EVOLVING INTELLECTUAL PROPERTY REGIMES IN
TURKEY AND UNIVERSITY INVENTIONS:
THE NEW ARTICLE 6 OF THE PATENT LAW AND ITS
IMPACT ON UNIVERSITY INVENTIONS
By
Omer HIZIROGLU, CLP-General Manager Inovent Corp.
In collaboration with Iclal ARGUC, Technology Transfer
Specialist, Sabanci University
When it
comes to technology transfer activities Turkey is really not on the map, yet. Lately,
Turkey’s dynamic economy is attracting a lot of international attention with a financial
sector that is stronger than ever in a Europe that is struggling with economic
crises. Nevertheless, delays in the
judicial and legislative processes, weak intellectual property protection and
low R&D spending may impede the Turkish government’s ambitious target to
take place among the top 10 economies in the world by the year 2023. Recently, Turkish government has become aware
that in order to build a long term sustainable growth and build its competitive
edge, technology is a must .Thus, among other government driven initiatives some
key measures have been taken to strengthen university research and the current laws
on intellectual property. However, these initiatives while worthwhile and necessary
do have some short comings and present few challenges for the technology transfer
and IP professionals.
In leading
knowledge based economies, universities have been an important source of new,
innovative technologies and products. While whether universities should stray
from basic research and education to applied research and commercialization
avenues is an ongoing debate the fact that is universities contribute a great
deal to technological innovation and to new products hitting the market via
their spinoff or licensing activities. Some well known examples coming out of
university research[1]
that changed the market range from Gatorade, CAT scan, LCDs, to your run of the
mill large multinational powerhouses such as Google and Yahoo.
In 2011, US
universities took the first four places of the top five among universities with
the most PCT applications published, with 583 applications in total for the top
four. Incidentally, the fifth university is the Korea Advanced
Institute of Science and Technology with 103 applications[2].
Turkey is currently considerably behind with regards to university originated
inventions being commercialized. Change, however, is on the horizon for those
stakeholders with some vision and patience. Three government incentives in
particular should be noted: the revision of the Decree Law 551 (“DL 551”) on
patents that contains important changes regarding inventions made within
universities, TUBITAK’s (The Scientific and Technological Research Council of
Turkey) new grant 1513 to promote the creation of technology transfer offices
(“TTO”) within universities, PROs and research or technology parks, and finally
the publication of Turkey’s top innovative and entrepreneurial universities
index by Ministry of Science, Industry and Technology (“MSIT”).
Currently, out of 170 or so universities in Turkey, less than a handful
has a dedicated technology transfer office (“TTO”). Of those, Sabanci
University is leading the pack, having being engaged in technology transfer and
commercialization activities since 2005. We should also note the substantial
advances made in the recent years by other universities, in particular METU
(Middle East Technical University), a public university leveraging its huge
academic resources and the knowhow of its academicians, coming up with very interesting
inventions and the efforts of its TTO to commercialize resulting patents are to
be recommended. Bosphorus University and
Ege University (EBILTEM Program) have also made substantial progress in this
regard. A relatively younger university, Özyeğin University has also made an
important impact in a very short time span, not so much in technology transfer
space but in its focus on entrepreneurship with the launch of very successful
“Startup Factory” within the university supporting early stage entrepreneurship.
Those other universities with a dedicated TTO are engaged more in project
management and industry liaison type of activities: trying to build a more
robust industry sponsored project portfolio, often leveraging government or EU
grants. While these efforts are worthwhile, technology transfer in the sense of
licensing university technology to industry is almost none-existent and
certainly not the priority for most university administrators or for that
matter industrial partners. At the risk of oversimplifying the issue we can
point to two main reasons: i) universities, for the reasons to be explained
below, have no IP portfolios that can be monetized by way of licensing; and ii)
industry has yet to see Turkish universities as a potentially important and
viable source of core commercial technologies.
While there is no verifiable data, it is not surprising that Sabanci
University is the only Turkish university, know to the authors that has
licensed technologies to industrial partners that are in fact generating royalties.
