OECD Workshop - Management of Intellectual Property Generated fromPublicly Funded Research

December 11, 2000

SESSION I: Examples of Best Practices

“Institution Building”By: Dr. James W. Murray

Interim PresidentWestLink Innovation Network Ltd.

CANADA

Issues to Address in Institution Building

I. Should national governments providegeneral guidelines that will help researchinstitutions build the types of supportnecessary for the protection and exploitationof their knowledge base?

Yes No X

• Thought provoking question for many years inCanada.

• Canadian Federal Government Committee in1998 / 99 - Expert Panel on theCommercialization of University Research.

• Group spent 1999/00 academic yearresearching new ways to develop moreeffective system of innovation in Canada.

• Report was produced - paper is a synthesis ofthe activities over the past three years.Expert Panel on the Commercialization of University Research - “PublicInvestments in University Research: Reaping the Benefits”(http://acst-ccst.gc.ca)

II. What kind of support should nationalgovernments provide to public researchinstitutions that are commercializing theirknowledge base?

• Canadian context examples will be provided in:A.) Issues Pertaining to Standardized Intellectual Property (IP) OwnershipB.) Model Contracts and Conflict of Interest (COI) GuidelinesC.) Estimates of Costs Associated with Exploiting / Defending IP RightsD.) Funding or Loans for Start Up of Technology Transfer Office’s

(TTO’s)E.) Studies of Costs and Benefits of Various Models of Technology

Transfer and Development ActivitiesF.) Skills Training and Recruitment of the Managers of Public Sector IP PortfoliosG.) Regional Alliances

A.) Issues Pertaining to Standardized IntellectualProperty (IP) Ownership

1.) The cases:- Lost commercialization opportunities

- Leaked commercial opportunities

a) Consulting contracts assigning away IP rights

b) Post Doctoral Fellows leaving country and taking IP with them

- Limiting innovative capacity of National Governments

- Litigation

• Comparison of proposed Canadian IPPolicy and U.S. Bayh-Doyle Act

Provisions of the Bayh-DoleAct

- Universities are required to determinein a reasonable time period whetherthey will take title of federally fundedinventions. If they choose not to, titlemay revert to the Fed’l Gov’t.Universities are restricted in theirability to assign to any other party.

- University must disclose inventionsto the Fed’l Gov’t in a reasonable timeperiod. Failure to do so entitles thegovernment to take ownership of theundisclosed invention.

Proposed Canadian PolicyPrinciples

- Universities are required todetermine in a reasonable time periodwhether they will take title tofederally funded IP. May elect toassign the title back to the inventor.

- The University must disclose the IPto the Fed’l Gov’t annually, providedsuch information is not subject to theAccess to Information Act.

Provisions of the Bayh-DoleAct cont’d

- Once a University takes a title to aFed'l funded invention, it must filepatent applications in a reasonable timeperiod, or title reverts to Fed’l Gov’t.

- Gov’t retains a non-exclusive right toutilize any innovations that it needs.

- Fed’l Gov’t required periodicreporting by Universities oncommercialization efforts.

Proposed Canadian PolicyPrinciples cont’d

- Once University (or affiliated org)take title to IP arising from Federalfunding, it must make reasonableefforts to commercialize IP in amanner that benefits Canada.

- Gov’t retains a non-exclusive rightto utilize any IP that it needs.

- Federal Gov’t requires annualreporting by universities oncommercialization efforts.

B. Model Contracts and Conflict of Interest (COI) Guidelines

1.) Model Contracts– Best source of Model Agreements in North

America - the Association of UniversityTechnology Managers (AUTM)

– Technology Transfer Practice Manual Vol. II, PartVIII: Pertinent Agreements, includes samples:

– Confidential Disclosures Agreement (CDA’s)– Option Agreements– Exclusive License Agreements– Biological Materials Transfer Agreements– Non-exclusive License Agreements– Software License Agreements

1.) Model Contracts cont’d

• New, updated model agreements are currently beingprepared by AUTM; web site address for futurereference: http://www.autm.net

2.) Conflict of Interest (COI)• COI policy guidelines are necessary and integral

part of the knowledge commercialization business.

• In Canada, almost all major public sector researchinstitutions have COI policies of varying degrees.

2.) Conflict of Interest cont’d

• I would like to offer the following principles:

– Conflict of Interest cannot be avoided and must bemanaged

– Full and complete disclosure is necessary

– Common sense must prevail

– Protection of the rights of the innocent is essential(i.e.: Graduate Students, Post Doctoral Fellows,Hospitalized Patients, etc.)

