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Chapter 1: Introduction
1.1 Background
Science is a study of human pursues to understand the nature. By understanding the nature, human could utilize the nature to invent, in order to live more comfortably.
This ritual runs from our ancient ancestors: starting fire with two stones or utilizing wheels to transport heavy stuffs; to sophisticated machine or computer calculation software that exists today.
Nowadays, a lot of scientific discoveries and inventions happen in university laboratories, in glasses, test tubes, solutions, machines or computers. Furthermore, Science today had branched into very small and professional niche, making new scientific discoveries seem “useless” if being inspect independently. Yet, scientific discoveries, if being gathered in a pool, could make a change in our life, rather than sitting on the shelf or only being published on academic publications. For example, a single component in an iPhone might be worthless, but when Apple put thousands of components together, an iPhone worth more than seven hundred U.S. Dollars.
Scientific discoveries that could be made into a unique device, method, composition, process, or make significant improvement to a current practice is considered a new invention. “Intellectual Property Rights” are the rights given to person over the creations of minds, for a given period of time. It is a kind of intangible right that works like tangible property right. Invention that is novel and not obvious to person having ordinary skill in the art1 could be patented. Inventor applies patent from a nation’s Patent and Trademark Office. He or she then has the right to exclude others from practicing its invention by applying for patent protection. Once an inventor applied and granted a patent, they could choose to make use, sell, or license the patent to a business counterpart.
A patented technology could be “transferred” from laboratories’ bench side to industry, transformed from basic science to business, evolved from spending money to
1 Often abbreviated as PHOSITA in the US
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making money through a process known as “technology transfer”. Technology transfer could involve licensing process or setting up joint ventures and partnership, with the ultimate goal to bring new technology to the market. Corporates, universities and governmental organizations, often have the “Office of Technology Transfer” (OTT, or TTO) to oversee and help with the licensing process. Technology licensing is a crucial
“bridging” process between science and business. A successful technology licensing not only fuel the future scientific discovery through the royalties’ income, it also helps progress the technology advancement.
In order for technology licensing to succeed, a lot of factors shall be taken into consideration, including but not limited to technology, talent, market, regulation, business operation, money, legal issue, intellectual property, employer, government, competitor, and the list goes on.
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example, a potential drug candidate that could change the world could be licensed to a local biotech company for further research & development, or to an international pharmaceutical company for commercialization into products.Taiwan is one of the countries around the world that highly invest in research funding. Taiwan overall R&D spending as percentage of GDP was 2.57% (about NTD$
331 Billion) in 2007 and was climbing to 3.02% (about NTD$ 413 Billion) in 20112. According to the R&D expenditure by Field of Science and Technology (See Appendix 1), Medical Science R&D expenditure was NTD$ 29.7, which made up 7.2% of total R&D expenditure in 2011.
Table 13 in this study showed that NHRI received NTD$ 2.26 Billion in 2011 from MOHW, which is about 7.6% of Taiwan overall medical science R&D budget.
Since NHRI did receive other funds from other funding agencies in Taiwan, for example National Science Council and etc., the ratio of NHRI funding over total medical science R&D budget should be higher than 7.6%.
Research result of government-funded research could be patented and licensed for commercialization, channeling the income to the inventor and back to the government. Research result should be managed properly and licensed to industry locally and internationally to benefit the tax-payer, which indirectly supports the research. According to Taiwan National Science Council’s Indicators of Science and Technology (FY 2012), the “ratio of technology payment balance”3 of the United States was 1.46 in 2010 (4 years average from 2007 to 2010 was 1.56), while Taiwan’s ratio of technology payment balance was 0.18 (4 years average from 2006-2010 was 0.24). It is apparent that Taiwan imports more technology than exporting it to other countries.
The process of technology commercialization is very complicated and it involves a lot of professions. Many factors including legislation restriction, government
2 Indicators of Science and Technology (FY 2012) (n.d.), Taiwan National Science Council, Retrieved from https://nscnt12.nsc.gov.tw/WAS2/technology/AsTechnologyDataIndex.aspx
3 Ratio of receipts from other countries for technologies exported and payments made to other countries for technologies imported. High imports (ratio smaller than 1) may imply that a country is poor at developing technology, or the country is keen on using new technology. High exports (ratio higher than 1) may imply that the country is an important developer and originator of a particular technology, but it may indicate that the country is not able to put new technology into efficient use, e.g. Leaving to others to commercialize it.
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policy, research quality, market demand and etc., might contribute to the success or failure of technology licensing. The process of technology commercialization could be briefly divided into two phases: Supply End and Demand End. The Supply End means the ability of research institutes to provide quality invention, while the Demand End implies the ability of industry to accept the supply end’s invention.
Since the passage of Fundamental Science and Technology Act, legislative restriction has loosened to be friendlier to licensing process. The act opens up a lot of licensing opportunities to the Supply End of the commercialization process. The responsibility connecting both Supply and Demand parties relies on the Technology Transfer Office (TTO). It is crucial for TTO to convey sufficient information between the Supply and Demand parties. The enactment of Taiwan Freedom of Government Information Law opens up a channel for the free flow of information – which is very crucial for the marketing and sales of an invention.
Referring to information published on the NHRI website, NHRI has licensed 22 of its invention to business corporates since the establishment of NHRI TTO (2001), among them 14 had been terminated and only 8 is under execution. NHRI on average has 10 patents applied in Taiwan (invention numbers not disclosed) and 2 licenses executed annually. Whereas it’s counterpart, NIH on average has more than 300 inventions disclosed annually and 180 licenses executed annually.
It seems that there are still rooms for improvement during the licensing process for the NHRI. This study intends to figure out what factors contributing to the weak licensing performance at the NHRI.
