Spinning Success from Science

by Sharon J. Proctor, Ph.D
Illustrations by Phillippe Béha

Getting innovations to the marketplace can be a tricky business

Even though technological advances are deeply affecting our lives, it’s impossible for most of us to understand how or why they work. In fact, they’re often so steeped in theoretical physics, chemistry, mathematics, and/or engineering that only university or industry researchers can create them. Enter SFU.

The university has produced many high-tech innovations now found in real-world products. And we continue to do so at a remarkable pace. How does this happen? It takes a special scientific or mathematical mind to create the innovation. But getting it out into the real world requires a business mentality. How would you do it?

Decisions, decisions

You can publish the details of your discovery and let other people develop it. Or you can patent it. If you patent it, you have two options. One is to license it to companies and let them pay to use it in their products. Alas, there’s not enough industry in Canada to absorb every new technology produced in our universities. Many academic researchers go for the second option. They create their own companies – termed spin-offs – and develop their own products.

This is not easy. First, a technology developed in a campus lab is usually in a primitive state. It has to be refined – made much more efficient and user-friendly. Second, since all modern commercial products are actually groups of technologies, you need to find the right companion technologies for the new one. Third, it’s nearly impossible to predict the future course of a new technology because there’s always the unexpected.

This is why SFU in 1986 set up the University/Industry Liaison Office (UILO) and staffed it with experienced experts in marketing, financing, patenting, intellectual property issues, and business management. They help SFU researchers navigate the complexities of moving a technology from a campus laboratory to an industry setting, either by licensing it to others or by creating their own spin-off company.

To date, SFU has spun off 69 companies and signed 60 licenses.

Fred Popowich’s experience

Meet Fred Popowich, computer science professor and president of an SFU spin-off called Axonwave Software Inc. He joined SFU’s faculty in 1989. “I started working with Paul McFetridge in linguistics. My background was in computing science; his was linguistics. We worked in SFU’s natural language laboratory, which merges the two disciplines. My contribution was to figure out ways to teach a computer how to process and understand human language.”

In the mid-1990s, he and McFetridge helped a firm in Sidney, B.C., develop machine-translation software that would automatically translate TV dialogue into subtitles in a different language by creating the language translation architecture for it. Unfortunately, the firm went out of business in 1999. Later that year, the duo started their own company, called Gavagai Technology Inc. “At first, we wanted to create our own language-translation product,” Popowich explains.

Then came the unexpected.

The Boeing Company had a problem. It had nothing to do with language translation, but it did require the same analytical approach Popowich and McFetridge had used before. “We developed a core natural language engine that Boeing could use to handle aviation safety reports – one they could embed in their aviation safety system.” And so the SFU duo moved away from language translation into information retrieval and extraction. “We developed and patented software that looks for patterns in computerized English language text and data, patterns that reflect certain concepts – for example, ’It looks like illegal activity,’ or ’Our company president said it.’ Companies can now license this software from us.”

In Gavagai’s early days, Popowich and McFetridge turned to the UILO for assistance. “They told us about government granting agencies,” recalls Popowich, “reviewed our grant applications, directed us to people who could help us, assisted us with legal matters, and gave us good business advice.” Gavagai secured grants from the federal and provincial governments. Subsequent private financing enabled them to hire experienced managers to run the company.

Then the unexpected happened again!

When setting up the firm’s web site, they discovered that the web address “gavagai.com” was not available. So in 2003 they changed the company name to Axonwave. Today, Axonwave is aiming at the health insurance market. “Instead of educating the world so everyone can see how brilliant your technology is,” says Popowich, “you have to ask what problem out there needs solving, and how your technology can solve it. You have to change your technology so it solves someone else’s problem.”

What John Borden did

John Borden, professor emeritus in biology, is the newly appointed director, research and development, at Phero Tech Inc. One of SFU’s first spin-off companies, Phero Tech has a complex history involving SFU people and companies spun off from Phero Tech. The one constant has been Borden, who helped set up SFU’s master of pest management program.

