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Transferring Technology,
Ellery Jose Creating Wealth

s a graduate student of technology management (a relatively new graduate


A program of UP), I am often asked by my acquaintances to differentiate my degree
from an MBA or MPA. I explain it in terms of how they differ in content and emphasis,
a very academic definition. My classmate gives a more illustrative definition and
a better idea of technology management. For him, it is simply “making money out of
technology.” I have since adopted his definition and I was glad that this idea resonated
in a recent article that I read. It was about several Filipino entrepreneurial teams that
won in local and international business plan competitions. Featured were a graduate
student from Silliman University who invented a technology for waterless live fish
transport, a team from FEU with their business plan for construction boards made out of
aluminum packaging, and engineering undergraduates from UP Diliman who prepared a
business plan for affordable, high-quality medical equipment. Congratulating them was
Presidential Consultant Jose Concepcion III who said, “It’s time for Filipinos to make
money.”
However, this idea of “technology for wealth-creation” still has to be cultivated in
the Filipino consciousness. In the Philippines, a science or engineering career is not looked
at as a pathway to becoming rich. When I was an undergraduate, students knew that
academic research, especially if they generate inventions, had potential commercial value.
But somehow, it was uncommon to think of using our scientific or technical know-how
to build a business enterprise. We know that the University of the Philippines has not
yet realized the potential value of its technologies or benefited greatly from them, unlike
Stanford University, which has already earned $552 million in royalties from its patents
since 1970. Based on a survey, for the year 2000, American universities have received a
total of $1.2 billion in royalties from their licensed technologies, which have generated
$60 billion in product sales and 400,000 new jobs. And this does not yet include the
multiplier effects of the increased economic activity on the entire national economy.
Universities enable wealth-creation by transferring the knowledge they create
primarily through published work and through their graduates. Knowledge can also
be embedded in inventions that arise from university research and are the subject of
technology transfer. A university will then apply intellectual property (IP) protection in
the form of a patent or utility model and then seek potential investors who may want

Supply Chain Planning, TMX Philippines, Inc., Lapulapu City, Cebu, Philippines.
efjefj2001@yahoo.com or Ejose@timex.com
Transferring Technology, Creating Wealth 97

to license the invention. It is actually like a software license that gives a user a right to
use MS Word but not own it, which means that it cannot be reproduced and distributed
to other PCs unless permission is granted because the copyright for it remains with the
owner, in this case, Microsoft.
A technology license will always include provisions on payments (royalties, up-front
fees, milestone payments), exclusivity (MS Word is nonexclusive because it is licensed to
anyone who wants to use it and pay the required fee), length of effectivity and obligations
of the investor or licensee. I was saddened to hear from an Ateneo professor that one
of his colleagues invented a very useful device but sold its patent to an investor rather
than licensing it, thereby losing all his rights to the technology. Yes, this is an option, but
not preferred, for obvious reasons. Licensing allows maximization of revenues from the
technology because it gives the patent (or utility model) owner a longer (and ultimately
greater) stream of income, unlike selling, which means just a one-off payment based on
the present (and potentially lower) valuation of the invention. If it were licensed, then
depending on the terms of the license, the value of the payments may be renegotiated.
Biological materials, like cell lines or tissues, may be transferred through a material
transfer agreement (MTA). Some of the MTAs I have seen from UP microbial culture
collections limit the use of the microbes for research work. An MTA is an excellent way
of controlling the distribution of reproducible materials like cells even if these are not
patented and its scope can extend even to the progeny material. If it is not protected by
IP, then other entities may use the same material freely as long as it was from another
source not governed by an MTA.
The next level of technology transfer would be in the form of spin-off firms and
equity participation. A university may want to receive equity in an enterprise that will
commercialize a certain technology, instead of royalties. Faculty members would most
likely be the founders of these firms themselves and the university may provide business
incubation services to them. This is a very different setup that is not yet widely used.
It will take time before UP evolves into a full-fledged “entrepreneurial university”
or for the Katipunan area, with UP, Miriam College, and Ateneo University as research
seeds, to metamorphose into a mini-Silicon Valley. The starting points for building an
entrepreneurial academic community would be a dynamic research culture and an
environment that respects intellectual property. Without these two elements, there may
be no technologies to transfer in the first place!
Below, I discuss the technology transfer systems in other countries. I want to
emphasize that despite their varied forms, all of them provide the same set of core services
in the form of IP and business advice and financial support for patent applications.
USA: University technology transfer in the US has its historical roots in the successful
agricultural extension activities of the early American land grant universities, after which
our University of the Philippines was patterned. Its administration is primarily through in-
house technology licensing offices, which have responsibility for technology disclosures,
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patent applications, technology marketing and valuation, licensing negotiations and


