In today’s global knowledge economy, Canada needs to foster policies that encourage ambitious science research and the commercial translation of resulting inventions into innovation. The recently completed review of Canada’s science funding framework, commissioned by federal Minister of Science Kirsty Duncan, can be considered a wake-up call. Better known as the Naylor Report, it found that very low funding success rates for young scholars and researchers have resulted in a profound sense of futility and the inherent discouragement of innovative, high-risk research.
Entrepreneurial science research is particularly constrained when subjected to the research output metrics currently in place to make funding decisions: “Canadian peer review committees favour proposals using proven techniques, in areas that have been productive in the past,” says the Naylor Report. Prominent academic entrepreneurs argue that research granting metrics are dissuading universities from conducting use-inspired basic research (Pasteur’s Quadrant), arguably the most important to address global challenges. It is hardly surprising that this risk-averse stance constrains Canadian scientist-entrepreneurs.
For those who do secure the initial research funding, Canadian university intellectual property policies currently serve as a disincentive for such scientists to found their own spinoff ventures to commercialize inventions from their research labs. Yet one of the rationales for governments investing in basic and applied science, according to the Naylor Report, is that “innovation is widely recognized as the ultimate driver of long-term economic growth and prosperity.”
If we want a knowledge-based economy, we need to remove constraints from scientist-entrepreneurs to allow them to succeed. University spinoffs are increasingly becoming the commercialization vehicle for breakthrough science-based innovation. Recently graduated PhD students are the logical co-founders and employees of these ventures. Yet, in Canada, our IP policies are too often undermining the emergence and success of such science-based ventures. One major policy change that’s urgently needed is a nationwide overhaul of university IP policies, resulting in a new vision for university technology transfer offices (TTOs).
Across Canada, TTOs have typically been managed through short-term cost recovery metrics. For those who think IP licensing revenue represents a significant stream of university revenue, consider this: a recent survey of three dozen academic institutions and hospitals across Canada reveals that licensing revenues ($62 million) are dwarfed by federally funded research income ($2.5 billion). Similarly, a focus on licensing to large incumbent firms is misguided. Large firms are reticent to license radical technologies directly from universities, instead preferring to acquire successful university spin-offs. Thus, the metric that really matters is this: how much economic and social benefit to Canada is potentially lost by discouraging industry involvement and/or spinoff creation due to misaligned university IP policies?
Typically, scientists lack the time and/or business acumen to bring an idea to market. TTOs have traditionally filled this gap, to a large degree by protecting and licensing the newly developed technologies to industry. In return, the university claims up to 66.67 percent of licensing revenues. At Canadian universities, intellectual property policies are currently an unnecessarily complex ecosystem, discouraging both industry investors and potential academic entrepreneurs. The status quo of IP policies is wide-ranging, with IP rights and revenues frequently negotiated between the university and the creator(s). For outside investors, many university IP policies represent a major disincentive to become involved.
We advocate for a harmonized university IP policy based on the University of Waterloo’s IP rights policy. Referred to as the “creator-owned” model, at U of Waterloo full IP ownership is granted to the inventor: thus, if the scientist-entrepreneur chooses not to involve the Waterloo TTO, the university owns none of the rights. In cases where the scientist-entrepreneur chooses to work with TTO, a five percent equity stake in the start-up is assigned to U of Waterloo (this equity stake is non-dilutive up to $2 million in value and dilutive above that).
As the head of the Waterloo Commercialization Office (WatCo), Scott Inwood explained: “Essentially, we want to get out of the way, from an administrative perspective, and just let creators explore the best commercialization pathway for themselves. Watco is thus a voluntary service provider for those researchers who desire institutional commercialization assistance. Ultimately, the goal is to drive as much knowledge transition from the University of Waterloo, regardless of how it gets done. This actually supports our ability to successfully secure more research contracts as we are seen as an institution where knowledge translation actually happens beyond the end of the research project.”
Implementing a “creator-owned” university IP policy requires a new vision for TTOs. Already, TTOs build successful partnerships among industry, business, government, and the university research community. Combined with creator-owned university IP policies, TTOs will be able to better leverage those partnerships. TTOs are part of educational institutions; one of their explicit missions should be to educate the student/faculty body that they serve.
In addition, more government funds need to be allocated to TTOs to encourage the filing of strategic patent applications on longer-term research. The WatCo model has spearheaded this approach: even if the technology does not currently have industry interest, if it is in the long-term strategic interest of U of Waterloo (e.g. if it is in an area where they have had substantial technology funding or in a key university strategic research theme area), WatCo will still make limited investment in patents which bolster the university’s more strategic and knowledge transfer activities. Particularly in the “hard sciences,” IP protection is critical for turning the ideas generated at our universities into commercially viable products and services.
We realize that the suggestions above require changing the metrics used to measure the success of TTOs. However, if implemented, this new vision for TTOs will be more closely aligned with the objectives of Canada’s national innovation system, including the formation of research clusters. This kind of policy change will not only attract outside investors, it will help retain our most promising scientist-entrepreneurs (and attract those from elsewhere) and contribute to building a thriving knowledge economy around our research universities.
Bart De Baere is a postdoctoral research fellow in the department of earth, ocean and atmospheric sciences at the University of British Columbia; and Elicia Maine is a professor of innovation and entrepreneurship, and academic director of the Invention to Innovation program in the Beedie School of Business at Simon Fraser University.