This general picture is, however, grossly misleading regarding the
innovative potential of Turkish universities. Indeed, while most universities
are not engaged in TTO activities, there are an unknown number of patent
applications filed by professors independently from their universities. One
reason for this is that current DL 551 still has what is known as “professor’s
privilege” in its article 41, referring to an exception to employee inventions principle
that allocates the ownership rights of employee inventions to the employers,
provided that such inventions were a result of the employee-employer
relationship. Thus, until the new draft on the DL 551 is adopted, inventions
made within universities belong to the professors and not to the university. The
other reason for almost non-existent patent portfolios within universities or
commercialized university originated products is that IP rights have never been
a strategic consideration for most universities, especially within state
universities despite considerable accumulation of knowledge and brain power
that these universities can rely upon to launch a very successful technology
transfer activity.
Three separate government initiatives that will impact commercialization
activities within universities are elaborated more in detail below.
1) Revisions to the Patent
Law (Decree Law 551)
The new draft patent law has been in the pipe line for a long time and
does indeed contain important revisions (thus cause for debate) most of which
are beyond the scope of this paper. The text is currently in from of the
Turkish Parliament and is expected to pass this summer.
Among the most critical changes contained in the text is the removal of
the exception to employee inventions for academic inventions at the
universities (the so called “Professor’s privilege”), modifying the current article
41 of the DL 551.
New article 6 in the draft text states in its pertinent part that for
inventions resulting from scientific research at higher education institutions
shall be subject to the provisions regarding employee inventions.
The inventor is required to submit an invention disclosure form to the
university and the university has to elect in a timely manner (as specified in
a separate regulation) whether to retain ownership rights on the invention. In
the event the university elects to retain the rights, the university has to
file for a patent protection. If the university elects not to retain ownership
rights or does not file for protection within the term specified by the
regulation, the invention then becomes a free invention and inventor is free to
apply for a patent protection in his or her name. If, at the time inventor
submits the invention disclosure form, a patent application has already been
filed by the inventor, the university can ask Turkish Patent Institute to be
registered as the applicant.
The university may elect not to claim ownership rights and propose to
assign the application or the patent to the inventor. In such an event,
university may chose to reserve a licensed right to use and exploit the
invention. This license however cannot be exclusive and the university is
required to pay the inventor a reasonable license fee.
The new article 6 also touches upon the potential revenues generated by
the invention in the event of successful commercialization of the invention by
the university. The university is required to allocate at least 1/3 of the
total revenues to the inventor. What is considered “revenue” is however not
defined by the lawmaker. It is also not clear whether the university take into
account patent prosecution cost before determining the net revenue generated. This
begs to question on what will happen if the university’s TTO elects to pursue
alternative methods of revenue generation such as cross licensing or receiving equity
from a startup in consideration for the license. The issue may be even more
complicated in the event university chooses to monetize by litigation and to
legally enforce the patent against a third party infringer. If, after what is
bound to be a very expensive process, university receives a settlement or
damages, should the university allocate to the inventor 1/3 of the total monies
awarded or the net amount after discounting litigation costs? We can assume
that some of these questions will be addressed later on as issues arise through
actual practice.
A corollary issue that may challenge the TTOs is whether this article
requires maximizing the potential financial returns on a patent that can often
be at odds with the university’s overall strategies, policies or cultural
approach, not to mention difficult to ascertain.
Unlike the current article 41 that dealt specifically with “academic
staff” (professors, paid post-docs, etc -- a term defined by the Law on Higher Education,
2547, 1981) the current article 6 is not as precise and refers in determining
its scope to “inventor” for inventions made within higher education
institutions. While the issue may be dealt with in a separate regulation,
without further qualification, one question is whether under graduate, graduate
students as well as other university personnel are subject to article 6.
The Article 6 however specifies, by reference to law on Higher Education,
ownership rights for research conducted under specific research agreements with
public or private institutions by adjunct faculty, interns, teaching assistants
and students shall be determined by an agreement between the parties, arguably
the university and the institution, party to the research agreement.
