Getting university IP to market: How Canada falls short

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This is the 27th article in a continuing series that examines the state of the ecosystem necessary to successfully bring technology to market. Based on dozens of interviews with entrepreneurs, venture capitalists, angel investors, business leaders, academics, tech-transfer experts and policy makers, this series looks at what is working and what can be improved in the go-to-market ecosystem in the United States, Canada and Britain. We invite your feedback.

By Francis Moran and Leo Valiquette

The Canadian university system costs about $25 billion a year. The total income for all Canadian universities from licensing their intellectual property is around $50 million. Subtract the cost of managing that IP and you’re left with a net income of only $15 million. Getting technology to market is clearly not a big income stream for the typical Canadian university.

Those numbers come from The Way Ahead, Meeting Canada’s Productivity Challenge, by Tom Brzustowski, a professor at the University of Ottawa’s Telfer School of Management. While the book is a few years old, the overall trend illustrated by those numbers hasn’t changed. However, Brzustowski also quotes one of our past contributors, Doyletech’s Denzil Doyle, who puts these numbers in their proper context. According to Doyle, the IP income to universities represents only 2.5 percent of the new sales generated by products based on it. Do that math and you arrive at $2 billion — $2 billion in annual sales for the Canadian economy. That isn’t an insignificant sum.

But this doesn’t mean that the emphasis must be on helping university researchers become better at commercialization to drive more economic activity from the campus. No. What they need is more help to become better researchers. As Brzustowski wrote:

“Commercialization requires expertise of a very different kind, and if we don’t have enough experts in the business of commercialization and managing innovation, than that’s the shortcoming on which to focus … commercialization is the preoccupation of every entrepreneur; it is the essential function of all industry; but it is only an afterthought for the relatively uncommon researcher who is concerned with it at all.”

A few weeks back we touched on some of the essential elements for successful technology transfer from the university lab to the marketplace. That post provoked some enthusiastic response from several readers hip deep in the process, so much so that we thought it worth another look to explore in more depth the issues and challenges we face in commercializing university research.

Granted, the title of today’s post doesn’t get us off on the most positive footing, but we’ll start with the bad and the ugly and finish next week with the good.

Bayh-what?

When it comes to who retains ownership of IP born on the university campus, Canada is a dog’s breakfast of disparate policies. A few weeks back we spoke with Tim Jackson of Waterloo’s Accelerator Centre about that region’s culture of collaboration. He attributed Waterloo’s growth as a tech hub in part due to the University of Waterloo’s progressive IP policies. Researchers retain ownership of their inventions, which has helped to attract world-class researchers to the area.

This, however, isn’t the norm in Canada. For Scott Valentine, director of marketing and communications at Solium Capital, a key barrier to greater university commercialization is Canada’s lack of an equivalent to the U.S. Bayh–Dole, or Patent and Trademark Law Amendments, Act. In essence, Bayh-Dole allows researchers to maintain control of intellectual property they have created through government-funded research. In a Canadian context, that would obviously include research done under the auspices of a university.

“There’s no national strategy, no will at the federal level,” Valentine said.

Since researchers often struggle to understand what rights they have and must negotiate the terms and conditions for licensing their inventions, “what happens 80 percent of the time is nothing happens.” Researchers, being researchers and not entrepreneurs, don’t know how to develop a business plan, seek market validation or get in front of investors and “peal money out of them.” More often than not, their IP ends up gathering dust.

Picking winners

Wesley Clover’s Andrew Fisher emphasized the need a while back for any government-supported program to back winners and ditch losers.

The challenge, of course, is levering the expertise of private sector individuals who have the requisite business chops. David Mayes, after having experienced firsthand how private industry and universities work to bring technology to market from the likes of Stanford, MIT and Santa Fe, sees crucial gaps in the commercialization chain for Canadian university IP.

“There just isn’t the experience here or the knowledge of how that networking works, to commercialize out of university,” he said.

Mayes is a founding partner of international business development firm Global Internet Group in the San Francisco Bay Area. He has also engaged with the B.C. tech community on several fronts, including founding solar energy company Sola Renewable Energy.

“We just don’t have the capital here to take on a world-scale global opportunity … the smart Canadian VC, if he has an idea, takes it to his larger partner in San Francisco and they invest together. But what unfortunately happens … is that they are obliged to move to California and the advantage to Canada is lost.”

