[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
BEST PRACTICES IN TRANSFORMING
RESEARCH INTO INNOVATION:
CREATIVE APPROACHES TO THE
BAYH-DOLE ACT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION
COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
TUESDAY, JUNE 19, 2012
__________
Serial No. 112-89
__________
Printed for the use of the Committee on Science, Space, and Technology
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Available via the World Wide Web: http://science.house.gov
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COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR., EDDIE BERNICE JOHNSON, Texas
Wisconsin JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas LYNN C. WOOLSEY, California
DANA ROHRABACHER, California ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland BRAD MILLER, North Carolina
FRANK D. LUCAS, Oklahoma DANIEL LIPINSKI, Illinois
JUDY BIGGERT, Illinois DONNA F. EDWARDS, Maryland
W. TODD AKIN, Missouri BEN R. LUJAN, New Mexico
RANDY NEUGEBAUER, Texas PAUL D. TONKO, New York
MICHAEL T. McCAUL, Texas JERRY McNERNEY, California
PAUL C. BROUN, Georgia TERRI A. SEWELL, Alabama
SANDY ADAMS, Florida FREDERICA S. WILSON, Florida
BENJAMIN QUAYLE, Arizona HANSEN CLARKE, Michigan
CHARLES J. ``CHUCK'' FLEISCHMANN, SUZANNE BONAMICI, Oregon
Tennessee VACANCY
E. SCOTT RIGELL, Virginia VACANCY
STEVEN M. PALAZZO, Mississippi VACANCY
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
------
Subcommittee on Technology and Innovation
HON. BENJAMIN QUAYLE, Arizona, Chair
LAMAR S. SMITH, Texas DONNA F. EDWARDS, Maryland
JUDY BIGGERT, Illinois FREDERICA S. WILSON, Florida
RANDY NEUGEBAUER, Texas DANIEL LIPINSKI, Illinois
MICHAEL T. McCAUL, Texas BEN R. LUJAN, New Mexico
CHARLES J. ``CHUCK'' FLEISCHMANN, SUZANNE BONAMICI, Oregon
Tennessee VACANCY
E. SCOTT RIGELL, Virginia
RANDY HULTGREN, Illinois EDDIE BERNICE JOHNSON, Texas
CHIP CRAVAACK, Minnesota
RALPH M. HALL, Texas
C O N T E N T S
Tuesday, June 19, 2012
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Judy Biggert, Vice Chairman,
Subcommittee on Technology and Innovation, Committee on
Science, Space, and Technology, U.S. House of Representatives.. 7
Written Statement............................................ 8
Statement by Representative Donna F. Edwards, Ranking Minority
Member, Subcommittee on Technology and Innovation, Committee on
Science, Space, and Technology, U.S. House of Representatives.. 8
Written Statement............................................ 10
Prepared Statement by Representative Benjamin Quayle, Chair,
Subcommittee on Technology and Innovation, Committee on
Science, Space, and Technology, U.S. House of Representatives.. 11
Witnesses:
Todd T. Sherer, President, the Association of University
Technology Managers
Oral Statement............................................... 12
Written Statement............................................ 14
Catherine Innes, Director, Office of Technology Development,
University of North Carolina at Chapel Hill
Oral Statement............................................... 24
Written Statement............................................ 26
Ken Nisbet, Executive Director; University of Michigan Technology
Transfer
Oral Statement............................................... 31
Written Statement............................................ 33
Robert Rosenbaum, President and Executive Director, Maryland
Technology Development Corporation
Oral Statement............................................... 39
Written Statement............................................ 41
Discussion....................................................... 49
Appendix 1: Answers to Post-Hearing Questions
Dr. Todd T. Sherer, President, The Association of University
Technology Managers............................................ 64
Ms. Catherine Innes, Director, Office of Technology Development,
University of North Carolina at Chapel Hill.................... 67
Mr. Ken Nisbet, Executive Director; University of Michigan
Technology Transfer............................................ 75
Mr. Robert Rosenbaum, President and Executive Director, Maryland
Technology Development Corporation............................. 79
BEST PRACTICES IN TRANSFORMING
RESEARCH INTO INNOVATION;
CREATIVE APPROACHES TO THE
BAYH-DOYLE ACT
----------
TUESDAY, JUNE 19, 2012
House of Representatives,
Subcommittee on Technology and Innovation,
Committee on Science, Space, and Technology,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:01 a.m., in
Room 2318 of the Rayburn House Office Building, Hon. Judy
Biggert [Vice Chairwoman of the Subcommittee] presiding.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mrs. Biggert. The Subcommittee on Technology and Innovation
will come to order.
Good morning, everyone. I would like to welcome everyone to
today's hearing on the transfer of innovations that come from
research funded by the Federal Government. The Federal
Government invests more than $135 billion each year in research
and development activities, and a portion of that funding
supports the majority of basic research conducted by
universities. The transfer of knowledge from universities into
the marketplace can have profound economic and social impacts,
so we are always looking for more ways to encourage this
process. I am glad that our Chairman decided to hold this
important hearing so that our Subcommittee can learn about the
innovation--innovative approaches that institutions across the
Nation are taking to accelerate the transfer of federally
funded research.
In fact, tech transfer has been a priority for me. To
further this goal in the energy sphere, I drafted the Energy
Technology Transfer Act, which was signed into law in 2008.
This legislation created jobs by accelerating breakthrough
energy technologies out of the national labs and into the
marketplace. It was based on best practices developed by
agricultural extension programs at the USDA.
For American universities, however, tech transfer is
governed by the Bayh-Dole Act. December 2010 marked the 30th
anniversary of the enactment of the Bayh-Dole Act, which
permitted universities to retain the intellectual property
rights to inventions developed with federal funding.
The Act was passed during bleak economic conditions, not
too unlike those that we are facing now. The United States was
enduring an economic recession, declining productivity, and
competition from Germany and Japan. All of this sounds
familiar. The purpose of Bayh-Dole was simple: facilitate and
support universities and small businesses in the
commercialization of their inventions, allowing society to
benefit and increasing U.S. global competitiveness. Promoting
university-based innovation and technology transfer was seen as
a way to combat the forces then working against the United
States. Thirty years later, Bayh-Dole still elevates these
efforts.
The collective efforts encouraged under the Bayh-Dole Act
have brought about the commercialization of many new
technological advances that impact the lives of millions of
people across the Nation.
Prior to the enactment of Bayh-Dole, less than five percent
of U.S. Government patents were commercially licensed. In 1980,
390 patents were awarded to universities; by 2009, the number
increased to over 3,000. In my home State of Illinois, the
University of Illinois at Urbana-Champaign holds nearly 400
patents and has created 61 companies.
I look forward to hearing from our witnesses about how
university technology transfer has evolved since the passage of
Bayh-Dole, and the innovative activities and partnerships
institutions are trying today to get more results to the
public. We thank each of you for being here and look forward to
your testimony.
Let me just say that, unfortunately, Chairman Quayle was
unable to attend today's hearing, but I am glad to be here to
hear about the innovative approaches to technology transfer you
are all here to discuss.
I now recognize the gentlelady from Maryland, Ms. Edwards,
for her opening statement.
[The prepared statement of Mrs. Biggert follows:]
Prepared Statement of Subcommittee Vice Chairwoman Judy Biggert
Good morning. I would like to welcome everyone to today's hearing
on the transfer of innovations that come from research funded by the
Federal Government. The Federal Government invests more than $135
billion each year in research and development activities, and a portion
of that funding supports the majority of basic research conducted by
universities. The transfer of knowledge from universities into the
marketplace can have profound economic and societal impacts, so we are
always loooking for more ways to encourage this process. I am glad our
Chair decided to hold this important hearing so that our Subcommittee
can learn about the innovative approaches that institutions across the
Nation are taking to accelerate the transfer of federally funded
research.
In fact, tech transfer has long been a personal priority for me. To
further this goal in the energy sphere, I drafted the Energy Technology
Transfer Act, which was signed into law in 2008. This legislation
creates jobs by accelerating breakthrough energy technologies out of
national labs and into the marketplace. It was based on best practices
developed by agricultural extension programs at the USDA.
For American universities, however, tech transfer is governed by
the Bayh-Dole Act. December 2010 marked the 30th anniversary of the
enactment of the Bayh-Dole Act, which permitted universities to retain
the intellectual property rights to inventions developed with federal
funding.
The Act was passed during bleak economic conditions, not too unlike
those we are facing now. The United States was enduring an economic
recession, declining productivity, and competition from Germany and
Japan--all of this sounds familiar. The purpose of Bayh-Dole was
simple: facilitate and support universities and small businesses in the
commercialization of their inventions, allowing society to benefit and
increasing U.S. global competitiveness. Promoting university-based
innovation and technology transfer was seen as a way to combat the
forces then working against the U.S. Thirty years later, Bayh-Dole
still elevates those efforts.
The collaborative efforts encouraged under the Bayh-Dole Act have
brought about the commercialization of many new technological advances
that impact the lives of millions of people across the Nation.
