Tech transfer: Surviving the valley of death

The so-called ‘valley of death’ can strike fear across technology transfer offices in the US. It arises when a government grant for a research project runs out but the researcher has yet to secure external funding from investors. Without this investment, research that may later be socially and economically useful, but is not yet commercially viable, can stall.

One of the big concerns for US tech transfer offices at the moment is that the valley of death is threatening to get wider because some corporations and other investors are becoming more cautious with their investments, following the financial crisis in 2008. Enter start-up companies, which provide another opportunity for academics to cross the valley and which are increasingly working with some US tech transfer offices.

From a tech transfer office’s perspective, the first step to success is, typically, forming a partnership with either a corporation or a start-up. The role of the office is to build the bridge between research and revenue, sometimes with an academic in the centre. Whether that means conducting market research, providing incubator space, or registering patents, the tech transfer office has to create a strategy that will lead the research to market and make money for the institution.

The financial crisis has threatened to make the valley of death wider, but start-ups have flourished at the Ivy League universities as some venture capitalists have been too cautious to enter into partnerships with them.

At Columbia University, the number of start-up companies developed from research has tripled in the last ten years. Orin Herskowitz, vice president for IP and tech transfer at Columbia, who joined in 2006, attributes this growth to “an increasing awareness of entrepreneurship”.

With his office providing “enhanced support in the form of mentors, start-up competitions and subsidised incubator spaces”, as well as other services, and the “ascendancy of New York City as a hotbed for start-ups”, Herskowitz believes that the growth in the number of start-ups is a positive development for academics and tech transfer offices.

However, he is not naive about the difficulty of creating a start-up. “Launching a new technology-based venture is already a challenging experience, and doing so based on relatively early-stage university technologies has some risks.

“In addition to all of the normal execution and competitive risks that are part of the start-up, early stage companies working on non-validated technology also have to directly address the scientific risks.

“That means the company has to have a laser-like focus in the first years on prototyping, running in vivo tests, or whatever else is required to prove that the underlying science is fundamentally sound,” Herskowitz says.

Tech transfer offices typically have two options when monetising research. They can find a corporate partner, or they can help to set up a new company with the academics and researchers involved, with the university as a joint owner.

For Jon Soderstrom, managing director of the office of cooperative research at Yale, the primary focus is still finding a company, big or small, to partner an academic with.

“We’re always looking for companies to partner with because they can provide resources, talent and money. They can help us advance the case because often we don’t have the resources to actually do the experimentations.

“Our job is to try to help academics and researchers move forward with their work. It is no good sitting on a shelf in Yale; it is not curing patients or helping the research advance. If filing patents helps draw investment dollars from corporate partners, then we are going to do that,” Soderstrom adds.

Robust patents

Tech transfer offices see patents as a step towards making better use of their research. But many changes to US patent laws arising from decisions at the Supreme Court, as well as the introduction of the America Invents Act (AIA), in 2011, have meant universities have had to modify their patenting strategies.

David Pruskin, senior associate director of operations and administration at Harvard, says “The biggest change in patent reform was moving from a ‘first-to-invent’ to a ‘first-to-file’ system.”

That change, introduced by the AIA, shifted the emphasis to registering IP first. It means universities (and others) wanting to protect their IP are more pressured into patenting their research at an earlier stage of its development.

“Universities have quickly adapted to this system. The most effective approach is for universities to work closely with researchers who intend to launch a start-up,” says Pruskin.

“With first-to-file, we’re now in a race, and universities aren’t good at racing because our job is to do the basic scientific discovery."

“There’s always the risk that technology may be too early for the market, so the success is driven by getting down to basics: a strong team that can execute, stay in touch with the real needs of the market and quickly pivot when required.”

Some observers think there should be even more reform to the patent system. In 2014 one attempt at patent reform, proposed by Senators Patrick Leahy and Mike Lee, broke down after an intervention from the Association of American Universities (and others). The association represents many US academic institutions.

At the time the association wrote that it had “serious concerns with the direction of patent legislation” because “many of the provisions assume that every patent holder is a patent troll”.

For Soderstrom, it is about having a “strong and robust patent system” and that “valid patents, as opposed to trivial patents, are important and they are well substantiated”.

He says, however, that “things are harder” for tech transfer offices since the introduction of the AIA.

“With first-to-file, we’re now in a race, and universities aren’t good at racing because our job is to do the basic scientific discovery that is the basis of the invention of the products made. How do you get to that point?

“We are not financed to do that, so this valley of death that everyone talks about has got wider and deeper for us,” he says.

But further reform wouldn’t be easy to achieve because the strains on the patent system could drag it into a tug-of-war between different industries, Soderstrom adds. He notes that demands for reform by life sciences and technology industries are opposing, with the former requiring a solid patent system for research that may happen over years, and the latter often seeing a turnover from its products within 24 months.

“You have these competing demands on a patent system which didn’t anticipate this. These debates are going to remain because the different industries have very different business models that underlie what they are using IP for.

“Frankly, it is hard to square the circle,” he concludes.

Public access and confidentiality

Tech transfer offices are often in a battle with academics, who are required to publish their work regularly and give talks on the research they conduct. With such public disclosure it means tech transfer offices have to direct usually limited resources to protect research at an early stage, perhaps before it is clear whether it is commercially viable or not.

“This is one of the key differences between patenting in the university context versus what the private sector does,” says Herskowitz.

“Because publishing papers is paramount within academia, university tech transfer offices don’t have the luxury that our corporate IP peers might: of waiting to file a provisional patent application until an invention can be further developed and validated.

“University tech transfer offices tend to file provisional patents extremely early in the invention process, specifically in order to ensure that researchers are free to widely share their results,” he says.

The ‘valley of death’ may have claimed the lives of 600 British soldiers in The Charge of the Light Brigade, but new start-up ventures, which are developed in the entrepreneurial spirit nurtured by US universities, offer research a path to survival.

But Herskowitz notes that while start-ups have been “an increasingly important way to get promising technologies over the valley of death” over the last five years, they are not always the best fit. “There’s no one answer for whether a licence to a start-up is better than a licence to an existing company. Not every technology is a good fit for the start-up path.”

As tech transfer offices are increasingly under financial pressure, they will be forced to become more innovative with how they use their cash.

As Soderstrom notes, tech transfer offices want a “strong and robust patent system”. One of the key challenges for politicians, therefore, is to ensure the system doesn’t deter academics from seeking protection for their research. To bridge the valley of death, tech transfer offices will need a strong patent system to provide the steel.

Ivy League tech transfer offices at a glance

Name of office:

Columbia Technology Ventures

IP chief: Orin Herskowitz, vice president of intellectual property and tech transfer

Year tech transfer office established: 1982

Number of start-up companies set up in 2014: 18

Key industries covered by start-ups: Biopharmaceuticals, medical devices, digital media, semiconductors

Notable start-up: Infinio

Name of office: Harvard University Office of Technology Development

IP chief: David Pruskin, senior associate and director of administrations

Year tech transfer office established: 1977

Number of start-up companies set up in 2014: 10

Key industries covered by start-ups: Biomedical, therapeutics, diagnostics, energy, robotics, imaging

Notable start-up: Crimson Hexagon

Name of office: Yale Office of Cooperative Research

IP chief: Jon Soderstrom, managing director

Year tech transfer office established: 1982

Number of patents filed in 2014: 139

Number of start-up companies set up in 2014: 6

Key industries covered by start-ups: Biotechnology, diagnostics, environmental engineering, pharmaceuticals

Notable start-up: Arvinas