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Federal Partners in Technology Transfer Workshop

PROCEEDINGS

"Skills Development for Technology
Commercialization"

Federal Partners in Technology Transfer Workshop

Skills Development for Technology Commercialization

PROCEEDINGS

This year's workshop attracted more than 100 participants from across Canada, as well as a few people from outside the country and included representatives from government laboratories, universities, and the private sector. The proceedings provide: a) a brief review of the workshop and its objectives; b) challenges faced by government laboratories and universities in the transfer of technology; c) recommendations and suggestions made by the speakers and by the participants either during the workshop or on the evaluation forms submitted; and d) a brief summary of the presentations. Formal presentations made by the speakers (some may have lost some formatting) are found in Annex A, and in Annex B, the FPTT Award recipients and their technologies are highlighted.

Brief Review of the Workshop

On June 19, the following topics were presented:

The Contribution of Research to Innovation in Canada
WorldHeart Corporation - The Complete Story
An Overview of Commercialization Skills Issues

A panel discussion moderated by Ilse Treurnicht, President and CEO, Primaxis Technology Ventures Inc., was held to provide an overview of the different perspectives on skills required for technology commercialization. This was followed by presentations that were moderated by Margot Montgomery, Director General, Industrial Research Assistance Program. The following issues concerning Canadian options and how to acquire the right skills at the right time were discussed:

Expanding the Pool of Technology Transfer Professionals
Keeping Current - Upgrading Skills
Networking for Ready Access to the Right Resources
Incubation Programs as Tools for Accessing Commercialization Skills

On June 20, a panel discussion moderated by Lorne Heslop, Senior Science Policy Analyst, Agriculture and Agri-Food Canada and Chairman of the Federal Partners in Technology Transfer, provided insights from other environments. The panelists, who were from the US and the UK, explained how they utilize technology transfer to benefit their organization. John Benesh, President, John Benesh and Associates, then acted as the interviewer for an armchair discussion on potential skills development solutions. Following the closing remarks by Dr. Brzustowski, two optional information sessions were held; one on the new Treasury Board of Canada policy "Title to Intellectual Property Arising Under Crown Procurement Contracts" and the other session covered the the Financial Information Strategy, focussing on the federal government's move to an accrual based accounting system and the impact on science-based departments and agencies.

Key Objectives

To learn how others gain skills in technology commercialization
To find out more about outsourcing technology commercialization activities
To gain awareness of organizations that provide training
To gain access to the talent pool
To raise concerns about the growing workload facing technology transfer practitioners due to the growing complexity of the job
To showcase the skills development capability and/or services of various organizations
To learn more about model practices
To share experiences with other technology transfer practitioners

Key Excerpts from Workshop

Research and development (R&D) are critical to innovation, however, they are not the only elements.
R&D collaboration requires determining a balance between research that is technology-driven and development that is market-driven.
Research is the catalyst for the conversion of money into knowledge just as innovation is the stimulator for the transformation of knowledge into money.
Technology is not just about money, it is about discipline and "smart money".
We are at "the cusp of a huge opportunity to take the next big leap in technology commercialization".
A technology transfer or business development officer is a necessary link between the industry and technology communities, hence it is necessary for him/her to possess a diverse set of skills in order to survive and to strive on this interface.
The job of a technology transfer officer is comparable to someone standing in a lake with one foot in a business boat and the other foot in a science boat.
Technology transfer is "a contact sport" and the skills are only sharpened with experience.
In order to learn about technology transfer, the best way is to get in there, find the mentor networks and skills training, and just do it!
Technology transfer officers should "add their value or step aside," meaning that they must step back when they are not needed to mediate between science and business parties.
Successful technology transfer requires a combination of a good technology, someone who wants it, and a technology transfer professional who can put the deal together and finalize it.
The reality of getting technology successfully out of the lab into products is primarily a function of entrepreneurism.
The "three Rs of commercialization" should be kept in mind: risk, reward, and resources.
During the commercialization stage, it is crucial to remember that in a good company, there is good feedback from the market.
The generation of companies is easy, it is making them work that is more difficult and requires the investment of time and money.
The top three growth factors for an SME are: strategic partners; seed capital; and management skills.
The business plan is essential because it is the only evidence that the marketability of the product has been carefully contemplated and the following questions have been answered: "Does the technology have a market?" and "Is the technology unique?"
Companies that go through a formalized incubation period process are four times more likely to succeed in business within a five-year period than those that don't.
Learn from failure; research managers must accept the fact that they might fail.
Be wary of "due diligence paralysis" because the containment of all the risks is not a guarantee, therefore, gut instincts must be trusted.

Challenges Faced by the Technology Transfer Community

The Canadian government and university laboratories need to enhance its effectiveness and efficiency in its ability to transfer technology.
We need to get ideas out of laboratories and into the marketplace, as this is fundamental to the building of a knowledge-based economy.
The government, government technology transfer practitioners, and university counterparts need to work together to strengthen their ties and build a stronger partnership (build a bridge). This collaboration will help to close the innovation gap.
More training needs to be provided (i.e. mentoring, networking, workshops, conferences, courses, co-op, and entrepreneurship programs).
Partnerships must be built with different levels of education, levels of government, chambers of commerce, and/or economic development groups.
Research-based innovation is only a narrow fragment of the very broad issue of innovation. The recognition must be made that there is valid information that is not research based, rather it is learned by doing.

Recommendations

To help address some of the key challenges and findings, a number of recommendations were made, some specific to FPTT and others encompassing the broader technology transfer community.

FPTT needs to become more active, take on a more formal leadership role, and become a core mandate of government.
An expert panel on commercialization of government research is needed.
FPTT must begin to play a bigger role in technology transfer skills development.
A uniform policy across Canada would bring more players up to the same level.
The federal government needs to be convinced that technology transfer is an essential investment.
We need to seek ways to capitalize on and increase cooperation between technology transfer offices and to create opportunities for synergy between the responsibilities of the IRAP industry technology advisors (ITAs) and those of the university industry liaison officers and/or managers.
Government must use a collaborative approach to regional skill building; this will increase communication and networking.
FPTT members need good metrics on their performance in technology transfer and commercialization. Establishing a baseline, then benchmarking from this point will allow for comparisons to be made so that future progress may be shown.
The identification of gaps in the technology transfer process that FPTT member departments and agencies need to fill is fundamental to their success.
Earlier identification of the commerciable technologies in federal and university labs is beneficial. Learn to choose the best technology, to protect it, and to quickly deploy it.
Clarification of the roles and core competencies of inventors, technology transfer officers, and R&D managers is needed. Appropriate skills development training should be provided in response to stated requirements.
Working with other organizations like the Association of University Technology Managers would help to avoid duplication as they are facing similar technology transfer and commercialization issues.
A good relationship and mutual respect between technology transfer officers and scientists/inventors are critical to the success of the technology transfer and commercialization process.
How to get early stage funding and help emerging firms to be investment-ready was suggested as a possible theme for FPTT 2001.
Wording used in patents is crucial. Therefore, FPTT could hold a workshop to help technology transfer officers and scientists with the use of effective wording (do's and don'ts).
Mentorship and internship programs, which provide practical experience, could be developed in federal labs, private companies, and with venture capitalists.

DAY 1 - Summary of Presentations

Graham Taylor, Communications Research Centre Canada, Ottawa

Mr. Graham Taylor welcomed everyone and offered his thanks and appreciation for their attendance at the FPTT Workshop 2000 on the topic of Skills Development in Technology Transfer. He stated that the goal of the workshop was to identify solutions to this gap in the innovation cycle through teamwork and collaboration. The purpose of the workshop, he explained, was to provide an opportunity to close the gap by inviting bright minds from government, universities, and the private sector to share their experiences and ideas. He encouraged people to "think outside of the box" in the process in order to provide solutions which, in turn, could become the action that is needed to promote advancement in the commercialization of technology in Canada.