Prior to the enactment of Bayh-Dole, less than five percent of U.S.
Government patents were commercially licensed, In 1980, 390 patents
were awarded to universities; by 2009, the number increased to over
3,000. In my home State of Illinois, the University of Illinois at
Urbana-Champaign holds nearly 400 patents and has created 61 companies.
I look forward to hearing from our witnesses about how university
technology transfer has evolved since the passage of Bayh-Dole and the
innovative activities and partnerships institutions are trying today to
get more research results to the public. We thank each of you for being
here and look forward to your testimony.
Ms. Edwards. Thank you, Madam Chair. And thank you to the
Chairman also for calling this hearing on university technology
transfer. And I want to thank our witnesses for joining us here
today to share your perspective on how we can get more
promising research out of the university labs and right into
the marketplace.
I am pleased that we are taking a serious look at this
issue. I am convinced there are a number of ways that we can
strengthen and improve technology transfer in this country.
There are far too many good ideas out there in our
universities, good ideas that have been developed through tax--
federal taxpayer support, but they languish. And as we continue
to look for ways to strengthen our economy and secure our
global competitiveness, I think it would be wise to focus on
technology transfer.
I am excited to hear from our witnesses today about some
innovative approaches to technology transfer and to discuss the
ways that the Federal Government can facilitate these
approaches. I am particularly interested in hearing Mr.
Rosenbaum's testimony today about our experience in Maryland.
The truth is there are various elements that contribute to
efficient and effective technology transfer. First, you have to
be able to identify research with commercial potential. This is
not an easy task. It can be a significant challenge since
researchers are not necessarily equipped to recognize
commercial potential and industry has limited exposure to all
the research coming out of universities.
At the same time, research may have commercial relevance in
a space not initially envisioned by the researcher or
recognized by industry. Finding better ways to identify ideas
with commercial potential is a challenge but one that is
critical to the entire technology transfer process.
Once you have identified an idea or concept with commercial
potential, you have to demonstrate its technical feasibility.
This is often accomplished through some sort of proof-of-
concept research and development of a prototype. Unfortunately,
there are limited financial resources for this sort of research
and development. I am pleased that the Economic Development
Administration has started funding these sorts of activities
through its i6 Challenges, which are generally focused on
accelerating technology commercialization. And I am also
pleased that EDA announced an i6 Challenge just last week
specifically on the development or expansion of proof-of-
concept centers.
Once the technical feasibility of an idea or concept is
proven, we have to get that technology out of the lab and into
the hands of a private sector entity that can commercialize it.
In some cases, this is accomplished by the researcher leaving
academia to start his or her own business, but it is often
achieved by the university licensing that technology to an
outside company or entrepreneur. Unfortunately, we frequently
hear from industry that licensing university-developed
technology is far from easy or straightforward and that often
bureaucratic red tape and unnecessary time delays frustrate
and, in some cases, deter industry altogether.
Our economy can't afford to let good ideas die in
university labs. We need to figure out a way to do this more
seamlessly, and I am eager to hear from our witnesses today
about innovative ways of speeding up this process and making it
more efficient.
And finally, once the technology makes its way out of the
lab, it needs to be commercialized. This may include large-
scale demonstrations and the development of functional
prototypes, putting together business plans and management
teams, and carrying out market validation activities.
Certainly, these are private sector functions. However, when it
comes to technology that has been developed with federal
taxpayer resources, I believe the Federal Government may have
an important role to play in facilitating the commercialization
of these technologies. Our responsibility should be to ensure
that federal taxpayers get the biggest bang for our buck and
that technologies developed with federal resources make it
across the finish line and into the marketplace.
There are, unfortunately, limited resources for
commercialization assistance for federally funded technologies.
I hope today we can discuss whether there are appropriate
leverage points for the Federal Government when it comes to
commercializing these sorts of technologies. I hope our
witnesses will challenge us to think more broadly.
Mr. Chairman, I want to--or Madam Chair, I want to thank
you again for holding this hearing, and I look forward to
hearing from our witnesses. And I hope we will be following up
this hearing with a separate hearing focused on technology
transfer from federal labs. I am pretty confident that there
are a number of Members on both sides of the aisle that are
interested in taking a critical look at these efforts and ways
that they can be strengthened and improved. And with that, I
yield the balance of my time.
[The prepared statement of Ms. Edwards follows:]
Prepared Statement of Subcommittee Ranking Member Donna F. Edwards
Mr. Chairman, thank you for calling this hearing on university
technology transfer. And thank you to our witnesses for joining us here
today to share your perspective on how to get more promising research
out of university labs and into the marketplace.
I am very pleased that we are taking a serious look at this issue.
I am convinced that there are a number of ways that we can strengthen
and improve technology transfer in this country. There are far too many
good ideas out there in our universities--good ideas that have been
developed through federal taxpayer support--that languish. And, as we
continue to look for ways to strengthen our economy and secure our
global competitiveness, I think it would be wise to focus on technology
transfer. I am excited to hear from our witnesses today about some
innovative approaches to technology transfer and discuss ways that the
Federal Government can help facilitate these approaches.
The truth is that there are various elements that contribute to
efficient and effective technology transfer.
First, you have to be able to identify research with commercial
potential. This can be a significant challenge since researchers are
not necessarily equipped to recognize commercial potential, and
industry has limited exposure to all of the research coming out of
universities. At the same time, research may have commercial relevance
in a space not initially envisioned by the researcher or recognized by
industry. Finding better ways to identify ideas with commercial
potential is certainly a challenge, but one that is critical to the
entire technology transfer process.
Once you've identified an idea or concept with commercial
potential, you have to demonstrate its technical feasibility. This is
often accomplished through some sort of proof of concept research and
the development of a prototype. Unfortunately, there are limited
financial resources for this sort of research and development. I am
very pleased that the Economic Development Administration has started
funding these sorts of activities through its i6 challenges, whic are
generally focused on accelerating technology commercialization, and am
particularly pleased that the EDA announced an i6 challenge just last
week specifically on the development or expansion of proof of concept
centers.
Once the technical feasibility of an idea or concept is proven, we
have to get that technology out of the lab and into the hands of a
private sector entity that can commercialize it. In some cases, this is
accomplished by the researcher leaving academia to start his or her own
business. But it is also often acheived by the university licensing
that technology to an outside company or entrepreneur. Unfortunately,
we have frequently heard from industry that licensing university-
developed technology is far from easy or straightforward and that,
often, bureaucratic red tape and unnecessary time delays frustrate
and--in some cases--deter industry altogether. Our economy can't afford
to let good ideas die in university labs. We need to figure out ways to
do this more seamlessly, and I am eager to hear from some of our
witnesses today about innovative ways of speeding up this process and
making it more efficient.
And, finally, once the technology makes its way out of the lab, it
needs to be commercialized. This may include large-scale demonstrations
and the development of functional prototypes, putting together business
plans and management teams, and carrying out market validation
activities. Certainly, these are private sector functions. However,
when it comes to technologies that have been developed with federal
taxpayer resources, I believe that the Federal Government may have an
important role to play in facilitating the commercialization of those
technologies.
Our responsibility should be to ensure that federal taxpayers get
the biggest bang for their buck and that technologies developed with
federal resources make it across the finish line and into the
marketplace. There are, unfortunately, limited resources for
commercialization assistance for federally funded technologies. I hope
today that we can discuss whether there are appropriate leverage points
for the Federal Government when it comes to commercializing these sorts
of technologies.
Mr. Chairman, thank you again for holding this hearing. I look
forward to hearing from our witnesses on this important topic. I also
hope that we will be following up this hearing with a separate hearing
focused on technology transfer from federal labs. I am fairly confident
that there are a number of Members on both sides of the aisle that are
very interested in taking a critical look at these efforts and ways
that they can be strengthened and improved. I yield back the balance of
my time.
Mrs. Biggert. Thank you, Ms. Edwards.
If there are Members who wish to submit additional opening
statements, your statements will be added to the record.
[The prepared statement of Mr. Quayle follows:]
Prepared Statement of Subcommittee Chairman Benjamin Quayle
Good morning. I would like to welcome eeryon to today's hearing.
Today we have the opportunity to survey some of the activities that
universities and other organizations are undertaking to improve the
transfer of federally funded research. I know there are some innovative
activities regions are taking across the country, and I am looking
forward to hearing about what things that have been found to work well.
Passed in 1980, the Bayh-Dole Act enabled universities and
nonprofit organizations to retain title to their inventions that result
from federally funded research programs. In 2002, the Economist
Technology Quarterly stated that the 1980 Bayh-Dole Act was
``[p]ossibly the most inspired piece of legislation to be enacted in
America over the past half-century...More than anything, this single
policy measure helped reverse America's precipitous slide into
industrial irrelevance.'' Even after 30 years under Bayh-Dole, the
process of technology transfer is evolving. That's why we are here
today, to understand how our Nation's universities and nonprofits can
more effectively transfer federally funded technology to better
society.
