Free Market Scholarship
UT, Technology Transfer and Academic Freedom
By Scott Henson and Tom Philpott
November 1990; pages 4-5; Volume 2, No. 2
"The focus on university based technology transfer has intensified over the past 10 years and much of the impetus for new programs to tap universities' treasures comes from state economic development leaders. In many ways, commercialization efforts at a university are anathema to academic traditions, culture and processes. The increased interest in university research shown by private sector coupled with economic development policy mandates create an interesting tension within the university and between the university and these outside interests."
- from "Universities and Technology Commercialization," a document from the press packet for the Center for Technology Development and Transfer.
In the '80s, "technology transfer" became a primary goal of UT economic planners. Led by George Kozmetsky, the chief economic advisor for the Board of Regents, corporate raider, and founder of the Institute for Constructive Capitalism (IC2), these people established and used state education money to fund an infrastructure through which they hoped to exploit the "universities' treasures" for private profit. Next month Polemicist will perform an in-depth case study of one major technology-transfer operation; this article will survey a few of the more prominent schemes whereby UT attempts to "commercialize" marketable research.
The Center for Technology Development and Transfer
In 1985 the legislature established the Center for Technology Development (CTDT), which operates out of the UT-Austin College of Engineering. Austin Sen. Gonzalo Barrientos both wrote and sponsored the legislation to create the center. The legislature mandated that the CTDT pursue "discovery, development, and commercialization of new products, technology, and scientific information."
In 1987 it became fully operational after UT, with the help of Austin Representative Bob Richardson, pushed through legislation that allowed universities and their researchers to hold equity in businesses that invest in university research. According to a public relations document furnished by CTDT, "Many now believe that Texas universities have the strongest and most flexible tools available in the nation with which to commercialize university research."
The purpose of the CTDT, like other university institutions devoted to technology transfer, is to take publicly funded university research and market it for private gain. In effect, the market dictates what these faculty research rather than simply a professor's personal academic interests. An examination of CTDT's function reveals the processes of technology transfer common to all such entities, both public and private.
According to a CTDT public relations document, the technology transfer process goes through four stages. The first stage happens when a professor brings a piece of technology to CTDT. The Center "determines the status of intellectual property protection of the research or technology," i.e., determines whether it's legal for them to market the research.
In the second stage, CTDT analyses, with the help of UT faculty, the technical "merit and potential" of the technology in question. Once the technical questions have been answered, the Center evaluates the potential to market the research. CTDT wants to know: "who wants it, who needs it, how many, where and why."
If a piece of technology passes this stage of the process, the next step is to develop a "strategic technology plan ... which outlines the innovation, its applications, the market potential, the probable competition and options for commercialization (e.g. license to an existing company, start a new company, subcontract manufacturing and focus on marketing)."
In the final stage of the commercialization process, CTDT finds capital to fund the production of the technology. This can mean anything from obtaining funds to create a prototype, to testing the product for effectiveness, to actually establishing a management team and locating the venture capital to fund a new startup company. Finally, when CTDT has set up the infrastructure, it "works with the university to arrange for a license arrangement to transfer the technology for commercial application."
In essence, CTDT has set up a mechanism whereby university professors insert their research projects into one end and see them pop out the other ready for the market. Since university professors themselves, as of the 1987 law revision cited above, personally profit from this process, there exists a strong incentive to submit your research to the CTDT. Of course, of the dozens of projects submitted to the CTDT, only a few will be accepted by the Center for commercialization and fewer still will make it to the market. A document obtained last spring from CTDT entitled "Projects of the Center for Technology Development and Transfer" lists only three projects that have actually resulted in a transfer of technology, and lists thirteen "projects underway" at CTDT. Given this small number of projects that succeed, professors who seek to profit personally from their research must gear their projects toward CTDT's marketing goals.
Research Applications Inc.
During the 71st legislature (89-90), state conflict of interest law was revised to allow members of the board of regents of public universities to sit on the boards or invest in non-profit or for-profit corporations that have licensing or sponsored research contracts with the university they preside over (See Texas Education Code 51.921). The ink had barely dried on the governor's signature before UT-System regents began taking the state up on its generous offer.
Perhaps the most egregious example involves Research Applications Inc. (RAI). Board of Regents chairman Louis Beecherl Jr., Regent Jack S. Blanton, and George Kozmetsky, chief economic advisor to the Board of the Regents, all invest money in the UT-oriented venture capital fund. RAI was founded in October 1987 by three members of UT's Engineering Foundation Advisory Council as a for-profit counterpart to the CTDT.
RAI maintains such close ties to UT, in fact, that the firm lists UT Vice Chancellor for Asset Management Michael Patrick on a document obtained by Polemicist entitled "RAI Investment Candidates." Patrick's name appears under a heading entitled "Organizations/People with Texas Vested Interest," and beside his name appears the words "University Fund."
RAI's chairman, former UT prof and Tracor Inc. founder Frank McBee, writing in Vol. 11 No. 3 of Discovery, a UT-published science propaganda organ, calls RAI "a Texas corporation, privately-held and profit-oriented, whose goal is to take ideas or patents or products discovered or invented on Texas campuses and introduce them into the world of commerce in a variety of ways. Inventor, university, and corporation will share in the profits made." A CTDT public relations document refers to RAI's function as "to provide that seed investment and the support functions necessary to start businesses in return for a license, for the technology."
Another function of RAI is to assess the marketability of specific research. Two letters obtained by Polemicist, dated June 27 and June 28 of 1989, illustrate this point. Both letters are from RAI president Dale Mosier to UT professors. And both concern those professors' funding proposals to the Texas Advanced Technology Program (TATP) - a high-tech and biotech R&D slush fund operated by the Texas Higher Education Coordinating Board.
