OTC News Archive

UT seeks to profit from its marketplace of ideas

Faculty, corporations link up to benefit both university and society

By Mark Lisheron, Austin American Statesman
July 6, 2003

Steven P. Nichols recently returned from Ireland and another opportunity to promote technology transfer, turning public research into private enterprise.

Nichols, associate vice president for research at the University of Texas, travels the nation and the world—and welcomes the world to UT—pairing researchers with companies that can turn innovation into marketable products.

When Nichols stayed at a western Ireland inn four years ago, the only people who could afford to stay were foreigners. This time not only were most of the guests Irish, but everywhere Nichols traveled there were new houses, new office buildings and new cars. Technology made this prosperity possible, he says, and the Irish aren’t about to let worldwide economic stagnation stop their progress.

For Nichols and his academic colleagues from Ireland and a half dozen other Western European countries who gathered in Dublin last month, technology transfer was worthy of a forum to exchange ideas. In an ever-more competitive world, technology transfer by universities has gained unprecedented importance, not only for universities’ prosperity but for healthy economies.

In Austin, Nichols is directing those efforts. Less than two years ago, his job—to scour the university for usable ideas and travel the world to find people to develop them—did not exist at UT. Today Nichols is one of the highest-ranked administrators overseeing technology transfer in the country.

The development of his department was a deliberate strategy by UT to create competitive academic programs in engineering and other sciences, every area tied to technology, says Juan Sanchez, vice president for research at UT. When Larry Faulkner became president of UT in late 1997 he promised the university would help build a new Texas economy. And while Nichols admits UT is starting later than many universities, he says his work is proof that Faulkner is taking his promise seriously.

“If the goal of a university is to create solutions to societal problems, and if the stimulation of innovation, creativity and leadership will address those problems, then the process of technology transfer is as important as the creation of the technology itself,” Nichols says. “Put another way, we spend a lot of money on a university. It had better be creating solutions to societal problems.”

Corporate, collegiate

Nichols is well aware that his efforts to build a program come at a time when technology transfer faces increasing criticism. Derek Bok, the former president of Harvard University, warns in his new book, Universities in the Marketplace, that some universities have made unsavory compromises to get ideas to market, and Nichols does not disagree with that assessment.

Bok is most critical of the influence companies have when they underwrite research, that they have, on occasion, suppressed negative research results and pressed professors into contracts that withhold for months publication of research data that academics have historically shared widely and easily.

“I think that if universities do not act now or if they respond ad hoc, the risks are greater long term, with administrators falling deeper and deeper into questionable practices,” Bok said in a recent interview by telephone. “There is plenty of evidence of companies pressuring and manipulating research and suppressing unfavorable test results.”

Bok is a critic of the excesses rather than the process of technology transfer itself.

Some have attacked technology transfer as a special deal for companies that exploit ideas nurtured largely by federal funding.

In Congress, U.S. Rep. Ron Wyden, D-Ore., has tried unsuccessfully for the past several years to repeal the Bayh-Dole Act, which allowed researchers and their universities to keep the patents to their research and dropped federal restrictions that made partnerships with investors difficult.

Wyden has directed particular vitriol at drug companies that he says use taxpayer-financed research to gain unfair advantage in a fiercely competitive market, then turn around and gouge patients.

Nichols, who is shaping the policies to guide UT’s process of technology transfer, says the excesses are exceptions that obscure reasons lawmakers in 1980 thought Bayh-Dole such an important piece of legislation.

Before 1980, the federal government owned the patents and rights to all research done with federal money. The government amassed a portfolio of roughly 30,000 patents by that year and, according to the Association of American Universities, about 5 percent were developed into products.

After watching U.S. automobile and steel industries take a pounding for a decade, legislators feared the Japanese would next target the infant computer industry.

It was then that Congress approved Bayh-Dole. Technology transfer has been growing ever since.