University research is generally long term and exploratory in
nature. Even when a university works to patent a discovery, it may be
many years before the intellectual property proves to be a marketable
success. The are many reasons universities create new innovations,
including profit, but I believe both the technology transfer process
and incentives to commercialize are more complex than simply making
money. Economic reward is just one of many metrics I suspect these
institutions are driven by to accelerate technology transfer.I look
forward to hearing from our witnesses about their experiences with
technology transfer and its evolution. Thank you for your presence and
willingness to testify before us today.
Mrs. Biggert. At this time, I would like to introduce our
witnesses, and then we will proceed to hear from each of them
in order.
Our first witness is Dr. Todd Sherer, President of the
Association of University Technology Managers and an Associate
Vice President of Research Administration at Emory University.
Next, we will hear from Ms. Catherine Innes, who is the
Director of the Office of Technology Development at the
University of North Carolina at Chapel Hill.
Our third witness is Mr. Ken Nisbet. Mr. Nisbet is the
Executive Director of Technology Transfer at the University of
Michigan.
Our final witness is Mr. Robert Rosenbaum, the President
and Executive Director of the Maryland Technology Development
Corporation.
Again, thank you for being our witnesses this morning. As I
am sure our witnesses know, spoken testimony is limited to five
minutes each. After all of the witnesses, Members of the
Committee will have five minutes each to ask questions.
And I now recognize our first witness, Dr. Sherer, for five
minutes.
STATEMENT OF DR. TODD T. SHERER, PRESIDENT,
THE ASSOCIATION OF UNIVERSITY TECHNOLOGY MANAGERS
Dr. Sherer. Madam Chairwoman and Honorable Members of this
Subcommittee, thank you for the opportunity to testify before
you today on the important topic of transferring university
technology transfer from lab to the marketplace. My name is
Todd Sherer, and I am the President of the Association of
University Technology Managers known as AUTM. AUTM is an
international organization with more than 3,000 members,
primarily university technology transfer professionals who come
from over 300 universities, research institutions, and teaching
hospitals.
I also head the Technology Transfer Office at Emory
University, and my office is responsible for managing a
portfolio of around 1,000 biomedical inventions made by Emory
faculty. We work closely with our faculty inventors to evaluate
early-stage technologies for commercial potential, determine
the best intellectual property protection strategy, and market
our technologies through a variety of channels in the hopes of
finding a corporate partner. If we find an interested company,
then we negotiate appropriate contractual partnerships to
ensure that our inventors, our universities, and taxpayers
benefit from the ultimate products. After licenses are signed,
we maintain relationships throughout the life of the agreement,
sometimes insisting upon return of our technology should our
partners decide to abandon its development.
As a result of Emory's passion and commitment to
commercializing its technology, over 90 percent of HIV-infected
patients in the United States and Europe on lifesaving
antiviral therapy take a drug developed by our researchers.
In the decades leading up to the 1980 Bayh-Dole Act, the
Federal Government accumulated title to approximately 28,000
patents, of which fewer than five percent were licensed to
companies for commercialization. Unless an exception was
granted, the ownership of inventions was kept centrally at the
federal agencies from which they were funded. The passage of
the Bayh-Dole Act boldly changed government patent policy,
providing ownership and control to any invention made with
federal funds to the very universities and small businesses
that made them.
Since its passage, the Bayh-Dole Act has proven
instrumental in recognizing that federal patent policy is an
integral part of U.S. competitiveness and it is the envy of
nearly every country in the world, as evidenced by similar
legislation in a wide variety of countries, including South
Africa, India, China, Japan, South Korea, and Taiwan. Its
beauty is that it aligns ownership and control of patent rights
to create incentives for universities, researchers, and
companies to develop and invest in patenting and licensing
their new technologies. Without local pride of ownership and
control created by the Act, many of these discoveries would
still be languishing on the shelf and their revenues would be
returned to fund even more research.
According to an article published in the journal Nature,
``an invention made by an academic in the United States has a
better chance of going to market than it does in other
nations.'' Since the Bayh-Dole Act was passed, more than 5,000
new companies have formed around university research, the
majority of which are located in close proximity to the
university.
In fiscal year 2010, university research helped create on
average 1.7 new companies a day. University technology transfer
creates billions of dollars of direct benefits to the U.S.
economy every year. In fiscal year 2010, universities helped
create 657 new products.
According to the former President of NASDAQ, an estimated
30 percent of its value is rooted in university-based federally
funded research results.
Technology transfer is not perfect. After all, we work at
the riskiest of all stages in the innovation pathway where
funding and resources are hardest to find. The odds of any
particular technology making it to market are astronomical, so
figuring out what works has not been easy and has taken time.
Despite the challenges of working at the discovery phase,
the academic community and federal agencies continue to find
better ways to manage innovations. Technology transfer offices
are constantly adapting to changes in the economy, learning the
best practices from each other, and understanding the
marketplace. Technology transfer offices have expanded their
service to help faculty create new companies. They are creating
accelerators, finding gap funding, encouraging entrepreneurship
by faculty and students, and rewarding that entrepreneurship.
While TTOs focus on negotiating licenses, that is just the
means to an end. The end is to get technologies out the door
and into the market for the benefit of the public.
Not all technology transfer offices have the same level of
experience but they have more resources to turn to than ever
before. Universities from across the country are already
working with smaller tech transfer offices to help them improve
their technology transfer function.
AUTM will continue its commitment to providing training and
education for technology transfer professionals for years to
come. We will provide networking events for our members to
share best practices and technology transfer as we all expect
new practices to continue to emerge just as they always have.
Our members must continue to strive to find new ways to reduce
the barriers to getting our technology from lab to market. We
believe that continued support for research at NIH, NSF, and
other agencies such as the newly formed NCATS is the best way
that the Federal Government can encourage even more
commercialization of American technologies.
AUTM, as well as other organizations, believe that the U.S.
technology transfer system will continue to be the catalyst for
innovation in the U.S. economy for many decades to come.
Thank you.
[The prepared statement of Dr. Sherer follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mrs. Biggert. Thank you, Dr. Sherer.
Ms. Innes, you are recognized for five minutes.
STATEMENT OF MS. CATHERINE INNES, DIRECTOR,
OFFICE OF TECHNOLOGY DEVELOPMENT,
UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL
Ms. Innes. Thank you. Good morning, Chairwoman Biggert,
Ranking Member Edwards, and Members of the Subcommittee. Thank
you for the opportunity to appear before you today to provide
testimony on the challenging, unpredictable, and oftentimes
rewarding process of moving good ideas from university labs to
the marketplace. My name is Catherine Innes, and I am the
Director of the Office of Technology Development at the
University of North Carolina at Chapel Hill. I am responsible
for patenting and commercializing promising new inventions
arising from our research endeavors. My testimony today focuses
on the implementation and success of the Carolina Express
License Agreement, which is a one-size-fits-all approach to
licensing technologies to UNC startup companies.
In early 2009, UNC began internal discussions among faculty
and research administrators on what could be done to stimulate
and increase the volume of new companies starting around UNC
technologies and how the process could be streamlined. We
wanted to start more companies and help them become
sustainable. However, we were constrained by limited financial
resources and unable to invest in these ventures. Instead, we
focused on finding ways to make the license process faster,
easier, and more transparent so that startups could more
readily get up and running.
UNC formed a committee comprised of serial entrepreneur
faculty members, licensing staff, general counsel, and a local
venture capitalist to consider what we might do. They reviewed
the terms of previous startups and determined the historical
range of financial terms and equity positions, both at the time
of license and at the point of a liquidity event. Our data
indicated that all of our past deals had been actually very
similar and that by the time an equity was liquid, the
university's share was less than one percent. The committee
arrived, then, at a set of financial terms that the
stakeholders agreed would be fair to all parties and would not
need to be renegotiated for the company to attract financing.
Minimizing the need to renegotiate was an important objective
as the negotiation process can be both time-consuming and
costly for all involved.
A significant factor in the successful launch of this
program was the buy-in from three local law firms that worked
with the majority of our startup companies. They agreed to
forfeit the fees they would normally receive to negotiate
individual deals with the university and recommend their client
sign the express license. While in part altruistic, the firms
all expect their businesses will grow in the long run as we
increase the rate at which we are starting new companies.
Another key feature of the express license is that it is
optional. If a company wants a different deal, they are free to
negotiate that deal with the university as usual. To qualify
for the express license, the company must have a UNC faculty,
student, or staff member as one of the founders and the company
must submit a business plan for review and approval by the
university.
The financial terms of the license agreement are modest
but, we believe, fair for the stage of development of the
technologies being licensed. One of the most unique features of
the agreement is that in lieu of taking equity, the university
receives a cash payout of .75 percent of the value of the
company at a liquidity event. Typically, universities take
equity in their startup companies, but we felt the cash payoff
when the company goes public or is acquired is much less
burdensome than dealing with a stock issuance and we end up at
the same overall value point.
