Myths about Stanford’s Interactions with Industry Timothy Lenoir Department of History Stanford University Draft: September 6, 2004

Stanford is typically featured as a paradigm example among universities generating innovations that lead to new technology-based firms; and indeed, Stanford entrepreneurial activity is generally regarded as virtually synonymous with the birth of Silicon Valley. This is the stuff of legend, but it is based in fact: In a study conducted in 2000 Tom Byers and colleagues argued that Stanford alumni and faculty account for more than 1800 technology based firms in the Silicon Valley responsible for 37 percent of all high-tech employment in the region1; and in his contribution to the Silicon Valley Edge, Jim Gibbons, himself a Silicon Valley legend, argued that Stanford technology startups, including Hewlett-Packard, accounted for 60 percent of Silicon Valley revenues in 1988 and 1996 if Hewlett-Packard is included in the accounting and slightly over 50 percent if HP is left out of the mix.2 But such accounts can be misleading. While it is undoubtedly correct that Stanford has been a significant factor in the formation of Silicon Valley undue emphasis on Stanford’s contributions can contribute to the myth that Stanford’s interaction with industry is a one way relationship. A second, equally distorted description of Stanford’s relation to industry is the view that in the wake of a continuous decline in federal funding for academic research over the past decade Stanford has somehow become the captive of industry funding, and that in the aftermath of Bayh-Dole and the gold rush on biotechnology patents, Stanford has become a “kept university” seeking to turn its intellectual property into a cash cow to keep up in the research game. I aim to challenge both of these myths.

In our soon-to-be completed study Nate Rosenberg, Harry Rowen, Jeannette Colyvas, Brett Goldfarb, Christophe Lécuyer and I argue that while Stanford has indeed played an important role in shaping the industrial economy of the region, Silicon Valley firms and inventors have been just as important in shaping research directions at Stanford. The Silicon Valley, with its startups, large high-tech firms, venture capitalists, law firms, and academic and government research institutions is very much an ecosystem with crucial flows and interdependencies among its various sectors. Bill Miller has called it a habitat for innovation and entrepreneurship. The key to understanding these dynamic flows between the Valley and Stanford is the role of Federal support of research and development at major universities as well as the stimulus provided by federal R&D for industry in technology regions like the Silicon Valley. Stanford has contributed to multiple waves of innovation in Silicon Valley by successfully setting its sights on obtaining federal funding for scientific research that is at the same time industrially relevant. Creating and sustaining an entrepreneurial culture has been crucial to developing this synergistic feedback between federally supported research and research problems of industry, and it has positioned Stanford researchers to make major advances in science and engineering. This is the surprising outcome of our study: Stanford’s Page 2 of 46 pages

entrepreneurial activity is actually an important source of new scientific directions that enhance the ability of its faculty to be competitive for research awards.

Stanford is fundamentally a research university with a commitment to graduate training. The primary, indeed almost exclusive source of its research budget is the federal government, particularly the NIH, the NSF, the Defense Departments and various other federal agencies. In addition to the federal government, during the past few years an increasing but relatively small amount of Stanford research (less than 5 percent) has been funded internally from its own endowment and from revenues derived from patents and licenses through the activities of the Office of Technology Licensing. But surprisingly (to me at least) very little direct support for research comes from industry. Thus, Stanford’s ability literally to keep the doors open has depended on the success of its faculty in the award of federal grants and contracts.

Stanford has evolved a highly effective strategy for staying on the cutting edge of the research front. Stanford—and universities like it—has become a highly effective bi- directional node within a federally funded innovation cycle. On the one hand it has evolved as an entrepreneurial, highly flexible institution that actively seeks to absorb new technological and scientific breakthrough areas that spring up in industry in Silicon Valley and elsewhere and turn them into scientific research areas worthy of federal research support. Former Dean of Engineering, Jim Gibbons has called this “reverse technology transfer.” Equally effective is the transfer of ideas, techniques, personnel and technology from federally funded research projects at Stanford into startup firms in the Silicon Valley area which occasionally pioneer path breaking new areas that transform the research landscape. But the contribution of institutions like Stanford to their regional economies is difficult to measure. Certainly training young scientists, engineers, legal and business minds for careers in industry is important, but it is impossible to measure the impact of such contributions. Also important is the invention and disclosure of devices, processes, and materials that are capable of contributing to industrial developments. Our study attempts to measure such factors. But if we press deeper into the features of university-generated innovations that have made a major difference and the institutional environment that has enabled those innovations to emerge, I would argue that a crucial element in the continuous synergism between Stanford and the Silicon Valley has been the presence at Stanford of an engineering school, a medical school, and an environment that encourages interdepartmental and cross-school collaborative work. Such collaborations have been fundamental in producing startup companies focusing on convergent technologies (such as computing and biotechnology, or nanotechnology and communications) that have been crucial to generating new waves of technological innovation. In what follows I will illustrate both processes: the process of reverse technological transfer and the production of path breaking discipline shaping research technologies that have emerged from the co-evolution of Stanford and the Silicon Valley.

The linkage of entrepreneurship and research at Stanford was born initially out of the historical circumstance of its (initially) less-than-advantageous West Coast location and circumstances connected with its small endowment as a private institution. During the intervening years Stanford’s endowment has grown, placing it fifth among private Page 3 of 46 pages

institutions of higher learning. But even today at its height, Stanford’s (2002) endowment is only 44 percent of Harvard’s endowment, 85 percent of Princeton’s, and 78 percent of Yale’s.3 Princeton’s endowment per student, $701,146 ranks it the highest in the country. Stanford’s $288,022 per student ranks in seventeenth position. The situation was much worse at the end of World War II when the administration of Walter Sterling began to turn the situation around. In his 1997 state of the university address, President Gerhard Casper quipped that it was an intimidating task to lead an organization that has to raise roughly 88 percent of its budget each year. This is a situation every Stanford administration has faced, and it has contributed to the invention of a university that is aggressively entrepreneurial. Faced with a severe financial crisis following World War II Stanford administrators overcame their traditional aversion—shared by other private universities up to that time—to accepting federal funds and aggressively pursued new federal funding opportunities that became available after the war, particularly in areas related to military sponsored research, as well as in new federal and private foundation programs targeted at transforming American medicine.

Making Research Pay: The Centrality of the Research Mission at Stanford

Before we go further, I want to make clear just how important the notion of research-- as opposed to applied science--and federal funding as an incubator of industrially relevant research are and have been to Stanford. As we shall see, the “recipe for distinction” developed by Frederick B. Terman and his colleagues in the Stanford administration in the 1950s was simple: focus on attracting and retaining the scientific and engineering talent most capable of winning federally funded research grants and contracts—steeples of excellence—and use those funds to support cutting-edge research that stimulates industrially relevant technology, which in turn reinforces the capability to do more and better research. That vision is as important today as it was 50 years ago. Since the late 1980s federal funding for research has been steadily declining in real terms for both federally funded programs at universities as well as funding of R&D in industry.4 At the same time private funding of industrial R&D has increased significantly. For universities like Stanford, however, in spite of its entrepreneurial faculty and close ties to industry, industrial support of research has been relatively insignificant. The support of R&D at Stanford by different sources is illustrated in Figure 1 for the years 1995-2000. The chart makes it clear that Stanford raises approximately 90% of its research budget from federal sources. Figure 1 illustrates that in the year 2000, for example, non-government sources contributed $42 million in research funds to Stanford in comparison with $408 million in federal funds, excluding support for SLAC. Figure 2 illustrates the distribution of Stanford’s total grants and contracts for the year 2000 in terms of the percentages received by the Schools of Medicine, Engineering and the Physical Sciences (included as a division within Humanities and Sciences). A striking feature of the funding detail illustrated here is the large percentage commanded by the Stanford Medical School, roughly 49% of the $408 million total, compared to 17% for the School of Engineering. Finally—and for us initially surprising—as Figure 3 illustrates, only 48% of the non- government funding Stanford received in 2000 derived from corporate sources. Thus, even in the banner years of industrial growth of R&D, a period in which corporate R&D accounts for more than 60% of total US R&D, and in which one might expect institutions Page 4 of 46 pages such as Stanford would turn increasingly toward private funding sources, Stanford has depended almost exclusively on federal funding for support of its research mission.

Figure 1

COMPARISON OF U.S. GOVERNMENT AND OTHER CONTRACT AND GRANT EXPENDITURES For The Years Ended August 31, 1996-2000

700

600

500

400 Millions 300

200

100

- 1995 1996 1997 1998 2000

NON-US GOVERNMENT U.S. GOVERNMENT Less SLAC* TOTAL U.S. & NON-U.S. GOVERNMENT INCLUDING SLAC

Page 5 of 46 pages

Figure 2

Total Stanford Grants and Contracts FY 2000 in Millions of Dollars

All other Grants and Contracts $102.7 Medical School Grants and 25% Contracts $201.2 49%

Engineering School $68.2 17% Physical Sciences $36.0 9%

Figure 3

STANFORD UNIVERSITY NON-U.S. GOVERNMENT CONTRACT AND GRANT EXPENDITURES PERCENT OF CONTRIBUTION For the Year Ended August 31, 2000

Charitable Foundations 6.9% Voluntary Health Organizations Other 3.6% 4.1%

State & Local Government 9.0% Private Foundations 27.4% Corporate Foundations 1.4%

Corporations 47.5%

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The 2002-03 fiscal year was a “lean” year for Stanford, a year in which it drew heavily on endowed funds. Sponsored research, consisting of grants and contracts from primarily federal sources, constituted 36%, or approximately $825 millions of the $2.3 billion total revenues of the university for 2002-03. This figure was more than twice that from the next largest sources of income: namely, income derived from the endowment (18%), and from student tuition and fees (15%). How this worked out in the operations of the different academic units of the university is indicated in Figure 4. The chart reveals the significant, indeed defining, role of research at Stanford. For the year 2002-03 the School of Engineering covered approximately 48% of its combined teaching and research operations from its research and contracts. When expendable gifts, which generally are provided by corporations as donations to specific programs, or are generated through departmental programs such as an industrial affiliates program, are added into this picture, well over 60% of the operations of a typical engineering school department at Stanford are derived from its research operations. General funds account for only about 20% of the budget of a typical engineering school department, while endowed funds are used for financing only about 10% of the operations of an engineering department.

A similar story is evident for the Stanford Medical School. Roughly 47% of the entire operating budget of the typical medical school department at Stanford is derived from grants and contracts. The category of “auxiliary income,” primarily derived from clinical services accounts for 22% of the operating budget of a typical medical school department; and general funds support just over 10% of the operating budget. These figures illuminate the phrase, “Each tub on its own bottom,” axiomatic among the chief financial officers at Stanford as an explanation of the finances and operations of the different schools. Today in centers like the newly opened Clark Center, the Photonics Research Center, the Stanford Nanotechnology Center, or in the Biomedical Devices Network patterns of entrepreneurship that draw upon federal funding to sustain the co- evolution of Silicon Valley with Stanford science and engineering are busy laying the foundations for the next wave of innovations. Page 7 of 46 pages

Figure 4:

The Terman Model: Steeple Building and the Recipe for Distinction

The basic model for the research university that Stanford has become was developed by Frederick Emmons Terman during his years as Dean of Engineering in the years immediately following World War II. In 1945 Terman returned from his wartime position as director of the Radio Research Laboratory (RRL) at Harvard to take up new responsibilities as dean, and he came with a plan for putting Stanford’s engineering school on the map as one of the premier programs in the nation. It was a plan born of his experience managing the RRL, combined with observations of the administrative structure and philosophies of Harvard and MIT. As a former student and close friend of Vannevar Bush, Terman was privy to the discussions in Bush’s circle about building a post-war alliance among government, industry and academe, the vision Bush set forth in his 1945 Report to the President entitled, Science the Endless Frontier. While still at the RRL Terman began to shape a formula for success. It involved using government funding, principally ONR contracts, to build 1) a premier faculty in areas of electronics, which Terman was confident would be the major engineering growth area in the post-war environment; 2) build a large Ph.D. program, transforming the curriculum from one focused solely on practical engineering training to one infused with physics, mathematics and the social sciences. Terman and a handful of his close academic friends believed that the university would be he key to postwar industry. In the research triad—government, industry, university—Terman believed the postwar university was the source of key Page 8 of 46 pages

innovations. Terman brought three ONR contracts for work in microwave physics and engineering with him when he returned in 1945-46. These resources were the beginning of a new university.

The primary resources for Terman’s vision for Stanford were government grants and contracts. In contrast to some of his colleagues at Stanford, such as Board of Trustee President, Donald Tressider and even President of Stanford Walter Sterling, Terman hoped to build close alliances with industry, but he did not think industry funding held the key to building a university in the post-war era. A number of efforts had been made by universities such as MIT before the war to finance research with industry funding, all with mixed results. Stanford’s experience with the klystron patent in the late 1930s was typical. The invention was made by physicist William Hansen and developed by Russell and Sigurd Varian. Licensing the patent to Sperry Gyroscope promised to supply the Hansen lab with ample funding to pursue their research in other microwave devices. But the relationship proved to be unsatisfactory.

