While most of China was sheltering in place this February, the world of university research experienced a breakthrough. It could solve longstanding problems that have made patent commercialization next to impossible for many researchers.
As China bids to become a global leader in technology, getting academy-industry transfers right is a key challenge. Measured by how many patents it files, China is a world leader in R&D. But lots of promising technology never leaves the lab because regulations make it easy for universities to get punished for commercialization and hard to get rewarded.
But new regulations could change that. It looks like China is finally set to implement many practices that have defined other leading innovation countries for decades. The outcome will probably be fewer university patents on paper, but the start of reforms that could see a lot more university patents commercialized.
Yu Uny Cao is a vice president at the Zhejiang Intellectual Property Exchange Center. His views do not represent those of the Center.
A few Opinions and one Work Plan
University tech transfers have been a pain point for years. The last time the Ministry of Education (MoE) intervened, it left university administrators fearing criminal penalties for undervaluing patents. Under laws designed to prevent corrupt deals to privatize state assets, a story like Google’s could have sent a university president to jail—that company’s technology turned out to be worth a lot more than they paid for it.
Faced with the inherent uncertainties of valuing intellectual property, many schools just slowed down transfers and licensing.
This year, the MoE came back to the issue. On Feb. 3 it led several government agencies to issue the blandly named Certain Opinions on Raising Higher Education Institutions’ Patent Quality, and Promoting Transformation and Applications (in Chinese), later made public on Feb. 19. To practitioners in university technology transfer, this is quite an exciting title. Opinions are a type of document in Chinese government to communicate interpretations of regulations.
Since a 2015 revision to the Law of the PRC on Promoting the Transformation of Scientific and Technological Achievements, these Opinions stand out as the most consequential for things on the ground. The first assessments from practitioners are that yes, university presidents are likely to take the Opinions seriously and act quickly. However, because the changes are so far reaching, they will still probably take a few years to implement.
Before anyone had time to contemplate the implementation, the agencies sent down a Work Plan—a kick in the pants for anyone slow to grasp the Opinions.
Digesting the Opinions
The Opinions touch upon all aspects of university tech transfer, including the funding of university research, ownership of patents, disclosure of inventions, payment for filing patents, commercialization, and intriguingly, management of “intellectual property assets” owned by universities. After discussing and digesting the Opinions with colleagues, here are our predictions of the landscape in a few years, after major mechanisms have been created or changed:
- Change: Additional evaluation steps before university research projects. Evaluations could be done either by the Ministry of Science and Technology, which funds research projects, or the university. This follows what’s in the Opinions: “Before a research project is funded, patents and research literature analysis shall be performed, intellectual property risk shall be assessed, research technology roadmap shall be decided, and research and development starting points shall be elevated”.
- New: Joint ownership of patents. To practically everybody’s surprise, the Opinions allow a patent to be jointly owned by both university and researcher, a practice that is unheard of in China, and rare around the world. This suggests an intriguing new possibility outside the scope of the Opinions: as in the United States, funding agencies in China may someday own patents jointly with universities.
- New: Disclosure of inventions. Disclosing inventions is a routine process at universities around the world, but conspicuously absent at Chinese universities. The Opinions ask universities to start.
- New: Evaluation of a disclosure before a patent application is filed. This evaluation step, coupled with disclosure, is also routine in much of the rest of the world but new to Chinese universities. The evaluation is to be done by the university with input from the researcher/inventor.
- Change: Paying for patenting. After the above evaluation, the next step is deciding who will apply for the patent and who will pay for the cost of application. In this regard, China again has been different from the rest of the world. Typically it is the researcher who decides whether to file a patent, and pays using his/her research funds, although many universities have a pool of money to reimburse this cost. The Opinions say if the university decides not to file a patent, then the researcher can choose to file on his/her own. However, it is not exactly clear whether the research funds or the university pays if the university decides to file.
- Prediction: Many fewer patents from universities. With the new disclosure-evaluation-payer regime, practitioners widely predict that the number of patents by universities will drop dramatically. This might be the most visible effect of the Opinions to people outside of the higher education circle.
- Prediction: More university technology transfers through licensing. The Opinions explicitly encourage licensing, while today university patents are typically transferred—sold—to enterprises.
- Challenge: Managing “intellectual property assets” of universities. The Work Plan introduces the concept of “intellectual property assets,” and asks universities to analyze the value of such assets. More importantly, it asks them to ensure the value is maintained, which looks like a tricky task. Deciding the value of a piece of intellectual property has always been difficult, and now “maintaining” its value through the years sounds even more so.
- Challenge: Universities will likely have to make major changes to their organizational structure to accommodate the changes ordered by the Opinions. For decades, the typical research university in China would have a department for scientific research, primarily responsibile for interfacing with national and provincial funding agencies. Over time, especially after the 2015 Achievements Transformation law, technology transfer functions were added to these departments. It appears that universities will now need either to greatly expand these departments, or to form new entities. Many universities probably will look to prevailing practices elsewhere in the world.
Getting it done
National implementation can be the trickiest part of Chinese policy-making, but pilot programs will create incentives for universities to lead experiments.
On Feb. 24, the National Intellectual Property Administration and MoE issued A Work Plan for Constructing National Pilot and Demonstration Higher Education Institutions in Intellectual Property (in Chinese). Now there are proposals to write, and demonstration or pilot programs to apply for. People will get busy, and there is no question that in a few months, China will have fifty or so “demonstration universities,” and a group of “pilot universities,” number unspecified, implementing the contents of the Work Plan as guided by the Opinions. Fifty is enough to cover all of China’s major research universities, such as the 985 and “world class” (shijie yiliu) schools.
Financing patent commercialization
Regulators are also doing more to promote commercialization of research, which is the crucial step that connects patents to useful products such as computer chips and AI software. By commercializing university research, society got Vitamin D and Gatorade, both of which originated in university research from the University of Wisconsin and University of Florida respectively. That is in addition to Wi-Fi, semiconductors, gene-splicing methods, and vaccines, which are more obviously related to university research.
Commercialization received a jolt from the Securities Regulatory Commission when it provided fresh guidance on “scientific and technological attributes” for companies applying for IPOs on the new Science and Technology Innovation Board on the Shanghai Stock Exchange. The Commission’s March 20 Guidelines for Scientific and Technological Attribute Evaluation (Trial) (in Chinese) clarify these definitions, and propose an evaluation index system. In particular, the Guidelines establish unambiguous links between patents, research projects at the national level, and national technology prizes, and qualifying a company to list on the board.
There is intense competition across the nation to get companies listed on the board—so there is no question that companies will be looking to universities, who are the sources of such inventions, projects, and prizes.
Hope for wiser spending and better patent results
The timing of the Opinions is fitting, given the changing of the guard in the world’s top research spender. Recent R&D spending figures show China in second place and charging fast—and in mid-January, the US National Science Foundation released part of its biennial report Science and Engineering Indicators, and Julia Phillip of the National Science Board told Science Magazine: “We think that China may have overtaken the US at some point in 2019.”
But doing university tech transfer right is no easy job. An annual survey from the Association of University Technology Managers in the US and Canada shows that, for decades, universities on average have recouped only about 4% of their R&D expenditure from tech transfer offices.
Will China spend wisely? Can China spend wisely? Will China achieve great commercialization results from its research? The Opinions are part of the answer, and they are pushing for change in the right direction. If China does this right, people in China and around the world will benefit from more sophisticated products originating from research in China.