Mr. Taylor paid tribute to the hard work of Catherine Deschatelets-Cullen and Rosanne Zarka of the FPTT Executive Office, who organized this event and who have been responsible for the efficient operation of the office. Mr. Taylor then introduced Morna Paterson and congratulated her on her new position as Director of the Federal Partners in Technology Transfer (FPTT) since the departure of Jocelyne Caloz.
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Arthur Carty, President, National Research Council Canada, Ottawa

Dr. Carty opened the workshop by declaring that innovation is the process through which new knowledge and technologies are created, transformed into products and services.

He suggested five methods by which FPTT can help the Canadian government to enhance its ability to transfer technology efficiently and effectively. These were: addressing horizontal issues related to technology transfer; providing a forum for federal science-based departments and agencies; providing opportunities for members of FPTT to work with leaders in the technology transfer field around the world; developing an infrastructure of government-wide policies and programs to encourage the transfer of knowledge to SMEs; and promoting public awareness of federal technology and knowledge transfer activities.

Dr. Carty pointed out that research is the catalyst for the conversion of money into knowledge and likewise, innovation is the stimulator for the transformation of knowledge into money. Research and development are critical to innovation, however, they are not the only elements. It is important to keep in mind, Dr. Carty added, that although new knowledge and novel ideas are created through research, they must be successfully developed into new products and processes in the marketplace in order to complete the cycle.

He also mentioned some of the goals that should be pursued in order to fill current innovation gaps. One should first get ideas out of government and university laboratories and into the marketplace, which is fundamental to building a knowledge-based economy. The opposite should also occur so that the marketing and business acumen is utilized to get ideas into the laboratories. Secondly, more training in this area needs to be provided, an issue on which the government, government technology transfer practitioners, and university counterparts can all work together. He concluded by stating that in an attempt to establish and build on this partnership, the following were important: mentoring, networking, workshops, conferences, courses, co-op, and entrepreneurship programs.

Doug Gill, University of Western Ontario, London

From the perspective of the Association of University Technology Managers (AUTM), Doug Gill, Canadian Chapter Vice-President, stressed the need for strengthening the link between universities, research laboratories, and governments. He stated that currently, there is a need for improved resources to carry out the evaluation, protection, and commercialization of new discoveries. He claimed that Canadian universities should be given credit for the significant improvements they have already made in the move toward greater innovation. He provided evidence to back up his claim by sharing statistics regarding the contributions of several Canadian universities. The University of British Columbia has created new companies around university inventions, accounting for the generation of 91 spin-offs over 16 years, of which 80% are still active; University of Alberta achieved $3 million US in licensing income in 1998; and several others were over the $1 million US mark in 1999.

He highlighted several challenges that when overcome, would result in highly skilled professionals working in interdisciplinary fields and having the know-how to transfer technology more efficiently. The following tasks are those that were listed by Mr. Gill:

to find better, faster ways to develop and improve technology transfer skills;
to find remuneration mechanisms within academia to entice and retain such skilled professionals;
to convince the federal government that technology transfer is an essential investment;
to seek ways to capitalize on and increase cooperation between technology transfer offices;
to create opportunities for synergy between the IRAP industry technology advisors and the university industry liaison officers or managers;
to integrate ITAs into the university technology transfer offices; and
to provide added benefit to both sectors, for example, by demonstrating opportunities for career progression in the IRAP program.

Mr. Gill outlined a few key points regarding AUTM. The members of this non-profit organization include technology transfer practitioners from academia, government and business who manage intellectual property, which he said is becoming increasingly predominant as business currency. The objectives of AUTM are to strengthen the practise of technology transfer and innovation by discussing best practices, seeking solutions to technology transfer issues and by providing training courses in various aspects of the technology transfer process.
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Tofy Mussivand, WorldHeart Corporation, Ottawa

Dr. Tofy Mussivand shared his experiences with the complexities and difficulties associated with the research and product development process and how this led to starting up a new company. He contributed suggestions about what to do and what not to do in terms of commercializing new technologies. Dr. Mussivand recounted the struggle to transform his dream of helping persons with heart failure prolong their lives by designing and bringing to market a left ventricular assist device (VAD), named the HeartSaver. The key point that he made several times was the importance of having faith in oneself and believing in one's company and product.

Dr. Mussivand claimed that it is possible to commercialize research that originates in universities and government research laboratories. That process can, however, be lengthy and fraught with frustrations. In order to take a technology to market, one needs to clearly understand the market and the niche that an invention will occupy in the market. For example, WorldHeart's focus is to develop a product to reduce the mortality rate associated with heart failure. There are competing devices but a key competitive advantage of the WorldHeart device lies in the fact that because it is totally implantable it immeasurably improves the quality of life of users. The ultimate and generalized goal is to reduce the numbers of people whose lives are lost to heart failure, as well as the enormous costs borne by patients, hospitals, and government in order to treat this deadly illness. For WorldHeart to play a significant role in achieving this goal will require a continuing R&D push to maintain a technological edge so that the HeartSaver is one of the VADs that finds widespread acceptance in the medical world.

As with any research and commercialization process, WorldHeart needed to find the right technology, talented and skilled people, the resources for funding, and the facilities to conduct the research and eventually manufacture the product. Above all, it needed to possess the vision, the desire and the will to make this process happen. This required a core group of dedicated people willing to commit to the vision, a key factor in any successful venture.

There were several challenges facing Dr. Mussivand, WorldHeart and the University of Ottawa Heart Institute in terms of developing a new, more efficient model of an artificial heart. After receiving several grants, the VAD (which is now called HeartSaver) was developed as the solution to the challenges that had been identified. Its advantages include its lightweight structure (which meant the reduction of a 300 lbs model such as the early Jarvik to one that weighs 600 grams); the fact that its control system is non-intrusive; and after implantation the patient is not hospital-bound as the performance of the heart can be monitored from a distance.

There were several rudimentary lessons that Dr. Mussivand shared from his experiences in developing the Heart Saver:

research grants are helpful and appreciated, however they are not sufficient for transferring technology from the public to the private sector;
unless you protect your technology (intellectual property, patents), any market advantage can be quickly seized by competitors;
analyze your potential customers and know their needs;
publish/disseminate all facts resulting from the research (be factual) in order to establish scientific and professional credibility amongst future users of the technology;
go through rigorous testing and promote your product and company to potential customers by demonstrating to them that what you are saying has been scrutinized and tested in the scientific area;
be truthful and open in discussing technical difficulties impeding a research program or product development - setbacks are inherent in such an undertaking; and
credibility is difficult and time-consuming to establish, but can quickly be lost.

Dr. Mussivand concluded by stating that in order to achieve international success in the area of medical devices, an innovator must persevere for many years. A strong sense of vision and dedication is necessary (i.e. the HeartSaver has been under development for more than 11 years). Starting with a premise/concept in a laboratory, the innovator must then work toward a solution with both scientific validity and potential market applications. Throughout that period of time, one must constantly raise funding from public and private resources, as well as maintain a strong standing in both scientific and financial communities. All the while, the innovator has to constantly inform potential customers and stakeholders of what is happening with the work. In closing, Dr. Mussivand advised anyone wanting to commercialize technology to listen to critics, to be honest, and to freely share scientific successes and failures.
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Ilse Treurnicht, Primaxis Technology Ventures Inc., Toronto

Ilse Treurnicht provided an overview of the skills needed to be a successful entrepreneur, the forces or challenges that must be conquered in order for opportunity to arise, and the traps that must be avoided to minimize the risks associated with start-up companies.

