Kilburn & Strode Partner Dr Marco Morbidini meets Dr Andrea Alunni, Special Adviser to the Executive Director at the European Union Intellectual Property Office (EUIPO), for an end-of-year fireside chat to discuss their common roots, their careers (spoiler alert: with a common denominator, a passion for, and a belief in Intellectual Property), but – more importantly – the increasingly strategic role of tech transfer in Europe, where the commercial use of new technologies is vehemently climbing the political agenda
Marco Morbidini: Hello Andrea, nice to meet you, finally! Please tell our readers something about yourself… from engineering to finance to tech-transfer, the trajectory of your career is quite unique, and it is of course still evolving.
Andrea Alunni: Great to see you, Marco. I would start by saying that my background is in space engineering. I was the first engineer to graduate from University of Perugia, in Italy, in 1990. Then in the 90s, during the investment spree of the telecom companies, I joined the corporate finance function of Telecom Italia; an extraordinary opportunity to work hands-on to create the global communication network we all know about today. Afterwards, I moved to the City of London as an investment manager at Nomura and witnessed the boom and crash of the .com economy, a tumble in my opinion largely due to the lack of intellectual property (IP) at the core of the progressing start-ups. In 2008, I moved to University of Oxford to become their first Head of New Venture Support and Funding, within of course the University’s technology transfer company, Oxford University Innovation (OUI). My experience at OUI gave me a unique window on best practices on the management of intellectual property rights (IPRs) within an entrepreneurial context, for the benefit of institutions, investors, and businesses. I am now an innovation leader, helping institutions – like the EUIPO, in my role as Special Adviser to the Executive Director – to develop commercially successful IP-based companies.
Only 10% of small-medium enterprises (SMEs) in the European Union (EU) – technically defined as businesses employing up to 500 people, or having a turnover of up to 50M, or up to 43M assets in the balance sheet, and therefore usually including start-up and spin-out companies – protect their IP. However, 60% of the SMEs think that they have something they should protect or in any case that there is value in protecting their ideas. Of the 10% mentioned above, 93% think that they received a positive impact from their registered IPRs. The European Commission (EC) has found strategic value in boosting SMEs, because 90% of the EU gross domestic product (GDP) comes from SMEs!
MM: So, we share some ‘firsts’! You were the first engineer to graduate from University of Perugia; I (believe I) am the first engineer to have delivered a dissertation in English at that University, back in 2002. Can small universities (such as our Alma Mater) have the ambition to compete in tech transfer with the big, more international universities, such as Oxford, Cambridge or Imperial in the UK, or the top universities in the USA?
AA: Without any doubts, any universities that fully embrace technology transfer processes, to successfully transform good research into good business, can make it. Nevertheless, such endeavours require a strong research output, to generate sound IP portfolios, plus dedicated Technology Transfer Offices (TTOs) as a meeting point between science and business. TTOs, in turn, demand teams of highly skilled Technology Transfer Managers (TTMs) who understand both the language of science and business, and that of surrounding entrepreneurial ecosystems capable of absorbing innovation and of providing ancillary services. Further, to make any new start-up or spin-out companies viable, it is vital that resources be available at the right time, and at the right level, and be managed efficiently. Therefore, smaller universities across Europe, such as our University of Perugia, but there are of course very many others, in all of the EU countries, can definitely compete in tech transfer.
MM: What needs to change to make smaller universities more relevant in the commercialisation of knowledge, and therefore for tech transfer to become more ‘mainstream’?
AA: They need to boost their research and their TTOs. And, let me add, since tech transfer is all about people, smaller universities may have the advantage of the support from (smaller) local SMEs, which can highly benefit from tech transfer activities in the territory. On the one hand, universities must build closer ties with their local or regional companies to facilitate the commercialization of their research. On the other hand, it is essential that TTOs recruit, reward and retain high-quality TTMs. TTO staff needs to be talented, highly motivated and also ‘motivational’, highly trained and knowledgeable in widely differing and rapidly evolving fields of activity, and they must also be able to effectively mediate between science and business. As you know Marco, TTO people are those who help the parties reach an agreement and conclude transactions in the tech transfer process. And it is when those transactions happen, that innovation happens. Going back to the point we made above about our ‘firsts’, in 2015 I organised and co-hosted the first joint Oxford and Cambridge technology transfer event to raise finance from investors to support IP-based start-ups led by researches from those two universities. All participating start-ups secured funding for their first round. And remember, also linking back to one of the points made above, universities create SMEs by definition (these being their start-up or spin-out companies).
