|All Government purchasers of PSRE research
(whether or not from the sponsors of the PSRE) should have as
part of their research mission the explicit objective of transferring
PSRE research outputs to the wider economy; this should be explicitly
reflected in all contracts with PSREs.
PSREs themselves should have knowledge transfer as an explicit part of their mission
The role of PSRE managers
4.9. As with all management challenges, the drive for greater knowledge
transfer needs to be led from the top. Knowledge transfer is best
pursued in an environment that encourages and supports scientists
in their efforts to commercialise their research. PSRE managers have
a crucial role here. They are in a unique position to lead by example,
to instil in their organisation a strong culture that encourages and
rewards commercialisation and to put formal processes in place to
encourage knowledge transfer. Even where much of the effort is outsourced
to a third party, responsibility must lie with PSRE Chief Executives.
4.10. The formal processes that PSRE management need to put in place include:
ensuring procedures are in place for identifying, proactively managing and protecting IP (which may include outsourcing these activities);
recognising commercialisation efforts in both the remuneration and the promotion processes;
recruiting individuals with commercialisation expertise into the organisation or ensuring PSRE staff have access to commercialisation expertise;
developing performance measures and targets against which their knowledge transfer efforts will be assessed; and
ensuring there is training on IP protection and commercial opportunities for PSRE staff.
4.11. PSRE managers are also the public face of the establishment.
It is through the promotion of the PSRE to third parties that an institute
can attract potential collaborators and identify potential areas for
commercialisation. It is also management's responsibility to form
the contacts with industry and other research establishments that
form the building blocks for potential future collaboration.
Reduce risk aversion
4.12. PSREs need not only a commitment to knowledge transfer, but
also permission to pursue it whole-heartedly. However, knowledge transfer
is currently undertaken in a climate which is predominantly risk-averse.
As not all attempts at commercialisation of research are going to
be successful, this culture can inhibit the robust pursuit of commercial
4.13. PSRE managers, their sponsors and funders need to be able to
accept an element of risk in an attempt to transfer knowledge from
the public to the private sector. Given the uncertainty of generating
a return on the upfront costs of commercialisation, PSRE managers
should carefully evaluate risk and balance this with the scale of
the opportunity. This is difficult in the prevailing culture of accountability
for public spending which incentivises risk avoidance rather than
4.14. The Government should encourage well thought through risk taking
as an integral part of the knowledge transfer process. What is required
is an environment that encourages PSRE managers to take decisions
where the outcome, although uncertain, provides substantial potential
upside for the wider economy and the possibility of significant returns
to the PSRE itself whilst explicitly recognising that there is also
a chance of failure.
Risk assessment and public expenditure
4.15. During the course of our study, several PSREs raised questions
over the level of risk the public accountability framework permits
them to take. At issue is a fear among some PSREs of falling foul
of the National Audit Office and the Public Accounts Committee for
investing public funds in projects to commercialise research where
the outcome is uncertain. If a commercialisation project fails there
is a fear of being criticised for misappropriating public funds in
that particular case since auditing is not conducted against a portfolio
4.16. The problems of risk management in the public sector goes wider
than the scope of this review. I was encouraged to see that in the
Modernising Government White Paper, the Government has outlined a
more positive approach to risk. It states:
"The Government is also determined to encourage innovation and share good practice. To do this;
we are working closely with the Public Audit Forum - which represents all the national audit agencies - to find ways of encouraging more modern and effective forms of service delivery at local as well as central level. Auditors are rightly interested in whether organisations obtain value for money. We want them to be critical of opportunities missed by sticking with the old ways, and to support innovation and risk-taking when it is well thought through. We welcome the Forum's statement that the national audit agencies will respond positively and constructively to our Modernising Government initiative. In future, people will no longer be able to use audit as an excuse for not delivering more co-ordinated and efficient services.
4.17. The Modernising Government White Paper also includes a useful
statement from the Public Audit Forum on their approach to auditing
risks incurred to advance innovation.
"Modernising Government represents a significant change in the
public service environment, and its successful implementation will
require new ways of working. The goal of achieving more efficient
and effective delivery of public programmes is one that is shared
between public sector managers and auditors, and the Public Audit
Forum do not want fear of the risks of change to stifle worthwhile
innovation designed to lead to improvements. So we encourage auditors
to respond constructively and positively to Modernising Government
initiatives and support worthwhile change.
