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Business Commentary University of Waterloo case highlights holes in Canada’s university innovation ecosystem

Professor of Law, University of Windsor and Senior Fellow, Centre for International Governance Innovation

In a dispute over patents, the University of Waterloo recently took legal action against an on-campus startup trying to commercialize a battery that could store power longer and more safely than standard lithium-ion batteries.

The university seeks a declaration that it owns patents which the students claim as theirs. The students invented the technology in a lab partly funded by an agreement between UW and an industry partner which gave UW ownership of the intellectual property generated from that funding. For their part, the students obtained the patents with help from the university’s campus incubator. In other words, UW, through its incubator system, helped its students patent an invention that it simultaneously claims to own. An e-mail from UW’s director of research partnerships, referenced in a Globe and Mail story about the dispute, describes “a hole in our process.”

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These holes are more like chasms and not just at University of Waterloo.

Without judging the merits of this case – a court will decide based on the particular facts – it is hypothetically possible for both UW and the startup, Salient Energy, to have acted legitimately and fully within the scope of UW policies and practices: It’s just that the policies and practices were not aligned. Similar situations arise across Canadian universities because of systemic disconnects within the campus innovation ecosystem.

Universities are increasingly encouraged to become “entrepreneurial” by commercializing intellectual property through technology transfer offices (TTOs) and transforming students into entrepreneurs through campus business incubators. There is a fundamental incompatibility between these two functions.

Through TTOs, universities are expected to generate revenue through IP ownership and licensing. They are also encouraged to secure funding through public/private partnerships. While these partnerships address IP ownership issues between the contracting parties, the funds often flow to labs that rely on multiple funding sources and involve students acting in many different capacities. In these circumstances, determining who owns what is complicated and universities have not been able to structurally manage these intricacies or their ripple effects.

The on-campus incubator system operates under a different set of assumptions. Here, the university is more hands-off, making no claim to IP but offering instead educational and other resources to support students in their business ventures. Reputational and financial benefits accrue to universities through the successes of their student startups, including whether these startups own IP.

Entrepreneurial students are often entirely dependent upon these incubators, which provide them with business skills, mentoring and access to potential investors. However, although incubators offer commercialization assistance, they do not generally provide start-ups with independent IP legal advice, leaving students particularly vulnerable in matters relating to IP ownership. The university treats them like independent actors, operating at arms’ length and with sufficient expertise to make informed IP decisions. Nothing could be farther from the truth. Not only are they disadvantaged because of the absence of independent legal advice, they are dependent on the institution for their grades and degrees.

University IP policies offer some guidelines, but there are holes here as well. First, not every Canadian university has a comprehensive IP policy. Of those that do, most are not student-centred in that they do not explicitly redress the systemic power imbalances. Even when they are student-centred, those policies aren’t necessarily always implemented or systematically applied. Further, whether IP policies are even legally binding on students remains an open question.

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Postsecondary stakeholders need to have a thoughtful debate about what an entrepreneurial university should look like within a publicly-funded system. As an institution of higher learning, a university’s mandate is to advance knowledge and disseminate it widely, and that includes providing education and resources to support student entrepreneurial activities.

However, this role collides with the other dimension of the entrepreneurial university which, through funding agreements and performance metrics, is incentivized to capture, for itself, the commercial value of the ideas generated on its campus. Universities must actively recognize this disconnect and do more to ensure that their TTO and incubation functions are properly aligned. Litigation is never a good option.

While the recent National IP Strategy goes a some way toward helping student startups by making IP education and IP legal clinics budgetary priorities, these initiatives will not be sufficient on their own. Federal and provincial policy-makers must a better job of ensuring that their various postsecondary innovation and entrepreneurship policies and funding programs cohere and do not inadvertently create conflicting institutional structures. Perpetuating an environment in which universities directly compete with their students over IP is simply not a good way to go.

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