Managing the intellectual property guide

8/14/2019 Managing the intellectual property guide

http://slidepdf.com/reader/full/managing-the-intellectual-property-guide 1/9614In Higher Education

A Guide to Strategic Decision-Making

in Universities

Intellectual

MANAGING

PropertyIntellectual

MANAGING

Property

A Guide to Strategic Decision-Making

in Universities

The GuideThe Guide


http://slidepdf.com/reader/full/managing-the-intellectual-property-guide 2/9615 Intellectual Property

Contents1 Why is IP management important? 16

1.1 The benefits 19

1.2 The need for strategic management 21

1.3 Strategic checklist 29

2 Financial expectations and budget management 34

2.1 Risk and returns 35

2.2 Handling uncertainty over expected costs and returns 362.3 What are realistic expectations? 37

2.4 Setting Budgets 39

3 Ownership of IP and negotiations with sponsors 44

3.1 Ownership and control 45

3.2 Negotiating with research sponsors 49

4 Incentives 60

4.1 To whom should incentives apply? 61

4.2 How should incentives be applied? 65

4.3 Relationship to other university policies 69

5 IP management functions 70

5.1 The responsibilities of the IP management office 71

5.2 The IP office: location and structure 73

5.3 The relationship between the IP office and other departments and research groups 76

5.4 Should notification of inventions be compulsory? 76

5.5 Some complexities in IP management 77

6 Implementation: working with others 82

6.1 Collaboration between universities to manage IP 83

6.2 Working with other external organisations 89

7 Monitoring and Evaluation 947.1 The monitoring and evaluation framework 95

7.2 Interpreting performance indicators and the impact of uncertainty of time horizons 96

7.3 Using input measures and ratios 97

7.4 Measures of internal process performance in IP management 98

7.5 Selecting suitable performance indicators 99

Annex A: Provenance of the Guide i

Annex B: Glossary iv

Annex C: AUTM performance measures v


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1. Why is IP

management important?

1 Why is IP management important? 16

1.1 The benefits 19

1.1.1 Effective knowledge transfer 191.1.2 Using others’ IP 19

1.1.3 Income 20

1.1.4 Staff recruitment and retention 20

1.1.5 Other benefits 21

1.2 The need for strategic management 21

1.2.1 IP issues are pervasive 21

1.2.2 IP management and other means of knowledge transfer 24

1.2.3 Key policy overlaps 24

1.2.4 Preservation of missions 25

1.2.5 Conflicts of interest 27

1.3 Strategic checklist 29

16In Higher Education



Intellectual Property, often known as IP, allows

people to own their creativity and innovation in the

same way that they can own physical property.

The owner of IP can control and be rewarded for

its use, and this encourages further innovation and

creativity to the benefit of us all.

In some cases IP gives rise to protection for ideas but

in other areas there will have to be more elaboration of

an idea before protection can arise. It will often not be

possible to protect IP and gain IP rights (or IPRs)

unless they have been applied for and granted, but

some IP protection such as copyright arises

automatically, without any registration, as soon as

there is a record in some form of what has been

created.

The four main types of IP are:

• patents for inventions - new and improved

products and processes that are capable of

industrial application

• trade marks for brand identity - of goods and

services allowing distinctions to be made

between different traders

• designs for product appearance - of the whole

or a part of a product resulting from the

features of, the lines, contours, colours, shape,

texture and/or materials of the product itself

and/or its ornamentation

• copyright for material - literary and artistic

material, music, films, sound recordings and

broadcasts, including software and multimedia

However, IP is much broader than this extending toconfidentiality (or trade secrets), plant varieties,

performers rights and so on.

What is IP?

1. Why is IPmanagement important?



IP management is of strategic importance for two

sets of reasons:

• universities can derive significant benefits from

an effectively managed IP portfolio

• effective management requires IP policies and

activities which need to relate to many other

university policies.


ACTIVITY

Using others’ research papers, publications, etc ✓ ✓

Research information

Preparing and collating research or experimental results ✓ ✓

Publishing or presenting research, academic or technical papers ✓ ✓ ✓ ✓

Industrial design projects ✓ ✓ ✓ ✓

Contract research ✓ ✓ ✓ ✓

Consultancy projects ✓ ✓ ✓ ✓ ✓

Starting discussions on a collaborative project or contract research ✓ ✓

Receiving important confidential information ✓

Giving out confidential information ✓ ✓

Using computer software ✓ ✓ ✓

Developing computer software ✓ ✓ ✓ ✓

Revising or providing a manual or computer assisted drawings ✓ ✓ ✓

Preparing notes for lectures ✓ ✓

Responding to telephone queries of a technical nature ✓

Reproduced from Theros IP guide (www.Theros.co.uk)

P a t e n t s

C o n f i d e

n t i a l

i n f o r m a

t i o n

C o p y r i g

h t

D e s i g n

r i g h t s

T r a d e M

a r k s

Figure 1.1: IP and University activities



1.1 The benefits

The size, and nature, of benefits will depend on the

size of the IP portfolio and the missions and strategies

of individual universities. All universities, however,

employ (and train) substantial numbers of staff and

students who generate IP in the course of their day-to-

day activities, and there are a number of potential

benefits which apply across the board.

1.1.1 Effective knowledge transfer

IP management is an essential part of

effective knowledge transfer

Universities are expected to engage in a diverse range

of activities in return for the public funding they receive,

and one of these is the generation and transfer of

knowledge. This is reflected in mission statements,

which typically encompass the development and

transfer of knowledge for social, quality of life andwealth generation purposes. In many cases, open

publication and making research results freely available

will be the most effective form of knowledge transfer.

But most research outputs require substantial

investment before they can be brought to market and

find applications. Competitive advantage derives from

many factors, depending on the nature of the market

and technology, but protection of the underlying

research results can be important.

The issue is not simply one of protection in order to

encourage commercial investment. University

researchers require continuing access to the results of

their research for use in future projects and teaching.

Effective IP management is required to ensure that this

is the case. The university may also wish to draw on

the results for commercial purposes in the future.

Negotiations and agreements therefore need to be

structured so that future needs of the university can be

accommodated.

Protecting research results and their publication are

not, of course, mutually exclusive. It will be necessary

only to delay publication for a short period while

patents are filed.

1.1.2 Using others’ IP

Universities have considerable latitude

to use others’ IP freely, but if their

research is used for commercial purposes they need to be on their

guard against the possibility of

infringement

Researchers are generally able to use IP owned by

others without a licence, provided it is used privately

and for purposes that are not commercial, or it is used

for experimental purposes relating to the subject

matter of the invention. However, if research activity



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crosses over into commercial work and, for example, a

university assigns to a company IP rights arising from

the research programme, there could be an

infringement. Considerations of a similar nature arise in

relation to copyright and the use of published materials

for teaching purposes (particularly e-learning). Part of

the IP management function is to ensure that there is

clarity amongst researchers as to the legal position

and to guard against any such infringements.

1.1.3 Income

There is undoubted potential for

universities to generate surpluses from

the IP management function, although

there is a need for realism over the

scale of returns. Effective IP

management can also attract research

sponsors

Commercialisation of IP can generate income for theuniversity. One way is directly through the sale or

licensing of IP. While there has, historically, been a

tendency to over-estimate the revenue potential of IP

generated within the HE sector, there can be little

doubt that real potential does exist. This potential is

unlikely to be realised if universities adopt a passive

stance towards exploitation. Instead, there is a need to

identify exploitable IP, decide how it can best be

protected, evaluate its commercial potential, identify

routes to commercial development, and secure and

negotiate with appropriate partners. The issues

surrounding financial returns from the

commercialisation of IP are discussed in more detail in

Chapter 2.

The strength of a university’s IP portfolio, and how well

it is managed, may also be a factor in attracting

research sponsorship. Sponsors may be interested in

accessing the IP within the portfolio. In addition, if the

university is seen to a be a competent IP manager,

then this will give confidence to the sponsor that

effective partnerships can be established to take

forward the commercialisation of results.

1.1.4 Staff recruitment and retention

The quality of IP management will

influence the financial benefits that

staff receive for commercially related

work and can therefore strengthen recruitment and retention

An effective IP strategy and policy can also help

universities to recruit and retain high quality staff. In

part, this relates to personal income incentives. There

are important differences between subject areas, but

opportunities to supplement university salaries through

commercialisation activities are an increasingly

important consideration for many academics. The



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perceived effectiveness of IP management may inform

their choices. However, income is not the only

consideration, and many academics will wish to see

their research outputs commercialised, and as a result

given application because they consider this to be an

integral part of their academic responsibilities.

1.1.5 Other benefits

Finally, there are a number of less tangible potential

benefits, which essentially arise because effective IP

management can raise a university’s profile in the

business and wider community. These include:

• the publicity that can arise from successful

knowledge transfer

• a perception that the university is a good place

with which ‘to do business’, thereby facilitating

wider interaction between the university and

the business sector

• a demonstration that the university is

contributing to economic development

activities, at a local, regional or national level.

1.2 The need for strategic

management

For research-intensive universities the scale of the IP

portfolio generated, and the potential returns, are

probably sufficient reasons for considering IP

management strategically. However, there are also

other reasons that apply, in principle, to all universities.

1.2.1 IP issues are pervasive

IP issues arise, to a lesser or greater

extent, in relation to virtually all

university activities, and policies and

activities need to be consistent

The discussion above has touched on some ways in

which IP issues relate to various university activities. In

practice, the overlaps are pervasive. There is a general

need in relation to teaching, research and consultancy

to ensure that IP with potential commercial value isproperly protected, that the university can access this

IP in the future and that the university is not exposed

to litigation because of infringement of others’ IP. As a

result, IP policy should be co-ordinated with policies

toward research, teaching, consulting, students,

employment terms and conditions and conflicts of

interest. Figure 1.2 illustrates some of the operational

issues that arise.




How other activities impact

upon IP management

Information provided during teaching

(particularly e-learning) may infringe

others’ copyright and other forms of IP

such as trade secrets and may expose

the university to litigation

IP generated needs to be identified,

evaluated and protected

Future access to IP by the university

needs to be considered

Research, if used for commercial

purposes, may infringe others’ IP and

may expose the university to litigation

Publications may infringe others’ IP and

may expose the university to litigation.

This is a particular issue with electronic

publication

How IP management impacts upon

other activities

It is necessary to ensure that teaching

materials do not infringe IP and that

students are educated about IP

management

It is necessary to ensure adequate

records are kept to comply with future

requirements for securing IP, and that

notification of invention takes place

Increase awareness amongst university

staff of commercial restrictions upon

possible research activities. Although it is

not necessary to obtain a licence to work

a patent for research purposes, providedthat the work is not for commercial gain,

problems can occur in practice

Electronic publication raises copyright

issues about which staff will need to be

informed


University activity

Teaching

Research

Publication

Figure 1.2: The cross-cutting aspects of IP management




How other activities impact

upon IP management

Consulting activities may infringe others’

IP, particularly in the area of trade secrets

Consulting activities represent a potential

leakage of university IP

If there are disputes over IP between

staff, they need to be managed

Research services will need to liaise with

IP management to consider IP issues

when organising research projects

Disputes over IP between staff and

students and between different students

may need to be drawn to the attention of

IP management, who will need to

become involved

How IP management impacts upon

other activities

There is a need to ensure that there is

adequate indemnity cover against IP

infringement by staff carrying out

consultancy work via the university

Staff should also be aware of limitations

to professional indemnity cover (such as

the ‘small print’ over aerospace-related

work and US-based activities)

Employment contracts need to align with

IP policies

Contracts will need to be vetted for IP

clauses

There is a need to ensure that IP clauses

in student enrolment are legal and do not

breach the ‘duty of care’

University activity

Consulting

Personnel

Research services

Administration

Figure 1.2: The cross-cutting aspects of IP management (continued)



1.2.2 IP management and other

means of knowledge transfer

All universities need to engage in IP

management. The level of investment

will, in part, be determined by the

costs and returns relative to other

forms of knowledge transfer

Universities transfer knowledge in many ways besides

the licensing and sale of IP. These include consultancy,

contract and collaborative research and Continuing

Professional Development (CPD). As the previous

section outlined, IP management has an important role

in relation to these activities, and complements, rather

than substitutes for, these other means of knowledge

transfer. Complementarity arises principally at the

stage of ensuring that any IP generated during the

course of these activities is identified and, if promising,

protected. IP management also encompasses the

active marketing of IP, potentially the costly extensionand renewal of patent protection and, if successful, the

monitoring of agreements with commercial partners.

An important consideration is, therefore, the extent to

which universities should invest in these aspects of IP

management activities at the expense of marketing,

and delivering, other forms of knowledge transfer. This

will obviously depend on the volume and quality of

research undertaken within the university. A

consideration of the relative costs, risks and returns for

different forms of knowledge transfer can be helpful in

this respect.

1.2.3 Key policy overlaps

Incentives for engaging in IP-related

activities need to be consistent with

general policies towards internal

income allocation between

departments and also towards other

means of knowledge transfer

Universities have no automatic claim to

student generated IP, but are arguably

best placed to manage it. Policies, and

procedures relating to students need

to explicitly address IP issues

There are two areas of university policy that are

particularly closely related to IP management.

The first concerns the general question of distributing

returns from the exploitation of IP within the university.

This also relates to the specific question of rewards to

individual inventors. Incentives are discussed in more

detail in Chapter 4 but there are a number of general

issues to consider:






Open dissemination of results can sometimes make

commercial sense as well as being entirely consistent

with university missions (see Figure 1.3).

Figure 1.3: Placing IP into the public domain free

of charge – The University of Manchester

The computer science department at the University

of Manchester has recently placed two significant

software systems into the public domain - the

Maverik VR framework, and the Balsa asynchronous

circuit synthesis system. Both are available under

Gnu Public Licences (GPL).

Professor Steve Furber, head of the department,

commented:

“With this sort of IP there is an issue of establishing and

demonstrating the value of the software. If the IP is

protected and offered for sale under licence, will anyone

buy it? If it is available free, does this imply it has no value and isn’t any good? Our judgement for Balsa was that if it

was not free nobody would pay for it or use it because of

the uncertainties of the tool and the technology it supports

(asynchronous design is still a minority interest among VLSI

designers), so there would be no revenue lost by making it

freely available. If available free, there are a number of

research groups that might pick it up, find it actually works,

and use it. Balsa will continue to be developed and, if its

use becomes significant, it is always possible to sell later

versions or extensions while giving away the core tool. This

is quite a common commercial model - to have a free

basic version while charging for a later, higher featured, fully

supported version. You can consider the initial free release

as a form of seed-corn.

In a university, the use of IP by others in the research

community has considerable indirect value. The use of

Balsa or Maverik by other groups enhances the reputation

of our groups and their ability to publish in the best places

and attract research funding.

Putting software into the public domain can greatly

increase its influence on the computing community - Linux

is the most visible proof of this. In some cases, it may serve

the university’s purposes better to maximise the influence

of its research by putting IP into the public domain rather

than by exploiting it for direct commercial gain. Influential

work raises the reputation of the university, with indirect benefits in terms of RAE ratings and the ability to attract

good students (at both undergraduate and postgraduate

levels) and research funding.”




1.2.5 Conflicts of interest

Little concern has been expressed, so

far, over actual conflicts of interest

arising from IP exploitation.

Nevertheless, a watching brief should

be maintained

The possibility that active management of universities’

IP portfolios might lead to conflicts of interest has, with

some exceptions, not been as prominent a topic for

debate in the UK as in some other countries, notably

the USA. Indeed, as one workshop participant put it:

“I wish the volume of activity was such that we needed

to worry about conflicts of interest.”

However, it is an issue which was raised by several

universities, and the specific concerns, which need to

be addressed at the strategic level, were that:

• commercial pressures might inhibit the free

flow of information within the research

community

• partnership with commercial organisations to

exploit university generated IP could

compromise, or be seen to compromise, the

status of universities as providers of

independent advice.

Some UK universities are now developing or refining

their policies towards conflicts of interest. For example,

the University of Glasgow implemented a new conflict

of interest policy at the end of 2001 (see Figure 1.4).

Figure 1.4: An Example of a University Conflict of

Interest Policy

The University of Glasgow’s new Conflict of Interest

Policy (implemented in December 2001) provides a

clear statement of the importance of managing

conflicts of interest in higher education. The policy

explicitly takes into account the reports of the

Committee on Standards in Public Life (the ‘Nolan

Committee’) – which defined the seven principles of

public life as: Selflessness; Integrity; Objectivity;

Accountability; Openness; Honesty, and Leadership.

The policy starts by recognising that “increasing

demands are placed upon universities to engage with

for-profit organisations in order to discharge their responsibilities towards economic development and in

order to generate funds to support their research and

related activities. In this environment, University

members are placed in situations where potential

conflict of interest may arise between their personal

and professional interests and the interests of the

University at large.”




