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SURVE~ OF DIRECTED MECHANISMS

FOR

INNOVATION OF UNIVERSITY RESEARCH

Paper for

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Licensing Executives Society International Conference

3-5 October 1979

Madrid, Spain

by

/

Niels Reimers19?8~79 President, Licensing Executives Society(USA)

Director, Office on Technology Licensing,Stanford University, USA

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Copyright © 1979Niels Reimers

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INDEX

Page

I. Introduction 1

II. Background 1

III. Return on Investment in Basic Research 2

IV. Forms of Organization 3

V. Other Forms of University/Industry 5Interaction

VI. University Policies 6

VII. Economics of Licensing of 10University Inventions

VIII. Representative Forms of Organization 10

Agency Nationale de Valorization 11de Recherche

Centre for Industrial Consultancy 12and Liaison

Danish Invention Center 13Government Agency Licensing 14Japan Engineering Development Co. 14Leuven R&D 15L'Institut Pasteur 16Massachusetts Institute of Technology 16National Research Development 18

CorporationResearch Corporation 19SINTEF 20Toronto Innovations Foundation 21Unikontakt 21University Patents, Inc. 22Wisconsin Alumni Research Foundation 23

IX. Summary

Key to Abbreviations

Bibliography

24

26

27

,

ACKNOWLEDGMENTS

I wish to acknowledge with thanks the open andfriendly assistance from those many individuals at thevarious universities and other organizations that werecontacted for information. In addition, I wish to givespecial thanks for the support of Agency Nationale deValorization de Recherche, Amoco Foundation, NationalScience Foundation, Norges Teknisk NaturvitenskapeligeForskningsrad, Stanford University and The Upjohn Company.

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SURVEY OF DIRECTED MECHANISMS

FOR INNOVATION OF UNIVERSITY RESEARCH

I. Introduction

This article will report on a survey relating toinnovation of university research results, particularly ofdirected mechanisms (organizations, policies) at universi­ties for transferring intellectual property rights to in­dustry. The survey was conducted primarily in the summerof 1978.While questionnaires were sent to a few represen­tative universities in each of a number of countries, muchuseful information. gathering resulted from personal inter­views at universities and national "research developmento.rqan Lz'at.Lons i " The survey was limited in the number ofcountries, the number of universities and other entitiessurveyed in a country, and in the number of individualsinterviewed. 1

II. Background

Increasingly, developed countries are pointing tothe urgent need to enhance their domestic innovation to becompetitive in world markets for manufactured goods. Thelooming competition from Eastern Europe, China, and develop­ing countries with lower labor costs and often extensivenatural resources portends even further loss of competitive­ness of domestic industries and more focus upon innovation.Innovation is seen as a means of leveraging intellectualproduct with capital and trained labor to produce goods andprocesses that compete on a technological rather than costlevel.

Directed mechanisms.toward enhancing innovation ofuniversity research were found to vary from country to country

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but more from university to university.2 Nevertheless, ofuniversities that had reached the threshold of deciding thatit was not inappropriate for the university or its faculty,research staff, and students to become involved in suchdirected mechanisms, three general forms of organization anda number of unique organizations were noted.

This survey focused upon directed mechanisms forachieving innovation of university research results. Clearly,much--indeed most--industrial innovation is aided by contri­butions from university research in the form of trainedgraduate s~udents, publications in learned journals, con­ferences, etc. However, the "directed mechanisms" reportedon here relate to.specific policies and organizations forcontractually transferring basic research results to industry.

III. Return on Investment in Basic Research

Return on investment (ROI), a familiar phrase tothe financial community, appears to be increasingly theattitude of pOliticians and the public with regard to re­search by the scientific community. This trend, exacerbatedby current economic conditions, has resulted in demands forevidence that science show a practical and/or economic valueto the public. 3

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on othen meehan~~m 60n l~een~~ng 06 ne~eaneh ne~ult~. Gen­enally, th~~ ab~enee ~~ due to ~evenal 6aeton~. One oovLou.s6aetOlt Ls a ~mall level 06 n.e.se.an.ch. wh~c.h doe.s not g~ve n.Ls e.to the need 60n an ongan~zat~on on othen tnan~6en mec.han~~m.

Al~o, at many un~ven~~t~e~, ~ome w~th a ~ub~tant~al level 06ne~eaneh, thene ~~mply had been no ~mpetu~ to 60c.u~ upond~nec.ted mec.han~~m~ 60n tec.hnology tnan~6en. In ~uc.h un~­

ven~~t~e~, the ~n~t~at~ve 6M tnan~ 6en 06 tec.hnology Ls leMto ~nd~v~dual~ on ~mall gnoup~ w~th~n the un~ven~~ty. Atothen un~ven~~t~e~, ~t w~ angued patent l~c.en~~ng had thepotent~al 06 ~nappnopn~ately d~vent~ng 6ac.ulty 6nom the pun­~u~t 06 knowledge to pun~u~t 06 patentable ~dea~; by e~tab-

l~~ h~ng mec.han~~ m~ to 6ac.~l~tate ~ ueh. l~c.en~~ng, ~t WM alleg edthat would only ~nc.nea~e that patent~al.

3. It ha~ been ob~enved th~~ tnend ha~ ~ome potent~al 60nundenc.ut~~ng1... ~uppont to c.un~o~~ty-on~ented, 6undamentat ne­4eMc.h. Th.L~ c.an be ~el6-de6eat~ng to ROI a~ the ma j an: tec.h­notog~c.al bn~akthnough~ genenatty ne~utt 6nom the unexpec.ted6~nd~ng 06 6undamental ne~eanc.h nathen than appl~ed ne~eanch.

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For example, the so-called Rothschild Report of theUK recommended that government scientific administrators,rather than making unrestricted grants to scientists, shoulddefine practical problems requiring solutions and then makeawards to scientists or other entities best suited to carryout the designated project. In the U.S., Senator WilliamProxmire, Chairman of the Senate Subcommittee that funds theNational Science Foundation, periodically awards the founda­tion a "golden fleece award" for wasting taxpayers' money ona particular research grant he considers frivolous and/or un­likely to provide results benefiting the public.

Another viewpoint was heard in hearings in Marchof 1979 for funding for the U.S. National Science Foundation.Representative Tom Harkin asked "how many people here wouldvote for $100,000 to study the growth of viruses in monkeykidney cells?" Representative Harkin then observed thatDr. Jonas Salk, a few years after completion of that study,used the results in his own research and came up with apolio vaccine.

Dependent on benevolent support of the taxpayersand legislators, many government research agencies anduniversities have concluded that by demonstration of success­ful innovations of scientific research, the public's andpOlitician's demand for ROI can be satisfied in at leastpartial measure, thus reducing the jeopardy to funding offundamental research.

This ROI attitude has been a key factor leading tothe establishment of many of the directed mechanisms reportedin this article for innovation of university research results.Nevertheless, it appears more universities than not are passivewith respect to directed innovation at the university admin­istrative level.

IV. Forms of Organization

Organizations for direct transfer of university re­search results to industry were found to vary substantiallyfrom university to university and country to country. How­ever, there are three general categories into which more·organizations may be grouped. These are: . (1) nationalresearch development organizations (RDO's); (2) universitylicensing offices (ULO's); and (3) industrial liaison offices(ILO's) •

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National Research Development Organizations ­National research development organizations (RDO's) aregovernment chartered to develop and exploit new technologiesarising from government~funded research to commercial appli­cation. An RDO may also take on for development inventionsfrom the public and corporations. In addition to the tech­nology licensing function, an RDO may fund further develop­ment of an embryonic but promising concept, joint venturewith industry, and act as a venture capital organization informing a new company to exploit a particular opportunity.

