Development of innovation at the University of Virginia

A November 7 article by John Yellig in the Daily Progress in Charlottesville describes efforts of that University of Virginia to commercialize faculty inventions. Pertinent text is as follows:

-->Recognizing the need to better take advantage of commercial opportunities such as Avaki, the University of Virginia Patent Foundation created Spinner Technologies Inc. in 2000. Spinner is a for-profit subsidiary of the foundation tasked with helping faculty start-ups to market.

“Spinner was formed by the patent foundation and the university in recognition that faculty entrepreneurialism had really become a national movement,” executive director Robert MacWright said. “We wanted to embrace that, and the patent foundation has given an absolute preference to licensing inventions to faculty start-up companies since 1998.”

The university, not faculty inventors, owns the rights to intellectual property developed with UVa resources. In exchange for equity in a new company, Spinner licenses the intellectual property to faculty entrepreneurs. Spinner also provides the new company with office and laboratory space, available at three facilities: the Corridor One Building and the Corner Building, both on West Main Street, and the Emerging Technology Center at the University of Virginia Research Park at North Fork.

All of the physical facilities are leased to the company at discount rates or, in exchange for a 5 percent to 10 percent stake, provided free for the first year or until the company raises $1 million in financing.

The lab space is an important step in a research and development company’s path to profitability. In order to qualify for federal Small Business Innovative Research grants, a primary source of funding for many R&D startups, a company must do 60 percent of its research in its own lab.

“We help reduce the hurdles, and in some ways the risk, that these companies encounter, so they have a greater chance of success,” Spinner general manager Andrea Alms said.

Since it was founded, Spinner has helped start nine companies, Alms said. Spinner’s goal was to start 30 to 50 companies in its first five years, according to news accounts of its founding in 2000.<--

Of the statement -->The university, not faculty inventors, owns the rights to intellectual property developed with UVa resources. <-- if the invention was developed with the use of federal funds, then the provisions of the Bayh-Dole Act attach. With the approval of the federal funding agency, the university may take title to the patents arising from the research, subject to certain retained rights of the federal government. If the university declines to patent, the faculty inventor may take pursue patents, as indeed happened in the case of Professor Madey, of fame in the case Madey v. Duke University.

The article also mentions criticisms of the Foundation:

-->The foundation is too passive in licensing its patents, he said, adding that the foundation relies too heavily on a business discovering the existence of a faculty member’s patent, rather than actively putting that patent in the hands of the licensee, he said.

“The likelihood that your patent is going to be licensed is under 1 percent,” said Martin, a former faculty member in the Medical Center’s departments of radiology and orthopedic surgery.

He added that the problem is not unique to UVa. “None of the universities in Virginia, and very few nationally, have the means to represent and warrant that the patents that they have are of any good business value. They don’t have the means of making patents available to businesses that might be interested. They rely on discovery.”

In the instances where the foundation does actively shop an invention around, it oftentimes exposes the university to significant losses because in attempting to determine the patent’s marketability, the foundation exposes the substance of an invention without filing a patent, Martin said.

“The university loses phenomenal amounts of potential revenue,” he said. “I think the intent of what they do is very good. I think the way they do it probably destroys more value than it helps create.”<--

In any context implicating the Bayh-Dole Act, the statement -->the foundation exposes the substance of an invention without filing a patent<-- is problematic. Under the Act, the university/foundation must maintain confidentiality of, and promptly file patent applications on patentable inventions, before disclosing the invention to third parties. Thus, in a Bayh-Dole context, the university/foundation should not be exposing patentable inventions to third parties prior to filing a patent application.


The article also mentions alternative sources of funding:

-->David Kalergis, a faculty member who successfully started a company without financial assistance from the foundation, said the university shouldn’t be regarded as the be-all, end-all of startup capital.

“In terms of actual investment in small companies, I think that’s a role for private investors,” he said. “How do [university staff] make decisions among their faculty without getting caught up in charges of favoritism?” [NOTE: The Berkeley/Novartis interaction illustrates that there are complicating issues, apart from favoritism.]

Kalergis’s company, Diffusion Pharmaceuticals, is developing a drug to treat cellular oxygen deprivation. The company recently secured $2.1 million in private investment and $1.2 million from the U.S. Office of Naval Research.<--