Technology Transfer Systems in the United States and Germany: Lessons and Perspectives (1997)

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ANNEX III Examples of Technology Transfer in Germany GTS-GRAL: TECHNOLOGY TRANSFER FROM UNIVERSITY TO A NEW TECHNOLOGY-BASED FIRM Starting in 1976, technology was developed to design a device-, computer-, and application-independent graphics interface. The interface was to allow for reusable graphics applications and to establish a common, state-of-the-art graphics programming technology. This development was initiated by Prof. Encarnação, head of the graphics institute at the Technical University of Darm- stadt. He made this an international effort by involving the national standardiza- tion bodies of various major countries and the International Standardization Or- ganization (ISO). These standardization activities resulted in a first graphics standard GKS (ISO 7942) in 1985, followed by a number of other graphics stan- dards on CGM (ISO 8632), PHIGS (ISO 9592), and CGI (ISO 9636). In parallel, Prof. Encarnação initiated the implementation of a prototype at his institute to verify the applicability of the theoretical work to practical situa- tions. The design team worked in the DIN and ISO groups on one side and gathered practical experience on the other. One of this team’s members was Günther Pfaff, a research assistant in Prof. Encarnação’s group, who also coau- thored a book on computer graphics programming with GKS. In addition to the goals of specifying a graphics standard and accompanying this work with a prototype implementation, a secondary goal was considered as well: to provide a kind of public domain implementation to nonprofit organiza- tions that could also be licensed to industrial parties interested in this technology. The nonprofits would get a time and know-how advantage if they based their own products on such a prototype system. In exchange, they would have to provide funding to implement the prototype. 349 

350 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY It became quickly evident that the successful implementation and distribu- tion of a professional graphics library such as GKS could not be done from within the university. Also, third-party funding was not available at short notice. There- fore, in 1984, Günther Pfaff joined the privately held company GRAL, which was started some time before by a former assistant of Prof. Encarnação. GRAL hired two programmers and under the management of Günther Pfaff, an industrial implementation of GKS (GKSGRAL) was developed in a 1-year period. In order to bring in professional marketing and sales experience, GRAL entered into a joint venture with a young sales company (GTS) to form GTS-GRAL. They released the first product version and quickly acquired a number of customers within Germany. However, it was soon recognized that substantially more mar- keting and development resources were needed for GTS-GRAL to become an internationally recognized player in the market. Late in 1985, a venture capital company came on board and provided around $2 million over a period of 2 years. GTS-GRAL developed the product further to cover all major computer operating systems and graphics peripherals existing in the market. A distribution network was established to cover the European countries as well as the United States. GTS-GRAL grew to a $4 million company by 1987. After the appearance of X-Windows and its rapid market acceptance, the emphasis of GTS-GRAL was shifted to X-Windows products as a distributor and to graphics packages centering around the CGM and CGI technology (the GRALX product line). This development continued in line with international standards developed after the GKS era. As of 1995, GTS-GRAL had grown to a multimillion-dollar company in Germany. Most recently, it opened subsidiaries in the United Kingdom, France, Benelux, and Switzerland. In addition, an office was opened in San Jose, California, to adapt the GRALX graphics technology to the U.S. market. Looking back to the relation of GTS-GRAL with the original research activi- ties at the university and the technology transfer involved, three aspects are im- portant: 1. the intellectual property rights related to the functional specification; 2. the ownership of actual software developed; and 3. the know-how acquired by students and research assistants during their university stay. The definition of the graphics system in this case resulted in a published ISO standard; in this way, the functional specification became public property. In fact, numerous implementations of GKS were developed and several dozens be- came known on a broader basis. So, there was no issue of licensing intellectual property rights. The issue of transferring a software product to the industry for further subli- censing is more interesting. In this case, the prototype developed in parallel with the standardization process was mostly intended to cover and prove the applica- 

