University IP revenue declines 12% while research contract income soars to $1.2 billion

Technology push versus industry pull

Income generated from the intellectual property (IP) generated by Canada's universities and affiliated teaching hospitals took a dive in 2007, declining 12.1% year-over-year to $52.5 million, just $10.7 million more than it cost to manage the IP. The near zero sum game is a sobering indication of the weak returns university IP generates for respective institutions and is certain to reignite debate on the metric's value for gauging the impact of the billions in research universities spend each year.

A far more potent indicator appears to be research contracts, which continued their remarkable growth in 2007 (the latest year for which data are available) to $1.2 billion, up 6% from 2006, according to the latest data from Statistics Canada.

The number of research contracts at Canadian universities more than tripled between 1998 and 2005 from 5,081 to 15,877 before easing to 13,996 in 2006. For 2007, StatsCan has dropped the metric so RE$EARCH MONEY was unable to determine whether the decrease in 2006 was an anomaly or part of a new trend.

"The numbers over the past 10 years clearly tell the story. There's been a five-fold increase (in the value of research contracts) from $287 million to more than $1.2 billion," says Marcel Mongeon, principal of Mongeon Consulting Inc and former executive director of McMaster Univ's Office of Research Contracts and Intellectual Property. "Why universities would not collect that data (number of research contracts) which are their bread and butter is beyond me."

While the dip in IP income is troubling from several perspectives, it provides ammunition to those who argue that research contracts are a more powerful and accurate barometer of university-industry interaction. Licensing and spin-offs are broadly defined as technology push activities while research contracts represent market pull, especially for the contracts involving industry.

"The so-called patenting, licensing and spin-off paradigm is stalling. It's very clear from the numbers that a plateau is forming. The growth area is research contracts,"says Mongeon, who has compiled 10 years worth of data on university licensing and research contract activity (see chart).

In addition to terminating the metric for number of contracts, StatsCan provides only a partial explanation of what types of organizations are contractually engaged with universities and research hospitals. While the value of contracts with governments is relatively clear, no breakdown is provided for the value of research contracts by business. Business is lumped into the "Other Canadian sources" and "Foreign sources" categories along with other unspecified organizations.

The declining value of income generated from university IP is not a rationalization for universities to scale back or eliminate their tech transfer activities. According to Ron Freedman, Canada's university tech transfer system is "at least the second best in the world" after the US. But tech transfer should be seen as one tool in a far more comprehensive toolbox universities should have at their disposal when engaging industry.

"Technology transfer is never the be-all and end-all for knowledge transfer. It's just one aspect and a relatively small component," says Freedman, a partner with The Impact Group and co-publisher of RE$EARCH MONEY. "Nobody is going to get rich quick from licensing technology ... From a financial point of view it's a lottery. Universities need to continue to do tech transfer because they do it very well. But they need to muster all university resources to help business succeed. A single point of contact is needed."

Freedman points out that the latest StatsCan data are already two years old and therefore don't capture the impact of the economic meltdown that began last year. Even so, the soaring value of research contracts underscores the importance of university research expertise and investments in research infrastructure.

"They're of more value to universities than tech transfer, at least 10 times as much," says Freedman, adding that when compared to net IP revenues, the value of contracts soars to 50 times those of tech transfer activity.

The StatsCan data also demonstrate that the target of $70.2 million in commercialization income by 2010 set by the Association of Universities and Colleges of Canada (AUCC) now appears to be beyond reach. That target was one of several the AUCC established in 2002 as part of a framework agreement with the federal government (R$, December 2/02).

The StatsCan report contains a wealth of data on other aspects of university IP and commercialization activities. These include:

* governments at all levels accounted for 47.5% of all research contracts in 2007;

* 16% of research contracts were conducted with foreign organizations;

* the proportion of institutions engaged in IP management declined from 82% in 2006 to 71% in 2007;

* the number of new invention disclosures remained virtually unchanged at 1,357;

* the number of patents issued to institutions increased 41% to 479 while the number of patents held decreased 13% to 4,185;

* 24 spin-off companies were reported in 2007, bringing the historical total to 1,174;

* of the 1,634 patent applications in 2007, 30.9% were in the health professions and sciences, while 36.9% remain unclassified.

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