By Renuka Sena, John Chong, Benjamin Thompson & David Oh
Mindvault Sdn Bhd
This is the first in a two-part series published on 23 December 2003 in the [email protected]
pullout of The Edge, Malaysia’s leading Business & Investment Weekly.
In our first article last week, we examined several areas that need to be considered when building a one-stop intellectual property (IP) infrastructure, namely, IP information resources, IP enforcement, IP marketplaces and IP registration. This week, we look at training, commercialisation and funding.
While IP is becoming a more popular topic at seminars and conferences, overall, the approach is too fragmented and very often targets the legal community. To fully equip people with IP knowledge, a more structured and long-term approach is required. While an IP training centre already exists and IP is being taught as a subject to law students in universities, there is a need to set up an institute dedicated to IP. This could serve potentially as a one-stop training agency.
For such an institute, training should not only be aimed at the traditional recipients – IP examiners at the Intellectual Property Corporation of Malaysia, enforcement officials and the judiciary – but also at creating a pool of specialist patent drafters. The latter need not have legal training or be legally qualified because the skill set required is more technical or scientific in nature.
A patent drafter would be required to understand the field of invention and articulate the novel and inventive characteristics of the invention to ensure that successful registration of the patent is achieved. As such, patent drafters traditionally have science, engineering and, in recent times, information and communications technology (ICT) backgrounds.
Currently, tens of thousands (if not more) of ringgit flow through our borders into countries like the UK, the US, Australia and Singapore to obtain the services of specialist patent drafters. Such expertise does not exist in Malaysia but there is no reason why it cannot. Perhaps, the relevant authorities should consider IP training for ICT or science graduates as an alternative to traditional job prospects. IP training may even be offered to our existing pool of unemployed science or engineering undergraduates who can, as a start, understudy foreign experts providing such services to legal firms. This will ensure new skills and job opportunities are created and reduce the amount of ringgit flowing abroad for such services.
IP Commercialisation and Funding
In Malaysia, it is difficult to separate funding from commercialisation and as such, we have decided to consider them together. The government has sought to set up an enabling infrastructure to spur research and development (R&D) via venture capital funds from Malaysia Venture Capital Bhd and Malaysia Technology Development Corporation, and government grants from the Multimedia Super Corridor’s R&D Grant Scheme; Intensification of Research in Priority Areas; Industry R&D Grant Scheme; Commercialisation of R&D Fund; and, more recently, Strategic ICT Thrust Areas.
However, government-funded R&D has no commercial thrust, as recent articles in[email protected]
show. One article reveals that of the 5,232 R&D projects implemented under the Sixth and Seventh Malaysia plans, only 5.1% were commercialised – an appalling figure since these projects were funded with public monies.
In response, the government has made Sirim Bhd the agent to match industry and market needs, although it is unknown at this juncture what model Sirim will adopt. In addition to this, the government has offered remedies, such as tax exemptions for income received by researchers and waiver of fees for filing patents.
The lack of pre-seed and seed stage money;
Expanding existing programmes to encourage more collaboration between government-funded research and industry; and
Harmonising national IP management with the setting-up of a one-stop agency within the Ministry of Science, Technology and Environment, namely, the National Innovation Centre.
In addition to reports on the lack of commercial focus at universities, there has been an ongoing tennis match between venture capitalists (VCs) and technopreneurs with regard to “commercialisable” business plans. VCs say the quality of business plans that are submitted for funding are below par while technopreneurs lament that the VCs are risk-averse.
So what does all this mean? Commercialisation of IP (which is usually the end product of R&D), put simply, is about planning how you will take your good idea to the marketplace. It involves working your idea into your business plan, consideration of protection options and determination of how to market and distribute the end product.
As practitioners who champion the importance of commercialising IP, it seems to us that before we forge ahead, we should take a couple of steps back and examine why we are facing the challenges that have been much publicised recently. Malaysia is said to be a nation in a hurry but perhaps in our haste to become a developed nation, we are forgetting some basic requirements that need to be met first.
For example, do we have an enabling infrastructure that supports the growth of technopreneurs and entrepreneurs in Malaysia? Does our education and business culture encourage innovation among students and employees? Is there ready access to market and industry research and statistical data that can assist entrepreneurs and researchers make informed and calculated decisions prior to undertaking R&D projects? Do inventors and researchers understand that protection of IP prior to publication can result in numerous sources of income via a multitude of channels, such as licensing, assignments, joint ventures, strategic alliances and technology pooling?
In a study conducted by the Organisation for Economic Cooperation and Development, it was revealed that across its member countries, laws and policies governing ownership of IP generated with public research funds are being re-examined. However, even with such changes, it can be seen that although legal instruments are important, a change in culture and mindset is imperative.
