An interesting item from my hometown, last week: the University of Manitoba is starting to license technology for free.

I exaggerate slightly.  What they appear to be doing is issuing technology, licensed for a percentage of the future net revenue, rather than for an up-front fee; the cost only kicks-in once the company starts making money.  U of M describes this arrangement as unique; but while this specific legal arrangement may be so, it’s actually part of a broader and under-reported trend taking hold in Tech Transfer.

When Tech Transfer offices opened at Canadian universities in the 80s and 90s, it was almost always with an American model in mind.  Following the adoption of the Bayh-Dole Act of 1980, and the astonishing success of university spin-offs like Genentech, universities everywhere started to believe that their own laboratories held untold riches, if only they could work with companies to commercialize them.

But commercializing technology is tough.  Really big companies who could go to town with some university-developed knowledge have their own development processes – it takes a discovery of exceptional magnitude to attract their attention, and to get them interested in dealing with all the hassles of patenting and licensing.  Smaller companies are easier to attract because they don’t have big R&D programs of their own, but they frequently don’t have the scientific, technical, or marketing wherewithal to get a product successfully to market.

To get big returns from a patent portfolio requires a local innovation ecosystem, with large numbers of entrepreneurs who have experience in science and technology firms, and a venture capital industry which understands S&T.  A number of US cities boast that kind of environment; in Canada, it’s a lot harder to find communities that fit the bill: outside Toronto, Waterloo, and Vancouver they’re in awfully short supply.  This is one of the main reasons Canadian attempts at commercialization over the past decade have been disappointing.

So, universities really have three choices: they can get out of the patent/licensing game, they can resign themselves to meager returns, or they can go out and create these communities themselves.  This last option is, in a sense, what places like UBC have done over the past couple of decades.  It’s a strategy that requires paying it forward (or, in newer management-speak, it means engaging in more “invisible handshakes”, as per Meyer & Kirby’s new book, Standing on the Sun, from HBR) – basically, doing whatever is necessary to create that external business community.  If that means foregoing profits in the short term, so be it; in the long run, it’s worth it.

So good-on Manitoba.  It’ll still take decades to reap the benefits, but there’s no time to start like the present.