Realizing the Profits of Research

Linden Rhoads hasnt forgotten her unpleasant experience a decade ago with the University of Washingtons technology transfer office. A local company she had co-founded, Nimble Technology, wanted to license technology owned by the school.

But the UW TechTransfer office, whose mandate is to commercialize research developed by UW personnel, dragged its feet. It took a very, very long time and many, many meetings that accomplished little, Rhoads recalls. I asked myself: Are we operating on entrepreneur time or university time? For entrepreneurs, she explains, Time is the enemy. Venture investment and related transactions fall through if it takes too long to get things done.

To make matters worse, TechTransfer, invoking a conflict-of-interest rule, refused to let another Nimble co-founder, who was a UW faculty member, sit on the companys board. Frustrated, he quit UW and went to Stanford University.

In theory, the interests of the university in licensing its research and businesses in commercializing it should be neatly aligned. In practice, however, the process has been far more bureaucratic than entrepreneurial.

The 41-year-old Rhoads, who was hired in August 2008 as vice provost of UW TechTransfer, never wants a scenario like Nimbles repeated. So shes been taking steps to make TechTransfer more entrepreneurial, including hiring staff from the private technology sector, relaxing conflict-of-interest and other rules, and launching new initiatives and processes.

Observers are impressed with UWs selection of Rhoads. Rather than hire a bureaucrat, they grabbed someone with entrepreneurial experience and contacts, says Len Jessup, director of Washington State Universitys Center for Entrepreneurial Studies. They are poised to do [tech transfer] really well.

The UW is also taking the right approach. Instead of [only] looking out for the universitys intellectual property rights and maximizing its revenue stream, TechTransfer has taken a more holistic approach to getting technology commercialized, says Sonya Erickson, a lawyer at Seattles Cooley Godward Kronish. The firm has represented dozens of companies seeking UW technology licenses.

When it comes to research dollars, UW ranks first among American public universities, pulling in a cool $1.2 billion annually from the federal government, foundations and corporations. The Obama administrations economic stimulus program could bump that figure up another $300 million.

Other eye-popping stats: At the end of fiscal year 2008, the UW had over 1,000 granted patents and more than 1,200 patents pending domestically and worldwide. University research-related activities support more than 42,000 jobs statewide. Through 2008, 244 companies had been started with UW research.

The University of Washington began commercializing its research in 1980 with the creation of the Washington Research Foundation, a private entity charged with developing technologies originating from the states universities, including the UW. Two years later, the UW technology transfer office was formed. Together, these two entities manage UWs vast technology portfolio, which, in 2008, produced revenues (after administrative expenses) in excess of $47 million.

But, as Rhoads Nimble experience illustrates, TechTransfer, which today has a staff of about 50, has been a frustrating place at times for both entrepreneurial researchers and entrepreneurs eager to use UW technology to launch a new business or enhance an existing one.

Consider Michael Lebedevs experience. In 2004, the co-founder of Mirabilis Medica, a medical device company in Bothell, began negotiating with the office for a technology the company wanted. TechTransfer initially hit him with a monstrous 80-page licensing agreement. Negotiations produced a final version less than half this length, but it took a year and a half to reach the endpoint. I didnt expect it would be such a cumbersome, lengthy process, says Lebedev.

Consider also a research study released in May 2008 about starting life sciences businesses in Washington. Funded by Seattle and the Washington Biotechnology & Biomedical Association, the study noted that technology transfer at UW had improved. According to one CEO interviewed for the study, UW Technology Transfer is not spectacularly onerous. It is about the same to deal with as everyone else. And, in an observation some might consider damning with faint praise, this same individual opined that [t]he California system is worse.

Despite a moderately favorable assessment of TechTransfer, the study also noted that a serious concern expressed by a significant number of the interviewees was that the local research cultureincluding the University of Washingtonis not one that supports entrepreneurship and commercialization out of the research institutions.

Entrepreneurs, of course, would like a TechTransfer that moves at warp speed. They shouldnt hold their breath. Tech transfer offices are by nature somewhat bureaucratic. Their job is to protect the interests of the taxpayers of the state, points out Rick LeFaivre, managing director of Kirkland-based OVP Venture Partners. But that stance doesnt mean the UWs office cant create and maintain an entrepreneurial culture. The key, he says, is for the office to view itself as a partner for faculty members seeking to commercialize their research.

Enter Rhoads, who has founded and run a number of companies. Despite this background, Rhoads describes herself as a less standard choice to head the tech transfer office because shed never run a large technology operation. Less standard or not, her goal is to make UW a place where talented entrepreneurial researchers want to come and stay.