Industrial sponsors of academic research like Sperry wanted control over the direction of research in the lab, and they wanted to insure exclusivity with respect to inventions coming out of the lab. Hansen, for example, found that Sperry would not give him, his colleagues and students free reign to pursue their own research on klystrons and other microwave devices the group believed would ultimately benefit Sperry Gyroscope. Moreover, industrial sponsors only wanted to fund work directly related to their own interests. They were not necessarily interested in furthering the academic mission of the lab (or university) through funding of fellowship programs, building construction, or purchase of instruments and equipment not directly related to their own goals. While the klystron royalties were an important resource for the lab, Terman believed that government funding would be a less restrictive and substantially larger source of funding for building academic research programs. This marked a substantial change in attitude toward government sponsorship of research compared to the pre-war period. Prior to the War, universities wanting to remain free and independent in their educational mission had been highly critical and generally rejected government resources for support of research. Moreover federal funding in support of research was not channeled toward private universities. The Manhattan Project, work at the RRL and other government labs on university campuses during the war had changed that.

Terman developed what he termed “a recipe for distinction”5 in building Stanford’s Engineering School. The recipe contained two main ingredients: The Mainstream Theory—one should be strong in areas of mainstream interest and importance rather than in “niche” areas, even though one might be able to be the leader in esoteric areas. The second key component of Terman’s recipe for success was to increase the science and engineering faculty in key areas where funding could be attracted—he called this his program for building “steeples of excellence.” Terman pursued projects he thought could be “self-financing” and would generate their own momentum of sustained growth. To accomplish this Terman sought to get the very best talent he could. Rather than using government grants to increase salaries of faculty already on staff, Terman pursued what he termed “salary splitting.” The strategy was to pay for half of the salary of a new Page 9 of 46 pages

faculty member from grants and contracts. Research associates and other personnel working on sponsored projects would be entirely covered from contract funds. In addition building expansions and equipment would be funded on contract.

Terman’s goal was not just to bring money into the university. The primary goal was to build the premier research program in electronics (or other potential “steeples of excellence”). This was to be accomplished by obtaining the very best talents in the field and building a graduate program around them. Training of graduate students and the production of Ph.D.s was as important as any other component of the program. Students were to be brought into the research project as part of their graduate training. In his many public discussions of these ideas in the 1960s when he was asked to advise other areas on how to go about constructing their own recipe for success, Terman was insistent on the centrality of the research mission of the faculty. He was scornful of going after a contract for applied research and generally rejected such contracts unless they fit into the overall mission of increasing the prowess of the research component (more on this later). He was critical, for instance, of a number of universities he advised because they went after contracts that they could fulfill with mediocre talent. Rather than simply bringing in contract dollars Terman’s goal was to get funding as a way to hire the best talent. Sponsored projects would then follow on the principle that the direction of research and development in the field was being set by the Stanford Electronics Research Lab.

If government funding provided the primary resource for Terman’s program, building a connection to industry was equally critical. For Terman the key thing was to turn ideas into technology, and this required close collaboration with industry. Terman was also concerned about building an industrial base closely associated with the Stanford program. In presentations to engineering societies and various public forums Terman repeatedly insisted that the requirements for a career in engineering had changed since before the war.6 Terman emphasized that engineers needed to be educated much more thoroughly in physics and advanced mathematics than previously, and he observed that technological complexity was advancing so rapidly that an undergraduate education would no longer suffice to prepare an engineer for the challenges of a career in industry. The requirements of modern industry were such that a master’s degree or Ph.D. were becoming a prerequisite for many fields, particularly in complex and rapidly changing new fields of electronics and computers. To address this problem Terman developed Ph.D. programs with graduate fellowships funded by federal grants and contracts, and he took the innovative step of creating the so-called “Honors Cooperative Program” which allowed researchers and workers at local firms to complete advanced engineering degrees at Stanford.

In this knowledge-intensive environment, Terman believed the university would play a more central role than ever in the creation of new technology. He envisioned what he referred to as a technical community of scholars made up of local electronics firms in the Bay Area and the west coast with research facilities near Stanford staffed by Stanford- trained engineers. It would be a dynamic community where research in Stanford labs would find its way into industry through the training of students and consulting by the faculty. Stanford-originated technologies would find their way into the electronics Page 10 of 46 pages

industry as well, providing revenues for enhancing the research program. Terman also allowed for industry to bring its own problems for research to the university, and in fact he provided numerous ways for this to happen. But foremost in Terman’s plan was that the university would be the center of the technical community providing innovations, training, and guidance. He explicitly sought to limit the influence of both the government and companies in defining the problems labs such as the SEL and the Hansen Lab would investigate. Terman sought to build trust among government and industrial sponsors of research in the technical directions pursued by the research faculty. By maintaining close relationships with the needs of government and industry through consulting and training of students the research faculty would naturally pursue projects of benefit to the sponsors as well as advancing the research mission. Thus instead of receiving research funds to pursue specific problems defined by a sponsor, Terman wanted both government and industry to invest funds in the research directions defined by the core faculty of the lab. Even in the case of industry funding, Terman rejected funds for specific applied industry problems in favor of funds to pursue a general research direction of interest to a company. The company funding the research would have privileged access but not exclusive rights to the research results.7

As plans for linking research labs with industry materialized an additional ingredient of Terman’s “recipe for distinction” emerged. The idea of using Stanford land for commercial property that would bring income to the university was already well underway by 1950, having been proposed by Alf Brandin as a means for generating income to offset the ailing finances of the university. Work in the Microwave Lab under Felix Bloch had already resulted in the creation of Varian Associates by Russell Varian and Edward Ginzton. Founded in 1949, Varian Associates was the first occupant of what would become the Stanford Industrial Park. Terman interested several other electronics firms in following moving research facilities to the 450 acre sector of land designated for commercial development by the Board of Trustees in 1950. Included in this was development of the Stanford Shopping Center. In 1952 the decision was taken to set aside land in this sector for the Medical Center that would move from San Francisco to the Stanford Campus in 1958. The Stanford Industrial Park was the area of land bordering on California Avenue, Page Mill Rd, El Camino Real and a sector along the Foothill Road extension of Serra up to Arastadero Rd.

An innovative feature of Terman’s evolving program over the years was its tight coupling of teaching, research, and technology transfer through close working—particularly consulting—relationships with industry. Many examples of this successful strategy could be given, beginning with a long term relationship with General Electric that started in 1953. GE received contracts to produce several types of microwave devices, including klystron tubes. In addition GE was interested in the commercial development of radiological devices, particularly the medical accelerator being developed by Henry Kaplan and Edward Ginzton in the Stanford Microwave Lab. In his proposals to GE for establishing an advanced research electronics lab in the industrial park near Stanford, Terman gave a detailed exposition of Stanford’s philosophy of linking research and development in electrical engineering and physics to industry.8 The research program, Terman explained, was an outgrowth of the academic program and was closely Page 11 of 46 pages

coordinated with the instructional activities of the University, particularly in graduate training. “Initially,” Terman wrote, “basic research projects are selected in the usual manner, simply on the basis of the extent to which they will add to the knowledge of the subject: but it has generally been found that practical applications of this knowledge are not long in forthcoming, and through the application of judicious assistance and planning along the way we have usually been able to produce, ultimately, not only equations and reports, but also practical devices embodying the principles involved.” 9 Research projects were taken on in fields in which some faculty member had specialized competency, an arrangement that allowed faculty to function effectively both as teachers and research workers without undue inroads on their time. Research projects were frequently used as thesis assignments for graduate students, thus permitting Stanford to employ graduate students as members of the staff of the Electronics Research Laboratory while they were at the same time pursuing their work toward a graduate degree. A key part of the typical arrangement with research companies in the Stanford Industrial Park was that Stanford faculty, research associates, and technical personnel would provide instruction to the company researchers in the design, development and construction of linear accelerators (or other related electronics technologies) developed at Stanford. Faculty members relevant to the company research interests would also be appointed as Principal Associate Scientists to assist and advise the company research staff. Companies such as GE would license the Stanford patents on klystrons and medical accelerators relevant to their commercial plans.10

An equally important aspect of Terman’s vision was that the synergy between Stanford and its industrial partners was not a one-way relationship. Stanford research programs should benefit from the knowledge and expertise housed in advanced programs in industry. Consulting relationships opened some of these doors, but teaching appointments of industry scientists at Stanford, and where possible the strategic hiring of entire teams of scientists from industry as Stanford faculty heading up their own teaching and research programs was viewed as a means to strengthen Stanford’s research profile and insure it would have cutting edge faculty defining the frontiers of new technical programs. These new “steeples of excellence” would provide the competitive edge for acquiring federal funding for new projects in the sciences and engineering. The GE agreement, one of the earliest of these joint exchanges, was typical of a pattern repeated frequently in the intervening years at Stanford. In the GE agreement, for example, provision was made for certain GE personnel to teach one three-hour course at Stanford in any academic semester without remuneration. GE staff with teaching appointments at Stanford were allowed to advise thesis work of Stanford students.

Perhaps the most spectacular example of Terman’s efforts to fertilize academic programs by absorbing advanced programs from industry is the development of the solid state physics program at Stanford. At the suggestion of his former student, David Packard the president and co-founder of Hewlett-Packard, Terman initiated the research and teaching program in solid state electronics at Stanford. Terman and Packard had watched the field of semiconductor electronics closely since the invention of the transistor by William Shockley, John Bardeen, and Walter Brattain at the Bell Telephone Laboratories in 1947. Terman and Packard viewed solid state electronics as one of the most promising fields in Page 12 of 46 pages

electrical engineering, and they wanted the university to build a major presence in this new field. Packard and his business partner, William Hewlett, were eager to transistorize their electronic measurement instrumentation business. They were also interested in producing semiconductor devices. Hewlett and Packard deemed it in their interest to support the development of solid state at Stanford. A solid state group at the university would act as a local resource for Hewlett-Packard and other electronics firms on the San Francisco Peninsula. It would also train engineers in the new technology. Hewlett and Packard expected to hire some of them.11

To build a dynamic program in solid state electronics, Terman hired John Linvill, a young engineer at the Bell Telephone Laboratories, in 1955. Linvill, an MIT Ph.D., had briefly taught on the MIT faculty before joining the technical staff of the Bell Telephone Laboratories. At Bell, he had made a name for himself by designing a new transistor- based amplifier which became widely used in local area networks. Terman liked Linvill’s inventiveness and expected that his appointment would give Stanford access to Bell Labs’ technology and scientific staff.12 Packard assisted Terman in recruiting Linvill from the Bell Labs. He actively promoted the position to Linvill. To help the university match Linvill’s salary at Bell, Packard offered him a consulting arrangement with H-P. Under the terms of the agreement, Linvill would give a series of lectures on transistors to H-P’s engineering staff. Packard also impressed upon Linvill the importance of building close relations with local electronics firms – especially those in the recently created Stanford Research Park.13

Terman rapidly came to appreciate that Linvill was himself a superb academic entrepreneur—a steeple of excellence. In the next fifteen years, the two men closely collaborated on building the solid state program at Stanford. At Terman’s urging, Linvill “transistorized” the electrical engineering curriculum and established the Solid State Laboratory, originally as part of Terman’s Stanford Electronics Lab, focused on transistor circuit research, and heavily funded by the Office of Naval Research, IBM, and Texas Instruments.