Efforts are underway in B.C. to change that, with a coordinated effort between startup incubators, investors, universities and business schools, which we will talk about in more detail next week. However, such broad-based initiatives do create fresh challenges, which bring us back to the political complexities of actively choosing winners.

If a government agency mindset prevails, Mayes said, it will be counterproductive. There will be an obligation to help anybody who comes along. But if there is instead an emphasis on picking winners, “success will be breed success.”

“It’s about the efficient use of the capital,” he said.

Appetite for risk

We’ve talked before about appetite for risk being a defining characteristic of an entrepreneurial culture. For Mario Kasapi, an aversion to risk is all too common among seed investors when it comes to banking on the commercial potential of university IP.

Kasapi is director at UBC Research Enterprises and associate director of the University of British Columbia’s University-Industry Liaison Office. For him the challenges boil down to access to capital and building that pool of experienced, successful entrepreneurs who are willing to get involved and take university IP to market.

“That’s not to say there isn’t money we can access for young companies,” he said. “In my view there is lots of money, but the difficulty is in getting it.”

U.S. capital is easier for his office to access than Canadian capital because early stage investors on this side of the border are “ultra-conservative.” Many who claim to be seed investors will ask ill-thought questions about revenue when the IP in question is still an idea on paper in the lab.

Compounding this is the challenge of finding those entrepreneurs who can take the IP to market and build a viable business around it. In other words, champions. It’s not just because the U.S. market is 10 times larger, there is also a “greater thrust of activity on a per capita basis.”

“In Vancouver, we’re OK for that, but there’s a big gap in other parts of Canada,” he said.

Next week we’ll take a look at what is being done, what should be done and who needs to do it to address the gaps in Canada’s commercialization ecosystem for university IP.

/// COMMENTS

11 Comments »
  • Brennan

    August 02, 2011 1:49 pm

    Great article! I agree the major issue for Canadians is how we can make a viable business model out of our ideas. Part of the reason we have brain drain, I think, is because we have great idea people but we don’t have the tech or industry business connections in Canada (not always, anyways.)

  • Leo

    August 02, 2011 4:26 pm

    Brennan:

    Yes, it is certainly all about connections, connections driven at the grass roots by entrepreneurially minded people who are not afraid to get on a plane. We’ll be hitting on that in next week’s followup.

    Cheers
    Leo

  • Didier

    September 02, 2011 2:40 pm

    I would be tempted to title my comment: Where is industry?

    Thanks for this overall status on this amazing domain. I have 2 comments.

    In the process of commercializing first. I am hesitant in saying that we would need an equivalent of the US Bayh–Dole, or Patent and Trademark Law Amendments, Act to foster technology transfer from university. After all, it’s all about business. When something doesn’t seem to work we tend to focus on the process (does IP transfer is facilitated or not, is it efficient, and so on), while forgetting the obvious: It takes two to tango, and that brings me to the second comment.

    We all know for we need a market to get an IP transferred. The question how big and active is that market. As you point, one need to understand the market, its driving forces. If you cannot connect quickly and efficiently with close connection in the market, you gonna have hard time to figure that (you may have that expert in-house occasionally but overall we cover infinite domains). That brings me to numbers of players, appetite for sharing info, giving precious time and interest in innovation and R&D. But, according to several reports, Research and development performed by business in Canada is low by international standards. The reality is that general speaking it is very hard in Canada to get companies’ attention on innovation, new products developments. We end-up most of the time touring the world to find that first lead adopter, that will eventually sell back products to our businesses, or we will attract investments for a start-up and see it leaving soon to “get closer to customers”. There are several initiative with that regard, such as the Canadian Innovation Commercialization Program, Sustainable Development Technology Canada as well initiatives in provinces, but these remain driven by governments. Businesses, especially large companies, could become a strong actor of the innovation food foodchain by embracing that trend of enabling technology adoption (pilot, small scale development, opening network to providers, etc.).

  • Leo

    September 07, 2011 8:25 am

    Didier:

    Thanks for your comments. Industry certainly does have to step up and play that role of champion, as you have put it to us in the past. In the followup to this post, Scott Valentine also cited the importance of serial entrepreneurs, as opposed to large corporations, looking to universities as the breeding ground for the next great idea that they can support and take to market. Either way, the leadership and the initiative has to come from the private sector.