One strategy for reaching this objective is hiring talented people from the high-tech world. Case in point: Janis Machala. Rhoads says shes one of the most networked high-tech people in Seattle, who is using her vast Rolodex to link UW researchers with entrepreneurs.

Machala directs Launch Pad Services, a program created by Rhoads predecessor, Jim Severson, to help entrepreneurial researchers put together startup plans. And Machala developed the universitys Entrepreneur-in-Residence program. It connects business executives and seasoned entrepreneurs with UW researchers whose promising technologies need further development to reach startup stage.

Most university tech transfer offices, says Rhoads, dont make contact with researchers until late in the game, when the research is ready for public disclosure. Programs like Launch Pad get the tech transfer office involved years earlier, introducing powerhouse researchersidea volcanoes, Rhoads calls themto industry people.

Another key TechTransfer hire is Todd Alberstone, the former general counsel for RealNetworks Inc.; he now plans, directs and manages UWs patent activities. The office has also hired a grant-coaching researcherits first everto help UW researchers secure R&D grants from U.S. Small Business Administration programs; and patent agents who prosecute UW patents, freeing up TechTransfer licensing officers to spend more time connecting with industry people and learning their needs.

Rhoads also is helping to liberalize the conflict-of-interest rules that drove her Nimble co-founder to Stanford. And shes made TechTransfer more flexible about compensation; in some situations, it will accept alternative forms of licensing fees, such as equity in a licensee.

Many people say Rhoads efforts are paying off.

LeFaivre, who was on the hiring committee that chose Rhoads, says the office is definitely more entrepreneur-friendly. Case in point: Michael Alvarez of Helionics, a Redmond biomaterials company that obtained a technology license in 2007 through TechTransfer. Alvarez wasnt involved in those negotiations, but I understand they werent all that positive. New negotiations in which he is involved have a far different flavor. Theyre very willing to talk and listen to all sides about making changes.

Still, it may take some time for TechTransfer to be recognized for its efforts. Think of the office as a huge ocean liner. It will take a while to turn the reputation around, says Bob Overell, president of Seattles PhaseRx Inc., a UW licensee. But the trend is in the right direction.

Chris Rivera, president of the Washington Biotechnology & Biomedical Association, says admiringly, Lindens structuring the [tech transfer office] like a venture capital firm.

And theres more to come. Rhoads wants to create an energy-related, clean tech accelerator for the region as well as a medical device accelerator. Shes also collaborating with Washington Life Sciences to create a group of life science biotech angel investors, the kind of investors who often hesitate to put money into companies whose success turns on FDA approval of their products.

TechTransfer already scores high by many quantitative measures. But quality also counts, says Rhoads, pointing out that a large chunk of Stanford Universitys license fees flow from just three Google patents.

UW also owns a big-ticket patent. A university biology professor, Ben Hall, created a process to make yeast produce proteins and antigens used in vaccines. Under a UW license, Merck uses the Hall patents technology for its a hepatitis B vaccine and, most recently, a human papilloma virus vaccine that can help prevent cervical cancer. Of all the products that trace their origins to UW research, thats our big hit, says Fiona Will, TechTransfers director of licensing technology.

Ben Halls patent expires in 2014, and with it the licensing fees. Yet by that time, Rhoads may have made TechTransfer so entrepreneurial that the patent will have been replaced by another blockbuster piece of UW technology.

The Future in Waste

Birgitte Ahring, an internationally-recognized microbiologist, sees potential in what others discard. Its her job.

Even if its waste, we dont waste waste, she says.

Ahring heads the Center for Bioproducts and Biotechnology in Richland. The Washington State University (WSU) center is based mostly inside the Bioproducts, Sciences and Engineering Laboratory, a 57,000-square-foot, $24.8-million facility, which opened in spring 2008 at WSUs Tri-Cities campus.

The new center aims to streamline the process for licensing research to entrepreneurs. They, in turn, will help the center understand what industry perceives to be key areas for innovation. The centers research mission is to convert biomass into bioproducts that can be commercialized. One example: turning wood chips or agricultural waste into the fuel ethanol. The need for such processes, Ahring emphasizes, is urgent because of the importance of reducing our dependence on oil.

Technologies produced by the center will be spun off into companies with good ideas that need a technology lift, says Ahring.

The center is a joint venture between WSU and Pacific Northwest National Laboratory (PNNL), the Department of Energy (DOE) research lab. This partnership brings together WSUs expertise in agricultural research and PNNLs proficiency in conversion technologies. As part of the partnership, PNNL has sent 50 scientists and engineers to work at the center; the DOE invested $10 million in equipment. A few researchers from the University of Washington also will be there.

Despite this investment of people and equipment, Ahring cautions that new products are not things that happen overnight. But shes enthusiastic about the prospects, saying, I see exponential growth.

Paul Freeman