Successful Factors for Commercializing the Results of Research and
Development in Emerging Economies – A Study of ITRI in Taiwan
Paul C. B. Liu＊, William Kuang-Wei Chueh＊＊, Meng-Yo Ger＊＊＊
Abstract
The Association of University Technology Managers (AUTM) uses a number of
benchmarks for judging success in commercializing R&D results, such as the
numbers of patents applications filed, patents issued, licensing contracts, royalty
income, start-up companies and job creation. Measured against these benchmarks,
most Asian counties are not doing well.
Our research has found that the following conditions are extremely important for
successful R&D commercialization in emerging economies by examining the
successful story of the Industrial Technology Research Institute (ITRI) in Taiwan: (1)
a clear policy of intellectual property commercialization in the organization；(2) a
clear incentive and punishment structure toward inventions and infringement；(3) a
professional team of intellectual property commercialization experts as well as the
provision of continual training；(4) a successful platform to match the demand and
supply side of technology market.
Keyword: Commercialization, Industrial Technology Research Institute (ITRI),
Technology Policy, Intellectual Property Management
＊
Paul C. B. Liu, Ph. D., Professor and Director, Graduate Institute of Intellectual Property, College of
Commerce, National Chengchi University.
＊＊
William Kuang-Wei Chueh is a Ph. D. candidate in Graduate Institute of Technology and
Innovation, National Chengchi University and LL.M candidate at Columbia University School of Law.
＊＊＊
Meng-Yo Ger is a Ph. D. candidate in Graduate Institute of Technology and Innovation, National
Chengchi University.
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1、Introduction
Since the 19th century, the continual discussion in the international community
regarding how to protect industrial right and intellectual property gradually resulted in
a good number of international treaties which formed the basis of the intellectual
property law in each country. However, in the current era of knowledge economy,
people more than ever realize that a successful model of knowledge management is
more than legal protection. It requires a good control over the whole process from the
initiation of a new idea to the final commercialization. (Polanyi, 1962)
Speaking of the theories and practices of intellectual property management, it is
impossible to ignore the development in United State for the past decades. Starting
early 1980’s, United States enacted a number of intellectual property related acts
which required relevant authorities to put into practical use the stock of intellectual
property “frozen” in government agencies and universities. The most prominent one
of them is Bayl-Dole Act which has served the foundation to establish cooperative
relationship among universities, industries and research institutes since its entry into
force. (Liu & Hung, 2002) The U.S. model later turned out to be a huge success in
1990’s. After that, more and more countries tried to follow this model. For example,
Japan’s effort in introducing “Universities Technology Licensing Office Act” was
widely believed to be a copycat of the Bayl-Dole model1.
It shall be noted that the so called U.S. model has its own historic and cultural
background. The implementation of this model in other country may not necessarily
bring the same favorable result. On the very contrary, it may turn to the other side and
bring opposite effects. Take Taiwan for example, although Taiwan claimed itself to be
one of the leading high-tech and OEM economies in the world, the unique advanced
educational, industrial and macro-economics structure made Taiwan unable to
“import” the U.S. model directly. The U.S. model had to be largely tailored to fit
Taiwan’s unique situations.
In the past, Taiwan greatly relied on governmental power to establish large-scale
national research institute which not only engaged in high-tech research and
development but also played an important role in nurturing high-tech managers as
well as creating a platform for start-ups, licensing activities and trans-organization
cooperation 2 . As time went by, it was observed that the macro environment of
technology transfer failed to coordinate well each player in the value chain. The
traditional large research institute was also asked to transform into a self-sustained
entity. In the transformation age, the Industrial Technology Research Institute (ITRI)
The full name of the act is ”Law promoting Technology Transfer from Universities to Industry”
which is an extension to” The Science and Technology Basic Law” enacted in 1995.
2
T he most prominent start-up companies under such model are TSMC (Taiwan Semiconductor
Manufacturing Company) and UMC (United Semiconductor Manufacturing Company).
1
2
in Taiwan was one of the most successful cases in Taiwan. This paper tries to present
the way in which ITRI transformed into its current success in order to show the
possible essential factors for the success of intellectual property commercialization in
emerging economies. The traditional factors believe to underlie intellectual property
success are presented in part 2. In part 3, the development of ITRI in this decade is
described followed by a brief conclusion in part 4.