She emphasized that it is important to focus on the skills needed to be successful because "we are only really at the very beginning of the journey of technology commercialization in Canada". These skills include three elements: recognizing market opportunity, establishing a clear commercialization path, and finding the right people to be involved in the execution process.

Dr. Treurnicht explained that the objective of technology commercialization is to maximize the benefits to society from our investment in research. She added that benefits are becoming increasingly parallel to cash return. She highlighted the fact that the transformation of a good idea into money coming into one's institution is vital to ensure success. From the licensing aspect, it is important to look after intellectual property by managing it, expanding it, and defending it. On the start-up side, a company must look after intellectual property, but overlaid upon that, it has to find a management team, collect funding, and build the company. The "three Rs of commercialization" should be kept in mind: risk, reward, and resources.

Dr. Treurnicht stressed that although there are some big forces out there which can be scary, such as the Internet economy and the biotechnology revolution, there are also many great opportunities. Increased demand for skills and resources is accompanied by increased expectation for success, therefore, the management of a company is very important. Innovation is essential to technology, the basis from which products and services are formed. Just as technology will not just morph into products and services, the products and services will not automatically move into market, therefore a plan to penetrate is required. Sales will follow investment of energy and time.

It is imperative, according to Dr. Treurnicht, that value be added at each stage in the commercialization curve. During the development stage, it is essential to set in place good agreements, build management teams, and global networks. Forming contacts worldwide is presently the biggest challenge for Canadian companies who have to go global in a hurry. During the commercialization stage, it is crucial to remember that good feedback from the market is essential.

Dr. Treurnicht offered her opinion that currently, the most predominate challenge is to build a bridge between industry, government, and universities. The construction of this link will improve relations between the knowledge and the business communities, who are expected to work together to develop a product. The elements of this bridge are simply good people and well-spent money.

Dr. Treurnicht suggested a few objectives to work on to encourage closer ties between universities and government laboratories. A company should hire people who can straddle the divide between the inventor community and receptor community. Creative economical ways to train these new employees must be implemented because money is limited in new companies. Giving young people a chance to spend time in a start-up company or to rotate between offices would allow them to receive cross-functional experience quickly. She summarized by advising start-up companies to "borrow, adopt, develop, or build expert processes for technology assessment, market assessment, project management, portfolio management, and customer relationship management."

The creation of an environment that is favourable for both learning and building is instrumental. The establishment of a learning environment requires:

spending time to arrange meetings between chemistry professors and clinician scientists (remember it is on the interface where the great opportunities are going to happen);
being patient;
being prepared to learn from failure; and
recognizing that there is a limit to how much you can learn about technology commercialization from watching it, hearing about it, and reading about it - understand that you need to get in there, find the mentor networks and skills training, and just do it!

A building environment entails being prepared to deal with raw and ugly IP issues, as well as flawed marketing strategy, and to overcome the struggle to find early stage capital. In order to guarantee success, Dr. Treurnicht recommended that start-up companies find partners.

Start-up companies may encounter several risks: an intellectual property risk, a technology risk, a market risk, and the risk that the team will not be able to deliver.

Dr. Treurnicht highlighted several traps that, if fallen into, could halt the progress of a company's success. Firstly, she introduced the concept of "falling in love with technology," which occurs when one falls in love with the impact of technology rather than its features. The second snare that she referred to was due diligence. Often, patience and fortitude are lacking. On the other hand, due diligence paralysis can also be risky because it is not always possible to be absolutely sure that the risks are contained, so gut instincts must be trusted. Another pitfall that some people fall into is the loss of market focus. It is essential to keep an eye on who the customer is, to pay attention to what the technology will do for the customers, consider why they would want to have it, and think about what they will be willing to pay for it. According to Dr. Treurnicht, an additional trap is that people spread themselves too thin. To prevent falling into this trap, people should try to expand their networks. Partnering on deals and sharing information will also be advantageous. Finally, greed was listed as another hazard. Raised expectations will cause a company to price itself out of the market, so it is essential that a firm maintains a grip on reality.
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Ken Lievers, Agriculture and Agri-Food Canada, Lethbridge Research Centre, Lethbridge

Ken Lievers explained that the responsibilities of a technology transfer officer (TTO) are multifaceted. He compared his job as a TTO to someone standing in a lake with one foot in a business boat and the other foot in a science boat. As a necessary link between the industry and technology communities, it is necessary for an industry liaison officer to possess a diverse set of skills in order to survive and to thrive at this interface. Each organization has a distinct mandate that will dictate the scope and expertise that are mandatory for it's technology transfer function.

He shared a little background information on Agriculture and Agri-food Canada. Its mission is to improve the ongoing competitiveness of the Canadian food and agriculture sector through the development and transfer of innovative technologies. Since the mid-1980s, it has been operating at "dual thrust" meaning that research is being conducted on two fronts: public good and commercializable technology. The first job is to see that new technology is developed for and used in the Canadian agri-food sector. The second job is to increase revenues from research and development. There are very few turnkey technologies (those that are totally developed in house then licensed out) that AAFC commercializes; the bulk of what they do is collaborative R&D. Having the collaborating company as a built-in receptor augments the speed and effectiveness of the transfer of the resulting technology.

Dr. Lievers also pointed out that time lags and a lack of tools might hamper a TTO's ability to deliver on those expectations. Expectations of TTOs differ depending on the milieu in which they work. For example, company executives and managers may demand more of a TTO than that person can provide, such as acting as a technology broker and endorsing a product. On the other hand, the investment community may expect TTO to be a scout for emerging opportunities. Dr. Lievers implied that one reason for these unrealistic expectations is the misconception that the TTOs have either very few or very insignificant responsibilities. A TTO often faces a credibility challenge, as their profession involves much more work than meets the eye.

Problems that TTOs have to deal with include:

scientists who don't see the TTO as a facilitator or protector of scientists' interests;
businessmen who don't understand science;
science managers who don't realize that once deals are signed, they still have to be monitored and maintained;
central agencies that do not understand the process of technology commercialization; and
auditors who don't grasp the concept of negotiation.

According to Dr. Lievers, TTOs need to be aggressive translators of a specific subject to a person working in that field (i.e. translator of law to scientists).

TTOs need to exhibit a diverse range of competencies if they want to be successful. Possessing skills in leadership as well as implemention are instrumental so that a balance of possible conflicting interests between different parties may be maintained. They must be familiar with their technology sector, know the players and the nature of their businesses. Another asset that is pertinent to the job of a TTO is the ability to make extensive use of external patent agents. Mr. Lievers emphasized that it is also important that TTOs "add value or step aside," meaning that they step back when science and business parties are communicating effectively.

How do we bridge the inevitable gaps in the huge range of skills required? Mr. Lievers answered this question by listing the following potential in-house options: hiring, formal training, mentoring, networking, and on-the-job experience. The last of which is the most advantageous because technology transfer, according to Mr. Lievers, is "a contact sport and the skills are honed with experience."

TTOs must engender a high level of trust in the way confidentiality issues are handled, be good communicators, and develop a strong relationship with the companies with which they work. Establishing these will help to combat the fears that business and industry associates may have. For example, a researcher or scientist may fear runaway commercialization of science, questions of ethics, and whether or not peer review and/or science will suffer. Company CEOs may be apprehensive about public backlash to their access to publicly developed technology, long-term liability for new technology, and downstream problems that may emerge. The general public may worry that a loss of credibility in science in general will result as a consequence of government and business linkages.

