Technology transfer is a fast-growing activity in the U.S. research and development system, and one which has received substantial attention from governments, industry, and universities. The exact nature of this activity is difficult to pin down, partly because the term has many different connotations. Some of the varieties of technology transfer commonly discussed in business periodicals (such as the Wall Street Journal ) include:
While all four types of technology transfer are of concern to businesses, this overview will deal mostly with the first two types. International technology transfer and North-South technology transfer these activities tend to be driven directly by foreign policy and national defense concerns, while the other two types are driven by a balance of corporate and policy interests.
Technology is information that is put to use in order to accomplish some task. Transfer is the movement of technology via some communication channel from one individual or organization to another. Technology is the useful application of knowledge and expertise into an operation.
Technology transfer usually involves some source of technology, group which posses specialized technical skills, which transfers the technology to a target group of receptors who do not possess those specialized technical skills, and who therefore cannot create the tool themselves (Carayannis et al., 1997). In the United States especially, the technology transfer experience has pointed to multiple transfer strategies, two of which are the most significant: the licensing of intellectual property rights and extending property rights and technical expertise to developing firms.
The major categories of technology transfer and commercialization involve the transfer of:
Most technology transfer takes place because the organization in which a technology is developed is different from the organization that brings the technology to market. The process of introducing a technology into the marketplace is called technology commercialization. In many cases, technology commercialization is carried out by a single firm. The firm's employees invent the technology, develop it into a commercial product or process, and sell it to customers. In a growing number of cases, however, the organization that creates a technology does not bring it to the market. There are several potential reasons for this:
From a public policy perspective, technology transfer is important because technology can be utilized as a resource for shared prosperity at home and abroad. As a resource, technology (1) consists of a body of knowledge and know-how, (2) acts as a stimulant for healthy competitive international trade, (3) is linked with other nations' commercial needs, and (4) needs an effective plan for management and entrepreneurship from lab to market.
From a business perspective, companies engage in technology transfer for a number of reasons:
For government laboratories and universities, the motivations for technology transfer are somewhat different:
The first requirement for an organization to transfer a technology is to establish legal ownership of that technology through intellectual property law. There are four generally recognized forms of intellectual property in industrialized nations:
Under U.S. law, a patent is granted only by the federal government and lets the patentee exclude others from making, using, selling or offering an invention for a fixed term, currently 20 years from the date the patent application is filed. The number of patents granted by the U.S. government is up by 21 percent in 2003. A trademark, as defined under the Trademark Act of 1946 (The Lanham Act) is "any word, name, symbol, or device, or any combination thereof (1) used by a person, or (2) which a person has a bona fide intention to use in commerce…to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others, and to indicate the source of the goods, even if that source is unknown."
A copyright seeks to promote literary and artistic creativity by protecting, for a limited time, what the U.S. Constitution broadly calls writings of authors. The general rule in the United States for a work created on or after January 1, 1978, whether or not it is published, is that copyright lasts for the author's life-time plus 50 years after the author's death. The copyright in a work made for hire or in an anonymous work lasts for 75 years from publication or 100 years from creation, whichever is shorter.
A trade secret is information that an inventor chooses not to disclose and to which the inventor also controls access, thus providing enduring protection. Trade secrets remain in force only if the holder takes reasonable precautions to prevent them from being revealed to people outside the firm, except through a legal mechanism such as a license. Trade secrets are governed by state rather than federal law.
The second step in technology transfer is finding a suitable recipient for that technology—one that can use the technology and has something of value to offer in return. Firms are now studying more systematically the process of licensing and technology transfer. There are five information activities needed to support technology transfer:
These information needs are often supported by service companies, such as licensing consultants, and by electronic media, including databases and online networks. Some new online networks use the Internet to help firms in these information activities.
The information-transfer process is one of the most critical steps in technology transfer. New licensing practices are designed to address this process. For example, many licenses now bundle both the basic technology and the equipment needed to utilize that technology in a single agreement. A license may also include a "know-how" agreement, which exchanges relevant trade secrets (with appropriate protections) to the licensee to help in exploiting technology. In some industries, such as petroleum exploration, firms even practice wet licensing, whereby employees of the licenser are loaned out to the licensee to teach how a technology should be properly used.
The major barrier to the increase in technology transfer among firms is organizational behavior. In the past, cultural blocks such as the "not invented here" syndrome prevented firms from even showing interest in technology transfer. New concepts along the lines of knowledge management are changing behaviors and beliefs, leading firms to realize the enormous gains to be made through the active pursuit of licensing.
Once the organization has at least started to establish ownership of the technology, there are several possible legal and/or contractual mechanisms for transferring technology from one organization to another:
The choice of which mechanism to use in a particular technology transaction depends on many factors, including the stage of development for that technology, what the company receiving the technology is willing or able to pay, what technology or other assets it might be able to offer in place of money, the likely benefits of establishing a longer-lasting partnership between the organizations instead of a onetime transfer; and the exact legal status of ownership over that technology. For example, if a small firm simply wants to sell its technology to a large firm in exchange for money, it will probably choose to license the technology. If the small firm also wants access to the large firm's complementary assets, such as its production facilities and distribution network, it will try to negotiate a more substantial and permanent relationship, such as an R&D contract or a cooperative R&D agreement.