The over-arching statement of policy is: “It is the policy

of the University that its officers, staff, and others

acting on its behalf have the obligation to avoid ethical,

legal, financial, or other conflicts of interest, and to

ensure that their activities and interests do not conflict

with their obligations to the University or its welfare.

This policy incorporates the Seven Principles of Public

Life established by the Nolan Committee; the

University’s officers, staff and others acting on its

behalf should abide by those principles”

The policy contains the following key elements:

All members of staff in a position to make or influence

decisions and all academic members of staff are

required to complete an Annual Return to the

appropriate authority. If they have nothing to declare

then staff must submit a ‘nil return’ for the record.

The University has established a Committee on

Conflicts of Interest to advise on ambiguous and/orcomplex situations, staff are also encouraged to seek

advice from heads of department and deans etc.

Specific activities are defined that should lead to

scrutiny. Guidelines are then provided on how to think

about the conflicts that can arise rather than to attempt

to define rules that cover all possible situations. These

range from the acceptable to definitely not acceptable,

with other items that need to be declared and actively

managed in order to be acceptable.

The full policy is available at:

http://www.gla.ac.uk/R-E/pub/policies/index.html

Figure 1.5 illustrates the approach taken by the

University of Lancaster.

Figure 1.5: Handling conflicts of interest: the

University of Lancaster

“Our approach is to build an explicit

acknowledgement of university ownership of IP into

employment contracts. However that has limitations

in terms of (1) the 1977 Patent Act, sections of which

may overrule university ownership in rare cases,

though we have had no such difficulty, and (2) what

then happens about “grey” areas. Examples of grey

areas could include consultant contracts and what

happens to IP arising from work done by staff

members during the time they are working as

consultants.

In practice, it seems unlikely any policy document

could explicitly cover every conceivable situation in

which a conflict of interest might arise without

becoming completely unwieldy.

The best solution is probably one in which (a) there is

a simple definition of what the university’s potential

commercial interest is; (b) a binding employment




contract between university and staff in which the

obligations of the respective parties are clearly spelt

out, and (c) an explicit assurance to staff that people

originating Intellectual Property will share in the

benefits. That keeps the documents relatively simple

and puts a good deal of weight on the application of

plain common sense. It seems to cover most cases

quite well.”

Roderick O’Brien, University of Lancaster

1.3 Strategic checklist

Central management’s main responsibility in relation to

IP management is to set the overall long-term strategy

that the university will pursue and to define how it will

be pursued. The principal elements of an IP

management strategy in a university include:

• providing a statement on how IP management

supports the overall mission of the universityand actively communicating the strategy to

university staff

• the co-ordination of the IP management

strategy with other policies and strategies,

including policies towards the ownership of IP

by different types of staff and students and

defining appropriate incentive structures for

staff

• defining the strategy to be adopted towards IP

negotiations with research sponsors who seek

to own this IP

• defining the responsibilities of the IP

management function, including the conduct

of any cross-cutting role it plays in relation to

other university departments and groups

• deciding how the IP management function will

be organised in relation to other relevant

functions, particularly research services, and

whether or not company structures will be

used for IP management

• establishing realistic expectations and targets

(in terms of level and timing) for potential

financial and non-financial returns to the

university’s investment in IP management

• designing a system for monitoring andevaluation that facilitates a virtuous circle in

improved effectiveness of IP exploitation and

providing a process for the review and, if

necessary, the re-design of the IP

management strategy.

These topics are discussed further in the remainder of

the Guide. At this stage, it may be useful to consider

some examples of the overall approaches universities

are taking towards IP management.




One prominent feature is the integration of IP

management within a university’s policy framework

and organisational structure (see Figure 1.6).

Figure 1.6: Policy framework and organisational

structure at the University of Glasgow

The University of Glasgow has sought to develop a

framework for an integrated policy towards research

grants and contracts, consultancy and commercial

activities that will evolve and change alongside trends

in research and its commercialisation and any

changes in government policy.

Intentions

This policy framework explicitly recognises that

‘enterprise’ is now a third component in the

university’s mission:

“...each of these elements is inter-linked and is

interdependent: the results of leading-edge research are used to enhance the education and learning

experience of students as well as to underpin the

commercial exploitation and economic development

activities. These activities include the commercial

exploitation of both research (contract income,

licenses and spin-out companies) and teaching and

learning….as well as consultancy and other advisory

services.”

Organisation

The department of Research and Enterprise (R&E) -

part of the university’s Central Administration - has

been given responsibility to coordinate research and

enterprise activities and to direct commercial

operations. The Director of R&E reports directly to the

Secretary of Court and works on a day-to-day basis

with the Vice-Principal for Research. R&E’s activities

are overseen by a R&E Steering Group – which is in

turn accountable to both the University’s

Management Group and to the Advisory Board for

Research and Enterprise. The latter reports regularly

to Court and to Senate. This arrangement is intended

to provide the agility necessary for effective

commercial operations whilst ensuring the

accountability that is appropriate for a university.

Tactics

The University’s view is that commercialisation of IP

can achieve economic benefits in different ways.

1. Direct; The university seeks to maximise the

commercial revenue ‘yield’ on its research

expenditure in order to invest in improving its

research capabilities – thus seeking to create a

‘virtuous circle’ based upon closely coupled research

and enterprise activities.

2. Indirect: The university seeks to assist companies

in the region to become more competitive through




technology transfer. In some cases, the University will

contribute IP to a company or group of companies if

it is believed that they are best placed to develop or

exploit it. In this case, the major beneficiaries are likely

to be the company and the local economy, but the

university believes that a strong company base and

local economy also lead to a more dynamic

environment in which to carry out research.

IP management staff are given high levels of authority

to act in facilitating research commercialisation and

take a direct and very active role in commercialisation

deal making.

IP managers act as advocates of a particular

business case and each case is critiqued by

colleagues at weekly prospect evaluation meetings.

Operations

R&E operates in a highly integrated manner such that

seamless life cycle support for both research and

enterprise is provided. This involves the use of

integrated databases and formal business and

decision-making process ‘road maps’. There is

considerable interest in other universities in emulating

some of R&E’s operational approaches – such as the

automatic generation every two weeks of emailed

progress reports from a database that logs all IP case

activity. This helps to ensure that all interested parties

are kept fully informed of the progress, or lack of

progress, made.


Several universities are conducting thorough reviews

of their approaches, with consequent revision of

structures and systems (Figure 1.7).



Figure 1.7: A recent strategic review of a

university’s management of IP -

the University of Ulster

Within the University of Ulster, a new structure has

been put in place to manage the process, involving

the establishment of two limited companies within the

university infrastructure to stimulate and manage the

university’s technology transfer:

• UUTech Ltd has been set up to implement and

develop the university’s technology and

knowledge transfer policy with the following remit:

☛ to work in partnership with the private sector to

promote actively technology transfer activities

associated with the university

☛ as a central mechanism to exploit the innovative

research activity emanating from the university’s

research centres

☛ to enhance the close relationship the universityhas established with the local community and

to contribute strategically to the diversification of

business/industrial sectors of the local economy

☛ to act as an umbrella company with a remit to

take venture stakes in start-up companies and

to manage university consultancy activities

☛ to manage and negotiate all matters related to

IP in order to maximise the benefit to the

university, its staff, students and the region.

• University of Ulster Science Research Parks

(UUSRP) has been established to develop and

manage the university’s science research parks

established at the Coleraine and Magee

campuses. The parks are not exclusively for

activities which have derived from the

university research base, and also house

appropriate externally started high-tech

companies. The rationale for this is (i) to

provide an environment for clustering of high

technology companies in close proximity to the

research strengths of the university, and (ii) to

provide an academic/industry innovation

community which will help to drive the

knowledge-based economy in Northern

Ireland.

The university is also planning to establish a university

investment fund, financed by a number of investors

contributing to a pool of funding, and set up as a

limited partnership. The fund will provide preferentialaccess to spin-outs in the university, but investment

decisions will be on a commercial basis and

assessed by an experienced management panel.

Two years on from the introduction of the strategy,

technology and knowledge transfer now form part of

the university’s core business activities alongside

teaching & learning and research.






2. Financial expectations

and budget

management

2 Financial expectations and budget management 34

2.1 Risk and returns 35

2.2 Handling uncertainty over expected costs and returns 36

2.3 What are realistic expectations? 37

2.4 Setting Budgets 39

2.4.1 Using the commercial revenue yield on research expenditure as a

ratio in budget setting 39

2.4.2 Considering anticipated capacity constraints 42




2.1 Risk and returns

Linking the IP management budget to

annual revenue targets may lead to

problems, because the costs and

revenues associated with IP

management are subject to major

external influences and can be volatile

University research results are characteristically highly

uncertain as regards potential future applications. A

particular innovation may eventually produce major

revenues, but many inventions or smaller advances will

not produce significant revenues and some may never

reach the market. This high level of investment risk

means that the return to the university will be low

relative to that captured by the organisations which

make the post-research investments. This simply

reflects how investment risk is distributed.

The range of financial returns that can be negotiated

by a university will be constrained by the extent towhich it is willing and able to commit funds to risky

investments in a similar way to the Venture Capital

sector. University seed funds aimed at facilitating

technology transfer can play a role in increasing the

share of the financial rewards. This type of investment

can reduce the perceived investment risk, by moving

the technology through various proof of principle and

proof of concept stages, producing a more favourable

negotiating position for the university. Figure 2.1

illustrates these broad concepts.

Figure 2.1: Relationships between cost, technical

risk and business risk in the commercialisation

process

The investment process associated with research

commercialisation consists of increasingly high

expenditures aimed at determining the technical and

commercial viability of the concept and then bringing

it to market. This sequence of investments reduces

the technical risk that the concept will not work as

intended, but the cumulative expenditures made

increase the risk that these funds will be lost.

Business risk only decreases as the product or

process nears market introduction and the probability

of commercial failure reduces. These basic

relationships are illustrated in the following diagram:

2. Financial expectationsand budgetmanagement

£

Initial concept

Cost (£)

BusinessRisk (£ at risk)

Technical Risk(prob. of Technical Failure)

Market introduction

Distance to market



All current and potential partners in research and

technology transfer activities should ideally be in

broad agreement on the anticipated investment risks

faced and their implications for the partnership, in

particular on the ways in which risk capital differs

from research funding. Although research funding

generates the option to commercialise the research,

it does not, in itself, allow this commercialisation

option to be taken up. Shares of the financial rewards

should reflect the shares of the investment risks

taken. Failure to recognise this principle at the

agreement negotiation stage can cause severe

problems at later stages.

2.2 Handling uncertainty over

expected costs and returns

The decision-making process for allocating resources

to IP management activities should recognise that the

variance in expected returns on this investment can be

high and will therefore be uncertain. This means thatsetting annual target revenue to cost relationships is

not viable, particularly if performance against such

targets is to be used to assess good or poor

performance in IP management. A moving average of,

for example, three years is likely to give a clearer

picture, although longer moving average time-frames

may be appropriate for smaller IP management offices

because the lower deal flow will be even more

sensitive to year-on-year variations in returns.

Figure 2.2 provides an example of a fund, established

in collaboration with Scottish Enterprise, which

enhances universities’ ability to capture the financial

benefits of their research.

Figure 2.2: Regional Collaboration in the

provision of pre-seed capital: the Scottish

Enterprise Proof of Concept Fund

The case for an in-house fund to help finance

research through the proof of concept stage is that

further investment will increase its attractiveness for a

commercialisation partnership and thereby secure a

greater share for the university. Yet staffing and

operation of such a fund cannot be done on the

cheap; there is a need to win the confidence of

investors and hard decisions have to made in

deciding which projects to support. To cover the

overhead requires a high volume of research activity,

and a collaborative effort by a regional grouping of

universities is one obvious approach.

One innovative approach is the £30 million Proof of

Concept Fund, established in 1999 by Scottish

Enterprise, as a way of addressing this critical early

stage-funding gap. “We see the Fund as part of a

pipeline, leading eventually on to other funding such

as SMART and SPUR awards and business angel

and venture capital funding. The applicants usually

2. Financial expectationsand budget

management



have some background IP, but they’re not at the

stage where they can market it.”

The fund is available to applicants for a maximum of

two years. The highest amount of funding available is

£200,000, with payments made quarterly. To date,

there have been two rounds of funding, with projects

for the third currently under evaluation. In round one,

there were a total of 83 applications, of which eight

were successful; in round two, there were 120, with

funding finally going to 36 of those. The third round

has attracted 130 proposals.

A management group is put together for each

successful project, led by the appropriate institution

and supported by Scottish Enterprise. “The idea is to

try and ensure that everything is kept on track and

that the commercialisation happens.” The money is

designed to be spent on proving the core

technology. “It’s meant to cover the salary of one or

two people for a couple of years – most of ittherefore goes on people’s time.”

Quotations are from fund manager Eleanor Taylor

Expected net returns must therefore be based upon a

realistic appraisal of achieving these ‘lightning strikes’ –

they are rare, and therefore the expected value of the

overall portfolio of commercialisation revenue will not

be high. This emphasis on the probability of achieving

different levels of financial return is also important when

it comes to considering the mix of technology transfer

activities. This is discussed in the following Section.

2.3 What are realistic

expectations?

There are some indications that UK

universities already actively engaged in

technology transfer are as effective as

their US counterparts when revenue

from commercialisation is considered

in relation to research expenditure

UK universities are often compared to their US

counterparts. The main reason for looking at the USA,

in relation to IP management, is that there is a longer

history of active technology transfer, reasonable data

sets and, consequently, an indication of how things

might be in the future for UK universities.

Examination of the evidence does not support the

view that there is a large untapped potential for

revenue generation for many UK universities. Figure

2.3 reports well-informed views.




Figure 2.3: Views on the performance of UK

universities

“The AUTM1 data … allow accurate comparisons. MIT

has a research base which, at over $900 million, is

equivalent to several UK HEIs. Therefore there is a

need to take into account the substantially lower

volume of research income available to UK HEIs when

considering the …. expectations of IP exploitation. The

value of $90 million of research to create one spin-out

in the US gives a more realistic expectation of what

could be achieved in the UK, especially taking account

of the cultural and infrastructure benefits that the US

enjoys.”

University of Edinburgh

“We... view with some scepticism the conventional

wisdom that US technology transfer offices are more

effective than those in the UK. Our own analysis

suggests that if revenues generated by BTG on behalf of UK academia are included, then UK

university licence income as a percentage of total

research income is not dissimilar from that in the

USA.

Similarly, we estimate that UK universities are creating

as many start-up companies per £ million of research

income as those in the USA. While the quality of

patent applications filed by UK academia is not ideal,

it is (in our experience) often better than that in US

academia. The more pragmatic approach that is

typically adopted by UK technology transfer offices is

also in many cases preferable to the narrow

commercial focus that is adopted by some US

technology transfer offices.

It is always dangerous to make sweeping

generalisations, but in BTG’s experience there is

certainly good and bad performance on both sides of

the Atlantic.”

British Technology Group plc

Those UK universities that have been increasing IP

management activities do not appear to lag behind

institutions in the US so far as commercial revenue,

and spin-outs, in relation to research expenditure is

concerned. It may be the case, however, that US

universities generate more commercial revenue for

each $ devoted to IP management, owing to a mix of economies of scale and cumulative experience. It is

those UK universities that are now seeking to catch up

that are likely to have the greatest potential to improve

their revenue. However, these tend to be universities

with relatively low research income and thus the scope

to add significantly to sector-wide returns may be low.


management

1 Association of University Technology Managers



2.4 Setting Budgets

It is not feasible to set IP management budgets based

on a precisely defined relationship between expected

returns and expected costs, and hence other

approaches must be used. One alternative is to set

the budget on the basis of the university’s research

profile. This requires an understanding of the

propensity of different subject areas to generate IP.

The easiest means of doing this would be if subject-

specific data on IP activity levels and mixes were

widely available. This would allow each university to

make an informed judgement about the nature and

extent of the expected deal flow. Unfortunately, such

data are not currently available. The collection of

standardised data of this type would, therefore, be

useful in providing benchmarks for budget setting.

2.4.1 Using the commercial revenue

yield on research expenditure

as a ratio in budget setting

The ratio of IP management

expenditure to research income is

probably the most useful budget

indicator.

Budgets can be set by considering the

size and mix of the university’s

research activities, using comparisons

with other universities

The ratio of revenue generated from research

commercialisation to research expenditure expresses

the direct commercial yield. It is important to be clear

that this is the direct yield to the university, and does

not include the wider impact of higher education

research on the economy and society. The desirability

of using moving averages to even out volatility and of

taking catch up phases into account should also be

borne in mind when using this ratio. The only readily

available (partial) data on this ratio relates to overall

research income levels and their relationship to licence

and royalty income. They therefore exclude revenue

generated from any equity sales, which should, ideally,

be included.

