SSTI Commentary: What Constitutes A Gift? TBED and Philanthropy

Probably everyone involved in tech-based economic development (TBED) can name at least one research building, innovation center or tech park named after a significant contributor to the project. And has become commonplace individual components of the structure have been named for individual donors: a wing, the auditorium, the foyer, the artwork, the chairs in the board room. The difference between naming rights, endorsements and sponsorships of business marketing, particularly evident in sports, and "patron recognition" in the arts, education and now, TBED, is increasingly blurred.

As that great English bard reminded us, what's in a name?  Naming rights can be a relatively free thing to give away for an organization or institution short of resources to advance its mission. Does it really matter, other than changing the website and stationary, if the Center for Whatever is now the John Q. Public Center for Whatever?

But what about other restrictions, expectations or requirements large money donors try to attach to their contributions? At what point does the fine print in the memo field of the donor's check come to resemble too closely a contract for services? It's also possible for the demands attached to a contribution to steer the organization too far from its mission. It's up to the grantee, then, to say "no thank you," a right all organizations possess.

Interestingly, there seem to be an increasing number of public examples of organizations saying "no", or at least "maybe not", particularly when it comes to university research. A case in point: A university faculty researcher who was able to cash in very well on technology developed at a Florida university donates $10 million to $15 million back to the institution toward a new chemistry building. The catch, he wants the majority of the building's research facility dedicated to his specific field of chemical study. The school says no; he wants his "donation" back. That one's in court.

A more complex example that potentially involves up to a dozen of the top research institutions in the country was the subject of the cover story in the March 17 edition of the Chronicle of Higher Education. Written by Goldie Blumenstyk, "Universities Forgo Millions Over Strings Attached to a Foundation's Grants" provides an excellent report on the potential abuses on philanthropy in the name of TBED. At issue are the terms and conditions that the Alfred E. Mann Foundation for Biomedical Engineering reportedly wants in exchange for establishing institutes near selected universities endowed with Mann Foundation funds ranging between $100 million and $200 million. The institutes would be separate nonprofit institutions neither controlled by nor affiliated with the university. The Chronicle has kindly provided free access to the article through its website: http://chronicle.com/free/2006/03/2006031001n.htm

According to the Chronicle article, one of the terms in the agreement the Mann Foundation offered the University of North Carolina at Chapel Hill and North Carolina State University would require the schools to license to the newly created Mann Institute "all university intellectual property for which the institute requests a licence in the life sciences and biomedical areas" that was not already obligated. The Alfred Mann Institutes would use the proceeds from the endowments to commercialize university research and return a portion of the royalties to the schools. It appears that in the Mann model of technology transfer, no other funds flow to the university for the opportunity of hosting a Mann Institute.

In fact, a March 20 article in the Triangle Business Journal on the Mann deal in North Carolina states that, in addition to the privilege of giving the Mann Institute all of their biotech IP, the universities are expected to secure $25 million in state funding to build a local headquarters for the new entity. The Journal article says the measure will be considered by the University of North Carolina Board of Governors in May. UNC officials are on record as saying the deal as proposed by the Mann Institute currently is not acceptable. Negotiations continue.

The foundation's methods of wooing top level university officials with the promise of significant funding for research and riches from commercializing university research has been repeated at several institutions around the country, the Chronicle reports. Several schools already have said no thanks to the offer, after the fine print is exposed late in the negotiations.

While the saying goes, "Don't look a gift horse in the mouth," it's becoming increasingly clear that all gifts need to be examined -- particularly to understand whether they truly are gifts. Those of us on the outside will wait with great interest to see how these deals evolve (or don't) -- a new model for university technology transfer or an example of a business deal under the guise of philanthropy.