing a partnership
tinuous support from all involved parties.”35         tant new direction for its R&D and that the uni-
                                                                                                                requires scientists in both
                                                      versity researcher believes is a promising route for
  Recommendation:                                     advancing a given science or technology.“In the               the university and the
  Companies should encourage internal champi-         university-industry partner relationship, universi-        company to draw heavily
  ons of research collaborations to identify poten-   ties may gain access to technology necessary for
                                                                                                                            on their team-
  tial university partners based on shared research   further advances in fundamental understanding,
  priorities. To expedite this process, companies     while industry may be able to improve a tech-                management skills and
  should make it as easy as possible for potential    nology in preparation for eventual sale of prod-               places a premium on
  university partners to communicate with the com-    ucts,” said the House Science Committee’s 1998
                                                                                                                    clear communication,
  pany research organization and should consider      National Science Policy Study.“This type of sym-
  establishing a central coordinating unit for this   biotic relationship is at the heart of successful                    openness, and
  purpose.                                            partnerships.”37                                                      forthrightness.
                                                            Managing a partnership requires scientists in
                                                      both the university and the company to draw
                                                      heavily on their team-management skills and
MANAGING RESEARCH COLLABORATIONS                      places a premium on clear communication,
     The appropriate form of management over-         openness, and forthrightness.38 It relies heavily
sight of a collaborative effort will depend on the    on the strength of personal relationships. “[You
type of research being performed and the objec-       need] someone on the other end who cares as
tive sought. Research of a more applied nature,       much as you do,” said Ron Iacocca, formerly
such as regulatory and problem-solving research,      associate professor, Pennsylvania State University,
often can be managed like internal or external        now research scientist, Eli Lilly & Co. “Where
research contracts, because it often has well-        that doesn’t exist . . . the project dies.”39 In addi-
defined goals and milestones. This type of             tion, in a collaboration no one person or organ-
research usually is a relatively small component of   ization controls all the resources necessary to
industry research performed in universities.          accomplish the program.40 When the partners are
     Fundamental, exploratory research, on the        making roughly equal financial and/or intellec-
other hand, requires a partnership management         tual contributions, decision making occurs pri-
approach. “Milestones that are appropriate for        marily by consensus.
problem-solving and regulatory projects may                 The contract should clearly define the dis-
limit creativity and progress in discovery            tinction between applied and exploratory
research,” wrote Beth Starbuck.36 Managing an         research. “Since research relationships between
exploratory-research collaboration requires “flex-     corporations and universities can take many dif-
ible” oversight to work through “often unpre-         ferent shapes—ranging from true collaboration to
dictable” turning points while keeping the project    the purchased provision of services—partners
relevant to the company’s R&D goals, she added.       should mutually acknowledge the form of rela-
Companies generally have not developed skills at      tionship they intend to enter and should structure
working with research partners in this manner.        any formal agreements to be consistent with the

