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June 2013
Transforming Ideas into Commercial Innovations
By Pete Prunkl

     A lot has changed since the third century BC when Archimedes singlehandedly brought inventions from the drawing board to the battlefield. The Greek mathematician was a genius at applying science to the practical problems of his day and for transforming ideas into innovations.

     Today the roles Archimedes played—researcher, inventor, funder, prototype builder, marketer and manufacturer—are distributed throughout any number of individuals and institutions. To stitch them back together, we moderns need offices, administrators, brokers, professionals, even legislation.

     The name for the stitching operation is technology transfer. Sometimes called “technology commercialization,” the term applies to the process for turning an invention into a manufactured product. The term originally had a more limited definition, one that centered only on federally funded research.

     At the University of North Carolina at Charlotte (UNC Charlotte) Office of Technology Transfer, staff members collate industry, state, local and federal government-funded research into the one product Charlotte craves: economic development.


Refining the Patent Process

     Before 1980, federally-funded research was difficult to commercialize. That unfortunate situation resulted from good intentions gone awry.

     In the early 1940s the federal government actively funded the invention and construction of weapons with war-winning potential. The proximity fuse that knocked out German V-2 rockets and the atomic bomb were two of their headliners.

     Flushed with success and convinced that science was the key to social, economic and military progress, the government continued spending on university-based R&D after the war. At the time, it seemed prudent to retain the patents on every invention they funded. But there was no unified or consistent policy across government agencies for granting licenses to commercialize its patents. That meant miles of red tape for any business brave enough to attempt a transfer of technology from the government to the private sector.

     By the end of the 1970s, the U.S. government had accumulated 28,000 patents with fewer than 5 percent commercially licensed. Faced with shuttered steel mills, a tsunami of automobiles imported from places other than Detroit, and a mid-1970s stagflation, Congress acted to free up the patent log jam. The Bayh-Dole Act of 1980 was their stick of dynamite.

     The act coined the phrase “technology transfer.” More importantly, it reversed, decentralized and revolutionized ownership of government-funded inventions and discoveries. Academic institutions that carried out the actual research now owned the inventions, not the government. They were also the ones responsible for commercializing research findings.

     This meant starting a small business or “spinout” with or without the participation of the inventor. It also involved granting licenses to the inventor or others so they could capitalize on the university’s patents. The act also insured that inventors shared in any income derived from the production of their ideas.

     “Since Bayh-Dole, there is little doubt that academic technology transfer has had a positive impact on the economy,” says Jodi Talley, director of communications at the Association of University Technology Managers (AUTM). “Technology transfer spurred the creation of 670 new companies and 591 new products in 2011 alone.”

     In 2002, The Economist named Bayh-Dole “the most inspired act of legislation over the past half century.”

     “The [Bayh-Dole] Act was a great first step,” says Carl P.B. Mahler II, executive director of UNC Charlotte’s Office of Technology Transfer and a patent attorney. “If the feds want to be serious about doing technology transfer, they need to go the next step.

    “That involves money,” continues Mahler. “Congress can remove a large stumbling block for universities by authorizing the National Science Foundation (NSF) and the National Institute of Health (NIH) to make grants for two tech transfer expenses: prototype building and patent applications.

     “It wouldn’t take much money,” he says. “If NSF and NIH added an extra five percent to every grant they fund that has industrial relevance, that would speed commercialization at every American research university.”


Processing Ideas at UNC Charlotte

     Even with Mahler’s expertise as a patent attorney and the work of Associate Director Brad Fach who is a patent agent, the patent process averages $10,000 but can be as much as $20,000. UNC Charlotte provides funds for about 20 patent applications per year.

     University-based research is certainly intellectual, but it is not necessarily intellectual property. To achieve that status, discoveries are awarded a patent, copyright, trademark or declared a trade secret. All four are designed to reward clever inventors and risk-taking manufacturers and to prevent unauthorized use, manufacture or duplication. Only the first two are pursued at UNC Charlotte.

