What is the best structure for a university’s technology transfer office?

Universities face a choice in deciding whether the technology transfer office should be part of the administration, or a separate company. There are then subsequent choices in terms of strategic alliances with partners and selling shares in a TTO if it is a company.

So how to make this decision?

First, there are three general points to make. Good people can make any system work and bad people can make any system fail. Nevertheless, some systems are better than others.

Then, the structure will be a reflection of what suits that university at that time, based upon the personal experiences of the decision makers involved.

And thirdly, whichever system is adopted the TTO must always remember its role within the university – the TTO is wholly dependent upon the willingness of researchers to engage in the process and on support from senior university members. Given this, the underlying philosophy should be to support researchers who want support.

To explain my use of terms: the TTO is responsible for commercialising university-owned intellectual property through the core activities of attracting and assessing invention disclosures; patenting and other forms of intellectual property protection; licensing; spin-out company formation; sales of research material; and managing seed funds. TTOs may act as go betweens in helping researchers sell their time as expert consultants.

The TTO is separate from the Research Services Office, which typically supports university researchers in identifying and winning research funding, and manages contractual relationships with research funders.

Benefits of a separate TTO company

These points are all based upon a 100 per cent wholly owned subsidiary. The challenges of partially owned TTO companies are discussed at the end of this article.

1. Business people prefer interacting with a business on business issues. Many find interacting with universities a challenge, having (mis)perceptions of ivory towers, different approaches, and science boffins in labs. They understand what a business is and prefer to deal with one, rather than with a university, which they do not understand.

2. At the same time university researchers prefer to interact with a business on business issues. Researchers come to the TTO for expert professional help on commercialisation and intellectual property management. These are business issues and they want to deal with a business-focused organisation.

3. The TTO company benefits from independent management. However, the TTO must behave in such a way that it does not to appear too different from its parent university. The benefits of independent management manifest themselves in a number of different ways. For example, the TTO can have its own human resource management systems: performance appraisal, competence framework, job descriptions, grievance, disciplinary and capability procedures, payscales, pay changes. The management structure and style can be set clearly by the board of directors and the managing director. The TTO company will be a small business, and can be managed accordingly, with the flexibility to respond rapidly to changing business circumstances.

With a separate company there can be clear and unambiguous management and focus as well as definition of responsibilities between the TTO and the Research Services Office.

4. The part of the institution responsible for determining the ownership of IP is different from that exploiting it.

5. A limited liability company provides a firewall for the university, which can shut down the TTO if it gets into trouble.

6. The charitable status of the university is not threatened by trading activity within the university. (Though this of course may vary, depending on local laws and legislation.)

Disadvantages of a separate TTO company

1. The downside of having a company is that it can forget it is owned by a university. If the TTO starts showing off, the researchers will turn against it.

2. If the heads of the TTO and the Research Services office do not get on there is potential for conflict given the inherent tensions between raising research funding (a service function) and protecting IP.

3. Physical dislocation can hinder interaction.

4. Poor governance of a TTO can lead to increase in risk to the university.

Other points to note with a separate TTO company

1. Some universities have established a subsidiary company that holds IP and trades, but does not have staff. The TTO staff are employed by the university, not the company. This approach misses out on the benefits described above.

2. In setting up a wholly owned subsidiary company there are a number of good governance points which should be taken on board:

• The TTO company should report regularly to the university and its board.
  
  
• The TTO company should be audited by the university’s auditors.
  
  
• The university payroll function should manage the TTO company payroll.
  
  
• The university should be well represented on the TTO company board of directors.
  The Chairman of the Board needs the confidence of, and access to, the head of the university.

Critical mass

There are additional issues for a small research university to weigh when considering whether its research activity justifies its own TTO.

It is imperative for the university to have some technology transfer capability so that its researchers know they are talking to part of their own institution about research commercialisation. The requirement to talk to an outsider raises the initial barriers for engaging in technology transfer.

It may be reasonable for a university to have only a modest TTO resource of its own (one designated person at the minimum), and to use external expertise to a substantial extent. But the university needs to build relationships with these external organisations to ensure they are committed to provide support over the long term and have the necessary breadth of expertise.

A group of universities may consider clubbing together to fund a central technology transfer resource accessible to all. While there are significant presentation, communication and management challenges to be overcome, this can be made to work.

But the point made above still holds in this model: it is imperative for the university to have some technology transfer capability of its own. The risks are that business and resource pressures will push the centralised resource to follow selected opportunities with selected members of the club and as a result it is no longer considered to be providing a service available to all. It may be said that the management of such a centralised resource will require significant social skills.

Strategic partnerships

In recent years a number of UK universities have entered into long-term strategic partnerships/alliances with technology commercialisation businesses.

This phenomenon was initiated by David Norwood and IP Group (previously Beeson Gregory, IP2IPO Ltd) in 2000, and there are now a number of similar companies in the UK, including Fusion IP (previously Biofusion), Braveheart, Angle Technology and IPSO Ventures. This pattern has also emerged to a certain extent in other countries.

These relationships are typified by the university trading a share of its IP commercialisation revenues over a long period of time (15 to 25 years) in return for spin-out company formation, growth and investment expertise, and access to investment finance. The key points to assess in these arrangements are the sustainability of the partner and the terms of the deal – in other words, what price is the university paying for the expertise it believes it is acquiring?

My own company, Isis Innovation, has created a consulting division, Isis Enterprise, which offers a different type of partnership. Isis Enterprise operates on a consultancy model, providing expertise in all aspects of university technology transfer on a “fee for service” basis. Where clients wish, Isis will take on some of the technology risk through commercialisation income revenue shares. This approach has the advantage of building a relationship over a period of time and providing whatever levels of expertise are appropriate at each phase of development of the university TTO.

TTO as a separate company but not wholly owned

Two institutions have adopted this approach: Hadassah University Hospitals, Jerusalem in Israel, and Imperial College in London. The potential risks lie in the diverging shareholding interests and the ability of the company’s management to satisfy both the university shareholder and the financial shareholders. The opportunities are perceived to lie in the ability to adopt a more commercial approach and access sources of investment finance.

Conclusion

In my view, the optimum structure for a university TTO is for it to be a wholly owned subsidiary company. The university and its TTO can then buy in consulting expertise as the need arises. In decreasing preference, I would rank the alternatives of part of the university administration; a long-term strategic partnership arrangement; a partially owned company.