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SUMMARY
The Office of the Auditor General has conducted a performance audit of the
technology transfer programs at Arizona State University (ASU), the University
of Arizona (UA), and Northern Arizona University (NAU), pursuant to Arizona
Revised Statutes (A.R.S.) §41-2958. This audit was conducted under the authority
vested in the Auditor General by A.R.S. §41-1279.03 and is the first in a series
of three performance audits of the universities. The other two audits focus on
capital project financing and information technology security.
Technology transfer is the process by which universities move faculty
inventions from academic research labs to industry for further development so
that new products such as medicines, educational tools, electronic devices,
safety equipment, and health services can become available to the public. For
example, Gatorade, one of the most well-known technology transfer successes, was
developed at the University of Florida. Since 1973, Gatorade has brought more
than $80 million to the university, which has used the money to support
research. However, this type of success is not typical. According to literature,
only one in 4,850 university technologies becomes a big income producer for its
institution.
Federal and state laws encourage university participation in technology
transfer, and the universities do so using somewhat different approaches for
facilitating their efforts. ASU and NAU contract with Arizona Technology
Enterprises (AzTE), a limited liability company whose sole member is the ASU
Foundation, to administer their programs, whereas UA uses an internal unit, the
Office of Technology Transfer, to perform this function.1, 2
This audit focused on three key areas of technology transfer efforts:
disclosing commercially viable inventions, marketing them to potential
commercial partners, and managing conflicts of interest that could arise in
university-industry collaborations.
Although performance varies, universities can take steps
to increase commercially viable invention disclosures
(see pages 17 through 32)
All three universities can work to increase the number of disclosures
submitted by university inventors. An invention disclosure is an inventor's
official declaration to the university that he or she has created an invention.
Disclosures are key to a technology transfer program's success because they
constitute the pool of potential technologies available for licensing to outside
industry partners.
ASU has consistently compared favorably with its peer institutions in the
number of invention disclosures received.1 However, organizational transition
and multiple vacancies in 2007 within ASU’s technology transfer provider, AzTE,
may have reduced outreach to ASU's inventors. As these vacancies are filled, ASU
should ensure that AzTE takes the steps necessary to maintain organizational
focus.
Inventors at UA have submitted a significantly lower rate of disclosures
compared to inventors at the university's peer institutions. UA can strengthen
its program by increasing interactions between its Office of Technology Transfer
(Office) and university inventors, thereby improving the ability to identify
promising research and obtain disclosures. UA can also build on the success of
the approach taken in its Bio5 Institute, where a staff member from the Office
is stationed part-time. This staff member helps inventors identify an
invention's potential, encourages them to disclose, and locates possible
industry partners. In fiscal year 2007, the Bio5 Institute produced the highest
number of invention disclosures at UA. UA plans to replicate the model in its
Optical Sciences department in fiscal year 2009.
Unlike ASU and UA, NAU is not a research-intensive university. As a result,
it does not produce many invention disclosures each year. However, NAU has
departments that conduct research with commercial potential, and it can work
more closely with its technology transfer provider to encourage disclosures so
that the work of its inventors can benefit the public.
Finally, the universities should consider implementing or expanding their use
of certain other improvements that experts have found can increase the quantity
of commercially viable invention disclosures submitted by university inventors.
These practices include:
-
considering participation in technology
transfer when making promotion and tenure decisions;
-
recognizing successful inventors through
award ceremonies such as UA’s Innovation Day; and
-
educating inventors about the technology
transfer process.
All three universities—particularly UA—should improve aspects
of marketing and all three should review their negotiation practices
(see pages 33 through 48)
The universities have some components of successful technology transfer
marketing programs discussed in the literature, but all three should improve
their marketing practices and encourage more industry-sponsored research.
Successful technology transfer requires not only that inventions be disclosed,
but licensed to a partner and brought into production. Licensing can stem from
several types of efforts, including marketing to potential commercial partners,
enlisting companies to sponsor research, or working with researchers and
investors to build start-up businesses.
As with its work in disclosures, ASU's licensing activity has historically
exceeded that of its peers. AzTE's structure and comparatively larger resources
allow for a specialized and well-qualified staff who focus on developing
relationships with industry, and these staff are aware of marketing practices
that are recommended by industry experts. However, AzTE's vacancies in 2007 have
hampered these efforts. To better ensure future success, ASU should ensure that
AzTE continues to rebuild and strengthen its marketing program under its new
leadership and staff.