A few years later, Linvill expanded the scope of the Solid State Laboratory to device physics and silicon processing. To do so, the Solid State Lab needed to acquire rare expertise in the fabrication of semiconductor devices which could be found in only a few corporations. Fortunately in late 1955 with Terman’s urging, Shockley, the co-inventor of the transistor at the Bell Labs, moved to the San Francisco Peninsula to start his own semiconductor venture, Shockley Semiconductor Laboratory. Shockley’s Laboratory specialized in the making of silicon devices. The establishment of the new Laboratory provided a wonderful opportunity for technology transfer – from Shockley Semiconductor to the university. Linvill and Terman asked Shockley whether they could dispatch a junior faculty member to his laboratory to work as Shockley’s apprentice and learn about silicon processing. Shockley liked the idea. He needed Ph.D.s with a solid knowledge of semiconductor physics and expected that a strengthened solid state program at Stanford would supply the skilled workforce he needed. This was a critical agreement for the development of the solid state electronics program at Stanford.14

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Linvill and Terman recruited Jim Gibbons, who had completed his Ph.D. with Linvill, to learn about silicon processing technology at Shockley. Gibbons’ task was also to reproduce Shockley’s lab on campus. This enterprise was funded again by the ONR.15 Gibbons joined the Stanford faculty and the technical staff of Shockley Semiconductor in the fall of 1957. Sending Gibbons to Shockley Semiconductor was a judicious choice indeed. The firm specialized in silicon, the material that rapidly became dominant in semiconductor technology. Shockley Semiconductor was also teeming with talent. Shockley had hired an exceptional group of physicists and engineers – men such as Gordon Moore, Robert Noyce, Jean Hoerni, Jay Last, and Eugene Kleiner. These men later played a central role in the semiconductor industry in Silicon Valley. At Shockley Semiconductor, Moore, Noyce, and Kleiner introduced Gibbons to key processes in semiconductor fabrication such as crystal growing, lapping, solid state diffusion, and oxidation. Gibbons also got to know these men well. When eight staff members (Moore, Noyce, Hoerni, Kleiner, Last, Julius Blank, Victor Grinich, and Sheldon Roberts) rebelled against Shockley and left the firm to start their own venture, Fairchild Semiconductor, they asked Gibbons whether he wanted to join the new corporation as its ninth founder. Gibbons, who was interested in an academic career, declined the offer. This later proved to be a poor financial decision as Fairchild Semiconductor established itself as a major semiconductor manufacturer and made its founders quite wealthy. But Gibbons had developed ties with key players in Silicon Valley. These ties later facilitated the growth of the solid state electronics program at Stanford.16

Rather than following the footsteps of the “Traitorous Eight,” as Shockley called his deserter research staff, by starting a new semiconductor venture, Gibbons replicated Shockley’s laboratory on the Stanford campus. In March 1958, Gibbons’ Stanford laboratory fabricated its first silicon device, a four-layer Shockley diode. This was a substantial achievement. Most people who had heard of Stanford’s plan to build a device processing laboratory thought that its success was very unlikely. Device research and fabrication had always been the province of industry. It was also widely argued at this time that device fabrication technology was too complex for a university to master. Gibbons proved that it could be done. In this example of “reverse technology transfer” Stanford was probably the first university in the United States to fabricate silicon devices. On the basis of this achievement, the ONR increased its already sizeable grants to the Solid State Laboratory.17 Over the next two decades the Solid State Laboratory was the home to some of the most advanced research projects in computer engineering in the U.S., including most famously, the DARPA supported VLSI (very large systems integration) project that led to the commercial development of RISC (reduced instruction set computing), which revolutionized computer chip architecture and formed the basis of MIPS, and the Geometry Engine, the basis for Silicon Graphics, and the SUN workstation, all major contributions to the dynamic firm culture of Silicon Valley.18

I have outlined several key components of what emerged during the 1950s as Terman’s “recipe for distinction”19:

• Using government grants and contracts to finance “steeples of excellence” • Salary splitting as a means to grow the faculty Page 14 of 46 pages

• Concentration on graduate student research and production of MS and Ph.D. degrees • The establishment of the Stanford Research Park as a means to create profitable exchange relations between industry and Stanford research labs, particularly in areas of electronics • The Honors Cooperative Program as incentive for companies to locate near Stanford and as a resource for supporting the teaching component accompanying the building of “steeples of excellence” • Emphasis on licensing Stanford inventions and establishing faculty consulting relations as means for getting Stanford ideas into the core of industry

A number of quantitative indicators suggest the power and success of this “Terman Model.” The impact of Terman’s ideas on university finances and departmental growth are unmistakable. The following several charts provide an overview.

Consider first the strategy Terman initiated of focusing on government funded research grants and contracts as the way to grow the quality of university programs. Figure 1 below charts Stanford research volume, degrees and faculty from 1945-2000. What the figure suggests is that research volume is central to running the university, and that with Ph.D. production closely tracking research volume, Stanford is above all a research institution. Research dollars pay a very considerable portion of the bills at Stanford. Page 15 of 46 pages

Figure 5: Stanford Research Volume, Degrees, and Faculty 1945-2000

3,500

3,000

2,500

2,000

1,500

1,000

500

0 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995

Graduate Degrees Rsch Volume ($100K, 1998) Undergrad Degrees Faculty (TL)

Source: Charles Kruger and Stanford University Financial Reports. Figures exclude funding for SLAC

In the 1950s and 60s the Engineering School accounted for the largest sector of government grants and contracts, and within the Engineering School, Electrical Engineering was the major recipient of government funding. A key objective of Terman’s program was to use government funding to increase faculty and build research programs, particularly graduate programs in engineering. Indicators of the success of this enterprise are the growth of school and departmental operating budgets, and the percentage of those operating budget accounted for by outside funding; namely, from grants and contracts as opposed to tuition and endowment sources.20 Certain patterns emerge from the information we do have that carry over into the post-1965 period. We present those patterns in Figures 2-4 and extrapolate to the 1950s based on sporadic data available to us for those years. Page 16 of 46 pages

Figure 6: Engineering School Sponsored Projects Compared to Total Operating Budget

$50,000,000

$45,000,000

$40,000,000

$35,000,000

$30,000,000

Total Engineering School $25,000,000 Sponsored Projects Total Engineering School Operating Budget $20,000,000

$15,000,000

$10,000,000

$5,000,000

$0 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19

Figure 7: Electrical Engineering Sponsored Projects Compared to Total Operating Budget

$20,000,000

$18,000,000

$16,000,000

$14,000,000

$12,000,000

$10,000,000 Electrical Engineering Sponsored Projects

Electrical Engineering $8,000,000 Operating Budget

$6,000,000

$4,000,000

$2,000,000

$0 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 Page 17 of 46 pages

Figure 8: Sponsored Projects as Percent of Operating Budget: Total for School of Engineering Compared with Electrical Engineering 100%

90%

80%

70%

60%

Engineering School Sponsored Projects as Percent of Operating 50% Budget Electrical Engineering Sponsored Projects as Percentage of Operating Budget 40%

30%

20%

10%

0% 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 Page 18 of 46 pages

What the data indicate is that in the Engineering School roughly 60% of the operating budget for the entire school was financed through grants and contracts. Terman’s program started in Electrical Engineering and the major external funding resources came to that department. Hence it is not surprising to see an even higher percentage of the operating budget to be covered by grants and contracts. With the high around 90% reached in the mid-1960s and gradually falling to around 70% in the 1980s in the post- Vietnam period, we see roughly 80% of the operating budget for Electrical Engineering covered from grants and contracts. The sporadic data we have for the 1950s and early 1960s suggest that the percentage of the operating budget covered from grants and contracts hovered close to 90%. Indeed, when we shift our attention to the Hansen Labs and the Electronics Lab we find anywhere from 90%-98% of the operating budget covered from grants and contracts over the period we have investigated. That in a nutshell was the Terman program.

Extending the Terman Model: Steeples of Excellence and Entrepreneurial Culture in the Medical School

The Terman model has been diffused within the Medical School as well. As noted above, in the immediate post-WWII years the financial condition of the University bordered on a crisis situation. The financial situation facing the Medical School in those years was even worse, indeed, positively desperate. The physical plant of the Medical School, located in San Francisco, was in need of renovation and expansion. The School ran a deficit of approximately $400,000 per year, which had to be financed out of University funds. In 1950 President Sterling and the Board of Trustees appointed a Committee on Future Plans of the Medical School, headed by Professor Henry Kaplan, the Director of Radiology. Between 1951-1952 the Committee interviewed and corresponded with faculty from the Medical School in addition to undertaking interviews with 20 medical leaders at other institutions. The work of the committee was distilled into a voluminous report. The most urgent needs the Committee identified were for major replacement and refurbishing of the Medical School physical plant and for annual financial support. They estimated that rebuilding the physical plant would cost ten to fifteen million dollars. To prevent the bleeding of general funds of the University for the annual Medical School operations would require new endowment of an additional fifteen million dollars. In plant funds and endowment, the total need was estimated at $30,000,000. The magnitude of the needed sum evoked the question: Would it be wiser to modernize and add to the existing Medical School facilities in San Francisco or to build anew on an alternative site? After more than a year of study the conclusion reached was embodied in the Board of Trustees' decision of July 15, 1953 to move the Medical School to the University campus.

As President Sterling commented in his foreword to the collection of speeches at the dedication ceremony of the new Medical Center in 1959 the basic reasoning given for this decision was that the future progress of the medical sciences would be inextricably linked with progress in the basic physical and biological sciences, and increasingly with the social sciences, such as psychology and sociology; therefore, Sterling concluded, Page 19 of 46 pages

“This key relationship of medical education and science to other scientific fields can best be strengthened and advanced by bringing the Medical School into the closest possible physical and intellectual relationship to the whole university.”21

The move of the Medical School to the main campus was accompanied by a complete revision of the medical curriculum in which more basic science was introduced. The Stanford Program, as it was called, lengthened the period of medical education from four to five years and included substantial work in basic science as well as a significant exposure to laboratory training. In addition, the medical faculty became a so-called “full- time” faculty, shifting its base of support from clinical fees to funds provided by the University. Thus in moving to the main campus the Medical School faculty became essentially university faculty just like faculty in the Engineering School or in Humanities and Sciences, and along with this the emphasis of the new Medical Center was to shift in the direction of scientific medical research.

Sterling used the attention generated by the new science-based curriculum and the move to the Stanford campus to launch a major public relations campaign and fund-raising drive for the new Medical Center. In addition to a public fund-raising drive, a key part of this effort was Sterling’s lobbying effort with Congress to get the Hill-Burton Act of 1947, which supported the expansion of American medical programs, to include the financing of buildings and other capital expenses. This new Hill-Burton Act was passed in 1956. Stanford was a major beneficiary of the new federal funding. Along with a large influx of federal funds to support the new initiative, Sterling was also successful in obtaining major Ford Foundation funding to support the transition of the faculty to full- time and the hiring of additional faculty for the new expanded Medical Center. Indeed, in a step signaling that the new Medical Center was heading in new directions, Sterling demanded that all heads of departments resign with the move to the main campus.22 Two new departments were to be created in the move, the Department of Biochemistry and the Department of Genetics.

In the midst of this major transition of the Medical School, Fred Terman became Provost in 1955. Terman’s style of encouraging entrepreneurial activity meshed well with the initiatives already begun by Sterling, Alway, and Kaplan in reshaping the Medical School. Terman wasted no time in encouraging Medical School faculty to adopt his strategies for building programs with government funds. His advice to William Walter Greulich was typical. Greulich, concerned with the low level of Stanford salaries, wanted to increase salaries of faculty by adding compensation to the faculty member from grant and contract funds for supporting his or her normal teaching and research activity. Greulich assured Terman that he had clarified the acceptability of this notion with NIH grants officers and there seemed to be no objection. Terman, however, saw this as inappropriate: such a shift could create a bad impression with other federal granting agencies who wanted contract funds to support exclusively the work under contract. Terman wanted a consistent policy in dealing with all federal agencies. Beyond that Terman felt it undercut the primacy of research. As he told Greulich, permitting staff members to receive additional compensation during the academic year for work done on research contracts would "encourage (and reward) faculty to seek research contracts for Page 20 of 46 pages

the sole purpose of obtaining a substantial bonus on their salary rather than because of a desire to do the particular research involved":

In searching for a means to improve the finances for the Medical School so that the salary scale can be improved, I would suggest that you keep alert to the possibility of charging government contracts, research grants, and funds with at least some of the regular salary of the faculty members who contribute research services. When the government is paying for research it desires to have done in the national interest, it would seem not unreasonable for the government to pay all of the direct expenses, rather than expect free services from senior research people. The government can afford to pay for what it is receiving, and I do not believe that it needs support from the Stanford endowment and from the tuition fees of our students to get its work done. 23

More importantly Terman thought an opportunity was being missed for expanding Medical School research faculty through government funds in just the same way he had built the Department of Electrical Engineering and other parts of the Engineering School:

When in my office, you stated that teaching duties in the Medical School normally took about half the time of a faculty member, and that the other half of his time was available for research. If one could have 50% of this research time charged against research contracts and grants, rather than carried by the regular budget, it would free enough salary money in the Medical School budget to raise all salaries by 33%. If all of the research time could be charged to research contracts (which is probably an impossibility although nearly true in Engineering) it would free enough salary money to double salaries.

Since the idea of having the government or foundation pay for the services that it receives credit for would seem entirely legitimate and is certainly not immoral, I suggest this method of aiding the finances of the Medical School be taken advantage of whenever possible. 24

As Provost, Terman encouraged faculty to be aggressive in their pursuit of federal funding and scrupulous in accounting for the research-related costs of their work.25 He held frequent meetings with deans and other University administrators explaining the elements of his “recipe for distinction” and his strategies for using salary-splitting and gift funds from corporate sponsors to expand the research faculty. The initial efforts were not easy. Terman encountered resistance by some faculty who thought federal funding should be avoided in order to remain independent, and his policies were opposed by critics concerned that the primary occupants of the Industrial Park were companies funded by military contracts. He sought to disarm such critics by seeking to attract companies in biomedical sciences into the research park. But Terman’s most important strategy for building an environment that supported entrepreneurial activity was in hiring faculty with similar incentives as his own to build a powerful infrastructure to support their research programs. Perhaps the most striking success of Terman’s efforts at building Page 21 of 46 pages an entrepreneurial culture during his Provost years was in building the new science departments of the Medical School.

