Yes, Bruce?

MR. ALBERTS: Bruce Alberts. I'm President of National Academy of Sciences. I'll speak on the basis of my 30 years as a university professor before that, and I also am giving a perspective as a biologist.

I think first of all, universities follow money and if you want to create change in universities and keep them up with the time and work against some of the inertial systems we have with silos and reward system, the federal government has to -- is mostly the source of research funding and has to be imaginative in a way you offer funds and I'm talking about competitive funds.

In my field I see a problem in that biology has overemphasized the individual efforts and what we need more and more in trying to do new things is people to think out of the box and that often means collaboration with physicists and other groups, people who are different from that. And there needs to be young people. Our academic culture runs against that, because who gets the credit when there are two of you? There's only one first author and so I think we need some -- my fundamental point is I think the whole system, to be kept healthy, needs some real thought and active management by federal funding agencies to encourage the best kind of behavior. I think the academic culture is quite conservative and often works against the kind of things we want to accomplish.

MR. BODMAN : What kind of things, Bruce? Can you be specific?

MR. ALBERTS: What you want, I think what we want, is a system that selects the best young people. I think we have that. I think it's a merit-based system and they'll go through a Ph.D. and post-doctoral work in my field. What doesn't work is that there's a great conservative force on young people to do safe work, the same kind of work that their predecessors had done. As a result, in my own field of cell biology, we have a large number of people working on the same thing, competing with each other trying to beat each other by two weeks and then we have huge areas of opportunity that nobody is working in.

I'm actually chairing a panel for the National Institutes of Health that's been working for 3 years on the process of grant review processes and one of the crucial things that we think we need to do is put in incentives for innovation and try to work against the very, very strong conservative force, playing safe, that is continuing the work that your mentor did, whether it's your graduate mentor or your post-doctoral advisor. That is the overwhelming path, I would say, for 98 percent of best young people because they perceive, and maybe it's correct, that they have only a short time to make a track record. They're going to be evaluated by their faculty or their peers on the basis of what they do coming out of the starting block and then taking on risky projects is a way to put your neck out on the line and a way that's dangerous.

I think we need to work actively against that because we're missing a lot of opportunity and by the time you're my age, it's too late to start new fields. I think we need to focus on young people. We need to talk to them. We need to do more to see what it would take to encourage them to try riskier things, newer things and have funding mechanisms that directly reward that.

MR. BEMENT: Bruce, is the problem with the peers, with the peer reviewers or with the funding mechanism?

MR. ALBERTS: Well, it's both. I would like us to think about, for example, the NIH context, picking out first time applicants and reviewing them separately, in a different way than -- what we do is we throw them into a study section and they're competing against established researchers and I've been -- I've chaired study sections and I think peers are a problem because in a competitive situation with well-established laboratories, they tend to penalize risk-taking and go for the safer experiments. I think there are ways to overcome that. We just have to be more energetic and creative.

MR. BODMAN: Other comments? Yes sir.

MR. MILNE: George Milne from Pfizer.

In addition, there is a key issue of time horizons and length of grants. As you reintegrate things, it takes longer to do that in an elegant and convincing way and so consideration should be given to making the duration of the grants longer.

And finally, success in a time of convergence requires that we bring to bear multiple eyes of people from the physical disciplines as well as from chemistry and biology. This dictates not only new ways of working but greater capital investment in the scientific eyes they use to interrogate key problems facing medicine and society. To me, the period that we're in is a very distinct period with a set of different characteristics and so we should be revisiting not only our priorities but also our process.

MR. BODMAN: Thank you. Yes sir?

MR. BERNTHAL: Yes, Fred Bernthal, Universities Research Association. I'd like to come back to a point that Marye Anne mentioned and stress the people element of the research support that comes from the many different agencies in federal government, because it's not always paid enough attention in the process of “procuring” research, if you will. Perhaps the National Science Foundation pays a little closer attention to the human element than do some other agencies, but in most agencies, I would say, the federal government and the departments view themselves as simply procuring research. But in that process, particularly in the universities, it's terribly important that the support of the people involved remain on an equal footing with the actual research product. The best technology transfer mechanism is the moving van, someone once said. I think actually I stole that line from my friend, John Armstrong.

We need to remember that throughout the government, and we haven't always done so. Indeed, therein lies some of the necessity of the partnership between universities and the federal government, in fact. Industry itself has become in the last few years the dominant funding mechanism for research in this country, with enormous growth in the last 15 years or so. But the people part of it, in the end, has to come from the universities as I think Marye Anne commented earlier.

MR. BODMAN: Thank you. Yes sir?

MR. APPLE: I'm Martin Apple from the Council of Scientific Society Presidents.

I've got a few points that I think we should address; I see us at the new millennial readdressing of the question of the social contract between universities and industry.

The way that I think things have been evolving over the last couple of decade, and this evolution has created a virtuous circle of interaction between industry and universities (which can be verified by analyzing the front page of US commercial patents and noting the growing frequency of citations to university research as the source of the patent), is that universities have taken on the “D” role of “R&D”. Now not exclusively for either, but the point is, that so long as this new system is in place and seems to work well, what we should be doing is looking at how to stimulate the R role of universities and then connect their discoveries to commercial and social utility. And that requires a set of attributes for the campuses, which I see as now differentiating into different types according to their needs for money, students and other factors. Success for university research requires the free exchange of ideas and findings and a whole number of other types of openness which I think are suffering and at much more risk right now, first from commercial interest constraints on openness and now post 9-11 security concerns.

The trends that I think are intersecting on the university that I think are potentially harmful, or at least could change the success of that which we have believed we will continue to enjoy, are first, woefully inadequate pre-college math and science education; and our unwillingness to invest the resources into sound math and science R&D instead of weak programs, now based more on opinion than data, to really improve it. Also undermining us is the incredible exponential growth of earmarked federal research money for universities that bypass this peer review and thus send the wrong messages to our next generation of grad students, the message that competitive merit is irrelevant. In the long run, how we develop our human capital, ideas and imagination, will determine the value of universities to society, not today’s earmark.

Third, is the rapid growth in the restraint of free exchange of ideas and information among researchers by both the influence of faculty and universities seeking to be directly involved in making profit for industry, and fourth, the repeated shifting of federal funding priorities, sometimes in what appears to be on a whim. For example, let us end long lines at gas stations and let’s all do alternative energy research; then when thousands of researchers get into those fields it de-funded; and so forth repeatedly is the history that we've had before, and it hurts us. Priority shifts based on leading groups of scientists determining that they have opened new opportunities because of new discoveries could have the opposite effect-new ideas and newer foundations for long term growth in innovation.

So I think these are things that we need to address on the issue and therefore I would re-aim our discussion of university R&D, the title, into really understanding the interaction of university R and industry D, and what we should be looking at is how to increase the synergy of, and maintain the independence of these two.

MR. BODMAN: Thank you. Dr. Colwell?

DR. COLWELL: Rita Colwell, Director of The National Science Foundation.

There are some trends we ought to be examining in the research and development arena, namely, basic research, applied research and development. I have data from the NSF Science and Engineering Indicators, two-volume “bible” that the National Science Foundation publishes.

The nation spent $48 billion on basic research in the Year 2000; $55 billion in applied research and $162 billion on development. There have been increases in each of these over the years, but what has happened is that the federal government historically provided the majority of funding for basic research. This has dropped from 71 percent in 1980 to 49 percent in the Year 2000. It's a continuing decline in funding for basic research, with more, proportionately, from other sectors. One might think this is acceptable, but the research the federal government funded is long-term basic research. When a decline occurs in basic research funding, it may be dangerous for the future of our country. The federal government provides 58 percent of the funding for basic research that universities and colleges carry out. A reduction in the percentage the federal government provides puts a squeeze on the research at universities and colleges.

This is demonstrated in an unintended consequence and that is less money for students. An analysis done by the National Science Foundation of grant size showed that the size of an average grant is smaller today than 30 or 40 years ago, in constant dollars. How was the money spent? We found that overhead costs have risen, perhaps doubled over the past 40 years. The cost of supplies has gone up. And the amount of money spent on students has gone down. A survey of our grantees (6,000 survey instruments with a 92 percent return) gave us very interesting results.

MS. GOOD: That's phenomenal.

MS. COLWELL: The message was pretty clear, that investigators would spend money, if they had larger grants, on undergraduate students, graduate students and post-docs. Fellowship funding for students has decreased. A National Science Foundation fellowship five years ago was about $15,000. NSF has raised it to $25,000. The survey, showed that the major reason students don't go on to graduate school is because they can't afford it. They graduate with debts. It's a very complicated, intertwined set of issues. Taken together, they don't look very good.

MR. BEMENT: Rita, I wonder if you could comment also on the plight of universities in getting facilities and instrumentation in order to balance out the research effectiveness

MS. COLWELL: Thank you for reminding me of that item. To do research, people, students, faculty, researchers are needed. Ideas and tools are also needed. Infrastructure for research in universities has deteriorated. The cost to replace or refurbish is multi billions for university facilities, research facilities, and national lab facilities. More than that, the tools becoming complicated and sophisticated. They are no longer only large telescopes installed at one location. Networks of engineering and earthquake engineering centers are being formed. Shake tables around the country connected by computers provides a “continental shake table” that is much more effective for research and teaching.

The point is that research tools are becoming more like “platform”, connected by high-speed computers, analyzing data from the observational opportunities.

We appear to be neglecting tools as a necessary part of the research enterprise, not separate from, but really necessary for the research to be carried out.

