John-Paul Flintoff

Progress at a price

Should university scientists profit from publicly funded research?

“Look at this,” says Peter Dobson, lifting a small jar and gently shaking it. The stuff inside, he says, is powder. Most powders, if you agitate them, behave predictably: even the finest talcs pile up into heaps, and scatter in dusty clouds. If the powder consists of nanoparticles – as small as one billionth of a metre in diameter – its behaviour is liable to be weird. Peering closely at the vial in Dobson’s hand, I’m amazed to see its contents ripple, and splash.

By popular consent, few areas of scientific enquiry are more thrilling than nanotechnology. The physical properties of nanoparticles provide constant astonishment. We simply have no idea what these particles can do. That’s why visitors to the gleaming laboratories of Oxonica, the company Dobson co-founded in 1999, generally leave the premises with their heads buzzing.

Leading me past furnaces, centrifuges and freeze-driers, Dobson enters a side-room and gathers three dishes of powder on a work-surface. Each powder consists of precisely the same substance. But by varying the size of the nanoparticles from one dish to the next, he can work magic. Switching on an ultra-violet light, he passes each dish beneath it: the first powder is transformed to the clearest blue colour, the next comes up red, and the third bright green.

Within ten years, the worldwide market for nanomaterials could be worth as much as £10bn a year. With luck, Oxonica, which currently occupies a modest suite of rooms at a science park between Oxford and Woodstock, will control a sizeable portion of that market – but only if it can identify a practical use for its nanoparticles. One possible application could be visual displays: the clarity would be exceptional, and energy consumption attractively low. Another possibility, involving particles of an entirely different substance, could significantly improve sun-lotions (understandably, Oxonica prefers not to describe this lucrative possibility in detail). Either way, Dobson – a softly spoken Cornishman, whose boyish enthusiasm is only marginally compromised by his woolly white hair – can reasonably hope to make a pile of cash.

Until relatively recently, Dobson wouldn’t have been able to profit from his research, for the simple reason that he’s employed as a full-time academic – he’s professor of engineering at Oxford University, and a fellow of Queen’s College. Outside the US, academics have not traditionally been encouraged to exploit their work. More to the point, they’ve tended to lack a mechanism for doing that. In the past, what tended to happen was that university researchers investigated ideas at the request of some unaffiliated business, in return for a lavish meal, or some new piece of equipment. But universities – constantly aware of pressures on their revenue – are no longer willing to give away know-how on this basis. Instead, they’re establishing formal arrangements for “technology transfer” (as the jargon has it). And of all British universities, the most successful appears to be Oxford.

The process began in 1986, after Margaret Thatcher granted universities the right to exploit publicly funded research. In 1988, Oxford set up a wholly-owned subsidiary, Isis Innovations, to manage the dual process of patenting inventions and licensing that intellectual property. Two years later, the university established the Oxford Innovation Society; members, including pharmaceutical and IT companies, pay handsomely to secure first sight of all new ideas. But Isis failed, initially, to make much impact. So in 1997, the university took a fresh look. It raised the level of investment, and appointed a new managing director, Tim Cook.

The first thing that strikes you about Cook, 53, is his enthusiastic manner. This helps him to pass effortlessly among academics and business figures alike; but there’s more to him than superficial charm. He’s highly qualified, with a doctorate (in cryogenic engineering) from Oxford; and he has worked for years in industry and as a private investor. Better still, he has personal experience of technology transfer, having co-founded one of the first companies Isis helped to spin out, Oxford Asymmetry. He applied for his current job after spotting an ad in the FT, and plainly adores it.

“It’s great fun,” he tells me. We’re sitting in the auditorium of a lecture hall, shortly before a presentation to the Oxford Innovation Society. “I’ve got access to 4,500 really bright scientists. If I hadn’t been doing this job I would never have met Lionel [Tarassenko], and in an hour’s time you will understand why it’s a good thing to meet someone like Lionel.”

At 6.00pm, the presentation begins. Tarassenko’s expertise is in neural networks, like nanotechnology a particularly hot area of scientific enquiry. Mercifully, he begins with the basics. “This is about how the brain processes information,” he says, pointing at cauliflower-shaped diagrams. “The point is to construct a completely different type of computer. With neural networks, the computer actually learns.” Tarassenko’s previous triumphs include an “intelligent” microwave cooker which became a best-seller for Sharp. Today, he’s talking about something with even greater commercial appeal: monitoring systems whose usefulness could extend from patients in hospitals to aircraft engines.

At the end of the session, a man in a dark suit raises a hand. “Can I ask you a question, a horribly commercial one? How far are you from putting out a product?” Maybe two years, answers Tarassenko. Maybe three.

Sir Peter Williams, chairman of Isis and master of St Catherine’s College, steps forward. Altogether, he says, Isis has patented 200 inventions in the past four years and spun out 19 companies in the same period. Five spin-outs have floated. There’s been “a blurring of the boundaries” between business and academia, he says. “Tim Cook has transformed the way academics view this.”

At the dinner party afterwards – in Magdalen’s great hall, where academics and investors sit along the long dining tables – Cook explains how his operation works. First, academics approach Isis to patent their inventions, then Isis licenses the patent, either to somebody else or back to the inventor, having first helped him or her set up a company to exploit it. This may not sound particularly complex, but pulling it off successfully is difficult. Several other universities, duly impressed, have sent ambassadors to Oxford to study Cook’s model.

