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Mixing Business with Tenure
Many academic analytical chemists participate in no run their own businesses
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or the past decade, the pros and cons of academics playing major roles in business have been hotly debated on university campuses. Issues surrounding patent rights, profit distribution, allocation of research time, ethics, and the conflicting needs of publishing academic research versus maintaining proprietary control of knowledge have been and continue to come under intense scrutiny. What seems certain is that technology transfer, the broad term that symbolizes these issues is becoming a permanent feature of university life (see box 313 A)
merous analytical chemists who participate in a business or even run their own. Six are profiled here in depth. What we found were some common rules and strategies. But, in many ways, the experiences and stories were unique for each chemist. Cotter goes beyond home-built
Robert Cotter, a full professor in the Department of Pharmacology and Molecular Sciences at The Johns Hopkins University School of Medicine, traces the current interest in technology transfer to legislative changes in the 1980s under the Reagan administration. These changes alTo take a closer look at how academic lowed universities to hold patents on disresearchers are coping with these two worlds, Analytical Chemistry talked to nu- coveries funded by federal granting
agencies such as the National Institutes of Health and the National Science Foundation. Prior to that time, these agencies expected that all research findings would be published. And, says Cotter, "anything in the public domain isn't going into the economy," referring to business's need for proprietary research. Cotter's research has centered on using MS for analyzing biomolecules. Patents on his work are held by Hopkins and licensed to interested companies. Cotter's work has led to licensing agreements with Kratos/Shimadzu for the reflectron optics incorporated into the company's newest matrix-assisted laser desorption/ionization time-of-flight (MALDITOF) MS, and with JEOL for magneticfield TOF. In addition, Cotter is a member of the scientific advisory board for SEQUENOM, a start-up company based in Hamburg, Germany. SEQUENOM has raised around $11 million in venture capital and hopes to develop an MS-based method for DNA sequencing that could be offered as a service or in test kits. Any royalties from these licensing agreements are distributed according to an agreed-upon formula: 45% supports research in Cotter's laboratory, 32% goes to the patent inventors, and the remaining 23% flows into the budgets of the dean, the department chair, and the technology transfer office. According to Teri Willey, president of the Association of University Technology Managers, most universities work with a basic formula that distributes one-third of the net royalties to the inventors or their laboratories, a third to the department or research center, and a third to fund technology transfer efforts. These royalty distribution formulae highlight the powerful incentives for universities and researchers to patent their work. "I haven't made any money from [those inventions]," says Cotter, "but I expect to." He hopes that an income from royalties will help support the work in his
Analytical Chemistry News & Features, May 1, 1996 311 A
Focus lab during a time of decreasing federal funds. Industry-sponsored research and consulting provide additional support for academic laboratories. However, says Cotter, participation demands that researchers do not lose sight of their basic mission to carry out fundamental, publishable research. At Johns Hopkins, academics are encouraged to consult for business, which is viewed as important in developing expertise in faculty. At the same time these consulting activities are generally limited to no than 20% of faculty time Cotter says his interest in commercializing discoveries extends beyond a potential financial reward. He cites his many papers on delayed-extraction IR laser desorption. That work was done on a home-built instrument and, without a commercial instrument, the technique was never going to become standard. "If you think you are doing something worthwhile, [commercializing the product] is the only way to get others to do it." It is a theme that many other analytical chemists reiterate In addition, Cotter's contacts with instrument manufacturers have benefited his basic research program. For example, his work with Kratos in developing an instrument for fast peptide sequencing has supported his recent interests in immunology, which focus on using MS to find antigens derived from tumor cells that are recognized by killer T-cells. His business connections, which must be disclosed in research proposals, have also affected his success in winning grants. "In some cases, reviewers respect that your work had led to something." However, in another example, grant reviewers argued that Kratos, with whom Cotter had been working, should fund a project that Cotter says the company was not in a position to support.