In summary, Dr. Lievers shared a little insight from a TTO perspective. He explained that "vision is the art of seeing the invisible" and "interfacing skills are particularly critical to successful technology commercialization."
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Jocelyn Paré, Environment Canada, Environmental Technology Centre, Gloucester

According to Jocelyn Paré, who is the Chief of Microwave Assisted Processes (MAP), a Division of the Environmental Technology Centre, the roles of the inventor, the technology transfer officer, and management in the area of technology transfer and commercialization are not always clear.

Intellectual property management involves patents and trademarks, therefore a preliminary licensing strategy needs to be selected. Then, the licensing organization must be convinced that there is value in the technology. He mentioned that there exists a fine line between where public good starts and where it ends. In order to assess the risks, the company should implement a mechanism to manage these potential dangers.

Dr. Paré noted that because most technology is based on process, it is important to think about how to enforce process patents. He suggested that a strategy plan be developed, in which scientists are required to convince the TTO of the value of their technology. The plan must be sensible; the scientist must remain realistic and the science must be checked. Dr. Paré also suggested that the impact that the technology will have and where it can be used should be kept in mind. A realistic outlook should be maintained when the benefit of the technology is for public good, however, the technology should not be undervalued simply because it is not being commercially exploited. He mentioned that scientists should have a firm understanding of the field in which the company plans to market so that the technology and the organization are both well protected. They should engage in the processes of both preparation and follow-up in order to avoid any potential liabilities that may arise. Dr. Paré concluded by stating that in order to eliminate the possibility of a misunderstanding arising, scientists must make sure that wording of the patent is correct.
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Greg Barratt, Communitech Association Inc., Waterloo

Greg Barratt, President of Communitech Association Inc., delivered an overview of his organization. He mentioned that the Association acts as the Waterloo area's voice for information technology, advanced manufacturing, and biotechnology. The Association conducts itself as a catalyst for collaboration, which is one of its instrumental roles. Mr. Barratt explained that Communitech not only implements mechanisms to accelerate the delivery of technology to the market, but it also speeds up the generation of good ideas. It provides a variety of services to members. In addition, it will assist people outside the Waterloo area to learn more about the community and to connect them to specific member companies.

Mr. Barratt indicated that peer to peer groups are one of the most effective programs for promoting interaction between companies, which will, in turn, improve the transfer of technology. These groups encourage people in like positions across companies to talk together on a regular basis, to mentor one another, and to share best practices.

Since his instatement as President in April, Mr. Barratt has defined a few objectives that the Association will fullfill in order to provide ready access to the right resources. He listed Communitech's core offering, noting that these programs will serve to provide networking opportunities, to share information in a seminar or conference format, to hear from speakers outside of town, or to transact in peer-to-peer groups. Advocacy was the second requirement that he described. Although lobbying will come into play, the main focus of this advocacy activity is to get people of like minds together in the area. Several things must be considered within this provision: human capital; financial capital; real estate; taxation; and infrastructure. The third initiative is to inaugurate and maintain an accelerator network. Once the investee companies pass successfully through the assessment mechanism, mentors will be assigned. This process will feature an outline assessment mechanism, which is another of Communitech's offerings, will be one of at least three or four models. For example, it could be someone who is assigned as a mentor to lead the young company through the process or it could be someone who is interested in helping the staff to understand what it takes to develop a business plan.

The business plan is essential because it is the only evidence that the marketability of the product has been carefully contemplated and questions like "Does the technology have a market?" and "Is the technology unique?" have been answered. If there are good start-ups, Communitech funnels them through the following process: improve the plan; polish the story; and shop the plan. The plan must constantly be improved so that it is solid. The story should be so polished that the company is able to capture the receptor's attention in one minute or less; in 15 minutes or less, they should be able to explain the most significant points of their business. During the final stage "shopping the plan", Communitech assists start-up companies by directing them toward likely sources of capital.

Mr. Barratt highlighted several objectives for the future. Due to increased expectations, a detailed strategy around each of the preciously mentioned objectives needs to be developed. Beyond that, the challenge over the next year will be to execute the plan. Continuing to build on partnerships with different levels of education, levels of government, chambers of commerce, and/or economic development agencies is another goal toward which Communitech will strive.
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John Gordon, Queen's School of Business, Kingston

John Gordon presented information on a program at Queen's University that was initiated in 1996. The fact that there are approximately 100,000 MBA graduates each year in North America alone aroused the criticism that an MBA degree was becoming a commodity, rather than a professional career. Therefore, a distinctive program, the Masters in Business Administration (MBA) for Science and Technology, was created.

Several of its attributes make it unique. For instance, it is residential and it takes place on campus. Mr. Gordon mentioned that it is a full-time, one-year course that is broken into four quarters. Due to the short timeframe, there are hardly any options or electives open to the students. There is a maximum capacity of 60 students per year. To be eligible, the students must have a science and technology background that consists of a minimum of two years work experience after the completion of an undergraduate degree in science or technology. The candidates must also aspire to management positions related to science and technology (S&T). Mr. Gordon stressed that teaching S&T is not part of the curriculum.

The course content is divided into modules which involve business-related projects. These assignments include the development of a practical business plan by the students that will be presented to a real client. A panel of venture capitalists assesses the evaluation of this business plan. For a period of four weeks, the students must also complete a project with a particular company.
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Janet Scholz, University of Manitoba, Winnipeg

Janet Scholz, as Vice-President, Planning for the Association of University Technology Managers (AUTM), spoke about keeping current and updating skills. She explained that successful technology transfer requires a combination of a good technology, someone who wants it, and a technology transfer professional who can put the deal together and finalize it. In order to execute the deal, a technology transfer officer must continually negotiate. She described a technology transfer administrator as someone who demonstrates the attributes and qualifications of a lawyer, an accountant, a venture analyst, a counsellor, a visionary, a marketing expert, a translator, and a magician.

Why technology transfer? Ms. Scholz referred to the conclusions reached at the May 23rd hearing in the US where the technology sub-committee of the House Science Committee convened to review the Department of Commerce biennial report on federal technology transfer. A concern raised by industry was that bureaucracy's prime interest was to avoid criticism and to make technology transfer decisions, rather than to complete the deal, which could pose a potential problem. As a solution, the following methods were suggested: education, training and skills enhancement, and networking.

It was noted that there has been every indication that licensing is becoming an essential element of lab activities. Ms. Scholz pointed out that the establishment and continued success of FPTT is evidence that this has already been recognized. According to Ms. Scholz, the licensing activities in the lab are becoming increasingly effective and productive, which may be partly contributed to the efforts of technology transfer officers in licensing and in knowing how to get the deal done. She suggested that more education and training opportunities for technology transfer professionals be encouraged. This can be accomplished by through workshops, courses, AUTM, FPTT and Licensing Executives Society (LES) programs, peer review journals, publications and guides, networking institutions, and on-the-job training.

In its 26th year, AUTM continues to pride itself on the professional development programs and networking opportunities provided through regular and annual general meetings, specialized workshops and courses, and its workshop program held in conjunction with the annual general meeting. AUTM programs are recognized around the world and are being incorporated into other technology transfer organizations. LES has also concentrated its efforts on its professional development program, which offers basic and advanced courses in licensing and technology management with a focus on legal practices.
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Ross McCurdy, InNOVAcorp, Dartmouth

As President and CEO of InNOVAcorp, Ross McCurdy explained that the mandate of his organization is to enhance the growth of the knowledge-based economy in Nova Scotia. Maintaining its focus on information technology and life sciences, InNOVAcorp uses the following tools: incubation, venture capital, mentoring, and partnering. Among its clients are the principle universities in Nova Scotia, as well as the would-be, want-to-be, and going-to-be entrepreneurs.