In Henry Kaplan, Terman and Sterling had at least one colleague in the Medical School who appreciated and enthusiastically endorsed the reorientation toward federally funded research programs. Kaplan had been trained in the emerging field of diagnostic and radiation therapy at the University of Minnesota, where he acquired a solid background in physics en route to receiving his master’s degree in radiology. Convinced that improvements in cancer therapy would only come from joining laboratory research and clinical investigation, Kaplan launched a project on the pathogenesis and induction of leukemia. After a brief period as assistant professor at Yale and a one-year stint at the National Institutes of Health in Bethesda, Maryland, Kaplan joined the Stanford Medical School in 1948 as head of the two man department of radiology

In addition to his investigations into the causes and treatment of leukemia Kaplan concentrated on Hodgkin’s disease, and several other types of cancer. In 1950 Kaplan was experimenting with using high voltage x-ray radiation as treatment to cure patients, but he quickly became unhappy with the x-ray machines available, which concentrated the radiation on the patient’s skin rather than penetrating to deep-seated tumors. In the fall of 1951 Kaplan learned about the work on the early linear accelerator being conducted at the Stanford Microwave Lab directed by Edward Ginzton, and he arranged a meeting with Fred Terman, Ed Ginzton, and Leonard Schiff, the chair of the Physics Department on the Stanford campus to explore the prospects for using the linear accelerator to create highly focused directed radiation. Ginzton and other members of the Microwave Lab were interested in exploring the potential biological and medical applications of microwave physics, nuclear magnetic resonance, and x-ray microscopy, so that Kaplan’s proposal met a welcome audience. Ginzton and Terman were also on the Board of Varian Associates, recently formed to exploit Stanford patents in nuclear magnetic resonance and advanced microwave devices, and they knew Varian Associates was interested in developing medical instrumentation as well. Thus began a multi-year collaboration between Kaplan, the Stanford Physics Department, the Microwave Lab, and Varian Associates to develop the clinical medical accelerator and determine standardized dosimetry measurements to provide therapists with accurate information on the absorbed doses of radiation at different depths with the patient’s body. To support the collaboration Kaplan and Ginzton received grants from the American Cancer Society ($100,000), the U.S. Public Health Service ($113,000), and the James Irvine Foundation in San Francisco ($75,000).The first successful clinical medical accelerator was constructed at the Microwave Laboratory and installed in the Stanford University Hospital in 1957, and shortly thereafter physicist Greg Nunan at Varian Associates was able to transform the prototype into a compact medical device for medical treatment. In 1961 Kaplan received funding of $945,000 with additional funding of $600,000 per year for six years from the NIH to establish the Clinical Radiotherapy Cancer Research Center at the Medical School to support research and treatment with the medical linear accelerator. In this facility Kaplan and his colleagues did path breaking work in establishing standardized therapy protocols for treatment of several cancers. Perhaps Kaplan’s most important work was in the treatment of Hodgkin’s disease, with which he was able to achieve astonishing cures Page 22 of 46 pages

of over 90% in Stage I and Stage II Hodgkin’s disease with a 79% survival rate over five years.

From this brief profile of Kaplan’s early research collaboration with the Microwave Lab and Varian Associates in developing the clinical medical accelerator (clinac) during the early 1950s, it is evident why he was among the loudest voices seeking to transform the fundamental clinical orientation of the Stanford Medical Center by moving it to the main Stanford campus where it would acquire a research focus through the establishment of strong ties to the basic research sciences. Kaplan completely shared Terman’s views about seeking federal funding to build research programs. Indeed in the spirit of Terman’s “salary splitting” strategy for adding faculty strength with research grants, the first round of grants Kaplan and Ginzton received for the development of the clinac supported the four physicists Michael Weissbluth, C.J. Karzmark, R.E. Steele, and A.H. Selby, who joined the medical accelerator project to determine dosimetry measurements. As head of the committee to advise Terman on the appointment of faculty to the lead the Medical School in its new research orientation, one of Kaplan’s first recommendations was to hire Arthur Kornberg.26 Negotiations began with Kornberg in 1957. Kornberg was the Director of the Department of Microbiology at Washington University, St. Louis, where he had been since 1953 following a move from the NIH. At Washington University Kornberg had already assembled a stellar cast of young biochemists and molecular biologists, including Paul Berg, David Hogness, Robert Lehman, Melvin Cohn, and Dale Kaiser. Kornberg and his colleagues also had an extremely impressive track record of Public Health Service grants for supporting their research. Kornberg negotiated with Terman and Alway to move the entire department to Stanford beginning in 1959. This was a major coup for the new Medical School, for in the months following his initial acceptance of the Stanford offer, Kornberg received the Nobel Prize for his work on the replication of DNA. Kornberg not only moved most of his staff to Stanford but was also successful in being awarded more than $500,000 in Public Health Service grants to equip his new Stanford laboratories.

As part of his negotiations for building biochemistry, Terman encouraged Kornberg to propose potential faculty for other departments that would complement the strengths in biochemistry, and he invited Kornberg to serve on the search committee for the chairmanship of the Chemistry Department. Kornberg immediately proposed bringing Joshua Lederberg to Stanford. Lederberg, who had been awarded the Nobel Prize in 1958, accepted the offer and left Wisconsin to form the new Genetics Department at the Stanford Medical Center in 1959. At Stanford Lederberg wasted no time in building a program in molecular medicine with matching grants of $1Mil each from the Rockefeller and the Kennedy Foundations to support construction of facilities for the Kennedy Center for Molecular Medicine in 1962.

Lederberg also received a $500,000 grant from NASA in support of work on planetary biology that year, a project that eventuated in the ACME computing facility and later the SUMEX computing facility. For the purposes of the present study, one of Lederberg’s most significant contributions to the new orientation in the Medical School was his establishment of the Biomedical Instrumentation Research Laboratory, funded by the Page 23 of 46 pages

NASA Exobiology program to support the development of an automated lab for the Mars Viking Lander missions. Lederberg, Carl Djerassi, and computer scientist Edward Feigenbaum created the first expert system, DENDRAL which was designed to analyze soil samples scooped up by a robot and run through a mass spectrometer to determine if there are organic molecules on Mars capable of supporting life. Lederberg hired Elliott Levinthal to direct the Biomedical Instrumentation Research Lab. Levinthal had done his Ph.D. in physics at Stanford with Felix Bloch, doing pioneering work in the field of nuclear magnetic resonance. After completing his Ph.D. in 1950 Levinthal became the first director of research at Varian Associates. In the mid-1950s he left Varian to start his own company, Resonex, a medical and surgical instrumentation company in Fremont, which he ran until Lederberg convinced him to return to Stanford in 1962 as director of the instrumentation lab.

Another key appointment Lederberg made to the Genetics Department was Leonard Herzenberg. Herzenberg had received his Ph.D. in biochemistry and immunology from the California Institute of Technology in 1955, which he followed with a postdoctoral fellowship from the American Cancer Society to conduct research at the Pasteur Institute in France before returning to the U.S. in 1957 to take a position at the Public Health Service at the National Institutes of Health. Herzenberg joined Lederberg as assistant professor of genetics at Stanford in 1959.

Herzenberg and his lab have also become the stuff of legend at Stanford. In his early years at Stanford Herzenberg’s lab began researching the interaction of lymphocyte cells in the immune response and in the genetics and biology of lymphatic tumors. They recognized the need for a method for isolating various kinds of lymphocytes, many of which differ only by small surface differences. Ideally they wanted to isolate variants of cultured single cell lines that differed from the parent cell line only by the loss or gain of a single receptor structure on the surface of the cell. A number of researchers were beginning to tag cell surfaces with fluorescent markers, enabling them to identify variants of cells quite precisely with the aid of a fluorescence microscope. Herzenberg, however, wanted not only to identify fluorescence-tagged cells, but also to be able to isolate these cells. Herzenberg presented the problem to William Bonner and Russel Hulett of the Biomedical Instrumentation Research Lab. About this same time, in the early 1960s, Richard Sweet from the Stanford Applied Electronics Lab was working on high-speed computer recording methods for an ink-jet printer for which Sweet, in 1965, pioneered the technique of independently deflecting droplets of electrostatically charged ink at the rate of 200,000 droplets per second. With funding from the NIH, Herzenberg, Bonner, Hulett and Sweet adapted these tools to fluorescence cell sorting.27 In their prototype FACS, cells stored in a liquid reservoir were passed single-file through a small area illuminated by a green or blue laser beam operating at a wavelength selected to excite fluorescence in cells tagged with the appropriate fluorescent material. Since cells of differing types will have more or less fluorescent material bound to them, they will generate different charges on a photomultiplier proportional to the number of fluorescent molecules on each cell. By pre-selecting the amplitude of fluorescence corresponding to a desired cell class, the cells specifically sought could be separated from the mixture. To accomplish this, FACS put the desired cells in a droplet which would then be Page 24 of 46 pages

electrostatically charged positive or negative, so that it could be deflected to an appropriate reservoir, much in the same way that electron beams are deflected in a cathode ray tube. In order to select desired cells, the fluorescent light, filtered to remove the exciting wavelength was focused onto a photomultiplier tube. A second signal, related to the volume of the cell, was also generated by detecting the light scattered out of the illuminating beam. The two signals were then processed and combined to trigger an electric pulse charging generator which served to charge the liquid stream at the moment the droplet containing a desired cell was forming. The prototype would sort cells at a rate of 5,000 per second with a sample purity of between 90-99 percent.

From the mid-1960s through 1972 the FACS project was supported by NIH grants. In 1972 a patent was granted to Stanford, and it became one of Stanford OTL’s earliest licenses. From 1972 until 1991 the FACS was licensed to Becton Dickinson Immunocytometry Systems of Palo Alto. The Herzenberg lab worked closely with Becton Dickinson engineers in transferring FACS technology to industrial development. More than 30,000 FACS systems were operating in labs around the world as of 2002.28 With revenues totaling nearly $30 mil over its lifetime, FACS became one of the top three OTL patents.29

The examples of the Kaplan, Lederberg, and Herzenberg labs underscore the extent to which the Terman model was embraced by the new breed of medical scientists chosen to reshape the Stanford Medical Center. A key element of their success was not only in obtaining federal funding to support their work, expand their faculty and research teams, but in their interest in pursing the development of instrumentation and therapies that grew out of collaborative efforts with the advanced laboratories of the physics, engineering, and computer science departments—the very sort of interdisciplinary collaboration and cross-fertilization that Sterling, Alway and Terman argued would shape medical science in the late twentieth century. As we have seen Kaplan worked closely with Edward Ginzton and the Microwave Lab, as well as with Varian scientists and engineers in building (and later marketing) the Clinac. The Instrumentation Research Laboratory Lederberg founded was led by a Stanford physicist Ph.D. with a distinguished career in industry. When the Herzenberg group turned to them for assistance in developing the fluorescence activated cell sorter, it is not surprising that they looked to the Applied Electronics Research Lab for ideas and collaborators. Moreover, the development of FACS by Becton Dickinson inaugurated just the sort of connection to industry Terman had advocated; namely a long-term relationship in which the company continues to work with Stanford in developing additional technologies. Since its initial licensing of the FACS in 1972 Becton Dickinson has licensed more than 20 other technologies in the immunochemistry field.30

From their inception the Departments of Biochemistry and Genetics have been hotbeds of innovation in the field of molecular genetics and molecular medicine, and they have been major sources of the biotech revolution in the Bay Area from the 1980s to the present. This movement has been so important that is worth considering it a new phenomenon parallel to the Silicon Valley phenomenon that we might call “Biotech Valley.” Aggressive pursuit of federal funding combined with careful cultivation of relationships Page 25 of 46 pages

to industry have been key elements of the entrepreneurial strategy of both departments. Federal grant awards to the Biochemistry Department were approximately $582,000 in 1966. In 1975 they topped $1mil, and reached $2.24mil in 1982, $3mil in 1987, and $4mil in 1993. The Genetics Department enjoyed even greater success in this same time period: Federal grants to Genetics totaled approximately $740,000 in 1966, surpassing the $1mil mark to $1.75mil in 1974, $2mil in 1978, $3mil in 1990 and due to the influx of funding from the Human Genome Initiative exceeded $6mil in 1993. In 1974 and 1975 these two departments combined accounted for 20% of the federal grant dollars received by the Medical School, and on average during the period 1966-2000 these two departments accounted annually for 6.6% (Biochemistry) and 7.6% (Genetics) of the federal grant dollars awarded to the Medical School.

The departments of radiology, biochemistry, and genetics all fit the Terman model in the style of their growth. As prime recipients of government funding, particularly from the NIH and NSF, these departments were the first medical school departments to finance their growth and operating budgets almost entirely from government grants (Figure 7). They also evolved important relations with industry and made extensive use of the Honors Cooperative Program in building teaching components of their programs directly linked to the emerging biotech industry. When compared with major Engineering School departments Electrical Engineering and Computer Science, illustrated in Figure 8, it is clear that very early on into its formation, the Terman model had made a major impact in shaping the Medical School.

