Fate of millions in NDSU research royalty money up for debate
FARGO — Higher education leaders are considering changing a policy that has generated almost $20 million in proceeds earned from innovations at North Dakota State University and has earned researchers $3.6 million over the past decade.
The State Board of Higher Education will discuss the policy Thursday, Nov. 30. The policy, which dates back to the 1990s, allows researchers at North Dakota's colleges and universities to pocket up to 40 percent of licensing revenues yielded by their research.
The policy initially allowed researchers to receive 30 percent of the licensing revenues earned from their innovations, but the amount was increased to 40 percent a few years later.
A proposed change to the policy would enable individual universities to have greater flexibility in splitting the revenues, allowing campuses to keep a larger portion after a certain amount had gone to the researchers.
"This was something the research office at NDSU has been discussing with the system office," said Richard Rothaus, vice chancellor for academic and student affairs for the North Dakota University System.
The discussion started six or eight months ago, and was prompted by Kelly Rusch, NDSU's vice president for research and creative activity, he said. The proposed new policy would allow institutions to establish a sliding scale. Once a certain amount is reached, researchers would receive a smaller share of the royalties.
Allowing university researchers to profit from the intellectual property they developed is a common practice, intended to reward their efforts and to attract and retain talented scientists, NDSU officials said.
Although universities routinely reward researchers with a share of the earnings from their intellectual property, they also are dealing with budget cuts that make maintaining costly research programs a growing challenge, Rothaus said.
"It's a constant tension for the research university," he said.
Payoffs for plant breeders
The majority of the earnings at NDSU, collected by the not-for-profit North Dakota State University Research Foundation, go toward supporting research programs. Licensing income from university innovations totaled almost $19.8 million from 2007 to 2016, records show.
At NDSU, the overwhelming majority of research royalties are earned by plant breeders and their research partners, including plant pathologists.
Most of the earnings come from crop seed varieties developed at the university, a rigorous process that typically takes from 10 to 12 years, said Ken Grafton, NDSU's vice president for agricultural affairs and dean of the College of Agriculture, Food Systems and Natural Resources.
Awarding university researchers a portion of the licensing revenues from their innovations can help make academic research jobs more attractive, since salaries and perks lag far below those that can be offered in the private sector, Grafton said.
The licensing royalties can provide "opportunities to attract very talented individuals, regardless of their discipline," he said. "North Dakota typically does not — we try to have a very good offer package, but that often isn't sufficient to attract the best talent."
The starting salary for a plant breeder, a position that requires a doctoral degree, ranges from $85,000 to $90,000, to be competitive, Grafton said. That compares to private sector salaries starting in the $95,000 to $100,000 range, plus incentives including signing and retention bonuses as well as profit-sharing, he said.
"So it's very enticing for students to go that route instead of worrying about tenure," which means a six-year probationary period for academic researchers just starting their careers, Grafton said. "It's a very trying time."
$1.1 million man
Competition also can come from other academic centers. A top wheat breeder at NDSU was lured away to head a grain breeding center affiliated with the University of Georgia two years ago. The breeder, Mohamed Mergoum, remains the top royalties earner at NDSU, receiving more than $1.1 million in licensing income over the past decade.
NDSU has 10 plant breeders working to develop new crop varieties for wheat, barley, oats, oil seeds, including flax and canola, dry beans, potatoes and trees and other woody species. But entire teams are involved, given the collaborative nature of the work. At NDSU, for instance, 18 doctoral-level researchers are involved in the wheat breeding program.
A new wheat variety, Grafton said, can generate hundreds of millions of dollars for North Dakota.
Licensing income retained by the university helps in a variety of ways, including hiring support staff and equipment. Also, some researchers donate some of their licensing earnings back to the foundation, said Richard Horsley, a barley breeder who heads NDSU's Plant Sciences Department.
"That money is being used for good things to support the university as well," he said, adding he has given more than $25,000. Grafton, who also heads the experiment station, said he also has donated some of his royalty income to scholarships and the new greenhouse, for instance.
After plant breeders and pathologists, the top research royalty earners at NDSU were mostly involved in researching polymers and coatings, but their earnings were modest by comparison. For example, the top researcher in polymers and coatings, Dean Webster, a professor who heads the program, earned $19,595 over the 10-year period.
Licensing revenues from research at NDSU have grown steadily since the mid-1990s, not long after the foundation was established in 1989. Licensing revenues rose from $331,997 in 1995 to more than $2.7 million in 2016, a more than eight-fold jump.
The foundation distributes the licensing revenues. Last year, just over 30 percent went to breeders and inventors, just over 30 percent went to NDSU Plant Science, and almost 14 percent went to an endowment for NDSU Plant Science, with 10 percent going to the NDSU Research Foundation Endowment.