Academic Research, IP Creation

and Commercialization of Research

Output in Malaysia: Challenges and

Prospects

Ida Madieha bt. Abdul Ghani

Azmi

Civil Law Department

Outline

• IP as a tool for wealth creation

• Universities’ IP and their role in

wealth creation

• Policy instruments on IP

• Internal IP Policies

• Strategic use of IP

IP AS A TOOL FOR WEALTH

CREATION

What is intellectual property?

• “Intellectual Property can be

defined as information that has

economic value when put into use

in the market place”

Innovation cycle

Profit/

Reward

Human

Intellect

Innovation/

creativity

IP as developmental tool?

• Strong link between innovation and economic performance

• Competitive edge shifts from production-based to knowledge based

• Value of physical assets (decreasing) vs. intangible of assets (increasing)

• Increasing importance of knowledge-intensive businesses as technology and the product life cycles are shorter

Innovation as the key driver in

the new economy

Strategic integration of IP with

development policy issues

Trends in Global R & D expenditure

• High income countries

– 70 % of R & D high-income countries

– 2.5 % percent of their GDP on R&D

• Low- and middle-income

economies

– ↑ 13 % share of global R&D

expenditure by 13 percent (1993 and

2009)

– China → >10 %

– China = 2nd second largest R&D (2009)

Government R & D spending as % of GDP (2008-

2011)

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

% 2008 2011 Highest level of GBAORD intensity between 2009 and 2010

OECD Science and Industry

Outlook 2012

Statistics of PCT application

Country of origin 2009 2010

US 45,617 44,890

Japan 29,802 32,180

Germany 16,797 17,558

China 7,900 12,295

Korea 8,035 9,668

France 7,327 7,288

United Kingdom 5,044 4,908

Netherlands 4,462 4,078

Switzerland 3,671 3,728

Sweden 3,567 3,314

The number of PCT

applications filed by

applicants from

China (+55.6%),

India (+36.6%) and

the Republic of

Korea (+20.3%)

sharply increased

in 2010. The

number of PCT

applications filed by

applicants from

Spain, Austria and

Japan also showed

positive annual

growth with 12%,

11.3% and 8%

increases,

respectively,

compared to 2009.

UNIVERSITY’S IP AND

NATION’S WEALTH CREATION

The building blocks of the new economy

Basic research

Intellectual asset

Technology transfer

Policy shift in IP, technology transfer

and commercialisation

1960s

Israel – univ IP policies

1980

Bayh-Dole Act

1990s

Europe

Professor’s privilege - university

1999

Japan

2000

Korea

The multiple vectors of knowledge transfer from

universities and PROS to industry

Research and publications

Dissemination of knowledge via

conferences, seminars, meetings

with industry and others

Education and training of

students/researchers recruited by

the private sector

Consultancies, contract research.

University-industry joint research

projects, joint research centers and

PhD projects

Creation of IP available for

licensing to established firms

and new start-up companies

Creation of spin-offs and other forms

of academic entrepreneurship of

faculty or students (with our without

IP)

Public

research

and

educatio

n

Industry

and

innovati

on

World Intellectual Property

Report: The Changing Face of

Innovation, 2011

Table A.4.1 technology transfer frameworks

Law/policy/decree entitling

ownership & inventor rights

Innovation and related policies Inventor

compensation

Mandatory

TTO creation

Brazil Ownership: 1996 Patent Law (Law

9279)

Inventors: 1998 Law on Industrial

Property (Art. 93):

maximum of one-third of the value

of the invention

2004: Innovation Law (Law No.