MR. BODMAN: Thank you.

MR. MILNE: I want to pick up on the comment about the issue of priorities and the need for a strategic view which has a lasting quality - one that allows for universities and students and the rest of the organizations to plan against it with confidence. Let me illustrate one gap that might emerge from a more strategic approach.

One example where I see a major strategic gap going forward is in clinical research. We are gaining understanding of the genome and the proteome at an incredible rate. What we're not getting is how these findings relate to human disease. We have, I believe, a very interesting disjuncture. We are well on our way to having an exceptional amount of fundamental information, yet we have largely dismantled a lot of our clinical research capacity around the country as part of the whole revelation of health care delivery and handling. We have not invested adequately in clinical methodologies just to pick up a point that Dr. Alberts made earlier.

It is not just a funding issue, but also one for the scientific community. Clinical research is something that is slow to do, so you don't get a lot of publications out of it. On the other hand our ability to capitalize on the enormous revolution of biology will in the end depend on our ability to relate it to medical outcomes. It is that part of the scientific enterprise which has not been invested in, in any strategic.

This is just one example of the impact I believe a group like this could have it they developed a sustained, comprehensive strategic view that properly reflects the evolving construct of biology and medicine and science in general. To use this to fund and to drive a longer range kind of perspective.

MR. BODMAN: Thank you, sir. Yes sir?

LT. GEN. ARMSTRONG: I'm Sam Armstrong from NASA and my role at NASA Headquarters, under Dan Goldin and also under Sean O'Keefe, is to promote partnerships and DOE inversions. I've sort of been their guide in Washington.

And I know -- and I read very carefully the transcripts of the two previous sessions, that Phil has got an idea of how he's going to put this all together in a report and who the intended audience is, but if I might make a thought come forward.

I think one of the places to start in a discussion that we're having today is with the term “national security.” I think that's an unassailable beginning point because national security comes in many pieces. It's physical security, part of homeland security. It's also economic security and it's political security.

That national security is supported by a number of pillars. One of those pillars is our academic institution. I know there's a government institution, and of course, industrial base.

In the other sessions, you talked about CRADAs, you talked about partnerships and I don't say that that's the glue that sort of holds these pillars together, but at a lower level. But if I could use a metaphor of what I just described is the mill, we haven't talked about the grist for the mill, which is human capital.

The human capital is number one on the President's management agenda, and we're all working very hard and trying to address that. I think it's timely that we highlight the issue of human capital. The same thing is under consideration by the Commission for the Future of the Aerospace Industry, which I also have appeared before. I think we all understand that we've got an impending problem in American science and engineers in the physical science and engineering fields, not in the life sciences, but in the physical sciences and engineering. Now if we don't have that grist for the mill, then the mill won't turn out the innovations that we need to support the national security. I think that we start from there.

Now any time that you throw a problem out on the table and you're now prepared for someone to say okay, what do you want me to do in the off chance that that happens, I think there are some things to be done.

I'm convinced and I have been working this with a number of people like Mary [Good] and Marye Anne Fox and Rita and some other folks around here, and I'm convinced there is no single solution to the issue that we face on human capital. In fact, I would say that there's not even a family of solutions. The best that I can understand is, it's a collage of things that might help. The trick, at least in the beginning, is to zero in on that collage of things, define those things that work the best and put our energies behind those. And if I get a second speaking chance, I'll talk about some of the things that have been -- we've been doing as a spin off of the government and university industry roundtable which Marye Anne is the co-chair on.

MR. BODMAN: Thank you, sir.

MR. VON EHR: I'm Jim Von Ehr, CEO, Zyvex. We're an early nanotechnology company and I think the topic of this is really great, how do we keep the American innovation engine alive and going as we move forward. There are a lot of people trying to copy us. It seems to me that some of the -- one of the good ways to go is to look at how we have succeeded in the past. I would say look at Silicon Valley. They're very multi-disciplinary teams of venture capitalists that come in and fund an idea and who will bring together engineers, marketing people, sales, documentation for a typical software product, but in universities we're very specialized. The fun stuff, the innovation really happens when you bring people with different disciplines together and they talk. I'm not suggesting a nanotechnology degree because I don't know what that is, but if you bring together someone very deep skills in physics, deep skills in chemistry and deep skills in engineering, put them in a room and have them talk about a project, you get a lot of innovation coming out of that.

I'd like to also echo what Bruce Alberts said about innovation in grants. It seems like to me, to some extent, the peer review process is designed to weed out really wild hair crazy ideas that might be interesting to look into with a limited amount of funding, just to see if something pans out. Weed out the things that are completely crazy, but go after something that seems a little wacky, fund it just a little bit and see where it develops.

The one thing that we don't have in the innovation engine at Silicon Valley and private industry is the ability to follow up on a happy discovery and I think that's at the root of most great scientific breakthroughs. Someone is doing project A, an accident happens. They notice a phenomena. They stop A. They go off and work on this phenomena and make a breakthrough. We can't do that in industry, but we should be able to do that in a university. So what I'm proposing is, let's have programs that bring people together in different disciplines, put them on a specific project, but allow for a happy accident and then follow up on those kind of happy accidents.

Thanks.

MR. BEMENT: Let me ask a follow-up question. If you go back early in science and technology policy after the war, the policy was that scientists were best to make the decision. They were also best to recognize good science and best to select good science.

In those days, there was a certain fraction of proposals coming in that were really considered to be outstanding. Today, I don't know what the NSF records show, but the portfolio is much broader and probably the number of fundable proposals received is pretty good.

In the old days, the program manager had a fair amount of authority to shape the portfolio so to speak. In other words, to determine how to balance the risk in the overall program. I'm just wondering if that's still the case today or whether it's pretty much dominated by the peer review process itself.

DR. COLWELL: Let me address that point because, as Mark knows he's a member of the National Science Board, we've had a lot of discussion about this. It is policy of the National Science Foundation that 5 percent of every program officer's portfolio must address a risk taking research. That is, a young investigator, without a track record, but with a great idea should be funded.

Even if the reviews come out mixed, the program officer can fund the proposal if there is promist of success. In effect, we even go so far as to make it part of the evaluation of performance. Have you funded risky proposals? If you have not failed with one or two, you really haven't made an effort to fund risky proposals. That's one point. We also focus on young investigators, although I must tell you the number of proposals coming in from young investigators is going down. We work awfully hard to make sure that a proportion of our funding is targeted to young investigations. That's one of our GPRA goals, a proportion of our grants going to young investigators, including previously not funded, young investigators.

The issue of the grants is a sad story. We receive 32,000 proposals each year to review. We have 50,000 reviewers on tap and 250,000 reviews are done every year. We're able to fund only 9,000 proposals. A third of the unfunded proposals are excellent. If you take into account the very good proposals, as well as, we're not able to fund $1 billion worth of proposals these are meritorious proposals. We lose money in the time and effort writing those proposals, perhaps $50 million lost in writing proposals that are excellent or very good and don’t get funded, not counting the ideas that could have led to jobs, products, etc. It's a big loss.

MR. BODMAN: Dr. Gast?

MS. GAST: Alice Gast, Vice President for Research at MIT. This call for interdisciplinarity, I think, brings up a few of the issues that have already been touched on -- we see a great surge of interest, I believe, amongst young faculty in interdisciplinary endeavors. It's hard to find people who are not fascinated by many of the wonders of the genomic breakthroughs and other innovations that they want to bring their own expertise to and join in the group and work together. In order to make those things happen, though, requires creative use of space. We find the desire to build tissue culture labs in mechanical engineering, electrical engineering, the media lab, all kinds of places, which isn't the most productive way to get groups working together. So this touches upon infrastructure issues that need attention. We are some four decades from the building boom that went on with federal funds and now our ability to facilitate changes, in old buildings is indeed a great challenge and is a fundamental aspect of strategic planning.

But the other aspect you mentioned which is important in the peer review process, is also important in academia and when you have a new faculty member who is pursuing an area of research on the boundaries of their traditional discipline, you really need to take care to identify the appropriate peers to evaluate their scholarship, just as you need to identify the peer groups that can evaluate research proposals appropriately when they're not squarely in the center of a traditional area. And so I think we (academia, industry and the government) need to work together.

The opportunities afforded by industrial sponsorship and a combination of federal sponsorship and industrial sponsorship give a little more flexibility to that process, but as Bruce pointed out, we don't want to be encouraging faculty to take the safe path in research when they can be much more creative if we're judging them appropriately at the appropriate time.

MR. BEMENT: Could I ask a follow-up question, Dr. Gast?

At MIT, what are the trends in academic faculty versus research faculty, faculty that do not teach, but do primarily research? Are there any changes? What is your policy in that regard?

MS. GAST: We have a cap on the number of research faculty and we don't see it growing, so we do have the demographic shift that our faculty is aging somewhat and that's probably manifest in this decrease in the number of young investigator grants. The other issue that was brought up earlier is the high cost of research and at the start-up package -- $1 million for a new faculty member is not unheard of -- and that's becoming an impediment to launching these new programs.

MR. BODMAN: What about the number and quality of young faculty? No one has spoken to that. Is everybody happy with young faculty? We're getting lots of them and we don't have to worry about that?

MS. GAST: I think we have -- in recent years there's been a lot of competition in exciting careers in industry and in young and small companies. Many talented scientists and engineers have gone into start-up ventures, rather than into academic careers. That may be shifting back.