Technology transfer between private companies is most commonly accomplished through licensing, although other mechanisms such as joint ventures, research consortia, and research partnerships are also quite popular. Licensing is a big business by itself. In 2002 U.S. companies received over $66 billion in payments on technology licenses from other organizations, of which $58 billion was from domestic sources. Data from the U.S. Department of Commerce compiled in the mid-1990s indicated that international technology licensing was rising at approximately 18 percent per year, and domestic technology licensing was rising at 10 percent per year.
Another growing mode of private technology transfer is the formation of research joint ventures (RJVs) between companies in the United States. For years, such joint ventures were rare, mostly due to fears among companies that joint ventures would provoke antitrust litigation from the government. Passage of the National Cooperative Research Act (NCRA) in 1984 and the National Cooperative Research and Production Act in 1993 relaxed antitrust regulation of such partnerships, leading to a substantial increase in RJVs.
Studies of the filings of RJVs registered with the Department of Justice under the NCRA shows some interesting trends:
Research joint ventures are an advantageous means of acquiring high-risk technologies, for several reasons. First, joint ventures enable the risks and costs involved in early research in technology to be shared across multiple firms, reducing the burden on each individual company. Second, the resources and expertise needed to develop certain technologies may be distributed across multiple firms, so RJVs are the only way to combine those resources in one effort. Third, in industries where technology advances quickly, RJVs are an effective way to keep up with new developments. Finally, RJVs are often used to develop and set critical technical standards in certain industries, especially telecommunications. These reasons indicate that RJVs will continue to increase in significance as a tool for technology transfer.
In an effort to increase the application of government research results to industry technology problems (and therefore fuel technology-based economic growth), the United States government has passed a series of laws since 1980 to encourage the transfer of technologies from government laboratories to industry. Technology licensing was the earliest focus of activity, based on the notion that government laboratories were like treasure chests of available technologies that could easily be applied to corporate needs. In fact, government technology licensing activity is extremely limited, except in the National Institutes of Health. The NIH has been the source of several groundbreaking therapies and other medical technologies and enjoys close relations with the pharmaceutical industry, enabling the agency to gain large amounts of licensing revenue.
Other agencies face substantial difficulties in licensing technologies. Often, their technologies require substantial development before commercialization, reducing their value to firms. Also, most government laboratories do research in areas where there is no clear, consistent path to commercialization as exists in the pharmaceutical industry. The uncertainty of commercialization also diminishes the willingness of firms to purchase technology licenses from laboratories.
Instead, most agencies have focused on signing Cooperative Research and Development Agreements (CRADAs), a mechanism developed under the 1986 Federal Technology Transfer Act. CRADAs are contracts to conduct joint R&D projects, where the government laboratory contributes personnel and equipment, while the partner contributes these assets and funding as well. The number of CRADAs signed by government agencies has increase steadily in recent years.
There are several potential benefits and potential difficulties involved in CRADA research relationships:
One of the original pieces of U.S. technology-transfer legislation, the Bayh-Dole Act, directed government agencies to encourage universities and other research organizations to license out technologies developed with federal funding. Since 1980, this activity has become a small but growing source of revenue for universities. Technology transfer from academia and other research institutions to industry continues to grow, according to the annual survey of the Association of University Technology Managers. The 2003 survey shows that increasing numbers of research institutions are forging licensing agreements with commercial entities to bring newly developed technology and products to the market. In 2003, the 165 institutions of higher education responding to the survey reported receiving close to $1 billion in licensing revenue in 2003, a 1 percent increase over 2002.
Commercial institutions pay royalties for the right to put inventions and discoveries from universities to commercial use in products such as computer-imaging technology, medical diagnostic testing, and treatment of disease. Institutions of higher education, in turn, can use the revenue to increase investments in research and development. This technology transfer also leads to sponsored research agreements between firms and universities, often to undertake additional research needed to commercialize technologies. Universities now receive approximately 7 percent of all research funding from industry, compared to about 3 percent in the 1970s. Institutions of higher education also reported spinning off nearly 350 companies and receiving 3,450 U.S. patents for new technologies and inventions. Since fiscal year 1998 when the question was first asked, 178 U.S. survey respondents have reported a total of 2,230 new products introduced to the market place.
For industry, universities offer the best way to acquire basic technological research as those activities are curtailed within firms. Universities also house experts in very focused fields of study that are likely to have benefits to a small number of firms. Finally, joint industry-university research is viewed as an important recruiting tool in today's competition for scientific talent, since industry-funded projects are often carried out by graduate students who later go to work for their former sponsors.
Technology transfer is a valuable mechanism by which industry can accelerate its innovation activities and gain competitive advantage through cooperation. Technology transfer can also boost overall economic growth and regional economic development. While further study is needed to estimate the exact benefits gained from technology transfer and ways to achieve those benefits, it is clear that this is an activity that is becoming a central feature of the U.S. research and development system.
Elias G. Carayannis and
Revised by Badie N. Farah
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