demic and business life, but he also wor"Professors are small-business operators already—raising money, hiring people, ries that a post-Watergate mentality has blown the issue out of proportion. "Capiand maintaining equipment." Kissinger talism works," says Kissinger. "We are so cites examples of business-oriented acasensitive to conflicts of interest that we demics, from Sir Humphrey Davy in the are crippling ourselves." early 1800s to Stanford professor Carl Djerassi, developer of the birth control pill. Treado educates a university Nevertheless, Kissinger sees the current interest in technology transfer as a Patrick Treado launched Chemlcon, Inc., in May 1994, only a year and a half after change in attitude in universities. In the joining the chemistry faculty at the Uni70s, universities were not very interested in supporting niche markets and didn't see versity of Pittsburgh as an assistant professor. The impetus to start the business the potential for much income, he says. came after researchers from Westing"They viewed the up-front costs of a patent house approached him with simple quesapplication as not worth the promise of a tions on things they wanted to monitor long-term return." with Raman microscopy in a hostile enviDuring that era, Kissinger began his ronment. Treado realized that there was business as a hobby. As BAS grew, "helpno commercial Raman instrument to suping scientists do science" became more port Westinghouse's needs "If I just than the BAS slogan. "It has been very satserved [Westinghouse's] needs it was a isfying," he says, referring to BAS's role sizeable market"
Kissinger sees the current interest in technology transfer as a change in attitude in universities.
Treado took the chance to launch a business, putting into action what had been a hobby of following the microscopy and spectroscopy markets. "I've been doing the market research for eight years," he says, tracing his interests back to graduate school days. Much of what Treado learned came from walking the convention floor at Pittcon. With the development of stable lasers and charge-coupled device (CCD) detectors, Treado was confident that "it was now possible to take Raman out of the lab and into the marketplace "
in drug development and biochemical research. He maintains an academic atmosphere within the company and considers BAS's location near the Purdue campus a real plus in attracting people to the company. BAS also takes advantage of its Midwestern roots to identify and license technologies from nearby universities. Twenty years after forming the business, Kissinger still works long hours. Kissinger, the consummate However, he says, "I don't see any separabusinessman tion between fun and work." He is trainMention analytical chemists who have ing his last graduate student and has for launched businesses, and most people will the past 10 years worked only 25% of the think of Peter Kissinger. Kissinger started time at Purdue. "Now," he says, "the uniBioAnalytical Systems (BAS) in 1974 while at Michigan State University and took the versity is my hobby." He considers his academic ties valuable and satisfying and company with him when he moved to Purdue in 1975. Today BAS employs 150 peo- plans to continue doing outreach work for Purdue and lecturing when he can. ple, about 30 of whom hold Ph.D.s. Kissinger is sympathetic to concerns For Kissinger, there is nothing new about potential conflicts between acaabout professors creating businesses.
In addition to Treado, Chemlcon employs three full-time and 15 part-time workers. The company has sold technology to numerous companies, including Procter & Gamble, Dockheed Martin, Westinghouse, and Ford Motor Co. Manufacturing is contracted to local machine shops; design, assembly, calibration, and installation are handled directiy by Chemlcon. Surprisingly, the university passed on the chance to hold the patent on Treado's Raman microscope, which allowed him to retain the license. He predicts, however, that next time the university will likely patent discoveries from ongoing research in his laboratory. "I've been described as a poster child at Pitt for technology transfer," he adds. According to Treado, the key benefit to the university is the stature it gains in becoming an engine for economic develop-
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Analytical Chemistry News & Features, May 1, 1996
ment. "[The business] is a tremendous investment for the community that helps to create wealth and high-wage jobs and enhances regional competition." Moreover, argues Treado, the spin out of his company helps fulfill the university's broad educational mission. "By supporting our company, the university communicates how science is relevant to everyday life. The university can point to a specific example where public investment in science is paying off." Like Cotter, Treado can devote only 20% of his time to business activities, and he is careful to disclose to the university his work for the company. Chemlcon funds some of his academic research, a situation that poses a potential dilemma for graduate students who need to publish their research. "Contracts with the university must involve well-phrased scientific questions," says Treado. A deparrmental oversight committee regulates these contracts. "The lines are clearly drawn [between the company and his academic research] after years of working with the university," Treado says. As with any grant, these contracts include overhead charges by the university. For Treado, the most difficult issue has been the time involved in running a research group and a business. Besides performing his full-time academic duties, he works nights and weekends on the business. A general manager has been brought in to handle the company the rest of the time. Fortunately, Treado's wife, who has a degree in economics, works alongside him as Chemlcon's chief financial officer. However, Treado says he does worry whether the company is well served by a part-time CEO. The t w o worlds of Regnier
