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Commercialization of IP In Canadian Universities: Barely Better Than Break Even

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Tuesday August 31, 2010
Last week, Statistics Canada released its latest report on the commercialization of intellectual property in Canadian universities.  Canada spends billions of public dollars on research funding each year and the government has been increasingly focused on how best to commercialize the results.  While there are several possible approaches to doing this, the government and some universities have been focused on building patent and IP portfolios as part of a conventional commercialization strategy.  The alternative could be an open access approach - encourage (or require) much of the intellectual property to be made broadly available under open licences so that multiple organizations could add value and find ways to commercialize.  The universities might generate less income but would better justify the public investment in research by providing the engine for larger economic benefits.

Which approach is better?  The full commercialization approach has been tried in the U.S. with legislation known as Bayh-Dole and studies (here and here) have found that patents to universities have increased, but the increase has been accompanied by harm to the public domain of science and relatively small gains in income.

The Canadian Science and Technology Strategy similarly places its faith in commercialization through IP portfolios and licencing, yet the Statscan data suggests that this has also been ineffective. 
The latest report is based on survey data from 2008 which finds that the total IP income (primarily from licencing) at reporting Canadian universities was $53.2 million. The cost of generating this income?  The reporting institutions employed 321 full-time employees in IP management for a cost of $51.1 million.  In other words, after these direct costs, the total surplus for all Canadian universities was $2.1 million.  The average income per university from IP was only $425,000.  Patent applications and patents issued were actually down in the reporting institutions and there were less than two-dozen spin-off companies reported by the universities.

While few would suggest that there is no value in the IP commercialization strategy for universities - there is surely a role for it - the emphasis on this approach as the optimal method of benefiting from billions in public funding for research has consistently failed.  Rather, an effective commercialization strategy might recognize that the commercialization is better suited outside the university with funded research the engine for new innovation that is openly available to entrepreneurs without licencing barriers.  The public pays for the basic research and might ultimately enjoy far more benefits than the current break-even approach by having more open access to research results.
Comments (18)add comment

Darcy Casselman said:

University of Waterloo model
It seems to me more institutions should look to the University of Waterloo's IP strategy. Researchers there own their work and can sell or spin-off as they wish.

Waterloo has seen far more benefit from companies like RIM or Open Text contributing back than they ever would have by trying to manage the IP themselves.
August 31, 2010

Harold Jarche said:

IP Flow
Funding agencies and universities have a mental model that IP only flows one way. They see it as a linear process. Universities think they are the creators of innovation which then gets thrown over the wall for commercialization. It's an ecosystem, not a pipeline.
August 31, 2010

Andrey said:

...
The problem, and solution(s) to it, is far more complex than selection of a ‘model’ for commercialization and probably relates to the conservative nature of Canadian public. Canada experiences similar problem when it comes to entrepreneurship and launching new start-up companies, particularly in high-tech sectors. A glance at WIPO’s 2008 report reveals that Canada had about 10,000 patent filings; about 8,300 or which were international filings in Canada due to it proximity to the USA; and about 1,700 were genuine Canadian filings. This is a pre-recession data. This data placed Canada behind Finland in terms of patent filings per 1 million citizens, right on the bottom of the list of industrialized countries. I would venture to say that problem with lack of patent filings propagates in Canada into lack of patent commercialization and lack of patent based start-ups. Canada in terms of producing inventions and commercializing them is about as effective as a steam engine, taking in consideration number of technical universities in Canada, level of average education, federal and provincial investments in education and technology development, internet infrastructure, proximity to the USA, and sophistication of consumers.