ANNEX III 351 bility of subaspects of the overall system definition. These modules were far from a salable product or even from forming a basis for completion as a full product. If more resources, in the form of computer equipment and a professional software development environment, had been available, a sublicensing to origi- nal equipment manufacturers (OEMs) could have been meaningful. What remains is the time-to-market advantage of perhaps 1 year for the people involved with the specification process. This represented the most critical factor for GTS-GRAL’s success with GKS. CTS-GRAL, Dr. G.E. Pfaff, Darmstadt, February 1996 CO2 DYEING PROCESS: INDUSTRIAL COOPERATIVE RESEARCH The original idea of using supercritical fluids as media for dyeing processes came from the Deutsches Textilforschungszentrum Nord-West (DTNW) in Krefeld. The concept is based upon the fact that the textile finishing industry is a large consumer of water, and therefore new technologies requiring little or no water consumption would be highly desirable. The advantage of using super- critical media (the process has been termed SFD [Supercritical Fluid Dyeing]) is that no water is used; therefore, no waste water problem exists. The Forschungskuratorium Gesamttextil, an industrial research association, asked for public support of a related research project and received a grant through the Association of Industrial Research Organizations (Arbeitsgemeinschaft Indus- trieller Forschungsvereinigungen, AiF) (AiF-No. 8666). All research activities in this field have been carried out under the guidance of DTNW. One doctoral thesis, one university diploma work, one work for a college diploma, and several additional laboratory investigations have been com- pleted. The first breakthrough occurred after completion of the AiF research project. The research results are published in scientific papers and have been pre- sented at national and international meetings and in exhibitions on environmental technologies (21 published papers, 5 others in press). The possibility of constructing an SFD apparatus, which was central to the research project, was demonstrated at the technical level. A prototype apparatus was shown at the ITMA ’91 exhibition in Hannover. Following this, some me- dium-scale industrial machines have been built and introduced in practice. Based on further results and experience, a completely new construction was presented at the ITMA ’95 in Milan. Research in supercritical CO2 represents a high ecological standard; investi- gations in the industry indicate that SFD can be handled very economically. At present, research is under way to create new products using the new technology. In the longer term, besides their use in new dyeing processes, supercritical fluids 

352 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY may facilitate other textile finishing processes, for example, impregnation or even biochemical or enzyme catalysis. Dr. Eckhard Schollmeyer, DTNW, Krefeld, August 1995 PRODUCTION AUTOMATION: TRANSFER FROM A FRAUNHOFER INSTITUTE TO INDUSTRY Tasks and Targets of the Fraunhofer Institute for Production Technology and Automation (IPA) The main emphasis of the institute’s R&D work lies in solving the organiza- tional and technological problems posed in industrial production. The IPA’s R&D projects are aimed at pointing out and exploiting reserves in automation and at rationalizing the plants in order to maintain and enhance com- petitiveness and jobs through improved, more cost-effective and environment- friendly manufacturing sequences. In the course of realizing these targets, methods, components, and appli- ances—even complete machines and plants—are developed, tested, and employed for demonstration purposes. The projects are mainly commissioned by industrial firms. Projects promoted by state research programs are also carried out. One specialty of the institute deals with customer-specific solutions in the area of material-handling automation, (e.g., palletizing, commissioning, conveying, magazining, handling, and transporting). The services offered range from plan- ning to the realization of partial systems up to complete material-handling systems. The activities of the institute will be illustrated by the examples of material- handling automation in palletizing and commissioning. Automatic Chaotic Palletizing (ACP) The palletizing of packing units from a random product range into a store assortment, ready for dispatch, is carried out exclusively manually at present. Economic and work-ethic reasons argue for automating this process. However, for a random packing unit mix a suitably fast palletizing algorithm was lacking, one that, for example, would give an industrial robot the position for the next packing unit on a pallet already partially loaded with packages. With the institute’s own funds (basic funding), an algorithm, capable of going on-line, was developed for palletizing cube-shaped packages in a random assortment. Oper- ability was proved by experimental means. A major commercial enterprise (Würth GmbH & Co.) was interested in uti- lizing the developed process. By means of a provisional prototype, built in the company’s own distribution center, the technical feasibility and the capacity of the algorithm to meet the specific demands were shown. A prototype facility was 

