University Intellectual Property

A Source of Finance and Impact

Graham Richards

• Publisher: Harriman House
• Year: 2012
• ISBN:
  9780857192271
• Edition: 1
• Topic: Business
• Subtopic: Imprenditoria
• Index: Business

The traditional role of the university has been to teach and conduct original research, but this situation is changing. As governments judge universities on new criteria - including the 'impact' they have - and as universities are driven to search for finance from new sources, those that run universities are increasingly looking to exploit the intellectual property created by their researchers to help deliver this impact and income. How this should be done, and whether it should be done at all, is subject to much debate.The key issues are:- What constitutes intellectual property?- Do academics or universities own IP?- Does the commercialisation of IP impact academic freedom?- How can IP best be exploited and who should be financially rewarded when it is?- What assistance can governments and other bodies provide?This book investigates these issues. After a review of how the current situation came to be, the views and experiences of a range of experts are presented, including those of a former high court judge, a senior lawyer, a patent attorney and professionals involved in technology transfer. The contributors examine whether the roles of higher education institutions have changed, what academics and universities should be doing, and how technology transfer can be made more effective and efficient. To conclude, a provocative look at the ethics of the situation is presented.This insightful and thought-provoking book will help readers to understand more about an increasingly important aspect of academia and business.

1. Introduction

By Graham Richards

I am not a lawyer, but nonetheless I have had considerable experience of the exploitation of university intellectual property (IP) in some 50 years at Oxford University – where I chaired the very large Chemistry Department – and extended periods in California at Stanford University and at University of California, Berkeley. I was directly responsible for the creation of several spin-out companies from university research departments, have acted as a non-executive director or chairman of several more, and have been associated with perhaps another 50 companies created on the basis of university IP.

The current economic situation, where governments are unlikely to be able to fund universities to a level at which they would wish, makes it increasingly certain that universities will look to their intellectual property as a source of finance. The most important reasons for the existence of universities are to provide teaching and to perform original research, but this third leg of IP exploitation is certainly going to grow in importance.

This increasing pursuit of commercialisation of research need not undermine the other work that universities do. Professor G. H. Hardy of Trinity College, Cambridge may have toasted the Cambridge Mathematical Society as follows: ‘Here’s to pure mathematics. May it never be applied’, but his wish was in vain because there is no branch of science of which one can be sure that it will never have any practical application. As another wise man once said, ‘there are only two sorts of research: applied research and yet to be applied research’.

Indeed, the most successful and financially rewarding returns from the exploitation of intellectual property have in fact arisen from blue-sky research, so there is no reason for a change in emphasis towards exploitation [of intellectual property] to cause academics to modify their choices of research topic. They just need to be aware, as does their department and the central university, of the possibilities, pitfalls and mechanisms in the area of exploiting university IP. My experience has shown that as universities and their academics look to exploit the IP they have developed, they are going to come up against a number of problems. This is because the situation regarding the ownership of IP generated in universities is unclear in many instances and the system of rewards for academics and their students if the exploitation is successful is even less straightforward.

Part of this confusion is over patents and a lot of energy is usually expended in resolving disputes that arise in this area. However, there are other key areas too and if we are going to have sensible policies, preferably standardised across the sector, that lead to benefits for both institutions and individuals then copyright, trade marks, and even consulting and advising, should be included in government and university policy.

In this book I intend, with the help of experienced colleagues, to try to clarify the situation with regard to intellectual property and reward structures for those who create it. We also suggest what might be sensible modifications to the current practices so as to increase the value of returns and to achieve the fairness which most academics can endorse.

2. The Confused Situation

By Graham Richards

To begin this chapter, it may be helpful to give a brief account of my own involvement in this area over the 50 years I spent as an academic in Oxford. After this account I will describe the different forms of intellectual property that academics and universities are involved with and look at why the situation as it stands is confused; as will be seen, the status quo involves a plethora of varied policies and approaches. The views of others on these issues then follow in subsequent chapters.

