WHY CANADA NEEDS A TECHNLOGY TRANSFER ACT

EXECUTIVE SUMMARY

Prepared by Thomas E. Clarke, M.Sc., M.B.A.

Stargate Consultants Limited

http://www.stargate-consultants.ca

February, 2000

(Revised March, 2008)

[Complete report is available on request]

Governments around the world are viewing their in-house laboratories as a source of scientific and technical knowledge and hardware that can assist them in promoting and supporting knowledge-based industries needed to compete in the global economy of the 21st century. The Canadian government also believes that its government laboratories have a role to play in strengthening Canada's technological innovation infrastructure. Unfortunately, Canada's reliance on a mixture of government statements, antiquated Acts, and poorly drafted Treasury Board policies to promote the transfer of government developed technology or expertise is not adequate. This reliance has contributed to confusion over ownership of intellectual property (IP) that results from government procurement contracts, lack of consistent administration of rewards to inventors and innovators across government departments and agencies, questions regarding whether senior managers are really supportive of technology transfer, unnecessary fear over conflict of interest issues, and a "them" versus "us" attitude building up between government bureaucrats and Canadian industry.

In order to encourage the utilization and transfer of technology and knowledge developed by government scientific/technical personnel, and to bring fairness, consistency and legitimacy to the technology transfer process in Canadian government departments and agencies, including Crown Corporations, Canada needs a Technology Transfer Act .

The objective of this paper is to stimulate discussion on the need for such an Act and what the Act should encompass. To support the argument for such a Technology Transfer Act, an overview of pertinent US technology transfer legislation is provided along with a description of the various Canadian initiatives to promote technology transfer. This paper also provides recommendations on some issues a Canadian Technology Transfer Act should address in order to bring Canada's efforts to encourage the transfer of technology from government laboratories into the 21st century.

 

U.S. Initiatives to Promote Technology Transfer to the Private Sector

U.S. efforts to encourage the adoption or commercialization of technology from U.S. government agencies are usually based on legislation rather than policies or bureaucratic statements. The most pertinent legislation and mechanisms the US government has put in place to encourage technological innovation through technology transfer from government laboratories are:

 

The various amendments and improvements over the years since the Bayh-Dole Act were designed to overcome problems that the drafters of the earlier acts did not anticipate. It was not, however, until the promulgation of the Federal Technology Transfer Act of 1986 that some government agencies began to take technology transfer seriously. The 1986 Act ensured that government agencies could not avoid technology transfer activities and that public servants share in the royalties from the licensing of government technology. It also made each science and engineering professional employed by the U.S. Government responsible for transferring technology.

An important mechanism established under the Act of 1986 was the "Cooperative Research and Development Agreement (CRADA)". This was intended to improve the way in which federal agencies transfer commercially useful technologies to the private sector via collaborative R&D projects. Under a CRADA, a federal agency can provide people, services, facilities, equipment, IP, or other resources, but not funds, to the non-federal partner, and the non-federal partner can provide funds, people, etc. toward the conduct of specified research or development initiatives that are consistent with the mission of the agency. The CRADA rules were improved in 1995 by ensuring that the non-government partner would have the right to an exclusive license in some area of application. Some of the key features of a CRADA are:

 

The actions of the U.S. government to promote technology transfer has resulted in an increase in revenues from about $9.7 million in 1990 to well over $45 million in 1998.

It is clear from the U.S. legislation that U.S. legislators, prompted no doubt by industry, are proactive in considering technology transfer as an important tool to support and improve the U.S. economy. The U.S. Congress, in its review of H.R. 209 states: "the technology transfer process must be made 'industry-friendly' for companies to be willing to invest the significant time and resources needed to develop new products, processes and jobs using federally funded inventions". This is in sharp contrast to Canadian legislators who face only sporadic pressure from Canadian industry and have never had any substantial dealings with technology transfer issues in the past twenty years.

 

Canadian Initiatives to Promote Technology Transfer to the Private Sector

Canada has relied much less on legislation and more on government policies and statements to promote technology transfer. Even where there is legislation, departments and agencies can opt out and not adhere to the spirit of the legislation (e.g., awards to inventors). Canadian government efforts to promote technology transfer have been more inclined to make the process "government-or bureaucrat-friendly" rather than "business-friendly".

