HALIFAX — Canadian universities spent $4.5 billion on research and development in 2018, but generated only $54.4 million in licensing income from their intellectual property that year, according to a new report.

The income amounts to a return on investment of about 1.2 per cent, down from 1.3 per cent the year before, despite a drop in research funding. Universities also reported a substantial drop in new innovations, despite a rush of new startups. 

The findings from AUTM, which monitors commercialization from academic research in Canada, offer new details on the conditions at research institutions leading up to a string of recent public- and private-sector programs meant to address the dearth of revenue from publicly funded research in Canada. 

The 32 research institutions that participated in the survey reported a substantial decrease in the number of new commercial products spun out from their research, from 85 in 2017 to 50 the following year. While the number of new U.S. patent applications generated from that research increased slightly, from 759 to 878, there were nearly 100 fewer invention disclosures—the prerequisite to a patent application—suggesting an increase in licensing income may be years away. 

Overall funding for university-based research, including at research hospitals, was less than $6.1 billion in 2018, down $92 million from the year before. Most of the deficit came from a drop in federal funding, from $2.4 billion in 2017 to $2.3 billion the following year. 

The gap between university research funding and the commercial income institutions generate from those funds has long been a point of tension in Canada’s innovation economy. While Canada ranks among the top 10 countries for supporting innovation through means like funding R&D and venture capital support for startups, it lags its peers when it comes to commercializing its IP, according to the 2020 World Intellectual Property Organization report. 

“Canadian research institutions have little to no innovative economic activity, and it’s clear from this report that they’re not doing innovation,” said Jim Hinton, an intellectual property lawyer based in Waterloo, Ont. Hinton said the slight increase in patent application says little about the potential to generate more licensing income in subsequent years. “Often universities file patents and then give up on them long before the market is ready for them, because the technology is very forward thinking, and they don’t have the budgets or the wherewithal to sit on them longer to be able to benefit from them,” he said. 

Governments and institutions have recently begun trying to address the mismatch between Canada’s spending on R&D and the relatively little revenue it generates from those investments. In 2018, the federal government established an $85.3-million intellectual property strategy meant to get Canadians to generate more patents and royalties from their inventions. The initiative has had a slow start, so far committing just $30 million of the budget to the Innovation Asset Collective, a four-year pilot project that officially launched in December 2020. The non-profit, co-founded by Hinton and chaired by former BlackBerry executive Jim Balsillie, will acquire patents for cleantech firms to license, and help them generate more IP through education and funding. 

Some provinces are also considering ways to improve returns on their R&D investments. In July 2020, the Ontario government announced plans to revise the mandates of post-secondary institutions and startup hubs, like Communitech and Toronto’s MaRS Discovery District, to place more emphasis on turning publicly funded research into revenue-generating products. The team leading the action plan, led by Balsillie, is tasked with working with post-secondary and research institutions to create commercialization mandates and improve overall IP literacy in the province through an IP curriculum. The government has so far budgeted $1.5 million for the initiative. 

In B.C., the new minister in charge of innovation, Ravi Kahlon, plans to develop an IP strategy to help companies in the province commercialize their products. 

Hinton noted that improving commercialization requires an update in universities’ mandates to include economic returns for research that’s being funded. “There are two principal objectives for universities in Canada: education and fundamental research,” said Hinton, whereas other countries like Finland have three objectives: education, fundamental research and economic development. “It has to come through their funders and provincial and federal funding mechanisms to say, ‘You guys can’t just sell billions of dollars of research for pennies and think that that’s acceptable.’” 

The University of Saskatchewan topped the AUTM list again in 2018 for most licensing income from its IP. The school generated just under $17 million in revenue, down from $18.5 million the year before, though still at least nearly double the licensing income of any other Canadian university. USask attributes a large share of its IP income to income to a vaccine for a virus found in pigs, which researchers at the school discovered in the mid-1990s. The University of Toronto ranked second, with $9.1 million in licensing income, followed by McMaster University with $7.1 million. The University of British Columbia, which spent the most on research and development, filed more new patent applications than any other institution, at 81. UBC ranked second after McMaster for total licences, of which it owns 85.

While the AUTM report shows an steady increase in the number of startups created at universities over the years—from 81 in 2014 to 119 in 2018—Hinton said the trend is removed from institutions’ ability to generate income, as seen by stagnating licensing income over the past decade, even as the number of startups surged. Universities are also stretching research dollars further, producing 1.45 new patent applications for every $10 million spent, compared to 1.24 new applications for every $10 million the year before. And tech-transfer offices (TTOs) are now far more likely to secure non-exclusive patents than exclusive ones. “TTOs are getting more creative, branching into areas like data and software,” reads the report. 

Despite what he sees as a low innovation productivity at Canada’s universities, Hinton said maintaining funding levels is key to helping them do better. “Universities have got to be encouraged and supported to reorient,” he said, “and that comes through funding.”