Personal story

The British government of Harold Wilson, buoyed up by Wilson’s slogan of the white hot technological revolution, which he coined in an attempt to revitalise the UK economy, decreed that universities should create University and Industry Committees to foster the then not very active boundary between the two sectors.

In 1978 I became chairman of the committee, succeeding my entrepreneurial mathematical colleague Alan Tayler. There was very little happening in terms of interaction between universities and the commercial world at the time. Oxford’s rules prohibited academics from consulting on university-headed notepaper and as far as patents were concerned, the university stated that it neither owned nor sought to own intellectual property derived from work done in the university by its employees.

This attitude derived from the fact that Oxford was totally dominated by the avoidance of any risk to itself. This obsession in turn arose as the result of an infamously damaging case in the 1920s when an academic got the institution into an expensive mess as a result of fraudulent activity. This incident – the Owen case – is described in detail in a later chapter, but suffice it to say for now that so serious were the ramifications that Oxford and its sister university, Cambridge, were seeking to avoid any involvement with intellectual property.

So it was that one of my first acts as chairman of the University and Industry Committee was to take out insurance, very cheaply obtained, to cover the university against claims arising from academics doing consultancy. The old system probably would not have protected Oxford anyway.

The first modern spin-out and IP Group

When in the late 1980s the university did begin to claim ownership of intellectual property following a law change during Mrs Thatcher’s premiership, I started the first of the modern spin-out companies where the university had as of right some of the equity as a result of its contribution of IP. This was Oxford Molecular Ltd, founded in 1989. That company had an initial public offering (IPO) in 1994 before being sold in two parts in 2000. It is worth noting that the University benefitted to the tune of £10 million from that company.

When I became head of the Chemistry Department at Oxford in 1997, the big item in my in-tray was the building of a new research laboratory. This required raising some £64 million and this was achieved with a novel source of funding; the City of London company Beeson Gregory provided some £20 million up front in return for half of the university’s equity in spin-out companies created in the Chemistry Department for a period of 15 years, with a similar arrangement for licences. In the decade following the deal, set up in the year 2000, some 15 companies were formed of which five have gone public after successful IPOs. Both Beeson Gregory and Oxford have benefitted significantly from the arrangement.

Beeson Gregory, following a merger with Evolution, then went on to create a subsidiary to replay aspects of the deal with other universities. This separate company, initially named IP2IPO Ltd, later IP Group Plc, has partnerships with a dozen UK universities and has been responsible for the founding of some 70 companies, of which a dozen are now publicly owned following IPOs.

I was chairman of IP2IPO Plc for a time and am now senior non-executive director of IP Group, and in addition I am or have been a non-executive director of six university spin-out companies. I was also in large part responsible for the founding of Oxford University’s technology transfer office, Isis Innovation, and a director thereof for 20 years. This has given me a wide overview of the field of university IP development and commercialisation. In my work, I have seen that of the several forms of intellectual property it is the case of patents which has been most closely followed and so it is to these that I will now turn.

Patents

The Patents Act of 1977 in the UK placed the ownership of intellectual property generated by employees who were expected to produce patented work to their employer. In the case of industrial companies this is fairly straightforward: if you work for a pharmaceutical company in a research department, then developing new drugs is your job and your employer obviously expects to receive the rewards. Universities are less clear cut and accordingly the switch from individual academics owning the intellectual property arising from research in their laboratories to that ownership being vested in the employing university was not without contention. Is, for instance, an academic researcher expected to produce IP?

It may be hard to convince academics that the IP on work which they have done in their own research laboratory should belong to the university and that this is preferable for all concerned, but the latter part of this is in fact true, although perhaps not obvious at first sight. For example, if the individual is the owner, then he or she will have to pay all the patent and legal costs, whereas if the institution owns the IP then it will have to pay the expenses. Initial expenses are not large but once the international phase is reached these can become significant. A real danger of individual ownership is that patents are allowed to lapse, which is the worst of all possible scenarios as it means no ownership and alerting the rest of the world to the invention.