                                                                                                         BUSINESS–HIGHER EDUCATION FORUM 87
                                          CHAPTER 6

nature of the relationship,” cautioned Bill Decker,      company’s strategic processes is “the major prob-
associate vice president for research of the             lem with U.S. industry in general.”46 Beth
University of Iowa.41                                    Starbuck urges that companies stay in touch with
      Both sides should choose their words care-         university researchers and students while “their”
fully. Some company officials tend to call all their      research results are being integrated into the
external research “contract research.”After all, it is   product or service development process. They
all contracted out. University officials usually          can consult as experts and advise during the trou-
prefer to call university-industry collaborations        bleshooting phase. Such continued contacts offer
“sponsored research.”42                                  the added benefit of maintaining the relationship,
      More is involved here than political correct-      even during interruptions in funding.47
ness or hurt feelings. Conventional “contract                  Because the company collaboration manager
research” is often based on a company protocol           is such a key part of the collaboration team, his or
and follows company-mandated work schedules              her departure can present difficult challenges.
and methodology. Company officials expect to              Experienced university and company officials say
be able to give orders to the contractor perform-        that frequent turnover of company project
ing the research. But “sponsored research” may           managers is the most disruptive personnel change
involve a topic proposed by a university                 that affects collaborative teams.48 University            Because the company
researcher and may draw long-term support from           researchers may interpret such personnel changes        collaboration manager is
several funding sources.43 In such cases, the            as evidence of lack of commitment by the com-              such a key part of the
researcher and university have obligations to the        pany.49 Even experienced faculty can become
                                                                                                                 collaboration team, his or
other funders as well as to the company. In addi-        frustrated when personnel changes bring less-
tion, university faculty members fiercely guard           skilled replacements.                                          her departure can
their academic independence. Using a term—                     Personnel changes are a part of corporate life,             present difficult
”contract research”—that connotes a subordinate          particularly in an era marked by corporate merg-
relationship will feed their apprehension that           ers and acquisitions, and in a high-tech world
industry research collaborations mean the loss of        where often the best strategy for a young, entre-
academic freedom.                                        preneurial firm is to join forces with a larger
      Nevertheless, company officials have the            company. But Boeing Rocketdyne’s Ray
right to remind university researchers that a con-       Edelman suggested, “Always have a backup in
tract is a contract. “No matter what you call it,        mind.”50
university partners do have to understand that
industry-sponsored research is not NIH- or               The Role of Students
NSF-sponsored research,” said Diana MacArthur,                The involvement of graduate students can
president of Dynamac Corp. “There are obliga-            both enhance and impede a collaborative
tions to fulfill and timetables to be met.”44             industry-university research project. One of the
      Tying university research to company sched-        major reasons that research-oriented companies
ules is essential to a successful collaboration.The      began engaging in such collaborations was to
company, the university, and the researcher should       meet, evaluate, and possibly hire bright graduate
pay close attention to any timelines before agree-       students. But many of the obstacles that collabo-
ing to a project.“I want to confirm that the goals        rations encounter stem from the need to protect
and objectives of the research plan are realistic in     students’ academic interests.
light of the subject matter, timeline, and expecta-           In either case, graduate students and occa-
tions of the scientists,” said Edward Pagani, direc-     sionally undergraduates will nearly always be
tor of strategic alliances for Pfizer Global              involved in university-industry collaborations.
Research & Development. “We then make a                  Education is a key mission of the university.And
determination whether Pfizer should enter into a          graduate students perform much of the labora-
collaboration for the proposed research.”45              tory work in any university research project.
      However, Boeing Rocketdyne’s Carman                     The biggest challenges posed by student
suggested that integrating research results into a       involvement arise during negotiation of confi-

88 Working Together, Creating Knowledge
                                                      Corporate Best Practices: Making Collaborations a Core Competency