"Public sector managers are of course responsible, as stewards
of public resources, for assessing and managing the risks associated
with innovation and increased flexibility, and for ensuring the proper
conduct of public business and the honest handling of public money
while pursuing innovative ways of securing improvements in public
services. It remains important to ensure proper accountability but
this must not be approached in a rigid way that might mean missing
opportunities to deliver better value for money. And auditors will
respond to this new environment positively and constructively by:
adopting an open-minded and supportive approach to innovation (including the use of techniques tried elsewhere), examining how the innovation has worked in practice and the extent to which value for money has been achieved.
in the process, supporting well thought through risk-taking and experimentation.
consistent with their independent role, providing advice and encouragement to managers implementing Modernising Government initiatives by drawing on their audit work in this area, seeking to identify and promote good practice so that experience can be shared and risks minimised.
"In these ways, we believe auditors can support and encourage
worthwhile change, while providing independent scrutiny and assurance,
and fulfilling effectively their statutory and professional responsibilities."
4.18. There is more to be done in developing a less risk-averse culture.
The National Audit Office and the Public Accounts Committee are a
key part of the risk culture. I welcome the statement of Government
Policy Quoted above, but there is a clear need to develop these general
principles in the specific case of knowledge transfer.
|I welcome the movement in Government towards a more mature understanding and handling of risk. Treasury and OST should work with the NAO and the PAC to promulgate a accountability framework for commercialising public sector research that emphasises portfolio risk management and transparency of operation rather than incentivising risk avoidance.|
5. PSRE/SPONSOR RELATIONSHIPS: MANAGEMENT
AND CONTROL OF IP AND FINANCIAL FREEDOMS
Management of intellectual property
5.1. Given the large volume of knowledge generated by research establishments,
and the rapid pace of technological development in the market place,
it is clear that organisations seeking to maximise the economic potential
of their research need to have an active policy for managing and controlling
their intellectual property.
5.2. The value of the knowledge produced is heavily time dependent.
The value of scientific discoveries, no matter how innovative or well
protected, if left undeveloped for too long will be severely depleted
and may be overtaken by the market.
5.3. The management of intellectual property is a complex task that
can be broken down into three steps; identification of ideas with
commercial potential; the protection and defence of these ideas and
Identification of ideas with commercial potential
5.4. All organisations need to have processes in place for identifying
research that has commercial potential. During the study I came across
telling instances in which research institutes had failed to identify
innovative ideas as commercial opportunities which were subsequently
exploited by other organisations. Amongst these are the liquid crystal
display developed at what is now the Defence Evaluation and Research
Agency and the monoclonal antibody technology developed in the MRC's
Laboratory of Molecular Biology in Cambridge. I have no doubt there
are also instances of potentially exploitable ideas the value of which
has never been realised or even identified.
5.5. Highly motivated staff who recognise the importance of commercialisation
are one, very effective, means of ensuring that research with exploitation
potential is identified and brought to the attention of the PSRE's
management. The need to motivate and incentivise research staff is
considered in more detail in chapter 6 of this report. But, to support
this effort PSREs also need formal procedures for identifying ideas
with commercial potential.
5.6. It is for PSRE management to determine the most appropriate procedures for their establishments. I have encountered a range of possible mechanisms that have been adopted, these include:
ensuring scientists, when reporting on the progress of their research, evaluate its commercial potential
ensuring supervisors regularly review the commercial potential of their scientists' research
arranging for technology transfer experts or specialist external reviewers to consider applications for commercial exploitation
ensuring that all articles and presentations of research are submitted to research supervisors or the technology transfer section prior to being made public
outsourcing the identification of IP to a third party.
Protection and defence of intellectual property
5.7. It is well known that once research establishments have identified
research which may have commercial potential they
need to ensure that they have adequate protection for that innovation.
All the research establishments visited during the course of our study
were well aware of the importance of adequate IP protection.
5.8. IP protection is rarely straightforward. When determining how
to protect their knowledge base, PSREs need to think strategically
about current developments, potential competitors, and the potential
the research provides for new products or services. PSREs often need
to find a balance between protecting their rights over a discovery
and maximising their flexibility to develop the technology into a
range of products and services.