Figure 7: Percentage of total operating budget covered by Sponsored Projects for three Medical School Departments (Source: Stanford Annual Reports)

100%

90%

80%

70%

60%

Biochemistry Genetics 50% Radiology Combined Med School

40%

30%

20%

10%

0%

8 2 6 8 2 6 0 4 6 8 0 6 7 7 7 8 8 9 92 9 9 9 0 9 9 9 9 9 0 1966 19 1970 19 1974 19 1 1980 1 1984 1 1988 19 1 19 1 19 2

Page 26 of 46 pages

Figure 8: Percentage of total operating budget covered by sponsored projects for two Engineering School Departments

100%

90%

80%

70%

60%

Electrical Engineering 50% Computer Science Combined Engineering School

40%

30%

20%

10%

0%

6 2 6 8 2 6 2 6 8 6 7 8 8 9 968 97 974 97 988 99 994 99 19 1 1970 1 1 19 1 1980 19 1984 19 1 1990 1 1 19 1 2000

Source: Stanford Annual Reports

Reverse engineering

I have argued that one of Stanford’s key organizational strengths as well as a conscious strategy has been to adapt to changes in the environment by absorbing breakthrough developments in industry into Stanford and building academic programs around them. The case of solid state physics is paradigmatic for our story. But there are parallel developments in the medical school. Due to the time lag in building the top research programs in the medical school, and due to the fact that the biotech revolution—to which Stanford inventions such as the Cohen-Boyer patent and the FACS have contributed enormously—is a recent development, the phenomenon of “reverse engineering” described above is only now beginning to happen. But it is beginning to happen, particularly in the area of biomedical devices and other areas of biomedical technology. I could explore examples from the area of bioinformatics, where, as I have argued elsewhere, the Stanford-based startup Intelligenetics was crucial in literally creating the field that has subsequently transformed the practice of biochemistry and molecular biology. But the case of Affymetrix and the GeneChip is an equally compelling example that continues the thread of developments around “life and light” we have begun exploring with the FACS. Page 27 of 46 pages

The connection of Affymetrix with the FACS began with Lubert Stryer’s long term fascination and research on light and energy transfer. His interest in the topic started when he was an undergraduate in chemistry at the University of Chicago working with Harold Urey and James Franck. After completed his MD at Harvard, Stryer decided to take a postgraduate research position with Edward Purcell, who like Felix Bloch at Stanford had pioneered the field of nuclear magnetic resonance. Stryer followed this stint with Purcell at Cambridge with work on molecular biology with Max Perutz and Kendrew in 1962-63. Stryer was recruited by Arthur Kornberg as an assistant professor in 1963. At the time Stryer was working on energy as a spectroscopic ruler, using synthetic peptides and fluorescence tagging to investigate local bonding sites. Stryer moved on to Yale, where he shifted his field of research to neurobiology with a focus on the chemical processes of how light excites vision.

In 1976 he returned to Stanford as part of the new department of structural biology in the Medical School and began pursuing a line of work on fluorescent phycobiliprotein conjugates extracted from blue-green bacteria and red algae. Working closely with Leonard Herzenberg and Vernon Oi from Herzenberg’s lab and with Alexander Glazer from Berkeley, Stryer showed that the phycobiliproteins could be used together with fluorescein-labeled reagents for two-color analyses carried out with the cell sorter in a number of different types of biologically interesting molecules, including hormones, growth factor, and lymphocytes. This work also pointed the direction for four-color fluorescence labeling. A patent for these reagents filed by Stanford OTL in 1982 and was awarded in 1985 and licensed to Applied Biosystems in 1986. This patent has been licensed widely achieving a ranking of fourth place on the list of top earners for Stanford OTL. Additional patents on other fluorescent conjugates for analysis of molecules and cells followed in 1989 and 1991.

In 1989 Stryer was approached by Alex Zaffaroni to become the chief scientific officer of the new company he and Leighton Read were founding, called Affymax. The goal of this company was to develop novel chemical approaches to automated drug discovery focusing on the synthesis of peptides as opposed to proteins, which had been the standard direction in the field. The approach Zaffaroni envisioned, but did not quite know how to implement, involved the generation of small peptides with novel sequences against various protein targets. One idea was to generate different peptides be and screen them while bound to either bacteriophage (viruses) or plasmids (small pieces of DNA). Random optimization methods would be developed to modify these lead peptides into potent drug candidates. Basically, however, when Zaffaroni and Read started the company, they had no clear idea of how they were going to proceed. Instead, they gathered a group of high-level scientific advisors led by Lubert Stryer, who had taken a leave of absence from Stanford to head the research team at Affymax, and brainstormed about how to proceed. Participating in this high-level think tank/startup-to-be besides Stryer, Zaffaroni and Leighton, were Paul Berg, Ron Davis, (assistant professor) Michael Pirrung from the Stanford Biochemistry Department, and Joshua Lederberg.

Page 28 of 46 pages

In one of their meetings Read tossed out the idea of just mimicking makers of semiconductor chips, who use beams of light to manipulate molecules on solid surfaces in order to create random chemical diversity. Though he had spent his career working with light activation and fluorescent labeling, Styer had not thought of this possibility. He was intrigued and began asking around if anyone was working with similar ideas. Stryer’s long-time Berkeley collaborator Alexander Glazer suggested Steve Fodor, a young Princeton Ph.D. with a NIH postdoctoral fellowship working on time-resolved spectroscopy of bacterial and plant pigments in his lab. Glazer recommended Fodor as a biochemist of exceptional ability, indeed he already had the reputation of being something of a visionary. Although taking a position in industry was not of interest to Fodor, the opportunity to brainstorm with Zaffaroni, Stryer, Berg, Lederberg and Davis was an opportunity he did not want to miss. The academic appointment could follow. In 1989 Fodor joined the group at the Affymax offices on Porter Drive in the Stanford Industrial Park.

Over the next 18 months Fodor worked intensely with Lubert Stryer in what both describe as the most stimulating and productive period of scientific invention imaginable. The invention they, together with colleagues at Affymax, ultimately produced—light- directed spatially addressable chemical synthesis—was quite literally the marriage of biochemistry and the photolithography techniques used in chip design in the local semiconductor industry. Briefly what they demonstrated by 1991 with the prototype was a process for depositing onto a glass substrate—literally a microscope slide cover— amino acid groups—NH—that were blocked by a photolabile protecting chemical group—X (Figure 9). Illumination with a laser through a mask led to photodeprotection, allowing, in the next step through chemical coupling, the addition of a first chemical building block A containing a photolabile protecting group X. A different mask is then used to photoactivate a different region of the substrate. A second labeled group B is then attached to the amino groups exposed by the illumination through the mask. This process is repeated as many times as desired to obtain the desired set of products. By washing a bath of peptide chains with a fluorescent marker attached to the end, it would be possible to determine the composition of amino acids forming the chain with the aid of a photomultiplier/scanner that operated similarly to the FACS. The initial microarray consisted of 1024 peptides in a 1.6 cm2 area generated in a ten-step process. This was the first microarray, designed specifically for peptide synthesis, and at the same time Fodor developed a scanner for reading the output.31 Page 29 of 46 pages

Figure 9: Concept of light-directed spatially addressable parallel chemical synthesis.

Source: Fodor, et al., Science, Vol. 251(15 Feb 1991), p. 767.

Part of the beauty of combining photolithography with combinatorial chemistry is the resultant high density of the compounds on the substrate. Theoretically, the only physical limitation on the density is the degree to which they can be activated – in other words, the diffraction of light. This provides for an incredibly high degree of miniaturization, and in 1991, at the time of the publication of the paper, Fodor and his colleagues at Affymax wrote:

“Our present capability for high-contrast photodeprotection is better than 20 µm, which gives >250,000 synthesis sites per square centimeter. There is no physical reason why higher densities of synthesis sites cannot be achieved.”32

Using photolithography essentially brought Moore’s Law to Affymetrix. Similarly to the semiconductor industry, Affymetrix has steadily increased the density of synthesis sites, while making the chips more complex and harder to manufacture.33 Indeed, five years later, Affymetrix had produced a prototype chip with a million probes.34

As Fodor, Stryer and their team emphasized in the end of this path breaking paper, this technique, which they called combinatorial chemistry for generating large chemical libraries, could be applied to many different areas. One of the easiest and most obvious Page 30 of 46 pages

areas would be in the use of sequences of DNA as the material for the different matrix elements of the microarray. At this point, it was decided to spin off the GeneChip as a completely separate business from Affymax, and given the use of matrix technology at the heart of the method, the new company was called Affymetrix. After the successful conclusion of project Stryer had directed at Affymax, he returned to Stanford. Michael Pirrung moved on to Duke. A U.S. patent was issued to Fodor, Pirrung, Stryer, and Read for large scale photolithographic solid phase synthesis of polypeptides in September 1992.

The 1991 paper in Science on parallel chemical synthesis using microarrays inaugurated the field of combinatorial chemistry, and it may indeed be one of the key events in the genomics revolution. By 1999 articles in Science among many other scientific journals were celebrating the widespread use of microarrays and the way they have transformed genomics.35 People who never thought they would do large-scale gene studies suddenly were eager to try their hand at monitoring thousands of genes at once. They were watching patterns of gene expression change as strawberries ripen, viruses cause disease, and tuberculosis infects host cells. And they were cataloging the genes that are overexpressed or suppressed when normal cells become cancerous. The National Institutes of Health (NIH) has heavily supported this trend, funding its own microarray studies and providing grants to institutions to buy the technology. All this is generating a flood of data that traditional journals find hard to accommodate and digital databases don't yet know how to handle. The NIH funded workshops to spread the technology. A Cold Spring Harbor Laboratory workshop in 1999, for instance, was the most oversubscribed laboratory course on record in the history of Cold Spring Harbor programs. Sixteen people paid $1955 each to learn how to build and use a machine for genetics research. For another $30,000, four actually took the machine home. The course was new and was no even advertised, yet eight times as many people signed up as could be accepted.

Microarrays were immediately hot at Stanford as well. Several Stanford geneticists and genomics scientists wasted no time in transferring the technology to their own labs, some inventing their own versions of it. In the forefront of Stanford developments was Pat Brown in the Biochemistry Department. He launched his own work on DNA microarrays, publishing numerous papers as one of the key participants in the Stanford Genome Project.36 In 1994 he and his graduate student Dari Shalon developed and patented their own cDNA microarray technology, a robotic device that can put up to 13,000 genes on a 1- by 3-inch chip. The machine developed by Brown’s lab employed a cluster of metal pens to print thousands of tiny DNA spots on glass slides, which can be used to perform rapid studies of gene expression.37 Researchers liked the design because it allowed them to do gene expression studies for a fraction of what it would cost to obtain the equipment for similar studies from Affymetrix Inc. Brown, Shalon, and Stanford filed for a U.S. patent in 1994 and received one in 1999. Stanford gave Shalon exclusive rights to commercialize the arrayer, and in 1994 he founded Synteni. He then sold the company and its patent rights to Incyte Pharmaceuticals of Palo Alto for $80 million in January 1998. (Shalon is now director of Harvard University's Center for Genomics Research.)

Page 31 of 46 pages

A great deal of traffic back-and-forth between Stanford and Silicon Valley has occurred around the development and implementation of microarray technologies in teaching and research. Some of the new directions taken by Stanford faculty seem just as visionary as the original GeneChip itself. Calvin Quate from Applied Physics and the Photonics Research Center as well as David Cox from the Stanford department of neurobiology are among the Stanford scientists who have been engaged in expanding and refining the use of microarray technologies. Quate is a major Stanford inventor with numerous patents, including the acoustic microscope. He is an important contributor to developments in the fields of photolithography and nanotechnology. He has been on the scientific board of Affymetrix since its founding. Some of Quate’s work in Applied Physics is directly relevant to the future of Affymetrix and the microarray industry. For instance, in 1998 he filed for a patent through Stanford OTL on a new sequencing system using nano scale electrometers, which he has also invented. The abstract for Quate, Manalis, and Minne’s invention disclosure, Docket No: S98-157, “Method for Directly Sequencing DNA with a Transcription Protein and Nanometer Scale Electrometer,” reads as follows:

This invention is a way to sequence DNA based on the direct observation of RNA polymerase with a nanometer scale electrometer ("NSE"). Such NSEs can be produced on integrated circuit chips. In theory, a single In theory, a single chip could have a million NSEs operating in parallel, and at a rate of 100 nucleotides per second, the entire human genome of 3 billion base pairs could be sequenced in less than a minute.

