Senator Nelson Page 4 We have been advised that the venture has been a commercial success," and Dr. Beckham has also licensed other University technology, entitled "Ducted Grain or Material Ladder for Top Unloading of Storages and Vessels," upon which the Foundation has filed for a patent, which grain ladder may be used both in conjunction with the spiral separator or as a separate item of commerce. We feel that Dr. Beckham's company's ability to obtain venture capital related, at least in part, to his company's position as the exclusive licensee of Purdue Research Foundation. Both the spiral separator and the grain ladder are fairly simple to construct and would not be difficult for a competitor to copy. Again we feel that the patent position established by the Foundation, and the position of Dr. Beckham's company as an exclusive licensee for the technology, helps assure his continued commercial viability in a highly competitive market. A sample of Dr. Backham's advertising literature is attached simply to illustrate the type of product being sold under exclusive license from Purdue Research Foundation. In conclusion, I hope that this response will illustrate the fact that embryonic technology developed at the University has been brought to commercial use by the technology transfer program administered by Purdue Research Foundation on behalf of Purdue University, and it should be pointed out that if a government-wide institutional patent agreement were adopted such as proposed in the Federal Register, the technology transfer mission of the University would be greatly simplified and more technology would probably be brought to the consuming public at an earlier time than might otherwise be the case when petitions for greater rights, requests for transfer of title, and the like must be dealt with agency by agency under existing patent statutes, regulations, and policies. It should be pointed out that none of the three small businesses described above are licensed under technology that arose at the University out of research done with U. S. government funds, but the principle is the same, and the technology transfer program would be the same, but for the many disabling strings referred to above that must be dealt with on an agency by agency basis whenever federal funding is involved. It should also be noted that we do have other examples of government funded research that has produced patentable inventions that have been licensed both to large and small corporations, with notable exceptions being those agencies that have a strict title reservation policy, and inventions that come out of that type of research usually end up Senator Nelson April 20, 1978 being among those 27, 000 U. S. government patents referred to above. We hope this response will be beneficial for your Committee in its deliberations. Respectfully yours, M indreus F. N. Andrews Vice President for Research, and FNA:JRN:d Déjà Vu: Tom Edwards and his new air conditioner add up to a hot concept stock-just like the good old go-go days. By PHYLLIS BERMAN IN the brand-new headquarters of Rovac Corp. in Rockledge, Fla.. there is one empty office. One day-maybe-it will be occupied by the marketing director Why is it empty now? Because Rovac. one of the few hot-concept companies to come down the pike since the go-go days of the Sixties, hasn't a marketing director and has yet to market a single product-or even, it appears, to identify its market Yet its stock, book value 56 cents, sells for about $20 and the company s total market value is nearly $100 million. Rovac is having a lot of trouble even getting its product to work well, and it has already had troubles with the Securities & Exchange Commission over its money-raising tactics. A concept it has, though. In brief, it Is this: Rovac has the technology for an air conditioner that uses air and water ather than Freon as refrigerant "eon, of course, has been damned by the National Academy of Sciences as a 30 threat to the ozone layer That's the reason the Environmental Protection Agency has proposed banning some Freon aerosol propellants Freon is also the cooling agent in most existing air conditioners So. if Freon-propelled shaving cream is out today the reasoning goes. Freon air conditioners could be gone tomorrow And Rovac's air conditioner is the only feasible non-Freon une on the horizon. There is just one hitch in this happy story: The Feds may have no intention of banning Freon as a refrigerant Says an EPA chemist, "I don't think it will ever come to that Rovac contends that even so. its system is more efficient and cheaper than conventional models. But without the aid of law, Rovac may never get off the ground. It's a long way from a concept, no matter how brilliantly conceived and salable, to a product that can be massproduced. So tar. Hovac nas produced unly a dozen air-conditioning machines. all of them by hand. So what makes it, as a company, worth $100 million A story, that's what Remember what a hard time Chester Carlson had until Haloid (now Xerox) bought him out How much money has been lost chasing the will-o'-the-wisp of "another XeroxTM The Rovac circulator" is the brainchild of Thomas C Edwards, 34, the company's president and founder, an amiable and enthusiastic mechanical engineer Like all mechanical cooling systems. the machine works by compression But Edwards uses air and water-rather than Freon in the pipes over which the air passes-as the actual cooling medium (using some of the same principles in air-cooled aircraft engines) Edwards developed his device that is the heart of his