5.9. Protecting IP, and where necessary enforcing legal rights is
also expensive. The costs of maintaining a patent are considerable,
and once taken out a patent is only of value if the patent holder
is prepared to defend their property through the courts. There is
little benefit in protecting research outputs where there is no possibility
of deriving revenues from the work streams either now or in the future.
PSREs need to balance the costs and potential economic benefits to
determine the most appropriate IP protection for their research outputs.
Exploiting IP - Control of intellectual property
5.10. There are several factors which favour PSRE managers to retain and control their PSREs IP:
They have a unique understanding of the scientific field in which the establishment works.
They have direct access to the establishment's employees, many of whom have experience of knowledge transfer in the relevant markets (albeit sometimes limited).
They usually have links to relevant industries through various stakeholder relationship, and in some cases their PSREs will be positioned as a research base responding to industry needs.
5.11. Most if not all PSREs contract out some or all of these functions.
The use of private sector patent agents to advise on the technical
legal matters is widespread but some PSREs manage everything else
internally. At the other extreme some PSREs rely almost entirely on
outside assistance from organisations such as BTG plc, while others
have not found this approach satisfactory. Provided the reviewer takes
all opportunities to transfer the PSRE's accumulated knowledge, I
see no reason to recommend one approach over others, the choice depends
very much on the three way fit between the PSRE, the commercial partners
and the exploitation market. There are of course also financial considerations
because these partners may be the most practical means of meeting
the costs of managing and protecting IP. Whoever carried out this
function responsibility for managing the IP must still rest with PSRE
5.12. Yet in several instances I have found that the ability to manage
the IP is seriously compromised. Some PSRE sponsors and other funders
of research stipulate that they should retain title of the intellectual
property and require PSREs to seek their approval during negotiations
with potential collaborators. This can severely hamper knowledge transfer
activities, most notably by causing a delay in negotiating licensing
deals especially if the parent wishes to have a case by case involvement.
This can be further complicated where PSREs need to receive approval
from two or more funding organisations.
5.13. During the study I uncovered at least once instance in which
managers of a PSRE reported that the prolonged approval process had
resulted in a commercial opportunity not going ahead. In another case
a sponsor took so long to consider the licencing of a new technology
that the management of a PSRE decided to proceed without approval
to avoid jeopardising the project.
5.14. Negotiating terms for commercialising research is complex.
A PSRE needs to ensure that the potential of the science is maximised,
and that the establishment is adequately rewarded for its contribution.
The possibility of a large number of potential partners or a wide
choice of potential routes to collaboration mean an establishment
needs to have maximum flexibility and the ability to react quickly
to proposals from potential partners.
5.15. Yet the benefits of sponsors' intervention on each transaction
are unclear. I was not convinced that in general sponsors have sufficient
expertise or resources to add significant value in reviewing a PSRE's
deal by deal commercialisation plans, or indeed to justify this degree
5.16. In forming my recommendations in this area, I recognise that
the Medical Research Council seems to be a case apart. The MRC has
over 35 units researching into medical sciences, many of which have
fewer than 20 employees. Given this diffuse structure, the MRC has
formed a central team to lead and manage the knowledge transfer process.
The technology transfer group in the MRC appears to fulfill this central
role well, and provides its institutes with effective interventions
in commercialisation cases.
5.17. I accept the need to ensure that PSREs remain aligned to their
core objectives and to satisfy themselves that the requirements of
accountability for public spending are properly met. But I question
whether this requires detailed approval of each individual transaction
during negotiations. There is an overwhelming case for sponsors to
cede control of the intellectual property to their PSREs and forgo
their power of veto over commercialisation decisions. Instead PSREs
should be regularly asked to account for their performance against
their commercialisation objectives. Sponsors have an important role
in supporting PSRE commercialisation efforts and ensuring these are
conducted properly. But this is entirely consistent with vesting control
of IP with the PSRE itself.
|There is an overwhelming case for requiring that IP generated by a PSRE be owned by the PSRE and assigned by authority of the chief executive - unless effective alternative arrangements already exist (they do in the case of the MRC - but in no other instances that I have been able to find). The case by case involvement by public sector funders of decisions about the assignation of intellectual property - unless they have specific expertise and support to bring to the table - does not generally seem to add value and can be harmful.|
Financing knowledge transfer
5.18. The typical R&D cycle means that once research has been
identified as having commercial potential it needs considerable effort
to turn the ideas into marketable products and services. At this stage
in the research cycle financing is often required to demonstrate the
commercial feasibility of prototype products or processes.