10.973)

Incentives for R&D, collaboration

and technology transfer

YES

5% to 33%

of royalties or

licensing income

YES

At each institution

or shared among

institutions

Russian

Federation

Ownership: 1998 Decree and

2003 Revision of the Patent Law

2007-2012: R&D in priority fields of

science and technology

development in the Russian

Federation for 2007–2012

2002: Technology Transfer

Network

NO NO

Not mandatory but

encouraged

India Ownership: 2000 Governmental

Ruling

Inventors and clarification of

ownership rules: Utilization of

Public Funded Intellectual

Property Bill 2008 (under approval)

YES

At least 30% of

licensing income

NO

Not mandatory but

encouraged

China Ownership: 2002 Measures for

Intellectual Property Made

under Government Funding

(entitling patenting)

Inventors: S&T Findings

Conversion Law

1998: the S&T Advancement Law

and the S&T Findings

Conversion Law 2002: Opinion on

Exerting the Role of

Universities in S&T Innovation

YES

Varies according

to type of

transfer

NO

Not mandatory but

encouraged

South Africa Ownership: Patent Law

Ownership and inventors: 2010 IP

from Publicly Financed

R&D Act

National Research and

Development Strategy (R&D

Strategy)

YES

At least 20% of

licensing income

YES

Mandatory

Table A.4.1 technology transfer frameworks

Law/policy/decree entitling

ownership & inventor rights

Innovation and related policies Inventor

compensation

Mandatory

TTO creation

Argentina Ownership: 1995 Law of Patents

of Invention and Utility Models

(Joint ownership by the university

and the centralized agency

CONICET)

1995: Law on National Higher

Education

2002: National Program for the

support and fortification of

university linking with industry

YES

Up to 50%

(patent law)

NOChile

Chile Ownership: 1991 Industrial

Property Law

National Innovation Plan NO

(statuary

rules left to

institutions)

NO

National TTO

Malaysia Ownership and inventors:

2009 Intellectual Property

Commercialization Policy for

Research & Development

Projects Funded by the

Government

of Malaysia

Second National Plan for Science

and Technology Policy

2002-2020

YES

Varying shares

according to

value of revenue

YES

For public sector

R&D institutions

Mexico Ownership: 1991 Industrial

Property Law

Inventors: Federal Law of Labor

and Innovation Law of 2010

2002 Science and Technology

Law

2010 Innovation Law: inventor

compensation and TTOs

YES

Up to 70% of

income

YES

Not mandatory but

encouraged

Nigeria Ownership: 2004 Scheme of

Service for Nigeria’s Federal

Research Institutes, Colleges of

Agriculture and Allied

Institutions

Guidelines on Development of

Intellectual Property Policy for

Universities and R&D Institutions

NO

(recommended;

left to

institutions)

YES

Philippines Ownership and inventors:

2009 Technology Transfer Bill

1997: Magna Carta for Scientists,

Engineers, Researchers,

and other S&T Personnel in the

Government (for researchers at

PROs) and 2002: National

Science and Technology Plan

Only available

for governmental

institutions

60% (PRO)-40%

(inventor)

NO

National TTO (1997)

Table 4.6 Systematic impacts of IP-based

technology transfer policies Potential Benefits Potential costs

Broader impacts

on science

1) Increased impact of more focused

research

with potential for application

2) Improved innovation system linkages

• Efficient division of labor in the generation

and

commercialization of new inventions

• Private sector contribution to funding

basic and applied research

3) Increase in the quality of research and

education

1) Reorientation of the direction of research

• Overemphasis on applied, short-term,

more lucrative research

• Less diversity in scientific disciplines as

focus

on patentable outcomes increases

• Other university missions are neglected,

such as teaching and training

2) Negative impacts on open science

• Crowds out/displaces the use of other

knowledge

transfer channels to industry

• Publication delays, increased secrecy,

less

sharing, including the withholding of data

• Decrease in international scientific

exchanges

3) The promise of university income can

reduce

government commitment to funding

Innovation and

growth

1) Commercialization of inventions with

economic and social impacts

• Increase in consumer welfare and

business productivity

via access to innovative products and

processes

2) (Localized) positive impacts on R&D,

technology

spillovers, entrepreneurship, employment

and growth

3) Higher competitive position of country in

global market

1) Long-run negative effect of diverting

attention

away from academic knowledge production

2) Long-run negative effects of IP on open

science and follow-on innovation

• Patenting of broad upstream inventions,

platform technologies and

research tools increases the cost of follow-

on research and innovation

• Reduction in the diversity of research

3) Focus on IP might inhibit rather than

promote

commercialization of inventions

Table 4.5 Impacts of IP-based technology transfer

policies on Universities/PROs and firms

Potential benefits Potential costs (or investment)

