Transferring for commercialisation

17.12 Research commercialisation begins with the identification of new technology and an evaluation of its possible applications and commercial potential. Patents may be sought and, if obtained, the technology may be transferred to other researchers or industry for further development.^[9]

17.13 Chapter 16 noted the importance of patent protection in attracting commercial interest in developing genetic technologies.^[10] Consequently, as a result of government policy favouring commercialisation, organisations are now more inclined to patent the results of research rather than simply allowing them to be published and placed in the public domain.

17.14 As discussed in Chapter 11, since most research organisations claim ownership of intellectual property developed within their organisation, the capacity and the responsibility to obtain patent protection and develop or transfer their intellectual property lies with the organisation.

17.15 There is a broad range of approaches to transferring technology for commercialisation. These include research-industry linkages, creating spin-off companies to develop the technology, licensing-out and assignment. Each of these approaches is discussed below. The most appropriate approach will depend on the nature of the technology and the capacity of the organisation to develop it further.^[11]

17.16 Some difference of opinion was expressed in consultations about the capacity of universities and research organisations to commercialise research results effectively. Some suggested that universities and other research institutions are becoming better at commercialisation. It was also observed that research organisations are becoming more sophisticated in their approach to intellectual property and are often holding on to it longer, to add value and get better returns by licensing at a later stage.^[12] However, doubts were expressed about whether these organisations would develop the same level of skill and experience as industry.^[13]

17.17 The Department of Education, Science and Training’s 2002 report, Best Practice Processes for University Research Commercialisation (DEST Report), noted that some research-focused universities are developing a new approach that takes account of Australia’s strengths in basic research and lack of strong industry capability to translate innovation successfully into commercial success. This new approach features a more decentralised process of intellectual property identification and development; increased focus on growing start-ups; direct equity investment by universities; and selection and pursuit of strategic commercialisation areas.^[14]

17.18 There is also evidence that the nature of business–university interactions is undergoing a shift from ‘the traditional donor–recipient contracts’ to formalised joint projects between universities and businesses.^[15] The Australian Research Council (ARC) has suggested that this shift has resulted from changes in the business and economic environments that have made the process of developing new products for commercialisation more costly and specialised. These changes have meant that:

the concept of the individual inventor or research laboratory achieving commercial success on the basis of one activity, and without expert management, marketing and substantial ongoing financial support, is a misrepresentation of the nature of innovation. Innovation requires cooperation and collaboration within an organisation as well as with organisations external to it.^[16]

17.19 Transfer and commercialisation are also increasingly understood as two-way processes, rather than as a linear movement of technology from the research sector to industry. The research and industry sectors appear to be working more closely together to shape research objectives to fit economic objectives. This approach fosters research that is more readily exploitable by industry.^[17]

17.20 Despite these improvements, DEST stated in its March 2004 report, Review of Closer Collaboration Between Universities and Major Publicly Funded Research Agencies (DEST Collaboration Review), that ‘challenges remain in fostering science and innovation collaboration and linkages, especially between publicly funded research providers and industry’.^[18]

17.21 Similarly, the Australian Institute for Commercialisation (AIC) has commented that while Australia has improved markedly in commercialising publicly funded research, ‘there is considerable scope for further improvements to be made’.^[19]

Linkages

17.22 The ARC has noted that ‘successful commercialisation of university research requires a champion … a lot of hard work is involved in finding and developing the initial partner in the commercialisation of a new discovery’.^[20] Strong, well-developed linkages between research organisations and the industry sector facilitate identification of such ‘champions’.

17.23 Linkages can take the form of relationships between individual organisations and commercial bodies, personal networks between researchers and entrepreneurs, or more formalised and broad-reaching relationships through overarching arrangements supported by organisations, industry or government.

17.24 An example of the latter type of relationship is the New South Wales project, BioLink, a business initiative designed to improve commercialisation of medical research. BioLink’s stated aim is to ‘complete the development chain by establishing [a] platform for a research–industry–government partnership providing world’s best practice business development service for NSW medical researchers’.^[21]

17.25 There is a range of similar programs and initiatives across Australia. These include networking forums and linkage initiatives. A study by Dr Dianne Nicol and Jane Nielsen (Nicol–Nielsen Study) shows that ‘one of the dominant features of the biotechnology industry in Australia is widespread alliance activity between the public and private sectors’.^[22] The ARC has commented that ‘the traditional boundaries between education and commercialisation, basic research and applied research, and universities and industry are all blurring’.^[23]

17.26 Government policy has also led to the development of Cooperative Research Centres (CRCs) and other linkage programs between the public and private sector. A CRC for the Discovery of Genes for Common Human Diseases was established in 1997, linking the Murdoch Childrens Research Institute, the Walter and Eliza Hall Institute of Medical Research (WEHI), the Menzies Centre for Population Health Research and a number of other research organisations, with Cerylid Biosciences Ltd as an industry partner.