5.19. If a research establishment is unable to raise the funds to
invest the initial development then there is a risk that the economic
benefit of the research will be lost. This gap in funding is sometimes
called the "development gap". It is beyond the stage which is funded
by research income, but usually before the point at which business
inventors or venture capitalists are prepared to invest. The development
gap is a general problem faced by all research organisations. For
PSRE's however the problem can be more acute because of the tight
budgetary constraints and operating rules under which they operate.
5.20. In addition to the development costs, a PSRE also has to face
the administrative costs of protecting commercialisable research,
negotiating deals, and monitoring the licencing once an agreement
has been reached. As a result many PSREs see the financing of knowledge
transfer as a key constraint. Clearly there is some scope for PSREs
to lever more funds from private sector partners to meet these costs,
but there is more the Government can do.
5.21. Although I recognise that the nature of science funding means
that these budgets invariably allow little room for manoeuvre. It
may be in an institute's interests to invest a small amount of their
own money in ideas or research which thy believe have particular merit,
rather than lose the commercial potential of the research.
5.22. Funders of research should also examine carefully the knowledge
transfer strategy of the PSREs they support. To unlock the value of
the research they have invested in may require funding to be explicitly
directed at knowledge transfer.
|In agreeing future income streams with parent bodies and other purchasers, PSREs should be explicit about the costs associated with implementing a knowledge transfer strategy. Government must be prepared to meet these costs if it wants to give parity of esteem to the knowledge transfer mission.|
5.23. The financing problem is seriously exacerbated for those PSREs,
mostly departmental PSREs, which lack the freedom to maintain and
deploy surpluses. This arises when parent bodies impose strict cash
controls over their PSREs, preventing them carrying over end-year
surpluses, or retaining the proceeds of commercialisation deals. As
a result of such controls PSREs neither can afford nor have the incentive
to engage in commercialisation.
5.24. I identified several PSREs whose financial controls meant they
were effectively unable to benefit from receipts from their commercialisation
activities. This is despite the Treasury's Wider Market guidance which
allows departments and non-departmental public bodies to retain receipts
from commercialisation projects. It is important that these freedoms
are cascaded down to provide incentives to individual PSREs.
5.25. Method of dividing the proceeds from commercialisation between
sponsors/funders and their PSRE should err on the side of generosity
and provide a proper an incentive for the PSRE at all levels of income.
Sponsors should not use these arrangements as a means of clawing back
5.26. Some of the most effective schemes for allocating proceeds
have predetermined rates which allocate income between the PSRE and
the sponsor according to the size of the income. These maximise the
incentives for the PSREs by allowing them to retain the majority of
- if not all - revenue for relatively modest projects, with the proportional
falling as the size of the income increases. These strikes me as the
right approach. Indeed I see no reason why, for moderate levels of
income, a PSRE is not allowed to retain all the proceeds.
5.27. To avoid creating disincentives to commercialisation it is
important to provide incentives at all levels of income. For example
one research council maintain the right to retain all proceeds where
they exceed 10% of a PSRE's recurring income. Although this rule has
not yet been used in practice, it runs the risk of inhibiting very
large commercialisation projects, despite these being the ones that
can have the largest impact.
|Parent organisations should allow their PSREs the full freedoms to carry forward surpluses and retain receipts and other financial freedoms which are available under the Treasury's recent Wider Markets guidance. Arrangements for dividing commercialisation receipts between sponsors/funders and PSREs should err on the side of generosity to the PSRE.|
University Challenge Fund and other Government schemes
5.28. To help address the development gap in universities the Chancellor
announced in the 1998 budget, a challenge fund called University Challenge.
This provided £45m of development finance to be shared by competing
universities who could demonstrate their potential to take their research
closer to market. Funds for a further round were announced in the
5.29. In the first round Public Sector Research Establishments were
able to bid in consortia led by a University, but they were unable
to bid in their own right. I see no reason why PSREs should continue
to be excluded from University Challenge as lead bidder. I believe
that research institutes should be given the opportunity to compete
on merit for access to development finance. The Government should
also consider the scope for allowing PSREs access to other Government
support schemes where this is not already possible. Similarly, given
the importance of demand from industry in facilitating knowledge transfer,
Government should look at plugging PSREs into current schemes which
incentivise industry to exploit research.
|Ministers should examine the scope for extending
the eligibility criteria of initiatives for promoting knowledge
transfer, in particular University Challenge, to include PSREs,
where these are not already eligible.
