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Friday, August 6, 2010

Business angel club development in Russia: practical experience (part 3)

Dr. Eduard Fyaxel, professor and a business angel, on intellectual property and commercialization perplexities

Envy puts the brakes on progress

A huge stumbling block is academic bosses’ reluctance to see projects commercialized. Why? There are reasons. 

To them, their scientific legacy is an object of pride, not a vendible. 

They are too much used to living off government and grant moneys to welcome ‘dubious’ investment from ‘outsiders’. 

In fact, there’s little to market; few research results have commercial potential. 

Administrators dread collaboration with private investors; their worst nightmare is the fear of losing all their staff to employment in commercial companies. This is nothing short of sabotage, they think. 

In a nutshell, all those reasons may be easily distilled to one everyone knows of. It is envy. If a department chief at an academic institution gets word of his former junior researcher who became an entrepreneur and has made more money on some ‘outlandish’ project than his former boss in his old chair—it’s too much of insolence. Away with those innovators, we don’t need them!

This may look like an exaggeration, but it is a problem too serious to ignore. 

What project developers still don’t have…

There’s a long list of things that project developers still don’t have. Resources to commercialize projects are meager; conditions are inadequate. Few are really keen to market their projects—simply because it takes entrepreneurial experience that those people lack. There’s still much uncertainty regarding intellectual property rights, too.

It requires a team to further a project. Few understand that, though. Teams do get built sometimes, but members are typically scientists. A team of scientists can produce a scientific report or discover something but it cannot monetize a project. Their attempts to talk to an investor will take them nowhere. 

Why? Because their project is like a baby for them. Is it thinkable to sell a child? Never! “Scram with your money! We’ll do fine without it!” 

…and what they could have but…

Federal law 217 was passed last year on the setting-up of small innovation companies on university premises and IP rights. I’m an optimist and believe that our legislators will be smart enough to polish and refine it to a degree where the law can really work. Until then it will keep a ‘dusty shelve’ of hopeless projects intact.

“The project developer has the opportunity to receive a bonus, provided that the university administration finds it suitable. It is his right, not an obligation.” This is nonsense number one.

In one company I once talked to they do give bonuses for an innovation adopted. The amount is ‘astronomical’: a thousand rubles ($33). 

With this being fact, not a joke, I find it bizarre to hear academic bosses wonder why university-based innovations have shrunk twenty times over the past five years. Innovations could have dropped to a virtual zero. 

Unless the developer gets interested, you won’t get anything from him. 

Here comes nonsense number two that just bewilders me. According to the law, the poor investor who was unlucky enough to put up his money for a project has no right to sell the project! Under such conditions, you will have to subject him to torture to make him invest in the first place. 

You can’t sell your Motherland and you can’t sell your project—this seems to be legislators’ rationale behind the idea. I agree on the former but I just can’t fathom the latter. The guy invested his own money—how is it possible to bar him from selling at least his personal share?! 

The law must unambiguously, and without fail, allow academic institutions to (i) transfer to authors the rights for specific intellectual property; (ii) create mechanisms for authors to buy out their rights for IP; (iii) create mechanisms for authors to formally legalize their IP rights, and (iv) sell IP rights to investors. 

The current law 217 is void of all this.

What a venture capitalist looks for is ownership, not the license for it.

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