Partners in the Research Enterprise: University-Corporate Relations in Science and Technology [Reprint 2016 ed.] 9781512803648

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PAQTNEPS IN THE QESEAQCH ENTEQPßlSE

Editors: Thomas W. Langfitt Sheldon Hackney Alfred P. Fishman Albeit V. Glowasky

UNIVERSITY OF PENNSYLVANIA PRESS PHILADELPHIA

PAQTN EQS IN THE QESEAQCH ENTEQPQISE University-Corporate Relations in Science and Technology

Partners in the Research Enterprise: A National Conference on University-Corporate Relations in Science and Technology, held at the University of Pennsylvania on 14-16 December 1982, was funded by SmithKline Beckman Corporation. This work which represents the proceedings of the conference, was published with their support.

Copyright © 1983 by the University of Pennsylvania Press All rights reserved Library of Congress Cataloging in Publication Data Main entry under title: Partners in the research enterprise. Includes bibliographical references. 1. Research—United States—Congresses. 2. Research, Industriell—United States—Congresses. 3. Universities and colleges—United States—Congresses. I. Langfitt, Thomas W. Q180.U5P34 1983 001.4'4'0973 83-3507 ISBN 0-8122-7893-3 ISBN 0-8122-1150-2 (pbk.) Printed in the United States of America

Contents List of Contributors Prologue

/ Sheldon Hackney

Introductions

/ Henry Wendt, Paul Miller,

Dick Thornburgh PART ONE

Perspectives and Current Status 1. Free Market and Free Inquiry: The University, Industry, and Cooperative Research / A. Bartlett Giamatti

2. Overview of University-Industry Research Interactions / Herbert I. Fusfeld

3. University-Corporate Relations in Science and Technology: An Analysis of Specific Models / Gilberts. Omenn

4. The Pajaro Dunes Conference / Robert M. Rosenzweig

5. Core Technologies and the National Economy / Frank Press REACTOR /

Reginald H. Jones

PART TWO

The Anatomy of University-Corporate Relations 6. The Monsanto-Washington University Biomedical Research Agreement / Samuel B. Guze

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Contents

7. Licensing Revenue for Universities: Impediments and Possibilities / Thomas D. Kiley

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8. The Organization of Industrial Relationships in Universities / George M. Low

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REACTORS /

Peter B. Hütt, George E. Palade

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PART THREE

The Corporate Mission in Research and Development 9. The Evolution of Research and Development Policy in a Corporation: A Case Study / William G. Simeral

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10. The Role of the Corporation in the Education of Its Scientists and Engineers / Erich Bloch

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11. Organizing Knowledge for Action / William 0. Baker REACTOR /

Ronald E. Cape

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PART FOUR

Completing the Triangle: Government's Role in Research and Development 12. Recombinated Institutions: The Changing University-Corporate Relationship / Albert Gore, Jr.

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13. Government, Industry, and Academia: A Bermuda Triangle? / James B. Wyngaarden

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14. The New Investment in Science and Technology in France / Robert Chabbal

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Dietmar Frenzel, John R. Hogness, Steven Muller

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REACTORS /

PART FIVE

Summary: Presentations of Rapporteurs 15. Rapporteurs / Michael Hooker, Bryce Douglas, Jacqueline Wexler REACTORS / Barbara Culliton, Kenneth J. Arrow

Epilogue / Thomas W. Langfitt

List of Contributors

KENNETH J. ARROW, Joan Kenney Professor of Economics and Professor of Operations Research, Stanford University WILLIAM O. BAKER, Retired Chairman of the Board, Bell Telephone Laboratories DAVID BLAKE, Associate Dean for Research, The Johns Hopkins University ERICH BLOCH, Vice President of Technical Personnel Development, IBM WILLIAM G. BOWEN, President, Princeton University RONALD E. CAPE, Chairman, Cetus Corporation ROBERT CHABBAL, President, Scientific and Technical Mission, Ministry of Research and Industry of France DONALD COOKE, Vice President for Research, Cornell University THEODORE COOPER, Executive Vice President, The Upjohn Company BARBARA CULLITON, News Editor, Science Magazine WILLIAM H. DANFORTH, Chancellor, Washington University BRYCE DOUGLAS, Vice President for Science and Technology, SmithKline Beckman Corporation JAMES DUNCAN, Executive Director of Administration, University of Texas System ALFRED P. FISHMAN, Director, Cardiovascular-Pulmonary Division, Hospital of the University of Pennsylvania DIETMAR FRENZEL, Counselor for Scientific and Technological Affairs, Embassy of the Federal Republic of Germany, Washington, D.C. HERBERT I. FUSFELD, Director, Center for Science and Technology Policy, New York University A. BARTLETT GIAMATTI, President, Yale University ALBERT V. GLOWASKY, former Executive Assistant to the Vice President for Health Affairs, University of Pennsylvania ALBERT GORE, JR., U.S. Representative, Fourth Congressional District, Tennessee SAMUEL B. GUZE, Vice Chancellor for Medical Affairs, Washington University SHELDON HACKNEY, President, University of Pennsylvania JOHN R. HOGNESS, President, Association of Academic Health Centers

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List of Contributors

President, Bennington College Esquire, Covington and Burling REGINALD H. JONES, Retired Chairman and Chief Executive Officer, General Electric Company THOMAS D. KILEY, Vice President, Genentech Corporation THOMAS W . LANGFITT, Vice President for Health Affairs, University of Pennsylvania JAMES LESCH, Director, Research Development and Administration, University of Michigan GEORGE M. LOW, President, Rensselaer Polytechnic Institute ALEXANDER MACLACHLAN, Assistant Director, Central Research and Development Department, E J. du Pont de Nemours & Company PAUL F. MILLER, Chairman, Board of Trustees, University of Pennsylvania STEVEN MULLER, President, The Johns Hopkins University and Hospital GILBERT OMENN, Dean, School of Public Health and Community Medicine, University of Washington GEORGE E. PALADE, Professor and Chairman, Section of Cell Biology, Yale University WILLIAM PHILLIPS, Chairman, Department of Chemistry, Washington University FRANK PRESS, President, National Academy of Sciences FRANK H . T. RHODES, President, Cornell University ROBERT M . ROSENZWEIG, President, Association of American Universities ROLAND W . SCHMITT, Vice President, Corporate Research & Development, General Electric Company HOWARD A. SCHNEIDERMAN, Senior Vice President for Research and Development, Monsanto Company HAROLD T. SHAPIRO, President, University of Michigan WILLIAM G. SIMERAL, Executive Vice President, E.I. du Pont de Nemours & Company DICK THORNBURGH, Governor, Pennsylvania E. D . WALKER, Chancellor, University of Texas JOSEPH WARNER, Director, Grant and Contract Administration, Yale University HENRY WENDT, President, SmithKline Beckman Corporation JACQUELINE GRENNAN WEXLER, President, National Conference of Christians and Jews VAN ZANDT WILLIAMS, Vice President for Development, Princeton University JAMES B. WYNGAARDEN, Director, National Institutes of Health MICHAEL K . HOOKER, PETER BARTON HÜTT,

Prologue Sheldon Hackney

The number of participants from the university and the corporate world who attended the conference "Partners in the Research Enterprise" at the University of Pennsylvania in December 1982 was some indication of the high level of interest the subject evokes. In hosting the meeting, the university performed one of its most valuable functions, providing a forum for open discussion of an issue of general concern to broad segments of society. Without necessarily seeking to reach a consensus on the issues, our purpose in arranging the conference was to lay out as frankly as possible the advantages as well as the pitfalls of new relationships that are proposed or have already developed between industry and academia. It was evident to the planners of the conference that the time was right for an examination of the state of university-corporate relations for which the Pajaro Dunes, California, Conference, held earlier in the year, had already gone some way toward setting an agenda. At Pennsylvania, my colleagues and I determined that we could contribute most to this continuing debate by fielding all-star teams from both the university and the corporation. This was reflected in the composition of our steering committee which had equal representation from each. Recognizing that the public also has a stake in decisions for cooperation between universities and corporations, we opened the conference to the press and included a role for a spokesman for the public interest. The uneasiness in the outside world about these new associations is reflected in the creation of an evocative term—the "academic-industrial complex"—to describe such relationships. But suspicion is by no means limited to those watching from the sidelines. As academia and industry seek out new relationships, there are, despite a mutuality of interest, many real misgivings, although they are rarely voiced openly. Everyone knows that the raison d'être of universities is to improve the lot of mankind through knowledge while the identical aim of corporations is to improve human welfare by producing