Dr. McCurdy presented the results of a survey that was conducted last year of small- and medium-sized companies in the US. He reported that the most important success factors when introducing new products or processes were the following: developing the necessary technology, marketing, and having access to qualified people. A similar questionnaire was distributed to companies in Nova Scotia. Their answers indicated that strategic partners, seed capital, and management skills were the most essential aspects of their success. The Canadian companies said that in order to prosper, they needed creative thinkers at all levels of enterprise.

Evidence shows that investment in new technology grew at its quickest throughout Canada in 1997-1998. Dr. McCurdy verified that one of the critical factors accounting for this success is incubation. To accommodate its heavy focus on the marketplace, the incubation program needs to devote more resources to the process and the environment than to physical space. Dr. McCurdy explained that shared services are essential in order to help fill administration gaps, to allow for constant interaction between InNOVAcorp staff and the developing companies, to meet tenant exit and entry criteria, and to provide mentorship. Mentorship may be defined at three levels: peer-to-peer mentorship that occurs among the companies being incubated, more business advice, and mentorship by successful business people to emerging companies. An incubator must be responsive and flexible to ensure the management of client relationships. Dr. McCurdy shared statistics that conclude that companies that go through a formalized incubation process are four times more likely to succeed in business within a five-year period than those that don't.

Dr. McCurdy provided an answer to the question about how incubation fills the gaps. He said that through mentoring and the type of training programs that are offered during the incubation process, the right people and resources are available to help build the necessary management expertise, as well as focus on marketing and the investment that goes into these companies.

Dr. McCurdy identified the uniqueness of InNOVAcorp as an incubator. It has equity investment and the will to invest in companies; it is involved in the management of the incubating company through positions on the Board of Directors; it finds or provides staff to fill any gaps; it maintains a client relationship management model by assigning technical individuals to these companies full-time who will actually take them from the idea to IPO; it decentralizes commercialization staff and gets them out into the action.

Dr. McCurdy also discussed the impact of innovation on the Nova Scotia economy and how difficult it is to convince others that InNOVAcorp is doing meaningful work. This is due to the fact that although they are producing intellectual property, it is always being exported to add value elsewhere. The result of not having this dynamic is that Nova Scotia now has the second poorest rate of achievement in Canada. Dr. McCurdy noted that a goal for the future should be to shift the focus from exporting intellectual property to creating opportunity in the local area.

Dr. McCurdy concluded by proposing the equation "B/T >1" where B is the amount of time that the emerging company spends on business practices and T is the amount of time that they spend on developing their technology. This formula represents the type of value added that InNOVAcorp is trying to achieve. The actualization of this equation will increase the value of the investment portfolio and increase the number of jobs available within the province.
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DAY 2 - Summary of Presentations (cont'd)

Lorne Heslop, Agriculture and Agri-Food Canada, Ottawa

As the mediator for this session, Lorne Heslop, Senior Science Policy Analyst at Agriculture and Agri-Food Canada, provided a brief recap of the purpose of this workshop, which was to venture through Canadian experiences in technology commercialization in an attempt to find out who has developed an expertise, how they define it, and how that expertise is now extended to others. The second day of presentations calls for movement horizontally around the country to pick up the well-founded experiences of others. Mr. Heslop affirmed that in each of these dissertations, it will be identified that new skills need to be developed and incorporated into the lab. Sometimes this will occur at the expense of science money and sometimes with additional resources to carry out the new activities. In each case, something new must be added to ensure that the science being developed for the government is also providing benefit to the Canadian sector that the department may be associated with or to other sectors.

Jeff Skinner, University College London Ventures, London, UK

Jeff Skinner, Director, Office of Technology Transfer, University College London Ventures Limited, offered an overview of his experience with UCL Ventures and provided a brief summation of UCL's history of encouraging academics to create spin-off companies. He disclosed that the principal problem they have faced has been finding suitable managers. The right candidates must be competent, committed, and trustworthy individuals, who are respected by the founding scientists and who in turn, respect the founding scientists. Finding managers systematically is ideal, however, according to Jeff Skinner, it will always be an ad hoc process to some extent. Solving this problem will more likely happen by considering the following options for management: a technology licensing officer; a founding scientist; a technical director; or a consultant. Once the appropriate people are found, another problem transpires: when and with what to reward them. Rewarding managers with equity at the very beginning of their contracts is a mistake because once it is given, it cannot be taken away.

Dr. Skinner emphasized that there must be a zone of mutual respect between academics and research scientists, which can be created by teaching and networking. Each side must have an understanding about what the other side is doing and respect the skills and insights that they bring to the business. It is in the middle where their minds will meet. There has to be a realization by both sides that they do not know everything and that they are lacking certain skills. At the point when their unconscious competence must become conscious, the most effective work will be performed, as each side will contribute only their best assets.

One inefficient solution, according to Dr. Skinner is serendipity. Encouraging founding scientists to learn on the job often results in lost time and growth opportunities. Founding scientists can run a company at the outset but they rarely have the time or the skills to take a company beyond first round financing.

Better solutions suggested by Dr. Skinner are Seed Funds and Science Enterprise Centres. UCL decided that instead of implementing individual Seed Funds, they would set up a consortia, with an entirely independent board. The official objectives of these boards are to evaluate the idea, to identify the risks, to develop the strategy for getting the seed fund, as well as oversee the creation of an interim business plan. The report must be owned and written by scientific founders alone. This gives founders an incentive to work with managers because if they don't, they will not receive any money.

The aim of the Science Enterprise Centre is to teach entrepreneurship to students with graduate degrees ranging from BSc to PhD. The purpose of the Centre is to facilitate more and better start-ups.

Dr. Skinner mentioned a few mechanisms to bring expert management into companies. Students should be recruited because they are eager to learn and have long-term expectations. In addition, people who want to start new ventures should be encouraged to mix with students having MBAs so that they can learn alongside them. Students and people already in the business should be compliant to learning from each other. Dr. Skinner concluded by sharing a few lessons that he has learned to date. First, the senior faculty rarely make time to engage in entrepreneurship activities. However, younger staff are "hungry" to learn and to work. It is these thoughts and observations that formed the underlying philosophy and the schemes described above.
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David Salay, Battelle-Great Lakes Industrial Technology Centre, Cleveland, OH

From the perspective of an American citizen, David Salay, Director of Commercialization, began by pointing out that Canada often turns its back on the US. To ensure that businesses are in touch with the customer, people should be prepared to face the market and the consumers. Mr. Salay suggested that management and the organization of skills should be discussed more often. Why do we do research? Why would the public decide that research is necessary? Mr. Salay responded by explaining that what is being done for the commercialization of technology for both economic and social benefit is at the heart of conducting the research in the first place.

He gave some background information on Battelle, which is a charitable trust that was created in 1929. It serves most industrial and government markets. Its mission is to put technology to work. In an attempt to fulfil this goal, he is involved with two programs: the commercialization of technology from the Department of Energy laboratories and the management of a NASA regional technology transfer centre.

The organization of NASA is important. Internally, it has a commercial technology office (CTO), whose job is to commercialize NASA technology. On the outside, it has a contractor to operate a regional technology transfer centre. Mr. Salay pointed out that a lot of effort needs to go into the commercialization of technology. Persistence may often be profitable, but others may misinterpret it as obstinence, therefore one should strive to be flexible and willing to make alterations in the plan and the direction.

Mr. Salay presented three models for moving research out of the laboratories. The first was the introduction of an entrepreneurial leave program. This program is designed to allow an employee at the lab with entrepreneurial aspirations to take a leave of absence with an incentive package, benefits, the option to work on a part time basis at the lab, the availability of financial support, assistance in licensing, and access to staff and facilities. The advantage of participating in this program for the employee is that he/she will able to avoid a possible conflict of interest. There are also benefits to the lab, which include: the local employment of technology, the ability to retain and attract key employees, and the increase in staff motivation. The second model is the implementation of a commercialization advisory board. This entails a group of external companies whose executives provide NASA with a first-hand perspective of the industry partners. Finally, providing universities with the opportunity to reinvent themselves and create a new model was also mentioned. The university's role in delivering knowledge is essential, as the quality of education is directly related to the quality of the economy. The market for university services is growing so new ways of delivering services will need to be found. Universities should be embedded in the laboratories and in industry to facilitate overcoming cultural differences and enable industry to keep its employees at the forefront of knowledge.