Recent work by the National Health Service providessome useful guidance in this area. Its handbook for

R&D managers suggests that an average technology

licensing yield for medical and health R&D would be

around 2.5 percent of R&D expenditure – explicitly

ignoring any ‘lightning strikes’ of unlikely yet very large

licence returns.2 This would indicate a steady state

‘break-even’ IP management budget level of 2.5

percent of R&D expenditure.


2 This estimate is based upon evidence from leading UK research universities with medical schools and from an examination of the AUTM data. As an illustration, estimates of the ratio of

sponsored research income to royalty income from seven Scottish Universities lie in the region of just over 3 percent.



According to the NHS Guide the cost of running a

technology transfer unit employing two full time staff

plus clerical support could amount to £150,000 per

annum including overheads, and an additional

£100,000 in patenting costs (including patent

attorneys’ fees). The implication of using these NHS

estimates is that R&D expenditure of only £10 million

would be required to justify even a small team (i.e.

£250,000 is 2.5 percent of £10 million). This may be

regarded as a low estimate. In situations in which

higher salaries are paid a unit of two full time

professional staff may require a budget of £350,000,

implying in turn a threshold R&D expenditure of £14

million, still a relatively low level.3 These estimates

relate to health and medical research but the life

sciences do constitute a major area of technology

transfer activity in higher education and attract much

attention because of the rapid rate of scientific

advance and the possibility of making major financial

gains.

In reality however, a team of two professionals may be

too small to be effective. In addition, the estimated

yield of 2.5 percent of R&D expenditure may be

misleading for small portfolios since there is less

chance of a few high return projects balancing many

low return, and loss making, projects. Where large-

scale R&D expenditures are involved then a 2.5

percent yield is more plausible and economies of scale

start to become evident.

The University of Oxford’s budget for handling

technology transfer includes an operating cost

contribution from the university of £1 million per annum

(doubled from £500,000 in 2000).4 Isis Innovation Ltd,

the university’s wholly owned technology transfer

company, handled a deal flow of 415 projects last year

(see Figure 2.4). The university’s contribution facilitates

technology transfer arising from externally funded

research grant and contracts worth over £142 million

in 2000/2001. A yield of 2.5 percent would generate

just over £3.5 million per annum, representing a

significant surplus over costs.

It would be particularly useful for budget-setting

decisions if future analyses of the yield on R&D

expenditure examined how the yield varies with thescale of R&D expenditure. This would assist those

universities with lower levels of R&D expenditure to

decide upon how best to collaborate between

themselves and to use third parties to help them

manage their IP.


management

3 However, a recent survey of Scottish universities’ commercialisation activities indicated an average annual operating budget of over £500,000 per year and an average full time equivalent

staff of slightly less than 12. This apparent discrepancy may be because this covers offices with a wider scope that IP management alone. Source: Scottish Executive, Economics Advice

and Statistics Division (2001) ‘Intellectual Property Commercialisation in the Higher Education Sector’.4 There is also another £4 million in seed funding from a mixture of university, Treasury and Wellcome & Gatsby Trust funding and an Isis College Fund of £10.7 million (£1 million from the

university and £9.7 million from the colleges).



Figure 2.4: Budgets and Activity Levels at the University of Oxford

Year ended March 1997 1998 1999 2000 2001

University investment

£000 £40 £300 £500 £1,000 £1,000

Staff 3 9 9 17 21

Projects - 168 243 319 415

Patents filed p.a. - 31 51 55 63

Licences/options p.a. 4 8 18 21 32

New companies p.a. 1 2 3 6 8

External research grants and contracts 2000/2001 £m %

UK Charities £48m 33.7%

Research Councils £46.5m 32.6%

Industry £22.4m 15.7%

UK Public Bodies £10.2m 7.1%

European Commission £5.4m 3.8%

Overseas Charities & Public Bodies £10m 7%

Total £142.5m

Source: Oxford University Research Services Office and Isis Innovation Ltd




The figures discussed in Fig 2.4 only allow for the

direct costs of IP management. Universities may also

decide to contribute to seed funds. The aim is to

increase returns by funding further investment in order

to reduce the investment risk faced by potential

exploiters of the technology. The probability that a

licence will be taken out and will prove to be profitable

and/or that a spin-out company will be formed is

thereby improved. Obviously, the cost to the university

of any such funds needs to be factored into the

estimates.

Even taking into account the issue of the scale of R&D

expenditure and of the IP management office the

figure of 2.5 percent of research expenditure is only a

very rough estimate of breakeven expenditure on IP

management. Higher than average concentrations of

subject areas with high income generating potential

would justify higher expenditure. Conversely, if a

university is prevented from controlling higher than

average shares of the IP it generates, perhapsbecause of sponsor requirements, then lower than

average expenditure might be appropriate. Optimum

ratios of expenditure to research income are also likely

to vary over time for individual universities. US

experience indicates that the ratio follows a curve of

diminishing returns and, following a period of relatively

rapid growth consequent on developing in-house

expertise and staff enthusiasms, will flatten out.

Two other factors which could influence budget levels

are discussed in the following sections.

2.4.2 Considering anticipated

capacity constraints

Allowing for a degree of flexibility in IP

management budgets will help to

reduce the risk that the IP office hits

capacity constraints which affects the

mutual understanding and confidence

through which researchers and IP staff

work together to improve technology

transfer

Some of the most successful IP management

functions have achieved virtuous circles, through

which researchers become more likely to notify and

pursue IP exploitation opportunities, because they

expect the process to be efficient (in terms of the use

of their time) and effective in terms of final outcomes.Capacity constraints will, at least, inhibit such

behaviour. As the IP office workload approaches full

capacity, the time required to process paperwork and

make decisions will tend to increase. Hitting capacity

constraints may also disrupt relationships with external

business partners and potential new investors. An

example is given in Figure 2.5.


management



For these reasons, budgets will need to reflect:

• anticipated capacity constraints in handling an

expected increase in the deal flow

• economies of scale in IP management.

Providing for some flexibility in IP management

budgets, particularly in the area of the recruitment of

professional staff, can be important. This type of

flexibility can be designed to prevent capacity

constraints being reached and would be justified on

the basis that it facilitated the operation of the virtuous

circle, via which researchers and IP managers work

together in facilitating technology transfer.

Figure 2.5: Example of a hard lesson well learnt

A university found that its existing IP budget, which

had been frozen at £140,000 for four years, was

starting to constrain technology transfer activity.Invention disclosures stood at 56 per annum, with

significant increases expected. The strategic plan

had set a target of 15 new patent applications per

annum, and the patent portfolio stood at around 100

patents (this figure varied throughout the year).

Although general increases in technology transfer

activity were largely responsible for this budget being

insufficient, there were some specific problems:

a historical legacy of cases that had progressed

further through the system (hence generating costs)

than would have been allowed under current IP

management practices and guidelines. Not all of

these could be abandoned, because some had in

fact attracted commercial interest.

Due to a misunderstanding between patent agents

and their international affiliates, projected costs,

provided by the patent agents, were consistently

under-estimated. The consequence was over-spend

on budget.

The travel budget was insufficient to allow the IP

portfolio to be marketed effectively, which was an

impediment to generating greater licence revenue to

offset the increased IP management costs.

In view of these budget constraints, efforts were

made to reduce the size of the portfolio. In 1998/99

10 patent cases were removed from the portfolio

and in 1999/2000 14 cases were removed. The

patent portfolio was reduced from 100 to 85.

The way in which this IP management budget

problem arose led to the IP management office

requesting that, in future: greater clarity exist in

demonstrating how IP management contributes to

the university’s strategic objectives; the IP

management budget be set on the basis of these

long-term strategic objectives; and that other relevant

budgets, e.g. marketing and travel, be addressed as

part of the same discussion.




3. Ownership of IP and

negotiations with

sponsors

3 Ownership of IP and negotiations with sponsors 44

3.1 Ownership and control 45

3.2 Negotiating with research sponsors 49

3.2.1 Joint ownership of IP 50

3.2.2 The nature of the research 51

3.2.3 Relative contributions to research costs 53

3.2.4 The demonstrated capacity of the IP management office to maintain

an IP portfolio effectively 55

3.2.5 Risks associated with the use of licence-back arrangements 56

3.2.6 Companies’ overall need to minimise their investment risks 57

3.2.7 Sharing returns from exploitation 58




3.1 Ownership and control

The key consideration in IP

agreements is the rights that

universities will have to use and exploit

IP. Ownership is not necessary to

guarantee these rights, but may be the

most effective solution for universities

in practice

Almost all universities now claim ownership of IP

generated by their staff. There are a few exceptions,

but these typically reflect situations where, for historical

reasons, there are variations in the terms of

employment and some staff have contracts entitling

them to retain IP they generate. Ownership and

negotiation issues are addressed comprehensively in

Partnerships for Research and Innovation.5

Universities have no automatic claim to IP generated

by students,6

unlike that which arises in relation to IP

created within an employee’s ‘normal duties’. Thisraises important strategic issues relating to IP

management that are unique to universities. These

issues need to be properly managed, in a manner that

is advantageous and fair to the institution and the

student.

This asymmetry of ownership rights can present

problems for IP managers and for academic staff.

However, policies that seek to address this asymmetry

by assigning ownership of student IP to the university

may raise matters of legality and equity, which need to

be carefully handled.

Much university research involves staff and students

(most likely post-graduate students) working within

collaborative or supervisory relationships. The

fragmentation of ownership generated by the differing

(default) ownership rights between such staff and

students potentially militates against collaboration, and

against successful exploitation. In terms of

collaboration, it is possible that IP in the form of data,

code, text, or patentable ideas generated, and owned,

by a student could be withheld from a supervisor, orthat the academic collaborator could be prohibited

from using such IP in future research. Such conflicts

3. Ownership of IP andnegotiations withsponsors

5 Partnerships For Research And Innovation (produced by CBI in association with AURIL, DTI, HEFCE, EPSRC

and Universities UK) ISBN: 0 85201 553 66 S39 of the 1977 Patent Act, which broadly assigns ownership to employers, does not apply to students who have no employment relation with the University; nor will there be an

employment contract that explicitly assigns ownership to the University. Some post-grad students may, however, also be appointed as research staff and this case the University is likely to

own IP generated either by virtue of the employment contract or S39.



may be more easily mediated or resolved where the

university has equivalent rights over both subsets of IP.

Perhaps more important, the fragmentation of

ownership rights is an impediment to effective

exploitation. Student ownership of IP is particularly

likely to be perceived as a problem when research

projects are sponsored by industry. For this reason it is

common for research and CASE studentships to be

subject to a three-way contract that assigns ownership

to one party (the university or the sponsor).

“It could be argued that universities have a responsibility

to assist students in exploiting the IP that they generate.

Viewed from a duty of care, or commercialisation

perspective, students are generally not as well placed,

or resourced, as the university to effectively exploit IP.

Specifically, individual students rarely have weight equal

to that of the university when it comes to commercial

negotiations. Consequently, assignment of the IP and its

management by the university is likely to be in student’s self interest.”

Brian McCaul, Research and Business Services,

The University of Liverpool

With growing expectations that universities should

assist in economic development and, in particular, with

the growth of the student enterprise agenda, driven by

Science Enterprise Challenge and similar schemes, the

issue of management of student IP is likely to come

increasingly to the fore. An important aspect of this

enterprise agenda is the integration of IP tuition and

awareness seminars within the student curriculum.

Some universities have sought to address these issues

in the registration process. Often this is done by

including a blanket assignment of all IP that will be

generated by students during their time at the

university to the university. If this position, with its

evident benefits of clarity and uniformity, is adopted it

is important that it is done in an open and transparent

manner and that the legality of this contract is

professionally assessed. Alternatively, assignment

might be sought on a case-by-case basis, where

valuable IP arises, or a hybrid model, adopting different

approaches to different faculties might also be

considered.

With either approach, but particularly when seeking

blanket assignment, it is advisable that the process

and rationale are clearly explained. This might beachieved by including prior notice in student

prospectuses with a more detailed explanation in the

relevant student registration pack. In addition, a

distinct acknowledgement of the assignments might

be considered. The additional overheads of

procedures designed to secure broad assignment of

IP will, however, need to be fully considered.

Whichever procedure is adopted treating students akin

to members of staff in terms of the benefits of

supporting patent costs, and in terms of the

3. Ownership of IP andnegotiations with

sponsors



distribution of royalty income or equity can be powerful

incentives for achieving full consent to assignment of

student generated IP.

Another issue relates to IP arising from research

sponsored by an external organisation. This does not

include research funded by the higher education

funding councils and most of the research council

programmes where ownership is generally retained by

the university. It is not one of ownership per se, but the

scope that parties have to use, and manage, the IP.

The key requirements for universities are:

• the ability to use results in future research. In

cases where sponsors are also collaborators,

this may require access to IP which

collaborators have brought to projects

• the ability to benefit from the exploitation of the

IP, both directly and in combination with other

research results

• to ensure that results are put to use, whether

commercially or otherwise. This may be

important, since commercial behaviour can

often involve not exploiting IP or using patents

to block other firms’ technological activity and

to force competitors to work around protected

technological solutions.

In principle, all these requirements can be

accommodated within agreements that assign IP to

the sponsor. Access to results can be accommodated

by (free) licensing arrangements. The university can

take a share of revenue generated by the IP owners,

and doubts over the sponsor’s ability, or willingness, to

commercialise results can be addressed by

introducing penalty clauses for failure to exploit,

including reassignment of IP to the university.

However, in practice it may be simpler, and more

effective, for universities to guarantee these rights

through the ownership of IP. Licence-back deals which

seek to cover a range of possible situations can

become complex. In addition, verifying whether

owners are meeting their obligations to exploit can be

costly and, in some cases, virtually impossible. As a

result, there are good reasons for universities to seek

ownership of IP.

The issues are, however, similar from the sponsor’sperspective, including the relative merits of ownership

versus access via licensing. Narrow commercial

considerations may be relatively more important to

business sponsors than to universities, but charities

are major sponsors of university research and their aim

will be to see research applied, and used in future

research, as well as to generate income.




IP agreements reflect the outcome of negotiations,

which in turn reflect the inputs of the parties and the

benefits they expect to derive from various outcomes.

Ownership of IP by the university is one outcome that

universities can seek to negotiate in certain

circumstances. In the next section, the factors that

need to be taken into consideration during

negotiations are discussed.

The position of government sponsors with respect to

the ownership of IP is changing. Recent guidelines7

produced by the Patent Office start from the position

that IP generated in publicly funded research should in

general be vested in the organisations that do the

research. The rationale is that the research provider is

better placed to identify some form of economic

exploitation than the government sponsor. One

important caveat, however, is that those owning the IP

must have access to the skills and management

capability needed to handle the task effectively. These

Guidelines are reflected in the Ministry of Defence’sposition on ownership (Figure 3.1).

Figure 3.1: The Ministry of Defence’s new

approach to IP ownership

The Ministry of Defence (MOD), which funds a

significant volume of contract research in universities

and industry, has recently changed its policies to

bring the treatment of the two groups into line. MOD

will henceforth only seek ownership of IP resulting

from the contract research in limited circumstances,

typically the following:

• where the results have a particular military

sensitivity – e.g. in relation to nuclear, chemical or

biological weapons

• where the results will be commercialised in the

aggregate with other IP owned by MOD, which

may be MOD-generated IP or IP generated by

other contractors

• where the work provides direct assistance in the

formulation of government policy or in the

management of MOD’s business

• where the research provider is unwilling or unable

to protect and exploit the results satisfactorily.

In general, MOD will allow the research provider to

own the IP resulting from its work for MOD, subject

to the grant of a free non-exclusive licence to MOD

for MOD’s normal UK Government requirements. The

research provider will be responsible for making

decisions about the protection of IP, for securing


sponsors

7 Intellectual Property In Government Research Contracts, Guidelines for Public Sector Purchasers of Research and Research Providers – The Patent Office December 2001. Available from:

http://www.patent.gov.uk/about/notices/index.htm



such protection for itself, and for the cost of securing

and maintaining this protection. MOD will have rights

to oversee the progress of commercial exploitation by

requiring the research provider to provide an

exploitation plan and to engage in discussions with

MOD on the matter, but MOD will not take a

reversionary right.

The MOD’s new policy suggests that a strictly non-

negotiable attitude to ownership of IP or a narrow

approach to the granting of licence rights to the

research customer could restrict the ability of a

university to attract contract research work.

3.2 Negotiating with research

sponsors

It is necessary for research partners to recognize the

divergence of views that can occur between

universities and sponsors. The key issues that need to

be considered when identifying potential partners arehighlighted in Fig 3.2.