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Prologue goods and services. Such truisms are considered quite suitable for discussion, but the fact that universities cannot do research without funding, and the fact that corporations stay in business by making a profit are less likely to be brought out. The university's point of view is well expressed by the words of an early scientist: "Money is like muck, not good except it be spread." Even though Francis Bacon was not talking about grants, corporate managers, as well as shareholders, are wont to ask searching questions about the purposes and results for which their money is spread. Academic researchers, meanwhile, are rightfully indignant at the suggestion that they- could be asked to predict results before receiving the funds to carry out the research. Nonetheless, the need to build solid relationships is recognized by both industry and the university. With all due caution against a potential conflict of interests or goals, each "side" has seen the advantages of exploring the terrain and discovering common ground on which to build. Realistically, universities are interested in cooperation because support from the federal government has been declining in real dollars over the past decade. Although the drastic cuts that had been predicted were avoided in the most recent budget, there is a marked shift in funding toward the physical sciences (military research and development) and away from the biomedical field in which, since the fifties, major breakthroughs have been made with government support. Basic research has reliably provided the starting point for new technologies and 70 percent of it still takes place on campuses. Recognizing that the amount of time between the discovery of a basic idea and its application has been steadily decreasing, corporations, which rely on new knowledge, have an interest in becoming more closely connected to the source of new ideas. Both universities and corporations are paying attention to the new relationships that are emerging because of the large profits that may result from the successful application of new ideas. Dramatic examples of such relationships exist, some of which were described in detail at the Pennsylvania Conference, along with a range of possible models for future cooperation. In the course of two days of discussion and debate, it became apparent that, despite all reservations, both sides are optimistic and place a high value on developing the partnership between universities and corporations. Certain broad areas of agreement also emerged. For one thing, both sides acknowledged that the government's role in funding basic research is crucial and any thought that government might be supplanted by the private sector is illusory. Private industry currently provides some 4 percent of the support for basic research at the university. According to the most optimistic predictions that proportion will never exceed 10 percent. Increased industrial support, it was nonetheless agreed, has an important role to play at a critical moment

Prologue

as universities seek ways to maintain the high quality of their basic science programs. A second area of agreement was the seriousness of the problems involved in bringing universities and industry into closer partnership. From the university's point of view those problems revolve around the threatened diversion of its faculty from teaching and basic research into more applied investigation, and even into the management of small companies in instances where research results in a technological breakthrough. Moreover, university faculty members engaged in proprietary research or in basic research with the promise of some near-term application might find themselves in a "diversionof-interest" situation with their duties at the university pulling a different way from their interest in research programs sponsored by a profit-making corporation. The private industry people, on the other hand, worried mostly about how to evaluate basic research done in universities, or indeed in their own laboratories. Their questions were: What do we get out of it? What is it worth? How much is enough? The main reason why relatively little campus research is at present funded by industry is that industry invests heavily in research programs of its own. A view expressed informally at the conference, but not on the podium, ran something like this: "Why should we enter complicated relationships with one of your professors when we can soon buy the graduates he has trained in his labs?" Corporations, it was pointed out, are eminently responsive to their own interests, and equally averse to becoming too dependent on any outside source. If they need labs, they will build them; if they need scientists, they will hire them. At the same time, the very fact of industry's growing awareness that it does depend on universities, not only for the new ideas that come from basic research but also for a steady flow of well-trained scientific and technological talent led to the recognition that for industry to do anything that would inhibit the ability of universities to fulfill those missions of research and education would be similar to "eating one's own seed com." Both sides further recognized the essential tension between the competitive ethic of the free enterprise system, with its legitimate need for secretiveness, and the cooperative ethos of the academy as a community of independent scholars linked by mutual adherence to standards for testing the truth and for freely communicating the results of research in the cause of advancing knowledge. Universities fear that, since little money comes without strings attached, firms may apply undue pressure on the research enterprise. This actually recalls similar arguments about the potential impact of much more massive federal funding in the fifties which led Clark Kerr, près-

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Prologue ident of the University of California at Berkeley, to denominate the research institution as "the federal grant university." It was pointed out, however, that all external support has a potential for corruption but that industry grants may actually involve less red tape—the color of the "strings" attached by government bureaucracy—and thereby relieve investigators of some of the burdens associated with applying for funding from government agencies. At the present time, applying for grants is a major activity in the life of a researcher and, in fact, competes in an intrusive way with his time in the lab or the classroom. There was a consensus, though not complete agreement, that the best solutions will be reached on a case-by-case basis, particularly if all parties are clear about their goals and the principles they most wish to preserve while seeking to effect new partnerships. There was widespread agreement that even well-recognized problems in all their various forms can be solved best if faced fully and frankly between partners who have confidence in each other and a great deal of respect for the opposing position. Good faith is the basis of a good agreement, and, during the conference, there appeared to be a growing amount of it. Beyond the simple self-interested quest for research funding by universities and for the new technologies and trained personnel so avidly sought by corporations, the Pennsylvania Conference pointed up the less parochial demands that have increasingly drawn the sides together. For a long time—ever since the massive infusions of government money into research after World War Π—America held a dominant position in science and technology and also in its demonstrated ability to market its new discoveries. Free investigation and free enterprise went hand in hand, evidence of an eminently well-running system. Now, at a time when other nations are catching up if not passing us, American research universities, already on the brink of obsolescence and in need of vast capital expenditures, are obliged to turn to new sources to supplement an anticipated decrease in government funding. Industry now perceives its interest in and responsibility to universities as two-fold: beyond helping supply some research funds, it is prepared to help impress the government with the fact that basic research is not of esoteric value but it is fundamental to the future of American enterprise and its competitive stance in a highly competitive high technology world. The greatest unforeseen result of the conference is the growing and sharpening awareness of the community of interest that corporations and universities have in making sure that the federal government plays its primary role in "completing the triangle" by continuing its support of basic research. There is general agreement that there is no other source of such support to be found anywhere else in the country,

Prologue

and that the future of our nation's economy depends very much on a healthy basic science community. It seems fitting that this search for new, realistic solutions was conducted at the university founded by a great pragmatic scientist, Benjamin Franklin, who became the first chairman of trustees of the University of Pennsylvania. Franklin has been both praised and blamed for his down-toearth view of the needs and the function of education. Another more recent Fellow of the Royal Society and long-standing member of the faculty, A. N. Richards, may actually have forfeited the possibility of winning a Nobel prize for his work on the kidney because of the company he kept—with drug companies. Since those times, recognition has been growing that partnership holds out the most promising solutions and constitutes the best strategy for advance—even survival—in a complex world. On another august occasion that took place in Philadelphia, Franklin made his now famous observation: "We must, indeed, all hang together or, most assuredly, we shall all hang separately." That also seemed to be the consensus of those participating in the conference and a major reason for the optimism on the value and possibilities of future relationships between industry and academia.

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Introductions Henry Wendt

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George Bernard Shaw said that principles without programs are platitudes, a remark that brings to mind the distressing lack of realism characteristic of many conferences and meetings. I believe, however, that this conference on the relationship between the academy and the corporation directs our attention to one of the more important and realistic questions of the day. The question before us, it seems to me, is as basic as how our resources of knowledge and capital can best be deployed in the interests of human progress. What is needed is a strategy for synergism. And of course it must be a strategy that allows the academy and business to work together without compromising the principles of either. At a time when public sector funds in support of academic research are declining in the United States, this relationship naturally assumes greater prominence. At the same time, however, we are all aware that university-corporation collaboration is not without its problems. On the campus side, the anxiety seems to be that the corporation's profit motive will skew the university's research away from the pursuit of basic science and perhaps even "truth." On the business side, there is often apprehension about how truly "academic" research can ultimately be marketed and indeed whether knowledge can be translated to property and patents— the very stuff of industrial enterprise. Yet present economic realities, the scarcity of scientific talent, the growing complexity of virtually all research, and the large amounts of capital needed to fund it give urgency to the question. The purpose of this conference is to place the needs of both sides—business and academia—in a useful perspective. Chesterton said that there is only one thing that requires real courage to say, a truism. And perhaps George Santayana was expressing much the

Introductions same idea when he said that nothing requires more intellectual heroism than to see one's equation written out. Obviously we are dealing with an equation. Obviously there are matters of quid pro quo involved. And there is big money involved—in some cases many millions of dollars. The problems arising from such arrangements were reviewed in March at the Pajaro Dunes, California, Conference, as you know, and some progress was made in defining the concerns of both parties. It is my hope that this conference will make further contributions to our understanding of the expectations on both sides. Coming from the business side, I hope I will not be judged insincere when I say that the transfer to the marketplace of new technologies and the discoveries resulting from those technologies can have very positive social and economic implications—both for the United States and for the world. This conference will take us another step forward on the path of understanding and perhaps even reconciling conceptual differences. But I hope it will do more than that. I hope it will set a pattern for frank dialogue between university and corporation that will smooth the way to our mutual pursuit of common goals.

