Research released this week by intellectual property law firm Mathys & Squire shows that patents are rising as universities seek to commercialise the output of their research programs.
The UK's 50 largest universities — in terms of student cohort — filed 433 new patent applications until September 30 2022.
The University of Oxford, Imperial College London and the University of Cambridge are the UK's three most prolific patent-filing universities.
The impact of university-generated IP has been noticeable in areas such as nanotechnology, green technology, AI, material science, biotech and pharmaceuticals. For example, Oxford University developed the UK's first approved COVID-19 vaccine, AstraZenca.
The University of Oxford is the most prolific filer, with a track record of successfully launching spinout businesses (such as Mind Foundry, Organ Ox, and Oxccu) and attracting investment based on the university's IP.
The university has built up a reputation as a leader in biotechnology and pharmaceuticals.
Further, Cambridge University has become one of Europe's most successful technology clusters, home to 12 companies valued at more than $1 billion, including pharmaceutical giant AstraZeneca. It's also spun out companies such as Tenyks, Semarion, and Psyomics.
Are spin-outs in the best interests of startups?
However, UK universities face funding shortfalls due to a lack of EU investment post-Brexit. Universities that had previously benefited from the European Regional Development Fund may have to scale back on IP projects unless they can replace this funding.
Further, Nathan Benaich from Air Street Capital contends that “spinout founders part ways with too much equity, as well as hefty royalties and licensing fees, from day 1.”
In a blog post published last year, he outlines how Technology Transfer Offices (TTOs) at UK universities operate as “independent companies with the associated pressure to bring in real money.
This means that while the university wants to promote spinouts as a means of commercialising IP, its TTOs set the terms under which the spinout has the freedom to operate.”
Furthermore, those universities who also have affiliated venture funds in which they are also Limited Partners present further conflicts of interest between the university, the fund, and the TTO."
In contrast, US TTOs operate as offices within the university or even as philanthropic organisations with the goal of getting university technology out into the world for the benefit of society. This setup optimises for a more permissive spinout playbook.
Benaich cities the example of a biotech hardware spinout from University of Oxford founded on a graduate student’s PhD work. It had to give up 75% of the equity, of which 50% to Oxford and 25% to the academic advisor who was not going to contribute actively to the spinout.
Following a £1.2M Seed investment led by Oxford Sciences Innovation (OSI is the university-affiliated venture fund) and a transfer of equity from the university to OSI, the investment firm owned 50% of the spinout.
On top, the startup had to pay 6% royalties on any revenues (negotiated down from 16%) and is now a defendant in a lawsuit against OUI after contesting these terms.
On founding, a further two software spinouts based on research by students/professors of Oxford parted ways with a combined 30% equity to the university and OSI. Two other software spinouts parted ways with a combined 20% to the university and OSI.
Another software startup not based on a student’s work at the university parted with 15% to the university at founding. Licensing terms are unknown.
The US offers another way forward
Universities in the US still lead the way for IP innovation. MIT filed 329 patents last year, and Harvard University 247.
Legislation like the Bayh-Dole Act has helped the US lead the way in patent filings. The act creates an arrangement where the government has a quick route to protecting US technology by giving patent ownership to the university.
In turn, the university is incentivised to take full ownership through a slice of royalties for a project it didn't need to fund.
Iain Armstrong, Partner at Mathys & Squire, says:
"UK universities are home to some of the world's brightest minds, but there is clearly more potential to be unlocked.
Helping remove some of the red tape and providing much-needed funding would go a long way towards helping the UK catch up with the US.
Utilising universities' ability to produce intellectual property and work alongside businesses is something the United States is particularly good at. It wouldn't hurt for the UK Government to consider taking a leaf from their book."