MR. BREESE: Jack Breese from Microsoft Research. We have noticed it was more competitive a few years ago from the start-ups basically in terms of getting high quality researchers coming out of the graduate schools.

I also wanted to comment --

MR. BODMAN: So it's less competitive now than it was five years ago?

MR. BREESE: Three years ago. Generally, I'd say we're satisfied with the people we're seeing from the top schools that we attempt to recruit.

I wanted to comment also on this notion of interdisciplinary research. In my background, what I have seen is that the need for an interdisciplinary team really arises out of having a problem or an application. We say well, if we're going to solve this problem, you need to bring people together from various disciplines. Another dimension to these teams is a mix between basic research, and applied research and development. Our tack is that we have teams that span that spectrum. Over time and across different people in the teams, there is different emphasis on the basic research issues, the advanced development issues, and the applied research. Those things are churning continually and I think that that is a useful dimension to teams to think about so that we're not focusing solely on basic research, the applications inform what basic research we should be doing.

Now perhaps that mix would be different for a university versus an industrial research lab, but I think it's important to keep that communication across those boundaries and not see those as kind of impervious walls or something you throw over the wall.

MR. BODMAN: Just out of curiosity, what happens to your team after they solve the problem?

MR. BREESE: There's always the horizon out there -- you always see the next problem.

(Laughter.)

MR. BEMENT: So you don't reconstitute the team around the next problem?

MR. BREESE: Occasionally yes, you do need a different mix of people. Often though, when you solve one problem and get to the horizon, as I said, the new horizon is always out there, and you can move onto the next challenge.

MS. GOOD: I'm Mary Good from ASTRA, back to the issue with respect to university faculty. There is an issue. It depends on what kind of faculty you're looking at as to whether there's a problem or not. Right now, if you're looking for faculty in computer engineering, computer science or those related areas, there is a big problem because if you look at the numbers, over 60 percent of them that are graduating right now, are non-U.S. citizens. So the universities have both the difficulty of recruiting them, and there aren't very many. Last year there were 900 Ph.D.s in computer science in the entire country, to give you an idea. The industry recruits those very effectively as well as the universities.

If you look at the computer scientists, computer engineering and that area, you have the problem not only of recruiting them, then you also have the problem of trying to get them proper visa credentials to stay here, which by the way is not too difficult to do. You can get the H-1s, but then you're stuck with them, what do I do next because they're going to be here for three years. I've got to get the H-1 renewed and then I've got to try to work on the green card. These are things that some universities are reluctant to tackle, but if you're hiring in those areas, you will either tackle it or you won't hire.

Just to give you an idea, we advertised for systems engineering faculty last year. We had 52 applicants, 2 of them were U.S. citizens. One of those had taken a job before we got to talk to him and the other one was not very good.

(Laughter.)

So the end result is you understand what we hired. So there really is a problem in certain areas. It's not across the board, that is true. But there are certain areas like computer science, computer engineering and the computer-based disciplines where it is really tough to hire, even in the universities right now and certainly hard to hire really good ones.

Now it's true that because of the economic issues that happened last year and kind of the bust in the dot com business, it was a little easier to get good résumés this year than last. That part is true, but the résumés were all still, the good résumés were all still non-U.S. citizens.

And this is a real issue that I think has to be put on the table because with all of the discussion and issues with respect to immigration that's going on presently, if we get ourselves into a position where we cannot use non-U.S. citizens, I don't think that the policy makers understand that in many of our areas we will go out of business. So I think that's something that really has to be discussed and put on. Like I say, it's not across the board, but certainly in the computer-based disciplines the competition is still pretty tough and the issue has to do with how to get non-U.S. citizens here and how to keep them and how to manage all of the immigration issues that come with them.

MR. BODMAN: Are we still getting the best of foreign students to come here or are their native countries working harder to create an environment --

MS. GOOD: Sam, their native countries are working harder to keep them, but let me tell you we are still getting the best. Some of these students and some of the ones that we can recruit that are non-U.S. citizens are absolutely fabulous people. They are absolutely first rate. That part is still true. We still, regardless of what we see, slurp off the top 3 or 4 percent from everybody else and somehow we need to understand that, but we've got to figure out a way to keep them because all of them now are on a kind of precarious slope because the H-1s are 3 years. You've got to get that renewed and then the issue is okay. How do I get these guys on a green card track? It's not a simple business.

The other interesting thing is that the ethnic background in that area has changed significantly as well. It used to be that that group came from Taiwan. We see almost no Taiwanese students any more. They are now from either Mainland China or they're Arabic. I put the issue with respect to Arabic students on the table because it's really very, very important in the discussion as we go forward.

MR. BODMAN: Where are the Taiwan students going?

MS. GOOD: They've gone back to Taiwan. Well, they never came. It turns out that the Taiwanese have three or four absolutely first class universities today and indeed what they've also done is they have picked off some of our Chinese-American faculty. They've taken back to Taiwan two or three Nobel Prize winners and other folks of that sort and so the kids, number one, don't have to come here and secondly, there are good jobs in Taiwan.

Korea is getting close to that same situation.

MS. FOX: I'd like just to elaborate a little bit on what Dr. Gast said as well. We are facing in universities a major retirement problem, people who were hired in the 1960s are now en masse leaving and yet with the start-up packages that are required to start new faculty, we're not able to replace faculty one for one. So what this suggests and this is more broad than Mary discussed because the same is true in the humanities and the social sciences, not at a million dollar level, but beyond their budgets. So when perhaps two or three faculty retire, we’re able to hire one, rather than two or three and as we do that hiring it has a demoralizing effect on the others who are in post-doctoral positions for even longer periods, waiting for stable jobs, or they take adjunct positions for even longer periods, waiting for stable jobs, or they take adjunct positions and commute around the country.

MR. BODMAN: Is the reason for the two for one, the amount of money in the start-up package?

MS. FOX: Yes.

MR. BODMAN: Is that for research? Is that the issue?

MS. FOX: Yes, the traditional approach has been when somebody retired, the salary differential was enough to start a younger person.

MR. BODMAN: Right.

MS. FOX: That is no longer true.

MR. BODMAN: Now is that the amount of the start-up package, is that being caused by the market place by school A bidding against school B or is it being caused by the cost of doing research?

MS. FOX: There are, of course, competitive factors, but the cost of establishing a lab reflects increased equipment costs. As Dr. Colwell mentioned, the cost of the tools necessary to do state-of-the-art research is really much higher than a decade ago. There is one positive: the investment that a university makes in a young faculty person causes a university to bend over backwards to make sure the faculty member succeeds. But this means that a start up package must include not only the cost of the required instrumentation, but also support for the research group as well.

MR. BODMAN: Dr. Wrighton?

MR. WRIGHTON: Well, I think the world has become more competitive in recruiting faculty. I think for a variety of reasons, the public has become more supportive of science and technology at universities. We're gathered to talk about sustaining universities as powerhouses in innovation and I think people in the public have gotten the message. Maybe too much so, from the standpoint of the competitive environment. A large number of public universities and certainly a large number of private universities are coming off in an era of tremendous economic advantage and some of the infrastructural investments that have been announced recently are pretty staggering. If you go minus 5 years and look ahead 5 years, I can bring to mind five, six, seven universities that have made billion dollar commitments for science, engineering, medical infrastructure.

MR. BODMAN: These are new facilities?

MR. WRIGHTON: New facilities, expansion of faculty, instrumentation. In a way, I think we've educated our regions pretty effectively to the potential role that the research universities can play and I think it's going to be challenging to be able to realize the high expectations, but in relatively simple terms, I sometimes make the pitch myself to the public that if we're able to recruit faculty member against N.C. State or MIT, that that individual will very likely bring to our community $500,000, $600,000 of research support from agencies of the federal government and so the investment that we place, at least as the public sees it, is returned in just a few years.

The challenge we face in the universities is a trend that is exacerbating and it's self-serving, but it's my role. I'm university chancellor.

(Laughter.)

We face a shortfall on every grant or contract that we accept, whether that's from the government or industry and especially foundations which do not support the full costs of the engagement in the research enterprise. This is more difficult for the public to understand. They view the dollars coming in as a profit or as, certainly, money that the Administration has to do the things that we want to do. In fact, I would say the same is true for the major research universities that are represented around the table. That in rough terms, for every dollar we accept, 25 to 30 cents would be spent somewhere in infrastructure that must come from otherwise unrestricted resources. That's a trend that I'd say is very significant.

MR. BODMAN: And going up?

MR. WRIGHTON: And going up.

MR. BODMAN: So the 25 cents on the dollar is going up?

MR. WRIGHTON: Right. And that stems from start-up packages, the need to provide matching support and major instrumentation awards, the pace of change in research is certainly not slowing down so that when a new grant or contract comes in for a new project the space that we used to have that was very appropriate is no longer appropriate, re-plumbing, new electrical needs, the renovation costs accompanying new awards. It's pretty significant.

So those are all issues we're struggling with, but everybody will accept every extra dollar. We can't turn our faculty down. It's impossible.

MR. BEMENT: I thought you were going to say something about non-recovery of overhead.

MR. BODMAN: Yes sir.

MR. BERNTHAL: Yes, I'd like to ask a question of those who are currently active leaders in academe. The question is whether this wave of retirements, this bubble everybody expected from looking at the demographics, whether that has now actually now materialized? A few years back, perhaps as long ago as 10 years, I remember listening to the president of one of the large big ten universities tell us that by the end of that decade, the 1990s, something like half their faculty would have retired and need to be replaced. Big issue, big crisis, but it didn't happen. It's got to happen sooner or later, I guess, but I'm just curious whether this is actually happening now or not.