Paul F.Miller It was 128 years ago that a predecessor of mine, Penn Trustee Alonzo Potter, sent a letter to the faculty in which he described "the alliance between science and industry" as "one of the more notable facts of our time." His object was to persuade a resistant professoriate to create a program of graduate education. Few know that Pennsylvania was the first American university to consider so bold a proposal, though Bishop Potter's vision was not realized for another thirty years. Furthermore, you may not be aware that this is the second time the University of Pennsylvania has played host to representatives from other universities, industry, and government with the intention of exploring cooperative relations in science and technology. On 7 May 1926, Perm's chief executive officer, Provost Josiah Penniman, brought together on the campus colleagues from some of the same institutions and organizations represented here today. Among those present fifty-six years ago were the presidents of Cornell, Johns Hopkins, Michigan, NYU, Stanford, and Yale and officers from

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Introductions

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General Electric, American Telephone and Telegraph, the National Research Council, and the U.S. Public Health Service. They laid preliminary plans for what they expected would develop into an organization to stimulate scientific research of American universities. Those plans, that organization, and, indeed, the national endowment for research, which the Penn conference endorsed, all became victims of the depression. But it should be noted that corporate funding of research began even before the war that was won, in some measure, by the extraordinary scientific partnership created in the United States between universities, industry, and government. Afterward, beginning in the early 1950s, federal support for academic science increased rapidly and corporate funding declined in relative importance. By the 1960s, as others have documented, the better graduate students were passing up industrial careers for the academic life. The common interests uniting scientists in company laboratories were encountered with increasing rarity, and a cultural split developed, which ill served the nation. It has been evident for several years that the time has come to reforge the research links between corporations and universities. American industry faces mounting competition abroad and lagging productivity at home. Universities are confronted with ever more restrictive and less certain government funding. What is important now is to explore the spectrum of possible university-industry interactions and relationships.

Dick Thornburgh, Governor I have a clear sense of urgency about the opportunities that may be missed if this conference falls short of its stated purpose, to foster partnerships in research enterprise. Pennsylvania—not unlike several other states of similar maturity, industrial mix, and demography—faces the stark challenges of an economy in transition. This economy grew to maturity with a heavy reliance on a now eroding base of heavy manufacturing industries, most notably iron and steel, but it is now in distress because of a double-digit unemployment rate. Largely because these same industries are now operating at slightly more than 30 percent of their capacity, and because of the ripple effect that this sluggishness has had on a wide variety of satellite businesses both large and small, the prospects for a dramatic overnight resurgence of our historically heavy manu-

Introductions facturing base are not good. Thus, there exists the need to recognize the inexorable transition that must occur if high unemployment and underemployment are not to become a permanent state of affairs in states like Pennsylvania, and we need to answer the question, transition to what? An assessment of our physical, economic, and intellectual resources has led us to mount an effort to capitalize on the advanced technology explosion occurring in campus and industrial laboratories, as well as on the production line. We must begin to apply these innovations and the fruits of important basic research not only to the revitalization of our existing industry through introduction of state-of-the-art technology, but to the establishment of advanced technology centers throughout the state to incubate the new industries of tomorrow. We see forthcoming a role for state government as a convener of those from campus and industry, as a catalyst for cooperation on specific projects and, frankly, as offerer of both the carrot and the stick to bring together academic frontiersmen and their counterparts in industry to increase productivity and to create new jobs for working men and women. That is why I proposed to our legislature last February that Pennsylvania launch a new bid for diversification of our economy, a new consortium of academic, governmental, and private resources to establish Pennsylvania as a true competitor in advanced technology enterprise. This effort is called, appropriately enough, "The Ben Franklin Partnership" after that ingenious Philadelphian who most clearly embodied the qualities of scientist, educator, pragmatist, and political economist we seek in this endeavor. We are determined to make Pennsylvania a leading competitor in advanced technology enterprise and place it in a position to take up the slack that has created the phenomenon of the displaced worker as well as the skilled, motivated working man or woman in the prime of work life who has seen disappear not only his or her job, but also a large segment of our industry. Advanced technology fields such as robotics, biotechnology, data processing, telecommunication, and others are predicted to generate more than one million new jobs nationwide within this decade. Pennsylvania already has in place a range offinancial,technical, educational, and marketing programs designed to promote economic growth, and it has already redirected the priorities of these programs to provide greater assistance to advanced technology firms. It has become abundantly clear since February that our move to the partnership approach was right on target, and that this approach could be significantly intensified in months to come. The Ben Franklin Partnership will soon be distributing initial challenge grants totaling one million dollars to

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Introductions

qualified applicants under current appropriations, and we intend to seek a dramatic acceleration of that activity in budget recommendations for next year. Through the partnership, we seek to establish advanced technology centers across the state, centers in which a cooperative advanced technology research and development effort of academia, business, industry, organized labor, economic development groups, investors, and others can convert today's technology into tomorrow's jobs. Institutions such as our great University of Pennsylvania, University of Pittsburgh, Carnegie-Mellon, Drexel, Temple, and Lehigh universities, as well as our landgrant institution, Penn State, have already submitted impressive proposals to act as sponsors of the centers we envision for our state. The state's partnership grants will provide 50 percent of the financing for such centers, but 50 percent must also be supplied by the colleges and universities and the private sector. Our intent is to involve the private sector, business, and industry from the beginning, thus increasing our chances of new employment on a lasting basis for Pennsylvania. What we seek for Pennsylvania is obviously much in tune with what you are examining in this conference, but with a sense of urgency that reflects our recognition of the human cost of our present predicament. We seek an economy for the future enhanced by new enterprises at the forefront of technological innovation, supported by traditional industries benefiting from innovation, and staffed by a work force possessed of the enhanced expertise to make it work. Your deliberations, conclusions, and recommendations will be carefully scrutinized by Pennsylvanians and those in other states venturing down a similar path. Your efforts and those of corporations and universities across this nation can play an important role in all of our future plans. Through this conference, you are expressing a valid concern about what could and should be done in a world of changing hopes and expectations, and we in Pennsylvania, as your hosts, are grateful for that concern. Precisely because we can ill afford to forfeit our tomorrow through any failure to recognize, understand, and respond to the challenges we face today, we thank you for gathering here and we look forward to reviewing your findings and conclusions.

PARTNERS IN THE RESEARCH ENTERPRISE

PART

Perspectives and Current Status

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CHAPTER

Free Market and Free Inquiry: The University, Industry, and Cooperative Research A. Bartlett Giamatti

This conference is unusual in terms of its central theme and its composition. For represented here are corporate and university leaders, research directors from both industrial and academic laboratories as well as scholars and observers with a keen interest in the well-being of the business and academic enterprises. The central theme for discussions involves the points at which the goals of universities and corporations merge or at least overlap. At present "technology transfer/' or the mechanisms through which new knowledge emerging from our universities is refined, developed, and put to practical use, is the most talked about point of overlap. Surely the most important transfer between campus and corporation is that involving the young women and men on whom the success of our society depends. I want to share with you some thoughts about what many university administrators and faculty are confronting as they engage new and enticing opportunities for cooperation with industry. Forgive me for not giving equal time to the issues confronted by my corporate colleagues as they debate the pros and cons of cooperation with universities. I am not equipped adequately to provide that perspective. In this century, the time lag between the creation of a new scientific concept and its general application has usually been measured in decades. Occasionally, however, the gap is compressed as a new theoretical insight moves swiftly to the stage of application and, hence, of wide, practical dissemination. We are now in the throes of such a movement in the vast field of applied research in genetic engineering. At times of swift and intellectually exciting development, with the

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Partners in the Research Enterprise potential for such enormous benefits to society and financial profits to skillful entrepreneurs, it is natural that questions arise about the appropriate relationship of universities to commercial sponsors of university research, and, indeed, about the very nature of the university in society today. Because universities participate actively in many developing areas of science and technology, they have been seeking answers to these questions. Administrators and faculty committees on many campuses have been considering the issues raised by new and expanding relationships to private commercial firms. From these various deliberations will emerge policies to govern the nature and extent of university and faculty involvement in the commercial application of our scientific and scholarly research. Today I will suggest, as a stimulus to conversation, some principles upon which such a policy can rest. The university exists to protect and to foster an environment conducive to free inquiry, the advancement of knowledge, and the free exchange of ideas. Such an environment depends crucially upon trust and openness, and upon a clear understanding of a set of principles governing scholarly inquiry. The principles are simply stated: the university and individual members of the faculty pledge themselves to the open, unimpeded, and objective pursuit of ideas; to the exchange of ideas openly and without deceit; and to the full and wide dissemination, through teaching and written publication, of the results of scholarly inquiry. The appropriate discipline on the dissemination of ideas is the critical scrutiny of responsible experts in order to assure the general public that completeness in investigation and citation, and rigorous and logical analysis in drawing conclusions, have been applied in the work. As the university in its corporate body pledges to protect and foster an environment conducive to free inquiry, so also must the individual members of the faculty. As that environment and those principles engage a spirit that transcends the letter of stated principles, so each faculty member must sustain the university's commitment to free inquiry by fostering a spirit of collegiality, a shared sense of respect for and trusteeship of shared values of openness and intellectual freedom that the university exists to embody in the larger society. And, as the university in its administrative body must recognize that the members of the faculty, collectively and individually, are at the core of the university; and that, on behalf of members of the faculty, it is essential to protect academic freedom as well as to foster traditions of faculty self-regulation and self-government, so also is it essential that each faculty member recognize that the primary and overriding obligation of every faculty member, in terms of his or her commitment of time, attention and intellectual energy, is to the university, that is, to the students, colleagues, and general mission of the university.

