The bridge between academia and industry

By Emily Tan, China IP,[Comprehensive Reports]

The California Institute of Technology, commonly referred to as Caltech, is one of the top universities in the world. It is quite prominent in science and technology research. As of 2013, Caltech has 32 Nobel laureates to its name. This figure includes 17 alumni, 14 non-alumni professors, and 4 professors who are also alumni, which means there is one Nobelist for every ten thousand alumni. Caltech is an independent, privately supported university located in Pasadena, California, with approximately 300 faculty members, 600 postdoctoral scholars, 1,000 undergraduate students, and 1,300 graduate students. It was originally founded as Throop University in 1891 and renamed the California Institute of Technology in 1920. Cutting-edge research at Caltech can be found in all of its six academic divisions: Biology and Biological Engineering; Chemistry and Chemical Engineering; Engineering and Applied Science; Geological and Planetary Sciences; Humanities and Social Sciences; and Physics, Mathematics and Astronomy. Much of the work is cross-disciplinary, in areas such as Bioinspired Engineering, Computation and Neural Systems, and Sustainable Energy.

Researchers in these areas continually generate a wealth of inventions which need to be explored and applied to realize their real value. Technology transfer of the university’s research results is vital not only for the university’s intellectual property (IP) development, but also for the research development of the entire university and even for the whole country. In order to meet the needs of the growing interest among Caltech researchers (especially students) in moving the results of their research out of academia and into the marketplace, Caltech established an administrative office-The Office of Technology Transfer (OTT). OTT is responsible for the management of IP generated by Caltech researchers. China IP got the chance to interview Dr. Dvorak- Carbone, Associate Director of OTT, to learn more about the technology transfer practice from the world leading university.

China IP: Why was OTT established?

Dr. Dvorak-Carbone: OTT was established in 1995 as a response to the growing interest among Caltech researchers (especially students) to move the results of their research out of academia and into the marketplace. Prior to the establishment of OTT, few Caltech inventions were patented and even fewer were commercialized. Now, inventions developed in the course of research at Caltech result in over 100 U.S. patents each year; currently Caltech holds more than 1,700 active U.S. patents. Caltech receives more invention disclosures per faculty member than any other university in the nation. OTT’s licensing efforts have resulted in 40 to 50 IP licenses, including on average of eight startup companies per year. OTT’s mission is to promote and facilitate the transfer of useful technologies to the commercial sector so that the public can directly benefit from the ingenuity and creativity of Caltech’s outstanding researchers.

China IP: What is OTT’s operation model?

Dr. Dvorak-Carbone: The four cornerstones of OTT’s approach are to build trusting relationships with faculty, aggressively protect intellectual property, be industry-friendly, and support entrepreneurship. Good relationships with faculty are maintained by responsiveness to their inquiries and requests, and clear communication regarding their inventions and licensing prospects; this results in an increased likelihood of inventions being disclosed to OTT. Regarding IP protection, OTT files a U.S. provisional patent application on every invention disclosure received, and converts 50-60% to non-provisional applications, many with PCT as well as U.S. filings. When working with industry, OTT endeavors to act as a facilitator rather than a gate-keeper; and OTT promotes entrepreneurship by offering startup-friendly licensing terms (e.g., deferment of licensing fees and patent cost reimbursement in exchange for an equity stake in the startup) and helping researcherfounders make the necessary contacts with experienced entrepreneurs, funding sources (e.g., Angel and VC investors), and professional service providers.

China IP: You mentioned above that one approach is to build trusting relationships with faculty. How do you achieve that? Does OTT have patents itself? Does OTT only focus on patents of Caltech or does it also cover patents from outside the university?

Dr. Dvorak-Carbone: With rare exceptions, OTT only manages patents generated in the course of Caltech researchers’ work, which are therefore owned by Caltech. All Caltech employees and students sign a patent agreement under which they assign to Caltech the rights to any inventions they may make in the course of their work, and any patents covering such inventions. OTT receives invention disclosures from Caltech inventors, decides whether or not (and in what jurisdictions) to file patent applications, and hires outside counsel (patent attorneys) to work with inventors to prepare, file, and oversee patent applications to completion. OTT negotiates licenses with established or startup companies interested in commercializing technologies developed by Caltech researchers, and administers the sharing of any resulting royalty revenues with Caltech inventors consistent with Caltech’s patent policy.

China IP: Are service inventions owned the inventors or the university?

Dr. Dvorak-Carbone: In accordance with Caltech’s patent policy, any inventions made by Caltech researchers, faculty, other research staff and students in the course of their duties to Caltech and/or with the use of Caltech resources are owned by the university. If the university receives any revenues from the licensing of the patents associated with the inventions, 25% of those revenues (after recovery of patent prosecution costs incurred by Caltech) are distributed to the inventors.