University Licensing Offices - A university licen­sing office (ULO) is established within a university's admin~

istrative structure, typically reporting to a "patent board"of the university's governing body. A ULO normally performsonly the function of licensing of potentially commercializabletechnology arising from the university's research program.Until the licensing volume justifies full time licensingpersonnel, the licensing function is often handled part-timeby the university research administration manager or vice­president-research.

Industrial Liaison Office - An industrial liaisonoffice (ILO) of a university is typically separately incor­porated by the university's governing body, with officeseither on the university campus or directly adjacent. TheILO's governing board will often include representativesof the industrial community. Technology licensing is per­formed by an ILO, but this licensing function is quitelimited in countries where it is mandated results ofgovernment-funded research are to be managed by the nationalRDO. Primary functions of an ILO include liaison (for theuniversity) with industry in connection with industry­sponsored research projects, renting to industry specializedresearch and testing equipment, brokering university facultyas' consultants and coordinating conferences and workshopsfor industrial participants •.

* * * *

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There are many organizations which do not fit neatlyinto one of the foregoing three categories. These include,for example, an association of faculty of a number of uni­versities (Japan), an alumni-controlled non-profit institu­tion (U.S.), a university research institute (Norway), afor-profit company representing many universities (U.S.),a captive development company (France), and a non-profit"rese arch and development" organization (Belgium).

Representative organizations for directed transferof university research results to industry will be discussedin Section VIII in summary form. The Bibliography will listavailable references so that further information may beobtained by any interested reader about a particular organi­zation.

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It is tempting to seek to compare the differingforms of organization. Probably more significant than theform of organization, however, is the entrepreneurial char­acter of the individuals in the organization, and theavailable incentives. (In Section VI, the royalty incen­tive is discussed.)

V. Other Forms of University/Industry Interaction

This paper will deal with the directed mechanismsfor enabling innovation of research results of universities.For completeness, other means of bringing university researchresults to industry and forms of university/interaction arebriefly mentioned here.

Graduated Students - The first and most obviousmeans of technology transfer from a university to industryis the graduated student, who carries with him or her theknowledge gained during his or her stay at the university.

Publications - Another primary transfer mechanismis the publication in technical journals, textbooks, theses,etc.,. of university research results.

Research Contracts - Further direct technologytransfer to industry occurs through industry funding ofresearch at a university.

Technical Conferences - The role of technicalconferences and professional society conferences shouldnot be underestimated--where it is said more knowledge isexchanged through the personal contacts enabled by suchconferences than the formal papers presented.

Industry Affiliates Programs - In the U.S., a fewuniversities have "industrial affiliates" programs. AtStanford University in California, for example, a companythat joins the Chemistry and Chemical Engineering Affiliatesprogram pays an annual fee and, in return, participates inperiodic conferences arranged for the affiliate members onrelevant topics, participates in exchanges of researchscientists, receives early copies of publications, etc.

Consultants - University scientists are employedas consultants by industry, typically as individuals, al­though at some universities, through ILO's.

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Industrial Parks - A number of universities haveestablished contiguous industrial research parks, whichprovide an opportunity for cross-fertilization of researchideas between industry and university personnel. As scien­tists that do not continue their education become in timemore or less technologically obsolete, partic~larly in fieldssuch as electronics, it is a major advantage for a hightechnology company to be located near a research universitywith educational programs available.

Research Institutes - Research institutes in thevicinity of a university perform a useful function as anintermediary between results of basic university researchand applications of industry.

VI. University Policies

This survey focused on two areas of university policysignificant to an organization directed to innovation of uni­versity research results. These pOlicy areas were of owner­ship of research results, including patents, and of royaltydistribution.

Ownership - Policy with regard to ownership of patentand other proprietary rights of research conducted at a uni­versity varied but with some commonality within a country.

A 1977 survey by the Society of University PatentAdministrators (SUPA) of U.S. and Canadian universities re­vealed that for "unsponsored" inventions, 36 of 58 univer­sities took title, while in 11 universities, the inventortook title. In cases where the research was funded by anexternal research sponsor, the ownership question typicallywas covered in a patent clause of the funding agreement,and the institution would have prior agreement with theresearchers in order to carry out its obligations underthe clause.

In the UK, inventions developed with governmentfunding support are assigned to NRDC, and university facultyinventors generally had first presumption of title to otherinventions.

Generally, U.S. public (state) universities controlownership of faculty inventions while U.S. private universi­ties--based on a small sample--in more cases than not had apolicy of first presumption of title to faculty inventors.

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In West Germany, tenured university faculty havefull ownership to their unsponsored inventions and makeindependent licensing arrangements with industrial licen­sees altho~gh their university may share in royalty incomebased on the amount of university resources involved in theinvention. For .untenured university scientists, it appearsthe university can obtain title (with a share to the in­ventor) if it will undertake patenting and licensing. AsGerman universities have not undertaken licensing programs,this policy has not been tested.

Some universities varied their policy of ownershipof inventions based upon whether or not university facilitieswere used and whether their invention was "duty related."Generally, inventions not conceived with research sponsorsupport, not involving use of university facilities, andnot duty-related were owned by the inventor.

For universities with a policy of title to inventor,the university licensing program, to be successful, requireda reasonable royalty sharing policy and demonstrated com­petence in licensing.

Royalty Distribution - Royalty distribution policiesvaried substantially. The 1977 SUPA survey of 48 u.S. andCanadian universities revealed 23 different royalty-sharingpOlicies. Inventors' shares ranged widely with the medianat 33% of net royalty income. Several universities weregrouped at a net 50% and several at a gross 15%, but therewas otherwise little commonality.

Few inventions will cover the costs of licensingand administration; many will not bring in any income at all. 4However, the fortunate occurrence of one or more very largeroyalty producing inventions will reduce those costs to aproportionately small percentage. For average universityinventions, on the order of 50% of gross income would notbe an unreasonable allocation to cover licensing programcosts. However, factoring in the possibility of one or morevery large royalty-producing inventions would reduce thepercentage significantly.

An important factor to consider in royalty distri­bution arrangements is a distribution to the laboratorywhere the invention originated. The laboratory director

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one-th~~d 06 invent~on~ wh~eh a~e aeeepted 60~ l~een~ing and60~ whieh patent 6iling and oxh.e»: expen~e~ an.e. Lvuuuuuui , 06th~~ one-th~~d, pe~hap~ one ~n ten w~ll eventually p~ov~de

ov~ $25,000 eumulat~ve ~oyalty ~neome and one ~n two hund~edove~ $1,000,000. (See al~o Seet~on VI.)

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at a Danish university noted that, absent a laboratoryshare, there was little incentive to encourage diversionof laboratory faculty, staff or students from laboratorytasks to preparing invention disclosures, dealing withpatent attorneys, consulting and cooperating in licensingarrangements with industry. From an equity point of view,it was noted that an inventor has derived support from whathas been done before in a laboratory, its equipment, inter­action of colleagues, etc., and that there is thus a basisfor distribution of a share of royalty income to a laboratory.Such unrestricted funds can be used by the laboratory asseed money for new research projects for which other fundingis not available, sending junior faculty and students totechnical conferences for which there is inadequate labora­tory funding, etc.

At some universities, the amount of royalty distri­bution is negotiated on a case by case basis. Such a policywas generally limited to organizations that had few licenseagreements. Organizations with a reasonable volume of li­censing appeared to have found it necessary to have standardroyalty distribution arrangements, particularly standard per­centages to the inventor.

In some cases, no royalty distribution to an inven­tor is guaranteed in advance, but there is a possibility ofreceiving a financial "award" when an invention is successful,with the amount and the timing of the award determined bythe organization's management. Such awards also could bemade to individuals who were not inventors .pursuant to patentlaw, but who had contributed to the innovation.