dentiality and intellectual property terms. The       find that it is unpublishable because it contains
university needs to ensure that students are not      confidential corporate information.
negatively affected by the collaboration or by any          In most cases, however, a university-industry
financial and professional conflicts. Chapters 4        collaboration gives the company a chance to
and 5 of this report address these concerns in        evaluate graduate students on the job as potential
greater depth. But companies should keep some         employees.To this end, the company should build
additional considerations in mind.                    relationships directly with them. Steve Hahn of
      For example, the students should be             Dow Chemical Co. believes the goal should be to
informed at the outset of any confidentiality and      “get to know the students well enough that they
intellectual property expectations, particularly if   call you directly.”55 Hahn values informal, tele-
the company has shared proprietary data with the      phone, or e-mail contacts with university
university laboratory. Of course, even if graduate    partners—including graduate students or post-
students are funded by a company fellowship,          doctoral fellows.56       But some university
they work directly for their university mentor,       researchers mentor their students before letting
and their future careers can depend on that sci-      them talk directly to company representatives.57
entist’s guidance and goodwill. Therefore, the              Ultimately, what separates university-
mentor—who presumably is the researcher               industry collaborations from other opportunities               Because graduate
involved in the collaboration—and the university      to meet promising students is the expectation              students are important
are responsible for informing students of any         that the project will generate important results           members of laboratory
confidentiality restraints. But companies should       for the company. Involvement of students is
                                                                                                                 teams, companies that
make certain that confidentiality warnings are         important not only because they perform much
impressed upon them. If students join the project     of the actual research but also because their fresh           propose or issue an
mid-term, the company project manager should          insights sometimes can identify solutions to prob-         RFP for a collaborative
promptly educate them regarding these matters.51      lems that elude faculty researchers. “I have seen
                                                                                                                  project might consider
      Because graduate students are important         where a student went ahead and accomplished
members of laboratory teams, companies that           what the professor said wouldn’t work,” said                     timing it to fit the
propose or issue an RFP for a collaborative proj-     Hahn.58                                                           academic cycle.
ect might consider timing it to fit the academic
cycle. University researchers who might other-        Reporting Requirements
wise be interested may not participate if an               Formal reports from university researchers
unfortunately timed request does not allow them       provide the industry sponsor an important,
to secure student assistance.52 Ideally, a student    detailed, written account of the status of the col-
would begin working on a project after he or she      laborative effort. The Industrial Research
has taken a few courses, and perhaps the Ph.D.        Institute suggests that a formal annual report
qualifying exam, but before getting too far in his    “allows for a reasonable level of oversight, con-
or her research.The student should have enough        sidering both the flux of new people entering
time before graduation to become deeply               the university and the rapidly changing array of
engaged in the project.53 All parties, but espe-      consulting, publishing, and research activities of a
cially the student, should have a realistic under-    faculty member.”59 Annual reports also provide
standing of the commitment necessary to               exposure for the project to company officials
accomplish the collaboration.54                       beyond the project monitor.60
      Corporate sponsors should be prepared to             Informal monthly reports and a campus visit
hear, from time to time, that a particular student    about six months into the project also are useful
cannot work on a project—or even that the uni-        tools that keep a project on track.61 “If you just
versity won’t accept a project—because of confi-       send a check at the beginning of the year and hope
dentiality constraints. A common nightmare for        you get the results at the end of the year, you’re
university professors is the thought that a student   going to be very disappointed,” said McKinnell.62
may complete his or her thesis research and then           In addition, the project monitor at the com-