A particularly disturbing paragraph in article 6 is the university’s
obligation to indemnify the inventor in the event the application or the patent
right “ends for whatever reason”. First issue is why the university has to
indemnify the inventor if the university is the rightful holder of property
interests on the patent (as in the case of employee inventions). It is unclear
whether the law maker intended, erroneously, to reserve a conditional
retroactive ownership right in the inventor. The second issue that law maker
has clearly not considered the extreme difficulty in evaluating early stage
technologies. Arguably such an evaluation will be the basis of the indemnification
and Turkish courts are presently ill equipped to handle patent valuation
exercises. In the event there is mysterious formula to accurately evaluate
early stage technologies that is not known to this author, the corollary
question is in which national markets we will try to evaluate the potential value
of the patent application? The potential value is likely to be very different
in Turkey, in Europe or worldwide. What will happen if a national application
is granted but the PCT application succeeds in countries A and B but fails in
countries C and D? In addition, does the TTO’s mandate indirectly include
implementing an international protection strategy (with the required market
research and considerable in house and out-sourced costs) to maximize value?
What happens if the TTO files for a national protection, unaware or ignoring
foreign commercial potential, that turns into a national patent that has little
or no commercial value in the national market? Did the law maker consider the
fact one can modify claim structures in the application by considerably
narrowing the scope of the protection in order to have an issued patent (thus
avoiding the indemnification obligation) that does not provide a real useful
protection on what was initially expected?
What about if the application fails due to prior art hurdles, as a
result of invalidation action (costly to defend) or because of patent attorneys’
malpractice? Who bears the liability if patent attorneys drop the ball?
All in all, these two lines of the article 6 are ill considered and may
create new form of “ambulance chasing” lawyers flirting with professors waiting
for an opportunity to sue universities. Thus a type of patent trolls can rise
trying to build a portfolio of disgruntled professors ready to pounce on unsuspecting
TTOs. The end result is that universities, naturally risk averse, will be
pushed to not to claim ownership of university borne technologies thus
defeating the main purpose of article 6, that is to push universities to build
a patent portfolio, increase their technology transfer activities, creating a
functioning and sustainable TTO to contribute to knowledge dissemination, job
creation and creating financial and non-financial impact in society.
2) Publication of University
IP and Innovation Index
This year, the Ministry of Science, Industry and Technology published
for the first time ever an index ranking Turkish universities based on their
entrepreneurial and innovative activities. Of the 170 universities in Turkey, Sabanci
University has come on top of this index for this first year.
The index takes into account 20 odd factors grouped under 5 main
categories. These categories are:
1. Scientific and research capacity:
This category has a weight of %20 on the overall ranking and takes into account
factors such as scientific publications and citations, R&D projects that
have received national or international grants and number of PhD students.
2. IP Portfolio: This category has a
weight of %15 and takes into consideration number of patents, patent
applications (including utility model applications) and PCT applications.
3. University-Industry relations and
collaborative projects: This category
has a weight of %25 and takes into considerations factors such as R&D
projects in the context of University-Industry collaborations, amount of grants
received and number of students and professors involved in exchange programs.
4. Entrepreneurship and innovative
culture (weight of %15): This category takes into consideration undergraduate
and graduate level entrepreneurship courses, whether the university has a TTO
(including number of full time TTO staff) as well the number of workshops and
training programs conducted outside the university on entrepreneurship,
technology and innovation management.
5. Economic impact and
commercialization: This category has a weight of %25 and takes into account the
number of startups in technology parks and technology development zones where
professors and/or students (or recent graduates) hold equity, jobs created by
these startups as well as number of licensed patents, utility models and
industrial design rights by universities.
This index, while positive has a few
shortcomings:
1) With regards to IP portfolio size, the
index takes into account the number of applications and registered patents
(including utility models) not taking into account whether the patents were
issued or the portfolio represents a commercial value. Arguably the fact that
commercial value generated is not being taken into account is balanced to
certain extent in the number of licenses (again numbers and not the value of the
license), the index nevertheless follows the erroneous “quantity has a quality
of its own” approach motivating universities to patent even the most frivolous
inventions.