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1.3 Research Objective
This study is intended to identify what critical factors contributes to successful technology licensing and what are the main reasons behind the relatively low licensing performance among Taiwanese research institutes, despite very high investment in research funding. One way to increase the low ratio of technology payment balance in Taiwan is to increase the licensing out performance of Taiwan technology.
This study intends to figure out if it was due to licensing market demand not fulfilled, weak attractiveness of Taiwanese technologies, legislative policy that might slow down the licensing process, information asymmetry due to licensing information not disclosed, or other reasons.
It is believed that freedom in accessing governmental information is a basic right for citizens to surveillance it’s government. Freedom of Information Right gives
“the right to know” to an individual, gaining individual access to information held by the government.
The target of this investigation is limited to government-funded public research organization in Taiwan and the United States, of which National Institute of Health (NIH, US) and National Health Research Institute (NHRI, Taiwan) were chosen in this study. No scholars have been researching on the licensing process and performance of NHRI in Taiwan, except Chang C-P. in 20064 did a research on the technology transfer mechanism of research institutes in Taiwan. This research is considered a pioneer study in the field.
After determining the reasons that contributed to weak success of technology licensing, this study will provide suggestions based on the success factor of NIH to Taiwanese government funded public research organization to improve the success rate of licensing out a new technology.
4 張正平（2006），我國國家生物技術研究機構技術移轉機制之探討，國立政治大學法律與科技整合研
究所，第四章， 政大機構典藏 2009-09-17T06:18:05Z
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1.4 Research Methods
This research will compare the licensing practice between two government-funded public medical research organization in United States and Taiwan, namely NHRI and NIH. This study at the same time will compare the licensing performance of both research institutes to present a better perspective on the current status of licensing status in both institutes.
To get accurate and formal data, this research will mainly retrieve data from official annual report and official websites. Using results computed from research statistics, it is possible to identify factors that bring synergy to licensing and point out factors that hinder Taiwanese public research organization from performing well in technology licensing. This study would also compare and pin point the major difference in licensing practice between two institutes, including but not limited to website interface, licensing types, scope of application, sales and marketing strategies, availability of technology friendly to licensee and etc.
This study will address the importance of freedom of information access during technology licensing process. The author will practically talk to and request information that were absent on the public domain with both institute to evaluate to what extent does the government agency honor freedom of information access, since responsible disclosure of sufficient information is potentially or often underrated.
This study will also discuss and probe possible clues, which could further improve the effectiveness of technology transfer in Taiwan.
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1.5 Research Structure
Discussions and Suggestions Results
Research Method Research Objective Statement of Problem
Introduction
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The research institute referred in this research focuses on government-funded public research institute that are governed by Bayh-Dole Act, of which the allocation of invention ownership of intellectual property rights is given to the inventor. The intellectual property rights being discussed in this research excludes trademark, copyright, trade secret and only limited to patent. To be more specific, this study only takes National Health Research Institute (NHRI) from Taiwan and National Institute of Health (NIH) from the United States into consideration.
In Chapter 3, this study discussed about the supply (technology seller: research institute) and demand parties (technology buyer: industry) of technology licensing value chain. This study only discusses the supply party and does not discuss about the demand party. This study assumes that the demand of research invention is abundant.
Since an invention could only apply for a patent in a country, to avoid misinterpreting and exaggerating an institution’s licensing performance, this study only take local patent application into consideration, e.g. evaluation of NHRI’s performance will be based on Taiwan Patent numbers, while evaluation of NIH’s performance will be based on U.S. Patent numbers.
For NIH, while evaluating the performance of licensing activity, this research only focuses on Intramural Research Program to allow fair and on par comparison with NHRI. Data on Extramural Research Program will be excluded in this study.
For NHRI, it is to be assumed that NHRI should be categorized as government body as it receives research funding from Taiwanese government. Legislation of Ministry of Health and Welfare (MOHW) dictates that agencies receiving funding from MOHW should be viewed as government body. Thus, NHRI is bound to oblige with Taiwan Freedom of Government Information Act.
Despite this study is able to retrieve all information about NIH licensing performance, the information available from NHRI was rather limited. The reporting practice in Taiwan made it impossible to retrieve a full set of data on licensing performance, including but not limited to invention disclosed, royalty information and etc. This study only able to retrieve full licensing data of NHRI in FY 2010, thus comparison on licensing performance will only be based on FY 2010.
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AUTM Association of University Technology Managers BRDPI Biomedical Research and Development Price Index BSCs Board of Scientific Counselors
C.F.R. Code of Federal Regulations CIP Continued-in-part
FOI Freedom of Information FOIA Freedom of Information Act
FY Fiscal Year
GDP Gross Domestic Product
HHS United States Department of Health and Human Science ICs Institutes and Centers (of NIH)
IP Intellectual Property
IRP Intramural Research Program MHS Marine Hospital Service
MOHW Ministry of Health and Welfare
MSTI Main Science and Technology Indicators NHRI National Health Research Institute (Taiwan) NIH National Institute of Health (United States) OD Office of Director (of NIH)
OECD Organization of Economic Co-operation and Development OTT Office of Technology Transfer
PCT Patent Cooperation Treaty
PhRMA Pharmaceutical Research and Manufacturers of America PIs Principal Investigator(s)
R&D Research and Development SMEs Small and Medium Enterprise(s)
Start-up ECLA Start-up Exclusive Commercial License Agreement Start-up EELA Start-Up Evaluation License Agreement
TIPO Taiwan Intellectual Property Office
TRIPs Trade-Related Aspects of Intellectual Property Rights
TT Technology Transfer
TTO Technology Transfer Office U.S. United States
U.S.C. United States Code
USPTO United States Patent and Trademark Office WIPO World Intellectual Property Orgnization WTO World Trade Organization