ANNEX III 353 realized in the next project phase, together with a manufacturer of material han- dling systems (Beumer KG). At present, a large-scale facility, consisting of five robot palletizing stations for a new goods distribution center, is being built. At the same time, Beumer is marketing the ACP to their own plans or specifications support as a licensee of IPA. The algorithm is being further developed in re- sponse to customer- or task-specific demands. The future situation looks bright for IPA: • The institute has gained the Würth Group, a well-known, growth-oriented enterprise, as a key, trailblazing customer. • Beumer KG, a major company in the material-handling field, is marketing the ACP product worldwide to their clients. This means a wide market access for IPA. Automatic Commissioning with the Help of Robots Along similar lines, IPA is at present working on system solutions for the automated commissioning of easily separable and handled packages (e.g. bags, cube-shaped or cylindrical packages). The pathway from the idea to the well- financed work area should resemble ACP’s. Technical feasibility has already been confirmed by simulation studies and a system constructed for the Würth Group. A prototype should clarify the suitabil- ity of the process. Customer-specific solutions will be worked out in collabora- tion with a material-handling-systems manufacturer. The target is the technological leadership for difficult commissioning jobs, in cooperation with leading machine and plant manufacturers. With the help of this cooperation, we can gain access to important customers of these systems’ firms with their often worldwide organization and professional marketing. FhG-IPA, Dr. M. Hägele, Stuttgart, February 1996 MEDIGENE: ESTABLISHMENT OF A START-UP COMPANY IN BIOTECHNOLOGY A group of scientists of the Gene Center Munich (University Munich) and a representative of the chemical industry founded the start-up company, MediGene, in June 1994, with the goal of exploiting basic research results and leading tech- nologies developed at the Gene Center. MediGene is a venture-capital-backed company (DM 3 million). Further financing (DM 3 million) is coming form the Federal Research Ministry and the State of Bavaria. The company is collaborating with the Gene Center Munich and many other universities and clinics in Germany and abroad. In addition, it has also entered strategic alliances with partners from the pharmaceutical industry. 

354 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY MediGene expects to produce its first products in about 5 years. Because MediGene is involved in biopharmaceutical research, all products developed have to pass through clinical trials before being commercialized. MediGene’s first clinical trial was slated to begin in 1996. After the company was formed, the intellectual property rights of scientists at universities were transferred to MediGene and patents were applied for. The patent holders are the inventors and the company. MediGene holds exclusive rights, and the inventors will, in the case of commercial success, be paid accord- ing to the “German inventor law.” Because the firm is in the early development stage, it is not yet possible to assess whether MediGene will be successful commercially. Dr. Peter Heinrich, MediGene, Munich, August 1995 TECHNOLOGY LICENSING BUREAU (TLB) OF THE HIGHER EDUCATION INSTITUTIONS IN BADEN-WÜRTTEMBERG Introduction The TLB (Technology Licensing Bureau) of the Higher Education Institu- tions in Baden-Württemberg is a facility of the University of Karlsruhe that for several years has been exploiting, on behalf of several universities in the region, technologies that are generally the basis for commercial patents or applications for patents. The following examples describe in brief the course of some TLB technology transfer activities in a variety of technology fields. Innovation Award for a Topical Subject The Karlsruhe University, the National Research Center Karlsruhe (FZK), and the German Cancer Research Center (DKFZ) collaboratively developed a new method for cancer diagnosis and therapy, based on DNA encoding variant CD44 surface proteins. The initial invention on which all the subsequent work is based was made in 1990, and this work in its entirety was awarded the Baden- Württemberg research award in 1995. One of the inventors approached the Technology-Licensing-Bureau (TLB), as he had already reached an agreement with a large German pharmaceutical company enterprise (Boehringer Ingelheim) on the private sale of the invention for DM 50,000. In view of his involvement with the FZK and the presence of a co-inventor, an employee of the university, he wanted to settle this matter as quickly and smoothly as possible. In the FZK, university professors who work as heads of FZK institutes are obliged to assign their rights to research results to the FZK, according to a clause in their contracts on extra jobs (sidelines), so contact was made with the FZK patent office. Since the patent office of the FZK is also bound by a framework 

ANNEX III 355 agreement to handle the patent business of the DKFZ, it was agreed to let the FZK take over responsibility for the case. Since this invention did not relate to mainstream R&D activities of the FZK, a patent attorney experienced in the field of gene technology applied for a joint patent for all three institutions. After the original German patent application had been filed, negotiations were conducted with the above-mentioned enterprise and, as a result, a long-term research cooperation (budgeted at more than DM 500,000) between the FZK and the company began, which included the granting of an exclusive license by the university, the FZK, and the DKFZ. Efforts to introduce the first products to the market include submission of permit applications with, for example, the German Federal Health Office and the U.S. Food and Drug Administration (FDA), which are regularly required for products relating to this type of invention. Measuring Instrument to Determine the Diameter of Particles Transported in Currents The exact measurement of the diameter of particles that are transported in fluids is an important precondition for further development in many technology fields, including • mechanical engineering, • spray techniques, • energy production, • “clean-room” technology, and • protection of the environment. Research into laser methods to measure currents and particles has been car- ried out for years at the Institute of Hydromechanics of the University of Karlsruhe. A process to render the flow field visible in real time was patented only a few months after the patent was applied for and shortly afterward was licensed to an American company that is one of the world’s leading manufactur- ers of this type of equipment. Another recently patented invention by the hydrodynamics institute makes it possible to determine in real time the diameter of particles in gas or liquid current flows without physical contact. The Karlsruhe PALAS (PArticle-LASer) GmbH was one of the founding firms in the Karlsruhe Technology Factory (a business incubation center) and has made a name for itself even outside Germany, especially in the field of particle supply and analysis. In the past, PALAS repeatedly has prepared the way for scientific instruments to gain access to the commercial market by producing tai- lor-made prototypes and by skillful marketing measures. The university and the company agreed to do joint prototype development on the basis of an option agreement and to establish a formal licensing agreement after the preparatory work has been completed. 