To learn more, I visit Isis and talk to Herb Askew, who runs a team of six administrators specialising in physical science (another team looks after life sciences). Like Cook – and practically everybody else at Isis – Askew has extensive experience of both research and corporate finance – stemming in this case from spells at Castrol, Alcan and in the City. In his capacity as investor, Askew once walked away from a deal with Isis – in the period before Tim Cook arrived – because he didn’t feel they understood the requirements of commerce.

Back then, he says, most academics had no interest in the commercial aspects of their work. Even those with a patent to their name would commonly not bother to include that on a CV. (Much greater prestige attached to papers published in academic journals.) Still today, some don’t understand that their inventions cannot be patented if any details have been published elsewhere.

“If people come up with some research,” he says, “and they want it published in a journal, we say, ‘OK, but please give us a look first.’” Not so long ago, he says, “Somebody went off to a conference in the States, and suddenly a colleague came in and said, ‘This is the paper he’s going to deliver this evening.’ Recognising a valuable proposition, Isis got to work, turning round a patent application in seven hours. “But if you publish that, the buggers [academics] will think that’s all the notice we need, and we need much more. Even a week is not a great amount of time, but it’s better than seven hours.”

Askew takes a typical file, drops it heavily on the table, and opens it up. Inside, it contains a generalised description of the idea, research notes crammed with arcane symbols and terminology, and a receipt from the Patent Office. Then there are international search reports – costly investigations to check that nobody else has had this particular idea – and papers relating to patent applications in overseas jurisdictions. “You have to decide how many countries you want,” says Askew. “The US, Europe and Japan is probably enough. The Japanese application has to be translated, and that is where we start picking up some very heavy costs.” (More expensive still, scientists must sometimes be flown abroad to answer questions by overseas examiners.)

As he closes the file, I can’t help noticing a familiar name among the four applicants – our friend with the powders, professor Dobson. That’s right, says Askew. “Dobson’s quite commercial, for an academic.” The compliment is not intended to be backhanded; but it’s telling that Askew expresses it like that. Dobson would probably put it the same way himself. Despite having nearly 30 patents to his name, and despite complaining about the cramped university labs, in a converted girl’s school, he’s happier being an academic than a businessman. Before taking up his post at Oxford, Dobson quit a job at Imperial College to work in industry at Phillips. But he missed the academic environment. “Come October, I started to miss the lecturing… Most of us scientists realise we’re not going to make good managing directors.” (Though he co-founded Oxonica, and owns a good part of it, Dobson leaves the management to executives hired by Isis.)

“With spin-out companies,” Askew explains, “you really do need proper managers. Investors are not going to write out a cheque for £1m and give it to an academic: academics would spend all the money on research – they have no concept of marketing or PR.” So everybody’s happy: investors give funds to managers they can trust; academics get a shot at making big money; and the university, while sharing those profits, manages to retain its prized staff – the source of many more inventions to come.

In reality, the situation is more complicated. For a start, there’s an inherent tension in Isis’s position. Cook and Askew insist that Isis will always look after the interests of inventors in negotiations with license holders. But sometimes it is the inventors themselves who, through a spin-out company, seek to license their own idea. And since spin-outs commonly put research contracts back into the inventor’s department – paying around £50,000 a year, typically, for facilities and a full-time researcher – Isis can come under pressure from the department to license the IP at any cost.

At the early stages, Isis clearly aligns itself with the interests of the university. “People are turning in so many projects, now,” says Askew, “that we have to turn some away. But if professor X – the world expert – says, ‘I have the greatest idea’ – how are we to judge?”

The solution, he hints, is to patent as much as possible, and to hope investors can be found before the fees need paying. That’s not always possible. “We’ve got some stuff coming out of the Clarendon that is so advanced we have to patent it. One is for light-powered computers. They might not come into use for several years, so we’ll have to keep that patent and bear the cost as long as we can.”

Tim Cook likes to joke that he takes a million pounds from the university each year and gives it back five million in illiquid equity. For now, after a string of successes, he can afford this levity. But for how long? “We have to retain confidence,” he says, “because each spin-out company takes around five years to float. It’s like in Peter Pan, you have to say you believe in fairies, because if you don’t, another fairy dies. So it’s important that the university continues to believe in this for the next five years.”

By that time, according to Sir Peter Williams, Isis may have set a pattern for educational establishments around the country. “Much is changing,” he says. “Fee structures are already a big question. The great principal of free education for all is under threat… Since Isis was founded, the university has created £2bn of industrial equity. That allows the university to invest in its core business – scholarship, research and teaching.”

Not everybody sees it like that. A sizeable minority believe it is wrong in principal for academics to dabble in commerce, arguing that this skews their research – pulling them away from free and open investigations in the direction of whatever they think might make money. What’s more, they fear that unhealthy divisions will open up between the academics who are commercially minded and those who aren’t. Tim Cook, in a flight of fancy, hints at precisely that: “If this [university] were a business,” he says, “the scientists might be justifiably unhappy that they’re paid no more than the people in humanities, since it is science that brings in the money. But that’s only if it were a business – which of course it is not.”

2167 words. First published 17 March 01. © FT Magazine