                                                      pany often provides internal profiles at the

                                                                                                       BUSINESS–HIGHER EDUCATION FORUM 89
                                          CHAPTER 6

beginning of the effort, at the point when a          with that in mind as opposed to just having every-
patent should be considered, and at the end of        thing reviewed on their internal activities and
the year.63 The company integrates these reports      what’s done on the outside is ignored.”70
into research summaries and uses them in proj-              Companies also should periodically evaluate
ect planning and personnel evaluation.                collaborations with strategic partner universities.
Reporting requirements in a strategic university-     Rather than just reviewing the results of specific
industry relationship can become quite complex,       projects, however, these assessments should rate
but the system at smaller companies is usually        the efficiency and effectiveness of the entire rela-
more informal.64                                      tionship, including the university legal team, fac-
                                                      ulty cooperation, and any change in the
Measuring Success                                     relationship over time. Selection and continuation
      Metrics for evaluating a collaboration’s suc-   of a university as a “preferred provider” should be
cess can be applied at the project, personnel, and    based on a track record of success.71
organization level. Assessing the integration of            Evaluation of master agreements and strategic
collaborative research results into product and       alliances generally is a formal process, which
service development, however, is something that       includes regular reviews of both the research
most companies do not do well.65                      results and the collaborative process. It questions
      Companies can improve project evaluation        whether new projects and individuals are involved
by creating, and sharing, a matrix of measure-        in the relationship and whether academic freedom
ments to evaluate various types of projects. The      is impaired.The University of Massachusetts and
matrix should differentiate among problem-            Pennsylvania State University include this review
solving, exploratory, and regulatory research, and    process in their master agreements, and the part-
should recognize that different factors will be       nerships between Washington University in St.
important at various stages in the project.           Louis and Pharmacia,72 and between U.C.
“Raising a short set of generally accepted stan-      Berkeley and Novartis, do the same.
dards to high visibility corporation-wide develops          Success isn’t easy. “We made our External
a culture of careful assessment of external proj-     Technology Program a core competency just in
ects,” wrote Starbuck.66                              the fall of 1998,” observed Theodore Tabor, man-
      Project assessment also can benefit from         ager of External Research for Dow Chemical
peer review in publications or through presenta-      Co. “What is interesting is that we’ve had this
tions at scientific meetings. Funding by third         program in place for nearly 20 years now. It took
parties—such as the federal Small Business            a lot of work.”73
Innovative Research (SBIR) program or
Department of Defense research-funding
programs—offers additional external assess-
ments.67 The president of one start-up company
consciously uses the SBIR sponsoring agencies
                                                        Companies should strive to integrate university research collaborations into
as a source of external review.68
                                                        their product and service development process where appropriate. They
      With appropriate metrics, project evaluations
                                                        should involve their business units in this process, manage the collaborations
can also be used to assess the company project
                                                        appropriately, and plan for the turnover of key company personnel. Wherever
manager.When expectations have been met, the
                                                        possible, the company should involve students in the collaboration. The com-
manager can be rewarded. These metrics should
                                                        pany should modify its personnel evaluation systems as necessary to reward
be established during the project definition
                                                        the establishment of internal and external interdisciplinary teams. To achieve
phase.69 The same concept also can apply to com-
                                                        results, company leaders must make a long-term commitment.
pany researchers. “The annual performance eval-
uation of our scientists should include a review of
the goals and objectives of external collaborations
that they support,” said Pagani.“They are reviewed