revenue collection. In recent years, these offices are either being complemented by
university-industry relations units or are evolving to include some of their functions. This
is evidence of increasing recognition that technology transfer is part of a much broader
process of establishing university-industry linkages.
Other means of technology transfer are through external patent management firms
and establishment of university-related foundations. However, these external entities,
while shielding the university from business risks and legal liabilities, are not as widely
used by US universities as licensing offices. For one, they choose only a certain percentage
of invention disclosures to commercialize, leaving the university the responsibility for
the rest. Obviously, they tend to choose those inventions with the greatest potential
commercial value. To avoid this “cherry-picking,” some universities retain the
authority to decide which technologies to give to the external entity. But this strategy
also requires establishing some form of in-house licensing or patent office to prescreen
invention disclosures. Moreover, there were major publicized disagreements between
certain universities and their partner research corporations in the past, which may have
contributed to their negative image. The use of external firms or foundations remains
a viable option, despite these disadvantages, as shown by UK, Australian, and German
universities.
Right now, the US has one of the most vibrant systems of university technology
transfer. There is a professional organization called the Association of University
Technology Managers or AUTM which is composed of hundreds of licensing
professionals from different universities. The success of the system has been credited to
the famous Bayh-Dole Act of 1980, an act that gave American universities the right to
obtain titles on inventions arising from federal-funded academic researches. It provided
the academe incentives to set up their own technology transfer units and to maximize the
transfer of their intellectual properties to industry. Indeed, according to the law, it is their
mandate to do so. If they fail, then the federal government with its march-in rights can
take these patents and commercialize them on its own.
The success of the Bayh-Dole in the US, with other countries like Japan and
Germany adopting some of its provisions, has generated interest and debate in some of
our academic institutions and within DOST. Their question is: “Will a similar legislation
improve our local technology transfer system?” I have met some people who believe
that it will and some who believe otherwise. On the other hand, most are between these
extremes. Personally, I believe that there are lessons that we can learn from the history of
the Bayh-Dole Act but these lessons must be placed in the right context. The Bayh-Dole’s
primary contribution was to remove the greatest obstacle to the process: bureaucracy.
By giving the responsibility for technology transfer to universities, the Bayh-Dole
removed the need for private firms to navigate the maze of oftentimes inconsistent rules
on licensing by the different federal agencies that fund academic research. For example,
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licensing an invention that was funded by NASA, the NIH and US-DOE would have
been a legal nightmare! Today, a firm would just have to go to an appropriate office in a
university.
Further, the law allowed exclusive licensing of inventions from research funded by
public funds. As a result, more firms were encouraged to license these technologies.
However, not all inventions are licensed with exclusivity, as in the case of recombinant
DNA (and other basic technologies that will impact several industries). But exclusivity
has its inherent business advantages that make technologies more attractive to potential
licensees.
Similar to the US, a large part of academic research in the Philippines is funded by
government funds, and a Bayh-Dole-type law will greatly impact technology transfer.
But the government, particularly the DOST, and not universities, has already developed
specific mechanisms for technology transfer (IP Guidelines and TAPI or Technology
Application and Promotion Institute), although UP also has an emerging system. Such
legislation will facilitate the transfer process, especially now that other government
agencies are designing their own IP rules and policies. However, it is highly unlikely that
the DOST will give up its primary role in the transfer process. While the DOST system
needs improvement, it has shown itself capable of successful technology transfer from
university research, as in the case of the herbal medicines lagundi and sambong from UP
Manila.
There is no evidence, local or foreign, to suggest that internal units within universities
will necessarily be much better than a government agency or any other external entity
in transferring technology. It may be that a DOST-led approach may add another layer
of bureaucracy; however, based on my own observations, the “distance” between a UP
professor and a DOST research council may be “shorter” than the distance between UP
faculty and the UP administration. Nevertheless, there are good reasons for maintaining
the autonomy of academic institutions, particularly in shaping their research agenda. A
reduced role in managing their own intellectual properties may defeat the very purpose
of academic freedom, with grave consequences. (A compromise then has to be made!)
Regarding exclusivity for public-funded researches, I personally believe this is a non-issue
in the broader context and is best decided for each case based on acceptable criteria.
Japan: Prior to the 1998 Technology Transfer Act, tacit and undocumented transfers
of technologies and knowledge occurred primarily between an individual researcher and
a single, large firm with which he/she had had informal relations. Japanese university
professors then had ownership of intellectual properties arising from their own research,
with the government having a share only if the research was supported by a specific
allocation of public funds. With the aim of improving the transfer system, the 1998