MR. WRIGHTON: I've been looking at faculty demographics, at least for Washington University. In an earlier era, I looked at it for MIT. Faculty renewal is far more robust than most people appreciate, especially the trustees of our universities, many of whom are business leaders and comment to me frequently “when you're ready to get rid of tenure, I'll know you're serious about making some major improvements.” But in fact, faculty turnover is occurring at a very brisk pace. For our arts and sciences faculty, which might be regarded as the most conservative element on the faculty, we have seen replacement of nearly one third of the faculty in five years, and of course, it's expensive. I think there's a very big positive and that is, we can't hide behind the notion that there are no positions as we think about strengthening the diversity of the faculty. And so we've taken a look at ourselves and I know other institutions have as well. As we look ahead, faculty turnover is going to be significant and there are tremendous opportunities.

I think that if we can pull ourselves together, we're going to be able to provide some really great opportunities for career development and we're trying to find some new ways to do that. If we have time, I'd like to hear from others about ways we could strengthen the environment to make faculty life more rewarding. How can we bring people in and bring about the enthusiasm that may have been there at an earlier era? If we look at science and engineering, the physical sciences and engineering especially, the funding levels have been pretty constant. I think there's now an opportunity to rebalance the investment on the federal side, and from what I understand, that will be a big plus.

I think that we have a chance in this era to make some great improvements on the faculty.

DR. COLWELL: Could I comment? I think it's a little misleading, the numbers that get thrown out, calculating the eligibility for retirement and then saying they will retire. At least at the National Science Foundation, it's a very loyal cadre and people like working there. They stay; some of the staff will stay 29, 30 years. I think if the work is challenging and interesting and there is no mandatory retirement -- though we may have half or a third eligible -- I don't think there's going to be that mass exodus, at least from our agency.

MR. BODMAN: May I ask, thank you, Rita. Arden just commented to me, well, this is all very interesting, but what does this have to do with innovation? And so let me pose the question. I take it maybe unstated, do I sense that we like the model we have now? We are -- that we've had a model that seems to have worked. Graduate students coming along and you turn them into young faculty and they get funding from people like Dr. Colwell and her colleagues in government and move on through and that this -- we are still, as Dr. Good says, still getting the best. One of the worries was that we might not be getting all the best students, but that seems to be in good shape.

Do I get a sense of, we're happy with the model we have and all it needs to do is to be tinkered with around the edges?

Yes sir?

MR. VON EHR: Jim Von Ehr again. I'm not totally happy with the model because I think a lot of universities try to be all things to all people and I'm very much in favor of focusing into a particular area, building up a regional cluster. In fact, I believe so strongly of that that I've actually put my own money into the University of Texas at Dallas to help them become the core university of a nanotechnology cluster. The reason for that is if you bring in the very best faculty you can find -- we just recruited a Nobel Laureate, 75-year-old man; I donated some money to endow a chair for him and we're going to buy some equipment to get him started -- the very best people bring in the very best students. Those very best students tend to stick around after they graduate. You see that a lot in Silicon Valley, around Stanford, around Berkeley. They like it there. If they like it there, they will stay and they'll start companies. They'll go to work for companies. Those companies then grow up. They also need research. So they'll donate money to the university and hire more students.

MR. BODMAN: So you have more concentration in universities and more specialization.

MR. VON EHR: The thing that I like about UT-Dallas is that they specialize. They're not trying to be everything to everyone.

MR. BODMAN: What else?

MR. ALBERTS: I'm not happy.

MR. BODMAN: You're not happy? Why aren't you happy? I'd like to know why.

MR. ALBERTS: I think we're counting on foreign students, but foreign countries are going to be increasing the position that Taiwan is in. China is going to start bringing a lot of people back. Where are we going to then?

We've got to prepare for the future. We can't live off the fact that we've been importing all our talent. We're just sleeping.

MR. BODMAN: Well, what do we need to do about it?

MR. ALBERTS: I think we have to worry a lot about the fact that the first time investigators are going down, who's tracking that? Why is that happening? That's our future. We have to worry about what the young people are doing and how many young Americans are interested in science. We have to be much more serious about this.

The other issue I wanted to raise with the university presidents, unfortunately I have to leave and go chair a meeting after this, is there room for more resources and shared instrumentation grants because more and more the idea of an investigator accumulating all this equipment makes no sense because you want to encourage interdisciplinary work and there's a tendency when an investigator has their $1 million worth of equipment from the dean or from wherever, that's my equipment and it's not the best model, necessarily.

I think there's room for universities to look much more like industrial companies with instrumental cores. The problem is I don't think we have the mechanisms to fund those. This is something I think presumes a lot of thought because if you want new innovation and you want interdisciplinary work and you want people to try new things, you can't set a barrier that they have to go acquire their own equipment before they have to do this. I think there's a lot of room for improvement.

MR. BODMAN: Thank you, sir. Yes sir?

MR. GROSS: Rick Gross from Dow Chemical Company. With regard to the model today, I have three dimensions to comment on. It strikes on most of the things that have been commented on, but one that hasn't. With regard to interdisciplinary work or alliances, one of the things that we see, which I think is a real hope for the future, is a lot of cross-disciplinary work and so when we can work at drug delivery systems, for instance, at UT-Austin and be working with a professor in chemical engineering and a professor in pharmacy at the same time, you can't even tell where they're from and this is a great advance from not that many years ago.

The second dimension of that for us, from an industrial perspective, is speed. One of the things that we do see is from university to university, the intensity focused on speed. Time is everything, obviously and at a lot of universities, that isn't really understood, and thus, we don't tend to embrace or work with those universities.

MR. BODMAN: Let me just correct -- let me just understand. Is it your suggestion that there's a big variation among universities, some recognize the need for speed and some do not?

MR. GROSS: Correct.

MR. BODMAN: Is there an overall change in the average university's understanding?

MR. GROSS: Absolutely.

MR. BODMAN: That universities are becoming more responsive as a general matter?

MR. GROSS: Absolutely, but a wide variation.

The other dimension to alliance that is talked about is, we find more and more alliances where we're putting together pieces from multiple universities, so this isn't cross-discipline at a single university, but multiple universities. When we work, for instance, with an oil seed alliance that we put together on oil chemicals, that's a four or five university system. That is probably a dimension and a trend for the future that we're going to have to do more of, because what you need, you're not going to find at one university.

The last thing I wanted to raise is undergraduate research. I wanted to raise the importance of undergraduate research from a couple of dimensions. One is, if I go back to the UT-Austin example, much of the work is being done by undergraduates; with graduate students, post-docs, the full cadre. Obviously, that's a great thing from many dimensions. The one dimension I want to mention is that, as we talk about how we're going to get young people more interested in the physical sciences and engineering, my firm belief is that if they have an inquiry-based educational process in undergraduate school, and I hear what Rita is saying about funding, I believe a lot more folks will be able to find the resources if they're driven to go to graduate school, and I believe undergraduate research will drive them to do that.

The last point on that is even if they don't go to graduate school and even if they don't take a career in science or engineering -- so we hire them or the other folks around the table hire them, the worse thing that could happen is we could have a more science literate voting public and that would be a wonderful thing for all of us.

MR. BODMAN: Isn't the real issue on that at the lower grades, before you get them into a university environment?

MR. GROSS: Well, I absolutely agree with that and I think, in fact, third or fourth grade is probably where that all happens. But I would also tell you what I witness is that some folks who have that spark lose it along the way and I think undergraduate research needs to keep that spark alive.

MR. BEMENT: Richard, I'd like to ask a follow-up question. How many projects at Dow are really coupled programs with university faculty in the sense that there's true peer exchange, there's collaboration, there's two hands on the wheel?

MR. GROSS: The vast majority of them because of the old model, which was frankly as someone was talking about, over the transom, the old model is we went; we established a research contract. We went away for a longer period of time than you might like, came back and then we didn't get very good results.

We have principal investigators on both sides and these folks are in contact almost daily at times through net meeting and through other devices, but it's very important.

MR. BEMENT: I would assume that as a result of that, it's also providing a unique learning experience for their students, and graduate students and the undergraduate students as well.

MR. GROSS: Absolutely.

MR. BODMAN: We're going to wrap up this piece in a minute. I want to solicit any other comments on whether the model is appropriate.

Yes sir?

MR. YOUNG: I am Terry Young, Assistant Vice Chancellor for Technology Transfer at The Texas A & M University System and immediate past president of the Association of University Technology Managers, AUTM. AUTM is being pressed by countries around the world to provide training in technology transfer on how to establish and manage technology transfer offices, how to spin out companies. These countries include Taiwan, Japan, China, Indonesia, Philippines, and even Russia. I have always believed that these countries were looking at the U.S. model of tech transfer and seeing success however you measure success. This afternoon, I have heard that the best and brightest faculty educated in U.S. graduate schools are returning to their home countries. Maybe this exploding interest in the establishment of technology transfer offices in universities around the world is because these best and brightest faculty members are asking their institutions in their home country to accommodate their desires for technology transfer. This possibility never occurred to me before.

MR. BODMAN: It's probably going on.

MR. BREMER: I'm Howard Bremer, formerly Patent Counsel for Wisconsin Alumni Research Foundation and still active with that organization. After listening to all of the commentary, there are several items I’d like to address.

