To boost IP revenue, support what is already working

Universities typically generate much more income from industry contracts than from spinning out companies, says Calum Drummond

September 21, 2021
Australian dollars with calculator, pen and magnifier
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Australia’s mission to unlock more value from its university research commercialisation and IP management is a noble one. The nation has performed well below many other OECD countries in research translation for far too long and this needs to change.

Yet the homogeneously bleak picture of universities’ approach to research commercialisation painted by the likes of the government’s University Research Commercialisation Consultation Paper, published earlier this year, misrepresents the actual situation. More seriously, it risks discounting valuable lessons on what is already working in parts of a very heterogeneous university sector.

For example, the universities grouped in the Australian Technology Network, which include my own, have a major focus on industry engagement and research commercialisation, with researchers strongly encouraged and supported to work with industry. But it isn’t just about spinning out new companies.

New venture creation is usually a response either to a failure in the market to recognise an opportunity or a poor risk-reward profile for industry because of the relatively early stage of the R&D. Universities generally operate at the beginning of the research translation value chain – this is their role in the national innovation system.

But from a university perspective, too, it is generally a lower-risk approach to partner with an existing company to commercialise co-developed IP through that company. After all, existing firms generally have market intelligence built over many years. They also have integrated supply chains; in-house process and product development capability; proven business models; service delivery capability; distribution networks; and well-established marketing and sales channels. These all need to be developed in a new venture.

When I was a group executive at the Commonwealth Scientific and Industrial Research Organisation (CSIRO), the researchers in the business units I oversaw had generated about 40 per cent of the government agency’s patent portfolio – roughly 1,300 patents at the time. This portfolio, along with other non-patented know-how, was an example of background IP, defined as IP that has already been developed by an entity before a new research project commences. Having an option to access background IP if a planned research project is successful is often an attractive proposition for companies.

Research contracts generally include a description of the background IP that each of the collaborating organisations possess before a new project starts. Putting background and project-generated IP together, under appropriate, mutually beneficial contractual arrangements, can provide companies with a competitive advantage. The power of this formula needs to be recognised in any scheme aimed at boosting national prosperity.

My experience was that roughly 10 times more revenue was generated for CSIRO from direct contracted research, where background IP was involved, than from IP-associated licensing agreements or spin-out companies. Willingness to pay for CSIRO and university research that is targeted at business requirements is one measure of how industry values background IP and future research potential for value creation.

Yet while revenue from spin-outs and licensing are reported through the annual Survey of Commercialisation Outcomes from Public Research, reported by peak body Knowledge Commercialisation Australasia, I know of no specific reporting of research contracts that involve background IP. The magnitude of this very important end-use driven IP utilisation is therefore hidden to those outside individual research institutions.

As deputy vice-chancellor for research and innovation at RMIT, I have oversight of research translation, including IP management and research commercialisation. There is a similar use of background IP at RMIT, albeit on a smaller scale, as there is at CSIRO. Indeed, RMIT markedly exceeds CSIRO’s 10:1 ratio of direct industry contract revenue to licensing and new venture creation revenue streams.

Yet the fact that such figures are not externally available means that policymakers and programme developers may not appreciate the great importance of this revenue stream to growing Australia’s prosperity. Consequently, it risks being overlooked by the commercialisation and IP frameworks and schemes that they are currently developing for the university sector.

Any new government-backed frameworks and schemes should explicitly include mechanisms to support this use of background IP and pathways to research commercialisation with existing firms. Otherwise they may miss out on 90 per cent of the scope for growth.

Calum Drummond is deputy vice-chancellor for research and innovation and vice-president of RMIT University, Melbourne.

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