Special Report on Industry-University Collaboration - 2 The ultimate goal of NCKU's patent application: either to transfer the technology or to found a start-up to commercialize the patent
How can a professor of a national university applying for a patent at his own expense have got more than 100 domestic and foreign patents? National Cheng Kung University Assistant Vice President and Director of the Innovation Headquarters, Chuang Woei-jer, has made it. Chuang is not an engineer in the R&D department of a large enterprise, but only a professor in the NCKU College of Medicine. It is believed that there are at least two questions in the minds of many people: (1) Why would a professor in a public university have a large budget to apply for and maintain a patent? Especially, multi-national patents filed using the PCT (Patent Cooperation Treaty) model are costly; (2) What is the use of so many patents filed by a teacher? Can they all be commercialized? As the Director of the NCKU Innovation Headquarters, Chuang's patent policy is also NCKU's, and the above two questions can be answered by understanding NCKU's patent practice. Following on from an article titled "The quantity of patent licensing granted is more important than the quantity of patents issued, NCKU dispels the myth that the bigger, the better" in Issue 277, Chuang is invited in this issue to reveal the success factors of the NCKU Innovation Headquarters and the operation model of the Startup Accelerator.
Figure 1 shows NCKU's R&D innovation operating model, broken down into a simple five-step process:
Research investment → R&D results → patent output → vendor enquiries → technology transfer (another type is the establishment of start-ups, of which there were 11 in 2020).
After the profits have been generated from the transfer of technology or the establishment of new start-up companies, they are then invested in research and development. The NCKU Innovation Headquarters continues to grow thanks to the continuous cycle of the revenues.
NCKU's patent technology transfer rate was 18% in 2020, and the rate is gradually on the rise every year, while the figure was 5% in the United States, and Taiwan's patent technology transfer rate is not only exceptional, but even dominant in the world. However, it is necessary to face a reality: compared with foreign countries, the average amount of technology transfer in Taiwan is extremely low. Therefore, NCKU has a large number of patents and a high rate of technology transfer, but the income from technology transfer is not high because those who transfer Taiwan's technology are small companies in Taiwan, and they do not have much funding. Chuang said that NCKU could go one step further and that the goal was to have more patents to transfer technology to foreign companies in the future, so he has now enlisted the services of two American lawyers to internationalize NCKU’s technology.
Two strategies for patent commercialization: technology transfer vs. setting up a start-up company
This model may seem simple, but it is not easy to operate due to the difficulties in securing funding for research and development. Although NCKU claims to have a budget of at least NT$30 million a year for patent applications and maintenance, the annual budget is only a drop in the bucket, given that NCKU has more than 1,300 faculty members in total.
Chuang said that NCKU teachers who want to apply for a patent can request support from the school and there are different systems and approaches for teachers to choose from. Firstly, NCKU has a patent optimization process whereby internal and external teachers will be approached after a teacher has submitted a request for a patent application. After review and approval, the stages of the application process will be considered. Since we are based in Taiwan, most of us will file a Taiwanese patent application first, and then we have to decide where the market is. If we are looking at the global market, we should consider filing a PCT application, after which, we should choose a market, and the most likely one is the top 5 countries. Therefore, if a school teacher wishes to apply for a patent, he or she must go through a two-stage assessment process.
Chuang pointed out that if a teacher wished to apply for a patent but failed to pass the review in the first stage of the optimization process, he or she could still apply for a patent at his or her own expense, and if a technology transfer fee was produced later, the teacher would be able to get a larger share of the profit, which would at least cover the cost of patent application in the first place. And it is the responsibility of the facility to assist in securing opportunities for technology transfer.
However, a problem arises that even if a teacher's patent can eventually lead to a technology transfer and receive a sum, not every teacher can afford to pay for the maintenance of the patent application at the beginning, especially when filing a multinational patent under the PCT, the cost can sometimes be hundreds of thousands or even millions of NT dollars and how can this problem be tackled? To address this issue, Chuang Woei-jer used his own example to illustrate his point.
In the past five years, NCKU's foreign patent ratio was 40% on average, and 48% in 2020, with the goal of 50/50 domestic and foreign patents (non-Taiwanese patents are classified as foreign patents). The strategy of NCKU is to have a Taiwanese patent, and the US is the first choice for a foreign patent, and then it depends on where the market is and usually follows the companies. The key point is to start the search for a vendor and seek their interest in technology transfer or licensing before the patent application is published (within 18 months of filing). If you apply for a foreign patent through the PCT channel, you will have to enter the national phase within 30 months of filing, which is when the most money will be spent. As a result, NCKU will request technology transfer before the PCT patent enters the national stage. Although the patent has not yet been issued, many companies will opt for the transfer in view of the potential of the patent.
Chuang himself owns more than 100 patents, of which 40 or so were issued and 60 or so are in pending status. “It is difficult for a teacher to cover more than 100 patents, but we have two ways to solve this problem. One way is to transfer the technology to a firm within 30 months of filing the application, at which time the patent assignee is still NCKU, with the patent exclusive technology only transferred to the vendor, but the vendor is responsible for the subsequent issue and maintenance costs. Another way is that if a teacher feels that his or her patent has market potential, he or she can seek investment from foreign venture capitalists (VCs), then set up a company and use the company to commercialize the patent. Thus, although NCKU claims to have an annual budget of NT$30 million for patent applications, much of the patent funding is actually borne by firms or VCs,” Chuang said.