technology for a high school science fair project 17 years ago Ten years later he used it for his PhD thests at Purdue University Then he put it aside for three years to teach college. but couldn't get it out of his mind, so he obtained $15,000 in 1972 and set up Rovac (for Rotary Vane Air Cycle) FORBES, AUGUST 15, 1977 Touring the East Coast with a slide show, Edwards was able to raise another $500,000. It was hardly enough to perfect and manufacture his design, so in 1974 the brash little company went public-no mean feat in that bear market-raising another $2 million. The price. $5 a unit. "How did they do it?” asks Edwards first underwriter. Stanley Morgenstern of New York City-based Bond, Richman & Co. "The question is how did do it? It was a hard sell, believe me That was enough money for Edwards to deliver prototypes to General Motors, Ford, Fiat, Chrysler, the Army and the Air Force. They made an unbearable noise and were too heavy. To debug them. Edwards needed more money. Enter Allen & Co... the wheeler-deal er investment bankers famed as the sponsor of another hot-technology company, Syntex. The pioneer in hormones for use in contraceptives. Syntex was a spectacular growth stock of the Sixties. Allen offered a private placement in February for Rovac that will bring it up to $3.5 million, enough to produce 1,000 units a month. Bernard Stein, the Allen vice president who handled the deal, says: "What we were looking for was another Syntex. We told our investors. It's a great crap shoot. You could lose everything. [but] theoretically you could invest $4.50 and get back $1,000. Among the people who took a chance at $4.50 for a go at $1,000 were people like movie producer Ray Stark and former ambassador to Cuba Earl E.T. Smith. Meanwhile, Tom Edwards was selling off some of his shares-almost 31 milhon worth. He still has slightly more than half of the nearly 5 million shares outstanding. That's $1 million in his bank account and another $50 million on paper. Exults Edwards: "I'm very certain this is another Xerox or Polaroid." Hardly less enthusiastic is E.E. (Buzz) Geduld of Jersey City's Herzog. Heine & Co., which makes a market in Rovac stock. "It's a concept," he says, "and concepts move stocks. It's not highly technical. You can understand it. I can understand it. That's why the little guy buys it.' What is the "little guy" buying? A stock with a book value of just 36 cents a share. No sales. No earnings. No products. No clear marketing plan for applications. (Inventor Edwards has tackled the original-auto-equipment market, the truck-cab food refrigeration market and the housing market. Now he's tackling the auto market again-only this time with a new improved version, he's after the consumers, not the pros in Detroit. Add to this a couple of brushes with the SEC-the first for overselling the original private placement, the second for rigging the first public offering in 1974, both settled by a promise not to do it again. In a single hour last December Rovac dropped from $30.50 a share to $13.50 for no apparent reason. The stock recov ered the same day to $20, about where it stands today Meanwhile, Rovac is about to go back to the well for more money. Edwards says he favors a public offering. Allen & Co. says it would prefer a loan, to avoid further diluting the equity. Rovac could be another Xerox. On the other hand, whenever we hear about stocks selling at fancy prices when the company doesn't even have a marketable product yet, we are reminded of the one about the farmer who bought a barrel of oysters for an irresistible $2. "What's that you got?" asked a friend. "Oysters. got em for $2 the barrel." said the farmer. "That's a fine price. I'll give you $4 for 'em," said the friend. And so it went, until the oysters finally changed hands for $40. When the purchaser opened the barrel. he found the oysters were inedible. Mad as hell, he pursued the chain right back to the original seller, who turned out to be a canny old sailor in a seaport. "Them weren't eating oysters." explained the sailor. "Them are selling oysters. Having actively participated in the meeting of January 17, 1978 between, on the one hand, the President of the Universities of Minnesota, Purdue, Rochester and Virginia representing the Association of American Universities, representatives for the American Commeil for Education, and the Committee on Governmental Relations, National Association of College and University Business Officers and, on the other hand, Mr. Malson of the Domestic Policy Staff and Mr. Hartke of OSTP, I was cognizant of the concerns of the Administration in espousing a particular Federal patent policy. As the newly elected President of the Society of University Patent Administrators (SUPA) I conveyed those concerns to the members of our Society and, on behalf of the Society, desire at this time to endorse the position of the University sector which was set forth in the recent communication to you from the American Council for Education and sister organizations, Since that position paper did not analyze in detail some of the fundamental reasons for reaching the conclusions expressed, and since SUPA believes that such an analysis is an important element for use and for the record in the current deliberations on Federal patent policy and may, as well, be enlightening to those who are less familiar with intellectual property and the transfer of technology, you will find in the enclosed paper a discussion of the analytical basis for the position of the University sector and its support of the Thornton Bill, H. R. 8596. |