Perspectives and Current Status

These principles of free inquiry and open dissemination of ideas as well as the values of collegiality, mutual trust, and primary commitment exist to protect the environment for free inquiry. They also form the principles and assumptions underlying all that follows. Both university-based research, concerned primarily with the advancement of fundamental knowledge, and industry-based research, concerned primarily with marketable application, should serve the general well-being of society albeit in differing ways. Since the knowledge typically developed in university-based research is of a fundamental nature, it will often have a multitude of potentially useful applications. Because many of these eventual applications cannot be foreseen, it is particularly appropriate that such knowledge be disseminated as widely as possible so that all may use it if they will. While private industry pursues basic research, it does so less often, in part because it is difficult to demonstrate adequate financial return from such long-term, risky efforts. Universities are marketplaces where ideas are freely available; where knowledge is pursued by way of the norms of free discussion and the free access to and exchange of information; and where the freedom to publish must be present. In contrast to the university, the commercial enterprise is appropriately animated by the profit motive. Commercial application of new knowledge typically requires a substantial investment in applied research and development, and commonly in the equipment and physical plant required by new products or methods of production. A profit-making enterprise will undertake such an investment, and all its associated risks, only when it can reasonably expect an adequate return, a return not likely to occur if competitors are first to the marketplace. The opportunity for private profit provides the encouragement for the socially beneficial application of new technology. To realize profits from technological innovation, however, a company must strive to protect its proprietary knowledge and to prevent its exploitation by commercial competitors. The development of theoretical concepts, bom in the university, and the transformation by industry of those concepts into practical application, is often a complementary process. The complementary nature of these activities, however, simply throws into relief the basic difference between universities and industries: the academic imperative to seek knowledge objectively and to share it openly and freely; and the industrial imperative to garner a profit, which frequently creates the incentive to treat knowledge as private property. In the light of the underlying principles of free inquiry and free market, we can now examine specific issues concerning university-industry relationships. The first is the appropriate nature of faculty involvement with

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Partners in the Research Enterprise

profit-oriented companies, particularly such companies which seek to market new processes and products growing from university-based research. The second is the appropriate conditions of grants or contracts for basic research by existing companies to universities, especially when these conditions require some form of exclusive relationship, of license or treatment, by the university with the company as a condition to the grant. I should say here that there are likely to be ambiguous situations where reasonable people will have to wrestle with the application of policy guidelines to specific cases. It therefore makes sense for a university to have a permanent forum in which such cases can be discussed and shaped. My own belief is that such a forum should be comprised largely of members of the faculty, for they are the university and must serve, with administrative officers, as the custodians of the long-term health and vitality of the enterprise. I will now discuss some of the considerations that I believe must be taken into account in forming a policy. There are potential conflicts of commitment and potential conflicts of interest whenever a member of the faculty is involved with extra-university entities. Let us here consider the specific issues surrounding the involvement of a member of the faculty with a company seeking to exploit universitybased research. I doubt that a faculty member can ordinarily devote the time and energy the university requires and also pursue a substantial involvement in any such outside company. Such involvement necessarily demands great concentration and commitment, particularly at the outset or if business goes badly. When a faculty member becomes substantially involved in a company, the conflict in norms governing the dissemination of knowledge becomes very difficult to reconcile. The burden of maintaining a teaching program and two separate research programs, where the results of one research program are to be widely disseminated and the results of the other may be required to be kept secret in the pursuit of commercial success, is more than even the most responsible faculty member can be expected to shoulder. Finally, such involvement risks putting one's students and research associates in ambiguous circumstances, such that the graduate or postdoctoral student would not know, when working with a professor, for whom the student was working— the university, the professors, or the company. Of all members of the university community, the student especially ought to be working for himself or herself, and ought to be guided in research and trained in skills and techniques that are designed to produce a first-rate scholar, not profit for a company in the private sector.

Perspectives and Current Status I believe that if a faculty member becomes a manager of a company pursuing commercial application of his or her university-based research, or acquires, through gift or purchase, stock shares in this kind of company in such proportion to the total number of shares that he or she can have a significant effect on the decision making of that company, then there is a presumption that the faculty member's involvement in the outside entity is substantial. In such an event, there should be a review of the relationship, the possible consequence being that the faculty member might well have to decide to leave the university for a limited period of time, perhaps one year, by taking an unpaid leave of absence to pursue those outside interests. If, at the end of that time, the faculty member should wish to retain the outside interests described above, then he or she would relinquish tenure, if he or she had it, and assume "adjunct" status if the relevant department or school were to recommend such an appointment in the usual way. The alternative for such a person would be to sever all ties to the university completely. Should he or she wish to become a full-time member of the faculty at a later date, such a possibility would require the availability of an open position and the use of the institution's full appointments procedure. There are relationships of individual faculty members to commercial companies, even those using the results of university-based research, that traditionally the university has allowed and will continue to allow. In these "consulting" relationships members of the faculty provide advice to companies but do not directly manage corporate research. "Consulting" can enhance a person's professional competence and further the mission of the university. Many university policies stipulate that a faculty member may spend not more than one day in a seven-day week in such a role. Thus there is a limit on the commitment of time and energy. Serving as a consultant to a company or, within the rule of reason, accepting payment in equities from some cash-poor, idea-rich company, is less likely to create conflicts of commitment or conflicts of interest than serving in a role that has a significant effect on corporate decision making. A faculty member who has gone beyond any reasonable definition of "consulting" has reached the point where the question arises whether he or she should remain a full-time member of the faculty. Universities frequendy require that faculty members wishing to engage in consulting obtain the permission of a chairman or dean. In recent months administrations and faculty on some campuses have been considering whether to require faculty investigators to disclose outside commitments and the identity of organizations involved in their nonuniversity professional work. At

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least one major university system has already adopted such a policy. A faculty committee at Yale has recommended such a policy and it will be implemented in 1983. Such disclosure—of consulting relationships, of relationships with outside companies engaged in application of a faculty member's research or relationships with companies that sell to the university goods or services—is, I believe, the best stay against conflicts of interest or conflicts of commitment. Disclosure of this sort recognizes that there are grey areas where reasonable people might have differing views and it provides the occasion for discussion. In such disclosure to the administration, there is no direct monitoring of colleague by colleague. Rather a premium is put where it ought to be, on trust and openness. The second issue for university-industry relationships concerns the appropriate principles in an agreement between an established company and a university when a company wishes to support basic research in a specific area. When such agreements are discussed, questions of exclusivity often arise, either with regard to proprietary information provided by a company as part of an arrangement for cooperative research or with regard to exclusive license to whatever the university is entitled to patent. The university itself is the only entity that can enter into arrangements for cooperative research and many universities take the following position on exclusive licensing agreements. In general, we would prefer to grant nonexclusive licenses in order to make knowledge as widely available as possible. The university, however, will grant an exclusive license when it can be demonstrated clearly that a period of exclusivity is essential to bring forth the investment needed to develop an invention to the point where it is ready for the marketplace. It will sometimes be clear that society will be better served by the grant of an exclusive license in order to bring the knowledge to the public and that the benefits to society from such exclusivity are greater than the costs of any diminished competition. I believe each individual agreement must be negotiated on its merits. Through such negotiations, universities ought to insist on principles which seek to assure that their patentable inventions will be fully and beneficially used, and that knowledge with a potential benefit to society at large will reach the public in a timely and useful fashion. Research grants from business firms raise other questions as well, questions which are the same as those raised by research sponsored by the federal government or by private foundations. When contemplating a prospective grant or contract with any sponsor, the university will first consider whether the potential exists for upsetting the intellectual equilibrium and

Perspectives and Current Status human relationships in a department were one kind of research to be funded out of proportion to other kinds of research. As an indispensable condition to arrangements for cooperative research with industry, just as with government-sponsored research, the university will not accept restriction, inhibition, or infringement upon a faculty member's free inquiry or capacity orally to communicate the results of his or her research. In addition, the university will not accept any restriction of written publication, save the most minor delay to enable a sponsor to apply for a patent or license. Such a delay should not be so long as to lengthen appreciably the time normally required to bring results into print. The opportunities for cooperative research between universities and industries are very exciting and can redound to the benefit of society. These opportunities should not drive us toward arrangements for basic research which abridge our principles. Nor should the university ignore the potential availability of funds from commercial sponsors. We should negotiate appropriate arrangements, openly arrived at, which can further our mission. The constant challenge for the university is to know in clear and principled terms how to cherish learning, and its pursuit; and how to assist in bringing the results of free inquiry to the rest of society for the good of the public. As I noted at the outset, my remarks have focused on considerations important to universities. Our governance process involves the often lengthy debate, deliberation, and dialogue so essential to the collégial atmosphere. It is a frequendy frustrating process for outsiders, and insiders for that matter, with an interest in the outcome. But one role of a university is to preserve and pass on traditional values, to make decisions within the context of fundamental principles unlikely to change much over time. The rate of change in some areas of science, biotechnology being a current example, can be extraordinarily rapid. The pressures arising from the high stakes involved can be great indeed. But when we come to cast a retrospective glance at the decade of the eighties, we will find that the universities that acted within an established set of basic principles will still be able to proffer the strengths and quality that attracted industry in the first place. Finally, I want to note two of the conclusions of the National Commission on Research in its 1980 Report on Industry and the Universities. ( 1 ) The public must be informed of the nature and rationale of specific university-industry research relationships; (2) Misunderstanding and mistrust exist among members of industry, university students and faculty, and the general public. We must use forums like this one to raise the proper issues and give them a thorough hearing.