Most universities across the world now own the patent IP of their employees. What is much less universal is the situation with respect to the work done by students. If the uncertainty is not avoided then there are real problems when exploiting the research: a student could at some late stage turn up and claim to have done the work and give evidence in terms of joint authorship of publications. The prospect of this can be a severe impediment to financial backers.

Although it is best if the central institution owns all aspects of the IP and has mechanisms for technology transfer, it is equally important that all who contribute to developing the IP should have incentives and rewards. If exploitation is in the form of creating a spin-out company, then the responsible researchers should receive equity, the percentages being settled by negotiation, with the academics being reasonable and ideally having their own legal adviser.

If on the other hand the mechanism of exploitation is by licensing the IP to other companies then there needs to be a scale of remuneration dependent on the income. The Oxford system which I helped devise gives virtually all the early income to the researcher as an incentive to seeking patent protection, but then a sliding scale so that as the sums become larger the percentage going to the university increases. In the rare case where the invention brings in millions of pounds, then both the individuals and the institution will receive comparable amounts.

Copyright

If the situation with respect to patents is less than totally satisfactory, then the copyright situation is even more in need of clarification and change, although when this occurs it is certain to generate opposition, especially if the university has a share in or ownership of the copyright.

When a scientist working in a university laboratory discovers something which leads to a patent, it is now generally accepted that both the researcher and the employing university should share the rewards on an equitable basis. If, on the other hand, one of the colleagues of the inventive scientist spends all his or her time writing text books on the subject for which they are paid to teach and do research, then universally the royalties go wholly to the author. This does not seem fair because the sums of money can be quite considerable; there are academic authors who earn hundreds of thousands of pounds per year from writing standard texts. This is very much what academics should do, but it seems far from clear why synthesising a molecule of commercial value should lead to income sharing while writing books or articles should not. Why should universities own patent rights but not copyright?

Of course it is somewhat complicated by the fact that academics do not have set hours of work. The boundary between what is really part of one’s duties as a lecturer or professor and what is totally outside employment in a specific department is very fuzzy. However, if one takes the case of an academic historian, hired to cover a set period of history, who then writes books on this topic and makes magnificently remunerated television programmes, then it is hard to see why the employer should not derive some benefit.

A further level of complexity is now developing as a result of the internet and the use of IT by lecturers. Increasingly the contemporary student does not like lectures using traditional talk and chalk. Blackboards are even considered to provide a health and safety hazard. White boards and the provision of lecture notes on the web in the form of handouts are now expected. But who owns these lecture notes, the lecturer or the employing university? Some of these notes will be downloaded from the internet by lecturers at universities in other countries, either directly or via students who move on to teaching posts. Once more it is hard to see why there is any essential difference between this type of work and scientific research, given that the formal duties of the academic are to teach and to do research. If the university were to own the teaching materials then they can employ a mechanism whereby the content is protected and exploited to the mutual benefit of both author and employer.

Trade marks

Universities have often been very lax in protecting their names and symbols such as their crests. Oxford is a case in point as it failed to register the coat of arms of the university which had been in use for centuries and so had to develop a variant with a belt drawn around it, which was subsequently protected. The crest without the belt appears on tee-shirts and other items sold across the world, with no royalty on the proceeds due to the university.

An even more surprising omission was the fact that Oxford’s enormously successful publishing house, Oxford University Press, which dates from 1473, did not protect its name until the 1960s. At that time Robert Maxwell decided to publish an Oxford Dictionary of Spelling. The university took his company to court on the grounds that the book was passing itself off as being from the University Press. They lost. It was decided to appeal and fortunately for the university the case came up before the sparkling eyes of Lord Denning.

The corporate entity bringing the case was ‘The Chancellor, Masters and Scholars of the University of Oxford’. Denning observed that he was a plaintiff being both a Master, having the degree of MA, and a former scholar of the university, but neither side objected. The case of Maxwell’s company was that it was indeed based in Oxford so that the title of the work was accurate. Lord Denning observed that the defendants were located in the suburb of Headington and that the university would not object if the defendants’ work were called the Headington Dictionar...