By Gordon C. Rausser

Those of us who love Berkeley share many of the sentiments expressed by Professor Robert Berring in his California Monthly article, "Is Berkeley Off Course?". We support his call for a critical self-evaluation of Berkeley's values and culture. We recognize his description of Berkeley's uniqueness and the years of emotional capital from talented faculty that have shaped its character. We know that academic autonomy is the wellspring of Berkeley's vitality. And we agree that independent thinking fosters creativity and that the oversight of one's peers is the most effective system of checks and balances.

However, it is here that those familiar with university policy must part company with Professor Berring. He has chosen two events to illustrate "a deep and dangerous trend" toward entanglement with private enterprise, but hasn't got the facts straight about either event or their place in the history of privately assisted research at UC. The first event is the much publicized $25 million research agreement between the Novartis Agricultural Discovery Institute (NADI) and a department in Berkeley's College of Natural Resources. The second is the IPO of economic consulting firm LECG, Inc. Unfortunately, Professor Berring has his facts muddled both about the nature of the events and their place in the history of privately assisted research at UC.

Professor Berring bases his understanding of the NADI alliance on reports in the popular press rather than reading the governing documents. The publicly available agreement reveals that NADI's $25 million comes without strings attached and will be allocated to meritorious research proposals through a faculty peer-review process. The fact that NADI has "a seat at the table" in reviewing these grant proposals is no abdication of faculty control. In contrast, most privately sponsored university research is entirely directed by the sponsor, and the funds may be used only for projects selected by the corporate donor. Even taxpayer research funding comes with strings attached. Faculty almost never receive open-ended grants to indulge their curiosity as Professor Berring suggests: they receive limited funding for specified projects. The beauty of the NADI alliance is that it places the choice of research projects under faculty control.

What does NADI receive for its $25 million contribution? Professor Berring describes it as "first rights to particular developments in genomics." What he doesn't say -- and may not have realized -- is that NADI receives only the right to negotiate to acquire at fair market value a percentage of discoveries that may result from research it helps fund. In other words, if there are no marketable discoveries, or the university doesn’t accept NADI's offer to purchase them, NADI will receive no commercial rights at all. Even without this agreement, NADI could negotiate for licensing of any of UC’s proprietary rights. The university, on the other hand, will be a winner regardless of outcome. Having obtained not only needed cash and possible intellectual property ownership it will also, perhaps most important, acquire access to NADI's proprietary genomic databases which are essential to Berkeley's cutting-edge research in plant and microbial biology.

As important as the structure of the NADI agreement is the road traveled to reach its final terms. The search for an industrial partner was faculty-initiated and all but two Plant & Microbial Biology faculty announced their desire to participate. Fundamental principles of negotiation and economics were applied to extract maximum value for the university. Novartis was selected from the field of candidates largely because of its research reputation and compatibility with our agenda and culture. The Academic Senate conducted its own exhaustive inquiry, and faculty and students from other CNR departments were kept informed through a special website and Town Hall meetings. The negotiations were heavily reported in the press all the way through final contract signing, complete with the apparently obligatory pie throwing. I know of no other Berkeley private research agreement that has been so openly discussed.

With regards to private consulting by professors, Professor Berring seems to condone this time honored practice as long as it doesn’t rise to the level of an "enterprise" and no one gets "rich" along the way. Apparently, consulting is acceptable if you don't hire anyone to help you with time-consuming administrative chores or affiliate with another professor to share overhead costs and as long as you're not very successful. An odd set of standards, to say the least. In creating the Law and Economics Consulting Group (LECG), we discovered that investing in support reduces the time burden on faculty and avoids the temptation to use university administrative support or research facilities. Solo business efforts often create a greater drain on a Professor’s available time. Contrary to Professor Berring's suggestion, LECG has never used university resources, and does not recruit university graduate students or post-docs. The organization has, however, been an excellent source of jobs for many PhDs in economics, finance, and accounting who have already graduated from CAL.

LECG has provided the opportunity to work with talented colleagues across professional fields, exchanging ideas in attempts to solve challenging real-world problems. Major beneficiaries of this experience are the students who are exposed to contemporary and sophisticated case studies that grow out of consulting work. Fundamental research and peer review papers commonly grow out of these experiences. Obviously, some disciplines are better suited to a group effort or "enterprise" than others. It might, for example, be difficult to organize a large enterprise in the area where Professor Berring offers his paid expert consulting services: inheritance rights in families with polygamous marriages. But the university guidelines draw no distinction between outside endeavors large or small, faddish or arcane. Instead, they state that outside consulting is a "privilege long recognized" which generates "valuable contributions to the university and to an individual’s growth." There are, of course, time limitations on a faculty member's consulting activities; the Chancellor’s Office audited LECG‘s faculty-based principals, and found them in compliance.