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Overview of University-Industry Research Interactions

2

Herbert I. Fusfeld

Background The relationship between industry and the university must be considered against the background of our overall national technical effort. I cannot remember any other topic in the area of science and technology policy that has so rapidly achieved such overwhelming attention in the technical and business communities throughout the industrialized countries of the Paris-based Organization for Economic Cooperation and Development and even beyond. The closest comparable situation might be the concern in the 1950s about the potential impact of massive federal support of university research. This led to the famous series of lectures by Clark Kerr, president of the University of California at Berkeley, "The Uses of the University," in which he referred to "the Federal grant university." We must look at the needs of the university, of government, and of industry in order to pinpoint the factors that have pushed the subject of university-industry research interactions into the spotlight it has occupied for the past three years. A critical factor in preparing universities for the dialogue now under way was a concern for the possible decline of "the Federal grant university," however mistaken that view might be. A pattern of federal funding had been achieved by the late 1960s that many in the university wanted to look upon as stable, but which seemed to be tottering by the early 1970s. The major reason for government interest was also economic. The growing economic uneasiness of the late 1970s led all of the OECD governments to seek help for lagging economies without stirring inflation. As a friend of mine once said, "Technology is the only free lunch around!" Thus all governments looked to innovation, and all began to encourage mechanisms that would make the greatest use of their overall technical resources.

Perspectives and Current Status And along with the economic concerns of governments was a deep concern for the health of basic science and engineering. The third partner is industry. Although industry was a principal outside source of university research funds before World War Π, the federal programs that followed pushed the percentage of industry support to a low of about 2 percent in the early 1970s. This percentage has since climbed to just under 4 percent today. In actual expenditures, however, industry support of university research has increased steadily since the 1940s and reached $240 million out of the total $6.3 billion spent on research and development at universities in 1981. Thus industry has been a faithful companion of universities, though it often felt cast in the role of the spurned suitor during the fifties and sixties and is now in the unaccustomed position of the eligible, rich bachelor. Despite these minor strains in university-industry relations, it is safe to say that industry has always recognized and encouraged the critical role of universities in providing trained graduates and a continually growing reservoir of knowledge in basic science and engineering. There has always been a potential too for new business opportunities, though normally these emerge through university research that supports an area of company interest and that is absorbed and converted to commercial use through the organized structure of industrial research. Industry and the university have a long and honorable tradition of cooperation. But there are several aspects of current relationships that reflect pressures on industry that differ from the situation of twenty years or so ago. One pressure is the existence of selected shortages of technical people in some fields and the increasing sensitivity to the long-term needs for technical competence in all fields. We therefore see fairly intensive efforts at establishing university contacts by companies engaged in electronics, information processing, and pharmaceuticals, by those seeking to expand their interests in biotechnology, and by the Chemical Council for Research on behalf of the chemical industry. A second pressure is the growing need to provide options for industrial growth through the development of new products, new businesses, and increased productivity. An important source of such options lies in science and technology, and this is surely a major reason why industrial research and development expenditures have kept rising even in the face of the current recession. To the extent that university R&D activities can broaden the base of industrial R&D, they serve as an important input for eventual industrial growth. Thus, linkages with university research can be viewed as a natural consequence of the increased emphasis on industrial research.

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Partners in the Research Enterprise Still a third pressure comes from increased international competition. Foreign suppliers now provide technically superior products or reliable lowercost products manufactured by superior technical processes. We no longer have the luxury, as we did in the fifties and sixties, of incorporating the newest technical advances into the economy at our own speed. We are increasingly aware of the advances and competence in new technical developments commercialized not only by Japan, but also by any number of technically innovative companies throughout Europe. In brief, then, there is a focus now on science and technology by U.S. companies, which are highly receptive to increased contact with universities as a desirable means of broadening the technical base of their internal efforts. I hope I am not giving the impression, however, that U.S. industry is critically dependent on universities for technical activities related to current business plans. This is not at all true, and there must be a realistic understanding by each partner of the needs and strengths of the other in order to build a solid relationship. Let us look briefly at the scope of research and development in the two sectors. Quantitative Scope of Research and Development Efforts

In 1982, the United States spent about $70 billion on research and development. Of this amount, roughly 70 percent was spent within industry and about 50 percent was funded by industry. About 9 percent was spent at universities. Consider the absolute numbers. Industry funds about $39 billion of total U.S. R&D. Less than 1 percent—somewhere between $250 and $300 million—goes to universities for activities related to R&D. This is less than 4 percent of all university R&D funding. In contrast, the federal government provides about $4.6 billion, or 66 percent of all university R&D funding. If we look at basic research during 1981, some $4.3 billion was conducted at universities and $1.6 billion in industry. The universities carry out about 49 percent of the total basic research in the United States and industry about 18 percent. Further, the universities conducted some $2.0 billion of applied research. This amount of applied research at universities and basic research in industry provides a broad area of potentially overlapping interests that can serve to initiate university-indusoy cooperation. We get a somewhat different view of these prospective partners when we look at the distribution of R&D effort within each sector. There are some two hundred institutions that can be referred to as "research" universities. Of these, one hundred account for 85 percent of all federal funds going to

Perspectives and Current Status

university R&D. The top ten universities account for 25 percent of these funds. The maldistribution of effort is even greater in industry. Ten companies account for 33 percent of all R&D funded by industry. Of those, two companies alone account for 20 percent of all the basic research funded by industry. It is therefore important to note that, when we talk about universityindustry cooperation, we are referring to the matching of two sectors that have badly skewed distributions of effort, both in type of research and in numbers of institutions. Thus, our discussions of university-industry cooperation must take account of the characteristics implicit in these quantitative figures. On the university side, not only do we see the sharp differences in research activity, but also we note the equally great differences in philosophy concerning the desired role of each particular institution. Clearly, there is a relation between the philosophy and the intensity of research at universities. Within industry, two considerations must be kept in mind. First is this same element of diversity. Every industry's and every company's technical needs and its financial capabilities are different. Second, industry is relatively self-sufficient in providing the technical resources needed for its current business. The one factor provided by universities for the short-term needs of industry is trained personnel, and this is indeed the principal basis for university-industry cooperation.

Characteristics of University-Industry Cooperation Against this background, I would like to mention some of the principal characteristics of university-industry cooperation that emerged from an intensive study conducted by the Center for Science and Technology Policy at New York University from 1980 to 1982. We focused on mechanisms, objectives, and experiences rather than quantitative data. However, our first observation was that the actual amount of industry funds going to universities for R&D activity is substantially higher than the numbers officially reported, perhaps by 30 percent or more. This discrepancy is due to the fact that the multiple sources within industry and the multiple receivers within a university make central data collection difficult. Five key points emerged from the study: 1. The extent of industry-university contact varies considerably by industry. The chemical industry is the most active participant, followed by the drug industry. Information processing, food, and electronics are close

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Partners in the Research Enterprise behind. Only a very few companies interact on a significant scale and on a continuing basis. 2. Professional schools within the university get a far bigger share of industry support than do the basic scientific disciplines. Out of 465 research programs studied, 67 percent were engineering, including computer sciences. About 14 percent were related to the biological sciences, but almost all the funding came through the medical schools and basic medical sciences. Agriculture accounted for 5 percent. Thus, schools of engineering, medicine, and agriculture received about 86 percent of all industrial funds for research. This is based on a partial survey but includes most of the large research universities. 3. In about 75 percent of the cases, the establishment of cooperative research programs is based on a previous consulting arrangement between the principal university researcher and the corporate partner. Thus, the university policy on consulting has a direct bearing on the extent of future research programs with industry. 4. Cooperative research programs are initiated by the university in the overwhelming majority of the cases studied. While industry is receptive, it is clear that the university is selling, not receiving. Several notable recent exceptions in biotechnology do not change the overall picture. 5. The primary objective of industry in establishing university relationships is to obtain competent and adequate personnel. The need for specific research is far behind in statistical terms as a primary industry objective. I turn now to those issues and activities I believe will have a strong influence on the development of university-industry research interactions in the next five years.

