Technology Transfer in the United States -- the Bayh-Dole Act Reaches its 30 th Anniversary

Technology Transfer in the United States -- the Bayh-Dole Act Reaches its 30 th Anniversary International Winter School on Research Promotion, Technology Transfer and Business Creation Alexandria, Egypt November 22 nd, 2010 Dr. Ashley J. Stevens Special Assistant to the Vice President for Research Senior Research Associate Institute for Technology Entrepreneurship and Commercialization School of Management Boston University

Objectives Give you: Overview of the Act An assessment of Bayh-Dole as it turns 30 A look forward 2

Overview 3

Before Bayh-Dole Government owned patents Wouldn t grant exclusive licenses Bureaucratization Every agency had its own policy Determinations of release to contractor took 2-3 years Contractor had to pay costs without any assurance of receiving title Separation of Inventor from Invention Academic inventions are embryonic and need active involvement of the inventor Government controlled the patent rights University controlled access to the inventor 4

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Bayh-Dole PL 96-517 The Patent and Trademark Amendments Act of 1980 Main components: Universities could elect to retain title to the results of Federally funded research Universities were required to share proceeds with inventors Most restrictions on licensing terms were removed US manufacture required for products to be sold in the US Small business preference Non-exclusive license to US Government for its own use Ability to grant compulsory license in the public interest No funding added or removed Remaining licensing restrictions were eliminated in the Stevenson-Wydler Act (PL98-642) in 1984 6

Bayh-Dole A very simple Act The government was completely unobtrusive Turned responsibility completely back to the universities March-in was the only possibility for the government getting involved 7

An Assessment 8

Impact It worked: Expansion of academic licensing offices Initially staffed by patent attorneys and research administrators Second wave was people with small company business experience The only reason to protect technology is in order to transfer it! Expansion of academic patent applications and issuances Substantial research collaborations between companies and universities to access new technologies Substantial growth in academic royalty income about a decade later Emergence of high technology clusters anchored by major research universities 9

Impact (2008) 20,115 invention disclosures 18,949 patent applications filed 3,156 patents issued 5,132 new options/licenses executed 32,405 licenses/options active 15,498 yielding some sort of income 7,917 yielding running royalties Source: Association of University Technology Managers 10

Licenses Granted 50% small companies 35% large companies 15% start-up companies 56% non-exclusive 44% exclusive 11

Technology Transfer in the US -- the Bayh-Dole Act Reaches its 30th Anniversary 25,000 Invention Disclosures Received 20,000 15,000 10,000 5,000 - Year Source: AUTM 2008 Licensing Activity Survey unless otherwise noted 12

Total FTE's Technology Transfer in the US -- the Bayh-Dole Act Reaches its 30th Anniversary US Technology Transfer Employment 2,500 2,000 Total 1,500 1,000 500 Professional FTE's Support FTE's 0 Year 13

Technology Transfer in the US -- the Bayh-Dole Act Reaches its 30th Anniversary 20,000 US Patent Activity 18,000 16,000 14,000 Total Patent Applications 12,000 10,000 8,000 6,000 New Patent Applications 4,000 2,000 Issued Patents - 14

Patent Expenditures ($million) Technology Transfer in the US -- the Bayh-Dole Act Reaches its 30th Anniversary 400 Patent Expenditures 350 300 250 Total Expenditures 200 150 Net Expenditures 100 50 Reimbursements by Licensees 0 Year 15

Number of Licenses Technology Transfer in the US -- the Bayh-Dole Act Reaches its 30th Anniversary 35,000 Licensing Activity 30,000 25,000 20,000 Active Licenses 15,000 10,000 Licenses Generating Revenue Licenses Generating 5,000 - New Licenses/Options Year 16

Licensing Income ($ million) Technology Transfer in the US -- the Bayh-Dole Act Reaches its 30th Anniversary $3,500 Licensing Income $3,000 Total Income $2,500 $2,000 $1,500 $1,000 $500 $0 Running Royalties All Other Sale of Stock Year 17