David Cox is another Stanford faculty member with a long history of contributions to gene sequencing and potential medical applications of genomics. In 2000 Cox left Stanford in to join Steve Fodor in founding a new firm Perlegen, which pushes GeneChip and microarray technology to the next level of sophistication given the advances made by the Human Genome Initiative by focusing on single nucleotide polymorphisms (SNPs) within the analysis of whole genomes. Paul Berg and Lubert Stryer are other Stanford faculty who joined Cox as members of the scientific board. The challenge is to be able to identify which of the millions of SNPs throughout the entire genome contribute to a particular disease or drug response. Cox and the group of scientists he has assembled at Perlegen examine genetic variations in DNA samples obtained from clinical trial participants to explain and predict the efficacy and adverse effect profiles of prescription drugs. Through its approach to phramacogenomics, Perlegen seeks to discover genetic variants associated with disease for potential new therapeutics and diagnostics. Perlegen’s aim is to develop drugs for specific diseases. In June 2004 Perlegen was awarded a large NIH grant to work on autism.

In order to illustrate the continuity within the Medical School since the late 1950s of strategies for linking the pursuit of competitive excellence in research with connections to industry, and of absorbing cutting edge industry developments back into academic research programs, I have selected cases from radiology, biochemistry, and genetics. The point could also have been illustrated—and is in our large study—with examples from cardiovascular surgery and the Biomedical Devices Network, medical research areas at Stanford that have consciously modeled their approach on the style of the Engineering Page 32 of 46 pages

School. With these examples I have sought to illustrate the key point that what drives the university is federally funded research. But at the same time since its rise to prominence Stanford researchers have been deeply tied to the industry of Silicon Valley through rewarding reciprocal ties. Stanford’s ties to industry are frequent sources of new directions of research that makes it more competitive for federal research support. In addition I have chosen these examples to illustrate the high degree of interdepartmental and interschool collaboration that takes place at Stanford, particularly collaborations between parts of the engineering and medical schools, as well as with applied physics. Though born out of the financial need to restructure in the post World War II context, the siting of the Medical School on the same campus with the engineering and natural sciences has been a major source of innovation and intellectual strength.

In order to gain more than anecdotal evidence of these points based on a few well-chosen cases I want to draw on aspects of the data Nate Rosenberg, Jeannette Colyvas and Brett Goldfarb have collected for our larger study. Specifically they have sought to track pockets of innovation to the local school and departmental level. In order to do this they have examined invention disclosures filed from 1990-2000. Data for this period is a reliable indicator in part because the university has required disclosure of inventions in which university resources were utilized. In addition Stanford is an environment that is highly supportive of entrepreneurial activity, and studies have shown a high propensity among Stanford faculty to participate in technology transfer.38

There were 2147 invention disclosures filed with the Stanford OTL from 1990-2000. In order to track the contributions of co-inventors from different departments and schools, individual departments were assigned appropriate fractions of an invention disclosure. Rosenberg, Goldfarb and Colyvas find a significant trend toward multiple inventors listed on Stanford patents and invention disclosures. In the case of medical school innovations in particular a significant proportion of inventions also had at least one collaborating inventor from outside of the medical school, most frequently from the engineering school. Rosenberg, Colyvas, and Goldfarb estimate conservatively that more than 20% of Stanford biomedical inventions arise from sources other than the medical school. In the context of the classifications considered, for example, “drugs and medical” technologies make up the majority of medical school output (75%). However 20% of the total Stanford patents counted in the category “drugs and medical” technologies come from outside of the medical school. Innovations in the domain of biomedical devices frequently include co-inventor teams from computer science, engineering, and physics. The same is true of radiology. These findings are consonant with the transdisciplinary character of contemporary technical innovation and point to the importance of centers such as Stanford where researchers in an academic medical center easily form collaborations with colleagues in engineering, physics, computer science, and other disciplines to create new technologies.

The impression emerging from the share of invention disclosures at the school level was that inventive activity is roughly equally distributed within engineering and the medical schools. However, a closer look at a selection of departments themselves gives a finer- grained map of the main loci of inventive activity, and demonstrates that there are several Page 33 of 46 pages

highly innovative departments distributed throughout the university. Tables 1 and 2 (sources provided by Rosenberg, Goldfarb, and Colyvas) list the top 20 departments in terms of number of inventions (Table 1) and in terms of licensing revenues generated (Table 2). These tables illustrate the high concentration of inventive activity in particular fields; namely, several fields of engineering, biomedicine, computing, and chemistry. Within the School of Engineering, it appears that Electrical Engineering is the highest yielding department in both shares of inventive activity (357.45 out of a total of 589.43 for the entire school) and revenues ($13,284,907 out of a total of $18,889,076 for the school). Put another way, 61% of inventive activity for the school of Engineering, (17% for the entire university) comes from the department of Electrical Engineering alone. This is also reflected in revenues, as electrical engineering accounts for 70% of the School of Engineering (29% of the entire university). Computer Science also accounts for a fairly high share of inventive activity (51.32) and a disproportionately higher share of revenue ($4,075,351). The Departments of Aeronautics/Astronautics (A&A) and Mechanical Engineering (ME) come in third in terms of revenues ($646,330 and $638,916), although the share of inventive activity is nearly half (38.87) in A&A of what it is in ME (75.03).

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Table 1: Departmental rank in terms of invention-shares of invention disclosures (1990-2000) 1 Electrical Engineering School of Engineering 357.45 13,284,907 2 Department of Medicine School of Medicine 97.07 1,443,656 3 Mechanical Engineering School of Engineering 75.03 638,916 4 Chemistry School of Humanities & Sciences 72.21 410,478 5 Pathology School of Medicine 63.47 925,542 6 Radiology School of Medicine 58.4 255,241 7 Applied Physics School of Humanities & Sciences 57.55 372,260 8 Biochemistry School of Medicine 52.28 924,977 9 Computer Science School of Engineering 51.32 4,075,351 10 Genetics School of Medicine 45.55 1,801,436 11 Aeronautics and Astronautics School of Engineering 38.87 646,330 12 Pediatrics School of Medicine 37.35 369,722 13 Ginzton Laboratory of Physics Office of the Dean of Research 30.64 1,050,043 14 Biological Sciences School of Humanities and Sciences 26.33 171,243 15 Materials Science and Engineering School of Engineering 26.13 691 16 Music School of Humanities & Sciences 26 52,047 17 Microbiology and Immunology School of Medicine 25.77 842,958 18 Stanford Linear Accelerator Center Stanford Linear Accelerator Center 24.67 9,128 19 Physics School of Humanities & Sciences 20.92 63,475 20 Gynecology and Obstetrics School of Medicine 19.83 126,112

Table 2: Departmental rankings in terms of revenues generated (1990-2000) 1 Electrical Engineering School of Engineering 357.45 13,284,907 2 Computer Science School of Engineering 51.32 4,075,351 3 Genetics School of Medicine 45.55 1,801,436 4 Molecular Pharmacology School of Medicine 13.98 1,680,581 5 Medicine School of Medicine 97.07 1,443,656 6 Ginzton Laboratory of Physics Office of the Dean of Research 30.64 1,050,043 7 Howard Hughes Medical Institute School of Medicine 19.63 960,900 8 Pathology School of Medicine 63.47 925,542 9 Biochemistry School of Medicine 52.28 924,977 10 Microbiology and Immunology School of Medicine 25.77 842,958 11 Aeronautics and Astronautics School of Engineering 38.87 646,330 12 Mechanical Engineering School of Engineering 75.03 638,916 13 Chemistry School of Humanities & Sciences 72.21 410,478 14 Applied Physics School of Humanities & Sciences 57.55 372,260 15 Pediatrics School of Medicine 37.35 369,722 16 Neurosurgery School of Medicine 6.78 267,605 17 Hansen Experimental Physics Lab Office of the Dean of Research 14.12 255,453 18 Radiology School of Medicine 58.4 255,241 19 Chemical Engineering School of Engineering 16.12 194,414 20 Biological Sciences School of Humanities & Sciences 26.33 171,243 Page 35 of 46 pages

The Department of Medicine exhibits a similar pattern of concentration among a few departments. Genetics, Molecular Pharmacology, and Medicine account for 47% of total patent and licensing revenues to the medical school (11% of the entire university). The inclusion of the departments of Pathology, Biochemistry, Microbiology/Immunology and the Howard Hughes Medical Institute accounts for 81% of revenue shares to the school (19% of the university). Molecular Pharmacology appears to have among the highest returns ($1,680,581, which is 16% of that of the school) for the relatively smaller share of inventive activity (13.98, which is 2% of that of the school). 16% of the inventive share (97.07) for the School of Medicine comes from the Department of Medicine, followed by Pathology (63.47), Radiology (58.4), Biochemistry (52.28), and Genetics (45.55). The highest revenue shares come from the Department of Genetics ($1,801,436), which accounts for 17% of the school (3% of the university).39

Stanford Entrepreneurs

In order to investigate linkages between Stanford and the Silicon Valley, Rosenberg, Colyvas and Goldfarb focused on the various modes of interaction that inventors have in the technology transfer and development process. They sought to measure the level and nature of inventors’ involvement with 1) the transfer of knowledge to firms that make commercial use of it, 2) further development of those technologies once commercialized, and 3) further entrepreneurial activity on the part of Stanford inventors in industry, especially in the Silicon Valley. Focus on these three features of Stanford inventive output reveals the ways in which university students, faculty, and staff interact with firms in the Silicon Valley, creating a vibrant cross-pollination of knowledge, ideas, and practices.

The primary resource Rosenberg, Colyvas, and Goldfarb used for constructing the picture of Stanford inventors’ involvement with the transfer of their technology to industry was the Conflict of Interest (COI) reviews on file with the Stanford Office of Technology Licensing and OTL reports on licenses in which Stanford took an equity holding in the startup company. Stanford conducts a COI review when inventions are licensed to firms with whom inventors are associated. The purpose of a conflict of interest review is to mitigate any potential conflict of interests relating to the use of Stanford resources, such as laboratories and staff time. From the COI reviews it is possible to learn whether inventors had formal relationships, such as consulting, with particular firms. In general, inventor involvement with licensing firms is an uncommon event. In particular, of 1174 licenses in the sample, inventor involvement is associated with only 167 (14%) of them. Moreover, of the 2147 inventions, inventors of only 133 (6%) of them have relationships with licensees, as reported by the COI files.

For their analysis Goldfarb produced a randomly generated representative sample of these 2147 disclosures, which yielded 471 inventions, among a total inventor pool of 780 inventors.40 A detailed questionnaire was sent to the inventors querying their involvement with different dimensions of the licensing and technology transfer process. Approximately 275 inventors returned the questionnaires. Some of the results of the survey data are reported in Tables 3, 4, and 5 below.41 Page 36 of 46 pages

The majority (approximately 90%) of the respondents reported that they were Stanford affiliates at the time of invention, most of whom were faculty, postdoctoral researchers, or graduate student (comprising roughly 76% of the entire sample). Most of our sample of inventors reported that they were a graduate student when their invention was disclosed (31%), followed by faculty member (28%), and postdoctoral fellow (17%). Approximately 7% reported that they were researchers and 5% that they were senior scientists.

The school affiliations of the inventors look quite similar to the total data set of inventors discussed above in connection with Table 1. Roughly 85% of the inventors come from the School of Medicine, the School of Engineering, or the School of Humanities and Sciences. Approximately 39% of responses came from inventors from the School of Medicine, 34% from the School of Engineering, and 11% from Humanities and Sciences. Paralleling our previous data on share of inventor activity (see Table 3 above), these three schools reflected a representation of 28% (Medical School), 27% (Engineering), and 9% (H&S), respectively.