Andrey, http://www.pinskylaw.ca
August 31, 2010

James said:

...
The push to commercialize and proceed with patent protection is often by the University researchers themselves. While the University may not profit greatly directly, they may indirectly profit by being able to attract researchers by splitting this potential revenue stream. (Many Canadian Universities split funds with the researchers. If the average split is 50/50, that would imply over 50 million dollars in extra payments to Canadian researchers as a result of this commercialization. This would have far more of an impact than the 2.1 million net gain. (Assuming the numbers are accurate/complete).
August 31, 2010

E K said:

Patent numbers
Patent filings numbers have almost nothing to do with actual innovation, and only a small corellation to actual invention. In fact, patents can harm actual innovation (See e.g., Intellectual Property Rights and Innovation: Evidence from the Human Genome, http://papers.nber.org/papers/w16213)

August 31, 2010

Owen Funnell said:

...
The discussion appears to ignore the nationalistic aspect. Valuable patentable inventions lead to spin-off inventions, the rights to which can be controlled by the owner of the parent invention. How do you avoid having a foreign corporation patenting and exclusively exploiting in Canada inventions based on a Canadian public funded parent innovation?
September 01, 2010

Harry Pasternak said:

If It's funded With "Our" tax dollars - it's "Ours" - So Open Source It ..
All research funded with "our" tax dollars needs to be Open Sourced under a scheme similar to the GPL. Patenting kills innovation - and only keeps lawyers happy.
September 01, 2010

Chris Bruner said:

The purpose of research
This whole blog post ignores the purpose of University Research. It is not to make money. Universities are here to do research. They often explore areas of research with no foreseeable benefit. This is important because often knowledge will reach a plateau or a local highpoint, when searching along the "profit path". In order to bypass the plateau or local highpoint, you need to broaden your search to include areas that may have been overlooked. Pure research sometimes has the most impact, (the atom bomb came out of pure research musings). Pure research often has no impact. Not pursuing pure research means closing the doors to many possibilities.

I believe that Universities looking for patent protection to their ideas is like Microsoft calling itself a university. The only thing that can be learned there is what Microsoft wants to teach. If the public has paid for it, give it to the public!
September 01, 2010

Karen L. said:

...
I support the broad statement that publicly funded research should be public. However, if Universities *were* making money off of these patents, would that money not be going back into their budgets to fund more beneficial research? And ideally, would this not make Universities more self-sustaining and better able to respond to the effects of budget cuts? It seems to me that the stronger argument against the commercialization strategy is the one made in this post that this net gain just hasn't been realized -- if the administrative costs could be reduced, this commercialization model would not be completely at odds with my view of what is for the public benefit. But otherwise, there is no longer any justification not to make this research openly available.
September 01, 2010

oldguy said:

Publicly funded research

If my tax dollars are being used to fund research, and that research results in a patent, I want my cut of it as well. Not simply the profit generated by that patent, but the patent itself. This more closely mirrors corporate research results.
If I own a "piece" of that patent, I expect to be able to negotiate a reduced royalty usage of that patent, or perhaps even royalty free.

I am not adverse to publicly funded research, in fact I approve of it. But I am adverse to a university or individual researcher using "my" tax dollar to eventually enrich themselves, at my further expense when I use that patented work.

The situation is complicated. Certainly in this day of patent portfolios being built willy-nilly with no sense of ever creating a product based on that patent by the inventor, it makes sense to patent the results of publicly funded research. But it needs to be constrained when applied against Canadian businesses and citizens. It should also be available as a "defensive patent" to any Canadian being sued by a corporate patent holder.

September 01, 2010

DJP said:

...
Anyone who can say the following with a straight face has not looked very closely at how universities actually spend money:

"...if Universities *were* making money off of these patents, would that money not be going back into their budgets to fund more beneficial research? And ideally, would this not make Universities more self-sustaining and better able to respond to the effects of budget cuts?"

A more realistic scenario is that, at best, any money made would go into increasing the amount spent on the non-research staff of the administrator responsible for facilitating patents.

Universities have no business being in business. If professors want to exploit their creations commercially, they should do it in their spare time. This holds not only for science, engineering, and medicine but also for law, business, and economics as well as creative writers and faculty in the performing arts. What is their spare time? Anything beyond the amount of time spent doing fundamental research and teaching of the same quality and amount as the rest of their colleagues.
September 01, 2010

darryl said:

2008 or 1998 ??
The link to the PDF does not work, and the only report of that kind I can find on that web site is from 1998, NOT 2008.

Can you please provide a link to the pdf file, and check and confirm the date of this report, or more importantly the date the data was collected.