Borden joined the biological sciences department in 1966 and began studying insect pheromones. Pheromones are substances released to attract or otherwise influence other members of their species. Some attract the opposite sex. Others attract both sexes. Borden and his students studied three species of ambrosia beetles that attack and degrade conifer logs and cost B.C.’s forest industry over $100 million annually. They identified several “aggregation” pheromones and showed these could be used to trap both sexes of beetles. Meanwhile, SFU chemistry professors Cam Oeschlager and Keith Slessor figured out how to synthesize the pheromones. The whole package was turned over to a private company for commercialization in the early 1980s.

The company was created by a group of SFU graduates, who called themselves the Pest Management Group. Two were pest management program graduates. “To exploit our discoveries and capabilities with the ambrosia beetle pheromones,” explains Borden, “they got together with Stratford Chemical Developments and formed PMG-Stratford in 1981.” In 1982, it became Phero Tech. They also hired Staffan Lindgren, a pest management graduate who had invented a multiple funnel trap while working on his thesis. Borden’s former technician, Evelyn Stokkink, joined them later.

At first Phero Tech sold “sticky” traps (like fly paper) and chemicals to the forest industry. “Unfortunately,” explains Borden, “people didn’t know how to use them properly and so claimed they didn’t work.” Thanks to Stokkink’s advice, Phero Tech began requiring clients to buy their management service along with the traps and chemicals.

But, of course, there’s the unexpected!

Since Phero Tech was set up a few years before the UILO, the young spin-off firm had to learn some early lessons the hard way. One particularly painful one concerned patents. The SFU researchers had published the chemistry of one of the pheromones they had discovered. Three overseas scientists soon developed a synthetic version of it and patented its use in Europe and North America. Thus, while Phero Tech had licenses to use the multiple funnel trap and to use Keith Slessor’s synthesis method, it had to pay royalties to a European company in order to use that one pheromone!

“For years, Phero Tech was the only company offering the ambrosia beetle management service,” says Borden. “Earlier this year, however, it disbanded this department and now supplies pheromones and traps to qualified management companies. Some of these are owned or managed by former company staff.”

Today, Phero Tech has over 180 products, nearly all involving pheromone traps and chemicals. “You don’t make much money on any one insect,” explains Borden. “It’s different from a broad-spectrum pesticide, where a few products bring huge revenues. We have to grow our company through a plethora of species-specific insect-control products.” Phero Tech has licensing agreements around the world, and has agreements with other companies to distribute each other’s products.

About 40 percent of their current business is based on SFU research. “We have a new line of honeybee products from a collaboration of SFU professors Mark Winston (biology) and Keith Slessor (chemistry). We are committed to staying in forestry even though the market is small. But most of our future growth will be in the agricultural and urban sectors.”

What’s in it for SFU?

Historically, software innovations have been treated differently from the more physical innovations, like devices. Software fell under Canada’s copyright laws (though some software can be patented), and for years SFU automatically claimed at least part ownership of any software breakthroughs that were commercialized. Devices and processes, on the other hand, have always come under Canada’s patent laws. Until this past summer SFU allowed the inventors of devices to own everything. Most campus inventors, however, have opted to use the services of the UILO. They’ve assigned the intellectual property rights to SFU in exchange for a substantial part of the revenues from commercialization.

As of last July, SFU has a new intellectual property policy proposed by Bruce Clayman, former VP-research (now president of the new Great Northern Way campus). All innovations are now treated the same: if the university (or UILO) helps a campus group commercialize its technology, SFU gets 30 percent of the annual revenue. If help is not requested, SFU still gets 15 percent of the annual revenue above $25,000 per year.

To date, SFU has facilitated the investment of over $50 million in local spin-off firms. Of the 46 now operating, SFU has equity in 30. The spin-offs encompass a range of research fields, although most involve either communication/information technologies (40 percent) or biotechnology (20 percent). As well, SFU has 48 patents in good standing and 44 license agreements in force. The commercialization of research results should bring substantial financial returns in the future. And in the meantime, it’s creating exciting job, business, and learning opportunities for students, faculty, and staff.