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  • Rich Schneider

Creating Value from University IP: A Work In Process

Updated: Apr 4, 2023

Innovation created by American universities is broadly recognized as being the world’s best. The American university research community and its associated ecosystem have been the source of enormously impactful developments: the Google search engine, MRI imaging technology, GPS, speech recognition technology, Gatorade, and The Human Genome Project to name a few. Over the past 50 years, universities have played an increasingly important role in American basic research – estimates are that as much as 5% of the US GDP and over 3 million jobs are a direct result of university-generated research and IP. Support for this effort is enormous – over $75B per year of federal funding is provided to university research activity. Despite this impressive track record, there is considerable opportunity for improvement in how university IP is realized in the world at large.

A closer look suggests that among America’s universities, there is great variation between research funding and external impact. Frequently-used metrics for success include patents, licenses issued and royalties received, and spin-off startups created. Some institutions have enormous research funding with relatively few measurable commercial outcomes, while others have far more modest research platforms but a significant number of patents, licenses, and/or startups. Overall academic institutions accounted for only about 6,500 patents out of the more than 300,000 issued in 2016, and between 1996 and 2015, have spun off an average of 600 startups per year out of the more than 400,000 reported annually by the Bureau of Labor Statistics.

There is clearly a wide spectrum of practices across institutions in terms of their ability to recognize and realize high value from innovations. Our initial research suggests universities often lack internal processes for identifying high-potential innovations, lack an overall strategy for what they can do with the IP they generate, have limited visibility into the external commercial world, and are siloed across research domains. There is often a fundamentally different point of view between the faculty and the administration/trustees about what the purpose of the university and its research platform should be. In other situations, innovative entrepreneurial-oriented faculty often don’t receive the full support that they need for commercialization success.

While most universities have created Technology Transfer Offices (TTO), too often these offices are small, underfunded functions focused solely on managing the legal aspects of patents and licenses. Some other universities embrace a much broader approach. UCLA, for example, has created a standalone 501-(c)(3) company – UCLA Technology Development Group – which has successfully institutionalized all aspects of bringing university-generated IP to commercial success and has built deep relationships with the West Coast venture community. TDG currently has a significant multi-year pipeline of ventures and has created its own investment fund to support opportunities.

Commercialization of university IP can be substantially improved by taking a more strategic and structured approach. The good news is that universities (and faculty) are increasingly aware of the value their research efforts can create, and positive changes are evident. For example, the number of startups annually spawned out of university programs overall has tripled from about 300 per year in 1998 to almost 1,100 per year in 2018. This reflects the recognition that a comprehensive, strategic approach to managing and commercializing IP – such as the UCLA TDG – is possible and effective.

Sage Partners has developed a roadmap for more consistently creating value from the IP generated in university settings. This includes a clear strategy for how IP creation fits with overall university priorities and mission, a process for identifying market needs and potential external partners, an approach for creating realistic business models and executing them, and the marrying of external business and financial resources with the academic expertise resident in the university. This roadmap, or Maturity Matrix, creates a holistic capability for the institution to realize commercial value beyond the campus and still be true to its academic missions and goals. With this roadmap, high-performing institutions can improve their commercialization success, however they define it.

We would be happy to share our point of view and roadmap with you. Our goal is to help universities become more efficient and effective at fostering innovation and realizing the tangible benefits of commercialization - both of which are valuable for recruiting/retaining faculty and students alike.

Sage Partner Rich Schneider contributed this Sage Advice.

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