Figure 3.2: Identifying potential partners

Universities must recognise that:

• industry often needs help in finding relevant

services or solutions to their problems

• in many cases companies may be unaware of

their problems

• industry would prefer to see universities seeking to

understand their needs and then discussing and

offering research and other outcomes directed at

meeting these needs

• if the university makes the first approach, it should

ensure that it packages its assets in the form of

possible solutions to problems, which that

particular company needs to solve, or in terms of

deliverables, which are relevant to that company’s

business.

Correspondingly, industry should understand that:

• universities do not have identical mission

statements and they differentiate themselves by

cultivating different strengths and through

pursuing different priorities

• the focus of some university departments may be

international, while the focus of others may benational or regional

• research has a cost and universities are not

funded to provide research services for industry

from the public purse

• a university’s most significant contribution may be

in the medium to longer term.




The sub-sections below discuss key aspects to

consider in IP negotiations. However, there is a more

general point. Most universities will seek to negotiate

ownership, and other aspects of the IP agreements,

on a case-by-case basis, but the outcomes may

come to be interpreted by sponsors as university

policy. This implies that the reasons why certain

positions have been taken need to be articulated, but

also that the university needs to monitor how it is

perceived by sponsors. Issues to consider when

negotiating over the ownership of IP are discussed

below.

3.2.1 Joint ownership of IP

There can be problems associated with

the joint-ownership of IP, and normally

it is best avoided as a solution unless

carefully thought out protocols and

exploitation rights are defined

One potential solution to the question of who should

own the IP arising from externally funded research is

for joint ownership to be agreed. However this solution

is rarely advocated because8:

• potential licencees of a technology will prefer to

avoid dealing with more than one owner, as this

complicates the negotiation process and can

embroil them in disputes between joint owners

• joint ownership involving organisations from

the commercial and charitable sectors (which

includes universities) can give asymmetric

advantages to commercial organisations. Any

partner seeking to issue a licence must obtain

formal permission from the other partners.

However, the commercial partners could, in

principle, exploit the technology themselves,

whereas the charitable organisations cannot

trade on the same commercial basis.

Contractual provisions that limit the asymmetry

of advantages can be determined but at the

expense of greater complexity

• each country has different laws governing

what each joint owner of IP can do. In some

countries, either owner can act without the

other knowing, whereas in other countries,

they can only act together. Joint owners could,

in principle, end up destroying the commercial

value of the IP because of ill thought outactions. As a result, joint ownership is

particularly problematic when international

exploitation is anticipated.

Joint ownership should not, however, be dismissed

out of hand. Provided that carefully thought out

protocols and exploitation rights can be defined for

dealing with any asymmetry of advantages, this

approach may be feasible. The NHS is currently


sponsors

8 Parts of the guidance that follows on joint ownership are based upon that provided in the handbook on IP management produced by the NHS Trusts.



examining possible approaches to joint ownership

arrangements as a means of dealing with the HE/NHS

interface.

3.2.2 The nature of the research

Sponsors’ attitudes will depend, to

some extent, on whether their aim is to

integrate results into their core

technologies

The extent to which the advance in knowledge aimed

at is ‘stand-alone’ or depends, for its usefulness, on

strong synergies with other research projects (which

may be being carried out in different universities and/or

disciplines) will also shape the attitudes of sponsors. If,

for example, the sponsoring company is seeking

incremental advances that it will integrate with other

knowledge and IP in order to deliver a useful

technological package, the expected value of each

individual project to the sponsor may be comparativelylow. Figure 3.3 provides and illustration taken from a

CASE studentship9.

Figure 3.3: IP ownership and CASE studentships

– a view from a Research and Technology

Organisation (RTO)

“Industry sometimes sponsors post-graduate

students via CASE studentships and other such

arrangements. Although additional funding comes

from other, usually public, bodies such as the

Engineering and Physical Sciences Research

Council (EPSRC), it is left to the university and the

industrial company to agree the terms and

conditions of the sponsorship, including IP matters.

In the past, it was usually agreed that all IP arising

would be assigned to the company. Recently,

universities have been insisting that they retain IP. It

is interesting to consider the effect of such changes

from both parties’ viewpoints.

Industrially sponsored studentships are useful to the

university for a number of reasons. The research

work involved will be more relevant to industry needs, contact with the company’s staff will improve

the university’s understanding of industrial trends

and practices, additional money will be available for

both the department and the student and, finally, the


9 Cooperative Awards in Science and Engineering, PhD studentships jointly funded by industry and the research councils.



student has an improved chance of employment in

industry upon completion. Ownership of the IP

arising will allow the university to continue working in

the field, and may assist in teaching the subject.

The usefulness to industry comes from more

focused research, access to expert academic staff

and an opportunity to see how the student performs

before considering employment offers. To get the

most benefit from the arrangement, industry will

choose research topics close to their needs.

However, within the normal duration of a

postgraduate studentship, incremental advances in

the current research activities of the company are

probably the best that can be achieved. If the

university insists on ownership of arising IP, this

gives the company great difficulty. For research to

be valuable to the company, they must be able to

use it for their needs. If ownership is fragmented,

the IP is reduced in value, and control of future

activities is weakened.

In such situations, industry will evaluate the

advantages and disadvantages of any deal and may

simply conclude that it is not worth the risk to

support studentships in topics close to the core

activities and interests of the company. It will choose

peripheral topics and both parties will lose out. The

university will be kept at arm’s length from the real

interests of the company and the company will not

obtain the best possible research inputs for its future

developments. The student will have least to lose,

but will be slightly less valuable to the company than

if they had been able to work on more interesting

topics.

A possible route out of this impasse is for the

studentship agreement to recognise the needs of

each party; to allow for assignment of the IP when it

is necessary for the core activities of the company,

and to guarantee the appropriate licences to the

university so that the freedom to carry out future

research and teaching is protected.”

Anonymous

Figure 3.4 illustrates how one company’s position

varies according to the nature of the research

sponsored, and also the direct costs of IP

management.

Figure 3.4: A transaction cost based approach to

negotiations over IP ownership – Microsoft

Research Ltd

Doctoral Research

Microsoft Research Ltd funds doctoral students to

carry out work that is intended to enter the public

domain at the earliest opportunity. The company

does not seek to own any IP generated by this


sponsors



research because (a) valuable IP from a PhD project

is unusual, and (b) the time and effort (i.e. transaction

costs) involved in project-by-project negotiations with

different universities in several countries would make

such funding un-economic.

Microsoft Research Ltd is happy to fund doctoral

research, provided that it is able to draw upon the

research results without making an additional

payment to exploit the IP.

Other Research

As regards other research, the company draws a

distinction between specific work that it wants done–

in which case it does seek to own the IP - and more

general work, in which no commercial advantage is

anticipated. In the latter case, the same approach is

taken as in funding for doctoral research.

Weighing up transaction costs relative to

expected benefitsBy offering a deal for smaller amounts of funding that

is attractive, while being non-negotiable, the

company seeks to minimise its transaction costs in

funding research. This allows it to fund a wider

portfolio of relatively small projects than would be the

case if the transaction costs were higher. For larger

projects, the expected benefits are sufficiently great

that the higher transaction costs associated with

negotiations over IP are worth bearing.

Approach when a University seeks to secure

rights over IP

A university is free to seek to obtain patents for IP

arising from the research funded by the company –

but only at their own trouble and expense. If a patent

is taken out, the company insists on having a non-

exclusive, world-wide, and royalty free assignable

and sub-licensable licence.

Note: this approach to negotiating over the ownership of

IP is specific to Microsoft Research Ltd based in

Cambridge (UK) – it does not necessarily apply to other

parts of Microsoft Research.

3.2.3 Relative contributions to

research costs

Negotiation over ownership of IP will, in

part, be influenced by the price that

sponsors pay and the extent to whichthis may meet or exceed the full

research costs. Also the intellectual

assets brought to the project and also

other benefits derived by the sponsor,

such as access to international

research networks may have an

important bearing on ownership.




The value of benefits in kind provided

by both parties will need to be

considered in this context

Because there are risks involved for those contributing

to research, development and market introduction

costs, the relative contributions and expected

contributions to these costs are critical considerations.

With respect to research, the main issue relates to

contributions to the full costs of research – both direct

and indirect. A basic principle is widely accepted,

namely that the research sponsor’s capacity to

negotiate over the ownership of IP is proportional to

their share in the full cost of the research (including

overheads). The more payments by the sponsor

exceed full costs the less likely that universities will be

able to retain ownership.

Care should be taken in applying this principle. First, it

is necessary to ensure that the full direct and indirect

costs of research have been calculated accurately bythe university.10 Second, university research groups

have intellectual assets arising from previous investment

and by virtue of membership of networks of wider

research relationships, often involving many different

sources of funding. Indeed, the role of researchers

within international research networks, a role greatly

facilitated by the Internet, is precisely why some high-

technology companies seek to fund academic

research. It provides them with access to a wide body

of expertise which can be particularly valuable when

responding to unforeseen events and in alerting them

to breakthrough discoveries and to competitors’

research strategies

There is consequently a far wider, and often more

valuable, intellectual asset base than is captured solely

by the background and foreground IP involved in

negotiations. It is unlikely that any cost recovery formula

will fully account for the value of this underlying

intellectual asset base. Consequently, the payment of a

‘full’ research costs is not in itself sufficient justification

for a sponsor owning all the IP (Figure 3.5).

Figure 3.5: An industry view on the influence that

the type of research has on the ownership of IP

“In negotiating the ownership of IP arising from sponsored research it is essential to distinguish

between ‘contract’ and ‘new knowledge generating’

research. Contract research is, in this context, the

situation in which an industrial party contracts an

academic to produce a set of results requiring no or

little new intellectual input, even though special


sponsors

10 UK universities have recently done much work on introducing rigorous systems of costing for the Transparency Review (www.jcpsg.ac.gov.uk/transpor).



expertise may indeed be needed, e.g. doing a survey

or running some samples (provided by the sponsor)

through a technical screen. In this case the results

(data) should, in effect, be purchased (and owned) by

the contractor (sponsor) by paying on a ‘costs plus’

basis, i.e. fully overheaded costs of doing the work

plus a margin on top, negotiable depending on how

uniquely placed (or not) the academic is to provide

the work. For some academic institutions, conducting

contract research may be outside their remit or

constitution.

In contrast, ‘new knowledge generating’ research is

where the academic will be using their special

expertise and intellect to do true exploratory research

(whether basic or applied) to uncover new useful

knowledge and provide solutions to problems (make

inventions) etc. In this situation merely covering the

costs of the research doesn’t buy the Intellectual

Property assets created by it.”

Dr Jan Chojeck, Managing Director, Plant Bioscience

Limited

The value of benefits in kind brought to the research

both by the university or universities and the sponsoring

company or companies will also need to be considered

in the negotiation. In addition, it may be necessary to

take into account the ownership and exploitation rights

in any wider IP portfolio that the particular IP generated

depends upon for effective exploitation. As a result,

complex trade-offs may have to be made in the

negotiation.

3.2.4 The demonstrated capacity of

the IP management office to

maintain an IP portfolio

effectively

Universities will be in a stronger

position if they can demonstrate the

capacity of the IP management office to

maintain an IP portfolio effectively

The primary reason cited in the business sector for

seeking ownership of IP arising from industrially funded

research is the risk that the university will not have the

capability to manage the IP effectively and, as a result,

will damage the company’s competitiveness. Oneexample of a failure to manage IP effectively is missing

the strict deadline for a patent renewal due to

administrative inefficiency.

The strength of this argument is inversely proportional to

the demonstrated credibility of a university’s IP

management office in managing IP effectively. As




cumulative experience increases from the successful

handling of a growing deal flow, external confidence in

the capacity of the university also increases. The

investment risk associated with not owning IP therefore

declines.

In conducting negotiations over the ownership of IP, it

will therefore be helpful if universities can demonstrate

that they do have a good track record in maintaining an

IP portfolio, by highlighting the absence of problems and

inefficiencies. The monitoring and evaluation framework

can play an important key role in these negotiations and

it should therefore be designed with this use in mind.

If a university has traditionally assigned ownership of IP

to research sponsors (where this is insisted upon), it will

be more difficult to demonstrate the required track

record in maintaining an IP portfolio. This will tend to

reinforce the assignment of IP to business and

charitable sponsors, unless new arrangements to work

with third parties and/or collaborate with moreexperienced IP management offices are put in place.

Such arrangements can provide tactical advantages in

IP negotiations, by removing a major stumbling-block to

the university maintaining ownership.

3.2.5 Risks associated with the use of

licence-back arrangements

Special attention should be paid to risks

that future university research carried

out under licence-back arrangements

could be constrained

The potential loss to a university

through assigning ownership of IP, given

the potential for ‘bundling’ IP arising

from several different research projects,

should also be considered

When a sponsor seeks to own the IP arising from the

research, the university should seek a licence-back

arrangement in order to guarantee unconstrained future

research. This can be a practicable approach as long as

any contractual problems that may emerge have been

anticipated and addressed (an area requiring specialist

legal advice). One key consideration in such

negotiations is the implications for the university’s abilityto bundle together IP arising from several different

research projects funded from different sources. It is

easiest to produce an IP bundle if the IP is owned by

the university and the costs to be incurred will tend to

be lower. Complications can emerge when seeking to

create a comparable assembly of IP based on licences


sponsors



from different types of research funder. This is one main

reason why leading US universities seek to maintain

ownership of IP.

3.2.6 Companies’ overall need to

minimise their investment risks

Companies need to minimise their own

investment risks. This can be

accommodated even if the university

owns the IP

One argument put forward in favour of companies

owning IP is that they will usually have to commit

substantial risk capital in the commercialisation process.

Anticipated exit points in the investment process allow

external investors to calculate levels of commercial risk.

Possible investment exit points are very valuable in

reducing the investor’s perceptions of the investment

risks involved (thus increasing the probability of investment).

Particularly in a start-up or spin-out company,

possession of tradable IP enhances these exit points

and can lower the risk and size of the losses faced. The

lower the tradability of the IP portfolio, the less attractive

the investment, and tradability is highest when IP is

owned. However, the company can be granted a right

to sub-licence. Transaction costs may be higher than if

IP is owned by the company, and the time required to

complete a sub-licence may be longer than that

required to assign/sell the IP. But, the company is still in

possession of tradable IP, albeit of a lower value than if it

owned IP. (Figure 3.6)

Figure 3.6: An industry view on investment risk

minimisation and the ownership of IP

“It is understandable that start-ups (and their

investors) like to own title (although in some cases

exclusive licences should be sufficient). However, this

point only relates to IP that exists at foundation of the

company. As regards IP generated by sponsored

research, start-ups are in the same situation as other

companies. Exploitation rights are more important

than ownership. As a licensor (e.g. university)

providing technology to a start-up, you are taking a

risk as well as others investing their personal time or

their money under management. The risk is that the

technology gets locked into a company that fails early

on, maybe for reasons unrelated to the technology.Licensing in the initial stages, with the possibility to

assign later, at least gives some protection.”

Dr Jan Chojeck, Managing Director, Plant Bioscience

Limited

It is sensible to be sensitive to this issue when

conducting negotiations over the ownership of IP.

However, even if the university retains ownership of the

IP, ways can be found to provide appropriate sub-




licensing contingencies that will help to make the

company’s licences more liquid and consequently help

to reduce their investment risk.

3.2.7 Sharing returns from

exploitation

Agreement will normally need to be reached over the

share of revenue due to one partner from the

exploitation activities of another. Revenue shares should

reflect the inputs of the parties to research (both

intellectual and financial) and existing IP which they bring

to the research (background). However, significant

costs, and risks can be incurred during exploitation, and

revenue shares need also to reflect how these are

shared between partners. Figure 3.7 illustrates the

position, and experience, of one university in this

respect.

Figure 3.7: Negotiating with research sponsors

over revenue shares – experience at the

University of Nottingham

Negotiating with research sponsors over shares of

potential revenues can be difficult unless there is a

shared understanding of the costs and risks

associated with seeking to generate these returns –

and who is taking these investment risks.

“We actively negotiate what the funders’ share of

revenue should be, taking into account (a) who takes

the commercial risk on patent costs and (b) who

takes the lead on commercialisation. Some charities

who have asked for a 50 percent share of income

have accepted our arguments that this is inequitable

where we bear sole financial risk on patent costs and

undertake the commercialisation effort, and have

reduced their share to 30-35 percent. Where others

have refused to do so, we have made it clear that

our reduced share of revenue will be a factor to beconsidered in our decision whether or not to

commercialise, and that consequently we may

choose not to commercialise a project that we would

otherwise have taken forward.”


sponsors





4 Incentives 60

4.1 To whom should incentives apply? 61

4.2 How should incentives be applied? 65

4.3 Relationship to other university policies 69


4. Incentives



Knowledge transfer is, increasingly, a mainstream

activity for academic staff, but most universities

consider it necessary to provide incentives for

academic staff in order to encourage their involvement

in IP exploitation. This is for several reasons:

• many staff consider teaching, research and

administration to be their core duties.