I think you have two fundamental considerations here, people and dollars. Those are the two main ingredients in all of the commentary. The people, in terms of generating interest in young people to go into science careers, is a more difficult problem to address. The dollars are not as difficult to address.

On that score though, I just want to put into perspective, from the National Science Foundation information, Mr. Bernthal comment that “industry itself has become the dominant funding mechanism for research in this country.” Fifty-one percent of the money for basic research at universities comes from the federal government. Twenty-one percent or 22 percent comes from the universities themselves. While only 7 percent comes from industry. This data is important because we have scientists on campus that think if the government backs away from the support of basic research they'll get the money from industry. That just isn't going to happen. The disparity between government and industry funding is much too great. Industry will never make up the difference if government support falls off. The point that Mr. Bernthal made was that the R&D supported by industry, including the development, was phenomenally large. That is true with regard to the development, was phenomenally large. This is true with regard to the development aspect, i.e. applied research, but not so in the case of support for basic research. We have to keep the support for the two elements in proper perspective.

The universities supplementing their R&D with their own monies and monies from foundations such as WARF are dealing with unrestricted funds which are the most desirable form of support. With such funds universities are often able to leverage up to 20 times the amount in dollars for every dollar they get from such sources. On the average, a leverage factor of $5 or $6 for every $1 of unrestricted funding is obtainable. That is a distinct advantage in support of research because of the flexibility inherent in its potential application. The sharing of the income generated by WARF with the University of Wisconsin-Madison in WARF’s lifetime, since 1925, has amounted to about $600 million. That has enable the university to use such funds, leveraged and unleveraged, for many purposes, with the focus being primarily upon support of the research function. For example, the royalties that were derived from some of WARF’s vitamin D inventions and that were categorized as the department share, were accumulated by the Biochemistry Department and literally built a new biochemistry building addition.

During the course of the preceding commentary I believe there was a suggestion that the research conducted in academia should be directed. In my view, that is absolutely not what should be done. The universities are the only place that true “Blue Sky” research is being done today. That type of research is, I believe, key to keeping the U.S. as the technological leader in the world. There is a further consideration which must be kept in mind. With corporate downsizing in recent years we have seen corporations coming back to the universities to get research, both basic and applied, done. Industry has also used the federal laboratories to accomplish those ends. But, what we don't want to have happen is to have industry view universities merely another arm of their product development effort. I think that's a fundamental thing we have to protect against and discourage however the innovation problem is addressed.

I believe the current model for research support and technology transfer, at least at the University of Wisconsin, is working very well. WARF, as the intellectual property manager for the University of Wisconsin has some 70 collaborative agreements outstanding which are multidisciplinary agreements in most cases. I believe that, fundamentally, people are cognizant and comfortable with the current model and are doing a relatively good job. In fact, the technology transfer office often has the capability of fostering inter- and multi-disciplinary research by putting two researchers together based upon invention disclosures which it receives.

To round out the model at the University of Wisconsin-Madison WARF will give the university about $30 million this fiscal year for various uses at the university’s discretion but primarily to support research. These monies can be leverage to bring in substantially more dollars and engage in long-term commitments.

One other point, directly in line with what Mr. Wrighton said, is that a portion of that money will be used to contribute to what is termed a “Margin of Excellence.” That is, the money that comes from WARF supports potential and existing professorships and various endowed chairs to attract and retain good faculty. In addition, there is substantial support for fellowships which will attract and retain young faculty.

MR. BEMENT: Yes, I had a back-up question there, especially because of the WARF experience. How much of the activities would you classify as real technology transfer versus technology shaping? In other words, shaping in the sense of risk reduction by reinvesting and licensing come to make it more ready for application?

MR. BREMER: Very little. The next step from basic to the next, and of course, when you're dealing with a foundation you have IRS problems to contend with and you have to look at that when you're a nonprofit because if you decide to work for other people and we've had that request from other universities, then you're brokering inventions and you immediately lose your tax exempt status. So that would be a real disadvantage in that case. So you have all these various alligators in the pit and you're trying to walk that thin plank across the lake, but not fall into it one way or another.

MR. BEMENT: Forgetting for a moment what you were talking about, a foundation instead of a technology licensing office.

(Laughter.)

MR. BODMAN: Sam, did you have a comment?

LT. GEN. ARMSTRONG: Yes, Sam Armstrong and the question is, “is the system broken?” I don't think so in those terms. I think what's happened is the world has changed around it, so that it's not keeping up with the rest of the world.

I'm back to the human capital question and I've been accused of being a one trick pony and I plead guilty to that. I've had a number of discussions on the quantity versus quality aspect of it, and I would assert that the first thing to be concerned about is the quantity and the quality is the next thing you look at.

At one of our meetings, Rita told us some stats she had just seen about how many graduates coming out of various countries were in the science and engineering workforce and the numbers were huge in some places. The United States stood, I think, in probably the bottom third. So one of the things that could be done is for the United States to set a goal. Whenever you're trying to work these things and you're trying to measure improvement, you can't do it unless there's some sort of a goal.

I think that the United States should set a goal to at least be the median of all the rest of the world. Since we're in a slippage mode right now, how could you argue with that being a goal?

MR. BODMAN: Average is good, Sam.

(Laughter.)

LT. GEN. ARMSTRONG: Well, we're below it.

MR. BODMAN: I understand. That's a fair comment.

Why don't we do this -- thank you very much. It’s now 2:30, let's take 10 minutes and have a bit of a break. There are washroom facilities in the immediate surroundings here. We'll reconvene 10 minutes and I promise, I'll have you finished up by 4.

(Participants took a 10-minute break and reconvened.)

MR. BODMAN: If we could come to order. We've lost one or two. I think we lost Bruce. We're pleased to have regained one on the other side, Congressman Vern Ehlers is here, Congressman from Michigan and a leading spokesman for science and even engineering at times in the Congress.

We're going to turn our attention in this second session, second part of this session to the question of technology transfer, government and industry, R&D partnerships and topics related thereto.

In order to start off the discussion we've asked Dr. Good to hold forth. She is a multi-talented person who's come up here from her most recent assignment in Holden, Arkansas. She went home to retire, but has been unretired.

MS. GOOD: Didn't work very well. Well, first of all, thank you very much for inviting me to this roundtable. I think it's going extraordinarily well and I think the kind of discussion that we had, particularly on the manpower issue of the last round, is extraordinarily important and very, very timely.

What I thought I would do in my five minutes was to look at this whole business of partnerships and to say a few words about the background that got all of this started and the business of moving innovation from the lab to the markets.

Most of this business about moving partnerships, particularly partnerships that included the universities, began in the early 1980s and it was couched in the time when everybody was very concerned about the issue of Japan and the fact that high quality goods were coming from there and we weren't producing them ourselves and there was a big issue that had to do with competitiveness. Productivity issues were on the table. Product and process innovations were suspect in the country. People thought that companies were under investing in leading-edge technologies and that companies were not being very good at actually commercializing their own research much less utilizing the research that was out there in the community.

So the issue that was going on at that time, there was a lot of legislation and if you look at the legislation that has driven a lot of the partnerships it was all done in the 1980s. It's really kind of interesting. It was kind of a package, if you like.

What I thought I would do is just speak to a few of those and just give you my own view as to the ones that seems to have been very, very effective and some that have not. Some, which you know, were good ideas at that time perhaps, but have not really in many ways, produced the effects that people had hoped they would.

The first one of them was the original Stevenson-Wydler Technology Innovation Act of 1980 and what that did was to require the federal laboratories to facilitate tech transfer to state and local governments in the private sector. What's what set up the tech transfer offices and all of the laboratories around the country and certainly all of the DOE laboratories, in particular, but also, some of the Department of Defense laboratories, as well, were involved.

The second in that same year, of course, was the Bayh-Dole University and Small Business Act, which in many ways has driven a lot of what we have talked about today in terms of innovation. And in fact, I was a little bit amused at the conversation because for all practical purposes we just took that one for granted. If you listened to the conversation, Bayh-Dole was a given with the discussion that went around. Okay? And it was to give the intellectual property that was generated through federal grants that if you were a university or a small contractor, they would remain with the contractor.

It encouraged the universities to license their intellectual property to the private sector and if you look at what has happened, and this was really the first part of that, and I would say that by all measures that has been an overwhelming success. Like I said, I was amused by the fact that the conversation we just had took that as a given.

Now, that's not to say there are not some issues and I suspect before we're done today some of those issues will surface that are important and should be talked through because it's not all without some problems and so we can --

MR. BODMAN: These are improvements in Bayh-Dole?

MS. GOOD: Yes, on the Bayh-Dole. There are some issues with Bayh-Dole today and certainly those will come up, but on balance it has really been a very successful program. In fact, there was a report in the MIT Technology Review in the summer of 2000 and it's called University Research Score. For those of you who have seen it, it actually takes all the universities and talks about what their value has been and how this thing has played out for them.

The second and third one that happened was the Small Business Innovation Development Grant, the SBIR Program which was done in 1982 and this is where all departments with research budgets over $100 million have to set aside about -- nowadays, about 2.5 percent for small businesses. That one, in my mind, has been a mixed bag. Part of that was used to just do what the agencies had meant to do anyway. They just did it with smaller businesses, if you like, but a few of the agencies have used their SBIRs really rather creatively, in the sense of trying to get technology transfer happen through those SBIRs and not just because I once sat on the NSF Board, but the NSF SBIRs, by the way, in my mind, have been very successful for the most part because they really don't have an axe to grind and they don't have other things they want small businesses to do, so they've actually tried to set theirs up so that these were really products and things like that that made a difference. Part of the Department of Defense ones have gone that way, but a big piece of the Department of Defense ones have truly, in a sense, just been an extension of their own research and have not done much in the terms of really creating new avenues.