Universities and PRO s 1) Increased IP ownership facilitating

entrepreneurship and vertical

specialization

• Reinforcing other policies aimed at

academic

entrepreneurship (e.g., enhancing

access to finance)

• Licensing and other revenues (e.g.,

consulting)

can be invested in research

2) Cross-fertilization between faculty and

industry

• Intangible benefits to university

reputation and the quality of research

• Helping to identify research projects

with a dual

scientific and commercial purpose

3) Increased student intake and ability to

place students in firms

1) Diversion of time away from academic

research

• Distorting incentives for scientists and

potentially also

for the nature of public-oriented

institutions

• Reorganizing university processes and

culture

with a view to commercialization

2) IP-related establishment and

maintenance costs

• Establishing and maintaining a TTO

and related IP management,

including investment in expertise and

human resources

• Spending time on IP filings and

technology

transfer (even if contracted out to a TTO)

• Additional financial and reputational

costs

associated with defense of IP rights

Table 4.5 Impacts of IP-based technology transfer

policies on Universities/PROs and firms

Potential benefits Potential costs (or investment)

Firms 1) Facilitates the revelation of useful

university

inventions to the business sector

• Enabling firms to have access to top

scientists and to

collaborate with the scientific

community in developing

innovation within a clear contractual

setting

2) Enables the creation of a market for

ideas

and contracting with universities

• Framework diminishes transaction

costs and increases

legal certainty, facilitating investment

by private sector

• Securing an exclusive license

increases

incentives for further investment

• Ability to specialize is competitive

advantage (vertical specialization)

3) Commercialization of new products

generating profits and growth

1) Barriers to access of university

inventions

• Precludes free access to university

inventions – including

the more basic research fields and

research tools, except

where research is the result of a

sponsored contract

• Lack of access if another firm has

secured an exclusive license

2) IP-based transaction costs and

tensions in

industry-university relationships

• University scientists lack an

understanding of development

costs and market needs (cognitive

dissonance) leading

to higher probability of bargaining

breakdown

• IP negotiations can interfere with

establishment of joint

R&D and university-industry relations,

where universities

act as revenue maximizer with strong

stance on IP

Patent or perish?

R & D conducted by universities and public research office accounts for a substantial share of total R&D

In high income countries – 20 -45% of annual R & D expenditure

In low and middle income countries – PROs and universities are the main R D actors

↑ of patents from universities esp. in China

Global trends in university and PRO

filings

University PRO

Singapore 13% 19%

Malaysia 13%

27%

Spain 12%

Ireland 11%

Israel 10%

PCT filings (1980-2010)

Global trends in university and PRO

filings (1980-2010)

University PRO

US 52,303 12,698

France 9,068

27%

Japan 6,850

China 1,304

India 1,165

IPTA 2005 2006 2007 2008 2009 2010 Grand

total

International Islamic University Malaysia 3 9 9 2 0 0 23

Universiti Kebangsaan Malaysia 12 10 23 23 40 43 151

Universiti Malaya 30 13 17 18 41 44 163

Universiti Malaysia Pahang 0 0 0 4 49 41 94

Universiti Malaysia Perlis 0 0 0 0 7 4 11

Universiti Malaysia Sabah 1 0 0 2 1 9 13

Universiti Malaysia Sarawak 0 1 1 5 2 2 11

Universiti Malaysia Terengganu 0 0 0 3 0 1 4

Sultan Idris Education University 0 0 1 0 0 0 1

National Defence University 0 0 0 0 1 2 3

Universiti Putra Malaysia 19 22 25 55 71 90 282

Universiti Sains Malaysia 2 6 3 4 29 35 79

Universiti Teknikal Malaysia Melaka 0 0 1 0 10 7 18

Universiti Teknologi Malaysia 7 9 58 132 250 192 648

Universiti Teknologi MARA 6 21 16 12 27 37 119

Total 80 91 154 260 528 507 1620

R & D Institutes 2005 2006 2007 2008 2009 2010 Grand total

Agensi Nuklear Malaysia 0 2 2 1 1 1 7

Construction Research Institute of Malaysia 0 0 0 2 1 0 3

Forest Research Institute Malaysia (FRIM) 1 1 0 2 3 16 23

Institut Kemahiran MARA 0 0 0 1 0 0 1

Institut Penyelidikan dan Kemajuan Pertahanan Malaysia (MARDI)