Mr. Salay reported that a recurring challenge concerns the creation of a positive climate. What is the government organization's core mission? David Salay said that one reason for existing must be partly founded on technology commercialization. Realistic budgets must be allocated for this. The rewards and incentives that are involved lead to continuous recognition of the scientists for their work and increased job satisfaction. If all elements are put in place, researchers will get to see the benefits of their work and consequently, satisfaction is amplified.
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Tom Churchwell, ARCH Development Corporation, Chicago, IL

Tom Churchwell, President, ARCH Development Corporation, identified what he called the "chasm". He explained that although there is great technology present in the lab, it only becomes of value when it leaves the lab and is translated into products in the marketplace.

The probability of creating a successful licensing program, meaning one that is clearly set out to be profitable, is going to be hampered by the lack of venture activity. Licensing is most profitable when it is executed in small companies. Because there are very few small enterprises in the Midwest, the Arch Development Corporation was set up to create enterprises as well as do the licensing. It started off having a very strong incentive program, directing the corporation toward starting companies. The generation of companies is easy, it is making them work that is more difficult and requires the investment of time and money.

Mr. Churchwell reported that the reality of getting technology successfully out of the lab into products is primarily a function of entrepreneurism. Successful entrepreneurism is rare, especially in academic environments. He advised academics and imported company managers to refrain from focussing all of their time on pursuing things that do not progress. Instead, they should concentrate on the development of technology. This will occur if they are in an incubation environment with the infrastructure that is necessary for the business to succeed. A network of universities should be established to pull in technologies that are related and complimentary. Pooling technology is more effective than allowing it to sit in an inventory. Mr. Churchwell stressed that technology is not about money, it is about "smart money".

Partnering an academic with an experienced business manager is an example of how to train young people by giving them hands on training. Tom Churchwell shared his opinion that "an academic entrepreneur is an oxymoron," as this combination of skills rarely works. He indicated that the process of recruiting management for the companies should be systemized. Keeping in mind the basic rule that nobody gets paid until there is some money that can be allotted on a fixed pay scale. After management, the most essential ingredient is "smart early stage money". A lot of time is spent on experimenting and in turn, causes a lot of unhappiness if the only people who are involved in managing the company are those who lack credentials and experience.
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Arm Chair Discussion

John Benesh, John Benesh and Associates, Ottawa

John Benesh, President of John Benesh and Associates, opened the discussion by paying tribute to the four panellists, each having remarkable credentials, who were willing to transfer some of their extensive knowledge to the audience. Throughout the workshop, the focus has been on answering the following questions: What are the problems? What are the options? Mr. Benesh explained that the four experts sitting on the panel, all of whom are very active in different ways in solving these types of problems and putting things into practice, would try to answer these questions. Firstly, Pierre Fortier would share his insight into the different cultures involved in the commercialization of technology at different times in the innovation cycle. Then, Jim Murray would speak about collaborative approaches to regional skill building. Hany Moustapha would follow by giving a different perspective, that of a large multinational corporation on the issue of how to quickly deploy the surrounding technology and choose which ones to use. Finally, John Woodley would respond to the idea that "it's nice to have all this, but what makes it marketable? What do you need to do to protect your technology and move it along?"

Pierre Fortier, Innovitech Inc., Montreal

What is the overall objective of doing so much research in Canada? Can we do better? Pierre Fortier defined innovation as a method to bring research to the marketplace and to ensure that it is eventually used. He noted that the commercialization process is very complex and that the competition is worldwide and large-scale, therefore people have to be well trained. "Climbing the stairs to commercialization" is the name that M. Fortier gave to the upward movement in the commercialization process.

The first step is entitled "indication, knowledge and new horizons," at which point the goal is to teach about innovation and entrepreneurship. The second phase is called "more entrepreneurial training," which could be in the form of coaching or mentorship. An entrepreneurial centre could also be used to provide basic training that is addressed to anyone interested in subject. Next is the pre-incubation stage, followed by incubation. Finally, there is the venturing stage. He noted that there are training courses for people who are at various levels and are involved in different settings.
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James Murray, University of Alberta, Edmonton

James Murray declared that cooperatively and collaboratively, the goal is to create a healthy and strong innovation system. People will be motivated to accomplish this goal by producing results and creating wealth for Canada. Dr. Murray reported that in Canada, the industry of technology commercialization is in its infancy. His reasons for this allegation are the following: the technology commercialization activities in the public sector are underfinanced; there are not enough people with sufficient skills and backgrounds to manage the activities in universities; and the provincial and federal research departments have yet to rise to their enormous potential.

Dr. Murray explained that spin-off companies are the principal means to maximize benefits. Often royalties are a small contribution to the local economy in terms of what some very successful spin-off companies can do. The ideal combination of skills includes having an understanding of technology, management, and finances. The possession of these versatile skills is very rare, hence successful skill building programs are essential. Despite the existence of such programs as AUTM and LES, which are both public and private sector examples, a gap still exists for teaching a blend of intellectual property (IP) and business management combined with mentoring to technology transfer professionals.

WestLink Innovation Network has brought universities together in a not-for-profit organization. This network was formed to facilitate communication, collaboration, training, and technology bundling. Jim Murray proclaimed that WestLink is very proud of the fact that it has united all 13 Canadian universities and their affiliated research organizations. Although the Western Network has a menu of programs, the need to build technology transfer skills is its focus. WestLink has sponsored several skills building programs. For instance, it has supported The Basics of Technology Transfer and Intellectual Property, which is aimed at faculty staff and students who are interested and want to learn more about the process. Another program is called Spin-off Company Formation - Going Corporate. WestLink also supports the Internship program, which has yet to be fully developed. This last program proposes spending eight months in an industry liaison office, eight months in a licensee technology commercialization company, as well as eight months in an early stage venture capital company. A possible modification to this agenda may be some time spent working with the federal government.

Jim Murray recognized that there are fairly rigid boundaries that exist between the government, private sector, and universities. According to Dr. Murray, there needs to be more movement of people and ideas back and forth across these boundaries. He proposed that a collaborative approach would provide benefits to all, meeting the needs of increased communication and networking.
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Hany Moustapha, Pratt & Whitney Canada, Longueuil

Hany Moustapha presented information on skill development for the innovation culture. He stressed that structure and process (discipline) are critical. Technologists should be aware of the value of collaboration in terms of leverage and making sure that the technology is integrated. Execution is also very important, for example, preparation will improve speed, just as communication will increase awareness. A business strategy is needed to ensure "product pull," which is synonymous with pulling technology.

Balancing the portfolio requires risk management. Dr. Moustapha suggested that in this case, it is best to begin at the lowest point, which is integration, and work upward to the execution phase. However, in terms of technology, the opposite is true and work should be conducted from top to bottom.

There are four strategies that a company may adopt: cost reduction, technology revenues, improving design systems, and manufacturing processes; an additional one may concern environmental issues.

He emphasized the importance of competitive simulation, knowing the competition before bidding. The Competitive Intelligence Board (CIB) at Pratt & Whitney speculates on what strategies the competition will employ to beat the company for which they work. This is a defence mechanism so that the company may be prepared to surpass the efforts of the competition. Competitive analysis entails thinking about the company's standing in each one of these: technology vs competition, partner, etc. Then, the action plan is determined and set into motion.