April 4, 1992 BusinessWeek -- Industrial Policy 18

October 19, 1992 BusinessWeek HotSpots 19

BusinessWeek HotSpots Map 20

A major research university Quality of life Build on local industry Cooperation between local university, business and government Technology transfer from the university Funding sources -- state, VC, angels Incubators Ingredients of a High Tech Cluster Phases of Economic Development Start-ups New division of major US company Foreign companies move in Export lead growth 21

A major research university Quality of life Build on local industry Cooperation between local university, business and government Technology transfer from the university Funding sources -- state, VC, angels Incubators Ingredients of a High Tech Cluster Phases of Economic Development Start-ups New division of major US company Foreign companies move in Export lead growth 22

Number of Start-Ups Formed Technology Transfer in the US -- the Bayh-Dole Act Reaches its 30th Anniversary 900 Start-Ups Formed 800 700 600 500 400 300 200 100 - Year 23

Start-Up Companies 6,652 formed 1980-2008 72% located in same state as institution Every state except Alaska 12.3% from California institutions 11.8% from Massachusetts institutions 363 by MIT 349 by University of California System 175 by University of Utah 52% still active in 2008 AUTM Annual Licensing Activity Survey 1994-2008 24

The Pharmaceutical Industry in Massachusetts 25

Pharmaceuticals in Massachusetts In 1975, one pharmaceutical company in Massachusetts US HQ of Astra AB Two events: Spin-outs from Harvard, MIT, BU Some made it Biogen, Genzyme Some didn t and got acquired Genetics InstituteWyeth/Pfizer Massachusetts Biotechnology Research Park First big pharma arrival BASF Abbott 26

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Impact of Academic Research in Healthcare Discussed tomorrow 28

The Internet CERN University of Illinois Urbana-Champaign University of Illinois Urbana-Champaign (Stanford) Carnegie-Mellon MIT Stanford 29

Major Products in Many Sectors V-chip Hollow optical fibers PSA test Honeycrisp apple Cochlear implant Lightning detection technology Cell phone technologies AUTM Better World Report 30

Economic Impact 1996-2007* 279,000 jobs created $187 billion to added to U.S. GDP * Roessner, J. Bond, S. Okubo, M. Planting, The Economic Impact of Licensed Commercialized Inventions Resulting from University Research, 1996-2007 Final Report presented to the Biotechnology Industry Organization, September 9, 2009 31

The Impact on Science (and Scientists) 32

The The Traditional New Scientific Paradigm 33

The New Scientific Paradigm The Patent-Paper-Pair Fiona Murray, MIT 50% of papers in Nature Biotechnology 1997-1999 had a corresponding patent 1 33% of biotech papers in Science and Nature had a corresponding patent 2 1 Murray, F., Stern, S., Do Formal Intellectual Property Rights Hinder the Free Flow of Scientific Knowledge? An Empirical Test of the Anti-Commons Hypothesis, Journal of Economic Behavior and Organization (2007), doi:10.1016/j.jebo.2006.05.017 2 Lebovitz, R. M. (2007). "The Duty to Disclose Patent Rights." Northwestern Journal of Technology and Intellectual Property 6 (Fall 2007): 36-45. 2009 Ashley J. Stevens All Rights Reserved. Do not modify or copy. 34

Technology Transfer in the US -- the Bayh-Dole Act Reaches its 30th Anniversary Do Patents Encourage Secrecy? Patents require complete disclosure of the best known way of practicing the art as of the date of filing Best mode Another form of publication US patent applications published after 18 months since 2001 Scientists are secretive about the interim results of their research until they reach a publishable conclusion Availability of provisional patent applications since 1995 has facilitated patenting without delaying publication 35 2009 Ashley J. Stevens All Rights Reserved. Do not modify or copy.

Technology Transfer in the US -- the Bayh-Dole Act Reaches its 30th Anniversary Faculty Participation Career Disclosures % Never 64.2 Once 14.8 Twice 7.6 Three to five 11.4 Six or more 2.0 36 2009 Ashley J. Stevens All Rights Reserved. Do not modify or copy.

