Thoughts On Technology Transfer and Commercialization

Dr. David Martin, Executive Chairman of M-CAM, Responds to TTF Questions

1. How would you define or characterize technology transfer?

Ideally, technology transfer is the complete, enabling disclosure of an advancement in science and technology sufficient for its unfettered use and improvement. Such use should meet objectives which balance education and learning; and, enterprise creation or advancement; also serving as the basis for additional creative work and advancement. The most successful evidence of technology transfer in modern times would likely be the U.S. and European educational institutions who have engaged citizens of the world to be trained with, and expand upon, research endeavors in institutions of higher learning. Recently, Chinese and Indian institutions have innovated on these model programs and are making considerable contributions. While undesirable in its underlying impetus, the technology reparations from the German Industrial and State complex at the end of the Second World War serve as the greatest single technology transfer moment of the last century benefiting industries including materials science, aerospace, digital communications and data storage, medicine, chemicals, and structural engineering and design to name a few.

2. Who are the stakeholders in tech transfer generally? Which of these stakeholders play an active role in commercialization? Which currently do not but should?

Ironically, most “card-carrying” technology transfer professionals have little to no experience in creating invention or innovation; no experience with genuine first-hand enterprise creation and management; and, gross deficiencies in understanding the balance of capital investment versus commercial cash flow. Most current stakeholders are surrogates or brokers for researchers paired with quasi-bureaucratic trustees of technology. On occasions, persons involved in the venture capital business (many times having manifest a single success) take an active role in technology transfer. Absent from most technology transfer programs are people who understand, from serial experience, the process of obtaining and retaining customers. Additionally, non-equity capital providers (banks, factoring entities, and mile-stone based licensors) are infrequent in most systems and their deficit leads to significant institutional disappointment based on too narrow sets of expectations for both process and returns.

Vital to successful technology transfer is the professional competency which is more gained from merger and acquisition activity rather than venture capital and start up financing. One could imagine those who are qualified at curricular development for disciplines like systems engineering playing a vital role. Successful technology transfer must promote the receiver’s rationale for engagement as much or more than focus on the artifact being transferred.

3. What are the special technology transfer considerations by industry? (e.g., health, agriculture and food, information technology, alternative energy)

Health, agriculture, water and food security technology transfer require a depth of moral engagement frequently considered (with regret) post facto. There is a growing awareness in these fields, and in some conversations about environmental technologies, that the exclusionary practices arising from exclusive licenses and restrictive intellectual property paradigms, jeopardize the health and life of the planet and its inhabitants. Therefore, considerations beyond short-term monopolistic benefit are becoming increasingly important when considering the nature and mode of technology transfer in these areas.

In all industries, the plethora of abandoned and expired patents in public domain, make experience in the past 25 years increasingly irrelevant as most innovations now must incorporate an element of “innovation recycling” in which latent and public domain components must be included and acknowledged in the pursuit of the alleged “new”. The reckless use of intellectual property in the fields of information technology has lead to what some refer to as “chilling effects” on innovation while the European Patent Office executives have recently expropriated the term “Global Warming of Patents” signifying the overwhelming volume of indistinguishable proprietary claims which make transfer dubious at best. The point of this problem is that all too often, the actual identity of the party or parties qualified to represent a transferable interest is impossible to establish.

As a result, in the above referenced fields, technology transfer focused on education and capacity building is far more attainable and defensible than the attempt to perpetuate monopoly business models.

4. What are the unique considerations that come into play when looking at issues of South-South technology transfer?

Most industrial property models are precisely that – property models. The notion of alienable property at all – particularly when referring to creative endeavors – is not a uniform construct in all communities. Its absence is poignant in a number of Southern communities making the Northern models of exclusionary property right exchange dubious at best. Temporal assumptions – the notion that there is a single nexus in time where creation occurred – are cultural artifacts of the North. Discontinuous creative emergence and Heritable Knowledge and its contextual adaptation is warmly embraced by many cultures (including Northern – Asian cultures) and stand in diametric opposition with the industrial property mandate for a defined, verifiable creator at a defined moment.

More profound is the recognition that the U.S. and European model (largely adapted by Japan and Singapore) requires technology transfer to be associated with a monetary value exchange in most instances. The over-generalized Northern obsession with having everything denominated in a monetary exchange conflicts with the more complex nature of recognized value exchange seen in other cultures. I reflect on the National Innovation Foundation celebration in India where innovators received a wreath of flowers from the President of the country – something far more valuable than a few thousand rupees would ever be. Most industrial property advocates would see this as a quaint antiquarian legacy and fail to understand that the monotony of currency reductionism actually leads to vast failures in the promoted system. We’d all do better in adding to our palate of acceptable consideration rather than believing and promoting a currency common utility metric.