2 8 4 7 4 7 32

Institut Penyelidikan Sains dan Teknologi Pertahanan 0 1 0 0 0 0 1

Institute for Medical Research 0 2 1 2 2 1 8

International Islamic University Malaysia 0 0 0 10 21 37 68

Lembaga Getah Malaysia 1 0 1 0 2 2 6

Lembaga Koko Malaysia 1 1 2 0 1 1 6

Lembaga Pembangunan Industri Pembinaan Malaysia (CIDB)

1 1 0 0 0 0 2

Malaysian palm Oil Board (MPOB) 19 10 21 10 19 19 98

Malaysian Insitute for Nuclear Technology Research 1 1 0 0 0 0 2

MIMOS Berhad 2 1 76 110 131 144 464

National Hydraulic Research Institute of Malaysia (NAHRIM)

0 0 1 0 0 0 1

SIRIM Berhad 8 5 1 6 9 4 33

Total 38 40 109 151 204 222 764

Conflicting concerns

Accountability for R&D expenditure

Intense pressure for commercialization

compete to be an important player in IP landscape

Reduce knowledge sharing

Reduce the diversity of follow-on research and access to essential

tools

Need to leverage on alternatives as

well…

Open innovation platforms,

selected examples

Tools or platforms to capture ideas

from consumers or other contributors

Apple’s adoption of ideation software

like Sprigit to capture audience ideas

Prizes and competition Tata Group Innovista competition to

spour innovation among subsidiaries

Co-creation platforms Lego Minstroms allowing customers

to create Lego designs and robots

Platforms connecting problems and

solvers/ exchange of IP

Various platforms for companies to

post challenges: InnoCentive,

Grainger, Yet2, Tynax, UTEK,

NineSigma, Spark IP

POLICY INSTRUMENTS ON IP

Policy instruments

Public Sercive Department Circular (Pekeliling Perkhidmatan Bilangan 5 Tahun 1999

National IP Policy

2007

IP Commercial-isation Policy for Research and Development

(June 2009)

Public Service Department (Pekeliling Perkhidmatan 30 tahun 2009)

Important stakeholders

MYIPO

UNIK

AIM

(National Technology Transfer

Officer)

MOSTE

Others

MDEC BioTech

Corp

NRE

Min of Health

MITI

MTDC

IP Commercialisation Policy

Scenario 1

• IP belongs to recipient

• Where funding comes from Govt, & recipient creates IP

Scenario 2

• IP belongs to relevant body

• Where relevant body commissions research through consultancy or commission agreement

Scenario 3

• IP belongs to recipient or third party

• Govt →govt agency →to recipient

IP Commercialisation Policy

Scenario 4

• Joint ownership 3rd party + RI

• Govt → govt agency →3rd party + RI

Scenario 5

• Joint ownership by sev recipients

• Govt →sev recipient

Scenario 6

• Joint ownership RI = 3rd party

• Govt →RI + 3rd party

Scenario 7

• Joint ownership govt + 3rd party

• joint funding Govt + 3rd party

Employee inventions?

• makes, in the field of activities of his employer, an invention,

In the field of

activities

• using data or means placed at his disposal by his employer Use

facilties

Copyright?