Professor Berring assumes that Berkeley's commercial collaborations are new and necessarily dangerous, but ignores the very heritage that has allowed the university to thrive. We are, after all, one of the original land grant universities whose stated purpose was to marry scientific insight with practical knowledge to improve agricultural productivity. This might not sound like commerce, but it was in the 19^th century and remains so as we approach the 21st. One of the reasons U.S. agriculture is the most efficient in the world is that the land grant university system recognized and capitalized on the complementarities between scientific and practical knowledge. This same outcome has also emerged in many other fields, especially biotechnology and telecommunication.

Contrary to Professor Berring's intuition, close working relationships with the private sector have been the norm throughout the last century for this and any other American university that wanted to avoid "institutional Darwinism". Indeed, these collaborative efforts are the envy of most other democratically based market economies. The Bayh-Dole Bill enacted in 1982 recognized that the lines between pure and applied research had long ago faded and that universities must help spawn commercial applications that stimulate the economy and generate other public benefits. This legislation delivered to universities receiving federal research funds the ownership rights to resulting discoveries. Recognizing that financial ownership incentives are key to stimulating useful research, the University of California grants its faculty a percentage interest in any royalties flowing from the licensing of their patents and discoveries. The California Legislature went a step further and, in 1996, increased from 12% to 24% the tax credit for business investments in university research. The success of these incentives is demonstrated by the fact that the University of California has over 700 patents in active development, more than 500 patents pending, and received gross licensing revenue of $88.5 million last year alone.

None of this is new, and all of it was deeply embedded in the Berkeley culture long
before NADI or LECG came on the scene. In the contemporary setting, UC aggressively
courts private-sector partners to fund its research through a number of programs under the

umbrella of IUCR, Industry-UC Cooperative Research. One of IUCR’s component programs, MICRO for Microelectronics research, dates back to 1981 and has generated more than $100 million in private-sector investments. The similarly structured BioSTAR program uses the marketing slogan "When it comes to biotechnology, UC means business." In its first year, BioSTAR distributed $11.4 million for specific research projects, sourced $4.6 million from UC and $6.8 million from private industry sponsors. Grant proposals are submitted by pairings of a private-sector scientist with a UC scientist and funded projects give the sponsoring company rights to negotiate for future licensing. Brochures for a third program in Life Sciences Informatics tell corporate sponsors that their benefits will include "access to UC's outstanding faculty and students", "expansion of company R&D capacity through partnership with UC researchers", the "opportunity to negotiate intellectual property rights", and "participation in the development of the critically needed workforce."

President Atkinson has been a forceful advocate of these projects and has used them as a negotiating platform for additional state funding. Why? Because he recognizes that the university's mission requires us to contribute to the State’s economic growth and to facilitate the transfer of good ideas into private commerce where they can be employed. New growth theorists argue that up to 50% of all U.S. economic growth over the last 50 years is due to investments in research and development. Even if there were unlimited tax dollars for pure research at universities, the resulting discoveries would do little good for the economy or consumers if not effectively ushered into commercial application. Most university patents represent discoveries at the "proof of concept" stage, still remote from any commercial viability. Accomplishing this "technology transfer" has always been one of the most powerful reasons for a bridge to private industry.

Industries cluster around universities who produce usable research and then supply the highly trained graduates needed for success. Informed students know this, and elite universities integrate it into their curriculum as demonstrated by the invitation to IUCR corporate sponsors to "provide input into the graduate education process and ensure that UC continues to produce the needed highly skilled workforce." This research engine requires increasingly expensive fuel. In almost all sciences, library research of the type described by Professor Berring is simply inadequate to advance the frontiers of knowledge. Without modern laboratory facilities and access to commercially developed proprietary databases (such as the gene expression profiles and genome mappings to be supplied by NADI) we can neither provide first-rate graduate education nor perform the fundamental research that is part of the university’s mission.

We now know that the process of generating knowledge is not linear but a series of feedback loops. In many cases, curiosity-driven investigation may be the product rather than the progenitor of a technological adaptation developed in the marketplace. Brick by brick models for the advancement of knowledge have been rejected by empirical evidence. Private companies often prove more open-minded and creative in this process than their government and administrative counterparts. When Cambridge University's computer science head Royce Needham agreed simultaneously to run Microsoft's new $80 million lab at the campus, he observed that government subsidized research generally requires a commercial justification and "you don't get asked that sort of question by companies."

Given the large role commercial partnerships play in Berkeley's history, its current policies and its future plans, the controversy sparked by the NADI alliance is surprising. After all, this alliance offers more academic freedom, fewer restrictions and more reliable multi-year funding than any in the university's history, including those under the much-touted IUCR umbrella. Perhaps the outcry by Professor Berring and others is merely a function of the fact that the College of Natural Resources chose to make the negotiation process transparent and to engage rather than shut down debate. In this respect, the NADI alliance is the polar opposite of many industry/faculty collaborations which occur off campus with no oversight and little financial reward to the university. I hope the debate Professor Berring and I both call for will focus on these sub rosa relationships and on developing partnership structures where UC extracts the best from its industrial partners while safeguarding its values of academic freedom and peer oversight.

In the final analysis, Berkeley is a public asset of immense value. So long as our culture is maintained, this value will be enhanced, not diminished, when we work creatively in collaboration with other institutions, including private companies.