Economics & Strategy Group
Foundation for Research Science & Technology
Protecting and Managing Intellectual Property:
Patenting Decisions of
Publicly Funded Research Providers
David Webber
Economics & Strategy Group
Final Report
25 August 2003
Table of Contents
Executive Summary 4
Main Report 10
Section1: Background and Objectives for the Evaluation 10
1.1. Background 10
1.2. Evaluation Objectives 10
1.3. Evaluation Process and Report Structure 11
1.4. An Evaluation Framework 12
Section 2: Literature Review: A Summary of Relevant Issues and Experience 15
2.1. Coverage of the Issues 15
2.2. Patenting Within Models of Innovation 15
2.3. Number and Quality of Patents 16
2.4. Patenting Behaviour 16
2.5. Institutional Factors 17
Section 3: IP Strategies and Patenting Decisions: Survey Results 18
3.1. The Survey Group 18
3.2. Key Results 19
Section 4: Emerging Themes 24
4.1. Provider Attitudes to Creating and Protecting IP 24
4.2. The Benefits of Patenting 25
4.3. Constraints on Patenting 26
4.4. Patenting Practices Amongst Research Providers 26
4.5. The Quality of Recent Provider Patents 28
4.6. Organisational Strategies for Commercialising IP 28
4.7. Interpreting Patent Statistics 30
4.8. FRST Funding and Assessment Policies 31
4.9. The IP Policy Environment 32
Section 5: Policy Implications 33
5.1. Patent Data and Innovation System Performance 33
5.2. Patent Statistics as an Indicator of Provider Capability and Performance 33
5.3. The Consortium Model for Research Funding 34
5.4. Funding and Incentives for Proof of Concept Investment 34
5.5. Raising the Awareness of Researchers on IP Issues 35
5.6. Organisational Structure and Governance 36
Bibliography 39
Attachments
A. Patenting: A Layperson’s Guide to Terms and Procedures 40
B. Survey Questionnaire 45
Acknowledgments
The author is grateful for the time and effort that was taken by the staff of the research organisations and others who contributed to this evaluation. Particular acknowledgment is made of the contribution of Don Killick of IRL in helping us to understand the real “nuts and bolts” of the patenting process.
The author also appreciates the advice and support of FRST staff, especially David Bartle in the design and conduct of this evaluation and Peter Morten’s helpful comments on an initial draft. Special acknowledgment is also made of the highly efficient assistance of Amanda Gilbertson in conducting and analysing the survey of research providers and in preparing the layperson’s guide to patenting terms and procedures (Attachment A).
Any errors and omissions of course remain the sole responsibility of the author.
David Webber
Economics & Strategy Group
Wellington
Protecting and Managing Intellectual Property:
Patenting Decisions of Publicly Funded Research Providers
Economics & Strategy Group
Executive Summary
Purpose of the study
This evaluation of patenting behaviour amongst research providers was undertaken at the request of the Foundation for Research Science & Technology (FRST). The evaluation had three main objectives:
1. to learn as much as possible about how research providers manage and commercialise intellectual property (IP), especially patents;
2. to assess the implications of increasing numbers of patent applications by research providers in recent years in terms of FRST’s monitoring and evaluation of innovation data; and
3. to consider these two issues in terms of the effectiveness of government policies for research funding with a view to improving the delivery of funding policies and hence the performance of New Zealand’s innovation system.
Design of the Evaluation
The evaluation was based around a survey of 14 research providers: seven Crown Research Institutes (CRIs), five universities and two industry research organisations. The evaluation also comprised a brief review of domestic and international literature on IP protection and management issues and interviews with staff from the research institutions and others involved in IP management and protection in New Zealand.
Analysis and Presentation of Results
The main results of the survey are presented in this report. For reasons of confidentiality, the comments and responses of providers have been summarised and are not attributed to the respective organisations. Analysis of confidential data received from each organisation on its patenting activities in recent years also underpins the findings and conclusions in this report.