Given the importance of industry demand as a driver of knowledge transfer, Government should look at the scope for drawing PSREs into schemes which incentivise business to participate in knowledge transfer.
5.30. It may be that issues on financing knowledge transfer can be
addressed from within existing budgets based on the recommendations
above. However I believe there is the potential for modest additional
investment in this areas to reap greater rewards. Therefore I believe
the Government should consider earmarking some additional funds to
meet the costs of knowledge transfer in the PSREs.
|The Government should consider earmarking some additional funds to meet the costs of knowledge transfer tin the PSREs.|
The need for greater autonomy
5.31. In conducting this study I was struck by the contrast between
the regimes governing departmental PSREs and Research Council Institutes.
In the case of the former, the financial controls imposed by the department,
coupled with constraining IP policies, seem to unduly limit the scope
and motivation of the PSREs to engage fully in knowledge transfer.
The rules on the civil service management code (see next chapter)
create an additional barrier for departmental PSREs.
5.32. During my study I have encountered no good reason why departmental
PSREs should remain under such close control of their departmental
sponsors, except possibly for the very smallest ones. I firmly believe
that if these PSREs were put a greater arm's length from Government
departments it would remove them from unnecessary constrains and improve
their capacity to engage in knowledge transfer.
5.33. Providing PSREs with greater autonomy, for example as NDPBs,
would not inhibit their capacity to deliver their primary outputs
since it would merely be putting them in an equivalent position to
research council PSREs and might make create benefits by making the
distinction between purchaser and provider clearer.
5.34. Giving departmental PSREs the status of Non Departmental Public
Bodies ("NDPB") would provide PSREs with the necessary level of autonomy,
however I accept that there are other options which might be appropriate
in some cases.
I strongly recommend that the departmental PSREs be put at greater arm's length from Government departments. Ministers should consider how this should best be done for each of these PSREs, with the presumption in favour of a move to less central control - except where there is an overwhelming case to the contrary.
6. INCENTIVES FOR PSRE STAFF
6.1. Many scientists enter the scientific profession motivated by
their passion for science and their desire to push forward the boundaries
of human understanding. I have been impressed by the commitment demonstrated
by the scientists I have met during the course of my study. For most
scientists the greatest reward comes from the prospect of their work
leading to discoveries which benefit the public ( and from the peer
recognition so derived).
6.2. Scientists' career progression is largely dependent on peer
review and the prestige associated with publication. As already mentioned
in this report, collaborating with the private sector doesn't always
come naturally. The complexities and frustrations of working with
the commercial sector can act as a deterrent to commercialisation,
particularly if the potential rewards are perceived as being insignificant
in comparison with the professional rewards attendant on advancing
6.3. In order to level the playing field and encourage scientists
to overcome the frustrations of collaboration the Government needs
to ensure that the emphasis it now places on knowledge transfer is
translated into incentives for scientists to ensure that they are
recognised not just for conducting excellent science but for exploiting
6.4. There is a broad range of rewards which PSREs can offer their
employees. As well as highlighting and proclaiming strong performances
internally, PSREs are able to provide tangible rewards for commercialisation
by recognising it in their promotion processes and by providing financial
6.5. Rewarding and incentivising staff to commercialise research
should be regarded as an integral part of the process of promoting
commercialisation and an entrepreneurial culture. In the private sector
and in many of the research council's institutes incentive schemes
are now widespread.
|It should be a requirement for PSRE chief executives that they have in place effective schemes for encouraging and rewarding the participation of scientists in knowledge transfer activities.|
6.6. During the course of my review I found several examples of schemes
in which the PSREs share with scientists the financial income from
commercialisation work. Below is a table of an award to inventors
scheme operated by one of the research councils which provides the
inventor with a proportion of the receipts. The scheme operates on
a sliding scale, designed so that the proportion paid to inventors
falls as the level of income rises as shown below.
