UCLA, Eyeing Profits, Entrusts Tech Transfer to Industry Experts

UCLA

Brendan J. Rauw, associate vice chancellor for research at UCLA, says the new foundation to oversee patents and licensing will be strictly monitored.

The University of California at Los Angeles is one of the nation’s top research universities, with scientific inventions generating some $20-million a year in revenues.

But after years of dwindling state resources, UCLA doesn’t think that’s good enough. And so it plans to get more aggressive.

The university will create a new private foundation—overseen by corporate leaders in fields like medicine, engineering, and finance—that will take control of the university’s patent and licensing operations next year.

“The goal is to bring onto our campus something that we currently do not have,” UCLA’s vice chancellor for research, James S. Economou, told his university’s regents in May. “That is, that level of business decision-making experience, from the expertise of venture capital, business, high-tech, and pharma.”

The university regents, watching their state’s per-student support for higher education drop more than 60 percent since 1990, issued their own report last year urging campuses systemwide to find ways of boosting revenues from research, including the use of private-sector experts. The regents unanimously approved the UCLA plan.

The idea is finding advocates and skeptics. Among the doubters are those who fear that a privately managed board won’t make much difference, and that UCLA will merely become the latest university to discover that there is more to promoting scientific research and its commercial applications than outside expertise.

Some fear it may work too well, pushing yet another American research university away from basic science and toward more concern with profits.

“The idea of a board with industry on it seems scary to me,” said Adriane Fugh-Berman, an associate professor of pharmacology and physiology at Georgetown University who leads PharmedOut, a project that publicizes abusive pharmaceutical marketing practices.

Leaders of the UCLA private-foundation effort dismiss such worries. If anything, said Brendan J. Rauw, associate vice chancellor for research, the plan includes so much additional monitoring—including a new oversight committee of UCLA administrators and faculty members—that the new foundation might feel too hamstrung. It’s possible, Mr. Rauw said, that “there’s going to be too much light and transparency on this.”

‘Start With a Home Run’

Under the traditional model, technology-transfer offices within research universities help professors and other on-campus inventors decide what discoveries merit patent protection.

Such offices pay patenting and licensing fees, and recruit private-sector investors. The universities typically keep ownership of inventions made on campus, and share some proceeds with the inventors.

That source of revenue became more significant after the passage of the Bayh-Dole Act of 1980, which made clear that universities could keep ownership rights even when the research was conducted with federal grant money­.

Yet few universities make significantly more money than it costs to run their tech-transfer offices. Even the successful exceptions, typically instances involving blockbuster medicines, rarely generate more than a few million dollars a year, after expenses are counted.

Financial pressures, however, are now leading some to look harder at ways of maximizing those revenues. Many leading universities have recruited boards of private-sector business experts, though usually just in an advisory capacity. Perhaps a few dozen have created outside foundations to run some or all of their tech-transfer operations.

One of the most widely admired examples is the Wisconsin Alumni Research Foundation, which handles all tech-transfer operations for the University of Wisconsin at Madison. WARF has had great success, providing the university with $700-million over the past 15 years.

But WARF remains unique. It was formed in 1925 with millions of dollars in profits from a food-irradiation technology, and now enjoys a $2.3-billion endowment. Its placement outside the university structure also gives WARF valuable freedom from state rules on hiring and salaries, said its managing director, Carl E. Gulbrandsen.

And WARF’s biggest advantage—years of steady growth—is something that other universities can’t easily replicate, Mr. Gulbrandsen said. “People say, ‘How can we create a WARF?’ I say, ‘You need to start 89 years ago, and you need to start with a home run.'”

Mr. Rauw, a former executive in pharmaceuticals and venture capital brought to UCLA to improve its tech-transfer operation, said he recognizes that. “They operate as much as an endowment as a tech-transfer office,” he said of WARF, “and I’m not sure that can be replicated.”

On-Site Expertise

UCLA is still working out the details of overhauling its tech-transfer operations. In a memorandum last month to top university officials, Mr. Economou said that within a year, staff of the university’s existing Office of Intellectual Property & Industry Sponsored Research will report to the board of the new nonprofit corporation. That board, he said, will comprise “primarily individuals possessing extensive experience in bridging the worlds of academia and business.” Its members will receive no compensation.

Both UCLA and the University of California system surveyed other leading institutions, trying to identify best practices and pitfalls. For example, they learned that in-house staff often doesn’t have the business savvy found in the private sector.

They were also reminded that university leaders often have unrealistic expectations.

Some of that could be seen in May when the University of California regents voted to approve the new UCLA foundation. One regent, Norman J. Pattiz, a broadcasting magnate, told UCLA that the regents’ planned oversight committee should be regarded primarily as a “regents-encouragement-in-finding-you-the-dough committee.”

In the case of UCLA, there are legitimate reasons to think aggressively. The university has produced promising inventions such as Xtandi, a drug with demonstrated effectiveness against prostate cancer.

Still, in their report last year, the regents calculated total licensing income as a share of total research expenditures for a handful of universities nationwide. On that measure, they found, the UC system scored less than 2.5 percent, well below the efficiency of other leading universities.

The expertise of the new private board, Mr. Rauw said, could help UCLA realize as much as $100-million in annual revenues.

But universities often seize the yearly profits of their tech-transfer operations rather than allowing them to grow into the type of war chest that is key to the long-term success of an entity like WARF, Mr. Gulbrandsen said.

“Most institutions, public and private, don’t have the will to do that,” he said.

Weighing Net Benefits

And the prospect of UCLA’s devoting even more resources to its tech-transfer operation worries the representatives of some university employees. “It could have a huge impact on the bottom line, and they’re going to come looking for that money elsewhere,” said Marie Choi, a researcher at the American Federation of State, County and Municipal Employees chapter, which represents some 22,000 service and patient-care workers throughout the University of California system.

And while most licensing revenues aren’t huge financial windfalls, they’re still important to the individual faculty member, said David L. Day, director of the Office of Technology Licensing at the University of Florida.

If UCLA’s new venture tries to stretch limited resources by patenting and promoting only the inventions it considers potential home runs, it risks alienating faculty inventors, Mr. Day said.

He added that the research grant money amassed by the faculty means far more to a university than the profits from tech transfer will ever represent.

The University of Michigan at Ann Arbor gets about $15-million a year from its inventions, said Kenneth J. Nisbet, the university’s associate vice president for research-technology transfer. But it puts more emphasis on other results, including net benefits to society and overall perceptions of the university, Mr. Nisbet said.

“The things easiest to measure,” he said, “are probably the things that aren’t really telling if you’re doing a great job or not.”