Scholarly books, articles, audiovisual,

or other scholarly works

Belong to the employee/ scholar

Except under commission

Research collaboration with

external parties

Default position →a 1st right to negotiate either a non exclusive or exclusive licence

The third party →a first right to negotiate either a non-exclusive or exclusive Licence

If 3rd party made substantial contributions →may jointly owned

If only product development belonging to 3rd party →3rd party

Special condition

no Recipient shall grant to any

person the exclusive right to use

or sell any Invention in Malaysia

unless such person agrees that

any products embodying the

Invention or produced through the

use of the Invention will be

manufactured substantially in

Malaysia

IP Commercialisation Policy for Research and

Development (MOSTE 2009)

Nett Proceeds Inventors Recipients

1 First RM250,000.00 100% 0%

2. RM250,001.00 to

RM1,000,000.oo

80% 20%

3 RM1,000,001.00 to

RM2,5000,000.00

60% 40%

4. RM2,500,001.00 and

5,000,000.00

50% 50%

5 RM5,000,001.00 and above 40% 60%

Distribution Guidelines

Incentives for invention

a) Upon Disclosure of Invention : RM500.00

b) Upon Filing of Patent : RM5,000.00

c) Upon Grant of Patent : RM10,000.00

Government rights (march in rights)

The Government shall have the

right to require the Recipient, an

assignee or exclusive licensee of

the said Invention to grant a

royalty free, a non-exclusive,

sole or exclusive licence to a

responsible third party

Unik earmarks 113 R&D findings for commercialisation

(Tuesday April 19,2011 Bernama)

• CYBERJAYA: The Special Innovation Unit (Unik) under the Prime Minister's Office has

earmarked 113 research and development (R&D) findings with high potential for

commercialisation.

• Unik executive vice-president Rizatuddin Ramly said the R&D findings were identified within the

first four months this year.

• He said the R&Ds were conducted by five public universities and two research institutions,

namely Universiti Sains Malaysia (USM), Universiti Malaya (UM), Universiti Kebangsaan Malaysia

(UKM), Universiti Putra Malaysia (UPM), Universiti Teknologi Malaysia (UTM), Sirim and Institute

for Medical Research (IMR).

• "A total of 1,100 R&D findings were submitted by the universities, but after much analysis and

shortlisting processes, only 113 were identified to have high potential to be commercialised," he

said Tuesday.

• The setting up of Unik, with the aim of commercialising the findings of R&Ds conducted by local

universities and research institutions, was announced by Prime Minister Datuk Seri Najib Tun

Razak last year.

• Unik is a one-stop centre to formulate policies and strategies aimed at creating a conducive

ecosystem to propel development and innovation in Malaysia.

• Rizatuddin said among the criteria for the findings to be earmarked for commercialisation were

their market size and patent protection, both locally and internationally.

• He said most of the R&D findings were in the field of material science, life science and

biotechnology.

• UM and USM, for example, had conducted a research on medical diagnostics for tropical

diseases like dengue, cholera and typhoid, he said.

• Rizatuddin said the R&D findings were developed over a period of five to eight years and were

expected to enter the local market next year. - Bernama

Food for thought… 08/18/2010

No Copyright Law The Real Reason for Germany's Industrial Expansion?

By Frank Thadeusz

Did Germany experience rapid industrial expansion in

the 19th century due to an absence of copyright law? A

German historian argues that the massive proliferation

of books, and thus knowledge, laid the foundation for

the country's industrial might.

The entire country seemed to be obsessed with reading.

The sudden passion for books struck even booksellers as

strange and in 1836 led literary critic Wolfgang Menzel to

declare Germans "a people of poets and thinkers.

THE LEGAL CHALLENGE

Universities’ IP Policies

Evolution of Internal IP Policies

• Evolution of IP Policies

• IPTAs + GRIs

• 1999 Govt Circular

1990-

• Q: in the course of employment

• Recurring disputes in universities

• + NDA, Research Agreement, NDA, Disclosure

2000 - • IP Manual

• R & D Roadmap

• MOSTI Commercialisation & IP Policy (2009)

2005-

Legal basis for the transfer of rights to

employer-university

• Use of government R & D funds

• Assignment of rights, NDA, disclosure forms

• In the course of employment & use of facilities and resources

• Fiduciary duty

• Misappropriation of employer’s property/ conversion

Equity and common

law

Internal IP Policies

MOSTI IP Policy

Other contractual

means

Roche (2011) Supreme Court

Initial

ownership

• Q: whether the Bayh Dole Act = automatic divestiture of ownership rights to federal contractors?

