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Technology transfer

Thursday, December 9, 2021

Startup Jedi

We talk to startups and investors, you get the value.

Our article today will primarily be interesting to students and researchers, as well as to those entrepreneurs who intend to develop knowledge-based business.Let's talk about technology transfer — what it is and how it can be used in innovative projects, which are startups.

What is technology transfer?

In the historical perspective we can remember Archimedes (the same one who according to legend shouted “Eureka!”, sinking in water). It was this ancient Greek scientist who applied the scientific knowledge of that time to its practical application.

Technology transfer is the process of transferring technology from a person or organization that possesses it or has rights to it to another person or organization. This transfer can happen between universities, businesses (from small to large), governments, across state borders or within one country.

This can be either formal or informal, open or confidential. Technology transfer is often associated with the knowledge transfer, the part of which it is.In the modern world, technology transfer acts as the easiest way to monetize scientific developments. This process can be both horizontal, when technologies are transferred from one sphere to another, and vertical, when a product for the end user is created and promoted on the basis of scientific development.

Why technology transfer is needed

In most cases, technology transfer occurs for the reason that the organization where the technology was invented or developed differs from the organization that brings the technology to market. The process of bringing technology to market is called commercialization, and in many cases the entire process from invention to market launch is handled by one company. At the same time, in a significant number of cases, organizations at the stage of invention and commercialization are different. 

There are reasons for this:

  • If the discoverer is a private entity, it may lack the resources to bring the technology to the market, such as building a network of distributors, sales and simply money and production capacity. And even when a company has the resources, it may not consider the technology as a strategic product.

  • In the USA, if an invention is made in a government laboratory, then the laboratory is prohibited from competing with private companies by selling the final product or processes. Thus, the technology can only be put on the market by a private company.

  •  If the technology was invented at the university, then most often it does not have sufficient resources and expertise for the production and promotion of products on the market. And besides, if the technology was invented with grant money from the US government, then it strongly recommends transferring the technology to a private company for commercialization.

Stages of technology transfer

The technology transfer process consists of several stages:

Stage 1 —  evaluation of intellectual property;

Stage 2 —  intellectual property protection;

Stage 3 —  licensing and/or commercialization of intellectual property.

At the stage of intellectual property evaluation, the university or other scientific institution where the inventor works carries out work on commercial and technical estimates of the invention. The decision on patenting is based most often on two factors: the possibility of patent protection and the commercial potential of the invention.

Once the intellectual property has been evaluated, the second step is the protection of the intellectual property. The owner, most often a university or academic organization rather than a specific inventor, makes an agreement with the law firm that will accompany the patent application process. At this stage, the inventor works closely with lawyers to ensure that the technology is properly understood and protected.

Finally, in the third stage of licensing and/or commercialization, a path is chosen to obtain profit from the invention. The choice depends on many factors: market situation, state of technology development, expertise of potential entrepreneurs and availability of finance. Licensing conditions and costs may vary, and most often include an advance payment by a scientific organization, royalties and/or a schedule of payments over several years, as well as funding for further research with the option of licensing the obtained technology.

Technology transfer options

Technology transfer is most common in the private sector, where licensing mechanisms or the creation of a joint venture, research consortium or partnership are used. At the same time, licensing is a huge business in itself. At the beginning of the 21st century, American companies received more than $66 billion in technology payments from other organizations. At the same time, the annual increase compared to the 90s of the last century was 18%.

A joint venture is the most advanced technology transfer option, because, firstly, it allows you to share risks and costs at an early stage of technology development between several companies, reducing the burden on one organization; secondly, the resources and expertise required for technology commercialization can be distributed among several companies, and a joint venture is almost the only way to combine; and third, for those areas where technologies are developing fast enough, joint venture — possibility to keep “on the crest” of new developments.Finally, in such an area as telecommunications, joint ventures make it feasible to develop and set basic technological standards. All this suggests that the trend for the creation of joint ventures will only grow.

Since the mid-1980s, several laws have been passed in the United States aimed at technology-based economic growth. These laws primarily allowed the opening of “treasure chests” in the form of technologies that government laboratories possessed and that were needed by the corporate sector. 

In fact, licensing government technology has little potential, except for the National Institute of Health (NIH). It was the source of several breakthrough therapeutic and medical technologies, and thanks to its links with the pharmacy sector, it makes a huge profit from their licensing.Other government organizations prefer to sign CRADA (Cooperative Research and Development Agreements) — agreements on joint research and development. Under the agreements, government laboratories provide personnel and equipment, and the partner provides financial resources for research. At the same time, the number of CRADA signed by government agencies is growing every year.

Finally, it is worth talking about technology transfer from universities to industries. In the United States, this process is regulated by the Bayh-Dole Act, which recommends that universities and research organizations license technologies created with government financing.Since the 1980s, this activity has begun to bring a small but stable amount of income to universities. Statistics show that more than 150 educational institutions annually receive about $1 billion in revenue from licenses.

As in the case of government laboratories, universities can and do enter into agreements on joint research activities with commercial organizations. At the same time, universities take on about 7% of the total research budget. Another form is the creation of spin-off companies that are created with the participation of universities. The total number of such companies, which have issued about 3,450 patents in the United States and brought about two thousand new products to the market, is about 350 organizations.

Conclusion

While the leaders of the startup industry have been using the resources offered by the technology transfer process for a long time, in the post-Soviet space, research institutes and universities are only beginning to commercialize their developments and joint activities to bring technologies to market. At the same time, the potential for growth is huge, which will probably be the subject of one of our next materials.

9 Dec 2021

 

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