Recognition growing for importance of research contracts with industry

Encouraging technology pull

Research contracts with universities, colleges and polytechnics are worth at least $1.2 billion annually, far outstripping the value and importance of licensing and company spin-offs to industry. While not fully understood or quantified, a growing number of policy makers and R&D managers are looking to promote them as a powerful way for drawing the results of academic-based research into the marketplace.

Recent data from Statistics Canada show that Canadian institutions engaged in nearly 16,000 contracts in 2005 and approximately 14,000 in 2006 (see chart next page). Of those amounts, nearly 40% of contracts and almost 30% of their value are attributed to contracts with Canadian industry or other undefined organizations. Foreign businesses also engage in significant numbers of research contracts although StatsCan data do not isolate industry figures from those of foreign governments or other organizations.

Within the policy realm, research contracts are only now becoming a significant focus of debate and development. To date, the main focus has been on licensing and spin-off activity, which generates a comparatively modest $60 million throughout the Canadian university system. It's estimated that university technology transfer offices spend about $40 million to generate licensing and spin-off income, leaving just $20 million in gross profit.

The rationale for giving research contracts heightened prominence in innovation policy is compelling. Research contracts with industry exemplify technology pull — companies seeking to improve products and processes sought by customers by engaging academic researchers or accessing key expertise, either in the form of equipment or highly qualified personnel.

While StatsCan collects basic data on research contracts for its Survey of Intellectual Property Commercialization in the Higher Education Sector, there's a paucity of detail on who is conducting the contracts, the purpose of the contracts, which disciplines account for the bulk of activity and where within Canada contracting is most prevalent. Many have been anticipating new measures from Industry Canada to stimulate greater industry engagement with the academic research community. But with budget constraints and the government's apparent low priority ranking for S&T, any new initiatives in the near term are unlikely.

"Research contracts haven't gotten the recognition they deserve …The data are not uniform across Canada and not consistent for comparison," says Angus Livingstone, managing director of the Univ of British Columbia's University-Industry Liaison Office.

research contracts part of larger toolset

Livingstone points out that the importance of industry research contracts does not detract from other mechanisms for engaging industry. At UBC, he says five channels are developed and tracked. In addition to collaborative research (contracts, grants and clinical trials), there are also people (co-op students, interns), papers/workshops/training, intellectual property assets (licensing) and entrepreneurship.

For the past several years, UBC's university-industry liaison office has been diligently tracking the research contract activities of the university. For the five years between FY03-04 and FY07-08, UBC engaged in $230.2 million worth of industry-funded research for an average of $46 million a year. Industry-funded research engages an average of 22.3% of all externally funded researchers and 11.4% of all externally research funding. UBC also tracks which faculty is engaged with industry and the location of companies with which it collaborates.

"The innovation agenda needs to operate along all five channels depending on circumstance. They are not mutually exclusive. Research contracts are a strong one but they don't get enough attention because spin-offs are more sexy. In 2008 at UBC, there were more than 1,000 projects. It's hard to tell a compelling story," he says

Livingstone says ACCT Canada recognizes the value of research contracts. The issue has generated considerable discussion amongst its membership in terms of where they fit vis a vis traditional technology transfer activities. One early lesson learned is the difficulty faced by many of Canada's larger institutions in engaging local companies in their vicinity.

"Colleges do it better because they're plugged into local industry. The bigger the university, the harder it is to work with local industry. The radius of operations for community colleges is usually 50 to 10 kilometres," he says.

polytechnics and colleges closer to industry

Indeed, the ability of colleges and polytechnics to engage with industry has gotten the attention of policy makers provincially and federally. The Natural Sciences and Engineering Research Council now has a permanent program dedicated to colleges (R$, February 8/08). The Ontario and Alberta governments have also recently introduced new programs that colleges and polytechnics can tap for funding to engage companies (R$, April 16/09 & June 20/08).

Polytechnics Canada (PC) — a relatively new organization representing nine degree-granting colleges and technical institutes — has been developing metrics for the past two years to gauge both the quantity and impact of their applied research contracts with industry.

PC will focus on a collection of key metrics for both its member institutions and industry. Institutional metrics include the number of prototypes developed by member institutions, sources of project financing, new faculty engagement and internal research consultations. For industry, PC will track external research consultations, student projects with external clients, the number of integrated applied research projects carried out and the number of students engaged in projects.

"Research contracts are far more prominent at polytechnics than licensing or spin-offs ... We don't care about IP ownership. We pursue very deliberate engagement on very specific deliverables, getting product solutions out the door," says Dr Alex Zahavich, director of Applied Research and Innovation Services at the Southern Alberta Institute of Technology (SAIT Polytechnic). "I don't have to leave SAIT to engage industry. We have 70 programs at SAIT and each has an industry advisory committee. We have 700 industry reps on campus two times a year."

Last month, PC made a submission to the House of Commons Standing Committee on Finance for its pre-Budget consultation, outlining what it contends will assist its member institutions in boosting industrial R&D. Taking two recent Alberta initiatives, it recommended that the federal government introduce an SME Commercialization Voucher program to help small businesses with product and process research, product testing, certification, proof-of-concept and prototyping. It also recommended that Industry Canada establish Innovation and Technology Diffusion Centres at 10 locations across Canada, focusing on late-stage commercialization services such as technical assistance services, testing and adapting technological solutions and training for company personnel and students.

Zahavich says Industry Canada "gets it" when it comes to the importance of industry research contracts, noting that the department has inquired about PC's industry engagement model.

"Industry Canada is interested in the voucher program but it has no new money for a new commercialization program. Also, they don't know where to park it," he says.

When SAIT does require additional expertise on IP and licensing issues, it turns to other members in the Southern Alberta Intellectual Property Network, a unique collaborative initiative of area institutions. Established in 2005, the Network pools tech transfer and other commercialization resources that can be utilized by members institutions and industry.

" We leverage the Univ of Calgary's UTI (University Technologies International) for IP issues," says Zahavich. "It allows us to avoid duplication and cuts down on overhead."

challenge to universities

For Canada's universities, the change in mindset for technology transfer means that far greater emphasis must be placed on developing closer ties with industry in a variety of ways. With greater engagement will come a change in both the culture of academic institutions and companies seeking to leverage research to enhance innovation, productivity and competitiveness.

It's a challenging process and success is often determined by the type of company being engaged. Livingstone says that multinational companies are the easiest to work with given their in-house expertise working with universities on a multitude of levels. At the other end of the scale are small- and medium-sized businesses that often lack the skill sets and time required to initiative productive working relationships. Deals often take a long time to develop and many firms require instruction in how to best engage university researchers and their institutions.

"We need to build multiple channels with industry. We see that as the way of the future," says Livingstone, adding that encouraging more industry research contracts is a potent way to increase Canada's weak business expenditures on R&D. "We do that at UBC. We're out in front in terms of the bigger universities. Start with co-op and move up from there. It's an area where institutions can make a difference."

UBC's research contract income peaked in the late 1990s when it exceeded $50 million annually. More recently, income has fallen to just over $41 million for FY076-07 and FY07-08 (FY08-09 data will be available in the coming weeks) but it still accounts for a substantial amount of research income.

"The peak was before the impact of Genome Canada, the Canada Research Chairs and the Canadian Institutes of Health Research kicked in," says Livingstone. "I'd like to see it grow."

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