Then the Federal Technology Transfer Act of 1986 amended the Stevenson-Wydler one and it provided for the CRADAs in the national laboratories. And I would, my own observation of those over a long period of time is that they're a mixed bag. Some of them have been very effective, some of them have been disasters and some of them are in between. So the issue about how to make them more effective, my guess, is still on the table and probably should be, but interestingly enough, one of the issues on those is that universities are a big player in those. People don't know that and it's always assumed that it's just a business in the laboratory, but almost every one of them that has had some real science going on has had a university involved as well as a business. So it is a place where universities have had some major impact.

The Omnibus Trade and Competitive Act of 1988 created the Advanced Technology Program and I won't say very much about that. It's probably the most controversial program ever done by the government and also in terms of being, if you want to look at a program that has been reviewed and you want to read the reviews, this one, there is a literature. It has probably been looked at and reviewed more by -- than any program ever and as the people who have to manage it know between the Executive Branch and the Legislative Branch, it's kind of like the Perils of Pauline, to know where it will be at any particular time. But it has maintained itself. It's now at about $200 million a year and I noticed that the new piece is out.

One of the things that was not well understood about that program is universities were big players. If you look at the ones given out before last year and I haven't seen the numbers this year, but there were 150 individual universities involved in those programs which I think is not, was not well understood and many of the projects were university spin offs that were then put together by a small company, the university was involved and in some cases bigger business was involved as well.

The last one of 1989, actually allowed the GOCOs to do CRADAs as well. These are the government-owned and contractor-operated laboratories and then of course is when it allowed people like Oak Ridge and people like that who are government laboratories, but operator-owned to participate as well.

In 1992, the last of them was the Defense Conversation Reinvestment and Transition Assistance Act. Again, a lot of universities were involved in that, but if you remember that one had about two years of funding and then CRADA totally. You haven't heard from that one since about 1994 because it was essentially taken off the books after the congressional actions of 1994, 1995, mostly because I think that it was never as definitive as it should have been. It perhaps was not as well defined and certainly did not have -- it didn't have the kind of industry backing, frankly, that would have given it some life.

ATP has always had some industry backing which is what I think has kept it alive, but the TRP really didn't have that and so when it got into the issue about whether this was an appropriate piece for the government without that kind of support it just lost momentum and as far as I know that program is totally dead at this point.

So when you look through these competitive things, some of them have been really quite impressive and some of them have done very well and some of them are sort of in between. So I think that the issue that we need to look at in terms of moving innovation from labs to the markets is which is these collaborative programs have worked well and try to understand why they have and beef those up and some of those that perhaps are not as good as they ought to be, maybe we shouldn't spend very much time and effort on them. And it would be the idea of looking at them and looking at a new way of thinking about them, might be in order, actually, to look to see which ones are successful and which ones aren't.

Then there were other smaller ones. SemiTech, for example, was one of the real success stories. That one, as you know, is now totally taken over by the private sector. There's no further federal funding in that one, but I think almost everyone agreed, that that was probably one of the best programs that the government has funded in these sorts of give and take things. At the same time, the Microelectronics and Computer Technology Corporation, which was funded just before that, it's interesting about that one. That was done in response to Japan's fifth generation computer project and it never did very well. It was designed to be a joint company research and early technology development. Had about 14 companies involved. The companies never endorsed it. In fact, when I was with Allied Signal, we did not send our best people. We were a member because we felt we needed to be, because we needed to understand what was going on, but if you don't embrace it and send your best people, these things never work and this one just never got -- it's still in existence. It's very different from what it started out to be. But it certainly did not get us to the next generation technology for the computers as we've just heard this week with the advent of the super computer from Japan. We missed that window pretty significantly on this one. But it just didn't get there. But SemiTech, on the other hand, was really a very effective one. Again, primarily because the industry really wanted it and put their best people and the universities had contacts in there and also worked in that very real way.

And then there were a lot of others that the National Science Foundation Research Center's program which is in my mind one of the real advantages that the NSF did at a time when it really made the difference in terms of making it relevant and having the policy people understand why these things were important. It made a huge difference to engineering. I would say that it's probably had a bigger impact on engineering than it has on the rest of the science base.

Then there were some others like Maglev that never got off the ground. As many of you know, there was a Mantech program on manufacturing in defense. That never really did what people had hoped it would. So some of these cooperative things have done very well and some have not. And it would be, in my mind, an opportunity to go back and really look at those that have been successful because they were all bundled between about 1980 and 1992 and so maybe it's time at this particular crossroads to look at those and understand whether new legislation is required, whether some of them who are still hanging on by their teeth just need to be cut off and forgotten about and those that have really been successful, perhaps some of them need some small changes, but to put our efforts into those that have worked because we really do now have a collection that one can look at the results.

There was a paper done by a gentleman, David Mowery, who some of you may know. He wrote this paper in 1998 and at that time it had to do with collaborative R&D and how effective it is. And his end result was that he said it was too soon to tell, that there was so much collaboration had grown so quickly by 1998 that it was difficult to understand exactly how effective it has been. But that's four years ago now and so the opportunity, it seems to me to look at it and see how effective it has been, look at those that have been worthwhile, push those, look to see if there's new things that need to be done or if there are some things that could be and maybe even do some that look kind of risky at the moment. And some of them may fail. But that's okay too, because if we don't try some that have some chance of failure, we won't try the right ones.

MR. BODMAN: Great, thank you. That's a very good introduction.

Let's maybe, as Mary suggests, focus on the ones that have done well and comment on those and what improvements might be made. Any thoughts that any of you might offer?

Yes sir?

MR. LAZARUS: I'm Steve Lazarus of ARCH Venture Partners. I am your token venture capitalist.

(Laughter.)

I should mention that ARCH was an idea that was actually a child of Bayh-Dole and Stevenson-Wydler; conceived by the University of Chicago Trustees and the Argonne National Laboratory Board of Governors in the 1985-1986 period. It survives today as a private sector venture fund with about $700 million under management and a continuation of the technology transfer mechanism within the University of Chicago. And since its beginning, it's devoted itself to the commercialization of university, national laboratory and more recently large industrial laboratory research.

Clearly, the university trustees would not have been engaged in the early 1980s, were it not for the incentive, the combined incentive of Stevenson-Wydler and Bayh-Dole. The University of Chicago was fortunate at that time to have as its VP of R&D Walter Massey, one of Dr. Colwell's predecessors and he was catalytic in the development of that mechanism as well, which says something about what is necessary on campuses in order to get these mechanisms started. While there were many other reasons and objectives for the creation of that organization, the ability for the university to capture some of the return on the technology that emerged from both Argonne and the University of Chicago, was paramount and I might say in passing that the University earned about a 25 percent return on its investment as a consequence of that, 25 percent annual return over the course of about 15 years.

We've had experience within the portfolio. We started a hundred companies since we began. We've had experience in the portfolio with almost all of the mechanisms that Dr. Good mentioned. We have been users of the Advanced Technology Program with indifferent results. Twice companies --

MR. BODMAN: Different or indifferent?

MR. LAZARUS: Indifferent.

MR. BODMAN: Indifferent results.

MR. LAZARUS: Indifferent. In some cases there was a complete write off and in a couple of other cases, it led to two companies going public. So I think it truly depends on the idiosyncratic nature of the grant and how it matches up with the commercial objective that is being sought.

I would agree with the comment on CRADA. We found that CRADA lent to a tremendous concentration on means and process rather than ends and outcome and the celebration of the CRADA program constantly was somebody coming up on stage with a huge chart and showing how many CRADAs had been signed at a given period. I actually was present when President Bush, the first, announced the number of CRADAs which had been signed nationally. I say that was a program with mixed results, the second, Dr. Good.

MS. GOOD: I would make one comment about that. There is one program in the government where CRADAs have worked and they've been extremely effective and it's at NIST. And to my mind, that's the one that has worked the best. They can turn them around in about three or four days and therefore for specific kinds of activities that NIST can help industry with, those have been very effective. I would make that distinction.

MR. BEMENT: I may add, Mary, that one of the reasons why they have been effective, we use them very sparingly.

MS. GOOD: That's correct. Well, they use it when it makes sense.

(Laughter.)

And they don't kill it by paperwork.

MR. BODMAN: You mentioned before the improvement that could be made by Bayh-Dole. Maybe you could make a couple of comments, your thoughts on that?

MS. GOOD: Yes.

MR. BODMAN: We don't want to lose those brilliant thoughts of yours.

MS. GOOD: I was at a discussion at Emory University as a Sam Nunn group down there did a workshop for a whole day on Bayh-Dole, essentially that was the topic. And there's no question in anybody's mind of the value that it has done a lot of good things and not only that, it really goes with what states really are banking on these days and that's this business about clusters and where you have technology groups that can actually begin to do something about the economic development.

The downside that was discussed at some length has to do with problems primarily in the bio -- in the health sciences part of Bayh-Dole where people are concerned that the medical schools are getting too dependent on it in the sense that people are torquing their research, keeping their results to themselves and not discussing it with other researchers because they want to do the patents up front and things of that sort. So there was a fair amount of discussion about that, about how do you manage Bayh-Dole to get the positive aspects of it, but at the same time in particular areas like health sciences, where you don't want to impede the science by keeping it bottled up and not getting a real output and if you like good discussion among people, this was really the big discussion. And there were a lot of folks there. It's not such an issue in engineering or in the physical sciences, but it truly is a discussion today within the medical community and it brings up the whole question of conflicts of interest which is a major issue within the biosciences today, I think, and that, of course, does go over to the engineering pieces, but normally the conflicts there are of a different nature and they're not such -- they're not difficult to handle. But the conflict of interest issue is another one of the ones that is there.