Distribution of royalties to individual inventorswas considered by some universities to have potential fordiverting individuals from their scholarly pursuits. Itwas also observed with respect to royalty payments to in­ventors that there might arise dissension in an academiclaboratory when, after years of contribution by manylaboratory personnel to a particular line of research,an individual who fortuitously happened on the key inven­tion would be the only individual rewarded and contributionof the others not recognized. It was further noted thiscould lead to the lack of collegiality and the maintainingof research results secret so that a patent applicationcould be filed before a colleague.

In general, however, most universities felt itappropriate to reward inventors with a share of royaltyincome. In some countries, for example Germany and Norway,Federal law requires the distribution to an inventor. InNorway, however, the employee-inventor law does not applyto university faculty.

In many universities, it was entirely up to theindividual inventor to see to filing and licensing of hisor her invention, without a basis for sharing with the uni­versity.

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In some situations, it was required that a portionof any royalty income be paid to the government agencywhich may have funded the invention at the university. Forexample, the Norwegian government science agency must approvea licensing agreement by the University of Trondheim's re­search organization, SINTEF (Selskapet for Industriell ogTeknisk Forskning), with industry and can claim 50% of in­come until the science agency's investment in the researchproject is recovered, and then 25% of income thereafter.This income, however, is the net after the distribution tothe employee-inventor and recovery of SINTEF's investment.There have not been any cases at SINTEF where license in­come has resulted in a distribution to the science agencyat the 25% level. A "payback" policy such as this was con­sidered in most countries as counter-productive to innovationby its effect on incentive.

At Stanford University, a private U.s. institution,the individual scientist, the scientist's academic depart­ment, and the University itself are recognized as equalentrepreneurial participants in a research enterprise,each with budget and resource raising responsibilities.This has led to a distribution of net royalties (net of15% administrative charge and out-of-pocket expenses) inequal thirds among the three entities.

specific situations where royalty distribution touniversity inventors may have caused problems in diver$ionof research, reduced collegiality, etc., were not forthcomingduring this survey. In several actual situations, however,individuals named on a patent application voluntarily agreedto share the "inventor royalty distribution" with co-workerswho contributed to the research, but who technically werenot inventors according to patent law. In other situations,university inventors waived their share to their department,or laboratory, or to the university. .

It was generally acknowledged by .those responsiblefor a university technology licensing program that thepotential for receipt (or control) by a scientist of royal­ties from licensing a university discovery was a significantfactor in encouraging invention disclosures and participationin a licensing program. Many observed that the drivingforces for a faculty member's research clearly were thesearch for new knowledge and peer recognition. These arethe prime motivators leading to discoveries of significance,rather than the prospect of receiving and/or controllingroyalty income. It is after the scientist has come up withthe discovery that the prospect of royalties as an incentivebecomes a factor.

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VII. Economics of Licensing of University Inventions

Can a university expect that the revenues from li­censing of inventions of its faculty, students and researchstaff will be greater than the cost of patent filing, admin­istration and overhead costs of a licensing office? Theanswer appears to be "maybe."

A number of universities in the U.S. have had ULO'sfor many years. With few exceptions, a ULO is economicallyviable only if one or more "big hit" inventions has comealong. Some universities began their ULO with the adventof a "big hit," while many are not-so-patiently waiting.The few exceptions have been economically viable througha combination of: (1) a substantial base of research wherethe university controls title to inventions, (2) an entre­preneurially-focused licensing program, and (3) appropriateincentives for inventors and their laboratories.

An ROO will generally be better equipped to fullyexploit the "big hit" invention than a ULO. The "big hit"invariably has a strong worldwide patent position and amajor market. A strong patent position with worldwidecoverage is not a natural result of an important discovery.It requires an aggressive and intelligent patent managementeffort, with adequate financial resources to sustain thepatenting program pending the receipt of royalty income,which income may not begin to flow--if at all--for fiveor more years.

The great majority of university inventions, how­ever, have a more modest patent position and smaller market.Successful licensing of this larger category of inventionsappears to more often result when there is an enthusiasticinventor with transferable knowhow, the appropriate incen­tives are in place, and the invention is brought to industrypromptly, with exclusive rights available. Licensing supportclose to the inventor's laboratory is also a key factor.

Where (1) the prospective patent position isstrong and (2) other technological alternatives are signi­ficantly less attractive, an invention can be licensed atrelative leisure and non-exclusively. However, in mostcases, the licenseable value of an undeveloped universItyinvention (other than the "big hit" category) appears tobe inversely proportional· to the elapsed time from itsdiscovery. And when the prospect of exclusive rights (atleast for a limited term) are not offered to prospectiveindustrial licensees, the probability of licensing is signi­ficantly reduced.

VIII. Representative Forms of Organization

Information in summary form is given here aboutorganizations which are directed to innovation of university

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research. L'Institut Pasteur, not strictly speaking inthis category, is briefly mentioned because of its uniqueproduction company. The Bibliography will reference sourcesof further information for the interested reader.

* * * *

Agency Nationale de Valorization de Recherche(France) - The Agency Nationale de Valorization de Recherche(ANVAR), the national research development organization ofFrance, was established in 1968. ANVAR seeks to makearrangements with industry for innovation of technologydeveloped under support of government funded research inaddition to inventions proferred to ANVAR to manage byprivate inventors, companies, universities, and others.

ANVAR to date has not assumed directly the industrialjoint venture or new enterprise development financing func­tions carried out by NRDC of the UK. However, ANVAR actsas a catalyst in encouraging industrial research fundingby government research agencies and venture capital fundingby other funding sources, thus indirectly covering functionssimilar to NRDC.

ANVARleverages its staff (approximately 70) byusing private patent attorneys which are selected on thebasis of technical background, competence, and convenientlocation to the inventors.

The French government research funding policy comesunder tpe policy direction of the Delegation Generale Re­cherche Scientifique Technical (DGRST). Funds are distri­buted through the various ministries--for example, theministry of universities, ministry of agriculture, ministryof health, and ministry of industry.

The principal source of research grants to univer­sities and the national scientific research organizationCentre National de Recherche Scientifique (CNRS) comes fromthe Minister des Universities. Research policy and researchproject funding decisions are left to research councils ateach university. In turn, licensing pOlicy is left up tothe universities; one development option is ANVAR. ANVARestimates that perhaps one-half of the commercially usefultechnology from French universities are proffered to ANVARfor licensing. However, ANVAR handles all inventions ofCNRS and other French government research laboratories.

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ANVAR's royalty sharing policy for universitiesdoes not provide for a distribution of royalty income tothe inventor's laboratory of the university, but solelyto the inventors and to ANVAR. University research councilswere beginning to question this distribution policy.

An interesting experiment of ANVAR is their re­gional support program. This involves on the order of 15separate ANVAR "provinces" which serve to bring ANVAR re­presentatives closer to their inventing clients. A regionaloffice may involve representative(s) of the regional Chamberof Commerce and academics as technical consultants.

It is ANVAR policy to award any exclusive licenserights to a French company, except in situations where"reasonable" license arrangements are not possible. 5

Centre for Industrial Consultancy and Liaison (UnitedKingdom) - The Centre for Industrial Consultancy and Liaisonof the University of Edinburgh (CICL) was established in 1969and has a current professional staff of three. As with otherindustrial liaison offices, CICL makes consultancy arrange­ments with industry for university faculty. CICL also makescontractual arrangements with industry for university resEarchand contractual arrangements involving use of universityexperimental equipment. CICL, in addition, promotes andadministers conferences and courses at the university forindustry participants. Beginning in 1973, an aggressivelicensing program was initiated.