Time is also very much on the mind of Purdue University chemist Fred Regnier. His day generally begins around 5 a.m. when he starts working on university issues at home. From Monday to Wednesday, Regnier heads to campus where he teaches classes, checks up on his 15- to 18-member research group, and conducts university-related activities. Every Wednesday evening he boards a 6:30 p.m. plane for Boston that arrives around 11 p.m. For the next two days, he works from 6 a.m. to 8 p.m. at PerSeptive Biosys-
tems, a company he cofounded and for which he is chief technical officer. Saturdays he gets in another six to seven hours of work before returning to West Lafayette, IN, late that evening. Sunday is a more relaxing day with only a couple of hours of work. Regnier seems to thrive on this brutal schedule. "You deal with these two worlds in such high-intensity bursts; it is not as tiring as you think," he says. "Just as you get frustrated with one world, you are on the plane heading to the next." The effort seems to be paying off. PerSeptive Biosystems, a manufacturer of products and instruments for the life sciences LC mar-
ket, started in only 1988. Yet, the company has already grown to around 600 people and has a position on the NASDAQ stock exchange. To maintain his commitment to the company, Regnier has cut his time at Purdue to 60%. He meets most of his university obligations by going to fewer international meetings and reviewing fewer grants and papers. In exchange, Regnier says his business experience has given him an awareness of a larger world that he brings back to the laboratory. "I hire lots of Ph.D.s [at PerSeptive], and therefore I know better how to train graduate
general form of an exclusive licensing agreement, are now relatively standard The framework that allows universities practice in public and private universities. "How technology transferfitsinto and other nonprofit institutions to die mission of the institution differs from patent or license discoveries flowing from federally funded research is codi- institution to institution," she adds. Some universities seek to encourage lofied into law uuner the Bayh-Doll Act of 1980 (Code oo the Federal Register,cal economic development, whereas others view their role as disseminating 37, part 401.4). This act stipulates to institutions and nonprofit organiza- new technologies. tions the conditions and timetables AUTM works to raise the professional level of those involved in techfor informing the government of intellectual property rights such as patent nology transfer as well as publish examples of how various universities applications that spring from federframe their licensing agreements and ally funded research In effect the law profit sharing. Of the organization's opened the door to technology 1500 members, approximately half transcome from some 350 nonprofit institufer by defining" a pathway for converttions and hospitals and the rest repreing grant-generated ideas sent industry, federal agencies, and and licenses With technology transfer have come patent experts, says Willey. Willey, who works at Purdue Unioffices devoted to maneuvering through versity, says that her office handles the complex world of federal reporting and intellectual property rights. At the around 150 ideas each year, including software and biologicals. The univerNational Institutes of Health, the Office of Pollcy for Exttamural Research sity files around 40-50 patents from that group, most of which are licensed Administration (or OPERA) oversees to outside concerns. "Only a handful grantee compliance with federal regulaof these ideas will be lucrative," she tions. OPERA has gone on line with its "Edison" database to expedite reporting warns. Yet, in Wiiley's view, ,he value of technology transfer to the institution requirements (http://era.info.nih. goes beyond making money. "In many gov/Edison/). Offices have also sprung up on cam- of the ideas the science is excellent, puses. According to Teri Wiiley, current but there is no market or a 'no go' because you can't protect the intellectual president of the Association of Univerproperty it still brings attention to the sity Technology Managers (AUTM, laboratory " http://autm.rice.edu/autm), many aspects of technology transfer, such as the Legislation and rules define technology transfer
Analytical Chemistry News & Features, May 1, 1996 3 1 3 A
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clearly communicate their work in ways quickly assimilated by others and to developflexibilityin their research habits. At the same time, Regnier has drawn clear boundaries between his two worlds. He neither consults nor accepts research funds from PerSeptive. He, too, informs the university and his students of his business activities. Graduate students who feel their work is being exploited for the business can go to the department to resolve conflicts, he says. In Regnier's view, the academic laboratory belongs to a particular group of shareholders the university the federal government that funded the research and the students who invest intellectual and "sweat" capital Regnier traces his interest in business to a 1974 sabbatical with the Medfield, MA-based biomaterials group of Corning Glass Works. That group made the first microglass radioimmunoassay kits. The entire 15-person operation, which included marketing, was housed in an old grocery store. Everyone worked side by side. "You could do cutting-edge science and apply it quickly," recalls Regnier. He took away a key lesson from the experience. "In the commercial world everyone and everything is important, because if cinyone screws UD the product will fail" Fateley and the happy transition
research equipment rather than wait six months to a year for grant funding. This has allowed Fateley to move quickly into new research areas. 'The company has helped provide the research that I wanted to do," says Fateley. The university, in turn, has benefited from a spate of papers published from the research, he adds. The business operates pretty much on Fateley's own reading of what is marketable, a gut instinct he has developed during his many years of consulting with industry. Because the business is small, Fateley argues that it spends less than a large corporation to develop technologies. He estimates that a corporation licensing technology from DOM saves $6 million to $8 million in development costs.