Table 3: Position at time of invention Table 4: Affiliation at time of invention

Position Number Percent Affiliation Number Percent Graduate Student (Incl. School of Medicine 106 40.0% RA) 86 31.4% School of Engineering 92 34.3% Professor (incl. asst. and School of Humanities & assoc.) 75 27.4% Sciences 30 11.2% Postdoctoral Fellow 47 17.2% External 18 6.7% Researcher 20 7.2% Office of the Dean of Research 6 2.2% Senior Scientist 14 5.1% Unknown 5 1.9% Manager/Director 8 2.9% Other 3 1.1% Other 7 2.6% Stanford Linear Accelerator 3 1.1% Unknown 7 2.6% School of Earth Sciences 2 0.7% Professor (Research) 5 1.8% Graduate School of Business 1 0.4% Engineer 3 1.1% School of Education 1 0.4% Executive 1 0.4% Faculty and Staff Services 1 0.4% Professor Emeritus 1 0.4% Total 274 100.0% Total 268 100.0% Source: Rosenberg, Goldfarb, and Colyvas

Recent research in economics has found that academic inventor involvement in the technology transfer process is generally necessary for the successful commercialization of academic innovations,42 particularly in highly technique-dependent areas, such as biotechnology. Furthermore, continuing inventor involvement is critical for downstream improvements to university-generated inventions. At times, this involvement has significant economy-wide effects. But empirical verification of such claims has been difficult to obtain. In general, inventor involvement with licensing firms is not a given in all licensing agreements, and is difficult to definitively capture. Our study of Stanford inventors provides a window into the relationships of inventors to firms and supports the importance of inventor involvement in early stages of technology transfer.43 Page 37 of 46 pages

Stanford inventors are actively engaged in the technology transfer process. Very few inventors (25 out of 265 respondents) reported that they ‘did nothing’ during the licensing process. A significant number of respondents reported that they provided potential licensee contacts to OTL (76) and/or contacted potential licensees (42), hosted visits of potential licensees (41), or helped negotiate a license (35). Most respondents reported that they participated in one or more of the ‘invention disclosure’ and ‘patent application and prosecution’ aspects of the process with the number of responses ranging from 101 to 173. Such responses reflect the important mediating role of the Office of Technology Licensing at Stanford in both the administration of the intellectual property needs of inventors and their technologies, and also the ability to secure licensing firms that commercialize their technologies. While roughly 50% of the inventors surveyed reported that they knew of one or more potential licensees at the time of their invention disclosure, only about 29% reported that they provided potential licensee contacts. Only a few respondents (roughly 15 percent) reported that they contacted or participated directly in license negotiations. Such data suggest to us that inventor involvement is less ‘administrative’ and ‘marketing’ related, and more participatory in the actual knowledge transfer and development process. Page 38 of 46 pages

Table 5: Responses indicating the type of inventor involvement with the commercialization of their research before disclosure, after disclosure, after license, and as reported for co-inventors.

Before After After Co- Type of Involvement Disclosure Disclosure License Inventors Founder 9 25 30 42 President 0 5 5 8 Chief Executive Officer 0 1 3 7 Chief Technology Officer 1 3 10 11 Scientific Advisory Board 10 9 14 30 Board of Directors 6 14 17 24 Paid Consultant 7 4 25 32 Non-paid Consultant 9 15 14 10 Part-time Employee 5 5 8 12 Full-time Employee 2 7 17 23 Corporate Fellow in lab 0 0 0 1 Firm Personnel Formerly in Lab 20 18 20 17 Received Support as Grant or Industrial Contract 27 24 36 30 Received Support as Gift (incl. equip) 17 17 19 16 Other 12 9 13 6 Total 125 156 231 269 Source: Rosenberg, Goldfarb, and Colyvas

The survey data indicate that Stanford inventors continue interacting with licensing firms beyond the initial licensing arrangement. Indeed, the most intense interaction goes on after the licensing arrangement has been established. Table 5 summarizes responses to a series of questions asking about the types of involvement inventors had with licensing firms before the invention disclosure, after the invention disclosure, and after the license. Inventors were also asked about of the types of involvement their co-inventors had at these three time periods.44

Overall, there is considerable variation among the types of interactions that inventors have with firms, some reflecting the inter-generational ties that inventors have with colleagues or students with whom they have worked in their laboratories; some reflect direct entrepreneurial roles including advisory, founding, or management positions; some reflect consultative functions; and others reflect research ties in the form of financial support, grants, or contracts. But a number of interesting observations emerge from these results. First, a considerable number of firm personnel in licensing firms had been affiliated with one or more of the inventor’s labs (18-20). This number did not seem to change very much before disclosure or after license. Also, a relatively high number of responses reflect the receipt of industrial support as grants or contracts (27 before the disclosure and 36 after the license). This suggests continual collaboration and close alignment between university scientists and firms in their field. Perhaps the most striking Page 39 of 46 pages

involvement is the increase in consulting activity after a license with those firms compared to before the disclosure. 7 inventors reported having a paid consulting arrangement before the invention disclosure, 4 after disclosure, and 25 after the license.45

The responses to these questions also reflect a considerable amount of flow of personnel between the university and firms that license its technologies. While 2 respondents reported serving as a full-time employee before disclosure, 17 reported they held full- time positions with the firms that commercialize their inventions after the license was signed. Similarly, we see movement into founding and managerial positions. Before disclosure, 9 respondents reported that they served as founders of a firm that licensed their inventions, while 25 and 30 reported being founders by the time of disclosure and license respectively. While only 1 respondent reported serving as a chief technology officer, roughly 10 reported making the move to the position after the license. While this suggests a considerable amount of movement to industry in terms of knowledge and people, I would emphasize the two-way flow of interaction associated with these ties as well.46

Conclusion

In the course of this investigation I have been interested to examine the basis of the claim that Stanford researchers in biotech, materials science, computer science, electrical engineering, and other potentially financially rewarding fields are, with the strong encouragement of the leadership of the university, becoming the handmaidens of industry by selling their inventions in order to finance their research as well as for personal financial gain. I want to conclude with some reflections on how significant and important the licensing of its inventions is to Stanford. How important is this activity? Should Stanford researchers be engaged in these entrepreneurial activities? Why do it?

Here are some facts to conjure with: During its activities from 1970-2003 the Stanford OTL has generated a cumulative total of nearly $595 million; it has received 5,324 invention disclosures; and it has patented 1,371 inventions. As we have seen, the total research costs in 2002 exceeded $400 million. Thus, while Stanford has been extremely successful in generating revenues from licensing its inventions, the sum total of that activity is relatively small in comparison with the research needs of the university taken as a whole. The average over the period 1990-2000, for example, has been approximately $40 million per year. I am by no means asserting that licensing revenue is trivial, but the returns are relatively small compared to the costs of current research, and the potential ramifications to other dimensions of university culture and the mission of higher education are arguably high.47

So why pursue a vigorous technology licensing program aimed at the commercialization of university research? Obviously one can always hope to score one or several Cohen- Boyer patents that bring in revenue to support the work of an innovative program. But at Stanford since the days of Frederick Terman the primary answer to that question has been that interaction with industry produces cutting edge science that is not only economically relevant but enhances Stanford researchers’ competitive edge in winning federal funding, Page 40 of 46 pages the main plum in the game. Central to this approach was the notion that first began to dawn on Terman during his stint as director of the Radio Research Lab at Harvard during World War II that in the post war era the nature of science was going to change inalterably; that it would no longer make sense to distinguish so radically between pure and applied research and that the boundaries between basic research and development were going to erode just as certainly as the boundaries between science and technology were being redefined. In such an environment encouraging appropriately defined partnerships with industry was the path to recruiting and retaining the most talented faculty, and in the end, the path toward producing the kind of science and engineering that would be rewarded with federal grants and contracts.

In addition to catapulting Stanford from its marginal backwater status in the immediate post-War period into the top ranks of research universities almost overnight, Terman’s steeples of excellence program succeeded in building a faculty of star academic researchers in a number of fields in engineering, biomedicine, and the mathematical and physical sciences. Perhaps the most important legacy of this program, however, was the creation at Stanford of an administrative environment and institutional culture highly supportive of entrepreneurial activity. This point is frequently misunderstood to mean that Stanford and similarly entrepreneurial institutions encourage their faculty to seek industry sponsorship and government contracts that make the institution a handmaiden to industry and the military-industrial complex. The supposed goal of encouraging this entrepreneurial activity on the side of the administration is to generate income for the university. I have tried to argue that Terman resisted this approach and instead set his sights on going after research dollars and government contracts that supported basic research. He steadfastly resisted programs that tied any of his departments to a specific company (which he thought would ultimately reduce the flow of resources into the university and limit the impact of Stanford research programs) or to applied work for the military (as much as he appreciated funding from the defense departments). The attitude Terman cultivated was that highly motivated scientists and engineers should not be prevented from seeing their ideas and technologies materialized in industry. Terman’s view, a view that has been shared by every Stanford administration to the present and has become institutionalized as part of the culture, is that highly motivated scientists and engineers will simply want to see their work transferred to industry or to the clinic and that creating barriers to this activity would dissuade them from staying at Stanford. Ultimately the encouragement of industrial entrepreneurial activity—which in policy and practice at Stanford has been more of an effort not to create roadblocks to this sort of activity rather than explicitly requiring or strongly encouraging it—was viewed as a faculty and staff retention issue rather than a source of income to the university. The income would be generated by pursuing research grants and contracts. Highly motivated research engineers and biomedical scientists, in Terman’s view, are interested in technology transfer because they want to make a difference in society. They are also motivated by financial reward, but what persuades them to remain at the university rather than moving to industry is the opportunity to continuously expand and develop their research horizons in collaboration with colleagues and students and supported by institutional structures that facilitates the transfer of technology.

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The case studies I have presented and the data on recent technology and licensing developed by Rosenberg, Golfarb, and Colyvas I have drawn upon illustrates the continued relevance up to the present time of Terman’s vision and the strategies he pursued. Federal funding continues—by a very large margin—to be the primary source of research funding at Stanford, and indeed of funding for the university. The data on percentages of the contribution to the operating budgets for individual departments I have generated supports the notion that the pockets of innovation within Stanford are the ones supported by federal funding. This funding supports innovation in several key academic research units in the medical and engineering schools as well as some research units in the basic science departments, particularly chemistry and applied physics. The large number of invention disclosures and significant involvement of graduate students and faculty in technology transfer underscore the encouragement the Stanford administration and the OTL have invested in supporting a rich entrepreneurial culture in which cross- school and cross-disciplinary collaboration thrives particularly between elements of the engineering and medical schools. The view that Terman and his successors have fostered is that industry is both a source for employing students and for developing the technologies envisioned in Stanford research labs. But they have also viewed affiliation with industry through consulting relations and other forms of interaction as invaluable sources for stimulation of theoretical ideas and new research problems. This attitude found enthusiastic confirmation in areas of materials science, electrical engineering, and computing, and was significant in the early development of Silicon Valley.

Despite the important contribution made by Stanford scientists in areas of genetics, biochemistry, and applications of computer technology in the early years of the biotech revolution, Stanford biomedical scientists such as Henry Kaplan, Arthur Kornberg, Paul Berg, Joshua Lederberg, and Leonard Herzenberg were at first resistant to getting into the development of Silicon Valley-styled startup firms and other forms of industrial biotech involvement, fearing it would divert the advanced research directions they were pursuing and diminish their competitiveness for federal funding.48 Since the late 1980s that attitude has been reversed, in large part due to the recognition of opportunities for more rapidly advancing their scientific programs. Confirmation for the positive effect of research collaboration with industry in enhancing the productivity of biomedical scientists has been provided by recent studies of “star scientists” by Zucker, Darby, and Armstrong. Their work argues that “star scientists’” involvement with biotechnology firms appears to play a major role in determining which firms utilizing breakthrough discoveries will be most successful. Moreover, they demonstrate that these scientists often publish more and better science during the period they are involved with firms, apparently due to the greater resources which result from their commercial activities.49 My interviews with Stanford biomedical scientists support the findings of Darby and Zucker. Rather than viewing income from technology licensing as necessary for raising the large funds necessary to pursue the research mission, licensing revenue data should be viewed as a reflection not only of successful technology transfer of Stanford research findings to industry, but also as a marker of Stanford’s success in facilitating and fostering fruitful relationships with firms. These exchanges are reflections 1) of Stanford success in the creation of a product that is of commercial (and in many respects social) importance, and also 2) of the successful interaction of Stanford researchers with industry counterparts in Page 42 of 46 pages

the transfer of their inventions (often playing more formal roles as consultants and advisors). Moreover, paying attention to industry as sources for interesting scientific and engineering research questions helps generate adaptation and co-evolution of Stanford research and industry, particularly the industry of Silicon Valley, a process which in turn continues to sustain Stanford’s entrepreneurial spirit. During the late 1980s and 1990s Stanford biomedical scientists discovered what their colleagues in engineering and the physical sciences had learned from Terman: licensing and technology transfer is really a two-way exchange in which important ‘cross-pollination’ of knowledge, ideas, and practices takes place. Page 43 of 46 pages

Endnotes

1 Thomas Byers, Robert Keeley, Anthony Leone, George Parker, “The Impact of a Research University in Silicon Valley: Entrepreneurship of Alumni and Faculty,” Journal of Private Equity, Winter 2000.

2 James Gibbons, “The Role of Stanford University: A Dean’s Reflections,” in Chong-Moon Lee, William F. Miller, Marguerite Gong Hancock, and Henry S. Rowen, eds., The Silicon Valley Edge: A Habitat for Innovation and Entrepreneurship, Stanford; Stanford University Press, 2000, pp. 200-217, especially pp. 204-205.

3 See National Association of College and University Business Officers, 2003 Endowment Study Results, 5 February 2004, http://www.nacubo.org/documents/research/FY03InstitutionListingForPress.pdf

4 See NSF data compiled on Federal Funding of Research and Development.

5Frederick Terman, Recipe for Distinction, notes for Terman’s successor as dean of engineering. http://www.stanford.edu/dept/HPST/TimLenoir/Startup/TermanPapersSC160/SeriesIIIBox19/fol6/RecipeForDistinction.pdf

6Electrical Engineering Curricula in a Changing World, 1956 http://www.stanford.edu/dept/HPST/TimLenoir/Startup/TermanPapersSC160/SeriesVIIIBox1/fol9Speeches1955/ElecEngChangingCu rriculum1956.pdf

7 A number of studies, particularly those of William Stuart Leslie and Rebecca Lowen have depicted Terman as basically selling the university to the military and industry. This picture does not stand up under close scrutiny. Terman, like nearly every other university administrator, sought government funding for academic programs as the only serious financial option for program building. Terman’s own “recipe for distinction” was based explicitly on the university controlling the research agenda and being deeply involved in setting research priorities.