– Establish oversight committee to deal with the COIissues as they arise, not after they occur

C.) Estimates of Costs Associated withExploiting and Defending IntellectualProperty Rights– Example (for comparison):

• Assume that a commercialization office requires onecommercialization specialist for every 75 FacultyMembers

• Annual expenses per specialist is approximately$100,000/year to cover operating and capital costs

• Each major research institution requires a minimumof $1 million/year to protect IP

• Canadian Case Study: Natural Sciences andEngineering Research Council (NSERC)– NSERC’s research budget is ~ $500 million

– NSERC supports 7500 Faculty scientists

– NSERC Canada requires approximately 100commercialization specialists to deal with one NSERCproject

Total cost of specialists = $10 million

Other Costs for patenting, etc. = $15 million*

*estimated total in Canadian Institutions

• Canadian Case Study: NSERC cont’d

– Total estimated cost for NSERC supported research= $25 million.

– This is equal to 5% of the NSERC budget

• Since the Canadian Federal Government support of allUniversity research amounts to $1 billion / year, it wasrecommended that $50 million / year be allocated forthe commercialization of knowledge-based activitiesat Universities.** Annex 9, pg. 49 - Expert Panel on the Commercialization of UniversityResearch - “Public Investments in University Research: Reaping the Benefits”(http://acst-ccst.gc.ca)

D.) Funding or Loans for Start Up of TechnologyTransfer Office’s (TTO)

Benefits of Increased Funding to University TTO’s• Forecasts prepared in Canadian Expert Panel study show that

an additional $50 million per year over 10 years in supportof University TTO’s would result in the following benefits:– Estimated Increase in Royalties to Universities $120,000,000– Estimated Increase in Number and Value of

University Spin Off Companies $2,345,000,000– Estimated Increase in Federal Tax Revenue from

Increased Economic Activity by Licensees

and Spin-Off Companies $2,000,000,000

Over 10 Years $500 Million

Investment Yields Economic Gain of Over $4.4 Billion

•Benefits of Increased Funding to University TTO’s -Increased Royalties to Universities

* Forecast of cumulative increase in royalties paid to all Canadian Universities resulting from increased commercializationeffort by University TTO’s enabled by $50M additional federal support per year, 1999-2009. Forecast prepared for ExpertPanel Study - J. Murray / G. Tertzakian (1999).

•Benefits of Increased Funding to University TTO’s -Increased Royalties to Universities

* Forecast of cumulative increase in royalties paid to all Canadian Universities resulting from increased commercialization effortby University TTO’s enabled by $50M additional federal support per year, 1999-2009. Forecast prepared for Expert PanelStudy - J. Murray / G. Tertzakian (1999).

•Benefits of Increased Funding to University TTO’s -Increased Value of University Spin-Off Companies

* Forecast of cumulative increase in the number and value of Canadian University Spin-Off Companies resulting from increasedcommercialization effort by University TTO’s enabled by $50M additional federal support per year, 1999-2009. Forecastprepared for Expert Panel Study - J. Murray / G. Tertzakian (1999).

•Benefits of Increased Funding to University TTO’s -Increased Value of University Spin-Off Companies

* Forecast of cumulative increase in the number and value of Canadian University Spin-Off Companies resulting from increasedcommercialization effort by University TTO’s enabled by $50M additional federal support per year, 1999-2009. Forecastprepared for Expert Panel Study - J. Murray / G. Tertzakian (1999).

E.) Studies of Costs and Benefits of VariousModels of Technology Transfer andDevelopment Activities

• In Canada, there are two main models of UniversityTechnology Transfer Organizations:– Office / Department of the University (usually VP Research portfolio)

– Arms-Length Wholly Owned Company (for profit, one shareholder - thefounding University)

• Summary of key points:– The cost / benefit of either model is relatively equal, providing

that the following are in place:i.) Clear Policies on IP ownership, Revenue Sharing, and

Conflict of Interestii.) Structure and Attitude to nurture and assist early stage

inventions to the point that they are ready tocommercialize (see diagram)

Commercialization PathwaysResearch

Research Grants, CollaborativeResearch, Contract Research

Invention DisclosureFrom Faculty, Staff & Students

Results from Collaborativeand Contract ResearchTransferred to Company

Publication ofResults

TTO PrototypeDevelopment Program

Technology Scaling-Up / Proof-of-ConceptIn-Depth Technology & Market R&D

IP ProtectionTechnology Marketing

TTO CommercializationProcess

Technology & Market EvaluationsIP Protection

Technology Marketing

3rd PartyCommercialization Process

Technology & Market EvaluationsIP Protection

Technology Marketing

InitialTechnology.Assessment

Patent & Literature SearchTechnology & Market Assessments

TTO IP Committee Decision

LICENSINGOPTIONSSpin-Off Company

FormationDirect License to anExisting Company*

Direct License to a Spin-Off Company*

Technology Returnedfor Further Research

Technology Returnedto Inventor

TTO = Technology Transfer(Commercialization) Office

* May lead to the assignment of the IP to thecompany in exchange for equity, once agreed-upon corporate milestones are achieved.

