New Uses for Agricultural Products: Technology Transfer for Commercialization

by William H. Tallent, Assistant Administrator, ARS, USDA, Washington, DC, and L. Davis Clements, Chemical Engineer, CSRS, USDA, Washington, DC.

The previous chapter described how research scientists go about finding new crops as well as new uses for traditional crops. This chapter deals with the next step converting these research results into economic benefits. We provide some clarification of widely used but often misunderstood terms and concepts. We also consider the question of what are appropriate public and private sector roles in research, development, and commercialization of new technologies. Finally, we review several new initiatives in the United States and abroad that are designed to turn scientific achievements into economic growth.

Commercialization and Technology Transfer

Often the terms "commercialization" and "technology transfer" are treated as if they are inter-changeable. They are not. Commercialization is the process of placing a product into the marketplace with the goal of creating an economic success. Technology transfer, on the other hand, is a strategy for ensuring access to technical details that allow the production of the product being commercialized.

In order for any product to be a commercial success, at least five elements must be in place. They include a market niche, a reliable supply of raw materials, a feasible conversion technology to make products, a manufacturing facility, and a suitable business structure. Three of these elements the supply of raw materials, the conversion technology, and the manufacturing facility are essential for the development of new technologies. The sources for these new technologies may be generated from within the organization, purchased or licensed from others, or developed in collaboration with others who have complementary expertise and mutual goals.

The stages generally recognized in the conversion of fundamental scientific discoveries to commercialized products and processes are presented in figure 1.

The transition from one stage to another is usually a gradual flow, but it is helpful to describe the stages separately.

Dr. Thomas S. Seibles, a chemist with USDA's Agricultural Research Service, views an "electrophoresis" of potato proteins. Dr. Seibles conducts basic and applied research on fruits and vegetables, including investigations of the properties of plant enzymes. USDA 0186X013-32

Traditionally, basic research has been defined as the determination of fundamental laws and properties of nature without regard to practical application of the results. This definition, however, is unpopular with mission-oriented organizations that perform research aimed at solving practical problems or at exploiting scientific advances.

Perhaps a more useful definition of basic research focuses on the nature rather than the objective of the research. This definition says that basic research is fundamental, purposeful, necessarily high risk, and often carried out at the molecular or cellular level. This definition is broad enough to include efforts that solve problems or exploit scientific opportunities for new products. Generally, basic research is more long range than subsequent stages of the research and development process.

Applied research is less risky and shorter range. It is targeted toward specific applications and may involve experiments designed to evaluate potential practical benefits: planting test plots of a new crop, or making sheets of paper from a new fiber. Because applied and basic research are often conducted with the same tools and in the same kind of research facilities, the distinction between the two is not always very clear.

Development, the "D" of R&D, moves a step closer to practical application, and the risk and time involved are correspondingly reduced. Development is usually conducted using larger equipment and facilities, for example a pilot plant for a new product or a several-acre trial for a new crop. The development stage generally costs about 10 times more than the basic and applied research preceding it. The larger scale simulates full-scale production and permits better evaluation of both technical feasibility and costs.

Demonstration, the final step in establishing technical and economic feasibility, involves a 10-fold increase in cost compared to development. This step is carried out in prototype manufacturing or other commercial production facilities and may involve manufacture of prototype products. Test marketing may be conducted during the demonstration stage.

Manufacturing and marketing take place only if demonstration and test marketing give favorable results. The previous stages may or may not be conducted by private firms, but in a free market economy the private sector does the manufacturing and marketing that result in commercialization.

Two factors are important when we consider the research, development, and commercialization process. First, the survival rate of good ideas as they move from one level to the next is rather low. Typically, only 10 percent of all good ideas are seriously considered for commercialization. Out of every 10 candidates, 2 are likely to be introduced to the market, and 1 will be an economic success. The risks are very high, but they can be lessened by a broad base of innovative basic research, thorough knowledge of the markets, and appropriate sharing of the financial burdens.

The second factor in the commercialization process is cost. There is substantial government funding in the basic research enterprise and substantial commercial investment in the commercialization phase. There is a funding gap at the point where technologies are brought out of the laboratory but are not yet ready for commercial prototyping. It is at this point when the technology has not been demonstrated in commercial practice (bridging the funding gap) and must be moved from one organization to another that technology transfer often breaks down.

Overcoming the Gaps in Commercialization

The in-house approach to product and process development has been the preferred method in U.S. industry for many years. A joint or collaborative approach, however, may help to avoid the technology transfer gap that exists in in-house development. No single group should be responsible for creating a new technology; instead, several partners should agree to pool part of their resources to accomplish the task. The key to collaborative arrangements is that the partners should have complementary expertise and common goals and agree on the financing of their joint endeavor and the ownership of its results.

Collaborative arrangements allow an opportunity for dissimilar partners, such as private companies, government laboratories, and university researchers, to work together. These partnerships are sometimes difficult to create because of competition, lack of knowledge of capabilities, and differences in mission or institutional culture among the partners. However, there is continuing progress in developing a range of strategies to foster collaborative development efforts. Some of these strategies will be discussed in the section on public and private sector roles.

The Key Role of Patents in Technology Transfer

In an R&D program, the development, protection, and use of intellectual property are essential. The formal system for protecting intellectual property is through patents. Too often, patents are seen as guarantees of financial gain or market acceptance. They are neither.

A patent protects the rights of the inventor to the discovery and gives the inventor the right to exclude others from using it without prior agreement. A patent is a legal document that affirms that an idea is new and useful, but not that it is necessarily economically attractive. Consequently, most potential licensees are not interested in licensing a patented invention until they are convinced of its potential.

The Patent and Trademark Amendments of 1980 (Public Law 96-517) gave universities rights to inventions developed under Federal grants and contracts. Because universities could transfer or license these rights to cooperating private firms, this provided a major incentive for industry-academic interaction. Since 1980, technology complexes have evolved around major universities.