For consulting arrangements, it is optional foruniversity faculty to work with CICL. For consultancieshandled by CICL, CICL obtains a consulting fee which isnegotiated depending on the amount of the consultancy-­typically ranging between 10% and 20%.

For conferences promoted by CICL, CICL and the groupthat would put on the conference negotiate in advance adivision of surplus over cost. However, CICL takes allfinancial risks for an unsuccessful conference.

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genenally nollowed by o~hen RVO'~ and univen~i~ie~ whiehwene a~ked abou~ ~ueh a poliey. None had a ~peeinie wni~~en

poliey ~o ~hi~ ennee~.

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As NRDC handles inventions arising from the prin­cipal research funding sources of the UK, the base of re­search on which to draw for inventions by CICL is greatlyreduced. Nevertheless, CICL was able to financially breakeven in 1978, with higher licensing revenues forecast forfuture years. Such licensing by UK universities may beincreasing, as the UK government appears to be movingtoward a policy of allowing universities to license resultsof government funded research.

CICL's patent licensing program has been voluntary,but it is expected to become compulsory after a new law thatwill make the university a legal owner of inventions madeby its employees. Net income is divided with the inventors(50%), department or unit (20%), patent program 30%.

CICL is responsible to a board of management whichincludes the Secretary to the University and the UniversityPresident as ex~officio members. Membership also includesfaculty and industry representatives. The CICL has theunique feature of being organized similar to an academicinstitute, whereby its professional staff can obtain tenure,as compared to other administrative staff within the uni­versity which are not eligible for tenure.

Danish Invention Center (Denmark) - The DanishInvention Center (DIC), established in 1972, is a non-profitgovernment supported organization based in Copenhagen, withsix subsidiary offices in other locations in Denmark. DICnominally operates under the Technological Institute ofCopenhagen, which is a "technological service center inten­ded to develop, adapt, and transfer new technology is supportof trade and industry in Denmark." Clients of the Techno­logical Institute are Danish industry and the government,with about half of its budget from government grants andhalf from income for its services to industry.

DIC is supported by the government under a basicsubsidy, which subsidy was planned to reduce to zero by1982/83. However, there is some emphasis that governmentsupport be provided for the production and innovationactivities of the DIC, with self-financing not to be aprimary goal.

The DIC has a prototype workshop for manufactureof prototypes or experimental work with financial supportof clients. The DIC also arranges exhibitions of Danishtechnology for client industrial organizations. DIC actsas licensing agent for Danish inventors, including inventorsof universities and companies. University licensing hasnot been a significant income producer as yet. University

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inventors are not obliged to proffer their discoveries tothe DIC. DIC makes arrangements directly with the univer­sity inventor(s), incurs patent and licensing expenses atDIC risk, and returns 70-100% of net royalty income to theinventor(s), retaining 10-20%.

Government Agency Licensing (U.S.) - In theunited States, some government agencies which sponsorresearch at universities will take title to an inventiondeveloped at a university, rather than permit the uni­versity or inventor to license the invention. If theagency files for patent protection on the invention, itlicenses the invention directly or through the NationalTechnical Information Service (NTIS).

The inventory of patents held by the governmentfrom all sources (including universities) now totalsclose to 30,000. Of these, a very small percentage hasbeen licensed (about 5%) compared to university licensingexperience (30%-50%). The practice of taking title bygovernment agencies has come under strong criticism. Thereare over 20 differing patent policies of the various govern­ment agencies which administer research contracts and grants.

Bills have been introduced in both the House andSenate of the U.S. Congress to allow universities and smallbusiness to retain rights in their inventions which mayhave been derived under government support. These legis­lative attempts to accomplish similar purposes have failedin prior years. However, these bills are given a reasonablechance of passage in the present Congress. (Senate billS414 (H2414), University and Small Business Patent Pro­cedures Act)

Japan Engineering Development Company (Japan) ­The Japan Engineering Development Company (JED) was estab­lished in 1967 for the purpose of promoting innovation ofresearch of universities, not only of Japanese universitiesbut universities in other countries.

JED was established by a group of Japanese professors,and its staff is of emeriti professors. The shareholders ofJED are a large number of professors from universities through­out Japan. The Board of Advisors to JED is composed of chiefofficers of several major Japanese companies.

From its inception, it was the intent of JED tointroduce not only inventions of Japanese universities toindustry, both Japanese and foreign, but to introduce in­ventions of foreign universities to Japanese industry.

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The agreement that JED makes with foreign univer­sities or other organizations is administered along thefollowing lines. The foreign organization submits an in­vention for evaluation under the agreement. If JED acceptsthe invention, it files and prosecutes patent applicationsin Japan (and in other countries that may be agreed upon)with JED's agreement to make its best efforts to license·the technology to Japanese companies. If royalty incomeis received, the foreign organization receives 70 percent,and JED 30 percent, of the net income after deduction ofpatenting and licensing expenses.

Leuven R&D (Belgium) - Leuven R&D (LRD) was estab­lished by the University of Leuven in 1972 as a non-profitorganization to administer industrial contract research atthe university and act as agent for the university in admin­istering agreements with industry for innovation of researchof the university.

LRD is not intended to conduct research with itsown staff as SINTEF of Norway's University of Trondheim,but LRD does provide limited research assistance in theform of technical personnel to university laboratories whentechnicians of particular qualifications are not on theuniversity staff but are needed for an industrial researchagreement.

Although a separate organization,LRD is closelyinterwoven with the university and, because of its establish­ment concurrent with receiving its first industry develop­ment contracts, it has not needed any capitalization.

A fixed percent of LRD's "turnover" is allocatedto the university, but the larger distribution goes to thelaboratory responsible for the research under an industrialdevelopment contract. These contracts provide for parti­cipation of LRD in income which might be realized by theindustrial research sponsor as a result of a successfulinnovation based on contract research findings. LRD, ineffect, buys and sells the 20% of university faculty timewhich is permissible to use for consulting.

The current procedure for allocating expenses andincome of industrial research contracts is as follows.From the annual contract income, overhead charges of 5%and;12% are allocated to the university and LRD, respectively.After then deducting the direct contract expenses, the re­mainder is allocated to the university laboratory responsible.Of this amount, the laboratory may distribute 30% to indi­viduals, which sum may be less or greater than the 20% oftheir time allocated, depending on other expense/incomeitems for the account of the laboratory such as patentfiling expenses and royalty income.

-15-

LRD has also founded new companies. For example,LISCO (Leuven Industrial Software Company) was establishedby LRD with the aim of marketing computer-aided designprograms developed at the university to the electronicsindustry. LISCO.has recently been incorporated in theU.S.A. Complementary computer-aided design technologyfrom other universities is being considered for marketingby LISCO; thus, in this situation, enabling LRD to benefitfrom technology from universities other than the Universityof Leuven.

L'Institut Pasteur (France) - The Pasteur Institute(PI) has a unique and successful organization for innovationof basic research, involving a "captive" production company.The Pasteur Institute, established in 1888, is composed oftwo majorcomponents--a non-profit research foundation, anda production corporation, which corporation was establishedin 1973. It has a staff of approximately 900.

The research foundation receives income from thegovernment (approximately 50%), research services (approxi­mately 30%), and the production company (approximately 20%).The research foundation receives an 8% royalty on all pro­ducts manufactured and sold by the production company. PIlicenses its technology directly and uses the services ofANVAR.

Massachusetts Institute of Technology (U.S.) - TheMassachusetts Institute of Technology (MIT), a prominentU.S. research university, has operated a ULO from 1961. 6It is currently staffed by five full time (and one halftime) professionals with a support staff of three.