90 Working Together, Creating Knowledge
                                                         Corporate Best Practices: Making Collaborations a Core Competency

Broadening the Collaboration                             13
                                                            Robert L. Carman, interview by Beth Starbuck,
     Research-intensive companies involved in            Calyx, Inc., Case Study Final Report,
                                                         7 September 2000, 18.
collaborations with universities also might find it       14
                                                            Case Study Final Report, 7 September 2000, 9.
worthwhile to join hands with universities in            15
                                                            Alan J. Lesser, interview by Beth Starbuck,
some areas outside the laboratory. For example,          Calyx, Inc., Case Study Final Report,
joint examination of potential ethical issues            7 September 2000, 34–35.
involved in the research could provide a wider              Ibid., 3.
perspective and help arm companies against dis-             Gene Allen and Rick Jarman, Collaborative R&D:
                                                         Manufacturing’s New Tool (New York, NY: John Wiley
ruptive surprises—not just in clinical research, but
                                                         and Sons, 1999), 70.
also in exploratory areas such as stem-cell              18
                                                            Case Study Final Report, 7 September 2000, 5.
research, tissue engineering, and genetically mod-       19
                                                            Robert L. Carman, interview by Beth Starbuck,
ified organisms. Moreover, such expanded collab-          Calyx, Inc., Case Study Final Report,
orations might enhance the abilities of both sides       7 September 2000, 18.
                                                            Ray Edelman, interview by Beth Starbuck, Calyx,
to improve public understanding of the actual sci-
                                                         Inc., Case Study Final Report, 7 September 2000, 19.
entific issues involved and of the opportunities          21
                                                            Case Study Final Report, 7 September 2000, 11.
and benefits, as well as the challenges, of techno-       22
                                                            Ibid., 9.
logical innovations.                                     23
                                                            Elizabeth Starbuck,“Optimizing University
                                                         Research Collaborations,” Research Technology
                                                         Management (January-February 2001): 42.
                                                            Emil Sarpa, interview by Beth Starbuck,
                                                         Calyx, Inc., Case Study Final Report,
                                                         7 September 2000, 27.
                                                            Randolph Guschl,“Technology Transfer:Too Many
NOTES                                                    Options?” Chemtech (July 1997): 8.
  Hank McKinnell, remarks at Business–Higher             26
Education Forum summer 2000 meeting, Mystic, CT,         27
                                                            Emil Sarpa, interview by Randall Bramley,
29 June 2000.
2                                                        IEEE Computational Science and Engineering
  Rick Jarman, remarks during Making Collaborations a
                                                         (July-September 1998): 10.
Corporate Core Competency teleconference,                28
                                                            Randolph Guschl,“Technology Transfer:Too Many
15 October 1999, 19.
3                                                        Options?” Chemtech (July 1997): 9.
  Ralph L. Hutcheson, interview by Beth Starbuck,        29
                                                            Ibid., 8 and 10.
Calyx, Inc., Case Study Final Report,                    30
                                                            Case Study Final Report, 7 September 2000, 3.
7 September 2000, 43.                                    31
4                                                           Ibid., 7.
  Robert L. Carman, interview by Beth Starbuck,          32
                                                            Frank J. Knoll, interview by Beth Starbuck, Calyx,
Calyx, Inc., Case Study Final Report,
                                                         Inc., Case Study Final Report, 7 September 2000, 8.
7 September 2000, 18                                     33
5                                                           Gene Allen and Rick Jarman, Collaborative R&D:
  Case Study Final Report, 7 September 2000, 5.
6                                                        Manufacturing’s New Tool (New York, NY: John Wiley
  Emil Sarpa, interview by Beth Starbuck, Calyx, Inc.,
                                                         and Sons, 1999), 40.
Case Study Final Report, 7 September 2000, 27            34
7                                                           Ibid., 53.
  Hank McKinnell, remarks at Business–Higher             35
                                                            Randolph Guschl,“Technology Transfer: Too Many
Education Forum summer 2000 meeting, Mystic, CT,
                                                         Options?” Chemtech (July 1997): 7–8.
29 June 2000.                                            36
8                                                           Elizabeth Starbuck,“Optimizing University
  Gene Allen and Rick Jarman, Collaborative R&D:
                                                         Research Collaborations,” Research Technology
Manufacturing’s New Tool (New York, NY: John Wiley
                                                         Management (January-February 2001): 43.
and Sons, 1999), 91–92.                                  37
9                                                           Unlocking Our Future: Toward a New National Science
  Elizabeth Starbuck,“Optimizing University
                                                         Policy, Committee on Science, U.S. House of
Research Collaborations,” Research Technology
                                                         Representatives, September 1998, 41.
Management (January-February 2001): 41.                  38
10                                                          Case Study Final Report, 7 September 2000, 8.
   Case Study Final Report, 7 September 2000, 5.         39
11                                                          Ron Iacocca, interview by Beth Starbuck, Calyx,
   Michael J. Montague, interview by Beth Starbuck,
                                                         Inc., Case Study Final Report, 7 September 2000, 31.
Calyx, Inc., Case Study Final Report,                    40
                                                            Gene Allen and Rick Jarman, Collaborative R&D:
7 September 2000, 23.
12                                                       Manufacturing’s New Tool (New York, NY: John Wiley
   Karen Hersey, remarks during Building an Effective
                                                         and Sons, 1999), 204.
University Technology Transfer Team teleconference,      41
                                                            Bill Decker, through Mary Sue Coleman, e-mail to
17 December 1999, 33 and 35.
                                                         Project Director, 2 August 2000.