Main Findings
The following main findings contribute to the “learning” objective of this evaluation:
1. Understanding of the importance of IP is improving
Research providers are developing a much-increased awareness of the potential value of IP and the relative advantages of the various forms of IP protection. FRST’s requirements for providers to have statements of organisational IP policy have helped sharpen this focus. However, the quality of these IP policies is highly variable and in several cases they do not provide an effective framework for IP management. This does not necessarily mean that IP issues are poorly managed in these organisations, but their policy statements could be easily and substantially improved, if only by referring to the better examples.
Understanding of the commercial importance of IP, and therefore protection issues, is still quite limited in some organisations. Moreover, there is uncertainty, and some resistance, around the protection of valuable IP as opposed to disseminating the fruits of research. A “corporate approach” to IP ownership and protection is sometimes viewed as being in conflict with the wider purposes of the organisation, especially for some universities and faculties. These factors impede the creation and improved management of commercially valuable IP.
2. There is broad understanding of the benefits of patenting
Research providers understand that it is what you do with a patent that matters. Responses to the survey indicate that IP/commercial managers in these organisations perceive a wide range of potential benefits from patents, both direct and indirect. On the whole however, direct financial gains – for example from licensing - have been relatively small and only a few providers have organisational structures and expertise needed to support a fully commercial approach to the assessment, protection and commercial exploitation of patentable IP.
3. Most providers face significant constraints in pursuing patents
Research organisations face real constraints in pursuing patent protection, primarily in terms of the financial costs and the demands on staff time. Also, smaller organisations have limited (probably insufficient) expertise and knowledge in this area. A consequence of these factors is that patent protection is not sought for a considerable amount of suitable and potentially valuable IP in these organisations. The question of “organisational purpose” often arises as a negative factor when assessing the cost-benefit trade-offs involved in patenting, especially for universities.
4. “Patenting strategies” are well-developed in only a small number of organisations
Most providers pursue patents on an ad hoc basis – i.e. as various research programmes generate potentially patentable IP. However, a small number of providers are taking a more strategic approach. This mostly involves building “families” of patents around particular areas of protected IP and expertise (technology platforms). The value of this approach is that it enables the organisation to build stronger, more flexible and potentially more profitable commercial positions with the private sector, including other research organisations. There is a need to broaden the understanding of other providers within the innovation system of the methods and advantages behind this approach, including how to apply it within their respective fields.
Several providers note the difficulties they face in committing the time and resources to an effective patenting strategy. This often requires a “champion” or at least a small number of dedicated and commercially-oriented staff to lead the process. An effective patenting strategy is also certain to involve foregoing publication opportunities for a considerable period of time –something which may count against the organisation in terms of other funding and staff performance criteria. New Zealand experience supports conclusions in the Australian literature that “scale” is critical to the on-going capacity of the organisation to design and pursue a patenting strategy.
5. Mixed quality of recent provider patents
Measured in terms of direct financial income, the quality of patents reported by the public providers in this survey might be considered to be relatively “disappointing”. However, the task of comparing the “quality” of patents arising from Government funding in recent years with previous periods is fraught with difficulty.
A good proxy for this comparison is likely to be changes in the quality of decision-making processes within the provider organisations. On this basis, the evaluation supports the conclusion that most (but not all) providers are becoming savvier about protecting commercially valuable IP and this should have positive implications for the quality of patent decisions.
6. Many stumbling blocks on the road to commercialisation
Several providers have established comprehensive and sophisticated procedures for managing their IP. However, the step from laboratory to market is invariably a difficult one and most providers appear to lack adequate resources and expertise in this phase. For CRIs in particular, relations with the private sector investors remain problematic. The private sector’s desire for “clean ownership” of IP is often a major stumbling block in this regard. Relations between private firms and publicly funded research providers in New Zealand are sometimes adversely affected by conflicts over IP and this is impeding greater commercialisation of research.
