Utah State hopes for stock options to bring in money
A bill is being passed through the Utah Legislature that will make it easier for state-owned colleges like Utah State University to hold stock in companies that use their research, said Steve Kubisen, vice president for technology management and commercialization.
“We [USU] can take equity today, but this bill will allow us to do it more easily. It will make it so we do not have to jump through as many hoops,” Kubisen said.
“Part of this idea is that faculty and students are very creative people, and they have inventions and come up with technology that is actually useful,” said Brent Miller, vice president for research. “Because of that there have grown, around research universities especially, all these little companies related to university ideas that become a business.”
This means if a company has bought technology developed by USU and is successful with it, USU would be able to earn profit through the stock they would now be allowed to hold in that company.
Other schools nationwide are already reaping some of these financial rewards. Gatorade was produced from technology developed by a university in Florida, Miller said, and Kubisen referred to the technology developed by Stanford that led to the creation of Google.com. These schools continue to earn royalties from these products.
Miller said while it is good for USU to take part in start-up companies, it is especially advantageous if they become successful.
Miller said the idea of equity is especially appealing to smaller companies who are developing products from new technologies.
“A small company, with a few employees, would take this [technology] and try to create a new business. Because they are new, they don’t have much in the way of money, so the university, in lieu of cash, would take stock and own part of this new company. They would have ownership interest,” he said.
Kubisen said he feels the risks that could come from a university holding equity are very low.
“What people have to understand is that we’re not putting money on the table,” Kubisen said. “We’re not talking about state funds.”
Owning stock in a company will not take the place of a licensing agreement, he said. Companies will still have to pay for the technology they buy, but they will now have the opportunity to give the university shares of their company.
Companies would want to do this “when they want to have a longer-term relationship with the university and see us as a reason for being,” Kubisen said. “They want us to be successful.”
Kubisen said the amount of stock a company will give to the university is situational and all part of “negotiation.”
“Our job is to negotiate a fair marketable price for our technology. It’s a combination of licensing and equity,” he said.
Having equity in these companies will allow USU, its students and professors more opportunity to earn royalties from the research it develops. Currently, if a technology is used by a company, but the final product it markets uses technology modified from what was sold, the university has no claim upon those royalties, Kubisen said. Owning stock would allow USU to be part of the growth and development of the technology it develops.
Kubisen said giving stock to the university is also a smart move for companies when they want to build a “symbiotic” and “long-term” relationship with the university. If the company does well, it will in turn benefit the university supplying more resources for research that could help that same company in the future.
Equity is also another way to fund research, Kubisen said.
“There are three ways that technology is funded,” he said.
These include tuition paid by students, state funding, and private research contracts.
“Students are already paying more in tuition and the state is having economic difficulties,” Kubisen said. “If you can add another leg or source of revenue, it will help the university grow and prosper.
“The whole idea is to keep feeding the engine,” he said.
The Bayh-Dole Act of 1980 allows universities nationwide to license their intellectual properties to private companies, but charters created within the state of Utah back in the 1800s are still preventing schools from holding some stocks in companies, Miller said.
“[The Bayh-Dole Act] said that any invention that is created with federal sponsoring, that ownership is given to the university. The university holds the title to, or is the owner of things invented on university campuses,” Miller said.
A version of this bill has been passed by the House Education committee in the Legislature, but has not been finalized because of some disagreement, and should undergo a discussion to reach a compromise this week, said Lee Burke, assistant of the president for government relations.
Kubisen said one goal that would be reached by the finalization of this bill would be “increased revenue.” However, he also said this would only be one of many benefits that holding equity in successful companies could bring about.
“Universities with used technologies are recognized for their contributions,” Kubisen said. “MIT, Stanford – we’d like to have USU’s status and recognition brought higher on a national level.”
Schools with recognized contributions to society also tend to attract and retain “entrepreneurial” professors, Kubisen said.
Other benefits could include economic development that will benefit Cache Valley, establish a broader tax-base and create jobs, he said. Kubisen also said there is the potential for students to move from their work as students in research to employees at the businesses who use their technologies.
“It would be nice for students to do the job they were trained to do. These resources with companies could provide good jobs,” he said.
It is also rewarding for professors and students to see their research become part of a solution and have “further impact on society than just publishing,” he said.
When research is applied in the real world, “everybody wins. The company grows, they get good employees, stuff people want solved is solved, and students are involved in solving problems,” he said.
Licensing of USU technologies is handled through the Office of Technology Management and Commercialization, and equity held by USU will be handled there as well.
“Universities aren’t used to dealing with the business world,” said Kubisen of the OTMC. “We’re a bridge between the university and the business world. The transfer center increases the value of the research that the university does and solves problems that society has.”
-bnelson@cc.usu.edu