                                                                                                            BUSINESS–HIGHER EDUCATION FORUM 91
                                          CHAPTER 6

42                                                         62
   Council on Governmental Relations, letter to               Hank McKinnell, remarks at Business–Higher
Project Director, 8 March 2000.                            Education Forum summer 2000 meeting, Mystic, CT,
   Memo to Judy Irwin, from the office of Scott             29 June 2000.
Cowen, 8 August 2000.                                         Steve Hahn, interview by Beth Starbuck, Calyx, Inc.,
   Diana MacArthur, memo to Project Director, 27           Case Study Final Report, 7 September 2000, 22.
July 2000.                                                    Ibid., 3.
45                                                         65
   Edward Pagani, presentation to Government-                 Ibid., 7.
University-Industry Research Roundtable discussion,           Elizabeth Starbuck,“Optimizing University
Washington, DC, 17 December 1999.                          Research Collaborations,” Research Technology
   Robert L. Carman, interview by Beth Starbuck,           Management (January-February 2001): 44.
Calyx, Inc., Case Study Final Report,                         Case Study Final Report, 7 September 2000, 7.
7 September 2000, 19.                                         Ibid.
47                                                         69
   Elizabeth Starbuck,“Optimizing University                  Elizabeth Starbuck,“Optimizing University
Research Collaborations,” Research Technology              Research Collaborations,” Research Technology
Management (January-February 2001): 44.                    Management (January-February 2001): 44.
48                                                         70
   Case Study Final Report, 7 September 2000, 10.             Edward Pagani, remarks during Building an Effective
   Ibid., 10.                                              University Technology Transfer Team teleconference,
   Ray Edelman, interview by Beth Starbuck, Calyx,         17 December 1999, 30.
Inc., Case Study Final Report, 7 September 2000, 41.          Elizabeth Starbuck,“Optimizing University
   Elizabeth Starbuck,“Optimizing University               Research Collaborations,” Research Technology
Research Collaborations,” Research Technology              Management (January-February 2001): 44.
Management (January-February 2001): 43.                       Case Study Final Report, 7 September 2000, 7.
52                                                         73
   Case Study Final Report, 7 September 2000, 2.              Theodore E.Tabor, remarks during Making
   Beth Starbuck, e-mail to Project Director, 25           Collaborations a Corporate Core Competency teleconfer-
October 2000.                                              ence, 15 October 1999, 21.
   Robert L. Carman, interview by Beth Starbuck,
Calyx, Inc., Case Study Final Report,
7 September 2000, 19.
   Steve Hahn, interview by Beth Starbuck, Calyx, Inc.,
Case Study Final Report, 7 September 2000, 42.
   Ibid., 22.
   Ron Iacocca, interview by Beth Starbuck, Calyx, Inc.,
Case Study Final Report, 7 September 2000, 31.
   Steve Hahn, interview by Beth Starbuck, Calyx, Inc.,
Case Study Final Report, 7 September 2000, 22.
   A Report on Enhancing Industry-University Cooperative
Research Agreements, Industrial Research Institute,
Washington, DC, 1995, 5.
   Steve Hahn, interview by Beth Starbuck, Calyx, Inc.,
Case Study Final Report, 7 September 2000, 22.
   Ibid., 22.