China IP: Is licensing the main business of OTT? How do you operate licensing? Do you buy patents from the right holder or do you get licensing first and then license the patent to third parties?

Dr. Dvorak-Carbone: The “main business” of OTT is the facilitation of technology transfer from the research lab to the commercial sector, primarily through licensing to outside parties (startups or established companies). As described above, these technologies are covered by patents owned by Caltech and managed by OTT. On occasion, Caltech has accepted donations of patents (e.g., from alumni) or negotiated deals under which it takes ownership of patents to which it would otherwise not have rights (e.g., covering technologies developed by students outside of their Caltech research, but which the students cannot afford to patent themselves) and may license those patents to outside parties as well. Generally, Caltech neither buys nor sells patents and the patents it owns (based on the work of Caltech researchers) are licensed out, exclusively or nonexclusively, by OTT.

China IP: OTT also provides strategy service for IP protection in addition to patent applications. How does strategy consultation and litigation operate?

Dr. Dvorak-Carbone: As mentioned earlier, OTT uses outside patent attorneys to prepare, file, and complete patent applications owned by Caltech. When a patent or patent application is exclusively licensed, the licensee may ask that a specific attorney or firm be used for its licensed patent applications, and the licensee often contributes to patent application decisions. In most cases the licensee will also retain its own IP counsel for strategic advice. As for litigation, the details vary from license to license, but generally speaking Caltech and an exclusive licensee work together as necessary to enforce the patents licensed from Caltech against infringers.

China IP: Speaking of industry-friendly approach, could you please give a brief description of what this entails? What specific industries and companies do OTT pay special attention to?

Dr. Dvorak-Carbone: OTT tries to make IP licensing as industry-friendly as possible. With pre-approved boilerplate license agreements and licensing staff empowered to negotiate all financial and other key license terms, negotiations can move quickly with minimal administrative review. OTT welcomes licensing inquiries in any field in which Caltech has technology of potential interest, including pharmaceuticals and biotech, medical devices and diagnostics, advanced materials, semiconductors, energy and cleantech, aerospace, and many other sectors.

China IP: Has OTT cooperated with any Chinese companies so far?

Dr. Dvorak-Carbone: To date, OTT has not had much contact with companies based in China. However, there is no fundamental obstacle to doing so; it may simply be a lack of awareness on both sides (Caltech’s unfamiliarity with major Chinese companies, and those companies’ lack of familiarity with Caltech). Caltech’s industry-friendly approach should be as appealing to Chinese companies as to any others.

China IP: How does OTT evaluate patent value? Does OTT have its own patent evaluation system or standards?

Dr. Dvorak-Carbone: OTT recognizes that it is very difficult to put a dollar value on the kind of early stage technology that typically comes out of university research. In deciding whether to pursue patent protection for a particular invention, the question is not so much “how much will this be worth” but “is there a possibility it will be worth enough to justify spending the money on a patent filing.” OTT’s philosophy is that because it is very difficult to predict which technologies will ultimately be successful in the marketplace, the best approach is to “hedge bets” by filing a large number of patent applications to give as many technologies as possible a chance to succeed. As for setting a value on the patent when licensing, rather than trying to set a lump sum price on the rights to a patent, the licenses typically include a running royalty that is an industry-appropriate percentage of sales revenues payable to Caltech upon the sale of products covered by the licensed patents.

China IP: Are there any criteria in choosing the start-up? What are the differences between OTT and venture capitals?

Dr. Dvorak-Carbone: Unlike venture capital (VC) firms, Caltech does not make monetary investments in startup companies. Caltech will typically have a minor ownership stake in any startup to which it licenses IP, taking some equity of the startup in partial consideration for the rights granted under the license. It is up to the startup to decide where to establish itself and conduct its business, whether it be in Pasadena, elsewhere in the U.S., or overseas, including China.

China IP: Is Caltech research headed in any specific directions? How about the technological developments and anticipated future products resulting from Caltech research?

Dr. Dvorak-Carbone: Caltech’s research directions are as diverse as its faculty members and student body. With its six academic divisions and JPL, described above, technological developments and future products could be in just about any field.

China IP: How do you see the future development of OTT? What do you think of the Chinese market?

Dr. Dvorak-Carbone: As federal funding of research continues to decline and interest in entrepreneurship grows, OTT’s role in helping to bring industry and academia together, and in supporting startups, will become increasingly important for Caltech. The Chinese market is of course one of the largest and fastest-growing markets in the world, and as such is of great importance to Caltech’s licensees as they think about where to manufacture and sell their products. Over the past few years OTT has been filing a greater number of patent applications in China in recognition of the importance of this market to prospective licensees.


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