Current Trends

Commercialization of University Research

There is much public attention focused on the subject of commercialization of university research. The issue is not that basic science provides a foundation for industrial growth and that most basic science is performed at universities. Rather, our attention must be on the pragmatic questions of what organizational structures are most effective and what impact these have on university procedures and objectives. There are obvious potential conflicts, but it should be noted that there are few actual cases of abuse that are due primarily to these newer pressures. Similar pressures in the past have not weakened the universities, and there is a consensus within both the university and industry sectors on the need for caution.

Perspectives and Current Status This consensus and the active attention to potential conflicts are themselves a cause for optimism. But there are also other indications that the pressures that could cause conflirt are lessening.1 First, the recent flurry of new companies starting up in biotechnical areas with an accompanying flow of venture capital appears to have slowed. Substantial new support may well continue, but the pattern is stabilizing, and the bulk of funding appears to be shifting to the large corporations, which have developed or are developing longer-term relations with universities. Second, the universities are developing specific approaches to these relationships and criteria for faculty conduct and information flow derived from earlier experiences, which should provide acceptable mechanisms for industry linkage within the bounds of university objectives and procedures. Third, there is a steady growth of full-time professional university employees concerned with patents, licenses, and equity positions. This cadre of personnel should serve as a buffer between the traditional faculty functions and the actions necessary to commercialize research output. They should also provide realistic views about the implications of these activities for both university and industry that should permit orderly, long-range planning by both sectors. Shifts in Government Funding

Cooperative activities between industry and university rest implicitly on several factors that we may be taking for granted. One is the presence of a strong and stable research structure at the university which exists today because of the substantial level of federal R&D funding. A second is the level of research competence in those areas of basic science and engineering of concern to industry and the related career interests of graduate students. As the influence of defense funding of university R&D increases, the research and the graduate students are affected. There seems to be little danger that we would return to the days of twenty years ago, but there are constructive actions that must be taken at universities to strengthen the scientific base required by the public sector while maintaining effective technical links with the private sector. Finally, since university research requires adequate numbers of competent graduate students, there is a definite dependence on the level of student aid and fellowships. Thus, the level of government support, which seems to be holding up, can determine the strength of university research. However, shifts in funding sources can affect the reservoir of specific research areas and personnel available for industrial cooperation. It is in this regard that even the 4 to

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Partners in the Research Enterprise 5 percent of funds provided by industry can play an absolutely critical role by developing that reservoir. Export Controls of Technology

The direction in which this issue develops can influence the ability of the university to provide graduate students and research contributions in particular fields of critical concern to industry. It can also affect the ability of industry to be an open and cooperative partner in these same fields. This subject is too broad and sensitive to discuss fully here, but a few points should be mentioned. Issues of secrecy have been an active part of our R&D effort since World War Π. There is, and always will be, the continuing need to exercise judgment in each area of technical advance to determine whether the national security is better served by restricting the flow of that information or by allowing its open use in strengthening our overall technical and industrial base. This is the primary critical question constantly before us, but it is not a new question. There are, however, two new questions emerging today, and they relate to the criteria for controlling the export of technology. This is not a matter of secrecy, which limits the flow of technical advances within the United States, but of export controls, which limit transfer outside the United States. First, while licenses for exporting technology have been concerned traditionally with products and processes, that is, with some physical item including blueprints and reports, there is increasing attention to controls on the transfer of knowledge itself. Since knowledge is transferred best through people, this new emphasis could, in principle, lead to restrictions on visiting scientists in industrial laboratories and affect the exchange of information within a multinational company, and even the appointment of foreign graduate students to advanced research programs at universities. Second, there are some indications that Congress will be asked to extend the criteria for export controls to protect our competitive strength in international trade. It is unnecessary to point out the complexities this would introduce in the structure of international business operations and the enormous strain on our capacity to relate the process of technical change to the process of improving our international competitive position, not to mention having the decisions in these matters arrived at by a federal government regulatory system. Any increased emphasis on export controls applied to knowledge transfer will affect university-industry relations adversely. The university itself may become less of an available resource for graduate students and for research

Perspectives and Current Status advances. More important, if industry becomes uneasy about the legal obstacles of technical exchanges within its own structure, the directions and extent of technical cooperation with universities may be limited. It is unlikely that the most extreme applications of export controls will actually occur. But never underestimate the application of Murphy's Law to the realm of public policy. Constant attention to this area by university and industry will surely be a necessary factor to avoid undesirable excesses. Collective Industry Research

There has been considerable growth recently of cooperative research efforts by several different industries. The Electric Power Research Institute, Gas Research Institute, Semiconductor Research Cooperative, and the Chemical Council for Research are among the most prominent. In 1983, these four groups alone will spend well over $400 million on research and development. Such efforts go far beyond those of traditional trade associations. These typically have research budgets of perhaps several million dollars and support a modest number of grants to individual professors and graduate students. The newer and stronger collective actions can build centers of excellence at selected universities in areas of critical concern to the respective industries. This in turn may attract related government funding. Collective industrial research may therefore become an important mechanism for merging informally both government and private funding, with the university serving as the active focus for the programs. This trend could strengthen the ability of the universities to define further programs, both in education and in research, that might be of interest to individual corporations. Collective industrial research will of course influence priorities in particular technical areas and challenge both partners to provide for flexibility. Nonuniversity Training

Another trend of great potential impact is the growth of formal training in professional subjects provided by industry. Some have reached the status of granting degrees such as the Wang Institute and the General Motors Institute, which recently converted to operation under a consortium of companies. One reason for the growth of nonuniversity training is that in some fields the companies may be more advanced technically than the universities and able to provide superior equipment. Further, there is an overall desire to

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Partners in the Research Enterprise avoid technical obsolescence and to strengthen areas of current needs, much of which may involve formal training by company personnel. Depending on geographical location, there may be significant cost saving when many employees are involved. Whatever the reasons, the growth of these activities can affect future university-industry relations. While these programs may indeed compete with universities, they also help to define more sharply the needs and functions of both sectors and offer added opportunities for constructive cooperation.

Conclusion There is one thread that runs through all the issues discussed here. It is the increasing pressure that arises from the two roles of university research: one as an activity that supports education and the free pursuit of knowledge, the other as an increasingly critical component in our national technical enterprise. This pressure forces compromise upon the university system. The optimum structure for education differs from the optimum structure for a research institute. Criteria for appointments, sources of funding, accounting procedures must take these differences into account. To some extent, there is a trade-off between short-term and longterm objectives. An overall goal of the university must be its contribution to the well-being of society. Since industry is the principal mechanism in our society for converting knowledge to economic use, cooperation with industry is an important avenue for deriving social benefits. But it is not the only benefit, because we look to the university to provide objectivity and freedom of initiative in its conduct of research and in support of its educational mission. Thus, we encourage university-industry cooperation as one way to obtain relatively short-term benefits from university activities, provided we can maintain a strong and stable structure that will provide for the longer-term functions of initiative, objectivity, and education. The compromise before us is clear.2 As the university moves closer to a partnership with industry, more resources can become available, but the university inevitably relinquishes some of its unique capabilities for unrestricted exploratory research and freedom of action. There are no absolutes, and the issue becomes one of degree and common sense. There is little freedom in the absence of resources. Thus, each university must work out the degree of partnership to achieve adequate linkages and resources. Too close a partnership with industry can be bad for long-

Perspectives and Current Status

term growth, but too little can prevent the university from providing its optimum contribution. The primary requirement, therefore, is not so much increased partnership, but increased understanding of each other's role. That is the ultimate basis for a healthy strengthening of university-industry cooperation.

Notes 1. H. I. Fusfeld, and Mary Damask, "Role of the University in New Business Development," NSF Grant/Contract no. PRM-6117489, September 1982. 2. Lois Peters and Herbert Fusfeld, Current U.S. University-Industry Research Connections, National Science Board, 1982.

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University-Corporate Relations in Science and Technology: An Analysis of Specific Models Gilberts. Omenn

My charge in this paper is to focus on the sensitive and crucial relationships between faculty members and their own universities (figure 1, below), as I review specific models of university-industry research linkages.

Background Our universities are among the more remarkable institutions of modern society. Through their faculty and students, they pursue complex roles of scholarship, education, and community service, often with internal tensions among these roles. Depending upon the vantage point and the times, they seem both resilient and fragile, both proud and beggardly, both aloof from and involved in public issues. They vary tremendously in size, revenue sources, academic traditions, and public involvement. Universities stand for important values in our society. These include free and open communication, respect for individual views, insistence on excellence, disinterested objectivity, fastidiousness and honesty in the reporting of research results, and dedication through education and research to enhancing the state of basic and useful knowledge about ourselves and about the worlds around us. On a more practical plane, universities are very complicated organizations that must find the means to support their commitments to faculty, staff, students, physical plant, and various external communities. These responsibilities require collective, as well as individual, endeavor to adjust to changing times and new opportunities, while still maintaining essential values.