Among the initiatives to promote technology transfer in Canada are:

Public Servants Inventions Act (PSIA), and Regulations of 1973

Title to Intellectual Property Arising Under Crown Contracts [ 1991] (Revised in 2000)

Retention of Royalties and Fees from the Licensing of Crown-owned Intellectual Property [1993]

Award Plan for Inventors and Innovators [1993]

Statements in "Science and Technology for the New Century"

Guiding Principles for the Management of IP Issues [Draft, 1998]

Title to Intellectual Property Arising Under Crown Procurement Contracts [October, 2000] (Replaced the earlier 1991 policy)


These initiatives allow for:

 

Unfortunately, what is allowed, and what is practiced by all of the government departments and agencies is not the same. For example, despite the existence of a government policy that encourages the awarding of a percentage of IP royalties to government inventors/innovators, some departments have great philosophical difficulty in complying with this policy, especially in the case of innovators. A 1995 study of the extent of compliance with the 1991 IP ownership policy which did away with the presumption of Crown ownership found that most government departments and agencies were ignoring the policy and taking a "Crown pays, Crown owns" position. Although the policy accommodates this position through "exceptions" such widespread use of the exceptions wass not in the spirit of the policy. As a result, Industry Canada developed a poorly drafted, revised IP ownership policy that took effect in Jauary of 2001 that provided, among other minor changes, for the reporting of IP ownership decisions by government departments. Unfortunately, the reporting format does not distinguish between commercializable IP and IP with no commercial potential. Thus departments can continue to safely "give away" IP with no commercial potential while retaining commercially valuable IP and still look good in their reports to Treasury Board. There is also considerable confusion, even in Treasury Board, about when to apply the new IP ownership policy (i.e., to all procurement contracts, or only to those that will result in IP?).


Problems with the Existing Canadian Approach

The existing Canadian approach to promoting technology transfer from government laboratories to the private sector leaves too much power in hands of the senior bureaucrats with the result that the inventors/innovators of the successfully commercialized technology can be cut out of their fair share of the rewards of success. In addition, the senior bureaucrats can also dictate to the private sector adopter any and all conditions associated with the transfer of the technology even when the private sector adopter has been a player in the development of the technology via a partnership or contractual arrangement. In effect, even if the private sector puts up the majority of resources in a project, the government can refuse to assign them the intellectual property or even grant them a license

Thus some of the major problems associated with the Canadian approach to encouraging technology transfer in support of the technological innovation infrastructure are:

Discussion and Recommendations

The new Technology Transfer Act should replace all existing Acts and Treasury Board policies dealing with technology transfer and IP management. The Act should apply to all government departments and agencies, including Crown Corporations. It should reinforce the principle that technology transfer and any subsequent commercialization, is a legitimate, valued activity that supports both the ability of public servants to fulfill departmental mandates as well as wealth and job creation objectives of the government in general. Each department and agency should be mandated to prepare a report to Parliament on their technology transfer activities.

In particular, the Technology Transfer Act should address the following issues:

 

Ensure the Rights of the Non-Federal Partner or Technology Adopter


Mandatory Awards to the Innovation Team

At present, payments to inventors/innovators are discretionary and the amount of the award is subject to departmental or managerial interpretation. This has resulted in branch's in some departments refusing to make any awards, especially to the innovators, despite earning IP revenues.

The Technology Transfer Act should:

 

Return Royalties to the Laboratory of Origin

At present, there is no guarantee that IP revenues earned by an R&D laboratory will be returned to that laboratory. There is also no authority for the laboratory to use any excess IP funds for future R&D. This can cause colleagues who have no opportunity be part of an innovation team to be jealous of any awards a successful team receives. It is important that the benefits of a successful patent be shared among immediate colleagues to avoid conflicts and lack of cooperation.

The Technology Transfer Act should mandate that a considerable percentage of the funds earned from IP licenses, fees, etc. be returned to the originating laboratory to provide awards or resources to other researchers.