Commercialisation in general, and the exploitation

of IP in particular, make additional demands on

them. This is obviously the case with spin-out

companies, but also applies to other means of

exploiting IP. Inventors need to have at least some

involvement in securing patent protection, and

interaction with licencees will often be required

• there are various incentives for staff to engage in

other kinds of knowledge transfer activities and in

the case of consultancies, these often include

individual financial benefits. Unless a decision has

been taken to favour other forms of knowledgetransfer over IP exploitation, incentives need to be

balanced across different activities

• to ensure an equitable distribution from any returns

arising from the commercialisation of IP

The rest of this section discusses key aspects of

incentives policy: to whom should incentives apply?

how should they be applied? how should incentives

relate to other university policies?

4.1 To whom should incentives

apply?

Incentives can have an important role

in encouraging staff to engage in

exploiting IP

In principle all those directly involved

in generating IP should benefit, and

dealing with students at least as

generously as staff can encourage

them to use university IP management

resources. There are also arguments

for rewarding non-academic staff,

when their inputs are above and

beyond their normal responsibilities

Allocating a share of returns to the

department/unit compensates other

staff for the indirect contributions they

make to generating IP

Incentives clearly need to apply to those primarily

responsible for generating IP, that is the inventors, but

this raises two further issues. First, how are the

inventors defined and identified? Disputes over

inventorship or authorship can arise in universities and

it is important to clarify the position as soon as

possible. Disclosure record forms and databases are

helpful in this respect. It is also critical that no mistake

is made in terms of inventorship when filing for a US

4. Incentives



patent. Patent agents may assist in the resolution of

disputes and, as a last resort, the university may need

to provide contingency funds in case claims are made

in the future.

The second issue relates to student involvement. As

was discussed in section 3.1 universities cannot

automatically claim ownership of student generated IP.

However, because of the IP management resources

available to universities, there are arguments for

universities encouraging students to exploit their IP

through the university. This suggests that students

should be treated at least as generously as academic

staff in so far as incentives are concerned in order to

encourage them to use the IP office

The purpose of inventor incentives is to promote

directly the generation and exploitation of IP, but there

are important issues relating to other staff in the

department or unit. Other academic staff may make

indirect contributions to IP generation. They may, for

example, have assumed higher teaching ormanagement loads thereby freeing up the time of

those directly involved in the invention and, more

generally, they are part of the academic community

from which the invention has arisen. These factors,

and also considerations of equity, suggest that other

academic staff should benefit from the exploitation of

IP generated by colleagues. It needs to be clear,

however, that if a reward is made to participants (who

are non-inventors) then this does not accord joint

inventor status; otherwise further disputes could arise.

As discussed below, some universities achieve this by

allocating a share of exploitation revenue to the

department in question.

The issues are less clear-cut in relation to non-

academic staff within a department. Technicians can

make a very real contribution to IP, both in terms of

prototype development but also in the know-how and

ideas they can bring to commercially relevant research.

However, their input may not be part of their normal

duties and, as such, there is less of an argument for

ownership of IP. Incentives to encourage them to allow

the university to manage the IP they generate may be

important. When technicians are also inventors, there

is an argument for reward structures similar to those

that exist for academic staff. The incentive structure

needs to recognise and distinguish between these two

kinds of contribution.

The third group of staff involved in the exploitation of IPare the IP managers, and there is an important

decision as to whether incentives should be applied to

them, and if so what kinds. The principal argument for

incentives is quite different from that which applies to

academic and other staff. The skills and experience

required for effective management are in high demand

in the private sector and universities can face

difficulties with recruitment and retention. Incentives

can improve the attractiveness of the financial package

4. Incentives



that universities are able to offer in return for successful

performance. It should, however, be noted that while

IP management skills are undoubtedly in short supply,

universities do have considerable latitude in the

salaries they can pay senior managers.

There may also be drawbacks in providing incentives

to management staff based on individual deals:

• high financial returns to IP management typically

arise from a few very successful cases within a

large portfolio. If a university is not generating

sufficient volume, it is unrealistic to expect high

returns and therefore difficult to devise operational

incentive schemes

• there will always be an element of luck about

which cases are assigned to a particular officer,

and actual returns (on an individual manager basis)

could reflect case assignments rather than

performance

• incentive structures may create a bias towards staff

favouring deals that provide early, but lower,

financial returns

• IP managers may devote excessive effort to a few

cases which they judge to have the best financial

potential, and to making deals, rather than

encouraging staff to generate IP. Prioritisation is

important, but the IP office also needs to provide a

service function to academic staff.

Some, but not all, of these potential drawbacks can be

avoided, if the incentive scheme relates to the IP

portfolio as a whole rather than individual cases.

Nevertheless such an approach could cause tension

with other university staff.

Some universities are considering whether incentives

might be appropriate for IP managers although, to

date as far as we are aware, none have introduced

such systems so far. As such, it is not possible to

draw on actual experience for the purposes of the

Guide. However, institutions seeking to move to such

a system will need to consider:

• their willingness and ability to pay competitive

salaries for IP managers

• whether the deal flow is likely to be such that any

scheme would provide real and attainable

incentives

• how the activities of IP managers can be

monitored in order to ensure that the incentive

structure is helping contribute to meeting strategic

aims, rather than distorting management of the

portfolio.

Finally, universities need to consider whether there are

other mechanisms that may be deployed to offer the

generality of university staff greater opportunity to

share in the gains arising from the inventiveness of the

university research community as a whole, at least for

4. Incentives



universities where there is a substantial IP-based

portfolio of investments. A current case in point is the

situation at Imperial College (Figure 4.1), where

thought is being given to the design of a preferential

vehicle through which College employees can buy

shares, at an early stage, in the portfolio of spin-out

companies coming out of Imperial.

Figure 4.1: Incentives and Imperial College

There is an emerging consensus across the range of

universities as to how rewards should be

apportioned between inventors, their departments

and the university. By contrast the question of how

to allow other university staff members to share in

the profits created through spin-out companies has

proved a very complex issue. Imperial College (IC)

has been keen to find a way of widening access to

the potential benefits from successful

commercialisation across its staff members, but in a

way that avoids potential conflicts of interest.

IC asked Company Guides, a company that

supports commercialisation by universities, to look at

possible approaches to widening access to the

gains from spin-outs. Company Guides proposed a

collective investment scheme restricted to IC staff,

students and alumni. This fund would make early

stage investments in a range of IC spin-outs,

participating alongside venture capital investors,

thereby becoming involved at a much earlier stage

than would usually be possible for small individual

investors.

This initial idea was developed further by Company

Guides, which researched attitudes in some 44 HEIs

during the summer of 2001 to assess what interest

individuals might have in putting money into such an

investment vehicle. Potential interest was indicated

by some 62% of academic staff, 47% of support

staff and 60% of alumni. The scale of interest they

evinced was, respectively, £2,300, £2,000 and

£9,200. Two thirds took the view that the possibility

of some form of tax break, along the lines of those

available to other investors in start-up companies,

would be important in determining whether to

participate.

The obvious vehicle, a Venture Capital Trust (VCT),

could not be adopted unmodified as it has to be

quoted and therefore open to the public.Furthermore, most venture capital backed university

spin-outs are structured in ways that cut across a

number of current VCT rules. Company Guides has

put a proposal for a revised VCT scheme to the

Government. There may, however, be other options

for achieving the goal.

4. Incentives



4.2 How should incentives be

applied?

Incentive structures need not be

restricted to financial benefits. Support

for academic staff engaged in IP

commercialisation, and consideration

of IP-related activities as a criterion for

promotion, can also be important

Formula-based schemes for sharing

revenue between the university and

inventors are well established and

effective

Equity stakes may not be the best way

of compensating departments for the

temporary loss of staff to spin-outs,

and more direct and immediate

financial compensation should also be

considered

This section is primarily concerned with financial

incentives, but it should be emphasised that other

incentives are possible and, indeed, used with effect

by some universities. The majority of academics did

not choose their careers solely on the basis of financial

rewards, and thus financial incentives are unlikely to be

the complete answer. There are two main

supplements to financial incentives:

• explicit consideration of IP generation and

exploitation as criterion for promotion

• providing time to engage in IP-related activities.

This assumes particular importance in relation to

spin-outs, where staff may be granted leave of

absence, but there may also be scope to relieve

staff of other duties in order to enable them to

concentrate on exploitation through patenting and

licensing.

Financial incentives need, as a minimum, to meet a

number of requirements. They should:

• encompass the various groups mentioned in the

previous section

• be transparent and widely understood

• be fair and treat all inventors in a similar fashion

• reflect the returns generated

• be large and immediate enough to influence

behaviour.

Most universities have adopted a formula-based

approach to the allocation of returns from licensing

and sale of IP and some examples are given in Figure

4.2. Most embody a number of common themes:

4. Incentives





Formula-based approaches are, in general, an effectiveway of providing incentives. Each university needs to

decide what constitutes a fair return to the individual

and the institution, but it is probably true that variations

in the share allocated to individuals will have

comparatively little effect on perceived incentives and

behaviour. Significant differences between universities,

however, may be problematic if researchers from

different institutions are collaborating on a project that

generates substantial commercial returns.

One difficulty with these incentive schemes is that, giventhe time lags between invention and commercialisation,

rewards to inventors can accrue some time after the

academic input and this may lessen the effectiveness of

incentives. Universities could make projections of likely

returns and make payments in advance, but, given the

high levels of uncertainty involved, this would be a high

risk strategy and there is, in practice, little universities

can do to synchronise returns and inputs. However, it is

interesting to note that the Medical Research Council’s

4. Incentives

Imperial College

Net Revenue Inventor(s) Department Centre

First £50,000 75% 12.5% 12.5%

Next £200,000 50% 25% 25%

Over £250,000 25% 37.5% 37.5%

University of Cambridge

Net revenue Inventor(s) Department University

First £20,000 90% 5% 5%

Next £40,000 79% 15% 15%

Next £40,000 50% 25% 25%

Above £100,000 33.3% 33.3% 33.3%

Oxford (if Isis Innovation Ltd is used)

Total net revenue Inventor(s) General Fund Department Isis

Up to £72,000 63% 7% 0% 30%

£72,000 to £720,000 31.5% 21% 17.5% 30%

Over £720,000 15.75% 28% 26.25% 30%



incentive formula is based on gross rather than net

returns11. The rationale is that since patenting costs are

all incurred up-front any rewards based on net returns

will inevitably take longer to realise. Universities may

wish to consider such a scheme. The share going to

individuals could be reduced, to reflect calculations

based on gross rather than net returns. But the

university would be assuming a higher level of risk,

which it might find unattractive.

Spin-out companies typically require higher levels of

commitment from inventors, at least in the early stages.

In addition, there are higher levels of uncertainty over

returns, but also the prospect of higher returns than

might accrue to licensing, since the spin-out will take

research outputs closer to market, thereby reducing the

risk attached to its exploitation. For these reasons,

giving inventors a share of the equity in a spin-out can

be a more appropriate way of providing incentives than

a simple share of returns. Inventors have a direct, and

continuing, interest in the company’s success, andfinancial risk to the university is minimised.

Greater care to avoid conflicts of interest may be

necessary, however, when researchers hold equity in

spin-outs. Should the company encounter commercial

difficulties staff may be under more pressure to divert

from academic to company duties, especially if they are

also directors with legal responsibilities for the

company’s commercial health. Arrangements for the

use of university facilities by the company, and contracts

with staff and research students, also need to be

monitored carefully.

Universities may also grant inventors leave of absence

during the early stages of company development, and

this provides a further incentive to engage in spin-out

related activities. However, it also raises further issues.

The department in which the inventors are based will

bear the main costs of temporary staff losses. This

suggests that the department should also benefit from

any returns, otherwise there is little incentive for heads

to encourage staff to generate spin-off companies and

provide the initial time and resources required. One

possibility is to allocate a share of the equity to the

department, in an analogous fashion to departmental

shares of licensing income. However, this may not meet

departmental needs adequately, since the timescales to

realising cash returns can be very long, and high levelsof uncertainty will be attached to expected returns. A

more effective incentive, for departments, is likely to be

additional resources, which they can use to replace staff

time. This would mean, however, that the university is

absorbing more risk than if the department took an

equity stake.

4. Incentives

11 As applied to researchers in Medical Research Council institutes. University grant holders are, of course, subject to university rules.



The discussion above has, with the exception of

patenting costs, been in terms of sharing returns to IP

exploitation. Costs are also incurred, both for IP

management staff and patenting activities etc, but also

because university resources may be used to develop

ideas to the stage where commercialisation becomes

feasible. This raises an important issue as to whether

costs incurred should be reflected in incentive schemes.

The potential advantage of such an approach is that

incentives would be more closely aligned with net

returns to the university in order to offset the investment

risks it is taking. However, there would also be a

number of difficulties:

• individual incentives would be reduced, especially if

rewards were only paid after all university costs had

been met. If the priority is to transfer knowledge to

users, rather than to maximise financial returns, then

this becomes a serious consideration

• attributing costs to specific deals could discourageacademic staff from making full use of IP

management resources

• collecting cost data could itself add to exploitation

costs.

For these reasons, it is doubtful whether incentive

schemes explicitly reflected costs would be appropriate

or effective and, the consultation process did not reveal

evidence of any university having adopted such a

scheme. Nevertheless, it is important that all staff are

aware of the efforts the university is devoting to IP

management, and the associated costs, if only to

promote realistic views on the financial costs and

returns from IP exploitation.

4.3 Relationship to other university

policies

This section concludes with two brief comments which

reiterate points already made in the Guide. First,

universities transfer knowledge in many different ways,

including contract research, consultancy and

professional development. The incentives available to

promote the commercialisation of IP need be consistent

with the university’s strategy in relation to these other

knowledge transfer mechanisms.

The second point is more general. All disciplines have

the potential to generate financial returns through the

exploitation of IP, but the opportunities are far greater insome disciplines than in others. If opportunities are to

be fully exploited, then rewards need to reflect abilities to

generate revenue, but if universities are more than a

collection of separate disciplines then those

departments with lower potential also need to benefit

from the revenue generating potential of others. As

such, the balance between the university’s share of

returns and those of the inventor and department needs

to be considered in the context of more general policies

of distributing income within the institution.

4. Incentives







Figure 5.1 shows how these processes are linked together at the Robert Gordon University.

5. IP managementfunctions

S c r e e n i n g S t a g e 1

S c r e e n i n g

S t a g e 2

S c r e e n i n g S t a g e 3

I m p l e m e n t a t i o n

Enquiry

Received

Identify Target Market etc.

Assess byManager

IdentifyBusiness Model

Assess byManager

Assess byManager

Assess byPanel

Assess byBoard

Recommended forFast Track

Recommended FurtherDevelopment

Approve Fundingto agreed limit

Develop BusinessPlan & Partners

ImpementBusiness Plan

Support andMonitor Success

ApportionRewards

reject

reject

reject

select

AppealsProcess

submit to panel review

select

review in3 months

if withinagreedfunding

limits

© Robert Gordon University



5.2 The IP office: location and

structure

A range of models exists for

structuring IP offices and there are

examples of all types working well. The

key requirements are to ensure that IP

staff develop a constructive rapport

with researchers and that IP

management functions are closely

integrated with other university

management activities. This may be

facilitated by locating the office within

normal management structures, but

there are successful examples of IP

management being undertaken by

companies owned by universities

An important task of IP management is to increase

awareness and enthusiasm for generating exploitable

IP amongst researchers. This requires close andfrequent interactions. Physical proximity to the

academic staff is important, but the task may well be

easier if the IP office is perceived as an integral part of

the university, whatever its precise legal status.

Given the diversity and volume of relevant activity in

many universities, it is not feasible to resource the

function at a level which would enable the commercial

potential of all research to be assessed in detail.

Effective management depends to a large extent on

researchers coming forward with exploitable ideas,

and they are more likely to do so if the IP management

function is perceived as an integral part of the

university.

Effective IP management begins with the signing of

research contracts, if not sooner (see Figure 5.2), and

the IP management function needs to have influence

at this stage. It therefore needs to work closely with

whatever parts of the university are responsible for

marketing commercial and research services and

vetting and signing external contracts.