Perspectives and Current Status

The present may prove to be a watershed period in university relationships, as well as in our economy. For a host of reasons and with a nearly bewildering array of financing mechanisms universities and companies are seeking common ground. This very conference reflects the ferment and the sense of opportunity, since several of the host institutions have had only limited organized relationships with industry in the past. In many states, including my own state of Washington, there are concerted efforts to recruit and to build a high technology industrial future with considerable emphasis on the potential contributions of the research universities. Many of our most prominent scientists have become identified with these efforts. In the broadest terms, university relationships with industry are intended to serve the public interest by facilitating technology transfer, improving productivity, and enhancing the competitiveness of the nation in world markets. While there is respect for knowledge itself, the predominant theme of public investment in basic research in this country has been the potential application of such knowledge in industry, agriculture, and medicine. One need only recall President Lyndon Johnson's dramatic call—upon swooping down in his helicopter in front of the Clinical Center at the National Institutes of Health—that we scientists "unlock the secrets of the laboratory." The spectrum of university-industry arrangements (figure 2, below) ranges from individual and collective consulting to research contracts to cooperative research programs and formal research partnerships, as Denis Prager and I reviewed in Science three years ago.1 I will leave to our industrial colleagues here today the analysis of the advantages and risks for industry. For the university and for the faculty members, however, I have summarized the potential advantages of these arrangements: increased income, resources for program expansion, broadened opportunities for students, access to special equipment or research tools, and longer-term support for high-risk projects, presumably with fewer strings attached than from government funding; and the potential risks: creating imbalances of faculty, students, and space; using up the "seed com" of basic knowledge, while seducing or otherwise exploiting students and faculty into more targeted, narrower training and research; inhibiting communication, publication, and peer review; raising numerous potential conflicts of interest for the individual and the university; and losing public confidence and jeopardizing government funding. To be realistic and not too romantic about the often-troubled past, we should note that universities have found themselves negotiating over or adjusting to requests and requirements of the funding source, whether wealthy individuals, foundations, industry, or government. In the Daedalus volume Limits to Scientific Inquiry, Don K. Price reminded us, "It has been easy to

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forget the atmosphere of the time, less than a half-century ago, when the Federal Government considered research grants to private universities improper if not unconstitutional, and when the leaders of the National Academy of Sciences objected on principle to letting private universities accept government funds." 2 The tensions of university-government relations are beyond the scope of this paper, but are the subject of a major National Academy of Sciences review at this time. We should keep in mind, as we eagerly seek productive relationships with industry, that the several highly publicized, multi-million-dollar, multi-year contracts between individual companies and specific research groups at universities represent only a few tens of millions of dollars annually, compared with the $3.5 billion per year provided by the National Institutes of Health alone. It would be folly for both industry and academia if the government comes to view industrial investment in university research as a substitute rather than as a supplement. I have reviewed recently in The New England Journal of Medicine specific examples of three coherent institutional mechanisms for enhancing technology transfer: active patenting and licensing efforts, especially through university research foundations; not-for-profit contract research laboratories; and faculty practice plans in medical schools.3 These three mechanisms offer instructive historical context for our discussions of the participation of academic scientists in research contracts and venture companies in the biotechnology arena and other promising areas. In most discussions about the uncertain boundaries of the interests of companies, universities, faculty members, students, government agencies, and the public at large, the emphasis has been placed on the relationships between individuals and companies or between universities and companies." I wish to emphasize certain aspects of the sensitive and crucial relationships between faculty members and their own universities as I review specific models of university-industry relationships.

Model 1: Income Flows from Consulting Consulting arrangements are a critical element of university-industry relationships. Often, many years of consulting by one or a few specific faculty members, working closely with counterparts in the company, lie at the core of a major research contract or partnership arrangement. A good example is the longstanding relationship between Bert Vallee of Harvard and Monte Throdahl of Monsanto. Another is the consulting relationship of Howard Goodman with the Hoechst Company.

Perspectives and Current Status

Generally, consulting is permitted—or even encouraged—by universities as a means for faculty members to supplement their incomes. Other goals—including two-way technology transfer, opportunities for students, and development of company-university partnerships—are usually implicit. Information about the existence of a consulting arrangement itself, let alone the financial ternis and the technical domain, is generally considered private and confidential. Most universities, including my own, simply set limits on the amount of time that the full-time faculty member may take away from academic duties or away from the campus. A common figure is one day per week, or fifty-two week days per year. When weekends, evenings, vacation and holiday time are added, considerable latitude is apparent. At the University of Washington, any outside consulting must be reported in advance and approved by the departmental chairman, or the dean, with a note that the activity is considered appropriate. Even so, there seems to be little attention to the income flows or to overall time commitments. Some universities have sought to develop consulting ties on a program or departmental basis so that more faculty can benefit, the time commitments can be shared, and more expertise can be brought to the parties served. In some situations an informal clearinghouse function is mounted, with openness about the opportunities and stimulation of additional faculty to participate, if they choose. A more formal arrangement is the associates program, whereby numerous corporations pay annual fees for the right to participate in visits to university laboratories, briefings by faculty, and generally generic consulting exchanges. The associates programs, long a feature at ΜΓΓ, are being adopted in many areas of the country to facilitate the interchange judged crucial to high-tech regional development. Both consulting on an individual basis and consulting through associates programs can be enhanced if the university faculty generates patentable discoveries. The origins of patenting useful scientific discoveries in this country lie in Benjamin Franklin's founding charge to the American Philosophical Society in 1744 and in Article 1, Section 8, of the U.S. Constitution. There have been some notable financial successes from university patents. These include the irradiation of milk to activate vitamin D and the discovery of anticoagulants at the University of Wisconsin; the development of stannous fluoride as a dentrifrice at Indiana University; and the development of Gatorade at the University of Florida (see note 3). Whether through university research foundations at arm's length, or through active licensing programs within the university administration, many universities are trying to utilize the liberalized provisions of federal grants and contracts with regard to university patenting. Table 1, below, lists the ten leading research universities according

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Partners in the Research Enterprise to federal research and development support for fiscal year 1980 (National Science Foundation data) together with current estimates of the number of disclosures by faculty, some of which prove patentable, and the annual royalty income from past patentable disclosures (information gathered by Alan Dashen of the Washington Research Foundation through individual contacts). As one can see, the University of California system, ΜΓΓ, Stanford, Wisconsin, and Cornell stand out among these universities in terms of activity and yield. Some of the others have barely begun. Table 2, below, lists the FY 80 federal support for total R&D and for life sciences R&D for the eight universities which are the host institutions for this conference. Johns Hopkins, the University of Pennsylvania, and Yale also rank in the top ten for life sciences R&D (table 3, below). In terms of the division of net income between the faculty members and the university, the standard protocol at the Wisconsin Alumni Research Foundation is 15 percent to the inventor and 85 percent to the university foundation. In this case, faculty participation is strictly voluntary. At the Indiana University Foundation, the inventor receives 20 to 50 percent, depending upon the amount of university resources utilized, and the university share is divided evenly between the inventor's department and the rest of the university. In the celebrated case, now under review, of the CohenBoyer patents for the basic gene splicing and cloning techniques, the proceeds would go one-third to Cohen and two-thirds to Stanford, and one-half to Boyer and one-half to the University of California. Both Cohen and Boyer voluntarily assigned their shares to their respective universities. Patenting and licensing can be effective and, in extraordinary cases, lucrative. However, a major "winner" is necessary in order to make a patenting program successful and even then it takes years to realize substantial revenues. There is no comparison to the sensational financial returns for those who have benefited from the speculative fever of venture capital investments and equity holdings during the past couple of years. Nevertheless, it is increasingly apparent that that speculative fever has abated.