In order to thrive in innovation, smaller universities need to be equally ambitious both in technology transfer and in teaching and research excellence. This means placing much greater emphasis on extracting value from intellectual property. Today the main problem is that the great majority of ideas, whether protected or not, never make it to the marketplace. The reasons for this are as complex and varied as the tech transfer process itself. Yet, the missing links essentially relate to gaps in two areas: the human factor; and, lack of funding for early-stage proof-of-concept, prototyping and demonstration.
MM: Can you give us some numbers?
AA: Looking at the numbers, an estimated 95% of granted patents in Europe (around 3 million) are (commercially) “inactive”. Yet, the effective commercialisation of the remaining 5% of granted European patents brings a contribution of nearly 40% of the EU GDP. So, there must be a way to leverage this opportunity! The numbers speak for themselves.
MM: Thank you, Andrea, I am convinced! More generally, therefore, can we discuss what you think are tech transfer best practices?
AA: The most compelling parameters that determine the characteristics and performances of TTOs are the volume of research activities in the university and the quality of the research results (often based or supported by fundamental research). This is why world-class universities tend to make sure that all new inventions developed are disclosed to their own TTOs. TTOs will then coordinate inventors, patent attorneys and commercial partners throughout the technology transfer commercialization process. Smaller universities in particular, but the big ones alike, will need to stimulate their outstanding scientists to turn their tacit knowledge into valuable patents. The disclosure of ideas (from professors, researchers and students) must be encouraged by their different research departments, colleges and/or institutes. TTOs must build up an IP portfolio to create and manage technology transfer opportunities. Academic excellence is therefore a powerful source of innovation, and this excellence can often be measured by the quantity and quality of patent publications.
Modern universities should have a mission (their third mission, beyond the first two of teaching and researching) to ensure that their discoveries, inventions and new scientific applications lead to useful products and services for the public. A timely emphasis on extracting relevant value from the IP is necessary because it can otherwise become obsolete. Also, universities should be willing to make a long-term commitment to tech transfer. Long-termism has been the greatest factor affecting commercial success. For instance, as new disclosures, patent applications, patents and licence agreements are added each year to the TTO portfolio, cumulatively the chances that a fraction of these will eventually generate significant returns increase. It is widely accepted that technology transfer entails an unconventional timeframe for traditional investment. TTMs suggest that it typically takes five or more years for a technology that is licensed to an industrial partner to result into a marketable product or service. Accordingly, TTOs require seven to ten years to become successful, regardless of how one chooses to measure success. Universities should therefore be prepared to support TTOs for many years.
MM: Looking now at the institutional aspect, what you have just said seems to be fully in line with the plans of the EU to support and promote innovation in the next decades… what can you tell us about this?
AA: Yes, that’s right. The EU is fully committed to supporting innovation and to this effect it has recently taken a number of deliberations and actions aimed at exploiting IP resulting from EU research. This is, indeed, currently at the heart of the EU industrial policy and is embodied by:
the EU Industrial Strategy, highlighting the need to ensure that EU Intellectual Property Policy help to uphold and strengthen Europe’s tech sovereignty;
the Research and Innovation (R&I) Framework Program Horizon Europe, which foresees enhanced IP provisions and an obligation to exploit research project results (including those funded by the new European Innovation Council (EIC));
the European Commission IP Action Plan Communication, adopted in 2020 and aimed at promoting effective use and deployment of IP, especially by SMEs;
the European Parliament Resolution (11 November 2021) on an intellectual property action plan to support the EU’s recovery and resilience to back the European Commission (EC) in pursuing the objectives of its IP action plan.
