Silicon Valley North #63 March, 2004

The Way I See It… by Michael C. Volker

I.P. should mean “Interactive Process”

Intellectual property (IP) is what drives an advanced technology company. Indeed, companies are launched in the first instance because their founders had a vision for a better mousetrap.

However, as tech companies grow and evolve, they shift their focus from research and development to sales and marketing. As the emphasis on bottom line performance increases, they tend to spend less on R&D. While this may look financially good in the short term, it could lead to failure in the future.

Technology companies need to figure out how they can do more – not less – R&D in order to remain competitive and avoid being eclipsed by yet another spin-off with a better idea or by an established player with a strong R&D program.

One way of doing this is to tap into the huge R&D base that we, the country’s taxpayers, are investing in. The largest obvious source for this is our universities. I never cease to be amazed by the magnitude of this resource and our failure to take advantage of it. Federal expenditures for FY04-05 are slated to be $8.5 billion, a 7% increase over last year. Last year, the higher education sector performed $6.9 billion in R&D, out of a national total, including business, of $20.8 billion.

In March, Canada’s research community received an extra $585.9 million investment from the Canada Foundation for Innovation. Most of this is to fund research infrastructure in strategic areas such as health, the environment, nanotechnology, sustainable communities, and the new knowledge economy. In all, some 126 projects at 57 Canadian universities, colleges, research hospitals, and other non-profit research institutions, will be supported by this support.

With this increased investment in the country’s research establishments, the new federal buzzword is “commercialization”. Canada’s Innovation Strategy recognizes the need to consider knowledge as a strategic national asset. Federal departments, e.g. Industry Canada, will be focusing on this as a new challenge. After all, it makes sense for us to turn this expenditure into an investment. And, that’s where the private sector must step in.

Most research establishments now boast that they’ve set up technology transfer offices (TTOs) or university-industry liaison offices (UILOs). Their primary function is to commercialize research either through licensing or by creating new spin-off companies. In general, it’s pushing new know-how out into the marketplace.

In contrast, tech transfer offices in the USA find businesspeople regularly beating a path to their door looking for new opportunities. We often explain the absence of this phenomenon in Canada as a lack of “receptor capacity” – i.e. larger, well established corporations that will absorb and commercialize all this intellectual property. While this may be partly true, I suspect that many smaller, growing companies are missing the boat here. They are likely too busy to invest time and energy in cultivating R&D liaisons. A lot of R&D is simply not being commercialized.

Working with researchers may, to a certain extent, also help the smaller companies access external funding, either as government grants or project funding. When entrepreneurs look at the dollars that are being poured into certain research projects, they must drool at the thought of being able to benefit from some of that investment.

The Natural Sciences and Engineering Research Council (NSERC) with its $800 million budget encourages company and academic entrepreneurs to work together and it recognizes successful results through its annual Synergy Awards. It’s a splendid way for companies to perform R&D without having to pay for it!

The way I see it, successful technology companies are those that figure out how to develop and enhance their intellectual property through an on-going interactive process with our tax-funded university researchers. Maybe it’s time to make an appointment with a few UILOs.

Michael Volker is a high technology entrepreneur and director of Simon Fraser University’s Industry Liaison Office. He oversees Vancouver’s Angel Technology Network and is past-Chair of the BC Advanced Systems Institute and the Vancouver Enterprise Forum. He may be reached at mike@volker.org.