Dr. Moustapha suggested that R&D collaboration requires determining a balance between research that is technology driven and development that is market driven. What are we going to share within Canada and globally? Technology development involves:

Training, which is a gate process or a passport system in terms of technology readiness
Technology Readiness - When are you ready?
Risk Definition and Management
Portfolio Management
How can you get IN and OUT of the technology easily?
Considering the impact of technology

Dr. Moustapha then highlighted the importance of maintaining a strong link with the customer. It is vital that a technology transfer professional understands the client's needs and his/her business. Other goals that TTOs must stress are: ensuring integration; linking R&D; implementing a research program management course; and following the S&T process of technology management (exploit, apply, deploy).

He addressed several challenges that technology transfer officers must overcome or deal with: brain drain; maintenance of a balance between specialists and generalists, determination of technology priority (usually at the bottom), and recognition that universities need to catch up with industry. Dr. Moustapha concluded by stating that technology transfer starts from filing cabinets and computer screens and eventually progresses into a product, he emphasized that this process must take place very quickly!
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John Woodley, Sim and McBurney, Toronto

John Woodley explained that his job as a Patent and Trade Mark Agent is to protect intellectual property, as well as to get involved in the licensing and the transfer of that technology. He shared questions and concerns from the perspectives of intellectual property protection, due diligence, and networking.

From an intellectual property protection standpoint, Mr. Woodley explained that the World Intellectual Property Organization is working hard at harmonizing patent laws to have conformity in all countries in which one would need and would seek protection. Mr. Woodley asked that the following questions be contemplated: What is the impact on the Canadian system? Does this help us in technology transfer?

From a due diligence standpoint, John Woodley advised that the following questions be weighed: Where is the technology going? When looking at transferring a technology, is there a foundation in place? What investigations are needed by potential customers or licensee to ensure that everything is satisfactory? Since due diligence can be time consuming and expensive, are there shortcuts? John Woodley suggested that using the Internet as a marketing tools (by matching technology with potential partners) might assist in solving this last question.

Intellectual asset management, according to Mr. Woodley, may be determined in terms of intellectual capital, which is the sum of human capital plus intellectual assets. Does this have application in public-funded centres? If so, how would it be valued? He mentioned that there is competition from industry. Large corporations should start looking inwardly at their patent portfolio, examining ways to manufacture patented technology and to getting better value out of that technology. This becomes their major competition in licensing out their technology because "the well is only so deep with respect to implementing new technology," and potential customers become the competitors.

From a networking standpoint, one must determine where the demand for science is really coming from. North America and Europe are often the first places that come to mind, but should South East Asia and South America, where IP programs are being put in place, also be considered? Mr. Woodley disclosed that Canada is in a good position for developing new technology and licensing them internationally.

John Woodley spoke briefly about the Licensing Executive Society. He mentioned that it has many education and networking opportunities. He noted that two of LES's best features are its professional development courses and its complete entry-level program. The latter consists of four modules: Basics of Intellectual Property and Licensing; Opportunity Assessment; Doing the Deal; and Living with the Deal.

Questions and Answer Period:

Question:

How can we protect intellectual property in China? You mentioned that South East Asia is putting its IP protection programs in place, but we are miles away from the point where companies will feel comfortable in that huge market. How should we protect the IP in this country between now and the time when the protection is going to be part of their tradition?

Answer (John Woodley):
First, Mr. Woodley mentioned that patent protection in China could be filed for and obtained. This is process is not that expensive, as the procedure is straightforward. In addition, although China does not have much experience from the standpoint of enforcement of patents, he asserted that there is no need to worry because the process is so slow! The key thing is to have the protection in place; having the technology and the know-how is of value to them.

Answer (Jim Murray):
Dr. Murray noted that often, filing patents and getting a lot of protection in Asia leads to the possession of a lot of know-how transfer, but no licence. He then shared his experience of working in the Orient and his involvement with trade missions and technology shows. He mentioned that he holds the belief that as Canadians and as a small country, we can do better in the US and in Europe due to the fact that we share the same culture, business practices, and language. Overall, we can run more successful companies in these countries. He concluded that there is opportunity in Asia, but that it is a tough world there and technology often ends up in the hands of someone with whom we have no agreement or licence.

Question:

Who should be the owner of the intellectual properties for government-funded R&D projects?

Answer (Jim Murray):

If either a university or the federal government is going to go and establish an agreement with Pratt & Whitney, for example, it has to be certain that it has good, firm ownership of what it is going to approach them with.

Answer (Hany Moustapha):

Dr. Moustapha remarked that his company, Pratt & Whitney, own the IP under the following conditions: it is a technology or project that is closed to his company, it is not a generic project, it will make a difference in terms of the company's technology advantage and competitive advantage, or it will enhance market penetration.

Answer (John Woodley):

Mr. Woodley explained that ownership is part of the due diligence issue because a lot of money can be spent making sure that your house is in order. He suggested that the following questions be reflected upon: "Are you ready?" and "Are you prepared?" In the university environment, it is difficult to be certain of the answers, therefore, it is important to have people in your IP management office who will be tracking the grants. He cautioned companies to have a clear position on who owns what and who's entitled to proceeds of the commercialization of that product.

Question:

A number of inventors who want to take technology to market may or may not have the real aptitude for this, but are unwilling to relinquish control. What are some practical suggestions for dealing with this issue?

Answer (John Woodley):

One area that is being explored is the organization of a group of people who's objective is to convert technology from a university benchtop into a commercially-viable system, without venture capital investment. The inventor will, thereby, be involved in the process but will not be at risk of losing control of the system at the time that a joint venture is used to get the technology to the commercialization stage. It is at this stage that the inventor will find a perspective buyer and lose control, but their involvement to this point is recognized and rewarded. Then, the inventor has the option to work in affiliation with the company that picks up the technology or to take the money and run.

Answer (Jim Murray):

Dr. Murray stressed that inventors must be kept intimately involved in the process, as they are needed every step of the way: in the patent application, to work with the licensing team, and to work with licensees. He warned that the moment you start to disenfranchise the inventors from the system, you're heading for trouble.

Question:

The issue being questioned is risk aversion inside government organizations. It is thought to be changing and the focus of public service is shifting as a result. There is believed to be more encouragement for people to take risks. If we really want to solve this problem, can we start from the inside of the rather limiting environment of governmental and university research institutions? In response to the pace of change, should we be promoting and encouraging the formations of structures outside those limiting environments so that we can really move forward on a commercialization agenda?

Answer (Pierre Fortier):

M. Fortier explained that in order to change a culture of researchers, entrepreneurship centres have been instituted at the University of Montreal and could be used as an example. These centres are not for people to come with projects to be commercialized, but rather for people to talk about the issues and slowly develop a different culture. He added that if the commercialization office in each department is too small, then being outside the government or having a centralized office would work efficiently.

Answer (Jim Murray):

What we've proven in Canada is that trickling down economic benefit from excellence in Canadian research does not work at all! He said that we need more people, but we also need benchmarks to track progression. This will help us to know where we are at a specific point in time, then to move forward and adjust the model. If we do not keep records of our advancements, then our standard of living will deteriorate and we will not become competitive. He pointed out that currently, we have the people and the research; all we need to do is make sure that we move forward.

Concluding Statements:

Mr. Benesh wrapped up the session by stating that we are at "the cusp of a huge opportunity to take the next big leap in technology commercialization". He reiterated that technology commercialization is all about people and skill. He also stressed that speed is everything! Mr. Benesh acknowledged the abundance of wisdom that each panellist has gained over the years. He then thanked them for sharing their expertise and their opinions. While summing up, he encouraged the panel and the audience to think about one critical success factor that we have to do in the next six months in order to really make a difference.