     Patents and copyright protection begins with an invention report; UNC Charlotte receives 40 to 50 each year. “That is almost off the chart for most universities,” says Mahler. He is not blowing smoke

     Using 2010 AUTM data, UNC Charlotte with $35 million of research ranks fifth among 148 research universities in the United States and Canada in terms of new inventions reported per dollar spent on research.

     The typical research university averages one startup for every $50 million to $60 million in research done annually, Mahler estimates. UNC Charlotte is creating one for about $10 million in research.

     For most of its inventions, Mahler’s office quickly produces a provisional patent application, an internal document that establishes an early priority date for an idea. This is important because the America Invents Act, which recently took effect, changed the U.S. to a first-to-file country from the former first-to-invent model.

     “Having a working prototype usually no longer has a bearing on whether or not a patent will issue,” explains Fach, “unless the patent pertains to an area such as biotechnology where it is not clear whether or not an invention actually works. In those cases, a working prototype can be necessary.”

     “For, say, mechanical or electrical devices the science is so well understood that the patent office can look at the invention and determine whether or not it will work,” Mahler adds, and jokes, “although you’d probably need to provide a working prototype before you can get a patent on a perpetual motion machine.”

     UNC Charlotte’s obtains five to 10 utility patents per year. As per Mahler’s Patent Primer, a utility patent protects a “process, machine, article of manufacture, composition of matter, and improvement of the preceding items.”

     Among the 148 AUTM universities, UNC Charlotte ranks third in number of patents filed, 15th in patents issued, and third in new startup companies (all per dollar spent on research).

     “With the exception of the 15, we have been among the top 10 universities every year for the past 10 years,” touts Mahler.

     Fach adds, “AUTM rankings are all calculated on a ‘per dollar spent on research’ basis. Schools like MIT and Stanford that have huge research budgets dwarf us in terms of the raw numbers of patent filings, patents issued, and start-up companies, but when you look at the numbers on a ‘per dollar spent on research’ basis, UNC Charlotte really stands out—which means that we are consistently among the most efficient universities at turning our research into practical inventions.”


The Tech Transfer Process

     Only about 25 percent of the UNC Charlotte researchers that file an invention report want to be involved in a startup company.

     “We lose about half of those by attrition,” says Mahler. “Usually the better the researcher, the less likely you are to be a really good business person. It is the very rare person who can do both.”

     Over the five-year period from 2005 to 2009, over 70 percent of UNC Charlotte’s inventions came from the following departments: Software and Information Science (71), Mechanical Engineering and Engineering Science (53), Electrical and Computer Engineering (45), and Physics and Optical Science (44).

     Note the concentration of computer-related inventions. “We have a lot of world class researchers in computers largely because of our work with banks like Wells Fargo and Bank of America,” says Mahler. “Banks need cybersecurity and the ability to visualize Big Data—two areas where the university is particularly strong,” adds Fach.

     Cleverness easily crosses department lines on the Charlotte campus. “There are fewer silos here than anywhere else,” says Mahler, who previously worked at research Goliaths Case Western Reserve University and Carnegie-Mellon University. To make his point, he cites an invention to blast kidney stones that came from the UNC Charlotte physics department. Another to prolong the viability of a kidney removed from a donor for transplant sprang from the minds of a UNC Charlotte mechanical engineer and a biology professor.

     With 10 to 20 percent of their research sponsored by industry, Charlotte researchers are a practical lot. Many came to the university after years of work in industry. Their focus is applied research and their goal is quickly solving business-related problems. Contrast that ethic with medical research. In that setting, inventions are five to 15 years away from the operating room or pharmacy.

     The general model for tech transfer begins with an invention followed by a patent owned by the university, a license for the exclusive use of the patent, partnerships with entrepreneurs, production, royalties paid to the university by license holders and possibly, the eventual sale of the spinout company.

