Israeli universities such as the Technion are trying to capture more royalties from products created from their research.Last summer, Jerusalem-based Mindset Biopharmaceuticals added a researcher from the Weizmann Institute to its paid scientific advisory board. On his first exposure to details of the company’s technology – disclosed under terms of strict confidentiality – the scientist thought up a significant new way to use it. Mindset management was delighted. Their decision to hire the researcher was vindicated, and they were excited about pursuing commercial development of his idea.

A problem came up, however, when Weizmann management claimed that Mindset first had to negotiate a licensing agreement with the Institute, arguing that the Institute owned the intellectual property of its employee-researchers. Zvi Artstein, vice-president of technology transfer at Weizmann and chairman of its commercial arm, Yeda Research and Development, said the Institute regards professors as employees who are paid for their research.

“A professor who wishes to conduct research for industry while on the Weizmann staff needs permission to do so,” he said. Often this is not a problem, but in some cases a revenue-sharing agreement needs to be worked out between the company involved and the Institute.

“Companies should respect the fact that our researchers are not freelancers; they’re part of an organization. What they personally know cannot be separated from what the organization as a whole has helped them to know,” Artstein said. “All we ask is that the company, and the scientist, come and talk to us. Weizmann Institute is a public institution. We have an obligation to the public not to simply give away knowledge to private enterprises.”

Mindset chief executive David Chain, and the lawyers he consulted, saw things differently.

“Weizmann’s claim to owning this scientist’s intellectual property is illegal in our opinion,” he said. “The invention he conceived of was completely unrelated to his research activities at the Institute.”

Chain said the company declined to negotiate with Weizmann because it did not want to set a precedent and license something that he believes it owns. “In general, the university-industry technology transfer system here in Israel is a real problem,” he said. “The scientists are the ones who lose out.”

Israeli universities, according to Chain, have to wake up and make changes. “We see tremendous possibilities for licensing technology in Israel for the treatment of central nervous system disorders,” he said. “There’s exciting work going on in university research laboratories, but there has to be more efficient interaction with industry if that work is to be commercialized successfully.”

Israel’s knowledge transfer model goes back to 1958, when universities first created private entities to promote commercializing knowledge generated by their faculty and to ensure sharing the ensuing profits. For example, in the late ’60s the Weizmann Institute negotiated an agreement with the U.S. pharmaceutical firm Miles Laboratories, subsequently acquired by Bayer, that assigned to Weizmann 40 to 60 percent of royalties from applications of Weizmann faculty research. The faculty involved received 40 percent.

“One motivation behind technology transfer,” Artstein said, “is the satisfaction from research results making a difference in people’s lives. This satisfies our donors as well as the public who want to see practical outcomes from abstract knowledge. Another motivation, obviously, is the income generated by these licensing agreements.”

Academic research has often resulted in the creation of new, highly profitable, companies that have sustained their competitiveness by continuing relationships with academic researchers. But, Isaac Kohlberg, who served as chief executive of Yeda from 1982 to 1989, is unimpressed by these stories, however dramatic.

“Everyone points to the outstanding spin-offs that came out of (Massachusetts Institute of Technology), for example,” he said. “What they fail to mention is that MIT itself derived no revenues from these ventures. The way I measure the success of technology transfer is by looking at the royalty revenues generated as a fraction of the total research budget.”

According to Kohlberg, Weizmann’s royalty revenues are about $50 million a year.

“That’s two and a half times MIT’s annual royalty revenues and three times Harvard’s, even though both have much larger research budgets than Weizmann,” he said. “If you look at global drug sales for multiple sclerosis, for example, most of those drugs are based on intellectual property created here in Israel.”

It must be noted that while U.S. academic institutions may not have benefited from wealth created by faculty researchers, they have received huge gifts from founders of spin-offs. The success of these spin-offs also makes an institution more attractive to industrial and governmental funders of further research. In addition, successful alumni are often only too happy to pour millions of dollars back into their alma maters as a token of thanks. Just about the same time Kohlberg returned to Israel, a report commissioned by government from consulting group Monitor, was issued on the state of Israeli biotechnology. The report stated that the local biotech sector has great potential, but is hampered by several obstacles, one of which is the inefficient conversion of academic knowledge into commercial products.

Artstein dismisses the Monitor Report’s criticism as shallow. “It does not reflect an understanding of the intricacies of the technology transfer system. In fact, the authors did not even come to talk to officials here at the Institute.”

For their part, however, industry experts complain precisely about the lack of entrepreneurial understanding among scientists, as well as about the domineering approach of the universities in their relationships with industry.

“We see deal after deal and the quantity of excellent basic science which winds up in a product that is neat but worthless from a financial point of view is staggering,” said Ronny Ginur, vice president at Denali Ventures. “These people are missing the fact that without the economics there is no company and someone needs to drill that in and if that doesn’t exist then it is difficult to impose corporate discipline into that environment. It is virtually impossible.”

These differences notwithstanding, technology transfer agreements continue to be made. Lately, Kohlberg has been a busy man. Tel Aviv University has recently signed what he said is one of the largest technology transfer deals he has seen in 20 years. American Home Products and the Irish pharmaceutical company Elan will fund five years of early-stage Alzheimer’s research at TAU aimed at developing a vaccine. In addition, TAU will receive payments for reaching significant research milestones as well as royalties on sales of pharmaceutical products derived from the research. The contract also provides for expanding the agreement to cover research funding and royalties for applications.