Technology Transfer in the US -- the Bayh-Dole Act Reaches its 30th Anniversary A Look Forward 37 2009 Ashley J. Stevens All Rights Reserved. Do not modify or copy.

There s Good News and there s Bad News The Good News: The Obama Administration is really interested in enhancing university research commercialization The Bad News: The Obama Administration is really interested in enhancing university research commercialization The genius of Bayh-Dole was that it provided no new money It didn t need periodic reauthorization Reauthorization = Opportunities for meddling Time to stand up and be counted! Issued a Request for Information Responses due May 30 38

AUTM s Response to the RFI Focus on the Valleys of Death 39

Pg 40

AUTM s Response to the RFI Our Valleys of Death! Funding technology transfer office operations Proof of concept funding Market pull support Incentivize angel funding 41

The Economics of Technology Transfer 42

Financial Performance Financial Contribution Number % Loss making 68 52.3% Gross profitable 27 20.8% Net profitable 14 10.8% Self sustaining 21 16.2% Total 130 Abrams, Leung and Stevens, Research Management Review, What drives technology transfer Is it all about the money? Fall/Winter 2009 43

A Very Difficult Business Model? Income is distributed very unevenly A business of a few big hits $3.4 billion income in 2008 24.1% Northwestern Lyrica monetization 12.0% City of Hope Cabilly, settlement of lawsuit with Genentech 16.1% MSK (settlement), CHOP (monetization) and U. of California System 47.9% remaining 180 Only 198 licenses generated over $1million 1.3% of 15,498 generating any income Distribute 70-100% of what we generate Inventors Labs, Departments, Colleges 44

Was Bayh-Dole an Unfunded Mandate? Supplied no new funding Intended to be funded through IDC Then we got the 26% administrative cap! Much longer timeline to sustainability from income than expected And patents expire! Don t go into technology transfer expecting to make money for the university 45

Managing University Intellectual Property in the Public Interest National Research Council Recommendation 1: The leadership of each institution president, provost, and board of trustees should articulate a clear mission for the unit responsible for IP management, convey it to internal and external stakeholders, and evaluate effort accordingly. The mission statement should embrace and articulate the university s foundational responsibility to support smooth and efficient processes to encourage the widest dissemination of university-generated technology for the public good. Whether the primary emphasis is on global, national, regional, or local benefits is likely to depend significantly on the nature of the IP and vary with the type of institution (public or private), its history, research-intensity, primary sources of financial support, and educational characteristics. This places IP-based technology transfer squarely within the university s core mission to advance discovery and learning and to contribute to the wellbeing of society while recognizing institutional differences. 46

AUTM s Recommendations 1. Fund technology transfer offices directly 47

Is there an academic 25% rule? Aka The Stevens Rule 48

2008 Licensing Activity Survey Invention Disclosures 19,554 New US Patent Applications filed 11,626 59% Licenses Signed 5,002 26% US Patents Issued 3,156 16% Start-Ups formed 584 3% Active Licenses 30,920 49

Why Is This So Hard? Academic inventions are embryonic Average success rate 25.6% Median success rate All institutions 21.7% More than $200million research 22.9% Over 100 disclosures 19.7% MIT 18.8% Stanford 24.3% WARF 19.7% 50

Why Is This So Hard? Should we be more selective? Research Corporation Technologies accepted 228 inventions from 1991-2008 ~13/year 29% licensing success rate 51

Why Is This So Hard? Should we invest more to make them less embryonic? Translational Research von Liebig (UCSD) and Deshpande (MIT) Centers Philanthropically funded Von Liebig $10 million Deshpande $20 million Founded 2001 and 2002 52

Results Von Liebig Deshpande Annual Investment $1.2 mm $1.7 mm Projects Funded 66 64 Average Investment $42k $109k Licenses 4 (6%) 1 (2%) Start-Ups 16 (24%) 10 (16%) Total Capital Raised $71 mm $88.7 mm Average per Start-Up $4.4mm $8.9mm Leverage 105x 81x Source: Kauffman Foundation, 2008 53

