With New Outside Board, UCLA Makes Move to Boost Commercialization
By Brian P. O'Shaughnessy
This article appeared in the August 2013 issue of Technology Transfer Tactics. Click here for a free sample.
As a top-tier research institution, the University of California at Los Angeles (UCLA) has all kinds of academic accolades, world-famous scientific faculty, and a sterling reputation. However, UC regents have concluded that for too long the school’s commercialization engine has lagged behind its peer institutions, and that it’s time to take the operation in a new direction.
A key part of the plan is the creation of a new 501(c)(3) organization, dubbed Newco, that when fully implemented will oversee technology transfer, industry partnerships, start-up creation, and other facets of campus-based research commercialization. According to university documents, Newco will be a new “decision-making body” that will primarily consist of people with extensive industry experience in commercializing research. The structure is designed to make the tech transfer process more responsive to industry, which will have a bigger voice and greater influence over the direction of research commercialization activity.
This is hardly the first time a university has gone this route. Indeed, UCLA says it modeled the new approach in part on the Wisconsin Alumni Research Foundation (WARF) at the University of Wisconsin in Madison, WI, and Arizona Science and Technology Enterprises (AzTE) at Arizona State University in Scottsdale, AZ. But the move has sparked strong reactions from both proponents, who think this is just the sort of spark UCLA needs to take its commercialization engine to the next level, and critics, who see this as just another example of business encroaching on the academic mission.
One thing about which there is broad agreement is that there is a lot riding on UCLA’s move. If the approach is successful, some experts suggest that other campuses in the huge UC system will likely follow in rapid succession. And there is no question that other research universities are paying close attention to the proceedings as well.
I. Board will delegate authority 
Precisely how Newco will direct and interact with UCLA’s Office of Intellectual Property and Industry Sponsored Research (OIPISR) is still being worked out. Indeed, the people who will sit on the Newco board have not yet even been selected. However, it’s clear that Newco will have the power to set priorities across the full range of UCLA’s commercialization activities.
“The board of directors will hold us accountable for delivering against the expectations of the university,” explains Brendan Rauw, the associate vice chancellor and executive director of entrepreneurship at OIPISR. But Rauw also emphasizes that the Newco directors will not be getting involved in every patenting and licensing decision. “I will report to the board on a regular basis, and the board will provide strategic direction on innovation. But we manage too many patents, too many deals, and too many disclosures for them to engage on each and every one individually.”
Once the Newco board is established, Rauw says he expects that the board members will be involved with establishing the patenting budget as well as overall patenting criteria, and the board may advise on larger deals, but most operational decisions will be handled as they are now. “The board will delegate authority to the lowest level that is appropriate for a decision to be made,” notes Rauw.
A nomination committee is being set up to review candidates for the Newco board, and it will forward recommendations to the chancellor, who plans to have the full panel in place by July 1 of 2014.While the goal is for most of the Newco board members to come from industry backgrounds, Rauw says there will also be faculty representation, and all members must be free of conflicts. “They will be held to the same standards as the regents, the president of the University of California, and the governor,” he says. “There will be a vetting process involving campus counsel to ensure that there are no conflicts or potential conflicts.”
II. Critics question motives 
Despite such assurances, critics have already charged out of the gate, declaring that the approach is more about making money than serving the public interest. “I don’t expect it to be much of a tech transfer program so much as a rights arbitrage program,” observes Gerald Barnett, the director of the Research Technology Enterprise Initiative at the University of Washington in Seattle, WA. “That is, a portfolio scheme based on low-cost access relative to upside opportunities to flip IP for value. It is secondary whether university inventions actually get used for their intended purpose rather than being used to get patents that scale the perception of potential and thus command a higher value in investment deals.”