356 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY Diesel Soot Elimination A medium-sized company situated in Cologne and part of a U.S.-Japanese international concern is active in the field of dust elimination and milling technol- ogy. Among the inventions of the Institute of Mechanical Engineering of the University of Karlsruhe handled by the TLB, there are at present two for which contracts have been signed with this company, including the “electrocyclone for diesel soot elimination.” The problem of soot elimination is one of the most difficult in the field of dust elimination because of unfavorable physical parameters. Despite decades of international research efforts, no suitable process had been developed. A starting point was the electrocyclone, which was taken up again in work on a Ph.D. thesis in the institute. It was possible to obtain satisfactory results for soot elimination through suitable modifications in the construction parameters of electrocyclones. This invention was promoted by the European Research Center project on measures to clean the air. According to the rules of the sponsoring agency, the University of Karlsruhe applied for a patent. In spite of considerable efforts to find industrial partners, no starting point for awarding a license or the start of a cooperation for further (commercial) development could be found initially. The doctoral candidate took a job with the company after finishing his thesis. The company had been trying for some time, more or less without success, to eliminate the soot from standing diesel installations, as customers in the shipping industry must conform to new exhaust emission norms when sailing in harbor. After the firm was informed of the invention of the University of Karlsruhe and was convinced that the new employee would build his efforts on the entire know- how gathered at the university during the development process, an option on the further development and future exploitation of the invention was signed in July 1995. The second contract, with this same company, concerns the invention of a process to eliminate the smallest particles, which opens up a realm of possible applications in gas purifying technology and the synthesis of valuable materials. The high technical potential of the invention was confirmed by the firm’s initial steps to upgrade the process to large scale. Optimization of Component Parts Using Finite-Element Method Software—Company Set-Up At the Institute for Machine Construction of the university, a doctoral can- didate initiated the so-called Computer-Aided Optimization System Sauter (CAOSS), a finite-element method (FEM) optimization program that can be used as an additional module for most of the already-known software packages on the market, such as ANSYS and NASTRAN. It can solve various component part optimization tasks and, in the long run, leads to savings in materials while simul- 

ANNEX III 357 taneously improving the strength or life cycle of the components. CAOSS was given the ”European Academic Software Award” in 1994. For some time, the doctoral candidate has been contemplating exploiting CAOSS commercially in a start-up company. Since the beginning of 1995, he has done this with the support of Baden-Württemberg’s program for start-up com- panies created by university graduates, which is funded by the Ministry for Sci- ence and Research. The TLB has supported the candidate in the past, not only in reaching a software licensing agreement with the university that allows him to commercial- ize the CAOSS copyright, which fell to the university, but also in comprehensive counseling when applying to the promotion program mentioned above. At present, TLB assistance is concentrated on the possible application for trademark protection, as well as drawing up possible sublicensing and distribu- tion agreements with firms that should back up the new firm, especially in the fields of national and international distribution. Efforts Do Not Always Meet with Success—Solar A.C.-D.C. Converter Within a promotion project of the Energy Research Foundation Baden- Württemberg, a completely new solar a.c.-d.c. converter system was developed at the Electrotechnical Institute of the university. This system promised functional improvements and at the same time price reductions compared with state-of-the- art techniques. After a rough market analysis and preliminary discussions with several par- ties interested in licensing the invention, the institute together with the inventor decided not to apply for a patent, as this could have been counterproductive to the efforts to commercialize the invention. Small and medium-sized enterprises in the electrotechnical branch do not necessarily like using patent rights as a secu- rity measure, since these entail an obligation to publish, and the smaller enter- prises fear that they would not be able to defend themselves against imitators from big industry. Negotiations were held with a number of medium-sized enterprises, and sev- eral expressed interest in an exclusive license agreement and made offers. Then, the consent of the Energy Research Foundation to an exclusive license agreement for a limited period of time had to be negotiated, as this case was not foreseen in the statutes of the Energy Research Foundation. It took about 5 months to obtain this consent; then, the best offer got the license. The money involved was not the only deciding factor; the size and the know-how of the enterprise in the field of electro-solar technology were also taken into consideration. Immediately, a company that had not been awarded the license took the uni- versity to court, claiming damages of DM 750,000 because of lost profits, alleg- ing that the licensing agreement had already been promised to them and claiming 