2) While this index does not presume to
quantify the best academic institutions in Turkey, based on public perception
it does present a strong and persuasive tool for universities to market
themselves to attract the best students. Competing for the best students is, in
itself, not wrong but the fairness and the accuracy of these metrics may be
misleading.
3) Universities may, in trying to acquire
a larger patent portfolio start pressing academicians for a greater number of
invention disclosures, the same way the academicians often find themselves
pressured to publish scientific articles (at the very basic level these two requirements,
if not well managed by a TTO may be mutually exclusive). It is also important
that senior university administrators understand that an increased number of
invention disclosures is often the result of an increased research budget.
Expecting a larger number of disclosures without creating the research means to
do so will also lead to, what at best can be described as, useless patents. In
addition, the pressure to file invention disclosures will be felt more by
academicians in engineering departments as opposed to faculty in the social sciences.
The pressure will also felt differently by scientists focused on basic and
theoretical sciences. Finally, universities who are strong on social sciences
will have a harder time to aim for higher ranks within the index.
4) Finally, while important one can
question whether patents on their own are a valid indicator of scientific
output or innovative capacity.[3]
3. Government
Funding for Technology Transfer Offices
This year
TUBITAK has announced a comprehensive and substantial grant program to support
universities in setting up technology transfer activities (1513 grants). Only the universities ranking in the top 50
of the innovation and entrepreneurship index (described above) were eligible
for the grant. From those eligible, only 10 universities received the grant
this year. The grant is substantial: 1 million Turkish Liras (about USD
650.000) per year for 5 years with an option to extend for another 5 years at
TUBITAK’s election.
The grant
is anchored around 5 modules:
1) Awareness building activities on IP
rights, technology transfer, grant management, etc.
2) Building infrastructure to manage
grant programs.
3) Project creation activities and
management (sponsored research and industrial liaisons in the context of
industry – university collaboration).
4) Technology transfer office activities,
licensing and IP rights/portfolio management.
5) Entrepreneurship and startup
creation.
This grant
call will be renewed every year, thus more and more universities will have an
incentive to set up their own TTOs. Note that, of the five modules for which
grant can be sought, only two are directly related to a TTO functions.
One very positive
mid-term impact of the grant is to put, the often ignored IP rights and
technology transfer activities on the map for senior university administrators.
Few parting
comments however; technology transfer requires professionals with a very specific
skill set and such professionals are still very few in Turkey. University
leaders and stake holders also have to manage their expectations with regards
to expected impact of successful TTOs. I
believe two facts can be taken as given: i) building a successful TTO takes a
long time and TTO activities depend a large deal on the internal and external
ecosystem (i.e.: availability of risk/angel capital, industrial partners
willingness to engage universities, etc), ii) a TTO that is under pressure to
show profits is likely to be very unsuccessful, thus care should be taken not
to benchmark Turkish TTOs performances with AUTM’s heavy hitters who are able
to generate very large sums of licensing income.
One negative
and immediate impact of this grant program was the proliferation of so-called
technology transfer and IP portfolio management “experts” (often patent agent
spinoffs with absolutely no experience in technology transfer) hoping to get a
piece of the pie by selling their “expertise” flooding universities with their
service offers. Such an opportunistic approach will only serve the cloud
already not that clear IP and technology transfer ecosystem in Turkey.
In summary,
Turkey has made incredible progress within the last five year regarding the importance
of IP rights, role of universities in technology creation and overall awareness
creation. The efforts, in particular those of the MSIT, TUBITAK and Turkish
Patent Institute are worthwhile and should be encouraged. Better an increased
collaboration between government actors, NGOs (such as LES), universities and
private sector, including qualified service providers is still much needed.
Thus to answer a child’s favorite question, “are we there yet?” my answer is
not yet, but at least the journey has started.