It is also worth mentioning that the EUIPO will now play a central role within this EU policy context, with the uptake of the Code of Practice on the Smart Use of IP recently developed by the EC under the European Research Area (ERA) Policy Action 7. In fact, the ERA leadership not only denotes the strategic EC determination to target, in this campaign, R&I actors (such as Higher Education Institutions (HEIs), Public Research Organizations (PROs), Research Transfer Offices (RTOs) and researchers) but also yearns to enable the efficient and timely use of IP generated by public R&I funding. It is very recent news that President Ursula von der Leyen visited EUIPO on 9 December 2022. This is the second time that a President of the European Commission visits EUIPO and is testament to the great European commitment to IP that will come in the years to come.
MM: In all of this, we do not only need institutions to play their part, but private capital must be ready too… what are your thoughts on this?
AA: Certainly. As I see it, this is only the start of a long journey to mobilize more capital investment in innovation based on IP. As said before, one the missing links to translate innovation into viable products relates to the gap in impact funding for the early stages of proof-of-concept, prototyping and demonstration. Proof-of-concept (POC) funding is vital to trigger a successful tech-transfer process, but it is also the least likely to attract private finance. Academic research is often viewed as being at too early a stage to attract interest from venture investors or from companies that would develop it further, while conventional public grant schemes rarely support the proof-of-concept research needed to exemplify university technology. Luckily the EIC is addressing this point with clear vision and actions, investing at proof-of-concept level via its three funding programmes: Pathfinder, Transition and Accelerator.
Although the amount of POC funding required is relatively small, from the investor perspective, the risks inherent in the very purpose of POC funding greatly reduce the potential for generating direct returns other than reputational ones. Another common misleading perception among venture capitalists (VCs) is that POC is not an area for private sector-led investment activity, and that a POC investor needs nerves of steel because of the very high likelihood of seeing potential returns evaporate. For this very reason, private investors tend to show high risk aversion toward participating in early-stage funding and consider that holding an equity stake in a start-up or spin-out is a high-risk investment which often leads to a long-term illiquid asset. I believe that building a strong IP portfolio at the core of new venture initiatives is crucial in order to mitigate private capital aversion. VCs are key stakeholders in the innovation process and POC funding can only fulfil their investment purpose when a clear vision between the end-goals and the starting point to achieve them is available. I think that POC funding benefits should be perceived beyond the immediate direct returns, as its potential is inherent in the very purpose of POC funding, as in the longer-term it plays a central role in generating a compelling investment pipeline for Business Angels, Seed investors and VCs, and, with it, opportunities for corporate investment in start-ups and, ultimately, for society. The newly born European Innovation Council Executive Agency for SMEs (EISMEA) has been created to do exactly this: removing obstacles to the creation of benefit to society. On 28 October 2022, EISMEA and EUIPO signed an agreement to assist beneficiaries of Horizon Europe. The two agencies will improve intellectual property awareness and management among innovative companies in Europe in order to help bring high-risk, high-impact technologies to the market. This will start in January 2023.
Under this new agreement, the EUIPO will provide expertise through a service that helps companies identify which intangible assets should be protected and in what way intellectual property can help support business growth. The EIC beneficiaries will also have access to a list of experts that they can contact in case of doubt.
Intellectual property management is important in the context of EU programmes such as Horizon Europe as it touches upon the exploitation and dissemination of intellectual property within project results.
MM: Now that we have discussed in more depth how institutions and private capital can support tech transfer, can we take a step back and crystallise the role of IP in the triangle: laboratory, taxpayer moneys and the markets/capitals? My question, I guess, is: is IP fit for purpose?
AA: Yes, I consider that a well-managed innovation environment finds its foundation on IP protection. However, in the public minutes of the meetings of many boards of directors, governing bodies and investment committees dealing with innovation, the IP chapter is not always discussed, neither clearly addressed nor strategically secured as an asset for investments. This is a missed opportunity, typically arising from the (legal, economic and technical) complexity of the specific matter and (scarce) availability of experts skilled in the subject, which entails high-level know-how and experience not easily accessible. So, some cultural shift is needed.
In this sense, institutions like the EUIPO will play an increasingly important role dealing with IP and raising awareness of the role of IP in the innovation triangle you mention above: research, public institutions and private sector. This is particularly relevant as both the public and private sectors often use Key Performance Indicators (KPIs) to measure the results of their actions. Nevertheless, when it comes to KPIs for effective support to innovation stakeholders, IP-related indicators tend to be confined to commercially oriented output indicators such as invention disclosures, priority patent applications, patents first granted, revenues from IP, contract and collaborative research agreements, spin-offs and start-ups created, with volume of activity and revenue return being the most utilized. However, I think, the impact of innovation activities on economic development requires moving towards a broader assessment, which should encompass wider impact on society, which proposes a balanced scorecard approach to national research and SMEs innovation performance: this should take into account additional factors such as partnership development and project success – a key one being the quality of the relationship, as well as environmental and impact funding factors.