In the first letter, Mosier writes to Ted Bergman, assistant professor in mechanical engineering, who had apparently submitted a copy of his TATP research proposal to Mosier for consideration for RAI to discuss commercialization of his current research. Mosier tells Bergman how to make his proposal more attractive to TATP, outlining several structural inadequacies. For example: "I would also suggest beefing up this latter section under technology transfer ... It appears to me that one of the outcomes of this effort may well be a simplistic computer model that engineering people can use."
But in the end Mosier graded the professor and found him wanting, turning down Bergman's request. "It is not clear to me what the avenue for commercialization should be," writes Mosier. "I would suggest that you be continually aware of the possibilities for significant patents in your work as you understand better the nature of the problem and therefore can predict the solutions." In other words, Bergman should direct his research toward marketable, patentable ends - perhaps toward a computer model as Mosier suggests - in order to receive RAI support.
The second letter, from Mosier to zoology associate professor James Bull, shows even more explicitly the influence technology commercialization wields over university research. Mosier gives Bull a direct path for commercializing his research. He writes, "I see two major opportunities for the poultry industry. First, is the isolation of the gene for sex determination in the reptile and then transferring that gene to poultry in such a way as to have temperature of incubation determine sex. Second, is the discovery at the molecular level the mechanism of action of estrogen in reversing sex in reptiles (for which you have a patent pending) and then applying that technology to poultry breeding stocks. It is too early to speculate at this time, however, the most likely approach would be doing some additional development and specific industry testing to verify effectiveness in each specific industry."
Mosier's comments reveal much about the technology transfer process. Mosier doesn't just try to commercialize technology Bull has already produced. He actively directs Bull toward research avenues that RAI can market, telling him what the most "likely approach" to this research should be if he wants to commercialize the results. Ironically, Bull's research would be termed, in the academic world, as "basic research" because the ability to genetically dictate the sex of animals constitutes new knowledge. But as we can see by Mosier's discussion, the goals and consequences of Bull's research are purely commercial in nature.
Mosier concludes his letter with an appeal to a form of vulgar socialism. He tell Bull that "Assuming you receive the grant from the Higher Education Coordinating Board, I would be very interested in monitoring your progress and working with you when the time is appropriate for commercialization." In other words, if the state subsidizes Bull's enterprise, Mosier will be happy to reap the rewards for his privately owned company. Presumably, if the board turned Bull down, Mosier wouldn't be so "very interested."
In both cases, Mosier's letters display the influence of technology transfer on professors' research - he presents the two scientists with the impetus to bend their research to the dictates of the market. If professors want to receive the benefits RAI could offer, they must play by RAI's rules.
Texas Research and Technology Foundation
Another egregious example of regental involvement in commercializing UT research involves recently-appointed regent and former right-wing congressman Tom Loeffler and the Texas Research and Technology Foundation (TRTF). Loeffler sits on the Board of Governors and the Board of Trustees of TRTF, which operates a self-described "non-profit" research park and venture capital operation in San Antonio.
The governing board overflows with other big names from Texas politics, industry, and academia, including UT. The Board of Governors includes former Governor Dolph Briscoe, former San Antonio Mayor Henry Cisneros, billionaire H. Ross Perot, Austin banker Ben Love, and real estate tycoon and S&L-era high roller Trammell Crow. UT-connected figures include Bobby Ray Inman, former CIA operative turned research consortium director turned junk bond enthusiast, and (surprise!) George Kozmetsky.
The centerpiece of TRTF's operation is its Texas Research Park, located in San Antonio. The CEO of Concord Oil Company donated the land for the 1,514 acre park on March 19, 1986. Almost two years before, however, in October 1984, the UT-System Board of Regents agreed to build an Institute of Biotechnology in the park. It wasn't until a full year after the land donation to TRTF that H. Ross Perot donated $15 million to build the UT Biotechnology Institute the regents had promised three years earlier. In January of 1990, The Wall Street Journal reported that the program expected to attract $130 million in capital "by early this year." But as of June 1, 1990, UT's biotech institute stood as the park's only resident, and TRTF's venture capital fund, VenTex, had raised only $3.6 million.
In its literature, TRTF declares its purpose as:
- "Creating and managing research and development with maximum commercial potential.
- Commercializing research results with an emphasis on the formation of new companies.
- Providing the physical environment within which these activities occur - the Texas Research Park."
TRTF claims non-profit status, but these purposes reveal a clear commercial agenda. The foundation has even entered a partnership with University Patents Inc., a publicly traded company that "provides universities with pre-financing and technology transfer services," according to TRTF literature. The two entities together operate VenTex, a venture capital fund that finances microelectronics and biotechnology-oriented start-up companies.
VenTex's operating structure mimics CTDT's (see above). The company first acquires a promising technology, performs feasibility and proof-of-principle tests, and then develops a prototype. Then VenTex locates professional management for the project, performs the necessary marketing analysis, and develops a strategic plan for implementation of its marketing strategy.
Like CTDT in Austin, VenTex will provide the Institute for Biotechnology with a built-in mechanism to put professors' research on the market. Board of Regents Chair Louis Beecherl Jr. calls the biotech institute "one of the most significant partnerships between industry and academia." UTSA Health Science Center president John Howe III told the San Antonio Light that "The institute will focus on biomedical research with commercial applications." In other words, UT administrators even subject biomedical research to a marketing litmus test.
In essence, these technology-transfer schemes take engineering and science professors, who are paid (usually quite well) by the state, and turn them into free labor for Texas venture capitalists and technology-based industries. This transaction takes place under the veil of "economic development," which hides the true nature of the relationship: that taxpayers and tuition-paying students subsidize the payoff to a few private investors.