5. What approaches might improve technology flows between developed countries and emerging markets?

First, getting rid of the concept of “developed countries” and “emerging markets” will improve the flow. Implicit in this lexical colonialism is that engagement in the consumer process is a surrogate for some linear scale of development. For technology transfer to occur, as I’ve previously stated, as much emphasis and respect must be placed on the recipient as on the artifact being transferred. We need to see that the recipient has an established need in a defined context and we need to understand that that need and context is appropriately empowered to engage with the artifact. At the same time, we need to have the holder of the artifact adequately informed to engage in a culturally relevant context.

We can learn from GE’s work with trade credit offsets in which it experimented with using education, training, and explicit innovation licensing, as a means to build prospective engagement in counter-party countries with whom it was doing business. While nascent, this model, taken to scale, could have profound implications on the facilitation of technology transfer at a more reproducible scale..

I would recall my earlier comments on “innovation recycling” here as well. In the late 90’s rush to create consolidated, large corporations, acquisitions were usually justified around a few notable technologies or products in the possession of the acquired company. Some companies stated publicly, that if a business unit failed to generate at least $250 million in revenue, that unit would be abandoned or sold! How many countries would view an enterprise of half that value as the greatest economic engine in their economy? The fact is that a vast wasteland of “widow” and “orphan” enterprises has been created in the consolidation fervor and these could be re-birthed to the benefit of many countries and communities throughout the world.

6. Has the US model been successfully replicated elsewhere? Can it be? More importantly, should it be? What other models exist and what are their strengths, weaknesses, adaptability and implementability?

From the late 1970’s to the 2001, the U.S. model of technology transfer through the education of students from around the world was an unprecedented success. As I indicated above, I believe that China and India (and selected schools in New Zealand, Australia, Brazil, Argentina, South Africa and Iran) are starting to adapt this model with considerable success. Like the U.S. model where monetization of this activity represented less than 5% of the funded efforts, the belief that this would be the grist for the economic mill remains a myth. Additionally, what is often mislabeled success in the U.S. and parts of Europe has masked the other environmental conditions which contributed to the alleged success.

The majority of successful businesses arising from technology transfer were, in fact, merely transitional enterprises grooming an opportunity for ultimate acquisition by larger multi-national corporations (MNC). While many fanaticize (at great peril) about the creation of an equity market like Silicon Valley, Research Triangle Park, the technology corridor in Boston, these efforts have been the sirens which have lured billions of public dollars into ruin. Exits from transferred technology were not IPOs in most instances. With few exceptions, the winners were the venture capital intermediaries and the large acquiring companies.

The U.S. benefited from a post-World War II funding and procurement boom unlike anything seen before in modern times. To replicate this preferential national procurement would violate WTO subsidy rules. To replicate the excessive federal procurement which funded both the technology creation and its commercialization requires conditions that have not been seen before and may not precisely replicate again. Germany in the 1930’s was an example of this same fervor and it did not serve as a resilient model.

Emerging with the Creative Commons efforts, in the arena of copyright, a number of new, collaborative models are emerging which will be interesting to study. I believe that the trade credit offset models bear broader testing and assessment. Our own work in Heritable Innovation Commons launching in the Pacific, South America and in a number of other countries will require critical review. Re-opening the U.S. borders to students and scientists – many of whom felt unwelcome explicitly or implicitly post 2001 – would be a great way for the U.S. to contribute again.

7. What are the strengths and weaknesses of the US technology commercialization model in the US context? What are the implications for emerging markets?

The simple, overlooked fact is that the U.S. technology commercialization model is directly derived from and dependent on preferential domestic consumption. It is NOT generalizable for a number of reasons. First, our public expenditure on defense and health care – the two largest components of the federal budget – are what drives both the funding of science and the procurement from transferred technologies. Without that condition met, no application of the model can replicate the results. Tragically, having built our economic systems on preferential procurement, we codified prohibitions thereto in WTO and our misnamed “Free Trade Agreement” legislation. If other countries are going to experience organic enterprise growth, they must be free to pay a premium for the creative productivity of their people. Without this excessive premium reward for endogenous innovation, capacity building will perpetually remain inadequate. Finally, the failure of the U.S. technology transfer systems has been the wholesale absence of commercial relevance in the entire innovation process. Creating artifacts of innovation in our Federal labs and Universities and hoping the right counterparty will discover them as been an unmitigated failure. Respectful engagement of the ultimate recipient target is a precondition that has been unmet and remains absent from the purveyors of the U.S. legacy.

Thankfully, the present global market contraction has deflated the enthusiasm of the belief that the U.S. economic model was unassailable. As a result, we can learn from our phenomenal education successes, we can learn from our isolated cases of sustainable success and, simultaneously, we can review lessons learned from our missteps so that the world can emerge with a more respectful model in which both the creator and consumer of innovation are aligned in interest and benefit.