6. An Apn~l 1979 ~~udy 06 u.s. un~ven~~~y pa~en~ developmen~

pnae~iee~ by Wa~h~ng~on S~a~e Univen~i~y nepon~ed ~he~e ne~­

pon~e~ co ~he que~~iolt, "Wha~ ~ype~ 06 ~eehnology ~naf'!66en

on pa~en~ developmen~ onganiza~ion~ doe~ youn univen~i~y

u~ilize?"

33 -- Re~eaneh Conpona~ion

27 -- Youn univen~i~y ~~~el6

16 -- Loeal ~onpona~ion e~~abli~hed by younuniven~i~y

10 -- Ba~~elle Vevelopmen~ Conpona~ion

6 -- Univen~i~y Pa~en~~, Ine.6 -- O~hen ~epana~e ou~~~de ongan~za~ion~

Fi6~y-~ix univen~i~ie~ ne~ponded; 31 u~ed mane ~han onepa~en~ developmen~ meehani~m.

-16-

Gross income from licensing in MIT's last fiscalyear (1977-78) was $1.1 million. The significant portionof this total came from one invention. MIT has had severalinventions which could be classified as "big hits"; inparticular, the "computer memory core" and syntheticpenicillin.

MIT ownership policy considers that MIT retainstitle to inventions arising from research at MIT. Theinventor will retain title if university facilities arenot used and the invention does not fall under terms of aresearch agreement by a sponsor with MIT.

MIT shares 35% of the first $50,000 gross royaltyincome with the inventor, 25% of the next $50,000, and 15%thereafter.

MIT, with its experience of "big hits," is·not atypical ULO.7 Another major U.S. research university,obviously without a "big hit," gross less than $25,000 inits last fiscal year. .

7. MIT i~ a p4ivate U.S. unive4~ity. Mo~t pubtie (~tate)

unive4~itie~ admini~te4 4e~ea4eh th40ugh a ~epa4ate non­p406it 4e~ea4eh 60undation. A ~epa4ate 60undation i~

gene4atty 604 admini~t4ative pU4po~e~ (and at~o 604 tax­4etated and othe4 4e~on~--~ee Bibtiog4aphy 604 6u4the4in604mationJ. They pe4604m ULO 6unetion~ but a4e 4a4etyILO'~ a~ de6ined in thi~ a4tiete.

An exampte i~ Iowa State Re~ea4eh Foundation, whiehha~ had an aetive ULO 6unetion 604 many yea4~. One p40­6e~~ionat (with a~~i~tantJ handte~ tieen~ing. Royatty in­eome at Iowa State in 1978-79 wa~ $366,000, 06 whieh about75% wa~ att4ibutabte to one invention. Iowa State ha~ a~imita4 owne~hip potiey to MIT. Iowa State invent04~ 4e­eeive 15% 06 net 40yatty ineome.

-17-

National Research Development Corporation (GreatBritain) - NRDC appears to have been the first nationalRDO. It was established in 1949 for the purpose of "en­couraging the development of technical innovation withinthe united Kingdom within the public interest." In addi­tion to licensing inventions of UK government laboratories,universities, and others, NRDC finances industrial jointventure innovation projects and founds/finances new com­panies.

NRDC, with a staff of about 200, has achieved anet surplus over the past 10 years. For the fiscal yearending 31 March 1978, the net surplus before tax was inexcess of 9 million pounds.

The major revenue producer for NRDC has been thecephalosporin antibiotics. NRDC is also recognized forits role in establishing the UK's hovercraft industry.By financing in the UK computer industry during thatindustry's critical period in the mid-sixties, NRDC playeda major role in the success of what is now ICL, the UK'sprincipal computer manufacturer.

NRDC has first refusal to proprietary rights ofresults of research which is government funded. In addi­tion, NRDC receives a very large number of voluntary pro­posals from private individuals, of which less than 1%are eventually accepted by NRDC for exploitation.

Because NRDC automatically has first refusal toresearch results of government-funded research, UK uni­versities have a very limited base of research from whichto establish a campus licensing program. This policy hascaused dissatisfaction in some UK universities which con­sider NRDC is overconservative in which inventions itwill take on for licensing.

Judging from a 1978 Licensing Executives Societyconference at Cambridge University, some companies alsoconsider that NRDC is overly conservative in the develop­ment projects that it chooses to fund. This is a diffi­cult situation for NRDC because NRDC's stewardship respon­sibilities require them to tread the fine line of judgmentin which new discovery has reasonable potential of a com­mercial new product or process opportunity to be taken on.

NRDC reports it has been difficult in recent yearsto identify enough quality opportunities in which to in­vest, as NRDC clearly has adequate capital available toinvest. NRDC also finds that the present economic condi­tions have resulted in a climate of conservatism by com­panies to invest their resources in speculative develop­ment of embryonic new opportunities from universities andpublic sector laboratories offered for license by NRDC.

-18-

For cases handled by NRDC that derive from universityresearch, NRDC distributes 50% of the net income (net ofout-of-pocket costs) to the university. NRDC on occasionfunds a related university project and, if royalty incomeis substantial, will also deduct that expenditure.

It is at the discretion of each university as tohow to distribute the 50% of net license income receivedfrom NRDC. At some universities, including Oxford andCambridge, the inventors, rather than the university, makearrangements directly with NRDC.

For inventions of government laboratories, NRDCmakes no royalty distribution although a tax-free awardcan be made to laboratory employee-inventors with NRDCfunds.

In addition to joint ventures with industry, NRDChas established new ventures such as Compeda Ltd. (computeraided design) and Gensys Ltd. (construction industrycomputer software).

As with other RDO'S, NRDC brings technolog~ firstto UK industry. If a UK company does not manufacture over­seas, NRDC will license, for example, a U.S. company for theU.S., but reserves, when appropriate, selling rights for aUK company.

NRDC can deny without reason a nonexclusive licenserequest. In the U.S., nonexclusive licensing for inventionsfrom certain government agencies is required unless develop­ment is not obtainable without exclusive rights. NRDC recog­nizes that required nonexclusive licensing policies for newtechnology can act to freeze out smaller companies fromparticipation. It is also difficult to have meaningfuldiligence provisions in nonexclusive licenses for technologywhich requires considerable investment to bring to the market.NRDC thus has freedom to take the best licensing course inthe UK public interest to assure both timely innovation ofnew technology and participation by smaller companies.

Research corporation (U.S.) - Research Corporation(RC) was established in 1912 as a non-profit foundation forthe advancement of science and technology. Its founder, F.G.Cottrell, along with his associates, endowed RC with patentrights on his electrostatic precipitator for industrial gascleaning. RC objectives are to make inventions " ••• moreavailable and effective in~the useful arts and manufactures ••• "and "to provide means for ••• scientific investigation, re­search and experimentation .•• "

-19-

RC, based d n New York City, has invention agree­ments with well over two hundred institutions. However,as utilization of RC services is optional, and a number ofuniversities have initiated in recent years ULO's or ILO's,many of the invention agreements are inactive.

RC has been an important source of research fundingsupport to scientists, making a large number of small grants,typically in the $5,000-$10,000 range. A particular focusis upon "seed money" support to young faculty members, notyet in position to compete effectively with establishedscientists for major research grants. Reduced revenues inrecent years have caused a cutback in grant funding from$4.2 million in 1972 to $2.5 million in 1978.

The Invention Administration program, with a pro­fessional staff of about 15, evaluates, secures proprietaryprotection, and licenses inventions submitted. (368 inven­tion disclosures were offered to RC in 1978.) All expensesare incurred by RC at its risk with royalties allocatedamong the inventor, the institution and RC, the inventor'sshare depending on the patent policy of the institution.In 1978, of $1,279,624 gross royalties, $569,326 was distri­buted to institutions and $191,367 to inventors.