Figure 5.2: The importance of early interaction. A

view from Oxford Brookes University

“A university’s management of its IP has to begin:

generally with training and advising academics on IP

implications and opportunities (so that they can

target the most IP-advantageous ways of funding or carrying out research) and specifically at the stage of

constructing a bid for funding a particular project:

after identifying the base IP input (background) the

university is bringing to the research (including the

base position of any third party or non-employed

collaborators), the conditions of funding should be

examined in detail, so that the bid can include a

negotiating position on any disadvantageous or

conflicting IP terms (e.g. the funding conditions may




require disclosure although part of the background is

already owned by, or to be kept confidential to, a

third party). Usually a compromise position can be

found and it is essential that problems are identified

at a pre-bid stage, so that the position of having a

deadline to sign a funding contract which contains

IP terms with which the university is unhappy (and

which may be contrary to the university’s IP policy) is

avoided.”

In practice two main types of approach have evolved:

• IP management functions are undertaken by

research support services, who are also

responsible for securing research sponsorship,

contract approvals, marketing services and so on.

This may represent the closest integration with

other management functions. In many universities

staff assume IP as well as other responsibilities.

However, it is becoming increasingly common for

staff dedicated to IP to be appointed, reflecting thespecialist skills required, and also expanding IP

portfolios

• establishment of a company (wholly owned by the

university) to commercialise IP. This represents the

clearest separation between IP management and

other functions, but also offers a number of

potential benefits:

☛ because it is outside the university

management structure it can sometimes act

more quickly than would otherwise be the

case

☛ it is easier to pay higher salaries than the

normal university scale would permit, and

many IP offices have encountered difficulties

recruiting and retaining staff

☛ it may be easier for the university to monitor

and assess financial performance.

Figure 5.3 illustrates changing structures within a

university over time in response to emerging needs.

Figure 5.3: An evolving approach to organising

IP management - the University of Warwick

“For many years the University of Warwick has had

a Research and Development Services Office(RDSO) that has covered the whole spectrum of the

university’s research activities. Some 15 years ago

all staff carried a broad portfolio of responsibilities,

including the identification of research opportunities,

the discussion of research grant applications and

research contracts, and subsequently the

negotiation of patenting, licensing and dealings with

the exploitation of research results. In particular, the

Director of RDSO at that time had responsibilities for




IP, but also wide ranging activities across the

spectrum of the RDSO remit. As time progressed it

became clear that RDSO must specialise in its

various areas of operation such as dealing with

Research Councils, European funding, charitable

funding and business and industry.

As a result the Industrial Liaison Office was formed

and the Head of the Industrial Liaison Office, within

RDSO, had responsibilities for negotiating industrial

contracts and the follow-up exploitation of the

research results that came out of those contracts.

The specialised focus produced by this team proved

to be a significant improvement, so much so that it

attracted interest and activity across the campus

which threatened to overwhelm the staff involved in

the activity. As a result the Industrial Liaison Office

found itself pulled in various directions and in the

end gave priority to winning industrial and business

research contracts and had limited time to dedicate

to the exploitation of the research results thatemanated from the projects.

Some three years ago the University took the

decision to form Warwick Ventures which, in

partnership with the University of Warwick Science

Park, has responsibility for the exploitation side of

the university’s Research and Development activities

including patenting, licensing the patents, spin-out

companies and the attraction of seed-corn venture

capital funding to launch the spin-out activities.

Although very much still part of the University of

Warwick, and not a separate stand-alone company,

Warwick Ventures is housed in the Science Park on

the university campus to aid the link between

university and spin-out companies. The

Government’s HEROBC13 and HEIF 14 initiatives,

together with university funding, have enabled

Warwick Ventures to flourish, and we are now

seeing a rapid growth in the number of Business

Development Managers operating in Warwick

Ventures and also a significant increase in patenting

and spin-out activity.

In parallel it has now allowed the Research and

Development Services Office to concentrate on

working with academic staff to win research grants

and research contracts and to manage those

contracts through to successful completion. The

university takes great care that the whole area of research, innovation and enterprise operates in a

co-ordinated manner. The Deputy Vice Chancellor

with responsibility for Research co-ordinates a

Working Group that comprises the Directors of

RDSO, Warwick Ventures, the Science Park and the

Science Enterprise Challenge Fund operation which

is known as the Mercia Institute of Enterprise. All of

this is further supported by University Challenge


13 HEROBC: Higher Education Reach Out to Business and the Community Fund.14 Higher Education Innovation Fund



Funding operated through the Mercia Fund which

provides necessary seed-corn funding. Both the

Mercia Institute of Enterprise and the Mercia Fund

are collaborations with our colleagues at the

University of Birmingham and with the universities in

the rest of the West Midlands region.”15

5.3 The relationship between the

IP office and other

departments and research

groups

Consideration should be given to

identifying ‘IP’ contacts within each

department/unit

Some universities place (or identify) people with IP

management expertise within relevant academic

departments and schools of study in order to facilitate

information flows regarding IP issues. Whether or not

this is an appropriate strategy will largely depend uponthe nature and extent of the information flow problems

that may exist between the IP management office and

the departments. The advantage of expertise within

the department is that there is opportunity for informal

discussion which can highlight potential areas of IP

that would not otherwise be identified. The

disadvantages relate mainly to the cost of pursuing

this approach relative to the benefits obtained. A

compromise which has been found to work well is to

identify individual staff within departments who are able

and willing to act as the initial ‘IP contact point’ for

other staff. A period of secondment to the IP office can

increase their effectiveness.

5.4 Should notification of

inventions be compulsory?

Consideration should be given as to

whether compulsory notification of

inventions would hinder building an

effective partnership between

researchers and IP management staff.

If it is not judged to damage the

process of building this partnership

then compulsory notification may

reduce the chance that

commercialisation opportunities

are missed

The advantage of making notification of invention

compulsory is that it reduces the risk that the IP

management office will be unaware of IP generated

within the university. The disadvantage is that such an

approach can be counter-productive in an academic

environment.


15 Science Enterprise Challenge is a Government funding scheme to support a limited number of Centres and University Challenge is also a Government scheme providing a range of seed-

corn funds to support university commercialisation.



Many IP managers view the capacity of their office to

build informal partnerships with individual researchers

and research teams as a critical factor in the success

of IP management. They take the view that

compulsory notification is not necessary when such

partnerships exist. When these partnerships do not

exist, the chances of engaging in successful

technology transfer activity with a researcher who is

not particularly interested in doing so are relatively low.

Compulsory notification is unlikely to help a great deal

in this situation.

On the other hand, there are advantages in

compulsory notification and also technology audits in

ensuring that opportunities are not missed. Provided

that these procedures are swift and straightforward,

and consequently do not disrupt normal academic

activity, there is no reason why they should damage

building an effective partnership between researchers

and IP management staff.16 If the performance and

evaluation system needs to collect data on thenumber of invention notifications made each year, then

compulsory notification procedures can assist in

providing this information. Given that disputes over

inventorship are not uncommon in universities, early

and accurate recording via invention disclosure forms

can be useful.

5.5 Some complexities in IP

management

This Guide does not seek to provide advice on dealing

with the complex operational issues with which IP staff

are confronted. This section, however, presents a limited

discussion of selected topics, which have been identified

as important during the preparation of the Guide. The

aim is to give senior university managers some insight in

to the complexities of IP management on a day-to-day

basis. The topics are presented in a series of figures.

5.5.1 Practical considerations if IP

ownership is sought

Figure 5.4: Checklist of practical considerations

if IP ownership is sought

1. Ensuring clear title of IP

Established procedures need to be put in place thatwill allow the following questions to be answered:

• who are the inventors?

• who were they employed by when the invention

was made?


16 If the university’s intranet is used for invention disclosures, care should be taken to ensure that this information is secure.




• what funding were they using to support the

research leading to the invention?

• did this funding have IP conditions attached?

• what materials were used in making the

invention?

• did these materials have IP conditions attached?

2. Ensuring that patents are drafted to cover

commercially significant applications

Unless care is taken in instructing patent agents and

in assessing their work, patent applications may not

cover the commercially significant applications of the

invention. This will limit the technology transfer

potential of the invention.

3. Ensuring that there is timely and effective

communication between external investors andresearchers

External investors may require some additional

experiments to be carried out before making an

investment based on a licensing arrangement. It is

essential that effective communication takes place

between the investor and the relevant researchers

and that IP management offices facilitate and do not

hinder this interaction.

4. Ability to maintain and defend IP

In those situations in which the university seeks to

retain ownership of IP the capacity to maintain the

IP portfolio and to defend it against infringement will

be key issues examined by commercial and

charitable partners.

5.5.2 Dealing with problems in

valuing IP by selling options on

licenses

The economic value of the IP generated from university

research is characteristically highly uncertain. The

discovery of a promising new approach or an invention

represents the start of a process of determining its

technical feasibility and of estimating the likely return on

any investments made. Until risk-reducing/proof of

concept investments have been made it is often the

case that the value of the IP cannot be estimated with

sufficient accuracy to allow reasonable negotiations to

commence, let alone a licensing agreement to bereached. This process of determining the economic

value can be costly and firms will require an incentive to

undertake such an investment.

One strategic approach to this IP valuation problem is to

sell firms an exclusive option to obtain an exclusive or

non-exclusive licence after a specified period. Selling an

option delays the negotiation over the terms of the

licence arrangement until a point at which sufficient

information is available to allow its value to be estimated,

whilst providing the incentive for businesses to commit




the funding required to estimate the value. Some

universities, such as Cambridge, are now placing a

priority on selling exclusive options of this type. It is not

unusual for an option agreement to be related to a

collaborative research project aimed at determining the

technical and economic feasibility of the technology.

Although selling options to licences can facilitate the

commercialisation process by deferring IP valuations

until better information becomes available, the strategy

can also simply delay difficult and costly negotiations.

Companies may reasonably seek to have the terms of

an eventual licence specified in the option agreement (in

the form of a Heads of Agreement) and this will tend to

involve trying to estimate the value of the IP – thus

removing the advantage of selling the option in the first

place. Consequently, selling options can play a tactical

role if circumstances permit – but it is not a universal

solution to problems caused by uncertainties in IP

valuation. Figures 5.5 and 5.6 contain real examples of

recent option deals.

Figure 5.5: Recent option deals at the University

of Cambridge

a) A 12-month option was granted to a UK-based

manufacturing company for the use of a patented

invention in carefully defined types of scientific

instruments.

The option was minimally costed (essentially covering

only the University’s receipted patent costs), but the

University retained the right to market and licence the

invention to any other companies for all uses outside

those very specific types of instrument. The benefits of

this approach were:

• a focussed, specialist company was encouraged

to evaluate a new invention at a very early stage,

as their financial risk had been minimised

• the patent was “stabilised” as patent funding was

secured for the duration of the option. This period

allowed the University to embark on a more

concerted and considered marketing campaign to

other businesses and sectors

• the restricted field and term overcame the risk of

the invention becoming “locked-up” by the option

agreement.

b) A race-car manufacturer was granted an option to a

patented invention, but only for the particular category

of race-car that they produced.

The agreement included an initially modest option fee,

and a larger “milestone” payment if the technology was

to be used in a motor race. As well as securing the

patent position, various other mutual benefits flowed

from the option agreement:




• the company employed the services of the

inventor as a consultant (under a contract with the

University) in order to expedite the development of

the invention

• additional support from the company helped to

secure an EPSRC project aimed at further study

and development of the invention

• the company supplied high-value specialised

components, materials and expertise free-of-

charge to assist in the on-going research

• an introduction to a partner-company is envisaged,

with the potential for licensing into the volume

road-car market.

The intention of these arrangements was to facilitate

rapid development with a high-calibre commercial

partner, whilst retaining for the University almost all of

the future commercial rights to the invention.

Figure 5.6: Examples of option deals relating to

patents

a) An evaluation licence was granted to Company X

with an option to take assignment of the university

patent. The agreement included:

• Company X will form a dedicated business unit

around the patent on which university research

staff will sit on a consultancy basis:

• Company X will fund £100,000 of fully-funded

research at the university in the first instance, with

further projects being considered as and when

relevant

• the university’s sunk patent costs will be

reimbursed in the option, and on exercise of the

option an assignment fee of £20,000 will be

payable

• further milestone payments will be attached to the

granting of a patent

• the initial market entry will be within the scope of

the patent

• a royalty of 4 percent on sales of the product up to

£2 million gross, thereafter 3 percent, will be paid

to the university.

b) An option was granted by a university to Company

Y for a licence to an existing patent, for £100,000 for a

three year period, during which a fully-funded $2 million

research contract would be placed with the university

(with non-exclusive access rights to foreground IP, to

be owned by the university). Upon exercise of the

option at any time during the option period a further

payment of £200,000 will be received, and the parties

will negotiate in good faith for a three month period



thereafter the terms of royalty on sales and/or sub-

licensing.

c) An option deal was agreed with a local company in

which the company pays for the initial filing costs on a

patent application and pays £1,000 a month for an

exclusive option to exploit the patent, during an eight

month option period, during which time it seeks seed

funding to expand its business. If the company

exercises the option a payment of £50,000 will be

made to the university, plus royalty payments of 3

percent will be paid until the patent is granted, and 4

percent thereafter.

5.5.3 Exploiting the advantages of

investment exit routes in IP

management

This Guide has already noted (in Section 3.2.6) that

companies will seek to identify investment exit routes as

a means of reducing their overall level of investment risk. This involves identifying points in the commercialisation

process at which investment losses can be partially

recovered by selling IP or sub-licences and equipment

and materials used in the commercialisation process.

The same principle also applies to the university’s IP

exploitation activities. A strategy of identifying investment

exit routes (if things go wrong), and the effective tactical

decision-making over when to actually use these exit

routes, constitutes an important part of IP management.

Senior management should therefore ensure that the

university’s IP managers are making adequate provision

for investment exit routes in their management of the

commercialisation deal flow. This can significantly

reduce the costs associated with generating the

university’s overall returns from IP management because

the cost of failure is lower than would otherwise be the

case.

5.5.4 Business processes and

databases

One of the most important issues is the IP office’s ability

to monitor how its business processes are performing,

and to identify potential problems before they manifest

themselves. Some offices have found that formalising

procedures around case-handling decision points, with

progress tracked in a central database, can help to

increase the efficiency of business processes.

For example, the University of Glasgow has developedan integrated database on its case load (covering

research proposals etc through to commercialisation)

which automatically generates an e-mail every two

weeks to relevant university staff, informing them of the

actions that have been taken over this period. This

reduces the time spent by IP staff responding to

questions on progress made from researchers and can

help to alert staff to problems and opportunities simply

by providing regular reports on a ‘push’ basis rather

than waiting for information on a ‘pull’ basis.




6. Implementation:

working with others

6 Implementation: working with others 82

6.1 Collaboration between universities to manage IP 83

6.1.1 Sharing of best practice and information 84

6.1.2 Joint management of IP portfolios 85

6.2 Working with other external organisations 89

6.2.1 Public agencies 89

6.2.2 IP management services 90

6.2.3 The evolving partnership between medical research charities

and universities 92




6.1 Collaboration between

universities to manage IP

Staff mobility and collaboration

between researchers from different

universities mean that there is an

increasing need to consider issues of

joint management

There may also be benefits from a

more proactive approach to joint

management reflecting the potential of

pooling IP to create higher valued

packages and economies of scale in

various IP management activities

High levels of skills and resources are required for the

successful exploitation of IP, implying that there may

be scope for collaboration in IP management, in order

to share expertise and overheads. This section

distinguishes between two forms of collaboration:

• sharing of best practice and information

• active joint management of portfolios.

Figure 6.1: Managing IP in research partnerships

– Experience at the University of Nottingham

Joint interest in IP arises due to formal research

collaboration, informal collaboration, or mobility of

researchers and consequently arises frequently. The

University of Nottingham has developed an

approach to dealing with IP in cases of ‘multi-sector’

research collaboration, which is entirely

pragmatically driven and geared towards the

development of mutually acceptable and beneficial

IP management agreements:

“Formal research collaborations (those deliberately

entered into based on a collective bid) are in many

ways the easiest to manage, as due to the

significant awareness-raising campaign which

Nottingham has in place with respect to IP issues,

researchers are aware that they should seek the

Research Support Office’s help prior to

commencing the research. Either appropriate terms are included in the collaboration agreement, or a

separate IP agreement is drawn up to set out how

project IP will be managed, including:

• who will own what

• who will decide on and pay for patent protection

if appropriate

6. Implementation: working with others



• who will take the lead in commercial exploitation

and in which field

• how revenue will be shared

• what access rights are needed to background IP

for execution of the project and for subsequent

exploitation, and on what terms such IP will be

made available.

Each set of collaborators brings different intellectual

and financial strengths and resources to a project,

and the most appropriate ownership, access rights

and exploitation route have to be established on a

case-by-case basis. The issues are always

addressed at the outset since they require those

involved to focus on the commercial exit route for

the technology on day one.