358 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY to have already made a considerable investment with a view to going into produc- tion. The university was involved in considerable administrative work for ap- proximately 10 months, and the case was finally dismissed on all counts. In the meantime, the licensee had great difficulties in introducing the product to the market. This was in part because of the negative public views of solar energy. This negativity resulted when the government promoted the technology for several years but then permitted electricity suppliers or big industrial firms to buy up the production plants for solar cells and then transfer them abroad, due to a lack of returns. The promotion of the technology in Germany was no more than the prover- bial ”drop in the ocean.” Whereas in Japan, 100,000 roofs were equipped with solar systems at public expense, in Germany, only 1,000 roofs were equipped by the national government, although some federal states set up additional smaller programs. The solar industry would need a quantum leap in production volume in order to be able to offer attractive prices. Only if such an increase were guaranteed would chances improve for selling the solar-current converter of the University of Karlsruhe. It can be noted that, in the meantime, technology transfer has been achieved, even in a medium-sized enterprise in Baden-Württemberg, albeit at great cost (court case, negotiating new conditions for public support rules). But the desired final result, a product in the market on a large scale, still remains in the distant future, if it can ever be achieved at all. The assistance provided by TLB to the industrial partner is now focused mainly on the attempt to find distribution part- ners for the licensee in southern Europe or more especially in the United States, where market conditions are more favorable right now. Summary The brief case studies presented here illustrate the manifold mechanisms and courses of technology transfer. Although the examples do not provide a basis for generally acceptable conclusions in the strict scientific sense, they provide in- sights in the following areas: • legal framework conditions; • receptiveness to technology transfer of large as opposed to small firms and start-ups; • time and effort to market; and • framework conditions conducive to success (personnel transfer). LEGAL FRAMEWORK CONDITIONS There is reason to believe that it is neither the consistent reduction in price nor simplifying the access to technologies from the public sector that leads to 

ANNEX III 359 successful technology transfer, but rather the creation of possibilities to exclude competitors that seems to motivate companies to adopt and actively pursue mar- keting. It is apparently helpful if the transfer is achieved, not by simply ceding the rights to use, but by allowing the research institutions to remain rightful own- ers and so retain a permanent right to decide on the future exploitation of the technology. The cooperation between national research centers and universities in tech- nology transfer seems to work, although complex legal framework conditions in the patent area and in the area of framework conditions issued by sponsoring agencies do not really encourage cooperation in individual cases. RECEPTIVENESS TO TECHNOLOGY TRANSFER OF LARGE AS OPPOSED TO SMALL FIRMS Not only large concerns—sometimes operating multinationally—but also small and medium-sized firms are to be found among the participants in technol- ogy transfer with public research institutions and universities. There are grounds for the theory that large enterprises generally come better equipped to cooperate on a high-technology level with public research bodies. Small firms are only then successful if they themselves have emerged from the research environment, that is, if they have a product range oriented to modern technologies, understand the aims of the public research institution system, and are capable of introducing their technology-oriented products to the market. TIME AND EFFORT TO MARKET The phrase “time to market” is understood universally as the key to the sur- vival in industrial competition. There are grounds for the theory that the results of publicly funded research cannot be utilized to shorten drastically innovation cycles, as is often deemed necessary, especially within political circles. Feeding fundamental research results into the markets via technology transfer measures is, depending on the technology area, a mid- to long-term task that regularly needs substantially more resources than the investment in the originating R & D process. FRAMEWORK CONDITIONS CONDUCIVE TO SUCCESS Results of publicly promoted research that are amenable to technology trans- fer do not find users by themselves. The matching of inventors and suppliers to potential producers is an important task, one in which there is plenty of room for systemization and further development. From the point of view of someone who has to market the results of techno- logical research, the question arises whether it is satisfactory to commercialize a 

360 TECHNOLOGY TRANSFER SYSTEMS IN THE UNITED STATES AND GERMANY technology simply because the inventor joined a company that by chance needed this invention. Would this company have been identifiable under different cir- cumstances? Could it have been motivated to transfer technology without this personal factor? Or, to put the question another way: What role do these and other framework conditions have in the success of technology transfer as a whole? The theories and questions outlined here should be checked continuously in the future, using broader experiences and data bases. TLB, Thomas Gering, Ph.D., Karlsruhe, August 1995