92 Working Together, Creating Knowledge

Ribozyme Pharmaceuticals Inc.:
The View from a Smaller Company

W             hen Ribozyme Pharmaceuticals Inc. (RPI) was
              in its start-up stage––a small biotechnology ven-
ture aimed at developing therapies from the Nobel prize-
                                                                     genomes of RNA viruses. They could add a whole new
                                                                     class of weapons to medicine’s arsenal. Cech, who now is
                                                                     president of the Howard Hughes Medical Institute, and
winning discoveries of University of Colorado researcher             Sidney Altman of Yale University shared the 1989 Nobel
Tom Cech (pronounced “check”)––RPI President and Chief               Prize in Chemistry for the discovery.
Executive Officer Ralph Christoffersen made the university                  Christoffersen’s half-million-dollar grant to the
an offer it couldn’t refuse: a $500,000, five-year research          University of Colorado was a huge bet for a young start-up
grant, to be used for anything the university wanted to do.          company, amounting to 5 to 10 percent of its research
       “I used to be the president of a university, Colorado         budget. The significance of the stake dramatizes what
State, and I was an academic for 20 years,” Christoffersen           Christoffersen calls “the biggest conceptual difference”
says, “so I had a pretty good idea of what kinds of things           between small start-ups and large pharmaceutical compa-
would be of interest to the university. And one of the things        nies when it comes to university-industry research collabo-
that’s most difficult to get, for a university president, is unre-   rations: Large pharmaceutical companies can take more
stricted dollars.” State funding generally isn’t unrestricted,       chances, and can do so with substantially more money.
Christoffersen notes, and federal research grants certainly                 “Large companies can and do create a collection of
aren’t. “So I thought this would be a powerful thing for the         interactions with universities, multiple ones, because they
university president’s office to have.”                              can afford it,” says Christoffersen, who was senior vice pres-
       In return, RPI got an exclusive option to license any         ident and director of U.S. research for SmithKline Beecham
ribozyme-related discovery made in University of Colorado            Pharmaceuticals from 1989 to 1992. “Therefore, the impor-
laboratories––whether or not RPI funding had been                    tance of any one collaboration is less than is typically the
involved. The company already had an exclusive license to            case for a small company . . . .[where] resources are limited,
the university’s broad patents on ribozyme manufacture or            you only have so many bets you can make, and you have
use, and it licensed another Colorado patent during the five-        to pick them far more carefully.”
year grant period. It also forged friendly ties with Colorado               A smaller company does have some advantages over
University scientists in collaborative projects, in seminars at      an industry giant in a university collaboration, however. It
RPI’s labs or on the university’s nearby Boulder campus,             can move more quickly. For example, although RPI’s agree-
and by recruiting Cech and other Colorado researchers to its         ment with the University of Colorado included the usual pro-
Scientific Advisory Board.                                           visions for publication delays to let the company evaluate a
       “Tom Cech invented this technology, and the university        discovery, the company never had to hold things up for long
had made substantive investments in RNA chemistry and                or to ask for an extension. “We can look at something in a
biochemistry, and we were an RNA company, so for us to               week, and have a patent written in a month,” Christoffersen
have a connection to that set of expertise was very valuable,        says. “So in practice, it’s not a real problem.”
especially in the early days,” Christoffersen says.                         Whatever a company’s size, Christoffersen says, the
       RPI was founded in 1992 to develop Cech’s discovery           trickiest part of any university-industry research collabora-
that segments of RNA––once thought to have no function               tion involves balancing “the university’s need and require-
beyond a role in translating genes’ blueprints into                  ment for academic freedom, collegiality, and openness, with
proteins––can act as enzymes and cleave other RNA mol-               the company’s need for confidential information.”
ecules. Dubbed ribozymes, these small segments of RNA
offer the prospect of marvelously selective drugs to block the
body’s production of damaging proteins or to chew up the

                                                                                                                                BUSINESS–HIGHER EDUCATION FORUM 93
Ribozyme Pharmaceuticals Inc.: The View from a Smaller Company/Continued

       For example, if a company wants its university partner     that inhibits the formation of tumor-feeding blood vessels by
to file for a patent on a particular invention, secrecy is        blocking production of a key receptor, and a ribozyme
essential––at least for a while. Disclosure of the information    designed to destroy the hepatitis C virus as it attempts to
in a published report or a presentation at a scientific meet-     multiply in liver cells, are in Phase 1 safety trials and should
ing before the patent application is filed could limit or even    enter Phase 2 trials, aimed at assessing efficacy, this year.
invalidate the patent claim.                                      By year’s end, a drug to block breast-cancer cells’ produc-
       But students and postdoctoral fellows who are working      tion of a protein that spurs tumor growth, and an antiviral
on the discovery in the university inventor’s lab need to write   aimed at hepatitis B are expected to enter Phase 1 trials.
papers and theses, and they must have the opportunity to                  “These are real designer drugs,” says Christoffersen.
present their work at seminars and scientific conferences.        “You can design a ribozyme so that it will find and bind only
       “There is an inherent conflict of interest between what    to its target, and nothing else. And on a statistical basis, the
you need to do to keep the information nonpublic in order for     particular sequence of 15 nucleotides in the target will
it to be valid in a patent, and the way you go about having       appear only once in the entire [human] genome.” So
students give seminars,” Christoffersen says. “It’s a very        ribozyme-based drugs also should have low side effects,
tricky thing for a university, because once they decide they      “and that’s in fact been the case,” he says. “Both in animal
want to patent something, the principal investigator––most        studies and in our human clinical studies thus far, we’ve
of the time––has to be careful about what kind of informa-        seen an extremely benign side-effect profile.”
tion is made public when.”                                                The company also continues to maintain smaller-scale
       Now, six years after going public, and having grown        research collaborations with the University of Colorado as
from 15 to about 120 employees, RPI has four candidate            well as other universities.
drugs in or about to enter clinical trials. An anticancer drug

94 Working Together, Creating Knowledge

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