Some CRIs and universities have established, with mixed success so far, separate commercial entities for protecting and managing IP and for finding and negotiating with commercial partners. There is a need to disseminate information – from both local and international sources – concerning “good practices” and success factors in these areas. Scale, business expertise, financial resources and proximity to relevant and financially capable private sector investors are key factors in setting up these units successfully.
The research organisations with effective commercialisation strategies tend to be those whose governance structures and objectives are fully committed to the commercialisation of research. There are unresolved ownership issues for the Government with regard to both universities and CRIs on this issue.
7. Patenting data is mostly a poor indicator of innovation, capability and research performance
Patent applications have increased amongst most publicly funded research providers in recent years, though apart from two or three organisations the overall levels are still quite low. However, the international literature and the data gathered in this evaluation suggest that patent numbers should not be used to assess the effectiveness of research funding policies. They should also not be used to assess the performance or capability of individual researchers or organisations. This finding supports a conclusion from a parallel evaluation conducted for FRST focusing on private sector IP protection and management decisions. That study also concluded that patent numbers are easily over-stated as a measure of innovation system performance.
There are a number of reasons why patent data provides a poor indicator for these purposes. The key factors are the time lags, the highly uncertain commercial value of many patents, a propensity for some researchers to “game” around patent applications in applying for research funding and a tendency amongst some providers for FRST funding to be used to build underlying capacity, rather than specific patentable IP.
The analysis also suggests that FRST should exercise considerable care and flexibility when setting patent applications as a milestone for research accountability as this may compromise a more effective commercialisation strategy.
8. FRST funding policies are generally on track
Although it can be difficult to isolate the specific impact of FRST policies and funding decisions on the actions and achievements of providers, this evaluation finds support for most of FRST’s current interventions. Recognition and awareness of IP management issues and the importance of effective commercialisation strategies are major examples.
Concerns were expressed, however, that FRST’s consortium-based funding policies can exacerbate IP ownership conflicts. More work is required to understand and help improve commercial relationships between providers and the private sector, especially around IP ownership and risk sharing. Much more dissemination of good practices in patenting and commercialisation is also desirable.
Nonetheless, consideration needs to be given to alternative funding strategies that tackle the IP ownership problems specifically arising from institutional and governance structures and objectives. This study proposes a “self-selection” approach amongst research providers in terms of IP ownership conditionality (see below).
9. The IP environment needs careful nurturing
No particular problems were cited with the broader legal environment for IP management in New Zealand. However, a small number of providers noted the importance for New Zealand firms in maintaining a low-cost, highly efficient and highly reputable patenting regime. They argued that attempts to weaken this regime to accommodate selective commercial interests, especially in the pharmaceuticals sector, should be strongly resisted.
Policy Implications and Recommendations
The above findings give rise to the following (summarised) policy implications and recommendations in relation to the second and third main objectives of the study:
The ”patent monitoring and evaluation” objective:
1. Patent statistics must be used with considerable care when attempting to interpret innovation and commercialisation trends. Specifically, this evaluation suggests that:
· there is a general correlation between patent statistics and innovation over time, but the relationship is complex, inconsistent and subject to significant time lags,
· patenting behaviour differs frequently between CRIs and university researchers (and private inventors), thereby providing an unreliable basis for comparisons or common policy development,
· as a result, information on numbers of patents should not be considered a reliable basis on which to assess or report the impact of public funding policies on innovation at an aggregate level,
· FRST should encourage providers to base their decisions to patent (or use other methods of IP protection) on the basis of an optimal commercialisation strategy; this necessarily implies that patent data will generally be an unreliable indicator on which to base the assessment and comparison of research capabilities or the commercial potential of individual research proposals.
2. Despite these problems, patent data should continue to be collected from providers as a component of FRST’s monitoring and evaluation regime. Information on patenting activity, in a form similar to that collected for this survey, could be requested annually from research providers as a basis for identifying and discussing research commercialisation strategies and opportunities.