MR. MILNE: I understood another reason is, that because of the many ways of gene expression, many times a company has to license many intellectual properties and so the royalty requirement to many universities pretty much wipes out any profits.

MS. GOOD: That's correct. There's a big discussion about the overwhelming or the bottleneck, if you like, by some particular patents where you can patent a particular gene sequence or something like that and then anything you do beyond that requires you to get that license. And so there's this big business about even universities can't do their work or they've got to license that patent to be able to do so. So there are those kinds of issues that are bubbling out there with respect to the Bayh-Dole and the biotech and biological sciences.

MR. BODMAN: If I could, I wanted to see if we could elicit some comments from Congressman Ehlers who helped create some of these structures and any thoughts he had we would appreciate.

REP. EHLERS: Thank you. What I put together is just a few comments which I didn’t know until 12 o’clok that I was going to be here, so these were hastily put together.

I just broke it down into the roles that various entities can play in this whole issue of innovation in America. First of all, let me mention that I’m very pleased with the attention that innovation is getting because I believe most of us in this room know that the innovation of the past 30 to 40 years is what resulted in the great economic expansion of the last decade. Yale University celebrating their centennial of their engineering department had a symposium on innovation recently and Alice Gast played a major role in that. I spoke at that as did some other good speakers. And I found it very beneficial to be there and listen to that. Innovation certainly deserves some attention.

The title "Unlocking Our Future Toward a New National Science Policy" -- this is the paperback version. If you'd like a free copy, just call my office and we'll be happy to send you one.

I deliberately entitled it "Toward a New National Science Policy" because I didn't think it deserved the honor of being called a national science policy, but I have delegated Phil Bond to work on the technology aspects of it and Jack Marburger to work on the science aspects of it. At least I've requested that they do that because I don't have the time any more and that's probably where Phil is now. He's busy working at it.

(Laughter.)

MR. BODMAN: I'll remind him of that when he gets back.

REP. EHLERS: Thank you. What I put together is just a few comments, which I didn't know until 12 o'clock that I was going to be here, so these were hastily put together.

I just broke it down into the roles that various entities can play in this in this whole issue of innovation in America. First of all, let me mention that I'm very pleased with the attention that innovation is getting because I believe most of us in this room know that the innovation of the past 30 to 40 years is what resulted in the great economic expansion of the last decade. Yale University, in celebrating the centennial of their engineering department, had a symposium on innovation recently and Alice Gast played a major role in that. I spoke at that as did some other good speakers. And I found it very beneficial to be there and listen to that. Innovation certainly deserves some attention.

As I see the various roles developing, the university role, I believe, is still the one they've done very well and that is simply basic research, but more and more, they are not able to fund that research as the costs have increased. And that is the role of the federal government, which I will get to in a moment.

The university also has an extremely important role, which I don't believe they've done that well. They've done the basic research extremely well, but if we are going to live in an innovative society, it's not just having basic researchers. It's not just having researchers at businesses. It's not just having a few innovative individuals. I think our entire society has to understand innovation and the math and science that's necessary to deal with innovation and development, whether you're worried about Future Shock type of problems or whether you're worried about lack of adequate worker training, I believe the most important university role that they have in addition to basic research, the role which is not being fulfilled now, is educating for innovation. That has two aspects to it. One, educating undergraduate students to think innovatively, to look towards innovation in the future and not just simply say, we're here to acquire some knowledge, and then go out and get a job. I gave a commencement speech last week in which I listed the title of the speech was "Everything I Need to Know, I Learned Too Late."

(Laughter.)

So I had ten sayings of things that I wished someone had told me along the way and one of those points was that your diploma, when you graduate is not a union card. It's not something to entitle you to work, but it's a learner's permit and we have to inculcate that idea in all of our students that they are just learning how to learn, learning how to think and their job for the rest of their life is innovative thinking.

But the even more important part of the university role, I believe, is educating K-12 teachers who use and teach science well and also understand and teach innovation well. That is a great dearth in this country. I've spent a good share of my time the last few years working on that problem. The federal government can do some things such as fund teacher training institutes and so forth, but the universities, I believe, have to do a much better job in that role and in particular, I believe they have to get the science departments and the schools of education talking to each other instead of looking disdainfully at each other across a big gulf. I think that is a major university role and I hope they step up to the plate and do that in the future.

Final university role, cooperate with business and government. They tend to cooperate very well with government because government gives them money, so they're forced to cooperate, but I think universities can do a much better job of cooperative with industry. Again, I see that improving in the last decade. It's much better than it was, but we still have a ways to go.

The business role, I see as research and development, not so much basic research because in today's competitive market and particularly since it's a global competitive atmosphere and other countries don't do as much basic research, I don't see American organizations or corporations doing that much basic research, but they still have a major role in research and development. Innovative management, I think, is extremely important. I hear it constantly about the federal bureaucracy and I have to tell you I've had contact with many different organizations in this country and there are a number of businesses, I believe, that are far more bureaucratic than the federal government. I'm not apologizing for the federal government. But we don't have a stranglehold on it. There are a lot of businesses that need far more innovative management.

Furthermore, training employees, for innovation, I believe is an important role for business and rewarding risk-taking and innovation. That's really something that both government and industry have to build. The biggest problem I perceive with the bureaucracy is not the intent of the individuals, it's not the type of individuals who work. In my experience it's that bureaucracy builds in risk-averse mentality because you don't get rewarded for taking risks. If you fail, you're in bad trouble. If you succeed, you don't get merit increase and that's true in the federal government and it's true in state government and I think it's true also in a number of industries. So I think industries and the government have to reward risk taking and innovation.

The federal government role. Number one, fund basic research which as I said earlier, extremely important. And I include in that the national laboratories, as well as funding Rita Colwell to her heart's desire, which, of course, is impossible.

(laughter.)

MR. BODMAN: I was wondering how you were going to do that.

REP. EHLERS: But we got a bill passed last week in the House which at least sets a goal.

MS. COLWELL: For which we are most grateful and thank you.

REP. EHLERS: Yes. Another federal government role which I think is also extremely important about K-12 education and that is to fund K-12 teacher training. It's going to take a shot in the arm. You have to wake people up. You have to give the universities a reason to think about getting the academic departments and the colleges of education together and I think the federal government can play a good role there and leverage a lot of effort without an awful lot of money.

Something else the federal government can do is tax credits for research and development. I know we have had them for some time. They were renewed year by year which made them essentially worthless because no person in business is going to do their planning based on something which the federal government might withdraw at any time. We now have five years which is a little better, but I think it should be permanent so businesses can plan accordingly.

Tax credits, also for capital investment, especially related to innovation. That's -- we have some tax credit programs, but -- and I honestly don't know how one would do this, but I would like to encourage tax credits on the part of the federal government for particularly innovative activities and if you can dream up a way to do that, great. I don't have any good ideas on that, but I think that activity is essential.

Final federal role which I think is very important and Mary talked about many aspects of that, it's what I call a cooperative extension service. The reason I use that term is that I was just amazed when I got into the political arena at both the county level and then the state legislative level. Michigan State University was a land grant university. When they made a new discovery at their laboratories, in the agriculture area, the next year farmers were using it in the fields. It's that rapid. And I thought why in the world can't we have something similar to cooperative extension service which the Agriculture Department has and have that in all areas, something that really works? And identifies the needs very clearly, identifies ways to bridge the gap or what I call the Valley of Death between the basic researchers and people who need the information. So I think that is also very important, the federal government role.

Local government role, fund K-12 education well, number one. That includes the state in that. Secondly, select innovation encouraging curricula. The curricula choice is a very major problem in this country, made worse by the fact that Texas, Florida and California, the three biggest states, pick textbooks on a statewide basis so the individuals selecting those textbooks have an inordinate amount of power over the curricula that are offered to the nation as a whole. And this, in fact, may be something that the National Science Foundation has done good work in that in the past, but local government really has to be encouraged to select innovation and encourage curricula, particular in math and science.

Finally, local government has to recruit well-trained teachers for math and science and innovation education. That's where the rubber hits the road on the K-12 schools and it's a different outlook on the part of the local administrators and the local school board.

The state role, I haven't covered. I will just say that I think in terms of the cooperative extension service approach that should involve the universities and federal labs, the states and the recipients. I think all three have something to offer. I have a chart which I didn't take along, but related to my science policy which puts in the hexagon all the areas, partner -- potential partnerships and draws lines between the potential partnerships. I really think what we need to develop is multi-partnership activities. The tendency has always been the federal government with the business whether it's through CRADAs or ATP or something and leading the state on or it's the university and the state working with something. You really have to develop a good partnership program involving federal resources, state know-how in regard to their businesses and the business community reaction to it. So I'll ask my staff to hand these out so you'll have them and --

MR. BODMAN: And make a copy of your spider web too.

REP. EHLERS: We'd be happy to do it.

MR. BODMAN: That would be good. Thank you, sir.