Income from commercialisation Proportion paid to inventor
Gross receipts - the first £1,000 100%
- from £1k to £50k 20%
Net receipts - from £50k to £500k 10%
- from £500k to £1m 5%
- over £1m 2.5%
6.7. This scale cannot be universally applied to all PSREs as the
income ranges and the incentives given to scientists would need to
take account of each PSREs potential to commercialise research. But
the key features of the scheme have broader applicability. It provides
significant incentives, even for relatively small commercialisation
projects, while ensuring, for highly lucrative commercialisation projects,
that there is an incremental incentive for scientists to generate
6.8. Selecting a financial incentive scheme for each PSRE is not
straightforward. There is a balance to be struck between on the one
hand providing scientists with insufficient reward to encourage knowledge
transfer and on the other hand distorting PSRE's behaviour to the
detriment of the PSRE's mission or research programme.
6.9. Central Government has a part to play in this. The Office of
Science and Technology's oversight of science expenditure in the UK
and its close contacts with the scientific community make it well
placed to gather information on the incentive schemes currently operated
in Universities, PSREs and the private sector and to develop an understanding
of good practice.
|OST should help to exemplify and promote best practice in providing scientists with incentives for knowledge transfer including in respect of equity and share options.|
THE CIVIL SERVICE MANAGEMENT CODE
6.10. For staff of departmental PSREs, arrangements which offer financial
incentives as a reward for commercialisation work can constitute a
breach of their conditions of employment. At issue is clause 4.3.8
of the Civil Service Management Code which stipulates that civil servants
"must not use information acquired in the course of their work to
advance their private financial interests".
6.11. The current interpretation of the code tends more towards a
position that civil servants must not under any circumstances make
profit from private ventures deriving from their Government work while
they remain in its employment. This effectively rules out certain
forms of direct participation by serving Government scientists in
the commercial exploitation of their research, in particular receiving
equity or share options.
6.12. I believe the application of the code needs to be revised in
the interests of furthering the Government's objective of encouraging
knowledge transfer from PSREs to business. As currently applied, the
code misunderstands the nature of intellectual property and perpetuates
an inconsistent approach to knowledge transfer across the public sector.
The Nature of Intellectual Property
6.13. It is clearly important that civil service propriety is maintained
and is seen to be maintained. Civil servants should not benefit privately
by virtue of their position, by trading inside information for example.
This is what the code, in my reading, seeks to prevent. But entrepreneurial
scientists are not exploiting their position. They are exploiting
their own skills, experience and know-how as applied to and gained
from their work. Where this is the case, and where there are wider
benefits to be secured, such activity should be encouraged. It seems
to me that scientists exploiting their know-how are a distinct category
that should be recognised by the code.
6.14. It seems to me that there is some precedent for this in legislation.
The rights of employees to be compensated for inventions of outstanding
benefit to their employer were recognised in the Patent Act 1977.
Under section 40 of the Act, employees may appeal for compensation
to be paid by the employer. In addition section 42 states that the
rights for employees' apply equally to Crown employees and cannot
be diminished by terms of a contract.
6.15. Universities play a key role in innovation and technology transfer.
Many now recognise academic freedom to exploit intellectual property
and in some institutions, the individual ownership of IP. Now, because
of the close links which exist between universities and agencies such
as NHS Trusts and Research Council-funded institutes, these arrangements
are being replicated to some extent in these public sector bodies.
6.16. Underpinning this development in policy is a recognition that
creating incentives for knowledge transfer is beneficial both for
the advancement of science and for the economy. The current position
in departmentally funded institutes covered by the civil service management
code is inconsistent with the approach permitted in PSREs (often pursuing
similar kinds of science in furtherance of similar Government objectives)
which are NDPBs. This anomaly is difficult to defend. It also seems
unlikely to lend itself towards the retention, in the public sector,
of the best and most commercially oriented scientists.
6.17. The Government has started to recognise the need for change.
In the Modernising Government White Paper 1998 it refers to the need
to take a "more creative approach to financial and other incentives
for public service staff, including a commitment to explore the scope
for financial reward for staff who identify financial savings or service
6.18. It goes on: "Government departments and agencies will introduce
schemes which reward staff with a sliding scale percentage of any
savings or improvements made as a result of their suggestions. We
will create positive incentives for success at all organisational
level too. So we will look for new ways of rewarding organisation
performance and success-sharing, for example by using team bonuses
or by linking pay, bonuses or other rewards to the achievement of
performance or efficiency improvements."