The full text of the Carolina express license and related
program documents can be found on my office's Website, and I
have provided that URL in my written testimony.
As with any new and different approach, there are
supporters and critics. Our motto was unique when first
implemented because it offered the same set of terms to all
startups regardless of technology. Many licensing professionals
felt that the financial terms should vary by technology or
should offer a greater return to the university. These are
relevant points and questions each institution should ask in
considering the implementation of a standard licensing program.
We have found the program to be very effective and it
serves our objective of starting more companies. In the 2-1/2
years since inception, UNC has launched 19 startup companies
around intellectual property. All but three used the Carolina
express license. We have more than doubled the number of new
companies forming each year. At this time, all these companies
are still in existence, although most are struggling with
fundraising.
We have learned through this process that most of our
companies cannot repay the university for patent expenses on
time, and thus we must carry these costs for them for much
longer than anticipated. This is straining our internal
resources, but we believe starting companies is important and
we continue to explore new ways to support this effort. Many of
our companies have gotten started by winning SBIR grants and we
very much value this program.
In summary, I strongly believe that a standard licensing
program can work for universities, particularly for licenses to
startups. For a one-size-fits-all program to be successful, the
university must be willing to settle for a fair deal rather
than the most lucrative deal. It is also important to establish
criteria for when the standard agreements can be used, and
perhaps more importantly, when they cannot.
Finally, to implement a standard agreement that is intended
to work for many deals, it is essential for the university to
gain the support and buy-in of those negotiating on behalf of
the other side of the deal because just floating a standard
that one party thinks is workable will not likely get much
traction.
Thank you again, Madam Chairwoman and Subcommittee Members,
for the opportunity to appear before you today. I stand ready
to answer any questions you may have.
[The prepared statement of Ms. Innes follows:]
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Mrs. Biggert. Thank you, Ms. Innes.
Mr. Nisbet, you are recognized for five minutes.
STATEMENT OF MR. KEN NISBET,
EXECUTIVE DIRECTOR,
UNIVERSITY OF MICHIGAN TECHNOLOGY TRANSFER
Mr. Nisbet. Thank you, Madam Chair, for the opportunity to
speak to you today on the important topic of technology
transfer and the importance to the American public. I am Ken
Nisbet, Executive Director of Tech Transfer at the University
of Michigan.
The University of Michigan has a well-deserved reputation
for excellence and the breadth and depth of its research of
activities with over $1.2 billion of research expenditures
annually. While having a robust pipeline of research
discoveries is an ingredient for tech transfer success, it is
only one component of many. A critical factor is support from
university leadership to provide the resources and
encouragement for tech transfer and entrepreneurship. Our
President, Mary Sue Coleman, our Executive Officers, our Deans,
and others regularly communicate the importance of our tech
transfer activities with our faculty, our students, our staff,
and alumni.
Each year, our faculty report to our office over 300 new
discoveries that form a diverse portfolio of technologies and
market applications. We enter into over 100 different
agreements with our industry partners and annually and spin out
an average of one new start up every five weeks, most of which
stay in Michigan. We also strive to measure what is even more
important--the impact of our technologies and our activities on
our communities, our people, and our Nation.
There are a lot of good ideas to enhance tech transfer, but
it is important to tailor these initiatives to account for the
advantages and the challenges of a particular region. I want to
highlight three particular efforts that we believe are making a
big difference at the University of Michigan.
The first involves changes in investments we have made
within our office and our university to improve our operational
effectiveness. The second is using early stage development
funding to reduce the technical and market risk of our early
stage innovations. The third is enhancing our access to talent
to speed the deployment of our technologies and the formation
of our startups.
Over the last 10 years, we have revamped our office culture
by attracting and training tech transfer professionals with
technical and market skills and an appreciation for creativity,
risk-taking, and customer service. We have simplified our work
documents and processes to make working with others more rapid,
effective, and friendly. We have standardized agreements for
some situations--for example, software and research tool
licensing--but we find it important given the wide diversity of
technology opportunities and business models to be flexible and
nimble for the value propositions required by our partners.
We have established a full-service venture creation
capability with our office called the Venture Center to more
effectively form great startups for entrepreneurs and our
investors and to make it easier to do business with the
university. We have changed university policies and practices
to motivate our faculty to engage with industry and to
participate in commercialization activities.
We have formed broader industry research agreements with
innovation partners such as Procter & Gamble, Dow, and Ford,
and we have addressed industry needs for predictability and
flexibility with a new program, the Michigan Research
Advantage, that provides up-front license terms for future
inventions that may be derived from industry-sponsored
research.
We have expanded the funding resources available for our
early stage technologies and new startup opportunities. Our
university has several translational funds that allow technical
validation for emerging discoveries. One example is the Coulter
Translational Fund for promising biomedical innovations created
via a matched endowment from the Coulter Foundation.
Complementing our translational funds, the university is
reinvesting our tech transfer revenues into an internal gap
fund that is generously matched with funds from the State of
Michigan to address market validation and commercial readiness
issues. And recently, we established a program called MINTS--
Michigan Invests in New Technology Startups--in which the
university, alongside a qualified venture firm, is investing
endowment funds in promising U of M startups.
Having access to high-quality talent is a key ingredient
for success, and we focused our efforts to create several
effective talent initiatives. We have recruited and trained
graduate students and post-docs to provide technology
assessments and market analysis to enable our licensing
professionals to make quicker decisions and find more potential
partners. We have also pioneered a program to embed within tech
transfer a team of seasoned entrepreneurs, our Mentors-in-
Residence, to assist our efforts. The result has been improved
venture creation capabilities and a stream of high-quality,
sustainable startups that are creating jobs and providing
superior investment returns.
And seeing the positive impact of our U of M talent
programs over the last five years, we recently proposed and
received State funding for a Tech Transfer Talent Network. With
six other Michigan universities, we are sharing and creating
talent tools, resources, and activities tailored to their
regions to accelerate tech transfer success for their
institutions.
In conclusion, at the University of Michigan, we are firmly
committed to continual improvement of our tech transfer
capability and sharing of our findings to maximize the impact
of research discoveries on our economy and our quality of life.
As U of M President Coleman has said, ``universities bring
ideas to life but it is technology transfer that gives them
wings and lets them fly.''
Thank you for this opportunity. I am happy to answer any
questions.
[The prepared statement of Mr. Nisbet follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mrs. Biggert. Thank you, Mr. Nisbet.
Mr. Rosenbaum, you are recognized for five minutes.
STATEMENT OF MR. ROBERT ROSENBAUM,
PRESIDENT AND EXECUTIVE DIRECTOR,
MARYLAND TECHNOLOGY DEVELOPMENT CORPORATION
Mr. Rosenbaum. Thank you, Madam Chairwoman, Members of the
Committee, for the opportunity to speak with you today. We have
heard today so far from three folks with primarily academic
focus. I bring a little bit different focus, never been
employed by a university, always been in the private sector,
and now am with a quasi-public entity. I am Rob Rosenbaum,
President of the Maryland Technology Development Corporation,
proud to be representing the State that was recently named
number one for entrepreneurship in the country by the U.S.
Chamber of Commerce and the home for many billions of dollars
of federal research money, both in our universities and federal
labs.
As an intermediary organization, we look at ourselves first
and foremost as partners to the tech transfer offices. There
are a lot of elements that go into getting a business or
technology into a business. Tech transfer is one of the steps.
Intermediaries provide many other skills and opportunities that
don't exist within the university offices and often don't exist
within the entrepreneurs that are trying to commercialize these
technologies. So it is intermediaries; it is we folks that can
get in there and help them and teach them and train them on the
things that they need to do.
The other important difference for intermediaries versus
other constituents and stakeholders in the process is that we
are specifically and directly incentivized to do tech transfer,
to create jobs, to create economic development. We are not
there to create income for the universities, we are not there
to put our names on patents, and we are not there to take the
fame for successful IPO. We are there to create jobs and that
is our primary role.
One of the things that we help do is deal with the
difficulties of university culture. And I think it is fair to
say that universities have a very distinct culture in and of
themselves, and the researchers within those universities have
a particular headset in and of themselves. Primarily speaking
and historically speaking--although it is changing--researchers
within universities are very risk-averse. They enjoy doing
research, they enjoy the comforts of their labs, they enjoy
creating basic knowledge, and they have been incentivized to do
this over the years.
Universities are slowly changing their culture and changing
the incentives to get researchers to be a little bit more risk-
taking. Programs such as sabbaticals to take job creation and
job company formation to reality, programs that include tenure
as--include commercialization as part of tenure tracks are all
important. Also, the university culture is one of fairly
complex and byzantine rules and regulations. Intermediaries
help the entrepreneurs who have never even known the existence
of tech transfer offices to understand what is going on, to
help them understand what an express license is versus trying
to negotiate their own. So we play an important role in that
respect.
