August 1, 2005
Wagner: Emory to be 'good steward' of revenue infusion
BY michael terrazas
Emory’s sale of royalty rights to the anti-HIV medication Emtriva (emtricitabine) for $540 million (see story) is being hailed as the single biggest commercial sale of intellectual property for any university in history. Emory Report sat down with President Jim Wagner to discuss what this unprecedented development will mean.
Emory Report: What kind of immediate impact is this going to have on Emory’s operating budget?
Jim Wagner: There two parts to that answer, and the first is the restriction of the Bayh-Dole Act. That law is a way to make sure that new and beneficial technologies produced by universities would be attractive commercially for companies to license and manufacture. Any proceeds the University receives (after expenses) have to be reinvested broadly in the research and research-related educational mission. So in other words, we cannot build a parking garage or new dorms, or pay certain staff salaries with that money. So that’s answer one: There are some restrictions.
Answer two is that, even if there weren’t restrictions, we are entering a very disciplined phase of the implementation of our strategic plan. The elements of our strategic plan that are research-related and consistent with the Bayh-Dole provisions will indeed benefit from these moneys.
What was the rationale for taking the money up front rather than wait for annual royalties from this patent?
We think the return on investment for converting that money in the short term to new programs, to investing in people and programs, will pay a benefit—the compounding effect of that investment is far greater than we would have gotten from just the cash spread out. Also, I don’t know that we should expect a measurable, dollar-for-dollar impact from every penny we spend from this money; just as with any large revenue stream that is spent and invested wisely, there will be intangible benefits. Call it a sort of intellectual compound interest that may not jump out on a balance sheet but is no less real.
The initial amount predicted for the Strategic Plan Initiative Fund, which will serve as start-up funding for endeavors identified in the plan, was $25 million per year. Will that number go up to, say, $40 million a year now?
It depends how we manage this, and we really need to talk about that. How much of this cash do we have compelling, immediate needs for? And how much should more appropriately, more responsibly, take the form of an internal foundation? A lot of strategic thinking needs to be done to determine what fraction of this gets immediately invested and what fraction becomes an endowment.
And those decisions have not been made yet?
No. The next step is to assign strategic-program costs and uses in order to set funding priorities, and that’s part of what’s happening this summer. By the fall it will be clear how this money and future moneys would be used.
I had a conversation yesterday with former President Jim Laney, and I asked him, “When you got $105 million back in 1979, what did you do with it?” He said they used all of it to boost Emory’s endowment and then tried to use those funds in ways that people could match to the revenue, ways to challenge the University to get even more investment. So we’ve got a lot to think about.
Speaking of President Laney, with the way this is being presented in the mainstream press, a lot of people are going to look at this as a “second Woodruff gift” and possibly expect it to have a commensurate impact on the University. Do you think that’s a fair expectation?
I see both sides of that. In one sense, it’s hard to make the comparison. Remember, the Woodruff gift was completely discretionary. I would prefer to interpret this not as a gift that has motivated Emory to evaluate its opportunity for transition, but rather as an infusion of revenue that should give us great confidence to advance rapidly on implementing the strategic plan we’ve already been developing—and I do think the strategic plan is transformational. So it’s more that the plan is transformational than the gift.
Going back to the Bayh-Dole Act, the term “research mission” seems very broadly defined. Will it be enough to simply say Emory is using the money to implement its strategic plan?
There’s more to it than that, and in fact there are those in Washington who aren’t quite sure they like Bayh-Dole. Our understanding is that this is really something the federal government should see as a great success. After all, with a fairly modest federal investment, we have done a bunch of things, not the least of which is entice a bunch of private dollars into accelerating America’s research mission.
But the law saws that universities must share with the inventors a portion of the revenue received from licensing, and any remaining revenue after expenses must be used to support scientific research or education.
Is that narrowly construed to mean only the hard sciences?
No, but I think the general interpretation is that it is not principally intended to be used in the arts, and the reason for that is the whole premise for Bayh-Dole is economic development based on intellectual property. I’ve tried to say, “Look, this is a great thing in our sciences, but our commitment from our strategic plan is also to raise funds that will address the central importance of the liberal arts in a major university.”
There are plenty of first-rate novelists on university faculties; if one were to write a novel that went on to generate X amount of dollars and then was made into a movie that generated X amount of dollars, is that covered under Bayh-Dole?
No, it’s not. Every university I know of has a phrase in its policy that talks about traditional works of scholarship—textbooks, educational CDs, novels (and subsequent movie rights), all of those are excluded from Bayh-Dole.
So, moving into the campaign, does this make your job harder because people might say, “Why should I give money to Emory when they just got $525 million?”
Interestingly, I think that will not be a factor. I hope it makes the statement that Emory is worthy of more investment. It’s interesting that the most highly endowed, richest universities in the world are also those who enjoy year after year the most success in fundraising—think of Harvard and Princeton. Our determination to show good stewardship of this money—so that it’s not frittered away, so that it does contribute to transformation—will also convince potential donors that we can make good use of their additional funds.