R&D should be applied: NCKU's founding spirit is to commercialize R&D results
In the early days, NCKU would license the patents directly to the companies and only receive the basic license fee, so that the operation would be easier, Chuang said, however, after NCKU “grew up,” it realized that in order to earn more, it would need to use start-up companies, and then outside VCs would consider whether to acquire shares in the company or buy it, or invest money in it, and NCKU could gain more resources. As a result, start-ups have become another important avenue for NCKU to commercialize its patents, and the profits generated are much greater than those from licensing alone.
Chuang Woei-jer worked at the Ministry of Science and Technology for two years as the Director of the Department of Life Sciences, during which time he had many opportunities to visit foreign accelerators and foreign start-up companies. "I used to go and see how these companies worked overseas and I was very impressed by one of them, a Japanese company called Chugai Pharma. As soon as I walked in, I was told that it was a global company, but they were still maintaining their own R&D capabilities. The way it works is that it sells 51% of its shares to ROCHE and the products are sold by ROCHE, but the R&D is still led by the company and what is developed continues to be sold to ROCHE,” he said, adding that “So Chugai Pharma is a foreign company in Japan, because 51% of the shares are owned by the Swiss company ROCHE, and hence it is dominated by the Swiss company, but it still has some control over it in Japan. The company was originally ranked 10th in Japan, but has now climbed to 4th place. This is a good example of leveraging foreign resources to make oneself stronger.”
Basically, NCKU has adopted the same approach: the first approach is to have the patent directly bought out by a firm; the second one is to utilize a start-up company to procure more resources going forward. Chuang indicated that NCKU currently has about 168 R&D teams (NCKU has more than 1,300 faculty members and 900 clinicians) and that what is developed has commercial value. Even though NCKU has transferred its R&D results to other companies, its laboratories are still very active and continue to work on R&D.
NCKU's Innovation Headquarters is home to more than 80 R&D centers, bringing in around NT$900 million in R&D funding a year. Chuang Woei-jer said that few universities can get nearly NT$1 billion in R&D funding in a year, but NCKU has been able to make it because it has done the right thing by co-working closely with companies from the very beginning as well as with departments and colleges outside the university; on the other hand, NCKU has a close network with enterprises. When research in cutting-edge technologies requires a lot of funding, it will seek collaboration with industry. “The founding spirit of NCKU is to commercialize the R&D outputs, and successive presidents have done a good job of this and it is still making progress.”
Faculty's motivation to apply for a patent: a change of concept
Despite NCKU's emphasis on the application of R&D and the commercialization of patents, under the current system, the promotion of university faculty is still based on academic papers, what are then the motivations and incentives for faculty to apply for patents?
Chuang put it succinctly: "A patent is like an SCI impact factor." In fact, it is not difficult to obtain a patent, but only when you receive the technology transfer fee does it mean that the patent is useful. After a systematic review of the impact factor for a paper, it is possible to tell how many impact factors the paper has in the SCI, and the difference comes out between 10 and one. In addition, the value of publication in a reputable international journal is not the same as that of an ordinary journal. In contrast, patents are more difficult to evaluate because there is no standard system, except for those in the same field. The only more appropriate way to evaluate a patent is whether it is wanted or not: this is the criterion of value.
For the faculty members, the technology transfer fee is certainly one of the motivations to apply for a patent, but Chuang believed that the change of concept also plays a significant role. He said, "In recent years, many new start-up companies have emerged, and when presenting speakers at seminars or conferences, they often have the title of 'co-founder of XXX,' a practice that started earlier in the United States and is now the norm in Taiwan. In other words, the commercialization of patents is a critical trend, and although Taiwan is at least 5-10 years behind the US in this process, the practice has made its way into Taiwan. Many of NCKU's teachers have worked in the industry and it is important to apply for patents in the sector, and it is these who are bringing this practice to NCKU.” He contended that universities should not restrict what professors can do from the beginning to the end, and that they should be allowed to do industry-related, commercialized and top-tier cutting-edge research.
NCKU has created 11 start-ups in 2020, six of which are led by teachers and five by students. The success rate of NCKU's start-up companies is as high as 80%, which not only helps commercialize patents, but also helps students find their way. It is important for schools to have such a counseling mechanism.
NCKU's incubation center is not restricted to NCKU students only. In the case of being stationed in the center, in addition to the relatively low rent, companies can also make use of NCKU's resources, including human resources and software and hardware, such as network, literature search, instruments and R&D equipment. For example, for medical R&D, clinical trials can be carried out directly in hospitals. This is the best part of being based in a school incubation center, as it can be directly integrated with school resources.
Finally, Chuang reiterated that patent applications should focus on internationalization, the performance of industry-academia cooperation and technology transfer, and the establishment of new start-up companies, and that NCKU hopes to coordinate with the Ministry of Science and Technology and the Taiwan Patent Attorneys Association to deepen the concept of patenting to teachers and students and commercialize the results of patenting.
NCKU Assistant Vice President and Director of the Innovation Headquarters Chuang Woei-jer; Photo by Lee Shu-lien
Figure 1 NCKU's innovative R&D operating model and actual performance 2020
Source: NCKU Innovation Headquarters Dec 2020
Figure 2 NCKU's annual technology transfer exceeds NT$100 million for 12 consecutive years
Source: NCKU Innovation Headquarters Dec 2020
Figure 3 Technical fields and average annual performance of NCKU's main patent applications
Source: NCKU Innovation Headquarters Dec 2020