Results Rate of start-ups increased 6x vs. typical AUTM rate 80-100x leverage of VC funds raised vs. translational funding investment Consistent with preliminary results from Coulter Translational Research Programs in Biomedical Engineering 10 major research universities with BME programs 5 year program Medical devices 54

Coulter Translational Research Programs in Biomedical Engineering (Audited data after year 4; $ millions) Number Amount Average Leverage Projects Funded 210 $55 $0.262 Start-Ups VC Funded 16 $150 $9.4 35.8x Seed Stage 21 $5 $0.238 0.9x Total Start-Ups 37 $155 $4.2 16x Licensed to Industry 20 Gov t Follow-on Funding. $150 Total 57 $305 $5.4 20.4x Animal model/first in human Model 27.1% 150+ Source: Elias Caro, AdvaMed 2010 Conference, Washington, DC 55

Why Is This So Hard? Academic inventions are embryonic Need proof of concept funding Driven by Technology Push Need to find their Market Pull 56

Proof of Concept Funding Many good models Philanthropically or State funded Individual institution MIT/Deshpande, UCSD/von Liebig, USC/Stevens National Coulter, Kauffman Entrepreneurial postdoctoral fellowships State-wide Edison, Ben Franklin, MTTC 57

AUTM s Recommendations 1. Fund technology transfer offices directly 2. Provide proof of concept funding 58

Market Pull Mentorship Entrepreneur-in-residence Programs 59

AUTM s Recommendations 1. Fund technology transfer offices directly 2. Provide proof of concept funding 3. Provide funding for mentorship and entrepreneur-in-residence programs 60

Sources of Initial Funding for University Spin-Outs Source 2004 2005 2006 2007 2008 Individuals No External Funding 57 55 54 86 76 Friends and Family 94 104 123 135 109 Individual Angels 49 48 82 82 62 Angel Network 26 14 23 32 31 Institutions State Funding 36 29 41 63 63 Venture Capital 85 84 81 88 92 Corporate Partner 25 28 45 33 38 Own Institution 26 28 42 51 53 SBIR/STTR 32 43 45 42 43 Other 28 40 52 47 42 Total 458 473 588 659 609 Tec 61 Source: AUTM Annual Licensing Survey

Sources of Initial Funding for University Spin-Outs Source 2004 2005 2006 2007 2008 Individuals No External Funding 57 55 54 86 76 Friends and Family 94 104 123 135 109 Individual Angels 49 48 82 82 62 Angel Network 26 14 23 32 31 Institutions State Funding 36 29 41 63 63 Venture Capital 85 84 81 88 92 Corporate Partner 25 28 45 33 38 Own Institution 26 28 42 51 53 SBIR/STTR 32 43 45 42 43 Other 28 40 52 47 42 Total 458 473 588 659 609 Tec 62 Source: AUTM Annual Licensing Survey

AUTM s Recommendations 1. Fund technology transfer offices directly 2. Provide proof of concept funding 3. Provide funding for mentorship and entrepreneur-in-residence programs 4. Provide an investment tax credit for individuals who invest in a university spin-out company that s raised less than $5 million in equity 63

How do we Interact with Government? What is the political/business model? Technology transfer does not support itself at the university level Little activity in the UK till Third Stream Funding in 1999 University research funding and third stream finding survived budget cuts 200 million translational research center initiative Government understands the long term economic development argument 5 years of government support is not enough How do you make the economic infrastructure argument 64

The Fundamental Business Model Suppose a university gets a 5% royalty on sales of a big product Or owns 5% of a spin-out company that gets sold It s doing a good job But 95% of the economic impact is in the economy at large Not in return to the university Reflects the private investment in developing the technology Technology transfer needs to be part of a country s economic infrastructure Like roads, railways and airports Government needs to support it accordingly 65

Questions? astevens@bu.edu 66