Before Bayh-Dole, the annual total of patents secured by universities never exceeded 250. In 2001, universities secured 3,179 patents, more than twice the number issued in 1993, the first year that the Association of University Technology Managers began compiling the data.

Research spending rose as well. Universities spent $27.6 billion on research in 2001, more than doubling the amount they spent in 1992, according to the most recent figures compiled by the association. Industry contributed just $2.2 billion of that total. Federal grants accounted for $17.8 billion, and the other $7.6 billion came from state and private sources, according to the survey.

The results: Fees from patent licenses and agreements earned more than $1 billion for universities, research institutions and hospitals in 2001. That year investors built 402 new companies around university-patented ideas, the association’s survey showed.

Right man for the job

The promise of big payoffs is nearly irresistible. Columbia University’s pharmaceutical research was largely responsible for the $129.9 million the school and its researchers earned in licensing fees in 2001, tops in the nation. Columbia patented 62 discoveries that year.

Ten schools including Columbia earned at least $25 million apiece from patents in 2001. Vitamin D research patents brought millions to the University of Wisconsin, while the patented process that helped launch the cancer drug Taxol was a boon to Florida State.

By comparison, UT got a modest and late start, cutting its first technology transfer deal in 1988. Its licensing fees earned $2.3 million in 2001, and it secured 20 patents that year. But last year, the university earned more than $4 million from its licensing fees. Most came from patents issued years before Nichols’ appointment.

While UT lagged in creating a formal technology transfer program, the university has been known for fostering businesses, through the Austin Technology Incubator and IC2 Institute. Sanchez says the desire for building on that reputation came from the highest levels of the university.

“In the world as competitive as it is today, without technology transfer we would not be able to capture and hold the best faculty as well as top students,” Sanchez says.

Hired in January 2002, Nichols was the logical choice for change. A UT alumnus from undergraduate through graduate school in mechanical engineering, Nichols searched to find practical applications for his work when he became an associate professor in 1976. That year, he founded an engineering consulting firm, NAI, and two years later founded and sold a company, AHP Energy Associates, for a profit that made it easy to come back teaching, his primary interest. Seeing the value in understanding the law governing patents, Nichols became a lawyer in 1983.

“Not that we were looking for those very qualifications, but Steve Nichols had everything we were looking for,” Sanchez says. “And because he has been around for a long time, he was someone who knew a lot of people here.”

The matter of money

The development of technology transfer at UT will continue slowly, Nichols says. Sanchez directed him and Neil Iscoe, who recently moved from the tech industry to work with Nichols as director of technology transfer, to run their office solely from the royalties earned from patent development. Of the $4 million earned in 2002, half is shared with the professors who create the ideas, and half is kept by Nichols’ office. By law, all royalties must be used to further technology transfer.

While Sanchez oversees all research on the UT campus, Nichols and Iscoe are liaisons with the professors who might have work that could become usable products. Nichols and Iscoe travel nationally and internationally finding the right companies to develop UT’s research work.

A generation ago, money or influence of any kind from private industry was considered dirty, Nichols says. That attitude has changed, particularly in the sciences, where professors can see colleagues’ work saving or improving lives, he says.

What one sees at UT is a foundation being laid in the classroom. The business school is offering a class on the enterprise of technology. Nichols does guest teaching on intellectual property law at the law school and keeps close ties to the nanotechnology center.

“What Steve has been very good at is creating terrific opportunities for collaborative learning,” says R. Anthony Reese, associate professor of law, in whose class Nichols teaches. “Steve is very enthusiastic.”

And because his office is so new, Nichols says, he and Iscoe are only now confronting the technology transfer issues that distressed people such as Wyden and Bok. Assisting his counterparts at Trinity University in Ireland with their policies helped Nichols shape policies for UT, which will be reviewed by an administrative committee before taking their final form, he says.

Other universities serve as a models. Universities with a reputation for research are careful to uphold standards when dealing with outside influences. The Massachusetts Institute of Technology, which has engaged in technology transfer since 1940, keeps its rules simple, strict and easy, Lita Nelsen, director of the Technology Licensing Office, says.