SINTEF (Norway) - The Selskapet for Industriellog Teknisk Forskning (SINTEF) of Norway's technical univer­sity was established in 1951 as an industrial liaison officefor the university. It has evolved into a substantial(around 850 full-time workers) contract research organiza­tion, which draws upon both the university's and SINTEF'scompetence and resources in carrying out its program ofresearch. '

Cooperation by university faculty with SINTEF isvoluntary. SINTEF is generally allowed to use universityfacilities (laboratories, instruments, libraries, etc.)without charge. The university utilizes many SINTEF scien­tists as part-time teachers and thesis advisors. The uni­versity's computing center is run by SINTEF on behalf ofthe university.

Involvement of ,students in SINTEFprojects is notusual, but "spin,off" or exploratory research related toSINTEF projects is common.

The university's professors constitute the "generalassembly" of SINTEF, and appoint its board of directors.

Despite the potential for either the university orSINTEF adversely affecting the other's, functioning--such asdiverting the university from its primary role of education-­the relationship apparently has been synergistic and ofmutual benefit.

-20-

Licensing has not been a major activity as intellectualproperty rights have generally been left with research spon­sors. In 1970, Norway adopted an employee-inventors rightsbill, similar to Germany's, which poses unique administrativeproblems. For example, SINTEF clients in many instances mustdeal directly with SINTEF employees to obtain rights to in­ventions.

University faculty may offer inventions to SINTEFfor licensing. If SINTEF obtains income for the inventors,expenses are recovered and net shared with the inventors.Licensing activity for the university has been, to a largedegree, considered a service.

Toronto Innovations Foundation (Canada) - The Uni­versity of Toronto Innovations Foundation (TIF) is one ofthe newest organizations directed toward innovation of uni-versity research, having been established in 1979. TIF'sform of organization and licensing procedures resulted froma comprehensive study of features of other university licen­sing programs. The focus of TIF is as a business-orientedorganization, directed to bridging the innovation gap fromthe university laboratory to the marketplace.

The Board of Directors (12) are to include atleast three from the university and at least five fromindustry, commerce and government. TIF intends to bothlicense University of Toronto technology and to "start up"new companies and take equity positions in such new venturesin exchange for technology and financial support, whenappropriate. In its start-up function, TIF anticipatesproviding initial financing and technical and businessexpertise until the venture is at a stage where otherfinancing can be obtained.

TIF is being funded by a private foundation con­tribution, in addition to "membership contributions" fromCanadian financial institutions. "Members" will have theright of first refusal, on a rotational basis, for investmentin new venture companies, or in existing companies, if in-

.....vestment is r equdred to commercialize a technological oppor­tunity.

unikontakt (West Germany) - Unikontakt is at pre­sent the only German ILO, founded at Ruhr-University Bochumand also affiliated with Dortmund University. Unikontaktalso can act as an ILO for other universities.

-21-

Consulting for industry has been a private matterfor German university scientists. However, without a con­tact point at a university, it was observed to be difficultfor industry to reach appropriate consultants or to makearrangements for research or other services of the univer­sity which could be applied to benefit of industry. uni­kontakt was thus formed with the following main functions:

preparing, presettling, and, if necessary,supervising projects between university andextra-university partners, including thesearch for public sponsorship for the pro­ject;

procuring advisory services and usage ofuniversity equipment for practical problems;

conferences, seminars, and congresses thatenforce the flow of information between re­search and application and stimulate jointresearch projects;

assistance to project partners and especiallyto university members in securing and reali-zing patent rights. .

In Unikontakt experience, licensing of already­developed inventions are of significantly less benefitto industry in comparison to the collaborative university­industry research interaction.

University Patents, Inc. (U.S.) - UniversityPatents Inc. (UPI) was established by the University ofIllinois Foundation in 1964 to administer and market pro­ducts developed in university laboratories. Through con­tractual agreements, it acts as the exclusive licensor fora number of U.S. universities and, in addition, receivestechnology for licensing from other entities. The uni­versity agreements provide for distribution of 60% ofgross royalty income from an invention to the university.

In 1968, UPI acquired Regal Rugs, Inc. In yearswhich the patent and licensing function of UPIhas operatedat a deficit, the steady earnings made by Regal Rugs havebeen of great significance to UPI's cash flow. UPI nowmanages inventions for 11 universities and, after distri­bution of income to its client universities, is now operatingclose to break-even.

-22-

The University of Illinois Foundation is now onlya minor shareholder in UPI, a publicly-held company. UPI,now located in Norwalk, Connecticut, has a full-time staffof seven in Norwalk. It utilizes consultants (approximatelyseven at present) located at campuses of their various uni­versi ty clients -.

Wisconsin Alumni Research Foundation (U.S.) - TheWisconsin Alumni Research Foundation (WARP) was establishedin 1925 by alumni of the University of iVisconsin followinga controversial resolution by the regents of the university.This resolution, in effect, considered external gifts, dona­tions, subsidies, etc., for research as "tainted money" whichcould not be accepted. The result was to limit researchersat the university primarily to state support, which was rarelysufficient.

WARF was then established to manage the university'spatents and to use any funds derived therefrom to stimulate,promote and provide funds for scientific investigation andresearch at the University of Wisconsin. WARF is governedby a board of trustees chosen from alumni of the Universityof Wisconsin whose members contribute their time. Membersare typically. executives of major companies.

A Wisconsin inventor receives 15 percent .of the netincome that might be received for his or her invention.Other net income is granted to the university in accordancewith WARF's charter. Approximately $100 million has beenso granted from 1925 to the present with the current annuallevel approximately $4.5 million.

In addition to patent royalties, income has beenobtained from investments (largely in common stocks ofyoung, growing companies). These investments now providethamajorcportion of WARF. income. Other sources oLWARFrevenue are gifts, including real property, which,WARPmanages. The 1978-79 total annual gross royalty incomeapproximated $1.1 million, of which 60% was attributableto a single invention (an anti-coagulant).

WARF is staffed by 7 professionals, of which 3 areinvolved full time in patenting and licensing functions.By intent, there are no staff members (or trustees) who arealso on the university faculty or staff. Both WARF and uni­versity spokesmen have indicated there has been a closecooperation between WARF and the university.

-23-

IX. Summary

-- Increased emphasis on innovation of universityresearch was observed in all countries surveyed, with mostULO's, ILO's andRDO's or other forms of organization havingbeen established in the last 10 years.

--Three forms of organization directed to inno­vation ot university research results were observed to bemost common: the national research development organization(RDO), the university licensing office (ULO), and the indus­trial liaison office (ILO). Several other unique organi­zations were also observed. Fifteen organizations weredescribed in summary detail. It was also noted many uni­versities have no organization and/or were relatively passivewith respect to directed efforts to innovation of universityresearch.

University policies with respect to ownership ofinventions varied although public universities generally re­tained ownership of inventions.

-- Royalty distribution arrangements varied widely,although rarely was there not a policy which included sharingof royalty with the inventor. Sharing of royalty with theinventor's laboratory or department was common.