6.19. For departmental PSREs putting this into practice in the knowledge
transfer context requires clarification of the Civil Service Management
6.20. The current approach effectively rules out Government scientists' personal participation in commercialisation activities. A more mature approach would be one which allows such behaviour subject to defined conditions which protect the public interest. The Civil Service business appointments rules provide a good model here. These rules do not forbid civil servants to take business appointments - they provide guidance on the circumstances in which civil servants are required to obtain approval and how this should be sought. In a similar vein, civil servants should not be forbidden from making personal gain from commercialising research, but be able to gain approval subject to defined conditions being met, including the requirement for propriety.
6.21. The relaxation of the code need not compromise existing standards
of propriety. On the contrary, it could help to clarify the required
standards by putting a greater onus on research establishments to
put in place active approval mechanisms. In universities and other
public sector institutions not bound by the code, I already have practical
examples of how this can be achieved.
6.22. Relaxing the Civil Service Management Code will be possible
only if the important issues set out above can be squared with the
requirements of propriety. It will require a set of workable rules
or institutional arrangements. I suggest the following:
6.23. Serving Government scientists can participate in commercial activity provided that:
it is reasonably clear that the activity will contribute to the aim of developing and exploiting intellectual property, to the wider benefit of the economy;
the Crown has an appropriate share of the ownership of the IP, reflecting its investment in creating and developing the asset;
the scientist concerned had a key involvement in the underlying research and their continuing involvement is important to the likely success of the commercial venture;
others who played a significant role are appropriately rewarded;
an informed view has been taken on the most appropriate route to market for the product/process in question;
the PSRE has taken a collective view of the probity of the arrangements.
|As an immediate priority Ministers should review the application of the civil service management code to the special circumstances of science commercialisation. The effective bar on certain forms of direct participation by serving Government scientists in the commercial exploitation of their research - in particular receiving equity or share options - should be removed. The principles that apply should be the same as the business appointment rules for civil servants: personal gain should not be outlawed; rather it should be permitted subject to having proper systems in place for ensuring the probity of the proposed commercialisation arrangements.|
7. ACCESS TO COMMERCIALISATION EXPERTISE
7.1. I have already recommended that PSREs be given ownership and
control of their intellectual property and greater financial freedoms
to commercialise their research. But PSREs also need expertise in
commercialisation. Although there are several cases where PSREs have
successfully managed to commercialise research without access to commercialisation
expertise, such expertise can often prove invaluable. The benefit
of experience can often help develop coherent strategies and avoid
potentially costly mistakes. This was a clear theme that emerged in
7.2. Lack of experience has meant several PSREs have had to learn
lessons the hard way. Cases of publishing research findings before
the potential for commercialisation had been explored are common,
and most PSREs have learned from this. In a more recent case a PSRE
licenced some of its technology, but regretted not taking a more strategic
approach to technology transfer when it established a spin-out company
in direct competition to the licence holder of its technology.
7.3. Commercial pressures from third parties increase the need to
avoid mistakes. In recent negotiation over a consultancy agreement
for a small proportion of a scientist's time, experience helped a
PSRE identify and remove an unreasonable clause in the agreement.
Had it not been spotted it would have resulted in the commercial partner
having ownership rights to all the intellectual property produced
during the lifetime of the scientist.
7.4. Organisations in the public and private sector are increasingly
recognising the value of commercialisation expertise and there is
strong demand for individuals who have a scientific background and
practical experience in commercialising research. It isn't simply
advice and encouragement that is required but also deep private sector
skills associated with originating the prospects, helping to develop
the business case for potential relationships and providing hands-on
commercial support during the negotiating phase. Such individuals
are however in short supply. For PSREs which tend to perform unique
research in specialist scientific fields this skills shortage can
be particularly acute.
7.5. The specialist nature of many research establishments and the
considerable knowledge and experience of all PSRE managers means they
are in the best position to determine the appropriate level and source
of commercialisation expertise that their institute requires. I see
the prime responsibility for ensuring that the PSREs have access to
appropriate knowledge transfer expertise lies with the PSRE's CEO.
|PSRE chief executives must ensure that they have access to the skills and experience they need for knowledge transfer.|
7.6. This is not to say that PSREs have to do everything in-house.
As noted in Chapter 5 there is no one approach for accessing and deploying
the necessary range of skills for knowledge transfer. Some bodies,
most notably the MRC, seek to retain all necessary expertise in-house,
but have difficulty retaining staff once they have developed commercialisation
expertise. Larger PSREs (or consortia of PSREs) might be able to justify
recruiting in-house specialist teams, but in most cases the costs
of doing are likely to be disproportionate to the scale of the commercialisation
opportunities. Government's main concern should be to ensure that
PSREs are able to get access to the expertise they need, whether or
not this is retained in-house.
