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Public Research for Private Gain

UC Regents recently approved a new corporate entity that will likely give a group of well-connected businesspeople control over how academic research is used.



In a unanimous vote last month, the Regents of the University of California created a corporate entity that, if spread to all UC campuses as some regents envision, promises to further privatize scientific research produced by taxpayer-funded laboratories. The entity, named Newco for the time being, also would block a substantial amount of UC research from being accessible to the public, and could reap big profits for corporations and investors that have ties to the well-connected businesspeople who will manage it.

Despite the sweeping changes the program portends for UC, the regents' vote received virtually no press coverage. UC plans to first implement Newco at UCLA and its medical centers, but some regents, along with influential business leaders across the state, want similar entities installed at Berkeley, Davis, Santa Cruz, and other campuses. UC Regents Chairwoman Sherry Lansing called Newco at UCLA a "pilot program" for the entire UC system.

The purpose of Newco is to completely revamp how scientific discoveries made in UC laboratories — from new treatments for cancer to apps for smartphones — come to be used by the public. Traditionally, UC campuses have used their own technology transfer offices to make these decisions. But under Newco, decisions about the fate of academic research will be taken away from university employees and faculty, and put in the hands of a powerful board of businesspeople who will be separate from the university. This nonprofit board will decide which UC inventions to patent and how to structure licensing deals with private industry. It also will have control over how to spend public funds on these activities.

Newco's proponents contend that the 501(c) 3 entity will bring much-needed private-sector experience to the task of commercializing university inventions. Ultimately, it will generate more patents, and thus bigger revenues for UC through licensing deals and equity stakes in startups, they claim. UC administrators also say they have established sufficient safeguards for Newco and that UCLA's chancellor and the regents will have oversight over the entity.

But if last month's regents meeting in Sacramento is any indication, UC oversight of Newco may be less than robust. Several regents, in fact, objected to creating an oversight committee that would keep tabs on the new entity. The debate over the issue concluded after Regent Norman Pattiz suggested that "it shouldn't be called the Regents Oversight Committee. It should be called the Regents'-Encouragement-and-Finding-You-the-Dough Committee."

Critics of Newco say the scheme won't work, and that it will lessen transparency in UC research while undermining the public mission of the university. Putting a board of businesspeople in charge of the university's tech transfer operation also will create conditions ripe for cronyism, they fear.

In fact, that may already be the case. Records show that wealthy investors and influential businessmen with close ties to UCLA and one of the UC Regents — Alan C. Mendelson — are financially invested in companies that currently license university-owned patents under exclusive financial arrangements. Mendelson, who also is a trustee for the UC Berkeley Foundation and has investments of his own in businesses that profit from university-produced research, was one of the main backers of the Newco proposal and cast a vote in favor of it.

The Newco program also could benefit companies like the ones Mendelson and his network of friends and investors own and work for. Many of the UC Regents are also close friends of investors who want greater access to university inventions under more favorable terms, and who want the university to subsidize early-stage business expenses and take financial risks by investing in technology startups.

And under Newco, they may be able to get exactly what they want.

"It appears that the university is turning research policy over to a private group of businesspeople, and they'll control the decisions of campus officials who are required to work for the public interest," said Christopher Newfield, a professor at UC Santa Barbara who conducted campus-sponsored studies of a range of tech transfer policies at UCSB early last decade, and has sat on several technology transfer policy committees. Newco is the latest expression of a belief that the university's research policy should be evaluated by measuring patents and revenues, said Newfield. He believes that basic research is central to the university's public purposes, and that changes toward a more proprietary and privatized model will harm both science and society.

"After WWII, policymakers assumed that government-funded research did not need to depend primarily on for-profit commercialization in order to get out to the public; there wasn't the sense that patenting inventions and getting revenue streams off them was the main goal of the university-society interface," Newfield noted. "A famous example was Jonas Salk's polio vaccine, which he did not patent: 100 million doses were administered in the US in the two years following the successful clinical trial."

University policies changed in the 1970s as several universities patented lucrative inventions and earned millions in revenue. Even though these paydays were rare and only occurred at a handful of elite research institutions that got lucky from a tiny fraction of the total inventions their faculty were producing, many schools wanted to duplicate this luck. When Congress enacted the Bayh-Dole Act in 1980, which concerned patent and trademark law, university administrators quickly interpreted it as giving schools ownership of the federally funded research conducted on their campuses. The race was off.

Hundreds of schools set up tech transfer offices in an attempt to profit from inventions. Universities instituted policies claiming institutional ownership of all inventions created by faculty and graduate students, and many tech transfer offices began to choke back the supply of knowledge flowing from the university into society — all in hopes that the university could claim ownership of one of the rare "home run" inventions, as many in the tech transfer field call them, that generate millions in revenue.