• ‘right to elect’ = automatic entitlement of ownership

history

• Since 1790 –invention belongs to the inventor

Transfer of rights

• Mere employment is not sufficient to vest ownership to employer

• Must be followed with effective assignment of rights

Uni of Central Florida (2011)

Transfer of rights

• Fed Cts have consistently upheld the validity of patent assignment obligations imposed on univ. students, faculty and staff

Equity

• Staff owe fiduciary duty to the univ – not to conceal and misappropriate inventions to his own benefit

contract

• Validity of internal IP policies?

• Held = breach of contractual duty

AIA (2011)

Initial ownership

• Florida Regulations

• University Patent Policies

• Distance itself from Roche

Transfer of rights

• Distinguish between initial vesting and transfer of rights

• Effective transfer of rights

Gray (2008)

IP policy

• Not validly passed

• invalid

Common law

• Q: in the course of employment

• Duty to invent = duty of academic staff?

• Duty to research ≠ duty to invent

• Academic staff ≠ research employee in private firms

Rising IP disputes in university

compounds…

June 17, 2009; a former Stanford Univ. Graduate sued school and faculty advisor

Jan 26, 2012; Misouri Univ sued former post doctoral student and professor

Jan 24, 2012; Kens State Univ sued former post doctoral researcher

April 17, 2012; Columbia Univ. sues Illumina over DNA sequencing patents

STRATEGIC USE OF IP

Universities’ IP

OPTION 1: PUT ALL

IN THE FREEZER

OPTION 2: PACK

FRUITS OF

DIFFERENT SHELF

LIFE

OPTION 3: PICK AND

CHOSE OR CONSUME

THE WHOLE BASKET

IP life cycle

creation protection exploitation

All depends on level of IP

literacy! • Protecting High School Students IP

> I am a high school teacher in Queens. This year I've been asked to pilot a new

Android App Development course. I ran into an interesting problem, that I had

never considered before. My students want their app in the marketplace and they

wanted to make some money off them.

> This raised several questions:

>

> 1. Who 'owns' the games?

> 2. What would the students/school do with the money from this?

> 3. If they are created by a group of graduating students, how would I

> manage money?

> 4. How do I protect the students' ideas from other people profiting

> from them?

> 5. How do I maintain control of what is attached to the school?

> My solution was to release everything under the Creative Commons

> Attribution-NonCommercial-ShareAlike 3.0 Unported License through a

> school controlled account. That way the students' ideas are

> protected, and no one can make money off them, and I can keep an eye

> on what is being released.

>

The road to the market…

prototype Proof of concept

Non linear

Amount of IP

spending more than

royalties earned

Big universities

doing better than

the small ones

Sample

production

Table 4.3 Ratio of Income from IP licences, options

and assignments to total research expenditure, 2000

to 2009

2000 2001 2002 200

3

2004 2005 2006 2007 2008 2009

Australia 2.8 2.0 1.9 1.6 1.3 1.3 2.1 3.6 1.5 4.1

Canada 1.8 2.3 1.6 1.6 1.4 1.2 1.4 1.2 1.0 -

Europe - - - - 3.2 3.2 0.4 1.0 1.3 -

UK 0.6 1.1 1.1 1.1 1.5 1.3 1.3 1.4 2.1 -

US 4.8 3.4 3.5 3.4 3.4 5.3 5.3 5.5 6.6 6.5

Conclusion

• Basic research is mainly

conducted by the public sector

• Universities and government led

research institutes are a

fundamental source of knowledge

for the business sector

• The synergy between the

academic and entrepreneurial

activity in the univ must be

maintained.

Conclusion

• Importance of following other

country’s learning curve

– innovation policy

– Court disputes on Bayh dole &

internal IP policies

• IP ≠ money

• BUT IP = knowledge generation

• Need to strategise IP creation and

commercialisation