Contracting Between Corporate Sponsors and Academic Researchers

Janet BercovitzUniversity of Illinois at Urbana-Champaign

Beverly TylerNorth Carolina State University

The Landscape

Internal development alone is not adequate, given the depth and breadth of knowledge required for successful innovation

Corporations are using alliances to leverage

knowledge and create new knowledge

Increasing number of sponsored research relationships with academic institutions

Industry Sponsored Research at U.S. Academic Institutions

0200

400

600

800

1000

1200

1400

1600

1800

2000

1953 1958 1963 1968 1973 1978 1983 1988 1993 1998

Industry Sponsered Research Expenditures

Millions of Current 1992 Dollars

Source: NSF Science and Engineering Indicators

Know-How Research Funding Publication RightsBroad IP Rights Prestige: Pubs/PatentsStrong IP Position“Reasonable” Cost Financial Gains Income

Key Areas of Concern

Monitoring and Reporting Allocation of Intellectual Property Rights

The Nested Transaction

Transaction

Scientist--Company

University--Company

University—All Companies

Motivation Companies and academic institutions

seek to create contracts to help structure their relationship and protect their interest

There are informal as well as formal

aspects of governance

Limited understanding of what combinations constitute good alliance management

Transaction Cost Economics Perspective

Contract Terms Specified to Safeguard Against Exchange Hazards

Hold up hazards related to specific investments

Appropriability hazards associated with knowledge generation

Hazards due to technological uncertainty and measurement issues

Transaction Attributes: Monitoring and Intellectual Property

Rights Hold-up & Appropriability Concerns

H1: When the Company Partner Provides Specialized Inputs to the Research Program, Sponsor Monitoring and Intellectual Property Rights will be More Explicitly Specified in the Contract.

Technical Uncertainty & Measurement Issues H2: When the Research Program Focuses

on Basic Sciences, Sponsor Monitoring and Intellectual Property Rights will be Less Explicitly Specified in the Contract.

Relational Theory Perspective:Two Arguments

Prior experience leads to behavioral knowledge and a reduction in formal contractual safeguards (perceptions of exchange hazards decrease based on knowledge of specific partners expected behavior)

Prior experience leads to learning how to

contract and increased use of safeguards for all known contingencies (learning of all possible problems and how to safeguard against them)

Relationship Attributes:Monitoring and Intellectual

Property Rights Knowledge versus Learning

Behavioral knowledge (“Trust”) at the Individual Level; Learning to contract at the Organizational Level

H3: If the Scientist-Company Pair have Contracted in the Past, Sponsor Monitoring and Intellectual Property Rights will be Less Explicitly Specified in the Contract.

H4: As a Company’s Experience Contracting with the University Increases, Sponsor Monitoring and Intellectual Property Rights will also be More explicitly specified in the contract.

Study Design

Single private research institution Non-clinical sponsored research

agreements (SRA) <1000 signed between 1994 and 2005 Current dataset 136 research agreements

pulled using stratified random selection based on number of previous agreements between pairs

Coded core contract and statement of work

Dependent Variables

Monitoring TermsCompany Access Specified

Sponsor to Have Access to Research Site Sponsor to Have Access to Research Data Review Meetings will be Scheduled Know-How Sharing/Joint Evaluation of Results Company Representative Specifically Named Formation of Joint Scientific Advisory Panel

Range 0-5; Average 1.44

Dependent Variables

Monitoring TermsReporting Requirements Specified

Requirement to Maintain Records Final Report Interim Report Specification of No. of Interim Reports

and Dates Specific Requirements for Report

ContentRange 0-5; Average 2.17

Allocation of Intellectual Property Rights: Boilerplate Clause To the extent that the UNIVERSITY has title

to any new inventions resulting from the Research solely or jointly with SPONSOR, Sponsor is hereby granted, without option fee other than consideration of the Research sponsored herein and the reimbursement to UNIVERSITY for patent expenses incurred prior to or during the option period, an option to acquire a royalty-bearing license to UNIVERSITY’S right in the Invention.

Dependent Variables

Intellectual Property TermsAllocation of Intellectual Property Rights

Option Dimensions (World-Wide, Exclusive, Perpetual, Sub-License)

Option Delay (Exercise and Negotiation Periods) License Term (Specific Details, Processes,

Constraints) Reserved IP (Data Ownership, PI Restrictions,

Limits on 3rd Party Rights, Previous Conceptions)Range 0-11; Average 5.57

IPR – Publication Constraints:Boilerplate Clause

UNIVERSITY agrees to submit to SPONSOR, for its review, a copy of any proposed publication resulting from the subject at least sixty (60) days prior to the estimated date of publication, and if no response is received within thirty (30) days of the date submitted to SPONSOR, it will be conclusively presumed that the publication may proceed without delay. If SPONSOR determines that the proposed publication contains patentable subject matter which require protection, SPONSOR may require the delay of publication for a period of time not to exceed 60 days for the purpose of allowing te pursuit of such protection.

