Universities are starters in the innovation ecosystem and as a starter, universities follow an ethical cycle that holds early-stage innovations to support education, research and teachings for social benefit. However, the participation in this innovation ecosystem requires patience and investment.
Many times universities face various economically challenging situations. They spend billions to provide superior education and research to the students. To support this, universities depend on student fee and funds which they receive from government/corporates. However, as the government and federal research organizations have been steadily cutting costs on the grants they provide to public universities for research processes, it becomes very important for the universities and other public research organizations to become self-sufficient and start exploring the ways to protect their research activities to further generate more revenue from their resources i.e. Patents through profitable licensing fees, royalties and stock holdings.
Problems that Universities face in IP Commercialization
A lot of universities are investing on protecting the intellectual property which is developed through the extensive research and development. However, it remains an unvarnished truth that the most of the protected IP remains underutilized and the universities are no exception.
Below mentioned are some of the reasons that act as a hurdle in commercializing the Intellectual property for the universities.
There are many facts that stand out, however, the major problem remains is the lack of the strategic planning and efforts for the commercialization of the Intellectual Property.
Solutions to commercialize IP – Roadmap for Universities
As noticed earlier , patent commercialization is a cryptic job and it requires diligent efforts to convert IP into value. There are many universities that have been able to utilize their IP efficiently. Thus, if universities strategize the IP commercialization process then it will be possible to generate revenue from IP.
We have listed down some of the ways that may be adopted by the Universities to generate Revenue out of their researches
Through Technology Transfer
Technology transfer is the process of evolving and then commercializing technologies by “passing over” the information or manufactured devices, materials or prototypes , by legal means, or through the delivery of services, or through direct sales.
Business sectors that receive commercialization rights to a technology usually pay the owner of the intellectual property (a university) license fees, royalty payments, and sometimes equity in the resulting venture.
Universities start with the technology transfer deals to generate revenue for their institutions and for funding their research programs.
University can set up a technology transfer office (TTO) that may act as a bridge between the industry and the academia, identify and evaluate the potential inventions for commercialization and coordinate licensing to the interested companies.
Nowadays, universities file a patent application on an invention only if it aspires to license the invention for commercial development. Transferring the intellectual property (IP) to the marketplace through market mechanisms (i.e., licensing) is rapidly emerging involving an equilibrium of risk and reward which includes following financial components:
l Reimbursement of Cost of university’s Patent for exclusive licenses.
l Allowing annual License maintenance fees.
l “Running Royalties” which have produced revenue for universities worth millions and even billions.
l Equity in a business by offering stock in the company to the university as a form of royalty under the license.
Potential of patent licensing could be understood easily by Cohen-Boyer patents (a biologically functional recombinant plasmid capable of selection and replication in a prokaryotic cell) that yielded approximately $255 Million for Stanford University, as the technology was licensed to 468 companies.
For licensing the protected intellectual property, universities can identify the companies that are operating in the same value chain as their patented invention/solution and may reach to such companies for licensing the invention for commercial development.
By Transferring Proprietary Rights
Another pathway to the commercialization is the assignment of patent which involves the sale and transfer of ownership of property rights in a given patent(s) and any applications for such patents by the assignor to the assignee. This is one-time payment method where the patent owner prefers to receive a lump sum price, at the time of the assignment of his/her property, rather than collecting royalties. By assigning, the patent owner shifts these risks of reduced royalties in the event of technical failure, regulatory failure, market failure and competing products, to the assignee.
For example, university research and technological development can make a commercial deal, and choose to sell the patents on that technology, instead of licensing the patents, thereby raising considerable capital to fund further research and development of other patents in the portfolio.
Through Joint ventures
With more and more companies and organizations entering into collaborative innovation joint venture with universities/research institutes, joint ownership of IP rights has become very common. Companies work in collaboration with universities to work with their developers, technology and design houses. Revenue generated by the collaborative arrangement and strategic alliance may be shared equally between the joint parties. This is helpful for the universities as they are provided with the funding’s from the organizations.
University Start-Ups & incubation
Because of commercialization, university researchers are keen to shift their researches from university laboratories to the business labs. The start-up company’s patent can be made available by a technology developer such as a university, individual or any research institute. Start-ups can be a subsidiary of the university, itself, built to carry on a commercial business, or it may be a venture capital fund created by the university to help institutions derived offshoot.
Last but not he least “Through Patent Enforcement”
It is way easier to claim that if someone uses the protected IP then the owner can file the lawsuit. However, in reality filing an infringement lawsuit may be too costly and may put an extra burden on the university. That’s why we have listed this option at the end of the list. Of-course, this option is not off the list but it should also not be considered as the first option. Universities should first try to negotiate with the infringer to take the license of the patent and if all options does not work, they may think about filing the lawsuit.
There has been many instances in the past where universities have been able to generate revenue through this option.
Apple losing jury trial in a patent case filed by the University of Wisconsin is one of the best case scenario. The jury determined Apple’s A7 processors, found in iPhones which uses the technology patented by the institution and for which Wisconsin University was awarded $234 million.
However, we would suggest that the validity of the patent and product infringement should be affirmed before proceeding with patent infringement case.
Just an added solution would be to do the market research and find out the companies that may be interested in your invention, talk to them, negotiate if possible and make your invention a part of the market value chain. If universities put their best efforts with the proper strategies commercialization will be a smother sailing.
We hope that these tips will help the universities and the research institutes in their pursuit of generating value from the IP, as that is the ultimate objective and reason behind investing in the extensive research & development.
So next time if a university encounters a reason to not apply for the IP protection believing that IP does not provide return value, we hope that they have this step-wise guide to break the stereotypes. This may just help them to take the first step. So isn’t that better than simply giving up? Definitely something to think about.
Author - Aastha Singhal