Best Practice Processes for University Research Commercialisation: Final Report

In the context of the global knowledge economy, the traditional role of the university as a generator, repository and disseminator of knowledge and learning is being reworked, at least in terms of new mechanisms to pursue the age-old objectives. There is a growing view that universities have a larger responsibility, and a special capability, to assist in transforming their knowledge into potential fruits - economic and employment growth.

Commercialisation of research, whether in the form of the establishment of new companies to capture maximum benefits, licensing to existing companies offers considerable promise. But it should be recognised that this is but a small component of the ways in which universities can contribute to economic and social advance. Enhanced learning for a larger and wider proportion of the community, not just in formal education but for life, the sheer pursuit of learning, and the continuing contribution to comprehension of challenges and the facilitation of informed debate, deliver much greater returns.

However, with regard to research commercialisation, current metrics suggest Australian universities are well behind emerging performance targets, whether measured in terms of patenting, start-up formation, or revenue from commercialisation. At the same time, these indicators are highly lagged. Other evidence clearly shows that there has been a substantial enhancement in commercialisation performance in many Australian universities in the past five years.

Myth No.1 Universities are a vast untapped source of intellectual property.

Universities do contain a great deal of knowledge and scholarly individuals. But intellectual property is a rare asset, shaped by knowledge, the market and the rules of economics. Moreover, the process of transforming knowledge into intellectual property and then to a good or service is highly complex. Indeed, in many cases the process of research commercialisation is as creative and as complex as research itself.

Myth No.2 Every time we license or sell a technology we are selling the farm.

In a globally competitive world we must expect to sell a great proportion of the products of our efforts to markets overseas. This also has the benefit of linking us with global markets and operators, providing the basis of future economic activities. The challenge is to ensure we get a good price for our intellectual goods.

Myth No.3 Australian universities are way behind their overseas counterparts in

The data available demonstrate that the best-performing Australian universities are achieving research commercialisation outcomes broadly comparable with the best in the US and Europe, and way above their average. However there is considerable variability in performance, with a considerable gap to small and regional universities on the whole.

Myth No.4 Researchers despise the very concept of business and wealth generation.

The great majority of academics with a substantial research performance (on average about half) have a very strong interest in seeing the potential outcomes of their research being realised. This realisation may take the form of a new course, a book, a performance, a new scientific theory, or a technology, such as the computer or the Internet, which will change the world. Some can generate direct commercial returns, while from others the economic return is indirect, and the social return considerable.

1. Australian universities have significantly strengthened their research commercialisation capabilities and performance in the past five years. The research-intensive universities (predominantly the Go8) display a level of performance well above the average of American universities, and approaching that of the highest performers in America and Europe. However there is great variability in performance.

2. For the US, one spinoff company is generated from a research expenditure of A$130-177 million, with best performers at A$40 million; in Australia the figures are A$113 million per spin-off for the research-intensive universities, and A$303 for the medium and small research profile universities.

3. Scale is crucial; effective research commercialisation depends first on a sufficient portfolio of research, based on both quantity and quality of researchers; second, it requires sufficient breadth and depth of capacity in the research commercialisation function. This presents a significant challenge to smaller and regional universities.

4. Even in the best-case research commercialisation can only generate 3-5% of a university's revenue. Hence neither governments nor universities should pursue research commercialisation solely or primarily as a major source of revenue. However the direct and indirect benefits to the university and the economy can be considerable.

5. Licensing of protected IP to existing companies is the most common form of research commercialisation and generates by far the most revenue. Success depends crucially on a strong absorptive capacity in industry. Australian industry, with its fragmentation, small size and low R&D investment in general has a relatively poor capacity to absorb university-generated technology. For this reason, many linkages have to be established with overseas firms.

6. The establishment of spinoff firms is an important commercialisation mechanism to hold and develop IP in the absence of suitable receptors or where a high return can be anticipated from future sale. They are most common in the biosciences and IT fields. Despite public perception, spinoffs that generate a huge growth in value, such as Genentech, are rare, unplannable, and usually about 20 years in gestation.

7. The most common financial needs for universities in research commercialisation are for pre-seed capital to fund proof-of-concept and prototype development, and for funds to support adequate IP protection. Given the extreme pressures on the block grant, the only sources of this finance are the new pre-seed funds, angel investors, and in a few cases, returns from previous investments.

8. Effective commercialisation requires non-disclosure. Effective research requires sharing of knowledge. Maintaining an appropriate balance is crucial for the success of both.

9. IP identification is most effectively carried out through decentralised processes close to the researcher, but with effective partnership with the research commercialisation office. Researchers hence need to be assisted to develop these skills.

10. Assessment and exploitation of IP is most effectively conducted by a centralised commercialisation office with a concentration of relevant expertise; performance of research commercialisation offices improves with scale, breadth of expertise and experience.

11. The development of linkages with industry is best performed by the researcher, though the commercialisation office can provide support, particularly through the organisation of networking opportunities.

• One aspect of universities that may be particularly challenged by their involvement in research commercialisation is their governance. Their Acts, State Government auditing requirements, and the structure, authority, membership and practices of governing bodies may each raise, and in some cases have raised, evident inefficiencies, tensions and conflicts.

There is a need to review the elements of governance of universities to ensure they provide an appropriate framework to allow for, encourage and manage research commercialisation.

• The Bayh-Dole Act in the US has been called the Magna Carta of research commercialisation. Australia does not face the situation of the US in 1980. IP rights are held by researchers or their institutions. Hence there is no apparent need for legislation. However, the kick-start effect of a major government intervention does warrant appropriate action.

The National Principles for Intellectual Property, appropriately strengthened, applied and monitored, together with encouragement to universities to establish broad targets, could provide the basis for significantly raising the profile and awareness of research commercialisation.

• The capture of ownership and exploitation of intellectual property, has become of paramount importance in global competitiveness, and hence an increasingly important issue at the national level. The recent announcement by the US National Institutes of Health that it would claim IP ownership in proportion to its share of funding in projects conducted outside the US threatened the IP value and ownership of all such projects.

Vigilance, representation and appropriate policy may be necessary to protect the ownership of IP generated in Australia.

• While IP identification is best conducted by researchers, it is not a function to leave to the researcher alone. The UniQuest model of placing a 'commercialisation manager' in each faculty represents best practice, as they can play the roles of 'idea finder' and 'idea developer'.

The key challenge of raising the awareness and IP identification capabilities of research staff requires training and other support programs. KCA and AIC may have a role in developing and promoting such courses.

• There is an emerging tension between the growing requirement for collaboration between researchers and institutions to achieve effective research teams, and the requirement of venture capitalists for 'clean IP', where ownership is clearly determined.

The National Principles for IP Management should be revised to provide clear guidelines for the negotiation of IP ownership in cases where more than one institution is involved.

• There are few forms of financial support for early-stage research commercialisation activities. The ARC specifically excludes support for attendance at international conferences, where contacts with industry partners might be established. The NHMRC has established a modest competitive industry development grant to support proof-of-concept research.

Research funding agencies should examine their support for research commercialisation and consider establishing significant competitive schemes to assist with the costs of pursuing research commercialisation.

• Research commercialisation success is largely driven by considerations of scale. While these attributes of scale are fairly readily available to the larger and research-intensive universities, the smaller and regional universities do not have this capacity. This regardless that they well may (and do) possess pockets of research expertise capable of generating valuable IP.

There would seem to be a need to encourage networking between smaller and regional universities to share their research commercialisation expertise. This might be a role for KCA and/or AIC and for case managers involved with local (eg BITS funded) incubators.

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