Dependent Variables

Intellectual Property TermsPublication Constraints

Allowed Delay/Extension Sponsor Right to Review and Comment;

Comments Considered Delay for Sponsor Concern about Content Revise in Response to Sponsor Concern

Range 1-7; Average 1.68

Independent Variables

Company contributes materials and equipment

Basic fields (biochemistry, cell biology, immunology, genetics, etc.) versus applied fields (family practice, cardiology, engineering, etc)

PI-Company history (yes, no) University-Company history (total number of

sponsored research agreements)

Control Variables

Duration (period in months) Budget (log of total monetary value) Company Age (<1980=0; 1980-<1990=1; 1990-

2005=2) Year (1996=1; 1997=2; …2005=10)

Main PredictionsExtensiveness of Terms: Variable Description: Expected

Sign

Transaction Sponsor Provides Inputs

Research Program Focus

Material Transfer (43%)

(1=Yes; 0=No)

Equipment Loaned (15%)

(1=Yes; 0=No)

PI Home Department (30%)

Basic Sciences = 1

Clinical Sciences = 0

+

+

-

Relationship

(Experience)

Scientist –Company

Company-University

Prior Research Agreements

(1=Yes; 0=No); (45%)

No. Prior SRAs; (Mean=9.6)

-

+

Summary of FindingsAccess Reporting IP Rights Publicatio

n

Material (H1) 0.474 ** (0.200)

0.579 ** (0.200)

1.823 *** (0.408)

0.373 ** (0.158)

Equipment (H1) 1.173 *** (0.307)

0.716 ** (0.308)

1.243 * (0.627)

0.001 (0.242)

Basic Sci. (H2) -0.385 * (0.209)

-0.757 *** (0.209)

-1.004 ** (0.425)

-0.134 (0.165)

PI-Co Prior Contract (H3) -0.400 * (0.198)

-0.250 + (0.198)

-0.761 * (0.403)

-0.075 (0.156)

# Co-Univ. Prior Contracts (H4)

0.008 + (0.005)

0.011 * (0.005)

0.040 *** (0.011)

0.006 + (0.004)

Year 0.088 * (0.043)

-0.008 (0.043)

0.012 (0.087)

-0.039 (0.034)

Contract Duration (Mo.) 0.042 *** (0.009)

0.042 *** (0.009)

0.083 *** (0.018)

0.033 *** (0.007)

Budget (Ln) -0.112 ** (0.043)

-0.002 (0.043)

-0.062 (0.087)

-0.051 (0.034)

Company Age -0.166 (0.129)

0.387 ** (0.129)

0.038 (0.263)

-0.127 (0.102)

R-sq 0.338 0.362 0.346 0.206

Chi-sq 69.52 *** 77.17 *** 71.99 *** 35.35 ***

Summary of FindingsAccess Reporting IP Rights Publicatio

n

Material (H1) 0.474 ** (0.200)

0.579 ** (0.200)

1.823 *** (0.408)

0.373 ** (0.158)

Equipment (H1) 1.173 *** (0.307)

0.716 ** (0.308)

1.243 * (0.627)

0.001 (0.242)

Basic Sci. (H2) -0.385 * (0.209)

-0.757 *** (0.209)

-1.004 ** (0.425)

-0.134 (0.165)

PI-Co Prior Contract (H3) -0.400 * (0.198)

-0.250 + (0.198)

-0.761 * (0.403)

-0.075 (0.156)

# Co-Univ. Prior Contracts (H4)

0.008 + (0.005)

0.011 * (0.005)

0.040 *** (0.011)

0.006 + (0.004)

Year 0.088 * (0.043)

-0.008 (0.043)

0.012 (0.087)

-0.039 (0.034)

Contract Duration (Mo.) 0.042 *** (0.009)

0.042 *** (0.009)

0.083 *** (0.018)

0.033 *** (0.007)

Budget (Ln) -0.112 ** (0.043)

-0.002 (0.043)

-0.062 (0.087)

-0.051 (0.034)

Company Age -0.166 (0.129)

0.387 ** (0.129)

0.038 (0.263)

-0.127 (0.102)

R-sq 0.338 0.362 0.346 0.206

Chi-sq 69.52 *** 77.17 *** 71.99 *** 35.35 ***

Summary of FindingsAccess Reporting IP Rights Publicatio

n

Material (H1) 0.474 ** (0.200)

0.579 ** (0.200)

1.823 *** (0.408)

0.373 ** (0.158)

Equipment (H1) 1.173 *** (0.307)

0.716 ** (0.308)

1.243 * (0.627)

0.001 (0.242)

Basic Sci. (H2) -0.385 * (0.209)

-0.757 *** (0.209)

