The role of the holding companies when the university commercialises intellectual property
This report presents a review of policies and action taken in Great Britain, the Netherlands, Finland and Denmark relating to the universities’ and their holding companies’ handling and commercialisation of researchers’ intellectual property. It also describes the ways in which some universities use their holding companies, or equivalent organisations, for these purposes.
Like Sweden, all the countries studied have in recent decades increased their efforts in the area of application and commercialisation of research findings. In the Netherlands, as in Sweden, this is one of the universities’ three main assignments and the government has set a target of 2.5% of the universities’ public funding being used for “valorisation” activities. In Great Britain, knowledge transfer from the universities to society affects the allocation of public funds. In the late 1990s, the government made a relatively large allocation of SEK 60 million over a two-year period in this regard to funds set up by either individual universities or consortia. This led to increased investment in patenting and an extensive build-up of capacity at the universities.
The survey has found that there are substantial differences between different holding companies as regards their control, scope and work with intellectual property. The governments’ demand for application has however contributed to several universities and holding companies being professionalised. This professionalisation has among other things meant new ways of working to be able to share in the EU’s investments in innovation, identify and protect potential patents, bring researchers, entrepreneurs and investors together, and develop research and innovation partnerships with other organisations. How early the holding companies are involved in commercialisation differs between different companies. In some cases, for example at TU Delft’s Valorisation Centre, the holding company is in charge of the whole chain from patent identification to divestment of patents or ownership shares in companies. The universities’ and the holding companies’ IT efforts in the area primarily concern making identification, evaluation, protection and matching of patents more efficient.
A point made in the Swedish debate is that the universities and their holding companies should develop portfolios where information about patents and licences (that are not used by the researcher him- or herself) is continuously collected. One benefit of such portfolios is that it would be possible to approach potential purchasers with more comprehensive offers. The portfolios would also be able to be used for evaluation and advising on innovations at the universities. This, however, is not something that the universities studied have instituted, their foremost argument being that if a recipient of a new patent is not found within a few months there is no great likelihood of doing so in the future. They also feel that it would be too expensive to justify large numbers of patents that no one wishes to purchase.
With the efforts also comes a debate on how the state can evaluate and control these activities and the study reveals a number of things to be considered. One aspect in this respect is that comparisons between universities can create incentives for application but that it is important that the comparisons take different universities’ prerequisites into account. If the government sets targets for how much of the public financing is to go to application, it is important to be clear about what is being referred to. Otherwise the targets risk ending up being no one’s responsibility, as is the case to some degree in the Netherlands. At the same time, considerable reflection is needed when the targets are formulated. A central aspect is to foster quality and long-term societal gains in control rather than quantity and short-term revenues for the universities. An important element in accomplishing this is how the holding companies’ task is defined. In Denmark, for example, it has been proposed that the universities’ yield requirement from the holding companies’ hiving-off activities should be replaced by a non-profit-making societal function.
It is often a challenge for the holding companies that they are active in many different fields, which makes it difficult to bring a clear focus to their portfolios. One solution to this problem is to make public funding market-complementary and to aim at public private co-investments. Two examples of this kind of funds, which have been relatively successful, are OSEM in Oxford and Life Science Fund Amsterdam. In those holding companies that have been studied and that have acted as seed investors, financing was relatively good since they have over time built up substantial funds through revenues from sales of licences and companies and service activities.
A debate is going on in Great Britain and Denmark, for example, about whether the rules for the universities’ sales and licensing of intellectual property should be controlled by the universities themselves or by the state. In Great Britain, and some other countries, a desire has been expressed for standardised regulatory frameworks that apply to all universities. The main argument has been that the universities’ different procedures for selling and licensing create an administrative burden for the companies, in turn creating an obstacle to transfer of technology. At the same time, the universities differ so much as regards resources and level of ambition that it is considered to be difficult to establish a central regulatory framework.
As is well known, one distinct difference compared to Sweden, however, is that the universities in the studied countries to a large extent own the rights to employed researchers’ intellectual property. This creates incentives for the universities to have active technology transfer offices and holding companies. An important success factor behind this model, however, is that there are clear regulatory frameworks for distributing revenue from sales. In the Netherlands, for example, distribution is such that if the holding companies sell ownership shares in the company or underlying licence rights, the researcher, the department and the holding company each receive one third of the revenues.
Finland is an interesting case since the country abolished the teacher exception in 2007. Today the country uses a model that can best be described as a hybrid between the Swedish teacher exception and the model where the universities own everything. Researchers in Finland are obliged to report new inventions to the university but the rules governing ownership duffer depending on whether the discovery was made within the framework of open research or contract research. The distinction has however proven to be blurred, which has led to difficulties in showing who owns the rights to intellectual property. Whether Finland should revert to the teacher exception or switch to a model where the universities own all rights is now being studied.
In summary, the studied universities’ handling, commercialisation and application of employees’ intellectual property have changed and been professionalised over the past few decades. This is a result of relatively comprehensive political initiatives that have both created financial incentives for the activities and contributed to competence development. This has meant that the universities’ holding companies have come to play an increasingly important role. The perhaps major challenge, that several countries are struggling to manage, is to steer the universities and their holding companies towards a handling of employees’ intellectual property that has a notably positive impact in society and not only contributes to the universities’ short-term goal attainment and revenues.