1 August 2023

How to help scientists turn inventions into businesses


Universities are an important source of inventions and scientific breakthroughs, especially in the UK. But for us to benefit from them, those academic breakthroughs need to be turned into the useful goods and services. That can happen in a passive way, with inventors simply leaving it to others to apply their ideas, but increasingly researchers have been trying to commercialise their own ideas, licensing the intellectual property they create to companies, and even establishing entirely new ‘spin-out’ companies based on their research.

new report, published this week by The Entrepreneurs Network think tank, looks into how well universities have been supporting spin-outs, and whether more could be done to ensure that they flourish. We are not alone in this endeavour – in March, the Chancellor announced a review of his own on the question of how best to maximise the potential of entrepreneurial researchers in British universities. The sense we are falling short is widespread.

In the UK system, individual researchers do not own the patents to their inventions, or the copyright to their works. This intellectual property is instead controlled by the universities that employ or educate them. As a result, most universities over the last few decades have set up American-style Technology Transfer Offices (TTOs) – organisations responsible for identifying and commercialising the intellectual property that their researchers create.

In theory, TTOs are there to filter, refine, and package the inventions of researchers for the world of private enterprise. They can draw upon industry connections to identify potential customers or investors, and take on much of the administrative burden of negotiating the fees and terms for licensing inventions. In exchange, they and the university that created them will take a cut of the fees or a stake in the spin-out companies they help to create.

But TTOs face severe resource constraints. They are generally loss-making, do not have many staff, and often lack the specialist connections or skills to properly support all of the many research fields that a typical university covers. A TTO might be great at supporting AI-researchers, for example, but fall down when it comes to helping those working in life sciences.

This widespread loss-making inevitably and unsurprisingly leads to short-termism. Evidence abounds of TTOs demanding stiflingly large equity stakes from potential university spin-outs, and often charging licensing fees to their own spin-outs rather than prioritising their growth.

TTOs frequently, in effect, treat the creation of a spinout as the creation of a new licensee. After all, a large equity sale from a successful spinout is a far more distant and uncertain prospect than the certainty of cash in hand from charging licensing fees. The big concern is that TTOs are often killing the geese that lay the golden eggs. Some dissatisfied spin-out founders even question whether TTOs add much at all to the success of university spinouts.

There are many ways these problems might be solved, from increasing funding for TTOs to forcing them to take less onerous equity stakes. But at root, many of the problems stem from a monolithic, one-size-fits-all approach to spreading the innovations of university researchers – one that those researchers generally have no option but to use, because it is the universities that own their intellectual property.

The obvious alternative is for researchers to instead have control of their own intellectual property, giving them the ability to decide how best to use it: to release it to the world free of charge, or attempt to commercialise it independently, or use their own pre-existing business contacts (which is common among serial academic entrepreneurs), or rely on an accelerator for support, or perhaps even use a TTO of a university other than their own that is better-suited to their specialisation, or which has more resources at its disposal. There are many potential paths for an innovation to become widespread, not all of which involve using TTOs. They certainly have a place in commercialising university innovations, but there is little justification for requiring that they be involved.

The alternative of researchers owning their own intellectual property – an approach generally referred to as ‘Professor’s Privilege’ – is not just a theoretical ideal. Indeed, we have plenty of evidence from a number of EU countries in the 2000s that made the switch away from researcher ownership towards university ownership, and which then saw significant declines in the commercialisation of university research. Germany saw a dramatic 29% drop in patenting, as well as a decrease in the quality of the university research being patented. In Finland the decline in patents was even worse, despite government funding for research and development increasing at the same time. And in Norway the number of university patents and spin-outs halved, with those remaining spin-outs also seeing far less success. The trend in Denmark was much the same.

At the same time, one of the few countries to keep to a system of researcher ownership – Sweden – has flourished. Its rates of academic entrepreneurship seem to be higher than in the US, with its spin-outs less likely to suffer commercial failure.

If we are serious about supporting UK university spin-outs, we should learn from what has happened abroad and shift towards a system of researchers controlling their own intellectual property, giving them the choice of how to best spread their ideas, whether they wish to reach out to a TTO or not. This is not an argument against the existence of TTOs – far from it. They would, and should, still have a role in supporting the commercialisation of university research. But there is little justification for making them the preferred and sometimes only option. The overwhelming evidence from other countries is that we should give university inventors, scientists and would-be entrepreneurs the choice.

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Anton Howes is the Head of Innovation Research at The Entrepreneurs Network.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.