-1.004 ** (0.425)

-0.134 (0.165)

PI-Co Prior Contract (H3) -0.400 * (0.198)

-0.250 + (0.198)

-0.761 * (0.403)

-0.075 (0.156)

# Co-Univ. Prior Contracts (H4)

0.008 + (0.005)

0.011 * (0.005)

0.040 *** (0.011)

0.006 + (0.004)

Year 0.088 * (0.043)

-0.008 (0.043)

0.012 (0.087)

-0.039 (0.034)

Contract Duration (Mo.) 0.042 *** (0.009)

0.042 *** (0.009)

0.083 *** (0.018)

0.033 *** (0.007)

Budget (Ln) -0.112 ** (0.043)

-0.002 (0.043)

-0.062 (0.087)

-0.051 (0.034)

Company Age -0.166 (0.129)

0.387 ** (0.129)

0.038 (0.263)

-0.127 (0.102)

R-sq 0.338 0.362 0.346 0.206

Chi-sq 69.52 *** 77.17 *** 71.99 *** 35.35 ***

Robustness: PI Experience w/ Other FirmsAccess Reporting IP Rights Publicatio

n

Material (H1) 0.485 ** (0.200)

0.574 ** (0.201)

1.800 *** (0.408)

0.359 * (0.157)

Equipment (H1) 1.184 *** (0.307)

0.711 * (0.308)

1.220 * (0.626)

-0.012 (0.241)

Basic Sci. (H2) -0.380 * (0.208)

-0.759 *** (0.209)

-1.015 ** (0.424)

-0.140 (0.163)

PI-Co Prior Contract (H3) -0.403 * (0.197)

-0.249 + (0.198)

-0.755 * (0.402)

-0.071 (0.155)

# Co-Univ. Prior Contracts (H4)

0.009 + (0.005)

0.010 * (0.006)

0.038 *** (0.011)

0.005 (0.004)

PI Experience w/ Other Firms 0.035(0.044)

-0.017(0.044)

-0.076(0.089)

-0.043(0.034)

Year 0.074 (0.046)

-0.001 (0.046)

0.042 (0.094)

-0.022 (0.036)

Contract Duration (Mo.) 0.043 *** (0.009)

0.041 *** (0.009)

0.081 *** (0.018)

0.032 *** (0.007)

Budget (Ln) -0.115 ** (0.043)

-0.001 (0.043)

-0.055 (0.087)

-0.047 (0.033)

Company Age -0.182 (0.130)

0.394 ** (0.131)

0.073 (0.266)

-0.107 (0.102)

R-sq/Ch-Sq 0.341/70.49***

0.363/77.40***

0.350/73.10***

0.215/37.32***

In Sum

Contract StructureTransaction Attributes Matter But the Context in which Transactions Take

Place is Important as well

Contributions Detailed analysis of actual contracts

Enhanced granularity of dimensions

Consideration of the nested nature of alliance contracts

Insights regarding key terms in sponsored research agreements (SRA)

Theoretical explanation for the mixed findings of relational research

Moving Forward

Augment the Data Set More Contracts More Universities

Investigate Sub-Categories in Terms

Consider Additional Contract Terms Termination Clauses Indemnification

Link with Outcomes

Robustness: No. of PI-CO Prior ContractsAccess Reporting IP Rights Publicatio

n

Material (H1) 0.466 ** (0.200)

0.574 ** (0.200)

1.801 *** (0.409)

0.374 ** (0.157)

Equipment (H1) 1.203 *** (0.307)

0.734 ** (0.307)

1.302 * (0.626)

0.003 (0.241)

Basic Sci. (H2) -0.404 * (0.208)

-0.769 *** (0.208)

-1.046 ** (0.424)

-0.131 (0.163)

# PI-Co Prior Contract (H3)

-0.183 * (0.097)

-0.116 (0.097)

-0.336 * (0.199)

-0.058 (0.077)

# Co-Univ. Prior Contracts (H4)

0.008 + (0.005)

0.011 * (0.005)

0.039 *** (0.011)

0.006 + (0.004)

Year 0.094 * (0.044)

-0.004 (0.044)

0.019 (0.090)

-0.034 (0.035)

Contract Duration (Mo.) 0.042 *** (0.009)

0.042 *** (0.009)

0.083 *** (0.018)

0.033 *** (0.007)

Budget (Ln) -0.108 * (0.043)

-0.000 (0.043)

-0.055 (0.087)

-0.050 (0.033)

Company Age -0.176 (0.129)

0.380 ** (0.129)

0.018 (0.264)

-0.129 (0.102)

R-sq 0.336 0.361 0.343 0.208

Chi-sq 68.72 *** 76.89 *** 70.93 *** 35.78 ***

Growth in Number of U.S. Non-Clinical Sponsored Research Agreements

0

50

100

150

200

250

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004