We incentivize behavior. We believe in incentivizing
behavior and we believe that the federal policies can do such
things. We believe that activities such as job credits for job
creation and commercialization on the commercial side, on the
private sector side, would leverage public dollars with private
dollars in order to introduce and exaggerate the activity of
private sector organizations. We believe that there is an
opportunity for grant set-asides for commercial enterprises to
do tech transfer. SBIR programs are there to promote commercial
activities, but they are not targeted at tech transfer. They
could be targeted at tech transfer.
Some of the samples and examples of these successes in
Maryland and one of the programs that I think is known to the
Committee Members is the Maryland Innovation Initiative, which
is a new program that aggregates five research universities
with a unique process of mining technologies and utilizing an
intermediary to bring those technologies to the public and to
bring the entrepreneurs together with those technologies.
We have also had experience in forming foundations that can
be an aggregator for private sector dollars to be brought to
universities or federal labs in order to promote private-sector
involvement and commercialization of technologies. We have
many, many more examples, and we have created hundreds of
companies and thousands of jobs and would be happy to answer
any further questions you have on our specific successes or any
other subjects.
Thank you.
[The prepared statement of Mr. Rosenbaum follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mrs. Biggert. I thank the witnesses for their testimony and
reminding Members that Committee rules limit questioning to
five minutes.
The Chair will at this point open the round of questions.
And I recognize myself for five minutes.
This is a question for, I guess, whoever wants to answer. I
hope you all do. In considering inventions to accelerate
technology transfer, what do you set as your target metric? New
businesses, products, patents, profit, citations? And then
depending on the metric, how does the metric influence the
intervention? Dr. Sherer, do you have any comment on that?
Dr. Sherer. Yeah, it is a great question. The way I view
that and the way I articulate it to my staff in my offices that
we are dealmakers, and so the important thing for us to do is
to get a deal done, whether that is with a startup company or
an established company because that is the beginning of how we
transfer our technology. There is a lot that goes on in a
relationship with a startup or an established company once the
license is signed.
Mrs. Biggert. Okay. Ms. Innes.
Ms. Innes. Thank you. Yes, much like Dr. Sherer, we have
the same philosophy. Our goal is to get technologies licensed
because if we can't get a commercial partner, those good ideas
are going to sit on our shelves. So our most important metric
would be getting that deal done, whether it be to a university
startup or to an existing firm. So we look for technologies
that have a market opportunity and try to position them and
find the partner. So those are our most important activities.
Mrs. Biggert. And Mr. Nisbet, you have had a lot of, it
sounds like, companies and--companies that are well entrenched
already that you have dealt with.
Mr. Nisbet. Right, and our approach is similar that we do
look for having agreements and not just an agreement--but a
good agreement--with either an existing company or a startup. I
think our measure is both to have a quantity of agreements
showing that transfer of technology but also trying to measure
the impact that the agreement and our technology would play in
the American public. And we feel that is far more important
than the revenue. If you do a successful job, the revenues will
follow.
Mrs. Biggert. Thank you.
Mr. Rosenbaum.
Mr. Rosenbaum. Yes, substantially different from the
universities, our incentive is measured by economic
development. Are we creating jobs? Are we creating revenues?
Are we creating tax base? And one of the things we look at is
capital that is brought into our State as a result of our
activities. And we bring $43 for every dollar we spend back
into the State. So that is a huge measure for us and our
primary goal.
Mrs. Biggert. And certainly job creation is very important
to us, and thank you for what you are all doing.
But should technology transfer be a priority for every
university? Is it likely to be a profitable business for any
but the major research institutions? Mr. Nisbet, I think you
could speak to that.
Mr. Nisbet. Right. That is a great question because I think
that the potential of tech transfer at a particular institution
is dependent on a number of factors. Obviously, you have to
have a stream of quality research and researchers that form the
pipeline for those opportunities, but I think the ecosystem
also that the institution resides in is very important. So we
have worked with our sister universities in Michigan trying to
adapt some of the practices we have found that have worked in
the Ann Arbor area where we tried to figure out a way to kind
of influence things and augment their resources to do a better
job.
In the end, it is a very patient business and trying to go
after it just for money is, I think, shortsighted because it
takes so long. But the long-term potential of job creation and
economic opportunity is very vital.
Mrs. Biggert. Are there any other reasons for technological
transfer to be important to an institution?
Mr. Nisbet. There are tremendous side benefits to tech
transfer besides the engagement and the attraction and
recruitment of key faculty. It also is a wonderful way for
students who are finding it more and more important for them to
engage in these activities. So it is a wonderful learning
opportunity. It is a great attraction opportunity. It has
wonderful opportunities for engagement with the industry and
other partners. It is a great way to engage with industry,
which brings also great learning. So there is a number of
reasons besides the direct tech transfer activity itself that
brings benefits back to the institution and the region.
Mrs. Biggert. Thank you.
You know, with the research--and I know sometimes that the
labs that--you know, the funding runs out. What happens? And
this--you have got a contract, whatever, and a license. What
happens if--or that the research just doesn't go anywhere?
Ms. Innes. Those are very real questions. Thank you.
We do our best to help the companies. If they are small
companies, we help them get on their feet. We give them payment
plans. We do everything we can to keep them moving forward
because, I think, as my colleagues have said, we are really
trying to see these technologies advance because we want to see
an impact from our research. But it is very difficult. We spend
money on patents that we end up not being able to license or
that companies can't pay us for and that, unfortunately, is
just a cost of doing this business. We try to make more good
decisions than bad and try to choose wisely and invest wisely,
and I think to a large extent we do. But there are
difficulties. And again as we hit them, we try to work through
them. And so we are pretty flexible in our licensing terms. We
want to work with a company if they have hit hard times or
cannot pay to try to find a solution and maybe it is, again, a
longer term to pay us back.
Mrs. Biggert. Thank you. My time is up.
Ms. Edwards, you are recognized for five minutes.
Ms. Edwards. Thank you, Madam Chair, and thank you to the
witnesses.
I mean I think it has really been clear that all of us
agree that the Bayh-Dole Act was really transformational in
terms of university research and moving toward
commercialization, but in recent years, a number of very
provocative ideas have been thrown out about ways to modify
Bayh-Dole. And some of those include allowing the Federal
Government to recoup some of its investment if a federally
funded technology is successfully commercialized. Others
include allowing researchers to choose a third party or
themselves to negotiate license agreements for
commercialization or establishing regional technology transfer
offices. And of course there are others and so I wonder if each
of you would just briefly comment on some of these concepts or
others that would challenge the status quo and discuss why they
are or are not good ideas. Dr. Sherer.
Dr. Sherer. Thank you, Ms. Edwards. I will speak first to
the concept of potentially allowing researchers to control or
make a decision about who would manage their intellectual
property, a concept which is sometimes referred to as ``free
agency.'' I think that is a bad concept and the reason that I
think it is is because it adds additional negotiation time to
an already pretty burdensome process, because by definition you
have to add at least one more negotiation to whatever
negotiations are going to follow. And that is a negotiation
between the home institution and the party that is going to now
manage that intellectual property.
I think it is best to keep incentives aligned between the
university and the faculty member at which the invention was
created. And I also think that that kind of a system could
potentially--we could see more of our innovation move out of
state because you tend to engage the experts and the money and
the people around you where you are putting the deal together.
And if it is being managed out of state or across the country,
I would argue that that would be where things would have a
tendency to be concentrated.
Ms. Edwards. Thank you.
Ms. Innes.
Ms. Innes. Yes, thank you. I think a number of initiatives
that would be very helpful. In particular I wanted to talk
about the regional tech transfer offices. I think in areas
where you have a number of smaller universities who may not
have a large research base and can't really sustain an office
that could be very helpful. Those are some initiatives we have
talked about in North Carolina for our large university base
where we have tech transfer offices in place at 6 of the larger
of the 16 institutions.
I am not in favor of free agency. I just don't see that as
workable. I know I would have no capacity to take on
innovations from another university, from a free agency. Times
are tough; finances are tight. I am going to use my resources
to support the best and brightest coming out of my own
institution. So I think that is just not a workable situation
for us. And honestly, I think most faculty--but very few--would
be skilled negotiators for themselves. I think we offer a very
value-added service and we are helping protect their interest.
We are helping them find a good deal and a favorable deal so I
think we add value in that process.
So I think there are ways to enhance this and those would
be--my focus would be helping the regional offices get created.
Ms. Edwards. Thank you.
Mr. Nisbet.
Mr. Nisbet. I will also address that regional question. I
think it is a good one, because I think one size does not fit
all in terms of how you do it. Sometimes it makes sense to have
something centralized within a region, but often I find that
the hub-and-spoke model of cooperation is better. We have
recently had some experiences because our state government has
provided some funds to encourage just that, that partnering
among some of the neighboring Michigan schools and it has
worked very well, in particular helping to fund--find the
talent and fund the talent that helps with the evaluation of
new opportunities, to help with the venture creation
activities, finding and prospecting for new licensees,
especially in the execution of those relationships.
