MRI as a Commercialization Case Study

Researchers at universities across the country are constantly developing new technologies and applications for their work. Many cutting edge technologies that improve our lives have roots in academic research. University labs can do the kind of open-ended fundamental research that is intrinsically valuable, but can also lead to massive technological improvements on occasion. Companies have a hard time putting a price on this type of work since there is not a clear path to profit, so they are typically not incentivized to carry it out at all. Given the impact that success stories of commercialized technology can have in the world, it’s worth exploring how and why some technologies are translated from the lab to the market while others never find a niche beyond the walls of universities.

Technology commercialization is a complicated process, and very few innovations become successful products. Compared to the private sector, relatively little of the work product from university labs finds its way to market. Technology transfer offices (TTO) at universities are responsible for exactly this process today. When a researcher working for and funded by a university identifies marketable applications for their research, they work with their institution’s TTO to assess commercialization and patent potential.

Out of all the inventions disclosed to university TTOs, even from applied science research programs at universities, around 60% will actually be patentable. Once patented, the commercialization process can follow one of two paths. The researcher can either start a company with the intent of licensing and commercializing the invention themselves, or the intellectual property owned by the researcher and the institution can be licensed out to other parties to use for a fee. Still, only around 3% of technologies disclosed to TTOs are actually licensed by private companies or result in new companies formed by researchers licensing IP that they worked on.

Given this rather restrictive filter from lab to market, what is it about the technologies that find product-market fit and generate returns on investment? An illustrative example in the healthcare space is magnetic resonance imaging (MRI).

The early development of MRIs took place over the course of decades, involved hundreds of scientists, used licenses and patents in multiple countries, and put several different companies in competition. Given the technology’s success over the years, the process that brought it from the lab to the market serves as an interesting case study.

The techniques behind magnetic resonance imaging were first described by the physics and chemistry communities. After its discovery in the 1940’s nuclear magnetic resonance (NMR) proved useful for analyzing the structure of molecules. Individual nuclei in a molecule have a specific magnetic moment and spin, which when placed in the presence of a strong magnetic field, will align to the magnetic field similarly to the way a compass needle aligns to the earth’s magnetic field. Exposing the nuclei to a radio frequency pulse will knock them off their axis causing them to precess around the magnetic field lines like a wobbling spinning top. These precessing nuclei interfere with a weaker secondary magnetic field with a characteristic signal thereby allowing their detection. When the detector is revolved around the subject, three dimensional images can be generated of the distribution of different molecules in space.

In the human body, MRI machines are calibrated to detect the signature of hydrogen nuclei in molecules of water. They allow radiologists to observe the relative densities of structures in the human body based upon how much water is in different tissues. Observing these different structures and densities is what creates the massive diagnostic utility of MRI. MRI technologies produce a 3D map of the structures in different parts of the body without using harmful ionizing radiation.

Many different scientists were involved in the early application of nuclear magnetic resonance to image the human body. Paul Lauterbur produced the world’s first MRI image of vials of water at Stony Brook in 1973, and Peter Mansfield at the University of Nottingham in the UK was the first to test the technology on a human by imaging a lab assistant’s finger in 1973. Both would go on to win Nobel Prizes for their work.

An interesting point of contrast between modern commercialization and the process that these researchers would have worked with is on intellectual property (IP). Over the course of time the legal systems for IP commercialization have followed a fairly similar course in the United States and United Kingdom. Prior to significant legal changes after the initial development of MRI, the governments of both countries had the right of first refusal to ownership of IP generated through government funded labs.

The British Technology Group (BTG), a government owned tech commercialization company, would have owned the rights to the work done by Mansfield and other affiliated labs in the UK. US federal government entities like the National Institutes of Health or National Science Foundation funding medical research would have also owned the patents on work they sponsored at US universities. Both systems drastically changed in the 1980s. The passage of the Bayh-Dole Act in the US and the UK government’s privatization of the BTG eliminated each country’s effective government monopoly on the ownership of university-produced IP.

The university where the research took place were thereafter the primary assignees of their labs IP rather than the government. This drastically realigned incentives and expanded the production of technology from university labs. Income from technology licensing also helps to fund subsequent research at the university. The modern system of TTOs at universities arose in the wake of Bayh-Dole and plays an important role in the overall commercialization process. Research products like ideas or new theories will not be patentable, while some new or improved machines, methods, processes, or programs may be. TTOs help by reviewing the work, deciding whether or not to move forward with patent protection, and providing a recommendation on how to proceed with potential licensing.

Universities may tend to err on the side of overprotecting research products with patents even if the commercial viability of the product is limited. A potentially promising technology may prove to be licensable at a later date even if its commercial use at the time of review is not obvious, and it is better to start protecting a line of research early in case future improvements do have market value.

Good research does not always make for a useful product. Would-be entrepreneurs need to discover potential customers and understand their needs to produce marketable technologies. In hindsight, it seems clear that the MRI would be a commercial success. However, the early innovators in the MRI space had a theoretically interesting program of research, but no proof that there was a market for the new technology.