     Some ideas are in the middle of that process. UNC Charlotte owns the patent on Dr. Faramarz Farahi’s energy-generating fabric for tents, backpacks, awnings and curtains. The fabric itself remains nameless, but its potential for military use and for generating small amounts of energy from the sun might be called revolutionary.

     Dr. Farahi, a professor of physics and optics, has a few samples, an exclusive license to produce the flexible fiber optics-based product and a company name: Parasol. He lacks a production facility. He and his partners are discussing that possibility with a few companies, but none have signed on the dotted line.

     The tech transfer process has moved further along for Dr. Pinku Mukherjee, associate professor of biology. She and Dr. Rahul Puri are cofounders of CanDiag, Inc., a Waxhaw, N.C. spinout. Like Dr. Farahi, the patent for their tumor antibody and resulting blood test is owned by the university, their employer, with CanDiag receiving a worldwide exclusive license.

     The blood test has proved remarkably effective in the early diagnosis of breast cancer. After winning the $50,000 grand prize in the 2012 Charlotte Venture Challenge, Dr. Mukherjee herself proved effective in raising $500,000 more from venture capitalists. The patented antibody has the potential of locating a cancer site, finding where it may have metastasized, targeting drugs to the site, and checking on any possible recurrence.

     Another company, founded as a startup in 2007, is even further along in the tech transfer process. Submarines use sonar to detect submerged objects; Charlotte-based InfoSense, Inc. uses acoustics to detect sewer line blockages. For cities plagued with Godzilla-size grease clogs and root breakthrough, that is a significant accomplishment. Sensor information allows crews to prioritize clog-busting maintenance and repairs.

     InfoSense has been so successful that electrical and computer engineering associate professor and inventor Dr. Ivan Howitt has taken a sabbatical from the university.


Real Economic Development

     Calyptix Security is even further along the tech transfer trail. Founded in 2002 and in production by early 2006, Calyptix provides military-grade computer security to small and medium-sized businesses. The type of technology Calyptix provides is far more dynamic and adaptive than the products of larger, more established companies such as Symantec and Norton.

     Inventor Dr. Lawrence Teo founded Calyptix with UNC Charlotte professor Dr. Yuliang Zheng. Charlotte attorney Ben Yarbrough brought capital and business savvy to the firm. “The university’s technology transfer office is very easy to work with and supportive of our efforts,” says Yarbrough. “They want us to succeed.”

     Headquartered at Ventureprise in Charlotte, Calyptix Security produces software that automatically knocks out worms, spyware, spam, denial of service attacks and other modern nuisances.

     Only one of the university’s hundreds of spinouts has been sold. “It was a real home run for the university,” touts Mahler. Digital Optics Corporation, the Charlotte manufacturer of the lens in smartphones and other innovations, sold to Tessera Technologies, Inc. in 2006 for $60 million.

     “We didn’t get much in terms of payout,” says Mahler, “but that is not how we grade ourselves. We like to look at the economic impact to the community and Digital Optics brought in 200 to 250 jobs.”

     “Universities have a tendency to overvalue inventions,” says Mahler. Perhaps that holds true for community leaders as well. Invention is synonymous with new, creation, discovery and design, all long-standing American business values.

     A more important value is in the relationship between businesses and the university. “We always want industry to feel they’ve gotten a good deal and our inventors to feel they’ve not been taken advantage of,” says Mahler. “Everyone needs to walk away satisfied and respected.”

     “Universities that go into technology transfer expecting to make money are usually going to be disappointed,” maintains Mahler. “UNC Charlotte sees technology transfer in broader terms. It is a societal benefit to professors, sponsors, students and the general public. Like horse races, baseball games, the stock market and technology transfer, predicting success and making money are difficult.

     “For us,” says Mahler, “the big measure is what we are doing to help economic development.”

     Archimedes would be proud.


Pete Prunkl is a Greater Charlotte Biz freelance writer.
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