Closing Remarks

Thomas Brzustowski, Natural Sciences and Engineering Research Council of Canada, Ottawa

Dr. Brzustowski, President, Natural Sciences and Engineering Research Council of Canada, closed the workshop by pointing out that the general impression that this workshop gave him was that Canadians know how to do innovation, know how do it well and are willing to set up institutions to deal with the particular circumstances of certain situations that they have been able to sort out. He stated that the biggest problem is that although innovation has been mastered, there is not enough of it being done. He noted that a recurring theme of this seminar was research based innovation, whether it be from a university or a lab. He urged the audience to recognize that there is a lot of valuable innovation that is not research based. Dr. Brzustowski advised the audience to realize that research based innovation, which is only a narrow fragment of the very broad issue of innovation, should not continue to be the main focus.

Dr. Brzustowski also posed several questions. Why is it so difficult to get our act together in this country? The institutions that make sense have been put in place and are working across the globe, so why is there hesitation in Canada? Why is it that issues that are not debated in other countries have to be argued repeatedly in this country?

As a country, we are in the middle of a transition. In spite of a lack of popular support and understanding, we are progressing from a commodity economy that is based on natural resources to an innovation economy that is based on knowledge. With reference to the words of Michael Porter, Tom Brzustowski explained that each national economy generally goes through four stages: resource-driven stage, investment phase, innovation phase, and a wealth-driven stage. It is his opinion that while Canada has one foot in the resource pool and is still active in investment, it is in grave danger of moving into the wealth phase without first going through the innovation stage. Ultimately, this will lead to the country's decline if changes are not made.

Dr. Brzustowski acknowledged that this workshop provided an opportunity to meet smart people and to hear smart ideas. However, he felt that this workshop had fallen victim to the "Casablanca syndrome" (a roundup of "The Usual Suspect"), meaning that people were speaking to those who were already persuaded of the value of technology transfer. Dr. Brzustowski also assumed that, for the most part, there was nobody in the audience who had to be persuaded or convinced. Tom Brzustowski mentioned that "qualitative change" is desperately needed in the activities that FPTT is interested in. He ended his closing remarks with two thought-provoking questions: Whose behaviour needs to be changed? And who should be at the workshop next year so that they may be persuaded to change that behaviour?

Information Sessions

Bernie Arbez, Industry Canada, Ottawa
Mariette Plante, Treasury Board Secretariat, Ottawa

Bernie Arbez outlined the main aspects of the Treasury Board of Canada policy: "Title to Intellectual Property (IP) Arising Under Crown Procurement Contracts". She indicated that this policy is a revision of the 1991 policy and was legalized in June 1, 2000. She began by providing a few key definitions associated with this concept, such as specifying that a crown procurement contract is an agreement between the crown and a contract for the acquisition of, or the provision to the crown, of goods and services.

Ms. Arbez noted that the improved policy must be applied in a way that protects public interest, takes into account the needs of proceeding departments, is efficient, provides the best value for money, is fair to the private sector, and encourages commercial exploitation. Ms. Arbez pointed out that it must also be flexible enough to work across government and the very different mandates of the departments. The new policy includes exemptions that have been clarified to meet the needs of both the government and industry.

She highlighted the amendments that were made to this policy: the development of an implementation guide; the formulation of model clauses; a commitment by Industry Canada to provide information sessions to key personnel in departments; and the delivery of training packages that contain frequently asked questions (FAQ) to departments. Departments are encouraged with legal advice to adapt the model clauses to conform to their own practice so as to fit with their contracting documents.

Ms. Arbez reassured participants that the objective of the policy has not changed. The primary aim of the crown procurement contract is for the crown to use the products and services for which it contracted. The underlying premise of the policy is that innovation contributes to economic growth by improving the efficiency of production or by developing new products or services that better fulfil needs. One way in which innovations enter the market is through the commercialization of IP tied to those innovations.

Who does this policy apply to? Ms. Arbez explained that this policy applies to all departments and agencies as defined under the Financial Administration Act. What does it not apply to? This policy does not apply to the ownership of or the right to use any trade names or trademarks, personal information, contributions, grants, or collaborative arrangements.

Ms. Arbez and Ms. Plante then answered questions posed by members of the audience.

Ken Wheat, Treasury Board Secretariat, Ottawa

Mr. Wheat provided some insight on the Financial Information Strategy (FIS). First, he explained the purpose of FIS, which is to deliver better information to managers. It is one of the tools. He then listed the three parts involved with the implementation of FIS: a change in system; a change in policy; and a change in people.

From the perspective of accounting, the goal of FIS is to have government and department accounting on an accrual basis, which reports income when earned and expenses when incurred, by 2001/2002. Accrual accounting is a means of measuring the financial effects of economic events on an organization, whether they were caused by the organization itself or were things that happened to the organization. Ken Wheat highlighted that the government is currently operates on a partial accrual basis, which is cash basis accounting with some modifications like Payables at Year End, so they have a much bigger step to take.

The production of financial statements (a statement of financial position, which is a balance sheet, and a statement of operations, which gives the net cost of delivering a program and other statements) is the end goal of this type of accounting. Mr. Wheat clarified that the aim is to apply accrual accounting to the various economic events that involve IP so that the revenues and expenses associated with IP in a statement of operations may be accurately reflected, also so that the assets of IP on a statement of financial position may be recorded.

Mr. Wheat noted several challenges to meeting this objective. From a finance view, there are no accepted guidelines on how to account for many types of IP. The result of not having these rules is that some IP will not be reported anywhere, some will be understated, and some that should be capitalized will be expensed. Ken Wheat pointed out that this is a weakness for all accounting and is not specific to accrual. The second challenge that he listed was terminology.

In order for something to be recognized as an asset in the books, Ken Wheat listed two prerequisites: there must be some reasonable estimate of the cost that is provided and there must be certainty that this thing will deliver benefits over future periods. The latter cannot be met in research. Therefore, the costs that are associated with research are expensed. Generally, development costs are also expensed for the same reason. However, provided certain criteria are met, development costs can be deferred, that is, the costs are accumulated and shown as an asset. Mr. Wheat made known that whatever is derived in the R&D phase is one asset and whatever is used to protect that thing is another asset. They are not one in the same, for example, the product is an asset and the patent is another asset.

He classified intangible capital assets (i.e. patent, copyright) in terms of being identifiable or unidentifiable. The cost of these assets should be recorded. If a patent is purchased, its retail value should be recorded, however if it is produced, the costs of production (i.e. legal fees, filing fees, etc) should be listed.

A problem that Ken Wheat mentioned was that there is some controversy between the two rulebooks: public sector and private sector. If the blue book (Canadian Institute of Chartered Accountants - CICA) is followed, there will be very little deferral and very little capitalization. The red book (Public Sector Accountanting Board - PSAB) is more flexible on capitalization without the prospect of future revenue so more costs could be capitalized. In theory, this would provide a much better indication of the financial position of the government as well as the costs, however PSAB does not deal with intangibles or R&D.

The advice that Mr. Wheat offered was to talk to the finance people who are involved with the company about R&D. He concluded by putting emphasis on the fact that accounting is not a science, as there are NO RULES!

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Federal Partners in Technology Transfer Workshop

PROCEEDINGS

"Skills Development for Technology Commercialization"

June 19-20, 2000 Château Cartier Resort Aylmer, Québec

Table of Contents

Summary of Presentations

Arm Chair Discussion

Closing Remarks

Information Sessions

Federal Partners in Technology Transfer Workshop

Skills Development for Technology Commercialization

"Skills Development for Technology
Commercialization"

June 19-20, 2000
Château Cartier Resort
Aylmer, Québec