With both government spending on science and technology and the amount of money universities receive to teach each student having fallen steadily over recent years, vice-chancellors have been forced to look to private sources of funding to stave off deterioration in the quality of teaching, equipment and buildings.
Industry has proved the most responsive and unproblematical of the sources, which include alumni and charging fees to students. By 1990, industrial sponsorship accounted for pounds 105m of universities' pounds 763m income from research grants and contracts. Universities are rapidly acquiring commercial structures and expertise to guide their dealings with industry, to ensure that they, as well as industry, profit from the commercial exploitation of research.
Imperial College, London, has more than doubled its income from research contracts with industry in five years by channeling them through a central industrial liaison office with more than 30 staff and an annual budget of pounds 840,000.
The office, which has teams devoted to Japan, Europe and 'the rest of the world', has sole responsibility for issuing project estimates and signing contracts, and ensuring that they satisfy college policy on pricing, overhead recovery and arrangements for intellectual property ownership.
It has been particularly successful in securing contracts from industry and government in Japan, where there is still a strong commitment to supporting basic research. An initial long-term collaboration with Honda, which involved the building of a wind-tunnel in Imperial's department of aeronautics alerted the office to opportunities in Japan. This led it to secure a major contract with the Japan Research and Development Corporation for work in advanced semiconductor materials worth pounds 2.5m over five years.
The office has gone on to secure contracts in adhesives research with Toshiba and Nissan; for research into artificial intelligence with Hitachi Europe and Fujitsu and contracts in optical electronics with Fujitsu and Surukawa Research and Engineering Europe. It has also landed the first academic post in a UK university to be sponsored by a Japanese company: the Hitachi Europe lectureship in neural networks. Over the past five years the college has earned an average pounds 1m per year from contracts secured by the Japan team.
Universities are developing techniques for gaining the loyalty of industrial sponsors, for some of whom the long-term nature of research investment can pose problems. David Thomas, pro-rector for research contracts at Imperial College, says: 'We try to negotiate umbrella agreements with a view to getting a series of contracts with a given company.' He says that some large companies favour such arrangements because they prefer not to have to renegotiate terms.
But if large companies can afford to fund a whole project over the long- term, smaller ones usually cannot. To get around this, Glasgow University has devised a scheme where research in electronic and electrical drives is sponsored by 19 companies through an annual subscription to a research consortium. Any member of the group may make use of the patents developed.
Many universities are also taking advantage of the entitlement to raise profits through patenting and licensing inventions, granted to them in 1985 when the Government scrapped the British Technology Group's right to first refusal on commercial exploitation of the results of research funded by the research councils. BTG was privatised in the run-up to the last general election.
Oxford University has set up a company - Isis Innovations - charged with seeking out businesses interested in commercially exploiting intellectual property owned by the university. The company works closely with institutes that already have patentable results and sets up licensing agreements with businesses wishing to exploit an invention.
Anne Knowland, Oxford's research contracts administrator, says: 'Licences can either be sole or non-exclusive and are usually given on very clearly defined technical applications and fields of exploitation. They may also cover related research, incorporating any relevant discoveries into the patent.' The university shares the profits with its researchers, on a sliding scale that favours the researcher when earnings are below pounds 25,000 and the university above pounds 250,000.
The proactive approach helps Oxford to retain control of intellectual property arising from work funded by the research councils, which is devolved to approved universities by the Department for Education. Universities' intellectual property rights are subject to review every three years by the Exploitation Scrutiny Group, which must be satisfied that the universities are exploiting inventions effectively.
Steps are also being taken to ensure that universities retain intellectual property ownership when they sign research contracts with industry. Five universities that came top in the 1986 research assessment exercise - Oxford, Cambridge, Imperial College, University College London and Warwick - have agreed and are using a set of guidelines linking the price asked in research projects with the ownership of resulting intellectual property.
Ms Knowland says all research contracts, however lucrative, must meet with certain ethical conditions to be taken on by Oxford University. 'We never agree to an assignment that hampers continuing research and teaching in the university, or includes publication restrictions of more than six months,' she says.
Meanwhile, Imperial College has been increasing the percentage of overhead costs recovered on research contracts and encourages other universities to do the same, arguing that commercial rates should be charged for commercial research. Figures compiled by David Thomas from the Universities Statistical Record show that only 14 per cent of UK universities' research contract income in 1991 was available to offset overhead costs. The college has undertaken an activity costing exercise to persuade sponsors of the real cost of research and reports no fall-off in contracts as a result of charging a higher unit price.
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