Legalize Royalty Payments to Innovators and Software Developers

To encourage public servants to invent, disclose and commercialize government developed intellectual property, persons who make significant contributions to its successful transfer or commercialization should share in the reward with the inventor(s). The Act should:


Provide Multi-Year Awards for Internal Use of a Government Developed Invention

Government inventors/developers should receive monetary rewards for the internal use of their inventions or software products for as long as the invention or software is providing substantive benefits to the Crown. The cap of $5,000. should be removed and the award be based on a percentage of the identifiable savings to the Crown, paid annually, for as long as benefits accrue to the crown.

 

Make the Award Process Completely Transparent

The recipients of royalty or license fee awards should understand how their department or agency determines the amount they receive. This will avoid the positive effects of receiving an award from being undermined by uncertainty about whether they have received their fair share.

The Technology Transfer Act should mandate that each inventor or innovator receiving a monetary award should also receive a financial statement disclosing how the amount was calculated.

 

CONCLUSION

Canada's present approach to encouraging technology transfer has many deficiencies and the status quo is not adequate to meet the many challenges of smoothly integrating government laboratories into the national technological innovation infrastructure in the 21st century.

In order to encourage the utilization and transfer of technology and knowledge developed by government scientific/technical personnel, and to bring fairness, consistency and legitimacy to the technology transfer process in Canadian government departments and agencies, including Crown Corporations, Canada needs a Technology Transfer Act. This Act will replace the various out-of-date or "band-aid" efforts that have been put in place over the years to encourage technology transfer to the private sector.

The Technology Transfer Act must take into account the best interests not only of the government laboratories and their employees but also of the private sector. The private sector converts raw technology into cash flow, and its interests must be addressed and protected from arbitrary or self-serving decisions. Thus the development of a Canadian Technology Transfer Act must involve representatives from Canadian industry and academia, as well as public servants, if the resulting Act is to have wide acceptance. The Technology Transfer Act must be "user-friendly" to those who wish to make use of or commercialize government-developed technology or knowledge.

Without a new comprehensive Canadian Technology Transfer Act, government departments and agencies run the risk of alienating the better, entrepreneurial high technology companies because of their fear of being taken advantage of in IP license/ownership negotiations, and their own public servants who fear that they might not be treated fairly in the distribution of benefits resulting from their creative work. An Act would take away the potential for arbitrary decisions by senior bureaucrats.

A Technology Transfer Act will promote a "win/win" situation for both groups with the Canadian public being the overall beneficiary due to increased socio-economic benefits.


BIBLIOGRAPHY

Allen, Joseph, "GOGO and GOCO Tech Transfer Policies", National Technology Transfer Center, http://www.nttc.edu/technews/goc.html, 1996

Bozeman, Barry and Coker, Karen, "Assessing the Effectiveness of Technology Transfer from US Government R&D Laboratories: the Impact of Market Orientation", Technovation, Vol. 12, No. 4, 1992, pp. 239-255

Carr, Robert K., "Doing Technology Transfer in Federal Laboratories (Part I)", Journal of Technology Transfer, Vol. Spring-Summer, 1992, pp. 2-33; "(Part II)", Vol. 17, Nos. 2/3, pp. 24-33

Clarke, Thomas E. and Reavley, Jean, "Determination of the Status of the Federal Government Policy on Ownership of Intellectual Property Arising from R&D Contracts", Stargate Consultants Limited, Ottawa, Ontario, October, 1995

Government of Canada, "Science and Technology for the New Century: Summary, Ottawa, 1996

Liberal Plan, "Securing Our Future Together: Preparing Canada for the 21st Century", Liberal Party, Ottawa, Ontario, 1997, p. 39

Mings, John M., "Technology Transfer: A Shortcut in Danger of Short Circuit", Journal of Technology Transfer, Vol. 23, No. 3, Fall, 1998, pp. 3-6

OECD, ""The Changing Role of Government Research Laboratories", Paris: OECD, 1989

Radosevich, Raymond and Kassicieh, Suleiman, "Strategic Challenges and Proposed Responses to Competitiveness through Public-Sector Technology", California Management Review, Summer, 1993, pp. 33-50

Spivey, W.Austin, Munson, J. Michael and Flannery, William T., "Understanding the Environs that Impact Technology Transfer and Transition", Journal of Technology Transfer, August, 1994, pp. 63-73


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