  • Joe Flicek

    November 30, 2011 12:55 pm

    Francis,
    The largest patent market for licensing remains the US. The IP needs to move to the US Markets…you have an strategic advance over most…leverage it.
    My best Joe Flicek

  • Rohaldy Muluk

    December 01, 2011 1:27 am

    Comparing to experience from other countries in Europe and Asia, IP (I mean exactly patents) in universities at the first place devoted to the promotion of researchers and to increase the world ranking of universities, no matter whether the research will be funded by governments or other third parties. Most of university researchers think the purpose of their researches is for development of the science or technology itself, not for its commercialization. I think that’s why a big portion of inventions in universities can not be commercialize or have no commercial values. So in my humble opinion the universities have to develop strategies and taken measures that could balance between IP commercialization issue and the advancement of science and technology, especially for research funded by third parties.

  • Coffee with Julie

    January 02, 2012 10:38 am

    This is a fascinating and extremely important topic – thanks for addressing it here. I tend to think that Rohaldy Muluk, above, is correct. The greatest achievement of a university researcher is to “add a line to the book of knowledge” (I heard this exact phrase used by a researcher this weekend) rather than bringing an idea to market. To tap into the brain engine at our universities, we’d need an entrepreneurial mind to step into the early phases of research, rather than looking at the end phase (an IP) and help steer the direction in a manner that allows for effective commercialization. (p.s. If there are spelling mistakes in my comment, I blame the fact that the font is only showing at maybe 6 point, so I am typing blind here! :) )

  • Monique Dube

    January 25, 2012 12:30 pm

    As a previous Canada Research Chair and Canadian Geographic Scientist of the Year (2011) I found this article bang on. I have one addition however. You will always have some researchers that are entrepreneurial and some that are not. The issue is that there are a significant MANY that are and if the barriers of the Canadian academic process were removed for researchers (case in point the University of Waterloo that understands) and organizations such as the CAUT actually enforced IP and copyright statements made in Collective Bargaining Agreements, then the doors of innovation and transfer to market would open. The only true innovators at universities are the researchers- so letting them do what they do best and giving the IP to the researchers puts the researchers energy into action. Its their passion- they will take it to market. When you have to invest thousands of dollars as a researcher with external IP lawyers to ensure you can transfer your ideas out of the university to market – that is a losing game. What incentive is there for the researcher to work through mounds of academic red tape, IP polices and procedures that are vague at best and IP Clauses in Collective Bargaining Agreements that are completely dissociated from the realities of Ip and copyright law? My advice to university researchers is if you have an idea- get it out to the private sector before it develops otherwise it will die on a shelf collecting dust. If you are at the University of Waterloo- then I believe you are in a much better position. It is time that the business community and our governments funding universities demanded improved access to the innovators and their ideas and put university governance back where it belongs; not competing with researchers for their ideas but allowing them the freedom to move to market. Obviously universities supporting researchers deserve some return; at the moment there are no returns for anyone. After millions of dollars invested in an experience moving my own innovation to market from the academic environment-it is true the process is broken and our Canada is the loser.

  • Francis Moran

    January 26, 2012 12:13 pm

    Some good points here, Monique. I share your enthusiasm for the Waterloo model. I also like what Univalor, MSBi Valorisation and the other two sociétés de valorisation des résultats de la recherche universitaire du Québec (SVUs) are doing as the essentially outsourced — and, so, more private-sector-thinking — technology transfer offices of various Quebec universities.

    I agree entirely, though, that much more needs to be done to unlock the tremendous value of university-based innovations.

  • Caesar in Edmonton

    July 25, 2012 11:59 am

    The question I have is the following: are universities the appropriate place to develop technologies for commercialization? Is their mandate not to educate (not train, that’s vocational) young people so that they have the required generic tools at their disposal to help Canada compete in the international market? Should the private sector not step up to the plate and increase its R&D activities? That would provide the main product of the Canadian university system (highly qualified people) the opportunity to apply their talents and skills to the benefit of Canada instead of having to look south of the border for a career that utilizes their creativity and skills to the full.

  • Getting university IP to market: Levering youthful ambition | Francis Moran & AssociatesFrancis Moran & Associates

    October 15, 2013 12:19 pm

    [...] the past two weeks, we’ve talked about how Canada falls short when it comes to commercializing university IP and the leadership from the business community that is needed to address the gap. We’ve talked to [...]

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