Adapted from University-Industry Liaison Office Technology Transfer Process at University of British Columbia, Livingstone (1998)

F.) Skills Training, Retooling, andRecruitment of the Managers of PublicSector IP Portfolios

• Example: WestLink Innovation Network -Technology Commercialization Internship Program

– 2 Year “Graduate” Program• Interns hosted at each of University - Industry

Liaison Office, High-tech company / Spin-offcompany, and a Venture Capital firm at 8 monthintervals

• Intern hosts pay half of intern salaries, the otherhalf of salary and the administration of programis provided through Federal / Provincial support

• WestLink Technology CommercializationInternship Program cont’d

– Qualifications of Internship Candidates: science /technical background plus MBA (or equivalent inbusiness experience / demonstrated aptitude)

– Potential Employers: All 16 WestLink InnovationNetwork Members (14 Universities and 2Networks of Centres of Excellence); HighTechnology Spin-Off Companies; Venture CapitalGroups; Research Parks / Economic DevelopmentDepartments; Law Firms with Intellectual Propertyspecialization; National Research Council andother Federal Research Institutions; and ProvincialResearch Institutions.

• WestLink Tech. Comm. Internship Program cont’d

Three 8 - Month Intern Placements

Technology TransferOffice

Venture Capital Firm High TechnologyCompany

Topics covered include:• Overview of academic

research enterprise• Overview of technology

transfer operationsincluding sponsoredresearch, technologyevaluation, protection andlicensing, and spin-offcompany formation

• Technology evaluationincluding patentability,technical feasibility,market research,background IP rights, IPprotection strategy, andlicensing basics

• Courses: AUTM basiclicensing or equivalent

Topics covered include:• Overview of a venture capital

enterprise• Business opportunity

evaluation includingmanagement capabilities,technology assessment,market opportunity, andbusiness models.

• Structuring ventureinvestments includingdeveloping term sheets, duediligence, closing atransaction, and monitoringcompany performance

Topics covered include:• Overview of

managementresponsibilities to itsinvestors, board,customers and employees

• Business planning• Financing operations• Stock option plans• Product development• Operational issues

G. Regional Alliances - Two examples of Canadian regional initiatives

1.) Bureau de Liaison Enterprise - Universities(BLEUs) in Eastern Canada• U de M

• École Polytechnique

• École HEC

• McGill

• Laval

• Sherbrooke

• Concordia

• UQAM

• ETS

• INRS

• TELUQ

• U du Québec

• UQTR

• UQAT

• UQAR

• UQH

• UQAC

• ENAP

• Services rendered by the BLEU:– Research Projects: Preparation, negotiation,

administration, budget, billing, etc.

– Intellectual Property: Policy administration,protection, disclosures, BMTA’s, etc.; Training andinforming researchers

– Technology Transfer: Management of portfolios thathave been commercialized, evaluation of innovations,research partnerships, license negotiations,administration of agreements

– Spin-Off’s: Training and educating research andsupporting spin-off company creation

– Statistics: Information, liaison, and networking.

• Benefits of the BLEU’s:– Sharing of experience and information

– Giving strength to their negotiations

– Improving their efficiency

– Enhancing their lobbying position

– Allowing the power of the “group” for a unifiedvoice versus on an individual basis

2.) WestLink Innovation Network Ltd.• Not-for-Profit organization.

• Formed to facilitate communication, collaboration,training, and technology bundling andcommercialization.

• WestLink’s Membership consists of the WesternCanadian Universities and their affiliated researchorganizations located in Western Canada (westernOntario, Manitoba, Saskatchewan, Alberta, and BritishColumbia).

• WestLink’s Members include:• University of Alberta, ILO

• Brandon University

• University of BritishColumbia, UILO

• Canadian Bacterial DiseasesNetwork of Centres ofExcellence (CBDN)

• UTI Inc. / University ofCalgary

• University of Manitoba, ILO

• University of Northern BritishColumbia

• University of Regina

• UST Inc. / University ofSaskatchewan

• Simon Fraser University, U/ILO

• IDC / University of Victoria

• University of Winnipeg

• Protein Engineering Networksof Centres of Excellence Inc.(PENCE)

• TechBC Corp.

• Lakehead University

• University of Lethbridge

• WestLink’s Menu of Program and Services• Networking and Communication

• Building Technology Transfer Skills andAwareness

• Technology Bundling and CommercializationFacilitation

• Contract Services

• WestLink works as a facilitator and catalyst toprovide resources for Western technology transfer,organizing events and courses to developtechnology transfer skills for both the research andbusiness community, and encourage collaborationon commercialization issues among its Members.

III. How can national initiatives maintainflexibility so that individual institutions cancustomize them to their particular needs?

• National governments set the policies andguidelines.

• Individual institutions be given the authority tocustomize their activities within these policies andguidelines.

• Reporting annually - assist in evaluating theperformance of policies and guidelines beingimplemented and their effectiveness.

Questions?

WestLink Innovation Network Ltd.Suite 3050, 8308 - 114St

Edmonton, Alberta T6G 2E1CANADA

Ph: 1 (780) 425-7857Fax: 1 (780) 988-2191

www.westlink.ca