7.7. One consequence of the strong demand for commercialisation expertise
is that individuals with relevant experience command high salaries.
Public sector pay constraints, however, can mean that neither PSREs
nor their sponsors are able to attract and retain the most skilled
individuals. This is despite the considerable impact the expertise
could have on those institutes with considerable potential to generate
income from their research. As the costs of employing commercialisation
expertise comes from within their budgets, PSREs already have a strong
incentive to ensure that recruited expertise achieves value for money.
Given the potential impact that such experience could provide the
Government should consider improving flexibility of PSREs to attract
and retain commercialisation expertise. This may include greater use
of short term and part time contracts.
|Government should seek to improve the flexibility of PSREs to pay market rates to attract and retain people with commercialisation expertise.|
7.8. The shortage of relevant skills and the difficulties associated
with recruiting and retaining expertise means there are substantial
benefits to be achieved from partnerships which allow PSREs to share
knowledge transfer resources. In particular where research establishments
(including higher education institutes) have experience of commercialisation
there is clearly scope for sharing skills which are common to most
commercialisation activities such as legal advice, understanding of
commercialisation routes and generic business and marketing advice.
Where skills and experience are more specifically tailored to discrete
areas of science or industry, partnerships are more difficult, but
by no means impossible.
Support from sponsors and central Government
7.9. As the bodies coordinating several research organisations sponsor departments and research councils should where necessary ensure that PSREs have access as necessary to the commercialisation expertise they require. There is a broad range of measures that sponsors can take to ensure access to commercialisation expertise. These include:
establishing networks for their institutes and other research organisations to share experience and best practice on commercialisation activities
providing regular training courses to increase awareness and knowledge of the most appropriate commercialisation techniques for their institutes
where sponsors have several smaller research establishments, or where the nature of the skills required is common across many of the institutes it may be appropriate to establish a central commercialisation capability that is able to advise and support on issues which are generic to all their research institutes. As noted earlier, this model has worked in MRC. Elsewhere I have not been convinced that sponsors have the same degree of expertise to allow them to act other in the same way as MRC does. But nonetheless there is considerable scope for them to act in a broadly facilitating capacity.
Sponsor departments and research councils must where necessary
support their PSREs in gaining access to relevant expertise, and they
should promote a consortium approach to knowledge transfer where this
is most likely to achieve critical mass of activity and economies
7.10. Central Government could also have a role to play in ensuring
PSREs have access to relevant expertise. Clearly it would be impractical
for the Government to attempt to provide detailed commercialisation
expertise which is directly relevant to all the areas of science and
industrial applications covered by the PSREs. But I see a role for
a small central expert unit, perhaps located in the Treasury, which
is capable of providing advice and expertise in defined circumstances
for example for larger and more complex deals. This unit could help
drive forward and monitor progress with PSRE knowledge transfer more
generally. Such a unit could initially be given a life of say two
years, after which time its value is reviewed.
|Ministers should consider creating a small expert unit within central Government to drive forward the knowledge transfer agenda - and provide advice, help and encouragement to PSREs and their sponsors on knowledge transfer - particularly in relation to larger and more complex deals.|
7.11. Networks are perhaps one of the most effective methods for
establishing contacts and exchanging information. They bring together
institutes and individuals with a common interest and provide an excellent
forum for sharing best practice and making introductions to people
who can be later called on for advice. A network may also provide
the opportunity for two establishments to gain synergistic benefits
from working together.
7.12. A strong example of this is the Biosciences Network which brings
together on a regular basis the eight BBSRC institutes and the Horticultural
Research Institute. This provides a good forum to learn the experiences
of others and benefit from their expertise.
7.13. I would urge more networks to be established among PSREs and
with the broader academic community. These could be based around industrial
groups, organisations with similar science interests or common funders
of their research. It seems to me that PSRE sponsors, particularly
those which support a family of PSREs, are best placed to take the
|Sponsors of PSREs should encourage the development of networks among PSREs for sharing best practice in knowledge transfer and to promote synergies.|