What steps can we take to bring about such changes in mindset and culture to ensure that the nation benefits economically and socially from R&D and commercialisation? For one, we should consider the setting-up of institutions that can nurture young firms and budding entrepreneurs to help them survive and grow during the seed and start-up stage when they are most vulnerable. Such institutions could take the form of incubators, technology transfer offices or collaborative research centres (CRCs) as in the US, the UK and Australia.
To provide an enabling infrastructure, the following should be considered:
Establishment of CRCs or institutions between the government, the business community and educational institutes in targeted industry sectors. At present, R&D appears to be conducted in silos, with no pooling of resources, both financial and human, to undertake focused research in industry sectors. Such focused research requires input from the private sector and the expertise and infrastructure of universities to create research data/findings, which can then be utilised to produce end products ready for commercialisation.
Formation of inter-disciplinary teams. The success of such CRCs requires a myriad of skills and disciplines. It is suggested that the CRCs recruit or encourage secondments from universities and the business community to form two related but distinct teams that focus on R&D and commercialisation, respectively. The R&D team would require multi-disciplinary science and technology teams, marketing experts and IP practitioners. The commercialisation team would provide advice and assistance in relation to new business formation, capital development, technology transfer, access to industry and market research as well as provide hands-on management assistance.
Clear guidelines and policies. For all parties in such ventures to benefit or to be encouraged to come together, there must be clear guidelines that equally reward researchers, the private sector and the CRC. Such guidelines should rule that ownership and commercialisation of IP resulting from CRC research be owned by the CRC. However, to benefit all parties involved, there can be guidelines regulating floor and ceiling percentage returns via royalty or equity shares (depending on how the R&D is intended to be commercialised) to researchers, the private sector and universities and the CRC, reflecting efforts/resources contributed by all parties.
Access to critical research and data. At present, while the Internet does, to some extent, provide limitless research potential, access to industry-focused market research, global trends and statistical data regarding, for example, purchase patterns within customer segments is only available to those who can afford to commission research houses. Therefore, all such industry related/focused data should be commissioned or aggregated (from other available sources like Malaysia External Trade Development Corporation) by CRCs and compiled into databases that can be provided to budding entrepreneurs and the business community at an affordable cost.
Developmental funding and the creation of a complete and integrated funding value chain. It is a known fact in Malaysia that we do not have a vibrant angel network to provide pre-seed or seed funding, which is critical to create early-stage idea formation and prototypes, and generally provide access to industry networks. The CRCs may be well placed to provide such “institutional angel funds” and provide a strong business-building environment, especially at the seed stage, considering that the bulk of Malaysian entrepreneurs is in this stage.
Grants, financing schemes or incentive schemes for IP. While there are government grants that allow for IP-related expenses like patent and trademark searches and filing in overseas countries, such funds do not adequately meet the funding needs of budding inventors or entrepreneurs in terms of quantum and timing. Inventors or researchers need data on patents filed overseas in the early stages of R&D to determine whether to continue to focus R&D in the selected field or abandon R&D because of lack of commercial potential (because there is an existing third-party patent right).
Although some foreign databases allow free access and search facilities, this in itself is not the stumbling block. An unskilled person reviewing search results may not be able to accurately establish whether or how to design around patents or whether his R&D would be infringing a third-party right. This requires the expertise of specialist IP practitioners, but the fact is those inventors and entrepreneurs rarely have the funds to pay for such services. As such, the usual modus operandi would be to defer such services until seed or grant funds are obtained to finance such services. By then, it may well be too late and the inventor (and investor) may find that his IP right has been compromised.
It is ironic that funds are available to finance foreign IP registration but no incentives of financing are available for the inventor to draft and file local patent applications. It is suggested therefore that funds are made available to carry out such activities if the nation is to benefit from a local IP pool.
Perhaps the first task of the CRC (or any other institution identified to conduct the exercise) would be to review the 5,232 R&D projects that have been funded and ascertain why they were not commercialised. It may be necessary to rescue some of these now “orphaned” R&D by bringing in experts from unrelated industries to see if new uses may be identified. One way of doing this would be to set up a closed R&D marketplace and invite subscribers or local/foreign corporations to assess and evaluate R&D findings that may be beneficial to them.
A recent [email protected]
article, entitled “Strategic Roadmap for Universities”, highlighted possible solutions to the problems faced by universities in commercialising R&D. A study should perhaps be conducted to ascertain what incentives or policy changes would stimulate the private sector’s collaborative involvement with the universities.
Early this year, there was a debate on whether we should continue to adhere to the “Look East” policy established by Tun Dr Mahathir Mohamad. An area that was not addressed was Malaysia’s failure to “look east” at the development of the IP arena. Japan, whose economy was destroyed by World War II, rebuilt itself into an industrial giant because it learnt to exploit the IP right (known as industrial property rights in Japan) system to its advantage.
Why can’t Malaysia do the same? If there is enough political clout and industry commitment to deal with the issues raised in this article, “Made in Malaysia” will soon become a catch phrase of innovation and quality for the rest of the world.