"In the commercial world, everyone end everything is important because if anyone screws up, the product will fail."
The candid, original style of Kansas State DOM is not Fateley's only successful University chemist William Fateley— business. Five years ago, Fateley and which has served him so well as an anaDOM helped finance and launch a busilytical chemist—has propelled his business for two of his former Ph.D. students, ness dealings in some unique directions. Charles Chaffin and Timothy Marshall. Fateley formed DOM in 1979 as a techAeroSurvey is a service company that ofnology development company with funds fers customers open-path IR monitoring. he earned from consulting. Today, the In what he calls a happy transition, Fatecompany holds five patents, of which two ley has since sold his stock in AeroSurvey are licensed and two more are close to be- back to his former students. ing commercialized, says Fateley. It is a small business fluctuating between three Sacks finds success and walks and four people. away In 1990, University of Michigan chemistry DOM operates independently of the professor Richard Sacks and three of his university, which means all the risk falls graduate students began talking about creon Fateley. "I can make many of the decisions, allowing [the company] to run ating a company to develop the fast GC techniques they were exploring in the labfaster." Several times he has borrowed money against his house to keep the com- oratory. "I had been giving a series of talks, and I was getting lots of interest pany going. Nevertheless, Fateley says [about fast GC] from industry," recalls he has "thoroughly enjoyed" running the business. In turn, DOM has occasionally Sacks. Another suggestion that they were on the right track came in the fall of that supplied funds to Fateley's group to buy 314 A
year, when a small Michigan company working on fast MS approached Sacks about a collaboration to combine the techniques. A Japanese company, Horiba, was interested in selling such an instrument for monitoring auto exhaust, Sacks was told. "I knew from the very start that I didn't know enough about business," Sacks admits. He dug into his personal funds to hire legal and business consultants. To avoid conflicts with his university life, Sacks confined most of his business efforts to the summer. With the pieces falling in place, Sacks launched Chromatofast, Inc., during the winter of 1991. Initially, he thought the company would be like a think tank, but that changed when the fast MS company pulled out of the pending Horiba deal at the last minute. Sacks ended up negotiating a joint development agreement directly with the Japanese company. The deal turned out to be a happy marriage. In exchange for an exclusive license to develop just the auto exhaust instrument, the development funds from Horiba provided the resources Chromatofast needed to develop the technology. Horiba now manufactures the instrument, which is marketed to U.S. automakers. Chromatofast got another big break when a former University of Michigan student, now working for Varian Instruments, helped negotiate a five-year deal with the manufacturer. Now Chromatofast exclusively manufactures a GC inlet system and power supply that Varian installs in its fast GC. Varian even helped Chromatofast engineer the product. Sacks says that his business experience has made him a better researcher. He understands what industries need and has a slew of contacts whose businesses involve environmental and process monitoring. Ironically, as Chromatofast became more successful, Sacks found his interest in the company waning. Although he is the president and chief stockholder of Chromatofast, Sacks's research activities are independent of the company. He receives no paycheck or research funds from Chromatofast and now has little involvement with its day-to-day operation. "I walked away," S3.VS Sacks. "My real love is university work." Alan Newman
Analytical Chemistry News & Features, May 1, 1996