However, Brian O’Shaughnessy, an IP attorney at Washington, DC-based RatnerPrestia who works frequently with TTOs, takes issue with such views. “Condemning Newco and any similar efforts as thinly veiled profiteering schemes overlooks the sophistication of the marketplace,” he says. “People don’t just go out and buy patents to have patents, and it is very hard to make money just bundling things that sound sexy. In fact, I would say that it is just the opposite. Even very promising technology, or the rights associated with very promising technology, get overlooked just because people don’t want to pay the money for the rights and will figure out some other way to get at them.”
What UCLA is doing with Newco is really not that different from what many other universities have done, according to Spencer Lemons, who was VP of technology transfer at the Fred Hutchinson Cancer Research Center in Seattle, WA, and director of technology transfer at Wake Forest University in Winston-Salem, NC before founding Seattle-based Spira Consulting in 2007. “The primary reason why universities do this is it because it gives them more flexibility, particularly in a state system where state rules and state laws limit some of things they can do,” he says.
For example, some states don’t let universities accept any liability when they are engaged in big research projects. By establishing a separate non-profit, a TTO may be able to accept some liability and then purchase insurance to cover that risk, explains Lemons. “It also gives them flexibility around what to do with money when it arrives,” he says. “At some universities, the TTO isn’t able to retain some of the money that it makes off of inventions and then reinvest it in new inventions or in personnel. This gives them that added flexibility.”
Rodney Sparks, senior biotechnology patent counsel at the University of Virginia Licensing & Ventures Group in Charlottesville, VA, agrees with Lemons, noting that TTOs managed by separate non-profits can escape some burdensome state requirements around issues such as hiring, firing, and major purchases, for example. “Other potential issues of benefit include an extra layer of liability-shielding between the university and litigants in the event of a lawsuit,” says Sparks.
Lemons suspects one of the reasons why UCLA may be taking this step is so that the new organization can actually make investments in promising early-stage technologies that may not yet have a market. “It may also give them the ability to pay people more so that they can attract people with more experience to make these decisions,” he says. “If they are going to start investing larger sums of money in earlier stage technology, they better have people with a lot of experience in that or they could lose a lot of money fast.”
Lemons tends to favor having the separate non-profit organization in place to oversee commercialization. “If there are rules and regulations in the state system that unnecessarily inhibit the [commercialization] process, I think you have to do something like this,” he says. “You have to either change the laws and practices for the university to allow you to do this, or you have to step outside of that structure and come up with another way of doing it.”
III. Faculty have concerns 
One potential downside to such arrangements is that the university loses a bit of control, notes O’Shaughnessy. “You have a separate organization with separate leadership that has some level of autonomy in terms of how it will structure licensing deals,” he says.
Further, he stresses that it is one thing to inject business savvy and marketplace knowledge into decisions over what to patent and how to structure a deal, and quite another to let business and industry representatives drive a university’s research strategy and long-term objectives. “Universities do what they do best when they focus on fundamental research, and fundamental research doesn’t usually find its way into the marketplace quickly enough so that the patents actually have a great deal of value,” he says.
This is why faculty members tend to be leery of separate, business-minded technology transfer organizations. Rauw acknowledges there have been reasonable concerns raised about Newco. “I understand why people are concerned with the perception that industry is increasingly encroaching on the academic enterprise,” he says. “One of our goals is to make it clear that our mission is translation of research for social benefit. Yes, commercialization is part of that, but it is not the only part.”
Rauw points out that Newco has the support of UCLA’s faculty senate, and that it was approved unanimously by the Regents. “This has been a three-year process of refining what the model will be and getting buy-in,” he says. “The idea is to remove barriers to IP getting out there, and doing so effectively and in the best interests of all stakeholders.”
While there are undoubtedly multiple reasons for establishing Newco, Rauw stresses that the university has very aggressive metrics that it expects the new organization to achieve. “This last year was actually a very successful year for UCLA. We had over 400 disclosures, we launched 20 start-ups, and we increased licensing revenues by 30%,” he says. “We are doing well, but we aspire to be the best. And this is aggressive, but we are not just going to be measured on financial metrics. That is one of the elements, but overall this is a mission for service to society and service to faculty.”

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