UA's licensing activity has consistently fallen below that of its peers. With
its smaller though experienced and qualified staff, UA follows some recommended
marketing practices, such as Internet advertising and drawing on faculty
contacts in industry. However, UA could improve its evaluation of technologies'
commercial potential and increase its market research. To this end, UA secured a
grant from the Kauffman Foundation to invest in market research resources. UA
should also increase its industry contacts.
NAU, which uses AzTE to market technologies that NAU inventors develop, is
disadvantaged by its location far from AzTE staff. NAU should work with AzTE or
another technology transfer provider to ensure NAU's commercially viable
technologies are marketed effectively.
Beyond the marketing activities of AzTE and UA’s Office, all three
universities should also enhance their relationships with companies that provide
research monies. Industry-sponsored research, which can involve more than one
office representing the university, is an important way to transfer technology
by directing research toward industry-specific problems. However, some industry
representatives and university inventors auditors interviewed expressed concerns
about prolonged negotiations over the contract terms. Both ASU and UA have begun
efforts to evaluate their sponsored research programs; NAU is restructuring its
research administration and has hired a new vice president for research to build
its research program. As part of their efforts, ASU and UA should work with
industry to identify concerns and needs and to determine how the two sides can
more effectively work together, and NAU should take preventative steps to ensure
streamlined coordination of industry sponsorship. The universities should also
develop ways to measure progress in these collaborative efforts.
All three universities—particularly UA and NAU—need to better manage
conflicts of interest, and the Board should establish minimum standards
(see pages 49 through 59)
To a different extent, ASU, UA, and NAU should take steps to improve
conflict-of-interest management, and the Arizona Board of Regents (Board) should
provide better guidance to the universities. When participating in the
technology transfer process, inventors can develop financial relationships that
may compete with their university responsibilities. To ensure the integrity of
research and protect university interests, state law and federal regulations
require universities to prevent or control conflicts arising from
university-industry collaboration.
ASU generally manages conflicts of interest adequately, although it could
benefit from some improvements. ASU identifies potential conflicts of interest
and manages the conflicts through management plans. However, auditors found that
inventors did not always carry out the actions called for in these plans. ASU
could improve implementation by better monitoring the plans.
UA needs to more effectively identify and manage conflicts of interest.
Although UA policies require faculty inventors to disclose substantial
interests, these policies do not adequately provide for ongoing identification
and management of conflicts and lack criteria for when to require management
plans and what they should include. In addition, the policies do not state who
should be responsible for ensuring that conflict-of-interest management plans
are monitored. As a result, cases with potential conflicts of interest continued
without being monitored. UA has created a new position, Assistant Vice President
for Research Compliance and Policy, whose responsibilities will include
developing new conflict-of-interest policies for the university. UA could
improve conflict-of-interest management by (a) developing and implementing
policies and procedures that require initial and continuous identification of
conflicts of interest, (b) developing criteria for when to recommend a
conflict-of-interest management plan and what the plan should include, and (c)
clearly identifying responsibilities for the different aspects of the adopted
policies to include better coordination of university-wide conflict of interest
management. Further, to address outstanding conflicts, UA should develop and
implement a plan to identify and manage existing potential conflicts of interest
for inventors participating in sponsored research.
NAU lacks comprehensive conflict-of-interest policies and procedures for
adequate management of conflicts of interest. In June 2007, NAU created the
Office of the Vice President of Research, whose responsibilities include
managing research-related conflicts of interest. According to university
officials, NAU will develop more complete conflict-of-interest policies
following discussions all three universities are having with the Arizona Board
of Regents' General Counsel. The Board is considering updating its own
conflict-of-interest policies.
Because the universities inconsistently manage technology transfer conflicts
of interest, the Board should review its intellectual property and technology
transfer policies and establish minimum standards that each university has to
meet in its conflict-of-interest policies and procedures.
1 The ASU Foundation is a nonprofit
organization that supports ASU through fundraising and other efforts.
2 As of April 2008, NAU and AzTE were
reevaluating their agreement, and NAU was considering obtaining some
technology transfer services from a different provider. According to NAU
officials, they anticipate entering into a new agreement with AzTE and/or
another provider by the end of 2008.
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