8 Terman to Oldenfield, 8 April 1954, Terman Papers, SC 160, Series II, Box 18, fol. 8. http://www.stanford.edu/dept/HPST/TimLenoir/Startup/TermanPapersSC160/SeriesIIBox18/fol8/Terman-Oldenfield8April1954.pdf

9 Ibid., p. 6.

10 Ibid., Exhibit A, p. 4.

11 David Packard, The H-P Way: How Bill Hewlett and I Built our Company (New York: HarperBusiness, 1995).

12 When Terman recruited Linvill from the Bell Labs, he followed a well-established practice. Most universities and corporations eager to enter the field of solid state raided the Bell Telephone Laboratories in the 1950s and the early 1960s. Texas Instruments and Motorola hired Bell Labs physicists and chemists to build up their semiconductor business. Harvard, Berkeley, and other universities also recruited their faculty members in solid state from Bell.

13 Frederick Terman to R. Holt, March 11, 1953, in SC160, series II, box 15, folder 22; John Linvill, oral history interview, May 5, 1987, Tape SV5, Stanford archives and special collections; Linvill, oral history interview conducted by Christophe Lécuyer, April 25 and May 30, 2002; James Gibbons, “John Linvill – The Model for Academic Entrepreneurship,” The CIS Newsletter, Fall 1996. See also Leslie, The Cold War and American Science, 71-75.

14 In 1956, Linvill received a $13,600 grant from IBM. Texas Instruments also gave $11,625 for transistor circuit research. Terman to William Shockley, September 20, 1955, in SC160, series III, box 48, folder 8; Linvill to R. Wallace, September 20, 1955, in SC160, series III, box 48, folder 8; Linvill, “Excerpts from Lecture for Stanford Alumni in Los Angeles: The New Electronics of Transistors,” February 15, 1956, in historical files of the Campus Report, folder: John Linvill; Linvill, “Description of Research Projects on Transistor Applications Undertaken in Summer 1955 under Task 7,” June 27, 1955, in SC160, series II, box 15, folder 21; Gibbons, oral history interview conducted by Christophe Lécuyer, May 30, 2002.

15 Stanford received a $35,000 grant from the ONR to set up the laboratory.

16 Gibbons, “John Linvill – The Model for Academic Entrepreneurship;” Linvill, oral history interview conducted by Christophe Lécuyer, April 25 and May 30, 2002; Gibbons, oral history interview conducted by Christophe Lécuyer, May 30, 2002. For Fairchild Semiconductor, see Lécuyer, “Fairchild Semiconductor and its Influence,” in Chong- Page 44 of 46 pages

Moon Lee, William Miller, Marguerite Hancock, and Henry Rowen, eds., The Silicon Valley Edge: A Habitat for Innovation and Entrepreneurship (Stanford: Stanford University Press, 2000), 158-183.

17 Linvill, “Application for Equipment Funds for Semiconductor Device Research,” February 25, 1957, in historical files of the Campus Report, folder: John Linvill; Terman to William Cooley, March 6, 1958, in SC160, series V, box 7, folder 7; “Solid-State Devices Lab Tackles Silicon Transistors in Partnership with Industry,” June 1958, in historical files of the Campus Report, folder: John Linvill; Terman to Joseph McMicking, June 25, 1963, in SC160, series III, box 48, folder 8; Gibbons, “John Linvill – The Model for Academic Entrepreneurship;” Linvill, oral history interview conducted by Christophe Lécuyer, April 25 and May 30, 2002; Gibbons, oral history interview conducted by Christophe Lécuyer, May 30, 2002.

18 These developments are too expansive to cover in the current context. They are treated in the book-length study from which this paper is drawn.

19 From the points below I have omitted the important “industrial affiliates programs” initiated by Terman through which firms had access to research results and participate in conferences and workshops of special interest to their firms in exchange for an annual financial contribution to the research lab or sponsoring department.

20 It is difficult to obtain records that would permit a breakdown of department operating budgets and sources of income before 1966. In that year a change was made in the reporting of Stanford accounts in the Annual Financial Report of the university that enable us to track sources of income for individual departments. From 1950-1965 the practice was to simply to list the total for grants and contracts and report individual grants as line items in a general ledger rather than listing them by department and school. Hence it is difficult to extract the information we are seeking. This is not to say that data is unavailable for the period between 1950-1965, but Special Collections does not have a systematic and complete holding of the financial records of individual departments for those years.

21 Medical Care, the University, and Society. Speeches Delivered at the Dedication of the Stanford Medical Center, September 17 and 18, 1959. Stanford; Stanford University Press, 1959, p. 3.

22 Spyros Andreopoulos. "Stanford University Medical Center. 25 Years of Discovery." Stanford Medicine, Fall 1984, pp. 3-4. Also see The Alway Years, 1957-1964, published by Stanford University School of Medicine, 1964.

23 Terman-William Walter Greulich 1 August 1956, SC216, Box 62, Fol 8, Medical School 1956-57.

24 Ibid.

25 See for instance Terman’s memo to Dean Robert Alway, 19 January 1962, Terman Papers SC160, Series III, Box 43, fol 1: I understand that you and your staff have recently developed a consensus in favor of charging faculty salaries to research grants, to the extent consistent with the time devoted to such grant-supported research and with the overall funding of research, instruction, and service. I heartily approve of this policy and of its long-run contribution to the financial well-being of the school.

I would, therefore, suggest that full consideration be given to the use this year of an appropriate portion of the NIH general research support grant for faculty salaries which otherwise would be charged to university general funds.

I understand that it is NIH policy that any institutional funds which may be released by the use of the general research support grant will continue to be used for the direct costs of research or research training. I am sure that there must be substantial research and research-training related expenses in the medical school on which any recovered salary dollars could be spent within the spirit of the policy.

26 At this time Kaplan had the offer of the chair of radiology at Harvard and he threatened to leave Stanford if Alway and Teman did not succeed in getting Kornberg or someone comparable to join the effort to restructure the medical school. Certainly the support Kaplan received from Ginzton, Schiff and others in the physics and engineering departments at this time, urging Terman to do whatever it took to retain Kaplan, provided additional impetus to the plans for the medical school.

27 Hulett, H. R., Bonner, W. A., Barrett, J. and Herzenberg, L. A. (1969). “Cell sorting: automated separation of mammalian cells as a function of intracellular fluorescence.” Science 166(906): 747-9; Merrill, J. T., Veizades, N., Hulett, H. R., Wolf, P. L. and Herzenberg, L. A. (1971). “An improved cell volume analyzer.” Review of Scientific Page 45 of 46 pages

Instruments 42(8): 1157-63. Bonner, W. A., Hulett, H. R., Sweet, R. G. and Herzenberg, L. A. (1972). “Fluorescence activated cell sorting.” Review of Scientific Instruments 43(3): 404-9; Hulett, H. R., Bonner, W. A., Sweet, R. G. and Herzenberg, L. A. (1973). “Development and application of a rapid cell sorter.” Clinical Chemistry 19(8): 813-6; Herzenberg, L. A. and Sweet, R. G. (1976). “Fluorescence-activated cell sorting.” Scientific American 234(3): 108-17.

28 Herzenberg, L. A., D. Parks, B. Sahaf, O. Perez, M. Roederer and L. A. Herzenberg (2002). "The History and Future of the Fluorescence Activated Cell Sorter and Flow Cytometry: A View from Stanford." Clinical Chemistry 48(10): 1819-1827.

29 See Stanford Office of Technology Licensing, Annual Report, 2001-2002, p. 5. The top three OTL patents have been the Cohen-Boyer recombinant DNA patent, the Yamaha Sounds patent, and the FACS patent.

30 Ibid.

31 Stephen P.A. Fodor, J. Leighton Read, Michael C. Pirrung, Lubert Stryer, Amy Tsai Lu, Dennis Solas, “Light- Directed, Spatially Addressable Parallel Chemical Synthesis,” Science (Vol. 251), 15 February 1991: 767-773.

32 Ibid., p. 772.

33 Brian Alexander, “Biopoly Money.” Wired. June 2000.

34 W. Wayt Gibbs, “New Chips Off the Old Block – Can DNA microarrays do for genetics what microprocessors did for computing?” Scientific American. September 1996, p. 42-44.

35 Marshall, E., “Do-It-Yourself Gene Watching,” Science, 1999. 286(5439): p. 444-447.

36 Among many references see: Schena, Mark, Shalon, Dari, Davis, Ronald W., Brown, Patrick O. “Quantitative Monitoring of Gene Expression Patterns with a Complementary DNA Microarray,” Science, 1995. 270(5235): p. 467- 470; Eisen MB, Brown, PO, “DNA arrays for analysis of gene expression,” Methods in Enzymology, Vol. 303 (1999):179-205.

37 See for instance, Shalon, D., S. Smith, and P. Brown, “A DNA microarray system for analyzing complex DNA samples using two- color fluorescent probe hybridization,” Genome Research., 1996. 6(7): p. 639-645.

38 See the illuminating study by Janet Bercovitz and Maryann Feldman, “Technology Transfer and the Academic Department: Who Participates and Why?” Unpublished conference paper, quoted with permission. National Bureau of Economic Research, Inc., Summer Institute, Cambridge, Mass., July 23, 2003: http://www.nber.org/~confer/2003/si2003/papers/prio/feldman.pdf

39 Interestingly, for the remarkably large share of inventive activity coming from the Radiology department (58.8, which is 10 % of the school), the department yields a relatively small share of revenues ($255,241 which is less than 3% of the school).

40 Details on the construction of the sample and their analysis is included in our larger study.

41 An interesting sampling problem occurs as some inventors are associated with numerous inventions in our survey. (One inventor was associated with 10 inventions in our sample.) Since the Rosenberg, Colyvas, Goldfarb survey asks inventors about specific inventions and licensees, it was not reasonable to expect inventors to respond to questions about 10 distinct inventions. Hence, they limited the electronic survey to three inventions. When choosing which inventions about which to ask inventors, they favored inventions for which there was a COI, followed by those licensed with equity, followed by those that were licensed, and finally those that were not licensed. While this creates an interesting sampling issue, we plan to follow up and interview multiple-inventors in order to fill in data about missing inventions.

A similar problem occurred when considering inventions that were licensed to multiple firms. There were twenty such dockets. They asked questions concerning no more than five licensees of any particular invention. If an invention had more than five licensees, we first asked questions about licensees that had appeared in the conflict of interest reviews, and then those that had signed equity licenses.

Page 46 of 46 pages

42 Richard Jensen and Marie Thursby, “Proofs and prototypes for sale: The licensing of university inventions,” The American Economic Review, Vol. 91, no.1, Mar 2001: pp. 240-259.

43 However, a point not explored here is our observation of important variations in inventor involvement in terms of technological type and industry, as well as stage of invention and mode of technology transfer.

44 We interpret these figures as lower-bound estimates of our sample because of the coverage of our sampling frame includes a large number of licenses that occurred in the later years of the decade we covered. As a number of years are needed in order to secure intellectual property rights and an industrial partner to commercialize an invention once disclosed, we anticipate that a significant number of licenses are not yet observed.

45 A slight distinction between paid and non-paid consultation is observable. In the case of non-paid consultation, we observe 9 respondents reporting to have these ties before the invention disclosure, 15 after the invention disclosure, and 14 after the license.

46 Obviously the survey instrument and OTL documents we have consulted focus on technology transfer from the University to industry. In this study I am concerned to establish the centrality of federal funding of Stanford research and the ways in which research conducted at Stanford is transferred to industry. In discussing Terman’s strategies for building steeples of excellence I have attempted to illustrate the ways in which key research directions have been imported from industry into Stanford, especially through the hiring of key faculty and staff, a practice that continues today.

47 See Derek Bok, Universities in the Marketplace: the Commercialization of Higher Education, Princeton; Princeton University Press, 2003.

48 This theme is explored in depth in the larger study upon which I am drawing here. Space limitations has prevented me from expanding upon it here.

49 Lynn Zucker and Michael Darby, “Star Scientists and Institutional Transformation: Patterns of Invention and Innovation in the Formation of the Biotechnology Industry,” Proceedings of the National Academy of Sciences, USA, Vol. 93 (1996): pp. 12709-12716, especially pp. 12714-16; Lynn Darby, Michael Zucker, and Jeff S. Armstrong, “Geographically localized knowledge: spillovers or markets?” Economic Inquiry, Vol. 36(1) 1998: pp. 65-86.