Enhancing Value of Technology

The quality and quantity of research within the public research organizations (PROs) does not seem sufficient for many of the PROs. In 2009, only 169 PROs, which is 61.9% of total PROs, perform technology transfer activities. Among them, 150 PROs have established a technology licensing organization (TLO) and the internal department form of TLO accounts for 90% (135 out of 150). It means that the majority of PROs adopted the form of internal department. Both of the number of PROs performing technology transfer operations and the number of TLOs in 2009 increased, compared to the corresponding statistics in 2008.

Although each PRO establishes a TLO with at least one staff member, most TLOs are thinly staffed and can not afford to hire experts in the field of commercialization. As of 2009, TLOs had staffing of 6.4 employees on average. To break down, university TLOs had staffing of 5.03 employees and government laboratory TLOs had staffing levels of 7.74 employees on average. It should be noted that only about a third of the employees play the role of licensing associates and the others provide clerical support.

The technology commercialization capacity of PROs does not seem that high. PROs of type B, which represents the lowest group, account for 47.1% of the 1701. By the way, government laboratories showed the highest levels in terms of three indices, ‘resource & infra’, ‘strategy & action’, and ‘performance’ in 2008 and 2009, followed by public universities, private universities, and the others.

With growing R&D investment, technology transfer, and royalties received have increased likewise. Above all, the rates of technology transfer have been increasing in Korean PROs. To be specific, the cumulative rate of technology transfer increased over the past three years, although the annual rate of technology transfer in 2008 decreased, compared to that in 2007.

As of 2008, royalties received by PROs have increased to 1,228 billion Korean won. Although the royalties received by universities account for 20.6%, the mean growth rate for royalty over the past three years is 60.0% which is nearly three times that of government laboratories, 18.3%.

* Problems of TLOs in Korea

However, TLOs still remain a cost-center, facing several systematic barriers to technology transfer and commercialization. First, although R&D investment of PROs has been increasing over the last several years, R&D productivity has been stagnant. As R&D investment grows, patent applications, technology transfer, and royalties received have just increased proportionally. Moreover, re-investment over the R&D budget, one of the key indicators of TC, is extremely low.

Second, staff members are exposed to moral hazards because they had little incentive towards technology transfer duties. In 2005, the ‘Regulation for Managing National R&D Program’ stipulated that PROs are allowed to pay some of royalty income to TLO staffs as a reward, while all PROs should pay at least 50% of royalty income to inventors as a reward. As a result, it is reported that rules for incentives for TLO staffs were not effective in the real world.

Third, there may be several inefficiencies in operating a TLO since the majority of PROs adopt the internal department form of TLO uniformly, neglecting the other alternative TLO models. It seems that PROs and the Korean government pay little attention to the fact that the ‘Technology Transfer Promotion Act of 2000’ allows PROs to establish a joint TLO that serve participating PROs depending on the quality and quantity of their research.

Fourth, Korean PROs dare not challenge the self-supporting in technology transfer operation unlike the TLOs in developed nations. It has been around ten years since Korean PROs began to establish their TLOs, according to the “Technology Transfer Promotion Act of 2000.” Considering that TLOs require seven to ten years to be successful, Korean TLOs now need to show the possibility of reaching the level of self-financing in near-term. However, Korean TLOs hesitate to set these goals since they worry about the penalty of not achieving their objectives.

* Government Programs for Supporting TLOs in Korea

A series of pro-technology transfer programs were launched in Korea just after the Korean Technology Transfer Promotion Act of 2000, which resembles the U.S. Bayh-Dole Act of 1980 and the U.S. Stevenson-Wydler Technology Innovation Act of 1980. Since most TLOs were newly established and thinly staffed, they lacked the competence to become self-sustaining.

Out of necessity, the desire grew to leverage complementary resources. As a result the Korean government launched a program entitled ‘Toward Promoting TLOs through Consortia (2002-2006)’. This program triggered the formation of consortia by licensing offices that were located close to each other. Five Korean regional technology transfer consortia were formed as unincorporated affiliations among PROs for the purpose of stimulating TLOs and facilitating public-to-private technology transfer. At the end of the operation period, all five consortia unanimously decided to cease operations as of March, 2006.

In addition, the ‘Private University Technology Transfer Program’, sponsored by the Small-and-Medium Business Administration, was launched in 2000 and ended in 2005. This program assisted 19 private university TLOs with their operational costs. The Korea Technology Transfer Center has also supported the technology transfer activities of PROs and private businesses since 2000. The ‘Public University Technology Transfer Program’, sponsored by the Ministry of Commerce, Industry, and Energy assisted five public university TLOs during the period of 2004-2006.

The Korean government launched a new competitive program called “Toward Promoting Elite TLOs (2006-2011)” while replacing the existing programs for cultivating TLOs. This program aims to enhance the performances of selection of PROs (18 universities and 10 government laboratories) that have a high potential of self-sustaining with technology licensing offices. Considering that it usually takes five to ten years for a licensing office to achieve a positive net cash flow from technology transfer operation, the post-consortia program seems like a good start to ensure that licensing offices in PROs advance to a self-sustaining level.

* Problems of the Support System for TLOs

Although the Korean government has made a lot of effort to cultivate TLOs since 2000, there remain a few problems in relation to the support system. First, the priorities of the target TLOs are distorted when the government supports TLOs. Since the support system for TLOs was unified in 2006, promising TLOs have been first chosen and supported with operational cost and marketing expenses. On the contrary, there are few benefits to smaller and newer TLOs which need to be supported by the government more than the larger and leading TLOs.

Second, there is no criterion for terminating programs supporting TLOs which are beyond infancy or close to the self-sustaining level. Until now, the concepts and criteria for the completions of supporting programs have not been considered when the government selects the recipient TLOs. Therefore, TLOs under support may be exposed to moral hazards because they do not have to make an effort to improve their technology transfer capacity rapidly.

Third, there is a lack of policies for facilitating alternative TLO models other than internal department or independent organization. Although the TT consortium model had been tried through the “Toward Promoting TLOs through Consortia (2002-2006) program,” this model is no longer being employed. Most of all, joint TLOs are not paid any heed by the government and PROs although the quality and quantity of research within the institution are not sufficient for a lot of PROs. In other words, a lot of PROs just need to manage the occasional disclosure of invention on an ad hoc basis.

* This article was contributed by Park Jong-bok and Ryu Hyun-sun, researchers at the Korea Institute for Industrial Economics and Trade (KIET), a leading economic think tank in Korea.