-- Generally, ILO's did not emphasize intellectualproperty licensing, due often to a national RDO which coveredthis function and also not to retaining provisions for royal­ties in industrial research agreements. Leuven Research andDevelopment (LRD) is an interesting exception, emphasizingin its collaborative arrangements with industry the sharingby royalty or equity of successful results of university­industry collaboration. 8

8. Ah an edi~o~iat obhe~va~ion, an op~imat o~ganiza~ion 60~

innova~ion 06 unive~hi~!f ~ehea~c.h woutdappea~ ~obe 06 ~he

1LO 6Mm, wi~h a potic.y 06 nego~ia~ing a hha~ing wi~h a com­pan!f 06 ~ehut~h 06 a hUc.c.ehh6ut c.ottabo~a~ion, himita~t!f ~o

LRV. An adviho~!f boa~d 06 p~ominen~ individuath 6~om induh­~~!f woutd be hetp6.ut. A "ventu~e c.apitat" 6unc.tion ah p~o­

pOhed b!f T1F woutd be quite c.omptementa~!f. An o~ganization

tegatty hepa~ate 6~om the unive~hit!f witt be ~equi~ed in man!fc.ount~ieh 60~ adminiht~ative and tax-~etated ~eahonh. App~o­

p~iate ineentiveh and ~ighth to owne~hhip q6 inventionh c.on­c.eived at the unive~hit!f woutd be 06 Mitic.at higni6ic.anc.L

-24-

, "

-- Government research agency involvement in theinnovation process through either retention of ownershipin inventions, or required payback of royalty income, orrequired non-exclusive licensing appeared to act as dis­incentives or absolute bars to innovation.

Economics of a ULO were generally not favorableto a university in the absence of one or more fortuitousmajor income producing inventions. This principle alsoapplied to the university licensing element of RDO's.

-25-

-<y. e,;;

ANVAR

CICL

CNRS

DGRST

DIC

ILO

KEY TO ABBREVIATIONS

Agency Nationale de Valorizationde Recherche (France)

Centre for Industrial Consultancyand Liaison (UK)

Centre National de Recherche Scien­tifique (France)

Delegation Generale Recherche Scien­tifique Technical (France)

Danish Invention Center (Denmark)

Industrial liaison office

JED

LISCO

LRD

NRDC

NTIS

PI

RC

RDO

ROI

SINTEF

TIF

ULO

UPI

WARF

Japan Engineering Development Co. (Japan)

Leuven Industrial Software Company(Belgium)

Leuven Research & Development (Belgium)

National Research Development Corp. (UK)

National Technical Information Service

Pasteur Institute (France)

Research Corporation (US)

Research development organization

Return on investment

Selskapet for Industriell ogForskning (Norway)

Toronto Innovation Foundation

University licensing office

University Patents, Inc. (US)

Wisconsin Alumni Research

-26-

awareness will lead to an earlier~hr;fication of inventive concepts

federal granting agencies to maximizeg:cants dollars

(>-,"-.

Inventions can. arise from university research- These inventions can be put to practical use

Techniques to be tested:

- Assist faculty to recognize and disclose inventions- Acquaint university community with role of patents in

innovation

PATENT AWARENESS PROGRAM:

ft Ii, FOUR PHASESJ Iro ,

(Slide 1)

An Overvie~q

o Review of ongoing research/.Semi~ar~

j. oCont~nulng support (monthly/Report of results

Roles of faculty researcher: teach, acquire and disserninateknowledge

Connections between these roles and invention, patdn~s andinnovation

e-

-:

Recognizing An Inventiol1:

Recognition is a critical step in innovation process

Characteristics of inventions: newness, uSdfulness

- Ei,ther newness or use f uLnes s should alert the researcher- Not necessary that ·these characteristicscoexis·t initially

,~-,;, ",:,,;,;,·..;~..;..~_.._.~.-.-- ............-.............,.w.,_. ~'.""'_"""""~-~"~j

AN INVENTION IS

THE PROCESS OF INVENTION INCLUDES• "'W_~_"_"__'~~~W .._._..~,d.'7.:_~-,~..-.-~----.-,------=....,-~~~~---.--~

._, ._.__. ._ 1

Something new and useful which may be ...• A solution to a problem• Something tha·t sa.tisfies a need• A better way of doing somethingo An iinproveJ:\1en1:: to an exis·ting development

.. Mental act: the"conception" (an endresult: and the means toobtain it.) I

I\lPhysical act: the "reduction to practice" I

(proving by demonstration Ithat result is obtained) ----l

4)

(Slide 5)

Good records are vital

- As an aid to recognizing inventions-,1\1;'1 the only acceptable means to establish conception and

'reduction to practice

Disclosing th~'Irivent:i_on

A dLs o.Ioaur-e is a written descript.ion cian. invention

- 'l'wo Junctions: explain invention, state itS use

\.;'

- 3 -

(SHde 8)

",..\~

,,'

Applying for patent, then publishing, means that:

- An incentive to develop, usually required by academicinventions, can be. provided to industrial firms

- The incentive t.ovdeve Lop is a preferred marketing positionassured through a time-limited exclusive license

.-,-_._-....,----~---'-

BENEFITS OF PATENTINGo Provides incentives to industry to

deveLopo Gives R~plic. new products, processes

I'. not otl~~rwise'available

eMay prgx~pe financial return" Ii Reten'BiiJ5'.nof control by patentee can

I prevent abusesI} Disseminates knowledge

I c Stimulates further research by others

Misconception: "If yo~publish you can't patent; if you want topatent2ioucan 1 t publish" - not true if proper,time s~g~ence is, followed

'.o.';It;:)

pQplication before filihga patent application causes i~~ediateforfeiture of foreign rights .

- Six months after publication you lose the right to patentin Nest Germany and Japan

- One year after publication you lose the right to a patentin the United States

If you file first in the United States, you preserve the foreignpatent rights for one year regardless of.a later publication

\

To su.rnmarize, ';"'7 have considered the recognition and disclosureof inventions, patenting and publishing, and the options open tothe acapemic inventor

"

6:".

.'

5

.,}

. ,

,theE.tentative;growerskiller evlaborato

'Althou hhwnan P'pronam dela cane ris

-cnemi 1'8 ~

health rav'tions w re: •

The e sahandli s ,plicat rs;residu in(ppm te:morn r e'milk0 calalfall , II'perce tagMid-a dl

EP cont,tuce how pr,below the currenthat' the recorrIollo d, the hum.,.,minis ule. This wouldof th herbicide, EPAwith he chemical's ,prop ties, without II'grow S would sufferloss t bepassedon'·

,Ma y environmeby E A's detensThey ate thatacare nogenic (has etta bee: 'aga st suchco prise onche icalst~the from t, .. F themtUi advis>for Be!'whe pr

l

Already worried aboutbadpublicity in thiscountry, theJapanese havehired dozensof high-powered agents, in·cludlng former CIA DirectorWilliam Colby, to help in­fluence public opinion inhopes that nothing will bedone to bring the one-sidedprofiteering toanend.

The Japanese aren'toverlooking the Americanmedia! either. Costly junketsand a her freebies' are ar­ranged· for Americanreporters: newsmen 'VhOmight be expected to writefavorable stories are givenred-carpet treatment, whilethose who might be criticalfind it hard to get interviewswith topofficials.

One veteran correspon­dentloldourassociates JackMitchell andLes Whittenthat some Amertc anreporters jn~apan are ac­tually getling:payoffs fromthe ~apanesegoyennnentinreturn for· sympathetic

. stories. .

, ,

.cigarettes receive ~500 per­centmarkup.

And while Datsun andToyota are treated just likeanyotheraulamakersin.theUnited States, Americanmanufaelurers run into allsorts ofdifficulties trying 10

, selltheir cars InJapan,Two years ago, the secret

report noles, Americanfirms scored a major pro­

.duction breakthrough. ofphosphate fertilizers, widelYused in Japan.iBut theJapanese Ministry 'of Inter­national Trade and Invest­ment began, "informally.asking major .Japanesecustomers tio buyJapanese, "theireporlstates,TheU.S. firthssubse­quently lostabout30.percenloftheirbusiness inJapan.

TheJapaneseset tariffson. high-technology products at

triple the rates charged llYother free-trading, nations, 'while encouraging,theirown

. manufacturers to 'organizemonopolistic cartels forresearch and production ofthis badly needed equip­ment

''''' .