MRI was new, unproven, unvalidated with customers, and was necessarily an expensive device to manufacture. The costs to produce and operate the machines were necessarily going to be high given the strength of and expense of the types of magnets required to make an MRI work. Its nearest existing market competitor, the x-ray, was also significantly cheaper and had proven itself a commercial success over decades. Investors allocating money and inventors allocating time and effort would need to validate that the MRI stood a good chance of being a success.

Modern companies considering university-based IP have a number of avenues to validate their technologies. Conducting customer discovery interviews with potential customers can help to identify needs and tailor a product to meet them. Federally funded companies also have a number of funding mechanisms available to them. Most universities will be able to provide relatively easy access to seed funding for new companies using research developed within the institution, and programs like NSF I-Corps and accelerators can help founders develop business models around their technology.

Despite working largely independently, each of the early innovators in the developmental era of MRI were effectively proving out the viability of commercial MRI collectively. Successful results for one could be generalized to others. Raymond Damadian postulated that MRI could have implications for an evergreen funding justification in biology departments– cancer research. Lauterbur also realized that while histologists were able to analyze suspicious tumors by removing tissue, different tissues might exhibit different NMR signals in vivo, thus reducing the need for invasive procedures. It was not until 1977 when Damadian completed his full-body MRI scanner, modestly named The Indomitable, that the concept could really be proven out.

A useful heuristic for developing new products is that the new entrant should aim to be 10 times better than incumbents in some aspect for customers to actually adopt it. Buyers are rarely willing to adopt something new if it is only marginally better. iPods stored more than 10x as many songs as CD players and planes get passengers to their destination in less than 1/10th the time of a train ride. Sellers tend to overvalue the usefulness of what they are selling, and buyers tend to overvalue what they already have. Providing a 10x benefit makes it clear in the mind of a buyer that the cost and hassle associated with switching will be worth it.

Around the same time as Damadian’s machine proved that the MRI could be 10x better than X-ray along the axis of image quality, other companies affiliated with Lauterbur and Mansfield were also validating the market. The MRI’s dramatic improvement in image quality was critical to initially prove the market, but it became clear that the ability to produce 3D imagery would be a game changer. Its resolution was better but it could also do things that X-rays never could. All of the early companies sold their products to other universities and research hospital systems as they were refining their products. Not only were cutting edge institutions helpful early adopters of the technology, but their customers also produced an explosion of research that proved the technology’s value to new market niches within medicine that the original inventors never could have anticipated themselves. This produced a positive feedback loop of hospitals and researchers buying machines, which led to studies demonstrating new applications for MRIs, which led to more market demand amongst other researchers, which led to more hospitals and researchers buying the machines.

Although Damadian’s company Fonar was the first to market, it faced steep competition. Several other companies entered the market in the 1970’s and 80’s using a combination of licenses from some of the original IP. Philips, General Electric, Siemens, Toshiba, and Hitachi all entered the market using technology based on Mansfield’s work and licensed from the British Technology Group. These companies all offered advances in magnet strength, resolution, and patient comfort but would find themselves competing on cost when selling this inherently expensive equipment.

New technologies with the capacity to have an impact on the scale of the MRI are always being created. New technologies will all have their own unique stories, but some aspects will be similar to history. Looking at the historical trends of longer standing technology can provide a good deal of insight into patterns yet to unfold. Aspects like the complexities of intellectual property, licensing, new product development, customer adoption, scaling, and building a viable business longer term will all remain the same. Learning from past developments will hopefully help the people investing in technology to allocate their money as efficiently as possible. The same applies to researchers and entrepreneurs deciding how to allocate their own time and energy.

References

  • An emerging model for life sciences commercialization by Ashley J. Stevens
  • When and why was MRI invented by GE Healthcare
  • Paul C. Lauterbur Biography by The Nobel Prize Commission
  • British Technology Group Bill (House of Lords Debate 03 June 1991)
  • The Eclectic History of Medical Imaging by Greg Freiherr
  • Practical Structures and Lessons from Collaborations: The BTG Experience by Ian Harvey
  • Practical Structures and Lessons from Collaborations: The BTG Experience by American Chemical Society
  • Eager Sellers and Stony Buyers: Understanding the Psychology of New Product Adoption by John T. Gourville
  • Why Improving things by 10x Matters for New Product Adoption by Greg Myer
  • Inventor’s Guide by Stanford University Office of Technology Licensing
  • Intracranial Hematomas: imaging by high-field MR by Gomori et al., 19851
  • On the 2003 Nobel Prize in medicine or physiology awarded to Paul C. Lauterbur and Sir Peter Mansfield by Felix W. Wehrli
  • Superconductivity in Medicine by Jose Alonso & Timothy Antaya
  • The History of MR Imaging as Seen through the pages of Radiology by Robert R. Edelman

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