There were some other comments. We can invite comments on the Congressman's remarks if there are such. Ben, did you have a --

MR. WU: I was just going to say, if we can get that to -- one of the suggested metrics as suggested by Bayh-Dole is the licensing of the universities and AUTM has done what is considered one of the most comprehensive surveys that they do every two years. Terry Young, the past president, could be invited to say a few words about the survey and some of the results.

MR. YOUNG: Certainly. This is the ten year anniversary of the AUTM survey of institutions of higher education in the United States and Canada. The Survey provides data on a number of performance measures, such as patents filed, licenses granted, companies formed, and so on. The Survey has become a standard that is used by the press and others to measure “success.” But, the Survey also presents cumulative data for the entire nation that creates the impression that universities are making money “hand over fist” in this technology transfer activity. This is not an accurate conclusion. Income from commercialization versus the research expenditures in the best performing university is below 4 percent, averaging in the range of two and three percent of research expenditures. Royalties will never replace the sponsored research funding in academia. Our experience has suggested that there are five basic reasons for this enterprise of university tech transfer. One, technology transfer capability is needed to retain and recruit the best faculty. Secondly, Bayh-Dole has been instrumental in creating closer relationships between universities and industry. Both academia and the corporate world function very well in their respective but very different spheres. The two segments are brought successfully to collaborate in transferring embryonic university technology to marketable goods and services that benefit the public. Third, academic technology transfer is an engine for regional, statewide and economic national economic growth and development. State legislatures are raising expectations that university technology and its transfer to commercial goods and services will have significant and direct impact on State and regional growth.

Fourth, and most important to me, university technology transfer has enabled the creation of products that benefit all of us, by improving the quality of our lives. I am convinced that these products emerging from university research would not be in existence were it not for this mechanism of technology transfer. Protection of embryonic technology by universities induce investments by corporate partners, to complete the R&D necessary to deliver “real world” products to the public. Last, the model of technology transfer enabled by the Bayh-Dole Act returns money to the university for further research and education. The Bayh-Dole Act specifies how this income will be utilized: to return funds to the university for additional research and education; to provide incentive to faulty to engage in this process; and to support the administration of the technology transfer program. This information is in the AUTM Annual Survey. If any of you would like a copy of the FY00 AUTM Survey, I would be glad to send one to you. Give me a call.

MR. BODMAN: Thank you. Other comments, suggestions?

MR. YOUNG: Can I mention just one more for the record?

MR. BODMAN: Sure.

MR. YOUNG: For the record, I am convinced that the Bayh-Dole Act is one of America's greatest success stories; I believe history will so view the Act years from today.

MR. BODMAN: Thank you. Yes, Mr. Wrighton?

MR. WRIGHTON: I wanted to return to an issue that Mary Good was addressing in part in connection with the developments in the human health arena. I think there is a legitimate concern about the matter of conflict of interest and in the academic health centers where arguably a great deal of innovation is occurring, we need to embrace a patient first policy and I think that all of the academic health centers would agree that that's appropriate.

On the other hand, in order to bring benefits to patients in many cases the people best able to make the innovation, let's say in a medical device that might be surgically implanted, the best people to bring about those innovations are the practitioners, the most talented clinicians. And unfortunately, when they are involved in that kind of work, they are immediately in a rather complicated set of conflicts of interest and it would seem to me that we should be able to come up with something akin to a national review board for clinical trials of that kind. Each institution now has its own review board, but that group is also conflicted because of the potential positive outcomes for the university, and somehow we need to find a way that we can continue to make these remarkable advances in advancing human health and remove individuals from these very onerous conflicts and potential difficulties in connection with the implants and pharmaceuticals that are being tested on human subjects. It's a problem that I know that every academic health center faces and this is an area where I think the public needs to be involved and also an area where people who know the most, but typically surgeons, for example, are going to be innovating on almost every procedure, if you would allow that every case is just a little bit different. It's not as simple as it might seem and I think that we need to work out mechanisms to build those innovations and continue to march forward in advancing human health, but there have been a lot of examples recently which I think many would be aware of that have complicated the issue rather severely. I think that's an area where we could use some help.

MR. BODMAN: Where might such a board reside, Mark, in your view?

MR. WRIGHTON: Well, I think that while again it may seem to be conflicted, I think we do need to bring together people from different institutions. I'm thinking, for example, of a person at my institution who's one of the leading neurosurgeons who's working cooperatively with physicists and engineers, computer scientists, radiologists with a joystick, manipulate a magnetic particle inside your head. They can image it in real time. He's a very talented neurosurgeon of the traditional sort and the advantages that you can move that particle through the brain without doing damage, it can take a non-direct route.

Well, who's really going to do that other than this particular neurosurgeon? So maybe the review board would be other neurosurgeons, members of the public and they would oversee the clinical trials. But these are small departments typically and almost everybody knows everybody else. At first blush, it seems like it would be easy, but I think it's complicated. I think, in general, people from outside the institution need to be involved.

Another complication I'll just put on the table and perhaps George or others who are involved in the human health research arena would comment is the extraordinary tax that we now face or overhead associated with so-called material transfer agreements. Now people create a small biological safe hold and believe that it is going to save the world and every one of these has a more or less complicated agreement that surrounds its use by researchers other than those who created it. And it's a tremendous number of agreements, all the technology transfer offices have hundreds, if not thousands of them, and it's becoming pretty onerous.

MR. BODMAN: Biological centers?

MR. WRIGHTON: Biological centers.

MR. MILNE: An unintended consequence of the Bayh-Dole Act coupled with an emergency realization and that you could actually patent essentially the tools of research (whether it's a gene line, cell line or a gene or a way to manipulate those genes) has been to hinder biomedical research advance. This is particularly onerous when combined with reach-through royalties. This is not just an issue for industry but also for Academe. For example, if they're doing work at Washington University then at another university some researcher obtains that cell line, and uses it to make a further discovery, at what point is he or she, in fact, free to market that elsewhere? The maturation of university in this area covers from some real leadership in the NIH and from university based on the fact that it's both good business and good science to have nonexclusive licenses to various gene technologies, and also the belief that what people have begun to learn is that by charging a very modest amount of money and making these tools readily available, you, in fact, most often come out far better than by holding it exclusively to yourself and not allowing the net to be cast more broadly across the field. This relates to things the Congressman Ehlers talked about. The key lesson of moving agricultural inventions out in the field was that it was free to move at a very high rate. So I would encourage people to think very seriously about both the reasonable pricing and the use of the concept of non-exclusivity. Our focus should be on creating a web which is creating maximum value.

I would certainly like to us move down that path.

MR. BODMAN: Congressman?

MR. BREMER: Just a brief comment on what George said. If that's the approach that's to be used, then industry should adopt the same standards that universities do and that is not the case with material transfer agreements. So that has to be looked at carefully.

I'd also like to add one comment to Terry's remarks, namely, that the Bayh-Dole Act is an operation that didn't cost the taxpayers anything. There were no appropriations required to make it operative. People overlook that fact. Therefore, its contribution has been additionally beneficial for that reason. Mary Good's presentation, which was great for legislative activities in the 1980’s, should be expanded to include two non-legislative milestones. The Court of Appeals for the Federal Circuit which was formed in 1982 and the Chakrabarty decision in 1980. That Court, through Judge Markey’s able leadership, took away the forum shopping for patent infringements and other law suits. I firmly believe that the establishment of that Court was a major contribution in getting a level playing field for everybody in the country in the intellectual property arena. The Chakrabarty decision, which held that living things were patentable, opened the way for what the biotech industry is today.

MR. BODMAN: Thank you. Congressman Ehlers?

REP. EHLERS: Just a question of George and others. Are you suggesting we need to change our intellectual property rights laws or are you -- aren't you seeking anything that major?

MR. MILNE: I believe our intellectual property laws, have in fact served us quite well and favor no changes as a first course of action. I think it maybe much more to the point just to follow a path which Harold Varmis from NIH and others have pioneered which focuses on non-exclusive licenses for research tools. I think the time is right to make some real progress. As Mark has illustrated, universities also now understand that ready access is critical to the academic enterprise as well as their ability to market their intellectual property. So I believe that the marketplace will probably handle this. As Howard was saying, it is Pfizer's view that we are prepared to make a similar problem with Washington that are prepared to operate under a regime of non-exclusive access to research tools. We are hoping to compete in the area of true innovation rather than the tools under which it operates.

I believe we should not change the intellectual property rules, but rather engage in a practice which is workable and sustainable.

MS. GOOD: I might remind people, there was one example, one of the very early examples that was handled just exactly as you said. The Boyer patent from Stanford was handled exactly like that and everybody licensed it because it was the basic patent in which you then had to do other things. And they put a fairly reasonable price on it and they were probably paid a lot more money, frankly, with that reasonable patent -- I mean licensed to everybody than they would have if they'd held it and tried to make a big splash out of it all by itself. So there are some examples out there where that's been done and worked very well.

MR. MILNE: I think there's room for leadership at the university level that looks at -- it's in the context of conflict of interest. If you have an individual inventor who has got something, it may be quite possible that he or she and their venture capitalists will decide that they can put a lock on cascading events. This is sort of an interesting blockade created. And so -- but there is kind of a conflict that exists there. I think there's room for some institutional leadership in regards to that.

MR. BODMAN: Terry, did you have a comment on that?

MR. YOUNG: A short comment for Congressman Ehlers.

MR. BODMAN: Sure.

MR. YOUNG: Congressman, I do not believe a change in intellectual property law is needed. I perceive that the National Institutes of Health is addressing the issue with guidelines on material transfers and guidelines upon research tools that universities should make available on a widespr