And I think it is important to note, though, that we have
found that the strength of those regional centers, the pride in
their ownership, the links to their own alumni are very
important to maintain. So that is one reason why I am in favor
of a hub-and-spoke model to try to have the best of both
worlds.
Ms. Edwards. Thank you.
Mr. Rosenbaum.
Mr. Rosenbaum. I guess, with my background, I am going to
follow the money. You mentioned the Federal Government
recovering some of their investment in the research and my
concern with that is there are different motivations for every
entity and institution and money is a huge driver. And when you
redirect money, you are going to redirect incentives and you
are going to redirect efforts. And while it may be beneficial
to see some of that money come back to the federal labs that
have done that research, I don't think in the grand scheme of
things it is going to be a significant number of dollars on the
federal side but I think there are going to be some significant
changes in behavior on the research side, on the university
side that could be adverse. So I would be very worried about
making changes like that.
Ms. Edwards. Thank you. My time is expired. Thank you.
Mrs. Biggert. Thank you. The gentleman from Illinois, Mr.
Hultgren, you are recognized for five minutes.
Mr. Hultgren. Thank you, Chairwoman Biggert.
Thank you all for being here today. A couple of questions,
first, Dr. Sherer, wondered with the AUTM annual licensing
survey, I wondered what the biggest surprise you have found
from AUTM and just wondering if you are seeing any trends that
encourage you or anything that disturbs you really from the
findings from AUTM, the--I guess the Association of University
Technology Mangers annual licensing survey. So I wondered if
you could give me any thoughts on that.
Dr. Sherer. I would be happy to. We just completed 20 years
of holding and conducting the licensing survey and had a chance
to look over some of the trends of that data for the last 20
years. We don't have 20 years worth of data points for every
question within the licensing survey. The one result that I
found most surprising was that if you look at the--and it is in
my--the attachment of my materials. If you look at the rate of
federal research funding over the last 20 years, you can see
there has been a very steep and steady increase in federal
funding and what I found amazing was how closely the number of
new invention disclosures and errors that occur. Again, it is
on a different scale but the shape of those lines and the
increase of those lines is very similar. We have always said
that the amount of federal funding drives the amount of tech
transfer that we expect to see at our universities, but I
didn't expect the data to mirror each other that closely.
The other interesting thing is that everything sort of
follows from it. As we get more inventions disclosures, we
found more patents. As we found more patents, we get more
issued patents. As we negotiate more licenses, we see more
products on the market and we have--we are actually awaiting
some new job data that is going to be released tomorrow at the
BIO International meeting in Boston with calculations of jobs
created as a result of the licensing revenue.
Mr. Hultgren. Great, thank you.
Want to open this up to any of you that would have some
thoughts on this but one of my passions is again encouraging
young people to go into research and science and wonder just as
we are considering ways to help faculty and students transfer
more of the technology that they conduct research on wondered
from your perspective are younger faculty more open to spending
time on technology transfer? Have you seen that institutions
have built technology transfer into their tenure award system?
Or what approaches could we do to--and that have you seen, to
catch future faculty at earlier stages in their careers to
encourage them in this process of technology transfer?
Mr. Nisbet. Yes, I think that is a great question because
we are seeing efforts to try to engage both the younger faculty
in particular, but also some of the students, the post-docs and
the grad students who are engaged in these research activities.
They are very much interested in engaging in these both for
career opportunities but also for learning and for their own
networking purposes.
At the University of Michigan, we would make it a point to
try to reach every new faculty and to make sure that they are
acquainted with our office and the advantages. We have been
surprised that sometimes in recruiting trips from faculty to
Michigan they are actually looking for our capabilities and it
is one of the factors in their decision. That is always great.
We are looking for ways to try engage students in particular in
this through internships. The fellows program that I mentioned
is a great way to bring in grad students and post-docs and
introduce them to new opportunities and the thought process,
the decision process that shows their attraction in the
marketplace.
And we are now trying to experiment with an opportunity to
take post-docs who often have challenging academic career
decisions and if they are interested in following a
commercialization path through a new company that we have
licensed or into an existing company to provide some funding to
give them that path to see if that might be a career decision
they would like to make. So all of those things are very
important for the culture of the university, for the vibrancy
of the region, and for our activities in tech transfer.
Ms. Innes. I would also like to comment that we have done a
number of programs as well at the university. We do factor in
participation in the patenting and invention disclosure process
as part of promotion and tenure decisions. I think that is very
important to get our faculty engaged. And we are seeing a lot
of activity towards this coming out of the departments. They
are very interested in innovation. They are very interested in
seeing an impact from their research.
We have also developed a program for an entrepreneurship
minor for students in the College of Arts and Sciences, and it
is our most popular minor to date. We also have a program where
we are teaching how to start a company through our business
school and that is accessible to all faculty, students, and
staff. It is in the evening and it is free so we are really
trying to promote this.
As part of our new innovative Carolina fundraising
campaign, we also intend to--some of the money is going towards
innovation faculty so that we can really extend and consider
this opportunity.
Thank you.
Mr. Hultgren. I am going to ask one more question real
quick. My time is running down, but I would love to get some
quick comments on one last thing.
Many of you have talked about programs that allow business
people to come alongside faculty and to assist in the
commercialization process here. Wondered if you could just
briefly talk about best practices that you have seen to help us
do that.
Dr. Sherer. One area of the best practices is to have an
entrepreneurial residence type of program where you bring a
skilled industry expert into the university and let them spend
x period time, maybe six months, and you work with them to meet
with faculty and potentially find an opportunity that they
could spin out into a company.
Ms. Innes. We also use entrepreneurs and local
businesspeople to help us make tough decisions if we are
deciding on whether or not a technology we should continue with
that if the licensing is stagnant. We gather their expertise,
help us redirect the technology, help us find some way to help
the company if necessary, a very valuable resource.
Mr. Nisbet. And quickly, we took the approach of a mentor-
in-residence. We changed it because rather than follow one
technology, we wanted them to have a portfolio of technologies
like staff. It has been great with assessment, it has been
great for faculty consulting, and it has really enhanced our
capabilities.
Mr. Rosenbaum. And finally, real quickly, before we fund
any project that is a tech transfer or otherwise, we engage
outside industry experts to help evaluate the viability of it
so we are making sure there is a commercial viability before we
spend the dollars.
Mr. Hultgren. Well, thank you again. Thanks for your speedy
answers there but appreciate it so much. Appreciate your being
here and I yield back.
Thank you.
Mrs. Biggert. Thank you.
The gentlelady from Oregon, Ms. Bonamici.
Ms. Bonamici. Thank you very much, Madam Chair.
I have the privilege of representing a district in Oregon
that includes part of what is known as the ``Silicon Forest.''
We have trees and more rain. The important work that is
conducted by our high tech sector there is really exciting. Of
particular importance to the State is the Oregon Nanoscience
and Microtechnologies Institute, which is affectionately known
as ONAMI. It is a Signature Research Center that is an
academic, business, and government collaboration that grows
research volume and commercialization in the broad area of
nano- and microscale science and engineering.
Since its inception in 2003 and through last year, they
have leveraged more than $185 million in federal and private,
created 21 startups with $70 million in venture and capital
funding. They employ 86 full-time people and support another
1,700 jobs through research grants. They have created $290
million in revenue and filed 211 invention disclosures and
received 21 patents in nanoscience and microtechnology. So I
can tell you from looking at this record that they have been a
key player in our community.
So I would like to ask our witnesses how do you work with
any external partners like ONAMI to accelerate
commercialization?
Dr. Sherer. Well, I can't resist taking that question,
because I hail from Oregon myself and ran the tech transfer
program at the University of Oregon and Oregon Health Sciences
University where I was born and raised before coming to Georgia
in 2003. So I missed ONAMI and I know a number of great things
have happened since I left the State.
One of the things that we do in Georgia and do quite
successfully--and it is similar to what you are describing--is
we work with the Georgia Research Alliance, which is money that
comes out of the State and helps provide valuable risk capital
for early stage projects with the goal of creating new
companies that are going to build a workforce in Oregon. In
order to do that, we not only sit down with experts at the
Georgia Research Alliance, but through that program, we engage
some of the entrepreneurs I was talking about a moment ago. And
we also work closely with sister institutions throughout the
State because we all compete and participate in this Venture
Lab program.
Ms. Bonamici. Thank you.
Anyone else.
Ms. Innes. Similarly, we work very closely with the biotech
sector in North Carolina. We have the North Carolina Biotech
Center. They are helping us with technology transfer grants,
with loans to startup companies, and a number of programming to
foster the innovation coming out in the large bioscience sector
in our region.
Ms. Bonamici. Terrific.
Mr. Nisbet. In a similar vein, we have an organization
called Ann Arbor SPARK, which is a public-private entity that
is a collaboration with the university and with government and
industry that actually industry was formed as a result of a
recommendation from my Tech Transfer National Advisory Board
that were looking for ways to enhance our tech transfer
performance. And we talked about some of the ecosystem
advantages that we were lacking.