2、Relevant factors regarding intellectual property commercialization
2.1 U.S. Bayh-Dole Act and Technology Transfer Legislation
Since United States passed Bayl-Dole Act in 1980, the previously idle stock of
research results out of government subsidies was given much more attention. The
most important breakthrough of Bayl-Dole Act was its authorization to give the title
of research results to the contractors who receive subsidies from federal government.
Under such mechanism, universities, acting on their own self-interest as well as legal
requirement, started to retrieve value from a good number of research results that
possessed market value aggressively. Although the concept to impose on universities
the active role of intellectual property management was not first invented by
Bayl-Dole Act, it represented a new experiment to encourage universities to best play
intellectual property management with a “legal” requirement.
2.2 Intellectual property management
Management is one of the most important sciences in the 20th century. Great
scholars of classic school including Frederick Taylor, Henri Fayol, Max Weber, etc,
gradually developed a number of essential building blocks for management science.
Nowadays, people generally believe that the most import subjects in business
management refer to production management, marketing, human resources
management, finance management and research and development management.
Compared with the sound development of the first four areas mentioned above,
research and development management tended to receive comparatively less attention,
especially in Asian countries.
Back to the year of 1974, Schumpeter mentioned that innovation was an
important source of excessive economic profit. Nevertheless, Schumpeter failed to
explicitly point out that a sound intellectual property protection served the necessary
condition for bringing innovation into economic profit. Although enterprises may
work hard to bring new technologies of production efficiency and niche into existence,
the existing advantage will soon be erased by copying or reverse engineering from the
competitors, absent a sound mechanism of intellectual property protection.
After the wide recognition the importance of intellectual property protection,
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people gradually found that legal protection did not automatically result in
commercial success. A complete set of intellectual property management shall
integrate research and development management, marketing, human resources
management, finance and tax management and so on. Most importantly, the
consideration of an effective business model which finally generates the profit shall
not be independent from the whole management process.
2.3 Professionals’ training
One of the most prominent obstacle observed in intellectual property
management referred to lack of well-qualified professionals. Especially in Asian
countries whose educational system was not well fit to nurture inter- and
trans-disciplinary professionals, this became a more serious problem. Take Taiwan for
illustration; the fact that there were few trans-disciplinary legal professionals in
Taiwan brought a negative effect over the patent application process.
Although some big enterprises themselves could select and train their own patent
attorneys or other supporting technicians3, small and medium size enterprises might
not be able to self-nurture those well-qualified professionals.
It was also observed that technicians with little concept of intellectual property
laws might unknowingly use others’ patented technology and even trademarks. Their
hard work finally resulted in countless intellectual property litigations with huge
damages claims.
Faced with the forgoing difficulties, the solution to them is quite simple and
straightforward-“re-education” that brings the employees with sufficient and correct
legal background. While a number of enterprises may not be able to afford such
training expenses, the government shall consider providing adequate ways of
re-education as a public good.
2.4 Market information provision
The indispensable part of sound intellectual property protection lies in a sound
database available to search for pre-existing technologies and information. For
example, a good patent map may not be possible without a complete and informative
database.
A sound database not only plays a role of infringement prevention, it also acts as
a basis for value determination in the market. Without such information, the
innovation rent mentioned by Schumpeter may not come out of air.
2.5 Taiwan’s experience
3
For example, Foxconn, TSMC, Acer are noted for internal intellectual property trainings.
4
The forgoing four paragraphs being said, it is apparent that legal infrastructure,
management, educational training and market access serve the most important
factors in intellectual property commercialization. In Taiwan, the forgoing concepts
were transformed into a Pearl Structure (Figure.1).
Venture
Capital
IPR
Technology
Tranfer
Industries
Research&
Development
R&D
Institution
MultiNational
Entrepreneurs
Knowledge-Based
Innovation
Government
Start-Up
Companies
Academic
Capital
Market
SEMs
Figure 1. IPR Pearl Structure and The Gap of Practiced Theories
More often than not, a good theory is distant from perfect practices. Take the
pearl chart for example, the link among different sectors could not be established
overnight. Judging from the recent development in Taiwan, it is fair to assert that one
of the main difficulties lied in the gap among different actors in the inner circle. Since
the academic, government, institution and industries each had their own standing and
viewpoints, the huge disparity predicated the unsatisfactory efficiency of the final
results. For other actors surrounding the inner circle, there was no uniform
coordinating mechanism which reduced the possibility for them to become an integral
system. The lack of successful coordinating mechanism often resulted in a sharp
disagreement among the government, the academic and venture capital in the outside
circle. Those being said, the commercialization of intellectual property in Taiwan
indeed faced tremendous difficulties.
