TORONTO — University of Toronto-based satellite company SFL Missions is suing the institution, claiming it derailed plans to spin out from the university, causing “irreparable harm” to its business. 

In a claim filed with the Ontario Superior Court of Justice Commercial List last week, SFL Missions alleges that U of T violated a deal to separate the company from the university so it could operate independently. The satellite firm claims U of T failed to sign off on key aspects of the agreement, such as intellectual property licensing, denied it access to a specialized R&D facility and refused to share “tens of millions of dollars” in surplus funds the company generated while working out of the university.

The company claims that the stalled spinout has jeopardized its contracts and threatened its viability, and that damages could exceed $150 million. 

The University of Toronto has not yet filed a statement of defence and none of the allegations have been tested in court. 

U of T media relations director Philippe Devos said the university disagrees with the allegations and intends to defend against the claim.

“We are acting in a fair manner that is consistent with our academic mission and our responsibilities as a publicly funded post-secondary institution,” Devos told The Logic. “The university has a long-standing record of supporting faculty innovation and successful spinouts. We hope SFL Missions will be another one of these.”

SFL Missions has operated out of the university’s Institute for Aerospace Studies since 1998, when it was founded by Robert Zee—then a professor in the department—as the Space Flight Laboratory (SFL). The lab, which is still led by Zee, was designed to give aerospace engineering students hands-on experience building spacecraft. Since then, it’s become a commercially successful business and has designed and sold dozens of satellites for customers worldwide. 

The lab operated out of a facility on university-owned land, which U of T built with a $10 million grant from government and private capital, according to the claim. The site was equipped with specialized infrastructure to build and test satellites. 

The company claims that, in early 2024, U of T proposed spinning out the business after the university became “uncomfortable with the commercial aspect of SFL’s operations, and the substantial profit” it was generating. 

The company’s claim says Zee agreed to form a standalone entity and incorporated a new company named Missions in December 2023. Missions claims the two sides signed a “framework agreement” in May 2024 that outlined how the separation would work, with a target completion date of June 30, 2025.

In court filings, Missions claims that under the agreement, it would contract directly with customers while continuing to use the university’s facilities during a transition period. The arrangement would let Missions keep producing satellites uninterrupted while it finalized the spinout agreement with U of T. 

The company claims the deal began breaking down in late 2024 when U of T stopped accepting new work orders from Missions’ customers. It claims the university denied it access to its specialized facility, leaving it unable to complete existing contracts on schedule and exposed it to “irreparable” financial and reputational damage. 

The lawsuit also claims that Missions relied on the university’s commitment to share the millions the company generated, and took on “significant risk and expense” expecting to receive the money. 

The lawsuit also describes disputes over inventory and staffing, alleging that U of T hasn’t signed agreements that were meant to be finalized last summer. 

Neither Zee nor lawyers representing Missions responded to The Logic’s questions about its claims, including details about the alleged surplus funds and the contractual obligations of the spinout agreement. 

It’s typical for public universities, which are non-profit organizations, to spin out research-based entities as independent companies once they become commercially viable. More than 650 companies have been launched out of U of T, according to the university’s website, including drug-discovery company Deep Genomics, chemical manufacturer CERT Systems and autonomous vehicle startup Waabi. Missions’ trajectory is seemingly no different. It trained students and delivered satellites to paying customers. “Unfortunately, there are disagreements about how this spinout should proceed,” said Devos. 

Missions is asking the court to order U of T to complete the spinout on the terms it claims the university previously agreed to. Alternatively, the company is seeking financial compensation for damages it says exceed $150 million.