If it was realeased in 2008 but is based on 1998 data, what is the point.

Please check, relink and advise.


Plus, fundamental reseach with no short term commercialisation prospects form a large part of University research.

And quite often those fields yeild far greater outcome than trying to make a lighter smart phone..
September 03, 2010

Darren said:

capitalist pigs
So why does the research money need to produce something marketable? I would hope that government funded research would target areas that the corporate world isn't interested in. There are many areas of research that are immensely valuable that will never produce anything that is marketable.
September 03, 2010

oldguy said:

@Darren
..."So why does the research money need to produce something marketable?"

There is no way to predict which research will produce something which can be marketed, or not. Or when. Likewise there is no way to identify what private corporate research is taking place.

In fact, I would venture to say that nearly ALL research eventually leads to something that can be produced or marketed, even if only as a spin off or as an impact on other areas.

September 03, 2010

Darren said:

@oldguy
The last time I checked black holes where not marketable. There seems to be a reasonably sized crowd researching them. A cure for cancer is also not very marketable; I'm fairly certain that big pharma would hate to see the day cancer is cured.
September 03, 2010

oldguy said:

@Darren
Last time I checked, research on black holes was still confined to theoretical models and astronomical observation. But such theoretical research can still end up with marketable products (and patents). Quantum computing effects and memristors are recent examples. Both started with "unmarketable" theoretical models. People are now starting to see practical applications (products) for quantum entanglement, but the research surrounding this has been ongoing for years, and is still ongoing.

When doing research you often don't have a specific result in mind. What you find may end up having "marketable product" results in a few years or in many years.

Cancer research is ongoing in both the public funded and the privately funded areas. Based on the current state of the research, I doubt there will be a single solution for all forms of cancer. And yes, big pharma is very interested in this area of research.

As I said, you cannot separate research into "marketable products" and "non-marketable products" research. It is simply research.

Don't confuse pure research with product development research. They are different things. In the case of your cancer cure, the pure research might find things that are guaranteed to knock out a particular cancer (they have), but the side effects would kill the patent faster than the cancer. Not very marketable. Once you find something that is close, it becomes product research to see if there is a way to reduce the side effects to a livable level and still keep the cancer killing level.

"Research" tends to slide from pure to development as a natural part of the cycle. It also can have far off effects in many other areas. For example researching carbon nano-tube production techniques can easily affect both the electronics and bullet-proof vest industries, along with many more. But it starts with research into techniques into how to cheaply produce lots of carbon nano-tubes.

September 03, 2010

dennis said:

opensource = bad idea
once you opensource something you rarely see any financial benefit and you effectively prevent further opportunities tied to certain aspects of what was created.. opensource is not completely understood unless you are part of the commercialization community...
November 20, 2010

KSig said:

Missing the point
The one thing absent from this blog post and every comment is the well-researched fact that one of the most important factors leading to effective bridging of pure research to innovation/product development and positive commercial outcomes, is the continued involvement of the researcher(s) throughout the commercialization process.

Making university patents openly/cheaply available to entrepreneurs with non-exclusive licenses would almost certainly mean that the university researcher would have zero vested interest in continuing to be involved in the commercialization process. This equivalent to a death sentence for most patents. The research will still be there of course, and will be picked up and used to generate patents elsewhere (the U.S.)

Telling researchers that their job is to do the basic research and to leave commercialization to the businesspeople, or taking away their support services (all the admin personnel in tech transfer offices) and telling them that they are on their own if they want to stray from pure research activities will also kill patents from being transformed into something useful. Even worse, it will drive them to other places more friendly to their ambitions (The U.S. and elsewhere). Turning a patent into a commercially viable product requires the tacit knowledge of the researcher. The 'development' phase of R&D is long and full of problems, big companies will not pay huge licensing fees just for a piece of paper with technical information, they know that they also need the researcher's involvement, and a patent license cannot guarantee that.'

I think the major problem in Canada is that our business community is too risk averse to invest in high-risk entrepreneurial activity. Venture and angle funding is non-existent and so we miss out on opportunities.

December 09, 2012

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