At Nottingham, a heavy emphasis is placed on legal

due diligence with respect to IP, so any legal or beneficial interests will be uncovered at the

disclosure stage. The university’s policy is not to

deal externally in IP unless they have a joint

development/commercialisation agreement in place

in the case of an informal collaboration, or a revenue

sharing agreement where a researcher has moved

to Nottingham from the institution where they

started the research.

In the case of informal collaboration (where

collaboration arises as a consequence of

researchers in different institutions exchanging

information and material out of which IP is jointly

created) the royalty share is determined by the

respective intellectual and resource contributions,

the financial risk in terms of patent or development

costs, and who is making the commercialisation

effort. Informal collaboration may lead on to formal

collaboration.

Where mobility of staff is involved, and therefore

the interest of former employers, the situation is

complicated by the fact that the value of the IP may

be substantially increased during the researcher’s

time at Nottingham, in which case the former

employer’s interest should decrease over time. If this

is likely, then a mutually agreed scale is adopted,

whereby the former employer’s share of revenue will

decrease in accordance with the level of investment

applied to develop the IP at Nottingham.”

6.1.1 Sharing of best practice and

information

The networks developed by organisations such as

AURIL17 and UNICO18 are an excellent vehicle for IP

managers to share information on a wide range of


17 Association for University Research and Industry Links (www.auril.org.uk)18 The UK University Companies Association



operational matters and AURIL also seeks to inform

opinion more generally. While universities compete

fiercely with one another for grants and contracts they

do not, in general, consider themselves to be in

competition over the commercialisation of IP. As a

result, the networks are accessible to fellow

professionals and information flows freely. However,

the information exchanged is largely concerned with

operational issues, such as ‘how to’ advice and the

range of returns which might be sensibly sought,

rather than the strategic issues which are the concern

of this Guide.

When universities are reviewing IP management

strategies or, perhaps more importantly, when they are

articulating strategies for the first time, they need data

which enable them to benchmark their activities,

resources and returns against those of comparable

institutions. At present, these data do not exist for the

UK higher education sector. Although a number of

surveys of university-business links have beenundertaken they were not designed to provide

benchmarking data and do not give sufficient detail on

IP exploitation in the narrow sense, or enable activities

and returns to be associated with specific

characteristics of a university.

6.1.2 Joint management of IP

portfolios

Most universities will need to work with other

institutions on IP management at some stage, for two

main reasons. First, staff mobility means that IP

generated by academics, which they may wish to

bring to new research and commercial ventures, may

be owned by a university other than their current

employer. Second, more than one institution will have

an interest in IP generated as a result of collaboration

between staff from different universities. In the majority

of cases these factors do not give rise to significant

problems, but if commercialisation of IP, in which

others have some stake, is envisaged, then it is

essential that clear agreements are reached with them

as soon as possible. In practice this will usually relate

to reaching agreement over the use of ‘background’ IP

in subsequent developments.

This kind of collaboration is a by-product of otheractivities or history, but there is scope for universities to

enter proactively into joint management activities and

this arises for three main reasons. First, a bundle of IP

may have a greater aggregate value than the sum of

its individual parts, because it is seldom the case that

a single invention will generate increased

competitiveness and economic advantage. A well




known illustration of the benefits of bundling is the

bringing together of several patents, which led to the

first nuclear magnetic resonance machines. A single

university can bring together IP from different

departments but the potential to create high value

packages is greater if the scope of the research is

wider. IP bundling is becoming increasingly important,

both within and outside the HE sector, with several

institutions entering into transnational partnerships.

These, and other, kinds of partnership between

universities obviously add to the complexity of IP

management. They also mean that one institution is, to

some degree, reliant on another having good

management practices in place. In particular, relating

to the performance of due diligence activities properly

and addressing other legal requirements. One

implication is that the management practices of the

partners need to converge to some extent if

successful partnerships are to be established.

The second reason why collaboration may be

beneficial is because of the scope for economies of

scale. These may arise because:

• a single institution may not generate sufficient IP to

employ even a single IP manager fully. However,

while this might be the case in a small institution

newly beginning to exploit IP, it is unlikely to be of

much practical significance. In such cases IP

managers typically have other responsibilities. This

is not to suggest that all IP functions should be

performed in-house and even the largest

universities contract out some IP management

processes

• of more practical significance, the larger the

university’s portfolio, then the more feasible it

becomes to employ specialist (technology and

sectoral) expertise

• portfolios can be jointly, and strategically, marketed.

This may involve bundling, as discussed above,

but more simply it may be cost-effective to market

jointly at specific events such as conferences.

Collaboration in these ways can, and most often does,

take place on an informal basis, in the sense that there

are no formal agreements or joint employment of staff.

IP managers stay in close contact with each other,

sharing tasks and expertise on an ad hoc basis.However, there are also examples of more formal

collaborations arising. The Department of Trade and

Industry’s Biotechnology Exploitation Platform (BEP)

initiative, for example, has led to the establishment of

consortia of universities and other organisations,

including many NHS Trusts. These are, of course,

subject specific and reflect the potential for pooling

specialist expertise (see Figures 6.2 and 6.3).




Figure 6.2: An example of cooperation and joint

management in exploiting IP

The White Rose Biotechnology Consortium was

formed in 1997 using a £250,000 grant from the

Department of Trade and Industry’s Biotechnology

Directorate’s Biotechnology Exploitation Platform

Challenge. The consortium comprises the University

of York, University of Sheffield and the University of

Leeds. These three universities have a collective

bioscience base of 500 researchers and over £40m

of research funding. The universities also collaborate

in other areas apart from biotechnology exploitation.

The Biotechnology Directorate’s funding has now

ceased and the White Rose Consortium continues to

develop its cooperative approach to IP management.

Twenty-one bioscience companies have been

formed and over 50 patents have been filed.

Each university has its own biotechnologyexploitation manager who works closely with the

researchers within their university whilst also

facilitating inter-university cooperation within the

consortium. The consortium’s IP available for

exploitation is promoted in an integrated form via

one web site.

The existence of the consortium makes it easier to

exploit the different capabilities within each university.

For example, one spin-off company was set up in

York (where there is no medical school) with the

medical school links provided by the University of

Leeds. In another case, a spin-off company from the

University of Sheffield is based in Leeds in order to

exploit the local expertise – but is run from Sheffield.

Consortia of this type provide a means of facilitating

IP management based upon overcoming the

constraints faced by individual universities.

For further details: www.whiterose-bio.com/

A number of successful bids to the Government’s

Higher Education Innovation Fund also involved

consortia of universities, and many of these will

encompass some aspects of IP management. These

reflect the potential of regionally based collaborations.

Figure 6.3: Regional collaboration in harnessing

IP an example from the NHS

It is only relatively recently (1998) that the NHS

initiated a fundamental review of its strategic policies

towards IP. To begin with this focused on IP arising

from R&D, but it is now being extended to all

aspects of patient care. This latter aspect may, in

the event, prove of at least equal, if not greater,

importance; bearing in mind that the three main

NHS objectives in identifying and exploiting IP are,




in order or priority:

• benefits to the operations of the NHS in providing

enhanced patient care (which will always mitigate

against grant of exclusive licences)

• national economic benefit

• generation of cash.

There are some 300 organisations, in the main NHS

Trusts, that receive R&D funding, but none of them

has a scale of activity that would support its own IP

office (the largest Trust has research income of

around £40 million). Some form of collaboration

was, therefore, seen as essential and thought was

given to the possibility of contracting directly with

university IP offices for the service that the NHS

needs. This approach was not pursued for three

main reasons. First there could be conflicts of

interest as the NHS might wish, in support of itspatient care mission, to invest in IP that offered little

prospect of generating income. Second, a set of

agreements with universities would be unlikely to

provide full coverage across all NHS bodies. Third, a

related point, there is uneven expertise in university

IP offices with respect to the areas of science and

technology that are likely to be important to the

NHS. It is nonetheless recognised that positive

collaboration with universities will be vital to the

initiative’s success and there has been active

dialogue with both Universities UK and AURIL to

develop appropriate frameworks to help this evolve.

The decision was, therefore, taken to build up an IP

support structure, clearly distinct from the primary

health mission, that would deal with groups of NHS

bodies and it was concluded that the logic pointed

towards a set of regional IP ‘hubs’ aligned to the

boundaries of government regional offices and, in

consequence, the RDAs. It was this approach that

formed the basis of bids to PRSE Fund in July

2001. The outcome was largely successful except

that the four separate bids from London were given

a combined award and the bids from the, research

rich, East and South East regions, along with the

Bristol-centred South West region, were not funded

By way of example, the Yorkshire and Humber IP

hub will cover a number of trusts including the larger

ones in Barnsley, Bradford, Hull, Leeds, Sheffieldand York and whilst the hub’s central office will be

sited outside the health community (possible in an

RDA office, for instance) there will probably be a hub

staff member attached to the major centres. It is

envisaged that, three years hence, funding of

£500,000 per year will be required, at a minimum,

for each hub and that this level may, in practice,

prove insufficient (although needs are likely to vary

between regions depending on the potential IP that




comes to light). The budget allocation is to cover

patent and legal costs as well as staff; though the

former will sometimes be met, in whole or in part, by

the trusts. In view of their public service objectives

there can be no certainty of the hubs ever being

self-funding. Moreover there is no logical reason for

thinking this should be major criteria on which to

judge success.

6.2 Working with other external

organisations

Working with public agencies with local

economic development remits can

enhance the effectiveness of

universities’ IP management

There may also be scope to contract

with private companies for the delivery

of some IP management functions.

However, there is a need to maintain at least a minimum level of IP expertise

in-house

The previous section discussed collaboration with

other universities, but there are also networks and

agencies outside the HE sector which can make

valuable contributions to IP management. Most

obviously, these include IP specialists of various sorts.

Even universities with large IP portfolios and well-

staffed IP management offices do not seek to have all

the required expertise in-house. They will use external

legal specialists and patent agents when required. This

is because there is insufficient volume to keep such

specialists fully employed within the university, but also

because external specialists will be working in many

different contexts and their expertise can be refreshed

more regularly.

6.2.1 Public agencies

With increased policy emphasis on devolution and

regional issues, the number of public agencies with

local economic development responsibilities, and their

capacities, have increased. In Scotland, Wales and

Northern Ireland agencies with economic development

remits have worked with the HE sector for many years.

The key agencies today are: Scottish Enterprise and

the Local Enterprise Companies; the Welsh

Development Agency; the Regional Development Agencies in England; and Invest in Northern Ireland.

Many local authorities also continue to play important

roles in local economic development.

These bodies, to varying degrees, can provide

valuable assistance and collaboration in

commercialising IP:




• their regional innovation strategies, to which

universities have often contributed, help to define

which sectors and technologies are the regional

priorities and will receive special support

• some of the agencies themselves have expertise in

IP management and can be a source of advice

and contacts

• their general business support functions can be

accessed by the universities, especially in relation

to spin-outs.

6.2.2 IP management services

IP management providers19 offer different services, but

most are prepared to undertake some kind of

technology scouting service within the university in

exchange for a first option on owning or exploiting the

IP. The advantage to the company is early knowledge

of the technology and, possibly, also the opportunity tobuild up longer term relationships with groups of

workers.

The potential benefits to the university are essentially

two fold. First, many of these organisations will provide

their services without up-front cost to the university,

which, therefore, gains access to what may be

substantial IP expertise on a no risk basis. Second,

some organisations are also able to bring investment

funds and company management expertise. They can

therefore assist with further development of the

technology and the establishment of spin-out

companies.

If and when actual deals are made, universities may

receive lower returns from the IP management

company than if they were to offer their IP on the open

market. There is also a need to ensure that procedures

are put in place to prevent direct negotiations between

the IP management company and academic staff.

However, if the arrangement is working well then the

volume of deals should be larger than if the university

was reliant on in-house resources and, as a result,

overall returns to the university may well be higher. The

higher volume of deals is especially important to

universities who see the priority for IP management astransferring knowledge as well as generating revenue.

An example is presented in Figure 6.4.


19 For more information, contact the British Venture Capital Association (www.bvca.co.uk).



Figure 6.4: Using third parties – the experience

of Heriot-Watt University

Heriot-Watt has recently entered into an agreement

with an IP management company. Under the

agreement, the IP company has the right, which it

has exercised, to establish an office on-campus. It

has completely open access to all university

researchers, although they obviously cannot be

compelled to enter into discussions with the

company.

The company is only interested in spin-outs from the

university, but the expectation is that in searching for

candidates it will also identify IP suitable for

commercialisation by other routes and bring this to

the attention of the university. It will support spin-

outs with finance and managerial expertise.

The deal with the company is non-exclusive. The

company has a representative on the university’sdisclosure committee and informs the committee

whether it is interested in specific IP. If so, the two

parties will negotiate, if not the university can offer

the IP to any interested party. However, the

agreement does prevent the university from

permitting any other company to establish a

presence on campus.

There are no up-front costs to the university.

Universities should consider the costs and benefits of

such arrangements carefully in the light of their

objectives with respect to IP management. There may

also be opportunities for consortia of universities to

enter into agreements with IP management

companies. However, it is important that some IP

management expertise be retained within the university

for the following reasons:

• even if it were feasible to contract out most of the

IP management functions, a university will require

in-house expertise in order to act as an intelligent

buyer and to monitor performance

• institutions can expose themselves to significant

commercial and legal risks if they do not ensure

that due diligence activities are properly performed

in relation to the use and sale of IP. Given that they

bear the risks, it may be sensible to have in-house

control over these activities

• there is an important awareness-raising

component to IP management and, more

generally, a need to promote activities and develop

a rapport with researchers. This may be more

effectively undertaken by IP managers who are

perceived as being part of the university.

Web-based technology brokering services have also

emerged in recent years, some of which are free to the




universities. An example, developed by the Patent

Office and AURIL, is given in Figure 6.5.

Figure 6.5: Technology Transfer Brokering

Acindus is a free web-based service

(www.acindus.net) that permits university research

laboratories to promote their area of interest and

showcase their latest findings. This service was

developed by the Patent Office, in association with

AURIL, and acts as a matchmaker, pairing off the

scientific community with the commercial interests

they need. Its aim is to help to form profitable,

home-grown partnerships across the widest

possible range of disciplines.

In the words of Dr Philip Graham, AURIL’s executive

director “ACINDUS will promote entrepreneurism

amongst academics, and help close the gap

between vision and reality”.

6.2.3 The evolving partnership

between medical research

charities and universities

Medical research charities are seeking to play an active

role in facilitating the commercialisation and

implementation of the research that they have funded

in UK universities. This means that they are taking an

active interest in how effectively IP is managed by

universities, and examining the areas in which they can

work in partnership with universities to facilitate

effective IP management.

Some of the larger charities have significant

development funds that they can use to facilitate the

research commercialisation process – particularly

when it involves spin-out companies. They also

possess business support and legal expertise that can

assist in the spin-out process.

However, although there is great potential for building

effective partnerships between universities and

charities over IP management, both sides identify

significant impediments to partnership-building.

From the universities’ perspective, some charities are

adopting a very strong focus on maximising financial

returns from the research that they fund, and tend to

under-estimate the investment uncertainties and risks

that the commercialisation process entails. This meansthat they can seek a higher financial return than their

commitment of risk capital warrants.

In contrast, some charities have raised concerns that

universities insist on ownership of IP but pay

insufficient attention to ensuring that adequate

technology transfer takes place. There are also

tensions over revenue sharing.




The quotes in Figure 6.6 illustrate the divergent

perspectives. A strategic approach by both sides to

overcoming these difficulties could generate significant

benefits. A mutual understanding of each side’s

perception would be a useful first step in this direction

Figure 6.6: Universities and medical charities

Comment by a university IP manager

“Negotiations with charities, or especially the

companies set up by the charities to deal with the

universities, show that in some cases, the charities

are more commercially driven than the universities.

Tensions can develop between the universities and

these commercialisation companies. The original

perception was that charities were more interested

in the public good, but this has changed. There

needs to be a clearer distinction between ‘charity’

funding versus contract research funding.”

Comment from a charity representative

“Universities’ insistence on ownership and control of

their IP may often inhibit exploitation in those cases

where the universities do not have sufficient

exploitation resources or capacity or IP

management experience… some charities have

developed their own IP management and

exploitation groups to help address this concern

and complement the activities of the universities.”

“The root cause of the tension between HEIs and

charities is much more often about revenue sharing

though we acknowledge there have been some

(very few) about control. There have also been

tensions where the university IP office may not

understand the charity’s perspective (particularly the

patient-based ones) or the charity may feel its own

IP management expertise and focus in the area is

better.”