We have a very close relationship. We serve on the board.
They focus on things that we also focus on--business
development and traction, business acceleration, talent and
funding, and of course marketing of a region. So it is a very
close collaboration. It also has an extension into our state
government with our Michigan Economic Development Corporation.
So very similar outcomes, slightly different format.
Ms. Bonamici. Excellent.
Mr. Rosenbaum. And I daresay TEDCO is one of those
aggregators and accumulators of skills and technologies. We
actually--because we are not aligned with a specific
university, a specific corporation, or a specific interest or
stakeholder, we can actually aggregate and do aggregate
resources from around the State and are able to convene groups
of folks that wouldn't otherwise be able to get together. We
sit on the boards of every incubator in the State. We sit on
the board of every tech council in the State. We are involved
with every tech transfer office in the State both federal and
university. And we very often and easily can bring a cross-
section of all those constituents to the table in order to
collaborate in a very unthreatening manner.
Ms. Bonamici. Terrific.
And just as a follow-up to the earlier response about how
do we inspire and involve especially the students--and know Dr.
Sherer will be proud of this--the University of Oregon has a
technology entrepreneurship program. It is a year-long program
in which business, law, and science graduate students work
together to evaluate new technologies for commercial potential
and then they develop a business plan. It has led to the
creation of several successful companies since its inception in
2003. So that is a good partnership of bringing groups
together.
And I am almost out of time, but I wanted to ask Mr.
Nisbet. You mentioned that the University of Michigan has
changed policies and practices to motivate faculty to engage
more with industry. Can you talk about the challenges that
researchers face when engaging with industry and participating
in commercialization activities?
Mr. Nisbet. Yes. Often it is because of the nature of their
research interests and the interest of the organization that is
from industry. What we have found, actually, it wasn't so much
the terms that were really important; it was the predictability
and the timeliness as you mentioned. So that is why we formed
this recent initiative called the Michigan Research Advantage
and we--it is again optional and sometimes the industry does
not want it. But what we try to do is to come up with a way of
predetermining the license terms before the invention is even
created, which of course is quite difficult. But we find that
when we bound the opportunities and bound their cost, it would
lead to a much richer relationship with industry, which leads
to a lot of other advantages.
Ms. Bonamici. Thank you very much.
I will yield back.
Mrs. Biggert. Okay. The gentleman from New Mexico, Mr.
Lujan, is recognized for five minutes.
Mr. Lujan. Thank you very much, Madam Chair, and appreciate
you calling this hearing.
Dr. Sherer, I very much appreciate you bringing to light
the correlation behind the investment into tech transfer and
the number of licenses that are being yielded. Sometimes we
don't have to look far to see the importance of investment to
tech transfer. And I think we all certainly agree, including
most of us on this Committee, about the significance of what
tech transfer can yield for the United States economy. Does
everyone here--is there anyone that would disagree with the
statement that the future of the economy in the United States
can be strengthened through more robust investments and
collaboration with the Federal Government, universities, and
our national labs, and the private sector in developing tech
transfer?
I appreciate that because this is something that if the
United States was serious about--and I will just note for the
record that no one disagreed with that, Madam Chair--the
seriousness behind this is what can we do to turn this up?
Herein lies an opportunity where we have seen the loss of
manufacturing in the United States or even on that assembly
line, on the frontline the innovation yields that we reap that
were highlighted in a book ``Make it in America'' by the former
CEO of Dow Chemical--or the CEO from Dow Chemical talks about
the need to be able to bring that back. But in the realm of
tech transfer specifically, what are the right metrics to use
in judging the success of technology transfer? Just looking at
the number of patents and licenses is not anything sufficient
to understand the effect on the economy. And also, wouldn't it
be helpful to have longitudinal studies that would look over
time at the impacts of technologies? Ask anyone. Mr. Rosenbaum.
Mr. Rosenbaum. Yes. We actually measure our tech transfer
programs, not by the number of licenses because every project
we fund is a tech transfer license, but we track our companies
longitudinally for job creation, total revenue tax base, and
are proud to say that with the right support these young
companies can beat the averages. We have 82 percent of our
companies still in existence after five years, which is off the
charts compared to most startup statistics in the country.
Mr. Lujan. Mr. Nisbet.
Mr. Nisbet. I think that is a very important point that we
also try to--I think that quantity is important by the way. The
number of agreements, number of startups does show that the
number of shots on goal, but it is also important to measure
the impact of what occurs. And I think part of it is going to
be to follow on job opportunities and tax rates. That is a very
long-term process though and it is very difficult to measure
that when your technologies go into existing companies, which
is common.
Instead, what we try to do is to tell stories, show stories
of the inventors, of the inventions, of the technologies, and
the companies and try to show the impact on the American
people. I think that is one great way to motivate people. And
in the end what you are trying to do is to promote more
engagement which what you want to do is have some very careful
ways of marketing and reaching to all of your channels,
including your alumni which are quite valuable to get them to
work with the universities and to get your technologies out
into the marketplace.
Dr. Sherer. I would just add that I have always felt like
new products on the market are the ultimate validation of any
tech transfer program because that is really what it is all
about and used to think that it didn't really matter whether it
was a startup or an established company because it is just a
means to an end and the end is to get--the end goal is to get
products on the market. But in this jobless economy, talking
about jobs has become much more important.
We do know from an old BIO study that about 279,000 jobs
were created between 1996 and 2007 as a result of licensing
revenue and the products put on the market through universities
and hospitals. And so I would still advocate that products are
a very important metric that we track and that we need to get
deals done so that our partners can get products on the market.
Ms. Innes. I would emphasize that it is also--I agree with
everything that we have said. It is here on the--with my
colleagues. It is important to get the products on the market.
Absolutely that is the number one. Licensing is a measure of
how well you are reaching your contacts. But I think it is also
important to recognize this is an extremely long-term process,
especially if you are in early stage therapeutics and biotech.
So the return on investment is likely to come 10, 15, even--
years later. So it is important to recognize it is a number of
things that have to come together. It is not one metric or
another.
Mr. Lujan. Thank you. And I have some other questions I
will be submitting to the record, but given the--we have heard
a little bit about SBIR today. We don't talk much about STTR, a
program that has been terribly neglected by the Federal
Government when I would suggest the importance of what we could
be doing with small businesses around small business technology
transfer programs. Could STTR be reprogrammed to be able to
better work with small businesses, universities, and encourage
collaboration with our national labs to close that gap to have
better yields associated with technology transfer? Anyone.
Mr. Nisbet. I think absolutely it does and it is--and one
is obviously because of the funding. As my colleague mentioned,
you know, follow the funding and that does create incentives.
But it is also I think that engagement. It has to be a
carefully crafted opportunity that is not just finding funding
for the discovery purpose itself but to try to have that
partnership that whatever discoveries occur because of that
have a place in the marketplace. So it has to have a market
awareness and validation aspect to make sure that it is going
to be successful. But I think it definitely could be a valuable
part.
Mr. Lujan. Anyone else? Dr. Sherer.
Dr. Sherer. Yeah, I would just argue that we use the STTR a
lot as in--sometimes we use SBIR just sort of loosely to meet
those two programs. But we work very closely with our startup
companies to help them submit SBIR as well as STTR
applications.
Mr. Lujan. Very good. Thank you very much.
Thank you, Madam Chair--Mr. Chairman.
Chairman Hall. [Presiding] Gentleman yields back, I
presume?
Mr. Lujan. Yes.
Chairman Hall. Chair recognizes Mr. Lipinski, the gentleman
from Illinois.
Mr. Lipinski. Thank you, Mr. Chairman.
I think that this is one of the most important hearings
going on right now up here because everyone wants to know the
answer to the question where are the jobs going to come from in
our country? And there are great concerns over that and I
certainly think that we need to be doing more to leverage the
great research universities of our nation and also make sure we
do what--all that we can to get the return on investment for
all of the federal dollars that go into research in our Nation.
So let me start out with--there are a lot of different
questions because I think this is critically important. But I
want to first talk about the National Science Foundation
program called the Innovation Corps or I-Corps. And the purpose
of the I-Corps--it is a new program at NSF. It is to take
individuals who have received NSF funding for research before
and to teach them how to be entrepreneurs, essentially how to
commercially develop their ideas. Are any of you familiar with
the I-Corps program? I just wanted to know--I see Mr. Nisbet
nodding his head. Do you have any comments on the value of the
program or suggestions to improve it? So let me start, Mr.
Nisbet.
Mr. Nisbet. In our case it is fairly new. We are
establishing an I-Corps center in Ann Arbor for the Midwest to
provide that training that is associated with the I-Corps
program. The one thing I find most valuable is--it is twofold.
The focus on market awareness and understanding the market
needs before getting too far into the funding that typically
occurs through NSF grants and others; and secondly is
developing the entrepreneurial support and the mentorship to
try to provide some early stage guidance to those projects. But
I think it has the potential to--one, to attract more people
into the whole area of trying to commercialize research but
also to put it in a more focused path towards a real market
need.
