On March 20, IP Osgoode and the Hennick Center for Business and Law hosted a conference entitled, Commercialization of Innovative Research: Implementing solutions that work for Canada. The conference brought together stakeholders in innovation and commercialization from across Canada and the US. The speaking panels were composed of a diverse set of individuals from government, industry, and educational institutions and included legal scholars, Canadian and American lawyers, scientists from academia and industry, and public venture capitalists.
As the title suggests, the focus of the conference was on finding solutions that would further Canada’s ability to commercialize innovations. On a more fundamental level the conference helped to build links between the various stakeholders involved in innovation and commercialization by creating a platform to allow for “cross-talk”.
Throughout the day, audience and panelists were presented with information on innovation and commercialization ranging from government initiatives and funding for innovation in educational institutions, to new Canadian tax laws that would help spur investment. Each panelist also discussed some of the challenges they are facing within their particular field and highlighted how these challenges are barriers to innovation and commercialization.
Innovations from Industry
One of the first speakers of the day was panelist James Isbester from American law firm Townsend and Townsend and Crew. He began his talk with a summary of the success of Silicon Valley and their innovation lifecycle, reminding the audience that industry continues to be one of the main sources of innovation. The Silicon Valley dream is as follows: An employee working in a cubicle at a large Silicon Valley company comes up with a great idea for a product. The employee presents their idea to company management but it is rejected because it is a risky venture and the large company is risk averse. Disgruntled, the employee leaves the big company, creates a small startup firm based on their great idea, and uses seed investment from family and friends. As the startup begins to grow and the idea proves commercially viable Venture Capitalists (VCs) recognize the potential and provide additional capital for it to continue its growth. With a proven product and consumer, mezzanine investors provide additional financing. Ultimately the company either issues an IPO and goes public or is acquired by another large Silicon Valley company. The once small, risk taking startup has now transformed into a large, successful, and risk averse company that rejects their employees’ innovative ideas causing the spawn of new innovative startups and repeating the innovation lifecycle process. Isbester went on to explain, however, that in recent years VCs have become more risk averse, requiring startups to relinquish a greater share of their company for less money and requiring a faster return on investment (ROI). Where a couple of years ago an 18 month ROI was acceptable, VCs are now requiring demonstration of profit in as little as 6 months.
Deputy Minister George Ross for the Ontario Ministry of Research and Innovation in his keynote address at the beginning of the conference also recognized that Canada has a gap in the innovation and commercialization lifecycle that industry is unable to fill (especially in the current economic climate). As such, Ross emphasized that one of the tenets of Ontario’s Innovation Agenda for the Ministry of Research and Innovation is to act like a catalyst and fit in where the market isn’t. Throughout his talk, Ross highlighted the programs in place to invest the $3B budget the Ontario Ministry of Research and Innovation has committed to transforming Ontario and Canada into the knowledge economy.
Innovations from Educational Institutions
Even with the government providing the necessary financing for innovations to be commercialized, other panelists revealed it is not the silver bullet solution for Canada. Many important technologies emerge from educational institutions, and Dr. Tom Corr, CEO of the Accelerator Centre at the University of Waterloo highlighted how an institution’s policies around Intellectual Property ownership can be detrimental to commercializing innovation. Institutions that claim an ownership in students’, researchers’ and Professors’ IP could effectively discourage investment and stifle opportunities for a viable startup company. The counter-argument however, is that Universities that do not participate in the IP process with students and researchers may also harm commercialization. It was observed that students who are innovating frequently lack the necessary knowledge for commercialization, and that Universities may be able to provide this guidance. Furthermore, without the Universities to administer there may be a lack of certainty in IP ownership (especially between students and tenured faculty) that can complicate matters. Even if there is some certainty in IP ownership, there may be a disagreement about how to commercialize. The interests of an entrepreneurial student looking to develop a business and career from their research is at odds with the interests of a tenured Professor who already has an established career and little incentive to spin out a company from their research.
The Disconnect between Industry and Educational Institutions
Even if students and faculty have no interest in personally commercializing their research, a company may still license the innovation for commercialization. This is a favourable alternative as it would allow royalties from the licensing agreement to be funneled back into the researcher’s budget to fund new research while the benefits of the innovation is distributed to society. Panelists revealed, however, that there are a number of disconnects between industry and educational institutions that may prevent this type of favorable arrangement from occurring.
First, assuming that innovations developed in academia are viable and commercially ready, these innovations may be artificially restricted from commercialization because of the disconnect between industry and educational institutions. Marc Castel, Manger of Business Development with the Ontario Centres of Excellence, frequently encounters situation where industry has a need that could be satisfied by academic research, but do not know where to look or how to interface with the educational institutions. In some ways part of Castel’s role is to act as a “dating service” and facilitate the necessary matches. Panelist Darlene Homonko, Executive Director of the Golden Horseshoe Bioscience Network (GHBN) also fulfills a similar role. As one of twelve regional innovation networks around the province of Ontario, GHBN’s mandate is to establish a strong and thriving environment for growth and investment in the region. One of the ways it accomplishes this is by providing educational forums and opportunities for networking and dialogue among the biosciences and the associated business community.
Second, innovations developed in educational institutions may only be at the end of the research stage but need further development and testing on a larger scale to prove viable for commercial purposes. Ron Pearlman, Professor of Biology at York University, discussed how academic researchers developed and patented an in vivo screen for fungal infections in the lab, but were unable to perform the necessary screening to entice a company to license. Similarly, companies were unwilling to invest in the screening most likely because it was not economically viable. Professor Pearlman characterized the problem as essentially that the “D” in R&D was missing and neither industry nor the educational institutions could fulfill that role.
Lastly, certain research performed in educational institutions may be so commercially non-viable that industry cannot justify funding directly. In these situations it may also thwart the government’s efforts to fund research. Professor Pearlman discussed a number of situations where government NSERC funds were approved and allocated for a specific area of research but were not released because a non-government sponsor could not be found to match the government funding.
This last type of disconnect may ultimately have the most profound effect on innovation. To focus on a short term ROI seems to place too much credence in organizations to predict the potential benefits of research. History teaches all too often that some of the most innovative and beneficial discoveries were accidental and unintended. In their talks, Professor Pearlman and panelist John McCulloch, a Venture Group Advisor with the MaRS Discovery District both emphasized that one of the most important components for innovation is the funding of basic scientific research. Indeed, limiting funding to research that appears to have the most immediate ROI would seem to narrow the research pipeline and potentially stifles significant innovations that are still 20 years off.
After the closing remarks of the conference were delivered, attendees and panelists took the time to mingle and discuss the ideas canvassed throughout the day - perhaps because they were left with more questions than answers. One could argue that these unanswered questions were the true indicator of the conference’s success. These unanswered questions represent the new gaps and challenges identified when a diverse set of stakeholders are assembled to discuss their role in the system of innovation and commercialization. One can only hope that in discovering the right questions, Canada as a nation moves one step closer to finding the answers and implementing solutions that work.
Video recordings of all the presentations from the conference will be archived on the IP Osgoode website and made available for viewing in the near future.