ANDERSON, points the cause as far as

tradewithJapan is concern"ed, . ."Japanese barriers 10U.s..

exports is one case wherethere is more fire thansmoke,'" the memo states.The committee staff sug­gests that an upcoming con­gressional investigation mayprove to be so" "Intlam­matory" that it may "fuelthe growing mood of protec­tionism in the country and 'theCOngress."

Eor.: example, the eyes­oruystudYshows that the

.,.,Japanese. government's'gr ain-buytng agencycharges buyers of importedgrain'twice the actual im­portpries, while American .

merely means that theJapanese. have Increasedtheir per-c~pitabeef con­sumption from "a thinpattytoa quarter-pounder."

The Texas senator'sdisgust refleels a growingconcern in Congress that theJapanese are winning theirbiggest victory over theUnited States since PearlHarbor,

While the Japanesegovernment's protectionistpolicies put the cost of im­ported oranges at a dollareach and push Americanbeef toward the price range.of caviar, Japanesemanufacturers havenotrou­ble undercutting Americanautomobile and televisionmakersinthiscountry,

We now import $11.6billion more in goods fromJapan than we export in ayear, a situation that coststhousands ofAmerican jobs;adds fuel to inflation anddrives the dollar's valnedown..A confidential memoprepared by the staff of the'eong r e s.s i ona l J ointEconomic Committee pin-

,nw;;~nd.""uw.d hold price in"...

,

has tariffs beef witl1 Japanu.s.

crease.

By~ACK ANDERSONWASHINGTON - Two in­

fluential Texas Democrats,silver-haired Sen, LloydBentson and silver-tonguedtrade troubleshooter BobStrauss, were arguingrecently about themultibillion-dollar lickingAmerican businessmen aretaking from their Japanesecounterparts, ' '.

Thesenator, concerned forhis cattle-raising con­stituents, complained toStrauss that the Carter ad­ministration was letting theJapanese got· away withmurderous tariffs onAmerican beef. This haspushed the price of sirloinsteak as high as $45 a poundin Japan. Thecurrent tradenegotiations, said Strauss abit defensively, "are a stepintherightdireelion andI'mnot going to say any morethanthat"

The normally mild­mannered Bentson wasmov­ed to sarcasm by Strauss'claim. The sli~h~ increase inthe shipments of Americanbeefto Japan.Benston said,

!.

.... en W<Cj:;=,"""""~=I.~.".·=u.'i>';~;;u,-1t~~w:;;w~l·r-Jj@'i'ffi\WmM1?i7W"ri~~~i;l'1:.:ijWf?W~t'~0ii-1{'2%"5%'))iL'f'-""{P:rWF"';;i-'~lh--:;;'"'iWif;&,iii~%I':"41,c""';";m~;:;:~;;:~~~

F...~JJ:e!'I'!~tfl.1Jii"~~~S

iO '

Chicken UttlesaysThe Energy Dept. that Secretary James Schlesingerhas built seems to believe that the way to solve aproblem is to dramatize it. Predictably, its reaction tothe relatively small shortfall in oil supplies, caused bythe Iranian revolution, was to talk of an "oil crisis'landforecast gasless Sundays. '

Doomsday forecasting is a good way to get attention,IlS Chicken Little demonstrated when he declared thatthe sky WIlS falling. But a Cabinet officer who demandsattention should be prepared to make constructive useof it, and Schlesinger's thinking apparently did notextend that far. .

And so the net effect of the dramatics was to start amodest wave of hoarding. So far, it has not hadseriouseffects on supplies because not many: consumers' seemtotake Schlesinger seriously. But with enough encourage­ment from the Energy Dept., it could become a panic.:

Actually, the loss of Iran's production is not compa­rable to the 1973 embargo, although Schlesinger does.not seem to see a difference; The 1973 cutoff was abruptand deep. It was accompanied by a quadrupling inprices, a violently disruptive move.

The Iranian shortage is troublesome mainly becausethe U. S. did not let domestic prices adjust to the ..newworld price. The easiest response to Iran's shutdownwould be to let the open market determine the price, butthe U. S. cannot do. this now, because the switch from acontrolled price toa free price would be too inflationaryfor the economy to takeat this time.

There are things the Energy Dept. could be doing­such as shifting consumers from oil to natural gas andencouraging the development of small increments ofnew supply. It should be doing them instead of cryinghavoc.

Japan's money machine

The fsdinn nuideUnes ~ment's to~al national. bt;dget of $170 bill~0':1' NTT alone::;;J :::iJ ../. controls directly and indirectly about $2 billion worth of

'.' . . . . procurement.·)The Carter Administration may maintain a brave face The agreement calls for open international biddingin public, but in its strategy sessions it should recognize procedures in government procurement. But, saysthe fact that its wage-price guidelines program is Japan, it has not yet been determined that NTT'S buyingcoming to pieces. It would be better for the Administra- falls in that category.tion to write off the whole unfortunate experiment as a This is just one more example of the way Japan hasfailure than to try to keep up the pretense of effective- used interrelated companies and nontariff barriers toness. . shut its markets to imports. U. S. producers who have.

The guidelines, of course, have never been more than tried to sell in Japan have encountered taxes, testingwindow dressing. The real hope of stopping inflation requirements, licensing, and a wide variety of otherlies in fiscal and monetary discipline-in a shrinking regulations that shut the door to U. S. goods. Mean­federal deficit and strict limits on the growth of money while, Japan runs enormous trade surpluses that havesupply. But even as window dressing, the wage-price been one of the reasons for the decline of the dollar.control program has lost conviction. The breathtaking NTT has always followed a rigid "buy Japanese"rise of 1.3% in wholesale prices in January inevitably policy. Recently, a subcommittee of the House Ways &will work through the chain and emerge as double-digit Means Committee singled out the company as afla-.inflation at the consumer level. The big unions that will grant example. NTT, the subcommittee remarked, "doesnegotiate major agreements this year-the Rubber not appear to have any awareness of the incrediblyWorkers and the Teamsters, for instance-s will want to serious trade problems between our two nations orthatmake up for what inflation hils cost them before they NTT procurement policies are one of the sorest points inbegin talking about the 7% raises the guidelines our bilateral trade...." This is an issue on which theprescribe (page 22). . .. U.S. should make no concessions.

At this point, the Administration will be under "-_--mounting pressure to do one of two things: Either makethe controls compulsory Or relax the wage guideline topermit increases that match the rate of inflation, ThePresident should firmly reject both choices.

Mandatory controls do not work for more than 11

short time. They can check the wage-price spiral brief­ly, but in doing sothey create distortions in the marketand continuing misallocations of resources. The result isshortages, black markets, and, eventually, an inflation­ary explosion.. Bending the guidelines to accommodate higher wage

increases would" make the control apparatus part of theinflation process. It would give the Administrlltion'sblessing to wage increases that are bound to keep thewage-price spiral spinning. .

Before taking either step, the Administration shouldackuowledge that the control program is. one morefailure in the long history of attempts to stop inflationby dealing with symptoms rather than causes,

Japan has been an.eager participant in the fiveyears ofnegotiations among the world's major trading nations.that finally. have produced a package of liberalizingagreements, But now that the negotiators .are nearlyready to bring their codes home for ratification, theJapanese are still trying to exclude key governmentagencies from the new rules.

Perhaps the most crucial test-of Japan's good faith inthese negotiations will be whether Or not it agrees toallow free .intemational bidding on purchases byNippon Telegraph & Telephone Public Corp. and by.roughly 140· other Japanese government-controlledcorporations. The combined budget of these operations'comes to about half the size of'.the Japanese govern-

L'os BUSINESS WEEK: March 5',':79.c

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