University of Ottawa experiments with providing royalty-free IP to area firms

First in Canada

The Univ of Ottawa is initiating the first program of its kind in Canada to provide intellectual property (IP) from its faculty of engineering on a three-year royalty-free basis to small Ottawa-area companies. The pilot Technology Accelerator Program (TAP) will provide the researchers responsible for the IP with small research grants over the licence-free period, with a re-evaluation of the licensing terms if the IP is successfully commercialized.

TAP was conceived and proposed to the U of O by Dr Tom Brzustowski, the university's inaugural RBC Professor in the Commercialization of Innovation and former president of the Natural Sciences and Engineering Research Council (NSERC). Brzustowski says the objective of the pilot project is simple.

"It's to see if there is a better way to get IP in the hands of people who can create wealth with it," he says. "A lot of people are watching this with interest, especially the (U of O)president (Dr Gilles Patry). He won't have to be convinced to widen it if it works."

Moving commercially promising IP out of an academic setting and into the marketplace is one the most vexing challenges facing practitioners and policy makers alike. In Canada and many other countries, universities lack common IP policies, making if difficult for companies to utilize standardized negotiation procedures.

Technology transfer is even more complex when IP is spread over multiple institutions, or if IP holders demand a greater return than companies feel is warranted. This is especially the case for small companies with limited resources and personnel to navigate the complex shoals of IP negotiation.

Programs that add value to IP within the academic setting and specialized personnel within university industry liaison offices help, but the poor record of transferring IP to SMEs indicates that new approaches are required.

"This is a response to conditions that I'm aware of. Small technology ventures are short of cash and time and they are facing rapid market changes," says Brzustowski. "This is the Michael Raymont perspective (CEO of Energy INet and former interim president of the National Research Council). Get the IP into the hands of those in the Canadian economy that can create wealth."

modest beginnings

With a budget of approximately $500,000, TAP is being funded by U of O and the Ontario government through its Ontario Research Commercialization Program (R$, August 21/06). The money will be used to provide researchers with three-year research grants in lieu of royalties and to promote the program throughout the region.

"People are trying different mechanisms. In the information technology sector, there's lots of non-exclusive licensing going on," says Joe Irvine, U of O's director of Technology Transfer and Business Enterprise (TTBE). "With this program we want to increase the technologies coming forward and increase the uptake by SMEs … We'll be able to do a small number of these transactions per year since we're limited by resources."

If the IP results in a successful product at the end of three years, the TTBE will renegotiate with the receptor firm to determine a royalty rate for future product sales. Irvine notes that his office also handles contract research within the university.

"About half the tech transfer offices in Canada are like this," he says. "The most successful tech transfer is where there is contract research."

The standard practice for gauging the effectiveness of technology transfer is to calculate revenues from licensing royalties. In 2003, Canadian universities spend $36 million collect approximately $50 million in IP income, representing a net income of $14 million on a $14-billion enterprise. Brzustowski says that the meager returns IP generates are a powerful rationale for the TAP concept, since the underlying objective of tech transfer is to create wealth through company growth and increased employment.

Brzustowski cites the recent work of high tech guru and angel investor Dr Denzil Doyle, who developed a unique analytical tool to establish a more accurate value for technology transfer from government or university laboratories.

Doyle examined the economic payback of IP emanating from the Communications Research Centre and estimated that, for every dollar in licensing revenue, the company commercializing the IP generated $40 in sales. The $33.7 million in licensing revenue received by the CRC between 1989 and 2005 resulted in $520 million in incremental sales. When an analysis of resulting spin-off firms was included, the sale of products was estimated to be $1.6 billion annually (R$, January 18/07).

Another proponent of providing companies with free IP is Ron Freedman, part of The Impact Group and co-publisher of RE$EARCH MONEY. Freedman says he came up with the idea last year after examining the returns IP were generating for universities.

"The total return from IP commercialization is next to nothing, so why bother trying to protect IP when licensing it to Canadian companies would achieve its maximum benefit?" says Freedman. "It's no good for IP to be sitting on the shelves of universities behind paper walls."

Freedman says the issue of university IP has been kicking around since the early 1990s and while many proposals have been developed, the idea of free IP has never been proposed in a serious way.

"Nobody has had the guts or the moxy to try it out, which is why the U of O experiment is so important," he says. "I expect there will be a lot of resistance from established interests who will take a wait-and-see approach."

Not all are convinced that the pilot will generate the desired results. Dr Angus Livingstone, managing director of the Univ of British Columbia's university-industry liaison office, says there are several challenges associated with taking a blanket approach to all IP emanating from a specific faculty.

"It's a great idea and a great experiment but it may produce as many challenges as benefits," he says. "Engineering may not have local expertise in the Ottawa area and if a Toronto company wants exclusive rights what do you do?"

Livingston says about 20% of the technologies licensed by UBC involve multiple institutions, which makes dealing with IP issues on a case-by-case basis a more realistic approach. "The issues we face are always sector-specific and IP development-specific rather than policy bound," he says.

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