Act encouraged the creation of technology licensing offices (TLOs) by, among others,
providing seed funding for their operations.
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These licensing offices are usually separate legal entities servicing either a single
national university or a private university. There are also area-based TLOs that serve
several universities and research organizations in a particular locality. They provide
a range of services—patent applications, marketing, even business incubation—to
individual researchers who choose to assign their inventions to them. On the other hand,
companies have to pay membership fees to most TLOs in order to gain preferential access
to undisclosed patent applications. More details are given by TLOs to an interested
investor only after the two parties have signed a confidentiality agreement. A policy
change in the future may require researchers to disclose inventions and assign patents to
their respective universities.
United Kingdom: For a long time, commercialization of technologies from publicly
funded research was the monopoly of the government through the British Technology
Group or BTG. The BTG was subsequently privatized, and is now owned partly by
several universities. These universities have, on their own, also commercialized their
technologies without using BTG’s services. In particular, King’s College London and
Oxford have their own research corporations. Before its privatization, the BTG also
provided equity funding for academic researchers and institutions with marketable
technologies. But with the growth of the venture capital industry, this function seemed
redundant. The BTG is now focused entirely on technology licensing and sales.
Germany: Before 2002, university professors and their assistants had the “university
teacher” privilege that gave them exclusive rights to exploit their patents. As a
consequence, universities did not establish their own transfer units until a reform of the
law required professor-inventors to transfer their rights to their respective universities.
Six years before, the Ministry of Education and Research waived the government’s right
to collect shares of the license income from government-funded researches and allowed
exclusive licensing of technologies arising from them. To support these reforms, the
federal and state governments then vigorously established in-house licensing offices, and
technology licensing bureaus and companies serving several universities within a city or a
state. With the recent formation of sector-specific IP management firms that specialize on
certain technology areas, a new technology transfer setup is evolving.
Australia: According to an Australian patent attorney whom I met in an international
workshop, Australian universities traditionally own all the intellectual properties that
they generate, unlike in most other universities. Thus, the problems of IP ownership as
seen in the US that were supposed to be addressed by the Bayh-Dole were non-issues
in Australia. Also, even the public universities are not subsidized by government funds.
As a result, they are required to generate their own income from their activities and
assets, primarily through university-owned corporations, like the UniSearch of the
University of New South Wales. In recent years, exploiting intellectual properties has
become the dominant contributor to total revenues generated by these corporations. As
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a consequence, these corporations have become more like patent management-type firms
rather than full-blown business units.
ASEAN: Several universities, like those in Thailand and Malaysia, have established
TLO-type offices and even university-owned firms/foundations (as in Australia) for
commercializing technologies. A success story would be that of Thai Chulalongkorn
University’s University Industry Relations Unit or UIR, which has responsibility not only
for technology transfer but also for managing collaborative projects with industry and
providing business incubation services to university staff and students. In its first year in
2003, it already earned 7.7 million Thai baht from its six patents. On the other hand,
in Malaysia, many of these business units have not been effective because of lack of
resources and appropriate skills.
Our own University of the Philippines has also been trying to develop an effective
means of technology transfer. Over the span of two decades since it first formulated
an IP policy, the various constituent campuses and the system administration have
experimented with in-house IP offices, a not-for-profit foundation and, more recently,
a technology licensing office. The UPLB-BIOTECH has its own patent agent. Based on
my own research, UP has at present a total of twenty-six pending patent applications,
and five pending utility model applications from its large campuses in Los Baños and
Diliman.
Many of these patent applications had been filed even before the creation of the
system-wide licensing office and are presently managed by different administrative units.
It will take time before a more unified system evolves. UP may consider adopting the
system used at the multi-campus University of California which is a decentralized system
of independent licensing units from the different campuses and major laboratories,
coordinated by a lean system-wide licensing office.
For other universities thinking of formalizing their IP policies and creating units for
technology transfer, I hope I have been able to provide a wide variety of options and
lessons. Some of the issues I discussed are unique to a multicampus public university
like UP and may not be relevant to others. Universities that are privately owned
and financially independent may be more flexible in designing their own systems,
unconstrained by government regulations. It may be that university administrators feel
that their faculty is not yet producing enough research output to merit establishing TLOs.
This is an important concern even in UP, where some people feel that not enough research
is being done. To achieve economies of scale, an external TLO owned by a consortium of
several universities may be an option.

Printed in two parts on June 2 and June 9, 2005