Mr. Lipinski. Well, I was hoping Mr. Nisbet was familiar
with it since July 16 is one of a--that starts at--another
round that starts at Michigan. Thank you.
Anyone else? Mr. Rosenbaum.
Mr. Rosenbaum. Yes, I would just like to say that I-Corps
as well as many other entrepreneurship programs around the
country and most universities today are very important but they
are just the first step of getting products to market. A
business needs to mature and I find that a lot of the
entrepreneurship programs teach folks how to start a business
but don't necessarily teach them how to grow a business and
manage a business. So I think that the I-Corps program is great
but we are going to need some follow-on support behind it if we
are going to have some long-term success. As we have said,
these things don't happen in a year or two years. Sometimes
they take ten years. And an entrepreneurship program talks
about the first year of life.
Mr. Lipinski. Anyone else.
Move on to another issue Mr. Rosenbaum had mentioned that
Maryland Innovation Initiative supports the use of funds for
early stage proof-of-concept and prototyping work. I was able
to get language into the SBIR reauthorization last year that
grants authority to NIH for a proof-of-concept program. What--I
am going to ask everyone on the panel. What are your thoughts
on the early stage funding for proof-of-concept programs? Is it
something that all federal agencies should be exploring? So I
will start with Mr. Rosenbaum.
Mr. Rosenbaum. Yes, proof-of-concept is important, but one
of the unique elements of the Maryland Innovation Initiative
and other programs that TEDCO has had is that we don't fund
those proof-of-concept projects until we know there is a market
availability and viability for the product. A challenge with
federal lab in particular is they don't have resources to look
outside at market needs. So you will need a third party to
validate a market need and then absolutely fund that proof of
concept for that research. But I would hate to see proof of
concept funds going to a dead-end product.
Mr. Nisbet. We have had some great experiences with the
Coulter Translational Fund that we have operated at the
University of Michigan for about five years. We have addressed
that issue of the market validation by actually closely
coupling the project management resources that were involved
with shepherding the inventions and the work that was going on
in the lab with work--with insider tech transfer office for
doing the market awareness and assessing the market needs. They
also used a board of directors, a council to help steer those
projects on a quarterly basis so the results we saw was much
accelerated projects with better decision-making and some real
market successes. We think that that early stage funding,
although not very large, can go a very long way in ensuring
success.
Ms. Innes. I think it is a tremendous idea to support the
proof-of-concept center and proof-of-concept funding. This is
an area that is really important, especially in these long-term
development projects such as early stage therapeutics. We
really need to get more information before you can tell if they
will be able to address the market they are attempting to serve
and this proof-of-concept center would be tremendous.
Dr. Sherer. I would just add that the single most common
feedback we get from potential licensees is the technology is
too early. So proof-of-principle, proof-of-concept funding is
the gating factor to getting more technology to a go-or-no-go
decision point.
The other thing I would add is that too often proof-of-
principle funds provide the same level of funding for life
sciences and physical sciences type of inventions, and it takes
a lot more money to get a life science invention to a proof-of-
concept stage.
Mr. Lipinski. Thank you for your testimony. I yield back.
Chairman Hall. The gentleman yields back.
I don't see anyone else that needs to testify or wants to
testify but I want to thank you for your time, and thank you
for timely presenting your testimony to where we could be ready
to ask you the proper questions. And thank you for the time it
took to travel here and you have been very generous. And with
that, I would ask you that we may ask you to respond to some of
the things in writing we send you, to timely do that if you
can. There will be others that aren't here. The other empty
chairs indicate that they have got other hearings and things
that are going on now but they are interested in your testimony
and they are appreciative of your testimony and may have some
other questions to ask you.
Mr. Lujan. Mr. Chairman.
Chairman Hall. Yes, sir.
Mr. Lujan. Because there were not a lot of folks that came
to the Committee hearing today, is it possible to get another
round of questions?
Chairman Hall. I don't think so. Do you have any other
questions?
Mr. Lujan. I do, Mr. Chairman.
Chairman Hall. All right. I will recognize you for how many
minutes?
Mr. Lujan. You can give me two, Mr. Chairman.
Chairman Hall. I will give you five minutes.
Mr. Lujan. Appreciate that, sir.
Chairman Hall. I will give anybody else time if they have
questions they really want to ask.
Mr. Lujan. I appreciate that, Chairman, and thank you for
calling this hearing. As I said earlier, I hope that we are
able to have a similar discussion when it comes to natural
labs--national labs and the technology transfer associated with
the relationships with our universities as well.
There is a program that recently was granted to one of the
universities of the United States where there is a
collaboration around entrepreneurship training. I appreciate
the recognition of what has been done to introduce
entrepreneurship into undergraduate programs but also making
sure that across disciplines--engineering, medical fields--that
we are including entrepreneurial studies to see what we can do
there.
Mr. Chairman, we have encouraged the entity associated with
the responsibilities with Epicenter that they invite Members of
Congress to be able to put together an entrepreneurship
training so that way we begin to be able to think outside of
the box associated with policy as well.
But specifically, Dr. Sherer, I am interested in the role
of the Federal Government in funding transitional research
beyond basic research to bridge the valley of death and help
mature promising new technologies. There already exist a number
of such federal programs with ARPA-E and with DARPA. Now, we
begin to see the DHS S&T directorate as well beginning to take
shape to spur innovation in particular sectors. However, there
is not a lot of promising technologies--or there are a lot of
promising technologies that don't necessarily fit into those
programs necessarily from a top-down approach. What are your
thoughts associated with the importance of strengthening the
Nation's economic competitiveness from a bottom-up technology
transfer approach?
Dr. Sherer. There are a lot of different directions I could
go with that question. One of the challenges I think with
translational funding is--and I think it is what you were
alluding to--is there are pockets of it and you can participate
in this particular one if you happen to come out of a
particular area and maybe this one over here--excuse me--if you
are in engineering or something of that sort. So not every
technology necessarily has a route or a path or the same path
and access to translational research funding.
But the other thing that I fear we are going to abandon in
these times that we are in is just the need to continue to
focus on the fundamentals and invest in the fundamentals. And
we need to have properly staffed tech transfer offices and we
need adequately sized patent budgets. The good news is is if--
again if you look at the amount of data, it hasn't started to
really taper off. It is in a few categories. If federal funding
goes down, it will be interesting to see if that disclosure
rate goes down and then everything else falls--flows from
there.
So we don't yet--so the good news is is despite what is
going on in the economy, tech transfer activity has been strong
even over the last two or three years. I don't know what the
next two or three will look like.
Mr. Lujan. Appreciate that.
Mr. Rosenbaum, I am very intrigued and supportive of the
Maryland Innovation Initiative, so congratulations there, in
part because there are some similarities in this area between
Maryland and New Mexico and having a large number of
researchers yet a relatively low degree of entrepreneurial
activity that we are hoping to spur up. We have two national
labs. We have the Air Force Research Labs, Air Force Nuclear
Weapons Center, in conjunction with Kirtland Air Force Base
where work was done with Sandia to the Satellite Operations
Office, three bases from a military perspective that the energy
directive programs, with Boeing, things of that nature, but yet
we are not seeing the promise there.
Over what time frame does the State of Maryland expect its
innovation initiative start yielding a positive return on its
$5 million investment? And what are the key factors in making
it a success? And what is the role of the Federal Government to
support that initiative?
Mr. Rosenbaum. Thank you. The key factor is some of the
uniqueness in the way it has been structured. There are five
universities participating, and all five universities will have
a modified version of an entrepreneur in residence. We are
calling them site miners because there will be multiples from
each university and they will be cross-discipline and they will
be charged with collaborating amongst each other and going to
each other's universities to see pieces that may be able to be
put together to create a whole solution. Much of what goes on
in medicine today, for instance, is as much involved in IT as
it is involved in biology. So having cross pollination across
the disciplines is a key success factor there.
TEDCO's history with doing proof-of-concept projects is
that we get about 25 percent of our projects to turn into
companies. We get about 40 percent of them end up licensing
technologies and about 25 percent turn into companies. So with
our $5 to $6 million budget, once we are up and fully running,
we expect to be funding between 40 and 45 projects a year so we
expect to be spawning 10 to 15 new companies a year out of
that. And we think that that will start in year two.
Mr. Lujan. Mr. Chairman, I appreciate your graciousness in
the recognition of more time. And with that I yield back.
Chairman Hall. The name of Lujan in New Mexico is very dear
to me, and that is why I give you 10 minutes and everybody else
gets five. If there are no further questions, the witnesses are
excused. And for any additional comments and statements that we
need from Members, you can do it by writing to them.
And at this time we are adjourned.
[Whereupon, at 11:14 a.m., the Subcommittee was adjourned.]
Answers to Post-Hearing Questions
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Answers to Post-Hearing Questions
Responses from Dr. Todd T. Sherer
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