Op-ed: Marketing intellectual property

Op-ed: Marketing intellectual property McGill University

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McGill Reporter
April 6, 2000 - Volume 32 Number 14
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Home > McGill Reporter > Volume 32: 1999-2000 > April 6, 2000 > Op-ed: Marketing intellectual property

Op-ed: Marketing intellectual property

| As adoption of the new policy on Intellectual Property draws near, perhaps some comments are timely on an aspect that has not received much attention, that being the role of the Office of Technology Transfer. According to the policy, we are to entrust the marketing, commercialization and accounting to OTT. My experience is that we should not only question the principle that our IP is owned by the University, but also to consider what might happen if the university attempts to market our IP. Past experience can give a harbinger of what we might expect.

Bryan Sanctuary

Let's go back a few years to 1991. One day my stock broker phoned me and said, "Hey, McGill University is floating a stock called Martlet R&D Investments Inc. It is a great tax shelter, and has the possibility of IP royalties. Waddyasay?" I said yes, put down $10,000 and thought about all my productive colleagues effectively using the $20 million or so, raised in the stock issue, to produce IP and royalties above and beyond the tax saving.

I enquired if, perhaps, a portion of funding could be directed to my research. After all, I'm a shareholder, a McGill prof. and I had a great project. Protein structure determination from Nuclear Magnetic Resonance involves a tedious and time-consuming step, that being the sequence-specific resonance assignment. The project was to automate the task by the development of some computer programs. If successful, universities and pharmaceutical companies around the world might find it useful.

Professor TH Chan told me that my project was too late and all the money had been allotted. For this money, there was no open competition and no call for projects. Twenty million dollars, minus what was held in reserve for managing the company and paying interest, was disbursed to those who had been invited to participate. Myself, and many of my colleagues were left out in the cold. Still, there were the tax savings and the hope of IP from the Martlet investment to console me.

I went on, with NSERC funding, and indeed my post-doc and I were successful in developing a program for the protein structure determination. Since this was developed at McGill with a research grant, I turned to OTT in 1993 and suggested a company, TRIPOS, that might want to license the software. My OTT contact was Robin Brassinga. It was a pleasure to work with him. He dotted i's and crossed t's and liaised with TRIPOS. My software was named CAPRI and royalty amounts were agreed upon These were to be split according to the McGill policy: 35 percent to the university and 65 percent to be divided between me and my post-doc. To date CAPRI has generated over $60,000 in royalties.

Martlet never generated any royalties. Each year, as a shareholder, I received a letter from the secretary, R. Timothe Huot, with no return address and no contact information on it, informing me of the shareholders' meeting. Each year the letter was the same and included the statement:

"The Company (Martlet) agreed to inquire annually with McGill University to confirm the amount of intellectual property royalties collected by it and, if such amounts were collected, to send to all its shareholders a report stating the amount of such royalties. As at the date hereof, no royalties have been collected".

One time, while in an official discussion with then Vice-Principal (Academic) TH Chan in his James Building office, I asked him about the lack of royalties from Martlet. He replied that Martlet was a great tax saving device and a good deal in itself. Why should I expect royalties to be generated? It seemed lost on him that a prospectus had been issued detailing all the projects being funded, all of which were stated to have the possibility of generating royalties.

Last year, I attended the shareholders' meeting. I arrived on time and about a dozen shareholders were present. We were kept waiting for an hour by the secretary, actually a lawyer, Mr. Huot. The Martlet board of directors, showing disdain for the shareholders, did not even show up to answer questions. Only one person, Huot, represented Martlet R&D Investments Inc. He had one item on his agenda: Since there were no royalties generated and the tax benefits at an end, the company should be terminated. Since I was fairly vocal and knew some of the ins and outs of what had gone on, a lady next to me decided that if the members of the board were too busy to attend the meeting, then perhaps I would do a better job. She nominated me to the board. Huot waxed into legalese saying this was unconstitutional, all the shareholders would have to be informed by a mass mailing and the meeting would be adjourned until the rules of the Quebec Commission of whatever could be applied. Although he said there was not a quorum to elect me, there was a quorum to dissolve the company! We let it drop, dissolved the company, and $20 million in R&D investments had generated no royalties.

I was pleased that from 1994 to 1996, I received royalty cheques from CAPRI. After that, nothing. In 1997, I e-mailed OTT to ask if there were royalties, but received no reply. I had also finished a new project where the protein NMR work, originally for 2-D spectra, had been extended to 3-D NMR. We caste this set of programs into the GUI (General Users Interface) of TRIPOS and informed OTT of our new and improved version. OTT never acknowledged this initiative and never followed it up. That was more than three years ago. Since then, I have asked OTT three times since then if they pursued the matter and received no response.

In November of last year, I was browsing the TRIPOS web page and noticed that CAPRI was still on the market. I immediately thought that royalties from the sales were not being sent to McGill. I contacted OTT and asked them to check into it. The reply I received came as a shock. They had indeed received royalties since 1997 (over $15,000 was my share) but they had neglected to send them to me. In January of this year, I finally received my cheque.

It doesn't take much of a mathematician to calculate what that $15k would be worth today had it been even conservatively invested in the stock market.

So what about interest? At first I was told that interest could not be paid. After six weeks of prodding, OTT finally gave me the dates and amounts that had been received. I calculated the interest at 12 percent compounded monthly and sent OTT a bill. I chose 12 percent because I believed it to be fair; it was less than credit cards charge and less than the Quebec government charges on overdue tax amounts. Much less than the stock market also could have generated.

OTT forwarded this bill to Associate Vice-Principal (Research) Ian Butler, who said that he would seek legal advice from the University lawyer, Line Thibault. I subsequently received a letter from Butler who indicated that indeed interest should be paid, but 12 percent was too high. They wanted to bargain. They would offer me six percent not compounded. I refused. Butler also noted that Alex Navarre, director of OTT, expressed surprise that I had not alerted OTT to this oversight, thereby trying to shift the responsibility to me for not being paid the royalties. Can one infer, therefore, that if academics have a contractual agreement with the University that we must keep on OTT's back to be certain we get our due portion agreed to in the contract? In response to this letter, I replied that the 12 percent was not negotiable and dug out my old e-mail proving that I had indeed asked OTT in 1997 if royalties were due, with no reply at that time.

A few days later, on March 30, Butler's secretary phoned me for a meeting. I met with him and Navarre this week. They explained that this had never happened before; that it was due to a change in personnel; and they would agree to pay me what I asked in return for a full release on the interest claimed on the $15k they had neglected to disburse. I agreed. Butler also assured me that OTT would now, finally, look into my 1997-upgraded CAPRI to see if a new agreement with TRIPOS could be worked out.

But all this should never have happened. If I had not contacted OTT in November of 1999 to enquire if royalties had been received, I am certain I still would not have my portion. If the University is to be the owner and guardian of our IP, then our contractual agreements have to be built on trust. In my instances of dealing with OTT, since 1997, this trust has been mitigated. Moreover, the new IP policy is being imposed upon us. I have found no one in the rank and file of the McGill research milieu who supports it. It reminds me of the discussion in the book, "The 7 Habits of Highly Effective People" by Stephen R. Covey that one should only enter into "win-win" contracts. In my opinion, the University is clearly attempting to impose a "win-lose" policy on us. So when this new policy is in effect, in the end, our hard work and good ideas will end up on the desks of OTT and there they may rest forever or generate royalties that we might not get.

The complete IP policy proposal may be found at: vm1.mcgill.ca/~inmf/http/software.html

Bryan C. Sanctuary is a professor in the Department of Chemistry.

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