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Commercialization of IP In Canadian Universities: Barely Better Than Break Even

By Michael Geist

Last week, Statistics Canada released its latest report on the commercialization of intellectual property in Canadian universities.  Canada spends billions of public dollars on research funding each year and the government has been increasingly focused on how best to commercialize the results.  While there are several possible approaches to doing this, the government and some universities have been focused on building patent and IP portfolios as part of a conventional commercialization strategy.  The alternative could be an open access approach - encourage (or require) much of the intellectual property to be made broadly available under open licences so that multiple organizations could add value and find ways to commercialize.  The universities might generate less income but would better justify the public investment in research by providing the engine for larger economic benefits.

Which approach is better?  The full commercialization approach has been tried in the U.S. with legislation known as Bayh-Dole and studies (here and here) have found that patents to universities have increased, but the increase has been accompanied by harm to the public domain of science and relatively small gains in income.

The Canadian Science and Technology Strategy similarly places its faith in commercialization through IP portfolios and licencing, yet the Statscan data suggests that this has also been ineffective. 

The latest report is based on survey data from 2008 which finds that the total IP income (primarily from licencing) at reporting Canadian universities was $53.2 million. The cost of generating this income?  The reporting institutions employed 321 full-time employees in IP management for a cost of $51.1 million.  In other words, after these direct costs, the total surplus for all Canadian universities was $2.1 million.  The average income per university from IP was only $425,000.  Patent applications and patents issued were actually down in the reporting institutions and there were less than two-dozen spin-off companies reported by the universities.

While few would suggest that there is no value in the IP commercialization strategy for universities - there is surely a role for it - the emphasis on this approach as the optimal method of benefiting from billions in public funding for research has consistently failed.  Rather, an effective commercialization strategy might recognize that the commercialization is better suited outside the university with funded research the engine for new innovation that is openly available to entrepreneurs without licencing barriers.  The public pays for the basic research and might ultimately enjoy far more benefits than the current break-even approach by having more open access to research results.

Full post as published by Michael Geist on August 31, 2010 (boomark / email).