Model 2: Industrial Research Contracts to Universities Academic appointments and university facilities are generally too confining for major technological or commercial work. Multidisciplinary centers or laboratories have become a favored mechanism for organizing "big science" with government and sometimes private sector contracts. Preeminent in the

Perspectives and Current Status

use of this mechanism is MIT, to which the federal government turned during World War Π to mobilize academic talent for the defense effort, but many major universities have large contract research units. Faculty are enabled to undertake projects simply not feasible within the academic departments, recruiting large numbers of technical staff, building special facilities, gaining access to government and other sources of information and spinning-off companies (see note 3). Generally, faculty do not stand to gain increased personal income from these contract research laboratory arrangements. Extraordinary funding for research institutes of laboratories in the biotechnology area has arisen lately with the establishment of the Whitehead Institute at ΜΓΓ, the Hoechst Department of Molecular Biology at the Massachusetts General Hospital, the Du Pont-supported Department of Genetics at the Harvard Medical School, and Monsanto support for the Department of Medicine at Washington University. The source of funds in these examples is the private sector, but the results are similar to those with federal funds: resources to expand faculty, staff, and facilities, accompanied by needs to clarify roles, accountability, and access by others to the research results. We might as well acknowledge that to many faculty in arts and humanities departments, medical schools as a whole, with their growth and reliance on a combination of NIH funding and hospital revenues, appear much like giant contract research laboratories! One of the most interesting examples of the not-for-profit research unit is the Wharton Econometric Forecasting Association (WEFA) at the University of Pennsylvania. The growth and commercialization of econometrics bears some curious parallels to the pattern in genetic engineering. During the 1950s and 1960s, the National Science Foundation (through the Social Science Research Council) supported economists who developed complex mathematical models of the economy, involving hundreds of simultaneous nonlinear equations to express the relationships among a host of economic activities. Such models of the U.S. economy were devised at Wisconsin, Michigan, and the Brookings Institution. There was general skepticism about their practicality. Few guessed that over the next decade such models would yield economic forecasts that would become basic economic planning tools for most of the leading corporations of the world and for many governments, or that one company founded by a Harvard faculty member. Otto Eckstein, would be worth $100 million on the stock market a decade later. In order to overcome limitations in resources, personnel, and pay scale, Lawrence Klein, one of the pioneers in this field, and his colleagues at the University of Pennsylvania set up a private, not-for-profit corporation

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Partners in the Research Enterprise with Klein as chairman of the board and still full-time professor of economics. The university extended a $250,000 line of credit, treating 40 percent as equity in the venture and the remainder as debt in exchange for the data, software, and use of the Wharton name. WEFA agreed to cany all subscribers to the pre-existing forecasting service and to donate the proceeds to Penn. The annual payment to the university grew to $150,000 by the mid-1970s. WEFA's revenues from new clients were plowed back into the operation. Klein accepted modest consulting fees from WEFA and continued his research, extending his models to other countries and initiating Project LINK to create a model for the worldwide economy. He received the Nobel Prize in Economics in 1980. Also in 1980 the university decided to sell 80 percent of its equity in WEFA, gaining an estimated $7 million. This decision represented a mutuality of interests. It generated essential capital for the expansion of data banks, software, personnel, and field marketing to keep WEFA viable and competitive. It brought the university endowment for an Economic Research Institute, repayment of certain guaranteed loans, a 20 percent residual interest in WEFA until 1985, and access to WEFA's models and data base for use by students and faculty. Klein and his colleagues continue as consultants. Despite the highly beneficial past and future arrangements, news of the sale triggered quite a stir on the Penn campus over the agreement between the purchasing company and the proposed Economic Research Institute, over the continued use of the Wharton name, and especially over the confidentiality of the negotiations leading up to the sale.5 Just as this conference provides an opportunity to share experiences, awareness of these events of 1980-81 at Penn might have been helpful to the Harvard administration in advance of its abortive proposal to help set up a company with a leading faculty member, Mark Ptashne.6 A new twist in the model of industrial research contracts is the use of tax-sheltered R&D financing through limited partnerships. Genetic Systems, Inc., is a small company in Seattle with rapidly growing links to private laboratories, drug companies, and university-based researchers. Highly focused, specific research contracts—including contracts in the School of Public Health at the University of Washington—have been funded through the limited partnership mechanism. The researchers are not—or at least need not be— investors! The most important development of the contract mechanism is the evolution of research partnerships, with significant research and technical support roles, carefully defined, for both the university and the company scientists.7 The Monsanto-Harvard Medical School contract was the forerun-

Perspectives and Current Status

ner of these partnerships. More than a transfer of funds is involved. The complementary research roles must be defined and the development of techniques and materials must be coordinated. Those involved gain a far better appreciation of the values, imperatives, capabilities, and constraints of the other partner.

Model 3: Negotiated Shares of Earned Income or Equity Positions Among the diverse arrangements of faculty and institutions to expand research, service, educational, and income-generating activities, an especially welldeveloped and at least partially relevant model for basic science faculty can be found in the negotiated arrangements of faculty in the clinical departments of most medical schools. Medical practice plans were stimulated by a desire to enhance clinical service as an essential counterpart to teaching and research, by a need to tap additional sources of funds in the face of increasing costs and decreasing real faculty salaries, and by an opportunity to take advantage of altered external circumstances, namely the availability of Medicare and Medicaid financing for previously unbillable clinical care in teaching hospitals. Especially for medical schools associated with state universities, the option to step free of restrictive personnel, salary, and benefit policies was an additional attractive factor. The response has been quite diverse in institutions around the country, reflecting different traditions and circumstances and reflecting different power relationships within individual schools of medicine and teaching hospitals. Negotiations in most schools have led to formal written financial agreements that succeed in keeping key faculty and in giving incentives to emphasize—but presumably not overemphasize—clinical service. The plans provide supplementary income to the individual faculty member, negotiated balance among practice, teaching, and research for the department, and unrestricted funds for the school and for individual departments. In many schools, the dean is able to use some of the funds to assist basic science departments. These plans represent a significant source of revenue for medical schools, increasing from $90 million in 1970 to $727 million in 1979, according to compilations from the Association of American Medical Colleges.8 The negotiation is the essence of the process—requiring faculty to be explicit about institutional goals and objectives and the different contributions of participating faculty. A. S. Relman has highlighted some of the serious

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Partners in the Research Enterprise difficulties in establishing and updating these practice plans and their income distribution formulas.9 The most pervasive is the wide variation in incomegenerating capacity and in academic orientation of the participants and their departments, exacerbated by the fact that high-earning capability may bear little relation or even an inverse relation to academic contributions. The same is true in the commercialization of genetic engineering, or other basic fields. Just as there are haves and have-nots among clinical departments, there are striking differences within and among basic science departments in the potential for revenues from outside sources, assuming that a desirable balance of outside and academic pursuits can be negotiated. Ironically, surgeons are now envious of the biochemists! Teaching hospitals have some surprising analogies with off-campus research ventures, both nonprofit and for-profit. Hospitals are sites of considerable income flows, whether for the individuals involved or for the institution or for both. The hospitals are often physically separated from the medical school itself, and from the rest of the university. They generally have separate boards of trustees and administrators, yet they are essential to the mixed academic-service roles of the medical schools in educating students and advancing medical knowledge. The excitement of clinical or applied work tends to "seduce" students away from basic sciences. Conversely, clinical challenges, like corporate challenges and advances in techniques and instruments, may greatly stimulate basic research, a factor in these relationships that the historian DeSolla Price has emphasized. The negotiated practice plan approach may be useful for basic science faculty, as a mechanism for making explicit and concrete some of the heated and often symbolic debates over values, activities, commitments, disclosures, and potential conflicts of interest in their industry relationships. Requirements for disclosure of outside activities, whether for income or not, vary tremendously across institutions, depending upon local political factors and sources of funding. Faculty must agree on what activities are subject to disclosure, in what detail, and to whom. Faculty will bring different values, different preferences, and different current ties to such discussions. In these negotiations, students' interests and intellectual property need special protection. Very sensitive analyses are required to define which activities are truly related to responsibilities of the faculty member to the department and to the university, and then to define any kinds of income-generating activities that might warrant inclusion in a faculty income-sharing plan.10 Precedents are the departmental consulting groups via associates programs and the assignment by Cohen and Boyer of their patent shares to their universities. Another instructive example is the assignment of a certain percentage of the

Perspectives and Current Status

equity in a new firm called Zymos (Greek for "yeast") to the Washington Research Foundation. Hopefully, other well-established faculty will be similarly generous toward their own universities. Dealing with equity shares will be a particularly awkward problem for the faculty negotiations, since they represent potentially lucrative and distinctive aspects of the commercialization phenomenon in biotechnology. The value of equity shares is often difficult to establish, subject to great fluctuation and to manipulation and promotion. Equity shares are not the only sensitive matters, however. The individual faculty member who consults or initiates outside research ventures or writes a book is benefiting from the institutional resources and reputation, as well as from his or her own record, ideas, and energy. The lesson from the clinical practice plans is not that negotiation of faculty roles is easy, but that it is feasible. Faculty plans in the basic sciences could capitalize upon the growing sense that intensive relationships with companies can, indeed, be a legitimate and desirable adjunct to traditional academic roles—both for the individual and for the institution. As partners in the research enterprise, we must leam and respect the values and driving forces of universities and of companies, as well as of the government agencies. In this process, those of us in universities should be especially sensitive to the interests and anxieties of our faculty members and our students. We should draw them into open discussions about the mechanisms to foster appropriate university-industry relationships. Figure 1. Relationships among Faculty, Universities, and Companies

THE COMPANY

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