7. Monitoring and

Evaluation

7 Monitoring and Evaluation 94

7.1 The monitoring and evaluation framework 95

7.2 Interpreting performance indicators and the impact of uncertainty

of time horizons 96

7.3 Using input measures and ratios 97

7.3.1 Research expenditure 97

7.3.2 Costs of IP management 98

7.4 Measures of internal process performance in IP management 98

7.5 Selecting suitable performance indicators 99

7.5.1 Benchmarking 99




This chapter considers issues which arise with

performance measurement and evaluation. It is

intended to assist in the design of internal measures

and systems. However, external considerations are

very relevant, for two different sorts of reasons. First,

there may be real benefits in universities benchmarking

their costs and performances against others, and this

obviously requires information to be collected and

made available on a consistent basis. This is

discussed later in this chapter.

Second, this Guide is concerned with the

management of IP in a narrow sense. Universities

transfer knowledge in many different ways, such as

consultancy and training, which are outside the scope

of this Guide. Although IP management needs to

interface with these activities, indicators designed to

assess the effectiveness of IP management will not be

appropriate for measuring the effectiveness of other

knowledge transfer activities. This point needs to be

emphasised. There is a possibility that indicatorsdesigned for internal monitoring purposes will be used,

externally, to assess and compare the performance of

universities. This is especially topical at present, with

consideration being given to future allocations of

knowledge transfer funding. It should be emphasised

that the indicators discussed in this section are only

relevant to IP management, and would not be

appropriate for evaluations of knowledge transfer

activities more generally. Further, individual universities

need to decide which indicators most closely reflect

their own objectives in IP management.

7.1 The monitoring and evaluation

framework

A useful first step is to clarify why

monitoring and evaluation are

necessary. In particular, universities

need to consider the relative

importance of demonstrating

effectiveness in IP management whilst

seeking to identify areas for

improvement

The framework needs to encompass

‘hard’ indicators but also ‘softer’

assessments of whether general

objectives and specific policies are

being attained

Performance indicators can fulfil two main purposes.

First, they can be used to demonstrate to external

organisations that the university is capable of

managing IP effectively. This can be important in

assisting the university to implement key policies. One

of the reasons some sponsors give for seeking to

retain ownership of IP is that they lack confidence in

the ability of universities to manage the IP. Hence, the

ability to demonstrate an effective track record can be

important in negotiations.

7. Monitoring andEvaluation



Second, performance indicators are obviously helpful

in assisting university managers to identify problems

and opportunities relating to IP management and to

modify budgets and strategies accordingly. In addition,

the monitoring and evaluation framework can play a

useful role in facilitating the process of learning-by-

doing in IP management. Cumulative experience

should ideally lead IP management to become more

efficient in its internal business processes and more

effective in delivering technology transfer outcomes.

Internal indicators need to be closely aligned with

objectives and management processes.

The monitoring framework needs to reflect two further

considerations:

• as has been mentioned repeatedly in this Guide,

income generation is not the only reason why IP

needs to be managed effectively, and factors as

diverse as protecting the university’s research

capabilities and contributing to economicdevelopment are also important. It is for each

university to decide the relative weight to be given

to these factors, but if there are objectives then

they must be reflected in the monitoring framework

• actual outcomes should be reviewed regularly, to

ensure that general principles are being adhered

to. Universities need, for example, to have clear

principles governing when they are prepared to

assign IP to sponsors and on what terms.

However, case-by-case decisions will establish

precedents, which may become established as the

policy norm in the minds of sponsors and

researchers. Monitoring needs to check that

pragmatic decisions are in line with more general

policies.

7.2 Interpreting performance

indicators and the impact of

uncertainty of time horizons

The long time lags between costs being

incurred and revenues being received

mean that evaluations of financial

performance should be patient and

recognise that costs and revenues are

decoupled, in the sense that changes in

revenues may have little to do with

changes in costs

There is usually little direct control over

the relationship between IP

management costs and revenues.

Because costs and revenues are not

strongly correlated, the measurement

and evaluation of performance should

also be de-coupled. Management

decision-making has little influence on

the cost-revenue relationship, save for




seeking to minimise costs and maximise

the probability of achieving high returns

The returns to the university’s investment in IP

management in a given year will relate to IP

management activities, and hence costs, in previous

years. Similarly, benefits from current investments will

occur in future years. This long time-lag has important

implications for assessing performance.

Chapter 2 suggested that the fundamentally uncertain

nature of the commercial returns from IP management

is central to strategic management and, in particular,

setting realistic expectations for financial returns. The

argument is not that significant financial returns cannot

be achieved; it is that they cannot be forecast.

Effective IP management is consequently concerned

with seeking to maximise the likelihood that

unexpected high returns might happen, not with

setting targets for financial returns and judging

performance against these targets.

7.3 Using input measures and

ratios

Ratios that relate research expenditure

to outputs such as patents and licence

revenue should be used with caution.

Income generated for the university as

a result of incurring IP management

costs may arise in other areas. If the

university seeks to compare the costs

and returns from IP it should identify

all income sources attributable to

effective IP management

7.3.1 Research expenditure

One commonly used input measure is research

expenditure which is frequently related to different

output measures (patents, licensing, option revenue

and start-ups) as a ratio. Although easy to calculate,

care should be taken in interpreting such ratios,

particularly if they are to be used in making

resource/funding allocation decisions. This is because

its behaviour is strongly influenced by a wide range of

factors, in particular:

• differences between subjects in the propensity to

generate commercial outputs

• differences in the proportion of externally funded

research that comes with restrictions over

exploitation. For instance, contract research

funding may tend to be associated with the

sponsor owning and exploiting the IP, not the

university

• differences in the proportion of full costs recovered

in research contracts and in whether or not




principal investigators’ salaries and on-costs are

covered by the research grant or payment

• in cases where international comparisons are

made the situation is even more complex because

research costs are affected by country-specific

factors.

7.3.2 Costs of IP management

The costs associated with operating the IP

management office can usually be identified. The

accuracy of these estimates depends upon a number

of factors and different figures have been reported by

universities in different surveys.

It is tempting to compare these costs with the revenue

generated, giving an estimate of net revenue. Care

should, however, be taken when relating costs and

revenues for the following reasons:

• the cost of managing the university’s IP includes

opportunity costs associated with academic time

spent on these activities, and also the opportunity

costs of university facilities used in the

development of IP. Costs may therefore be under-

estimated

• the costs incurred in one year will generate a

variable and uncertain stream of revenue in future

years. When the university is building up its IP

management activity the costs incurred in a

particular year will not relate to the revenues

received in that year

• the revenues received by the university as a result

of its IP management activities will not be captured

solely in income from commercialisation. For

instance, an option or licence deal with a company

may result in a collaborative or contract research

arrangement. This will increase the university’s

research income, a contribution that may not have

taken place without effective IP management.

7.4 Measures of internal process

performance in IP management

Internal performance measurement in IP management

is not a well-developed area of performancemeasurement in the UK. Indeed, the most recent

business interaction survey20 suggested that nearly 38

percent of institutions do not monitor the number of

invention disclosures on an annual basis.

Aspects of internal performance in IP management to

consider measuring include:


20 Higher education-business interaction survey. A report by the Centre for Urban and Regional Development Studies, University of Newcastle upon Tyne, December 2001.



• deal flow in the IP management office(s),

particularly with respect to the distribution of large

and complex versus smaller and simpler cases

• case eliminations: whittling down the set of cases

via procedures such as the Stage-Gate Process21

can be important in controlling IP management

costs by ensuring that relatively unpromising cases

are abandoned before they incur excessive costs.

It can consequently be useful to collect data on the

numbers of cases that pass and fail specified

investment decision-points (e.g. clear ‘proceed’ ‘do

not proceed’ decision stages). Private sector

companies’ return on R&D can be as heavily

influenced by the number of projects that are killed

off as by the revenues that stem from those

projects that reach the market. The same principle

applies to IP management in universities

• case load queue times: the incidence of delays in

starting or completing cases due to log-jams inhandling other existing cases

• contract drafting iterations: the number of iterations

required to complete contracts and the time taken

on these iterations.

7.5 Selecting suitable performance

indicators

There may be benefits in UK

universities collecting data on a

consistent basis for benchmarking

purposes, provided that performance

can be assessed on a subject-by-

subject basis rather than in aggregate

While benchmarking can be a valuable

exercise, each university needs to

decide for itself which, if any,

indicators are a useful measure of

performance against objectives

7.5.1 Benchmarking

Each university should identify those indicators which

are most appropriate to its aims and objectives.

Nevertheless, there are benefits in establishingcommon indicators since this would facilitate

benchmarking and decision making in relation to IP

activities22.


21 The Stage Gate Process involves the sequential elimination of less promising investment alternatives in favour of the most promising, thus seeking to maximise the ratio of investment

returns relative to costs.22 Annex C presents a set of indicators introduced by AUTM.


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Annex A:

Provenance of the Guide


http://slidepdf.com/reader/full/managing-the-intellectual-property-guide 88/96 ii Intellectual Property

The importance of the effective management of

Intellectual Property in HE was highlighted in

Excellence and Opportunity , the 2000 Government

White Paper on science and innovation policy. This

stated:

“The Government believes that effective IP

management should be a fundamental goal of

universities and research bodies in the public sector

because: identifying and managing IP is essential for

effective knowledge transfer out of the research base

to benefit the wider economy; and IP can itself be a

valuable asset deserving attention.”

“Research organisations need to follow some basic

principles if we are to achieve this goal. First, the

management and exploitation of IP needs to be

recognised as important by the top management in

research organisations – by vice chancellors and

principals of universities and by their top management

teams …. it is not enough to leave this task to theexperts.”

“As universities develop a more active approach to the

exploitation of their knowledge they also need support.

Good guidance is available at the technical level ….

but more needs to be done to get the attention of top

management and spread best practice.”

Reflecting the commitment in the White Paper,

Universities UK and AURIL, with the support of the

Department of Trade and Industry (DTI) and the Patent

Office, commissioned SQW Limited (with technical

assistance from TWI Ltd) to prepare a Guide to the

management of IP in HE23. The Guide focuses on the

strategic aspects of IP management, but some

discussion of policy and operational considerations is

also included to illustrate how these flow from strategic

decisions. It concentrates on IP arising from research

and its exploitation through sale, licensing and the

establishment of spin-out companies. Many of the

issues are, however, generic to other forms of IP and

exploitation routes.

There are two main target audiences for the Guide:

• Vice Chancellors and senior institutional managers.

The Guide aims to cover the key issues in the

development of IP strategy and policy in higher

education and to provide a framework to helpinstitutions to produce an IP strategy appropriate

to their mission and circumstances

• Pro-Vice Chancellors (Research) and senior

managers with responsibility for IP.

Annex A:Provenance of the Guide

23 Universities UK is the representative body for universities in the UK: it works to advance the interests of universities and to spread good practice throughout the higher education sector.

AURIL (The Association for University Research & Industry Links) represents industrial liaison, technology transfer and research administration specialists in the UK and Ireland. SQW is an

independent consultancy whose specialist areas include higher education and science and innovation policy.


http://slidepdf.com/reader/full/managing-the-intellectual-property-guide 89/96 iiiIn Higher Education

The Guide aims to cover the implementation of

policies and practices within universities to deliver the

effective management of IP. We hope, however, that

audiences both within and outside HE will find the

Guide useful.

This document reflects extensive consultations both

within and outside the HE sector. At the start of the

project, SQW undertook discussions within a small but

heterogeneous and representative group of

universities24. Discussions were also held with other

organisations, including research funding bodies,

economic development agencies, businesses and

financial institutions, all of which had direct interests in

IP generated by universities. The purpose of these

discussions was to identify the key issues relating to IP

management strategy and how they might be

successfully addressed. A consultation document was

then prepared, discussing the main themes identified

and raising a broad range of issues. This was widely

circulated, made available on the internet, andcomments invited. Five workshops were held, each

covering a topic which feedback to the consultation

document had suggested was of major interest25

Many people took part in this process and we are

grateful for the time they gave and their willingness to

share their experiences.

The project was overseen by a Steering Committee,

chaired by Professor John Archer, Principal of Heriot-

Watt University, and comprising staff from the

sponsoring bodies and a range of universities.

We are grateful to members of the project steering

committee for their assistance in this study. Besides its

other responsibilities, the committee reviewed papers

and draft reports during the project and members also

participated in a number of the workshops.

Annex A:Provenance of the Guide

24 In this publication the term ‘universities’ is used to refer to all higher education institutions.25 The five workshops were: (i) Incentives; (ii) Inter-university collaboration; (iii) Relationships with sponsors – the ownership and control of IP; (iv) Setting IP management strategies and

budgets, and (v) Monitoring and evaluation.


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AUTM American Association of University

Technology Managers

BTG British Technology Group plc

CASE

Studentships Cooperative Awards in Science and

Engineering: PhD studentships jointly

funded by industry and the research

councils

CBI Confederation of British Industry

CPD Continuing Professional Development

DTI Department of Trade and Industry

EPSRC Engineering and Physical Sciences

Research Council

HE Higher Education

HEI Higher Education Institution

HEIF Higher Education Innovation Fund

HEROBC Higher Education Reach Out to

Business and the Community Fund

IP Intellectual Property

• Background IP

• Existing IP brought to a researchproject

• Foreground IP

• IP generated during a research

project

Isis Oxford University IP exploitation

company

MIT Massachusetts Institute of

Technology

MOD Ministry of Defence

NHS National Health Service

PSRE Fund Public Sector Research Exploitation

Fund

PVC Pro-Vice Chancellor

R&D Research and Development

RAE Research Assessment Exercise

RDA Regional Development Agency

RTO Research and Technology

Organisation

SMART Small Firms Merit Award for Research

& Technology

Grants to help individuals and small and

medium-sized businesses to make better

use of technology and to develop

technologically innovative products and

processes

SPUR Support for Products Under

Research Scheme:

An R&D support scheme whose aim is to

help medium-sized businesses improvetheir competitiveness by developing new

products and processes to the benefit of

the national economy. (Now part of

Smart)

UNICO The UK University Companies

Association

Annex B: Glossary



Annex C:

AUTM performance

measures

v In Higher Education


http://slidepdf.com/reader/full/managing-the-intellectual-property-guide 92/96vi Intellectual Property

Some of the benefits from IP management are not

captured in the AUTM system. The most prominent

issue in this regard is when research sponsors are

attracted by the university’s IP portfolio. These benefits

to the university are not captured by licence income

alone.

The performance measures used by AUTM

(n=number)

RESEARCH INPUTS

Federal Government Research Expenditure ($)

Research Expenditure from Industrial Sources ($)

Total Research Expenditures ($)

RESEARCH OUTPUTS RELEVANT TO IP

MANAGEMENT

Invention disclosures received (n)

IP MANAGEMENT RESOURCES UTILISED

Licensing Full-Time-Equivalents in technology

transfer offices (n)

Other Full-Time-Equivalents in technology transferoffices (n)

Total Full-Time-Equivalents (n)

IP MANAGEMENT OUTPUTS

Securing IP

Total US patent applications (n)

New US patent applications (n)

US patents issued (n)

EXPLOITING IP

Licences & options executed: exclusive (n)

Licences & options executed: non-exclusive (n)

Total licences & options executed (n)

Licences & options executed to start-ups (n)

Licences & options executed to small

companies (n)

Licences & options executed to large

companies (n)

Total licences & options executed (n)

Number of start-up companies formed that were

dependent upon the licensing of your institution’s

technology for initiation (n)

Number of these that have their primary place of

business operating in your home state (n)

Number of start-up companies that were


technology for initiation and were reported in the

Survey this year or in earlier years that became

non-operational in the fiscal year (n)

Number of start-up companies that were


technology for initiation and were reported in theSurvey this year or in earlier years that were

operational as of the last day of the fiscal year (n)

Number of licensed technologies that became

available for consumer (public) or commercial use

in the fiscal year (n)

FINANCIAL PERFORMANCE IN IP

MANAGEMENT

Licence income received ($)

Licence income paid to other institutions ($)

Annex C: AUTM performance measures


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Amount spent in legal fees ($)

Amount reimbursed by licences ($)

Total number of licences/options yielding licence

income (n)

Licence income received: running royalties ($)

Licence income received: cashed-in equity ($)

Licence income received: all other types ($)26

PORTFOLIO PERFORMANCE

Number of publicly-traded companies in the

portfolio (n)

Number of privately-held companies in the

portfolio (n)

Source: The Association of University Technology

Managers Inc. Report entitled, AUTM Licensing

Survey, Fiscal Year 1998. Note: the indicative

classification of these metrics was carried out by

SQW Limited.

Annex C: AUTM performance measures

26 This refers to licence fees and annual fees paid as part of licence agreements.







Documents

Managing the intellectual property guide