MIT refuses to delay publication of research findings for more than the few weeks it takes to file for patents.

If a faculty member owns any equity in the company, MIT will not accept corporate sponsorship for the research. MIT does not invest in the early work of campus-based startup companies, and after startup a company must move off campus, Nelsen says.

“Our academic purposes—discovery, research dissemination and education—come first, and really first,” Nelsen says. “Money is the by-product of the technology transfer process, not its primary purpose.”

Money does, however, complicate matters. Rep. Wyden has attacked Bristol-Myers Squibb for using more than $30 million in federal research money to develop the cancer fighting drug Taxol and then reneging on a promise to allow other companies to manufacture generic versions of the drug.

The Florida State University process that contributed to Taxol brought millions to the school, but the Bristol-Myers Squibb legal trouble was a reminder that the transfer of technology into the marketplace is neither clean nor simple, says John Fraser, director of technology transfer at Florida State.

“I refuse to say you are dealing with the devil, but you are dealing with the unknown,” he says. “I’m not saying there haven’t been abuses but universities go into these relationships with their eyes open. You must demand a mutually respectful relationship.”

Nichols says he and Iscoe must assess those relationships one at a time. UT accepts sponsored research, but mandates that a committee be appointed to assure that no agreement restricts free inquiry. Nichols says the university must remember its primary missions, to teach and to research.

“If we were in this solely to make money,” Nichols says, “we wouldn’t do it. There are others who are much better at making money. There is an argument that we spend a lot of money on a university and that it had better be creating solutions to societal problems. If your goal is to benefit society, then you better give it every effort, find every way to do it.”

Technology in action

At UT, no better example of this ideal can be found than the work of Jonathan Sessler, a chemistry professor with Hodgkin’s disease. He and his oncologist, Dr. Richard Miller, founded a company, Pharmacyclics, in 1991. They are in the final stages of bringing to the market Xcytrin, which could begin helping doctors fight cancer by the end of 2005.

If successful, UT and professor Sessler will split a royalty that could total millions of dollars. Miller and his company stand to make much more, beginning to return to investors some of the $150 million spent to develop the drug.

Their case study in technology transfer began after Sessler developed cancer of the lymph nodes in 1976, while an undergraduate at Stanford University. In remission until graduate school, when the cancer returned, Sessler was assigned to Miller, who was serving a fellowship in oncology at Stanford.

A bit of a provocateur, Miller challenged Sessler to use his chemistry to fight cancer. Sessler was studying molecules in the blood that hold iron and for some reason settle in clusters of cancer cells. By the time he took his first post-graduate job at UT, Sessler was trying to figure out how to put these molecules known as porphyrins to work.

When Sessler figured out a way to enlarge the molecules, he asked, and in 1988 UT consented, to pay to patent the new molecule, Texaphyrin, named after his adopted state. The school eventually invested about $100,000 to patent Sessler’s work.

Texaphyrins, Sessler postulated, could carry an ionic charge that might disrupt the growth or even kill cancer cells, and it could allow for more targeted MRIs and radiation treatment.

Years after UT granted Pharmacyclics exclusive right to the patents, Sessler refined his research for development of the cancer drug now known as Xcytrin. Unlike three of his graduate students who went to work for Pharmacyclics, Sessler stayed at UT, where his cancer remains in remission and where he thought he could be more valuable doing research.

Miller has spent the past 14 years convincing investors Xcytrin can fight cancer. Only if it does can Pharmacyclics make money. Sessler has spent his entire professional life testing a single idea. Whatever money he earns in royalties, he says he has already pledged to invest in his laboratory at UT.

“Richard and I are doing this not for the money but because we had a very specific goal, he as an oncologist and me as a cancer patient,” Sessler says. “Personally, I do not believe in taking money for this invention. My motivation is to fight back against this cancer the best I can.”