MM: I am sure many businesses only see the petty side of IP – easy-to-gain tax credits and a nice ribbon to wear. Is this ‘unsophisticated’ take on IP still present today? What do we need to do to change this?
AA: The primary aim of my work is to show that a well-structured corporate, SME or TTO can achieve positive financial results from investing in IP in the medium-long term, and that the chances for an IP portfolio management to be ‘in the money’ increases if the business is attached to an entrepreneurial ecosystem. Institutions cannot attain everything on their own, even if some try to do so. Innovation finance should be made available, as it can play an important role in the process by providing immediate support to new ideas which are only defined embryonically in early IP filings. The expertise of venture capitalists, business angels, alumni, industrialists, IP experts and other professionals should be systematically leveraged to identify and nurture the technologies with the highest commercial potential.
I think that it is possible to invest early in SMEs, and that TTOs can also invest early and ‘stay in the money’. IP should never be confined to a marginal role. You do IP because it is the bedrock for finance raising and ingress in the world of business. Patent box systems function ex post. It would be more meaningful to develop tools that work ex ante. It is worthwhile softening a risk before one is taken. In this sense, as an example, the UK Government’s Enterprise Investment Scheme (EIS) seems to be a great tool. Also, the IP should never be valued according to its cost – this is simply barbaric. The value of the IP should be the value of the underlying assets, on which it is possible to transact. Banks should finally all have a new type of finance, innovation finance! Innovation finance should be based on the actual value of the IP as an asset.
MM: We’ve been chatting for some time… why don’t you tell us something that you have at heart, which our readers might find interesting or even inspirational?
AA: Thanks for this question Marco. I think that biodiversity loss is the biggest single negative consequence from environment degradation and that traditional knowledge might provide the key to successful ways of surviving in what could be more hostile natural environments in future, due to climate change. There is growing recognition that traditional knowledge, technologies and cultural expressions are not old, obsolete or maladaptive; they can rather be highly evolutionary, adaptive, creative and even novel! Moreover, tradition often represents the bond strengthening social cohesiveness and communities, and cultural identity. While intellectual property is today’s competitive instrument in global markets, exploiting and effectively protecting traditional knowledge is complex and difficult. Not all knowledge, innovation and creation lend themselves to the existing models of industrial and post-industrial societies, and more specifically the IP system. In this context, the value and usefulness of traditional knowledge in the preservation of natural ecosystems, seeds domestication, production of traditional food, use of alternative medicine and, more recently, biotechnology has been widely recognized. However, there is much debate on how best to protect such a knowledge from biopiracy, considering its multifaceted nature as well as its implications for various policy issues and sustainable development in general.
I hope that our work will help facilitate the emergence of a critical mass of well-informed stakeholders – including decision makers, negotiators from both public and private sector – in order to define an acceptable pathway to sustainable development, that encourages traditional knowledge protection sustained by both IP and non-IP options.
MM: Let’s now end this interview by returning to the topic at hand: tech transfer and its importance. How would you like to conclude?
AA: I would like to conclude our conversation by recalling that, on the occasion of the first EUIPO workshop I organized in 2018, the then Executive Director Mr António Campinos, now President of the European Patent Office (EPO) aptly pointed out that technology transfer is as old as human inventiveness, since it has fuelled human development and innovation across the globe through the millennia, from the Bronze Age to the present. Therefore, a vibrant culture of technology and innovation has always been required to drive economic success, sustained by research. To continue in this path, we need to ensure that the best and most creative academics, inventors, entrepreneurs and also investors, work closely together.
Keywords: intellectual property, tech transfer, Europe, SMEs, universities, research & development, spin-outs, start-ups, innovation, policy, EUIPO, due diligence, investment, EC, EU, EISMEA, EIC, technological sovereignty, commercialization, new technologies