The idea that universities should take more aggressive patent positions became institutionalized through the passage of the Bayh-Dole Act in the United States in 1980. The Canadian government and the Association of Universities and Colleges of Canada (now Universities Canada) enshrined this policy through their Framework of Agreed Principles on Federally Funded University Research in 2002. In return for greater federal investments in institutions of higher education, universities and colleges agreed to a “tripling of commercialization performance” by 2010. The focus was on patenting and licensing, as evidenced by the definition of commercialization performance as “the sum of income from intellectual property, cash dividends received by institutions and equity holdings, options and warrants cashed in by institutions, as measured by Statistics Canada.”

Despite the promise of tripling commercialization revenue, total commercialization revenues only rose from $52.5 million in 2001 to $67.4 million in 2009, or roughly 28 percent over the period. During the same period, however, expenditures almost doubled, from $28.5 million to $56.6 million. The increase in cost seems largely due to greater expenditures on personnel and the filing of more patent applications per protected invention. The result: net revenues actually fell during the period, from approximately $24 million to $10.7 million.

While there are certainly indirect benefits from university technology transfer offices (for example, through spin-offs), the overall picture is underwhelming. Rather than seeding the growth of a large Canadian technology firm that would bring in revenue and be controlled in Canada, the Canadian innovation ecosystem faces higher expenditures, a crowding of the patent space and slow translation of ideas into innovation. The over-application for patents is particularly worrisome: while the number of patents actually granted to universities remained steady during the period, the number of applications rose by 70 percent, meaning that much of the extra expenditure was wasted.

The current model of technology transfer — in which researchers disclose inventions to the technology transfer office, which patents the most promising inventions and then licenses them to firms or creates a spin-off — has not served Canada well. There are too many gaps and points of political pressure, as well as a lack of market insights, that prevent it from working. First, researchers often completely avoid technology transfer offices. A Swedish study found that two-thirds of all university research patent transfers to firms circumvented those offices. Second, technology transfer officers informally report that they patent not the best invention but the one with the squeakiest wheels: a professor threatens the officers that if those officers do not pursue a patent, the professor will complain to senior academic administrators. Thus, politics, rather than good management, leads to patenting decisions. Third, as already noted, universities seek patents too early, and as a result, firms are not willing to pay the university’s demands for revenue.

Reconceiving the Role of Universities in the Innovation System

Rather than perpetuate a failed model, it is time to reconceive the role of universities and colleges within Canada’s innovation ecosystem. It would be useful to begin by focusing on what universities and colleges do well: creating knowledge, passing on knowledge and bringing actors from different spheres together. Rather than create silos of knowledge through patents, universities and colleges can use their convening power and academic incentive systems to create knowledge that flows quickly to those who can best put it to use.

As Paul David argues in a 2003 article, universities and colleges ought to focus on developing, enlarging and circulating knowledge among a much larger group. Sharing knowledge increases quality, speeds validation and reduces duplication. It also reduces firm risk by identifying fertile ground that firms can till.

In contrast, university patenting leads to delays due to protracted and difficult negotiations: “The transfer of technology through the vehicle of licensing intellectual property is, in the case of process technologies, far more subject to tensions and deficiencies arising from the absence of complete alignment in the interest of the involved individuals and organizations,” David writes. Patenting comes in later, when a firm reduces an idea to a particular product or service, leaving room to other firms to do the same.

Despite fears of free-riding, the reality (as David notes) is that most knowledge is tacit, meaning that others can only realistically access it through collaboration. Collaboration is accomplished through not only joint research projects, but also the training and hiring of graduate students and post-doctoral fellows.

Refocusing universities and colleges on knowledge creation and developing collaborations through which to share (predominantly tacit) knowledge will position firms to not only understand ideas but also to quickly develop products and services around them.

Open Science Model of University Engagement

David coined the term “open science” to capture his preferred model of university engagement in science and innovation. He defined open science as an institutional “alternative to the intellectual property approach” of controlling access to scientific knowledge. This approach relies on the academic rewards system, rather than the market, to generate knowledge. The result is higher quality of the knowledge and fewer restrictions on the use of that knowledge. In other words, open science involves the free sharing of research outputs (open access) and of data (open data) without restrictions imposed by IP rights. Researchers push the limits of knowledge not because of patent incentives but because of academic ones, such as promotion and obtaining research grants.

Obtaining IP too early or too broadly risks impairing both science and innovation. As David observes: “Considered at the macro-level, open science and commercially oriented research and development (R&D) based on proprietary information constitute complementary sub-systems. The public policy problem, consequently, is to keep the two sub-systems in proper balance by public funding of open science research, and by checking excessive incursions of claims to private property rights over material that would otherwise remain in the public domain of scientific data and information.”

To reverse the last 40 years of failure, universities and colleges need to structure their relations with industry — and each other — around collaborations rather than IP. Removing IP from the equation not only reduces out-of-pocket expenses in personnel and patent applications, but also greatly improves the circulation of knowledge to firms and other researchers who can make best use of it. Because so much of the knowledge the universities produce is tacit, participating firms gain great advantage through their participation in these collaborations. Removing barriers related to IP also facilitates moving students and fellows between the university and the firm: students can freely publish their findings (and even their electronic notebooks) without restriction.