EPFL takes the overhead route

Part of the EPFL campus, on the shores of Lake Geneva.

Since becoming president in 2000, he has introduced tenure track procedures to recruit young professors and favoured school projects such as America’s Cup-winning boat Alinghi to trigger interdisciplinary research. With a budget that is 70 per cent funded by the Swiss government, he is now breaking the old rules of private–public partnerships and industrial relations to bolster EPFL’s coffers and accelerate its rate of technology transfer.

Unlike US counterparts Aebischer has no endowment funds to draw on. His first coup was to attract the luxury Swiss watchmaker Rolex to donate CHF50 million (around €31 million) for a new library building. And when it comes to technology transfer, Aebischer and his vice president of industrial relations, Jan Anders Manson, are not content just to imitate US universities: they want to beat them.

In his office above Lake Geneva, Manson explains his grand plan with the help of an architectural drawing. “After we have built the new learning centre [the futuristic library designed by Japanese architect Sanaa and financed by Rolex], we’ll start to build the innovation square.”

Next to the three (soon to be four) buildings of the start-up incubator Parc Scientifique, Manson points to seven ten-storey buildings. “They will be for rent to companies that want to collaborate with us.”

What’s the incentive?

That may be the hope, but how does EPFL expect to fill the 42,000 square metres of space shown on the plan? The polytechnic has shown in the past year that it does have pulling power, with Nestlé, Logitech and Merck Serono signing strategic alliances with the school. But for the moment, these agreements mainly involve financing new professorships. With large headquarters and R&D facilities in the vicinity why would  Swiss companies pay rent on the EPFL campus?

First, Manson believes that being on the campus will help companies to connect with EPFL’s various research labs. A former engineer with Boeing in Seattle, he is not focusing only on Swiss companies, but works closely with the Swiss inward investment agency, Presence Switzerland. And has completely rewritten the Swiss rules of engagement between the university and the private sector.

In the past, EPFL offered two types of contracts to companies. Research contracts linking a specific laboratory with a company, give the industrial partner the right to patent any innovation issuing from the collaboration in return for royalties; service contracts involve a fee for service.

EPFL’s technology transfer chief, Gabriel Clerc, says the research contract was not popular with companies. “For one, they had to sign a contract based on something that was not invented yet. If a final product was to be commercialised from the patent, it proved hard sometimes to distinguish what come truly from the patent, and what was due to other improvements carried out internally by the company.”

Other difficulties arose because EPFL’s professors and labs were working with corporate R&D departments that often have no say in the process of launching a product.

So research contracts have not been very successful, at least financially. EPFL gets only a few hundred thousand francs from them each year. Meanwhile, it has to pay millions for its research infrastructure and its maintenance.

Companies that signed research contracts did pay for the direct costs of the projects. For example, if a PhD assistant was hired, the company paid this salary as well as meeting the cost of new equipment or materials needed by the project. But the school had to support most of the indirect costs, whether for computer time or other equipment, the salaries of professors and technical staff, and so on.

“EPFL was asking only 6 per cent of those indirect costs to be covered as an overhead by companies, even if they represented often more than 100 per cent of the direct cost,” says Clerc. Only in the case of service contracts – when company asked the school to use its resources for a specific test – was the overhead was raised to 35 per cent. But these contracts were not expected to generate royalties.

“So last year, we have decided to change our collaboration policy in a bid to become more attractive, particularly to large international companies.” says Manson. Research contracts have now an overhead of 40 per cent, while for service contracts the level is 60 per cent. EPFL says the new overhead policy is pitched at the same level as US universities. But Aebischer and Manson wanted more. To play on the same field as Fortune 500 companies, they needed a competitive advantage.

Royalty-free contracts

Their solution: research contracts will not involve future royalties. And because companies sometimes take out research contracts to explore a field with no clear view of its potential, and would be deterred by the far higher overhead costs, EPFL has created a third type of contract, the Industrial Grant. This contract carries no overhead, but it gives the school full rights to any intellectual property arising from the collaboration and companies an exclusive option to discuss royalty-sharing in the future.

This new arsenal is already proving its worth. EPFL is in discussions with a number of potential international partners, and has signed letters of intent with some.

ETH Zürich, EPFL’s sister institution, is moving in the same direction, although it is yet to adopt the new contracts formally. And FNRS, the Swiss national fund for research, is also about to adopt new rules that may push its overhead request to around 20 per cent. This may trigger similar changes in other Swiss academic institutions.