October 24, 2014

Big Money On Campus

David Villano | 12/1/1995
Academic purists may cringe, but Florida's universities are turning their faculties' best ideas into profits. In the three years since researchers at Florida International University disclosed a new chemical process to strengthen aircraft fuselages, airline officials have been predicting an industry revolution. Lab tests have shown that the polymer coating can double or triple the service life of aircraft skin, while raising its resistance to fire. "People are saying they can put this on old planes and fly them forever," says Tom Breslin, vice provost for research and graduate studies at FIU, which holds the patent on the coating process. "And if that's true, this could be a very lucrative invention for our school."

Although FIU has yet to earn a dime from the discovery, Breslin remains hopeful that the coating process - dubbed PantherSkin, in deference to the school's mascot - will turn out to be the proverbial pot of gold at the end of the school's research rainbow. German aircraft manufacturer Daimler-Benz Aerospace is testing the process. If successful, a licensing agreement to use PantherSkin on the company's A340 commercial aircraft will follow. NASA, the U.S. Navy and at least one domestic aircraft manufacturer have shown interest, too.

"This could be our big one," boasts Breslin. To be sure, Florida's colleges and universities all are looking for their "big one" - that ground-breaking invention or discovery that will reap millions upon millions in royalty payments for cash-strapped research budgets. Indeed, with federal funding for basic science research expected to shrink by nearly 30% over the next seven years, school administrators are promoting faculty discoveries like never before. Somewhere in the lab notes or published literature of their faculty, they hope, may lie a cure for cancer, a vaccine for AIDS or some other blockbuster discovery.

Less profound innovations can mean big bucks, too. By many accounts, the financial lure of research on American campuses dates to a hot summer day at the University of Florida in 1965. The football coach, worried about dehydration, asked a team of physiologists at the school to whip up a high-energy, fluid-replacement drink for his perspiring players. They returned with a bland-tasting concoction that changed forever the meaning of the "water break" and changed forever the way universities view research conducted by their faculty. The drink, Gatorade, now generates $1.2 billion in annual sales.

At the time Gatorade was invented, UF had no formal policy for faculty inventions nor any interest in marketing the drink. But later, when the researchers refined the formula and sold it to food giant Stokley-Van Camp (now part of the Quaker Oats Company), school administrators took notice. Following a lengthy court battle, UF accepted a court judgment granting the university 20% of the money researchers receive from Gatorade sales.

University officials say royalty income for Gatorade is confidential, but sources place the figure at close to $4.5 million per year and growing, far less than the school would receive under the current royalty-sharing policy.

Today, such a discovery at UF would be handled differently. Like virtually all colleges and universities across the country, UF now lays claim to all discoveries made by school employees using its labs, equipment and other resources.

When those discoveries generate commercial revenue, the school splits the first $100,000 in net income, after expenses, evenly with the inventor. Of the next $100,000, the inventor gets 40%; after $200,000 the figure drops to 30%. Of the university's share, one-third goes to the inventor's department and the rest to a general research fund.

Each public university in Florida has its own distribution formula, but all are roughly the same as UF's. The University of Miami, the state's only major private academic research institution, divides its income after expenses three ways: one-third to the inventor, one-third to the inventor's academic department and one-third to the general research fund.

If the Gatorade story offered a crash course in the economics of university research, school officials in Florida have been good students. In a report for the Association of University Technology Managers, in 1993 UF ranked fourth among all U.S. universities in the number of new patents awarded, with 45, and ninth in royalty income from product licensing (one place ahead of Harvard), earning nearly $5.7 million.

Next time the figures are updated, Florida State University is expected, for the first time, to join UF among the top ten U.S. universities in royalty income. FSU's royalty income jumped from just under $600,000 in 1993 to $7.5 million in fiscal year 1995.

FSU's version of Gatorade is Taxol, a rare, naturally produced anti-cancer agent first synthesized in 1989 by a chemist at the university. After securing a patent for the synthesizing process, the school licensed the discovery to pharmaceutical giant Bristol-Myers Squibb. FSU's royalty income from the Taxol license this year was just under $7.3 million. Raymond Bye, FSU's associate vice president for research, says the school's take could be many times that if the drug proves commercially successful. "Taxol has really put us on the map," says Bye.

Meanwhile, UF has weighed in with its own anti-cancer agents. Now in clinical trials, the drugs are expected to reach the market in early 1998. Among UF's other promising products now under license: Trusopt, an eye drop used for the control of glaucoma; PerioGlas, a bio-active material used in the treatment of gum disease; and ProFibe, a powdered form of grapefruit pectin that may reduce cholesterol levels.

Other research universities in Florida are joining the party. Says FIU's Breslin: "Nobody wants to miss the next Gatorade."

The University of South Florida has made technology transfer a cornerstone of its long-term strategic plan. The school, with nationally recognized programs in medicine and oceanography, opened a research foundation in 1989 to oversee commercialization of faculty discoveries. USF netted more than $250,000 from 13 active licensing agreements last year.

