Commercializing Inventions at the University of Toronto

Working Paper October, 2020 Chelsea Tao and Mariana Valverde Commercializing Inventions at the University of Toronto What is a university? In Canada, as elsewhere, it is a centre for research and teaching, supported in part by public funds. It is also an employer, a producer of images, a subject of rankings, a real estate owner, a generator of revenues, and a hub in global networks of value and aspiration. But how does a university work? What exactly does it do? What are the powers and pressures, the practices and networks that constitute contemporary university worlds? An interdisciplinary team of faculty at the University of Toronto, we seek to discover the many worlds of our own institution, in collaboration with graduate and undergraduate students. We foreground the everyday experience of people who work or study in different corners of the institution, who live in its shadow, or respond to its public face. A pilot phase 2019-2021 has been funded by the Social Science and Humanities Research Council of Canada (SSHRC) Insight Discovery Grant #430-2019-00054 For more information about the project please contact [email protected] Visit our website at http://universityworlds.ca/ To cite this paper: Tao, Chelsea and Mariana Valverde. (2020) “Commercializing Inventions at the University of Toronto”. Working Paper 4, Discovering University Worlds, University of Toronto. 2 Abstract Universities all over the world have been pressured for several decades, and in turn have pressured their researchers, to help commercialize university inventions, mainly through setting up new corporations and/or selling intellectual property rights to existing corporations. This working paper traces the history of the University of Toronto’s (U of T) policies in regard to inventions and intellectual property, going back to the 1980s. The emergence of the MaRS ‘discovery district’ is recounted (although its financial and real estate connections with U of T are not sufficiently transparent to allow firm conclusions). Finally, we put U of T’s intellectual property policies in their larger context, concluding that while the university could do more to ensure that the financial benefits of commercially viable inventions are shared with the university and with the citizens that support it, in the end governments need to set legal rules minimizing the steady outflow of intellectual property created with public resources. Contents Abstract ......................................................................................................................... 3 Introduction ................................................................................................................... 4 Post-Connaught Labs policies on university inventions: The University of Toronto Innovations Foundation ................................................................................................ 5 The Manley Report ........................................................................................................ 6 A not so transparent partnership: a brief history of the MaRS’ relation to U of T .... 7 U of T inventions: who benefits? ................................................................................ 13 Conclusion ................................................................................................................... 15 Works Cited ................................................................................................................. 18 University Documents .............................................................................................. 18 Other Sources .......................................................................................................... 19 3 Introduction This working paper examines U of T’s policies and practices regarding the commercialization of inventions from the 1980s to today. After a summary of policy developments in the 1980s-90s, we present a brief history of the MaRS Discovery District, with which U of T has always had a close relationship. We then examine economic and legal dimensions of the university’s intellectual property regime concerning inventions. We come to the conclusion that although the university could do much more to ensure that the rewards – especially financial rewards – from inventions by U of T members benefit the university community, and the citizenry who support us and our research through government grants and other support, the fundamental problem lies in a national (and to some extent provincial too) policy vacuum. In the absence of regulatory policy (even the relatively weak policies the EU and some member states have developed), the market rules, which in the case of high-tech means that Silicon Valley rules. This report, we believe, has importance beyond our university. The university’s experiences with discoveries and inventions have long been shaped by the larger heated debates about the relative roles of the private sector and the public sector. It is important to note that these debates are not unique to the neoliberal era. That U of T has played an important role historically in scientific innovation is well known, and is highlighted in campus historical plaques marking the discovery of insulin. But it is not so well known that U of T’s Connaught Laboratories, which saw many world-changing public health inventions from the 1920s to the 1970s, were sold by U of T to the federal government in 1972 – well before the word ‘neoliberalism’ had emerged – and was then slowly privatized in Ottawa, with the Mulroney government finishing the job in 19851. 1 One account of the discovery of insulin and the creation of the Connaught Laboratories is found in Linda McQuaig, The Sport and Prey of Capitalists: How the Rich are Stealing Canada’s Public Wealth (Toronto, Dundurn Press, 2019), pp. 126-144. 4 Post-Connaught Labs policies on university inventions: The University of Toronto Innovations Foundation A Master’s thesis done at OISE in 2013 is the only source shedding light on the recent (that is, post-Connaught Labs) history of U of T policies and practices about the commercialization of inventions. It is a thorough case study of the University of Toronto Innovations Foundation (UTIF), launched in 1980 in response to federal pressure to strengthen university-industry linkages2. In its infancy, according to thesis author Kristjan Sigurdson, UTIF’s purpose was to help market university inventions, products, and processes to industry – rather than furthering the university’s own development of such inventions. The term that began to be used then for the university officials helping researchers commercialize inventions, ‘technology transfer’, is quite telling: it indicates the university has no intention to itself commercialize inventions, and may not even want to continue exercising intellectual property rights. Despite initially high expectations for UTIF to duplicate the successes of the ‘technology transfer’ university officials at Stanford and MIT, the Foundation faced several challenges. Insiders interviewed by Sigurdson suggested that it lacked the scale, expertise, and the industry linkages to meet its goals3. By the end of the 1980s, only a few of its inventions provided royalties and licensing fees worth more than the cost of commercialization4. After a disappointing first decade, UTIF underwent major organizational changes to take on new staff, separate from UofT, and develop a new system for vetting inventions. A new Inventions Policy was established in 1990 with improved financial incentives for inventors who chose to retain ownership of the invention. (This is still reflected in the current policy.) Inventors who chose to develop and commercialize inventions themselves would receive 75% of revenue while 25% went to UofT; inventors who chose to use UTIF would receive 25% of revenue 2 Kristjan Sigurdson, “The rise and fall of the University of Toronto’s Innovations Foundation”, Master’s thesis, OISE, University of Toronto, 2013, p. 36. 3 Sigurdson op. cit., p. 40 4 Sigurdson op. cit., p. 55 5 while UTIF and UofT receive 50% and 25% respectively5. These policies resulted in marked improvements in rates of invention disclosures. In 1998, UTIF underwent another restructuring, led by businessman Joseph Rotman. While it continued its licensing efforts, UTIF also recruited staff with experience in supporting start-up companies, and collaborated with the Rotman School of Management in doing so6. By 2002/2003, UTIF seemed to be making a successful turnaround. The 2003 Annual Report recorded $4.5 million in total revenue, including $493,622 in royalties and licensing fees and $1,941,774 in sale of commercialization rights and capital gains, as well as $30 million in seed venture funds raised. The Manley Report Though these successes sparked optimistic hopes, UTIF would not survive. In June 2004, U of T’s Governing Council asked four panel members to review the University of Toronto Innovations Foundation (UTIF). The panel, chaired by former Liberal federal cabinet minister and Governing Council member John Manley, found “a widespread feeling that UTIF is not performing optimally” and that UTIF “is not giving the university the stature it should have (and is increasingly expected to have) as a superb research organization”7. The report recommended that UofT should dismantle the UTIF and create a new entity that combined the activities of its Technology Transfer Office with other resources for commercialization, and that the new office be jointly

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