Licensing-out

17.27 According to the DEST Report, across the university sector generally, licensing-out patented technology to established companies is ‘the most common form of research commercialisation and generates by far the most revenue’ for universities.^[24]

17.28 However, the Nicol–Nielsen Study reported a low level of licensing-out activity in relation to gene patents. While 19 of the 23 responding research institutions indicated they owned biotechnology patents, only 12 reported licensing-out patented genetic technologies.^[25] Nicol and Nielsen suggest that this level of licensing-out activity can be explained in part by the growth phase currently being experienced by the industry. A number of respondents reported that they were in the process of finding parties to whom they could license, while institutions may still be developing technology to a point where it is capable of being licensed. Nicol and Nielsen also suggest that institutions face difficulties in finding parties to license to, with some respondents reporting that it was challenging to attract commercial interest.^[26]

17.29 The DEST Collaboration Review also noted that: ‘Licensing payments and royalties are not a significant source of revenue for the university sector … However, licensing is viewed as the simplest and lowest risk vehicle for commercialisation by universities.’^[27]

Assignment

17.30 Assignment of gene patents is generally not the preferred approach to technology transfer by patent holders. This may be because patent owners do not wish to lose all control of the technology and because assignment will reduce their patent portfolio. Conversely, industry recipients of technology may prefer assignment because it involves complete transfer of all rights.^[28]

Spin-off companies

17.31 Research organisations create spin-off companies as a means of holding and developing patented technology, generally because of a lack of industry receptors or because large returns are expected from developing the technology. Spin-off companies are also thought to ‘contribute to innovation, growth, employment and revenues’ while ‘the prospects of winning big make spin-offs an attractive gamble’.^[29]

17.32 According to the DEST Collaboration Review, university spin-off companies are often established out of necessity because of a lack of companies seeking to develop university generated intellectual property in Australia.^[30]

17.33 Spin-off companies may take one of a number of forms. Research organisations may establish a new company to develop technology arising out of its research activities or may move technology into a company already established by the organisation for the purpose of value-adding and subsequent transfer. In other cases, staff or former staff of the organisation may establish their own company if ownership of the technology has been assigned to them.

17.34 Research organisations may favour establishing spin-off companies over other approaches to technology transfer because they are capable of generating revenues for the organisation if it retains a share in the company. With this in mind, organisations often hold an equity interest.

17.35 Kelvin Hopper and Lyndal Thorburn have commented that ‘the continued fast growth in start-ups is essential to capture the public sector research outputs and ensure there is a pipeline for the industry as a whole’.^[31] In consultations, UniQuest emphasised that spin-off companies are more effective than licensing for moving technology out of universities and into industry.^[32] Establishing spin-off companies is also a particularly important mechanism for transfer in Australia due to the lack of industry receptors for biotechnology innovations coming out of the public research sector.^[33] Despite this, smaller organisations appear to prefer licensing to establishing spin-off companies.^[34]

17.36 A large proportion of Australian biotechnology companies were established as spin-offs from universities and other research organisations and the rate of establishing spin-off companies is increasing. Figures from one survey show that universities and CRCs established 38 spin-off companies in 2000, a 40% increase on the previous year.^[35] However, despite this growth in the number of spin-offs, such companies are declining as a proportion of the biotechnology sector as a whole. According to the 2002 Bioindustry Review, in 2000–01 these companies made up 55% of the biotechnology sector in Australia, dropping to 41% in the following year.^[36]

17.37 Although spin-off companies may be effective in facilitating technology transfer, they may not always be the best mechanism for generating returns for the research organisation. The DEST Report stated that ‘while a great deal of attention has been directed to spin-offs at least partly driven by a small number of spectacular successes, the major return to universities remains through licensing to well-established firms’.^[37]

17.38 Spin-off companies established around one patent or product face a high failure rate, as the company stands or falls on the success of that one product. If the company fails, the organisation that generated the technology will likely lose all control of it as the patent will be sold off during liquidation.^[38] Spin-off companies are often staffed by researchers, as they lack the funds to employ professional managers. There is consequently often a lack of commercial expertise within the company.

Other mechanisms

17.39 Technology also moves between research organisations and industry through other mechanisms. These include joint industry–organisation research projects, research contracts, public–private sector partnerships, shared infrastructure and the movement of personnel.^[39]