The University of Miami expects to receive close to $150,000 from 20 licensing agreements this year, up from $111,000 last year. Jeanie McGuire, UM's technology transfer director, says these figures are peanuts given the income potential of an important new drug or consumer product.

Like her counterparts around the state, McGuire is waiting for the one big discovery that will earn the university millions in annual royalties. The odds of one reaching Gatorade status remain slim. Even what seem to be can't-miss discoveries often come up short. According to a common rule of thumb, for every 100 inventions or discoveries, only 10 are patented and just one marketed.

With such uncertainty, universities employ the scattershot approach to technology transfer: the more inventions they patent, the better their chances of hitting it big. "You invent a zillion things without ever knowing which one will be a winner," says John V. Lombardi, president of the University of Florida. "So you just patent everything you can and hope someone will pick up the license. It could make a fortune or it could just disappear into outer space."

More times than not, Lombardi admits, faculty discoveries are overlooked because they're published in obscure scholarly journals.

At the University of Central Florida, Diane Jacobs, vice president for research and graduate studies, says making money from research is tougher than it may sound. "We've realized how wonderful we are at inventing things," she says, "but how dismally we have failed at commercializing them."

Not surprisingly, the universities most successful at marketing research employ full-time technology transfer managers to shepherd the discovery to the marketplace. UM, UF and USF have fully staffed technology transfer offices. The state's smaller institutions, which coordinate the function through their sponsored research departments, are clearly at a disadvantage. FIU, for example, which holds only four patents and has yet to receive any licensing or royalty income, hires an outside consultant to evaluate discoveries and do necessary paperwork.

In contrast, UF has a five-person technology transfer office which reviews close to 80 faculty "disclosures," or discovery announcements, each year. Of those, roughly 20 are patented. Even before the patent is secured, private firms are contacted in what Chris McKinney, interim director of UF's Office of Technology Licensing, calls "warm calls" - marketing pitches to firms interested in university licensing agreements. His office also distributes a booklet listing the school's licensing opportunities.

Stefan Borg, president and CEO of a young Jacksonville-based company called SunPharm Corp., says he first learned of UF's new cancer drugs four year ago while scanning the school's licensing booklet. After securing licensing rights (in exchange for company stock and future royalty payments), Borg then negotiated a sponsored research agreement that currently pays UF $625,000 per year to continue development and initial testing of the drugs. "Working with the University of Florida, I essentially was a one-man pharmaceutical company for the first two years," says Borg. "They've supported SunPharm every step of the way."

But the SunPharm example also illustrates a growing concern within academia. Universities not only are selling their independent discoveries but also a growing number of privately sponsored discoveries.

With federal research dollars dwindling, schools nationwide solicit funded projects, commonly known as sponsored research, from private industry. UCF, for example, has research agreements with Florida Power & Light, AT&T and Lockheed Martin. FIU has agreements with Gillette, Coors and the American Heart Association. Typically, the research is conducted for a flat fee, plus overhead expense reimbursement. If the work produces a commercially viable discovery, the university often holds the patent, while the corporate sponsor generally receives the licensing rights.

Critics raise a host of potential conflicts over such arrangements, not the least of which strikes at the core of any university campus: corporate secrecy versus the free exchange of ideas. Faculty members complain that research papers have been embargoed pending market assessments and that some corporate sponsors have asked them to sign confidentiality statements.

Skeptics say faculty promotion and tenure has become tied less to good scholarship and more to the amount of funding a researcher brings to the school. Some faculty have put research ahead of teaching as a result, leading peers to criticize their "conflict of commitment."

University officials freely acknowledge the complaints, but insist there may be no turning back to the days when dollars didn't matter. "There is absolutely no doubt in my mind that the university system that was around in the '50s and '60s is gone," says George Newkome, the University of South Florida's vice president for research. "The number of students are up, funding is down, so the question becomes: How are you going to run a comprehensive research university unless you change the basic paradigm that we all work with? It can't be done."

UM's McGuire is even more forthcoming. "Will there be conflicts of interest?" she asks. "Yes. Will there be ethical issues that arise? Yes. But we can't just stick our heads in the sand and say we can't be doing things this way. These are real problems, but we have to deal with them."

Perhaps the most confounding of those problems is the emerging Catch 22 of America's research and development infrastructure. With federal funding for many areas of basic scientific research decreasing, universities are turning to the market-relevant concerns of applied science. But without continued advances in the basic sciences (research for its own sake), there won't be much of anything new to apply. UF's President Lombardi draws the analogy of prospecting for gold. "If you don't occasionally find that mother lode, the next generation won't have anything to mine," he says. "Basic science is like finding the vein; applied science is like mining it. If you don't keep discovering new veins, eventually you exploit an area endlessly and with ever lower returns per dollar invested."

Maintaining a balance is the goal of Florida's research universities. Indeed, much of the licensing and royalty income they receive is earmarked for basic scientific research that otherwise might not be funded. Says Lombardi: "On one hand, we have to be very careful not to confuse the goals of science with the goals of the marketplace. But we also need to realize, particularly today, that one can be a very meaningful complement to the other."

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