Nevertheless, there were still few successful cases in Taiwan, the most prominent
one of which was the Industrial Technology Research Institute (ITRI). In case that the
macro environment was not well established, how ITRI reached its current success
merits further attention. This paper thus tries to illustrate the efforts by ITRI in the
hope that ITRI’s model could shed a light to other countries and institutes with
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similarity.
3. A study of ITRI
3.1 Background of ITRI
ITRI was composed of the former three research institutes, industrial research
institute, metal research institute and mining research institute under the control of
Ministry of Economic Affairs in Taiwan. It has long been located in Hsinchu City,
where there are two major universities, Ching-Hwa University and Chao-Tung
University whose main academic focus lie on science and technology.
As the economic situation and technology need constantly changed, ITRI
established a number of search organizations to echo the rapid change, such as
Electronics Research and Service Organization, Biomedical Engineering Center,
Center for Aerospace and System Technology, Environmental, Safety and Health
Technology Developement and so on.
Since its foundation in 1973, ITRI has long relied on government grants to
support its research and development activities. But recently, ITRI has already been
able to finance its own expenses out of the value of intellectual property created
itself4.It is a clear manifestation of the success of intellectual property management.
3.2 ITRI’s historic efforts in intellectual property management
In order to fully understand the successful development of ITRI, it is necessary
to have an overlook at ITRL’s response to an era of knowledge economy in different
stages.
3.2.1 The period prior to 1995
Even before the Science and Technology Basis Law (Taiwanese version of Bayl
Dole Act) was adopted in 1999, the efforts of ITRI already brought forth a good
number of successful start-ups. (Please refer toTable.1 for a detailed list)
Notwithstanding the remarkable success, those new start-ups also took away a
tremendous amount of resources insides ITRI such as technology and important
human capital.
Such phenomenon was highly relevant to the structure of IRTI at that time. Since
the budget of ITRI was then mainly supported by the government, those new start-up
companies were viewed as a symbol of economic development achievements. People
then did not really care whether ITRI got the due reward from the start-ups. It is
therefore imaginable that the reward was pretty limited in number. The fact that
well-trained human resources in ITRI transferred to private company soon after they
4
For relevant information please refer to:
vhttp://www.itri.org.tw/chi/about/annual_reports/fy92/annual2003c-4-3.pdf, viewed on 09/01/2005.
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had access to the latest technology was taken for granted.
Table 1 the Important IC Companies from ITRI Start-up
Start-Up
year
Gov. Employees
Fund From ITRI
The name of Company
IPO
year
Capital*
2005
1980 United Microelectronics Corp.(UMC) Yes
31
1985
6,472
1982
Syntek Semiconductor Ltd
3
1991
92
1986
Princeton Technology Corp.
4
2001
51
1987
Taiwan Semiconductor
Manufacturing Company (TSMC)
150
1994
8,105
5
1997
445
36
1995
1,405
72
1995
119
8
2000
72
333
1998
525
Yes
1987 Silicon Integrated Systems Corp(SIS)
1987
Winbond Electronics Corp.
1988
Taiwan Mask Corp.(TMC)
1989
Weltrend Semiconductor, Inc
1994
Vanguard International
Semiconductor Corporation(VIS)
Yes
Yes
* Unit: Million USD
3.2.2 The warm up period from 1995-1999
After 1995, ITRI little by little realized that importance of intellectual property
management. A great amount of attention was drawn to establish a management
system based on contracts. Articles stating that every service invention of ITRI’s
employees shall be entitled to ITRL were formally incorporated into the employment
contracts. ITRI also inflicted contractual burden over its employees that without
authorization, any employee shall not disclose or license any technology owned by
ITRI.
3.2.3 The period from 2000
The forgoing description shows that ITRI paid due attention to intellectual
property management even before the Science and Technology Basis law went into
effect. Therefore, the passage of the law did not bring any burden to ITRI. Instead,
ITRI’s took advantage of the deregulation and transformed it into due incentive for
further invention. The achievements that the number of patents and inventions sharply
increased during this period are shown in Figure 2.
7
1400
Pre STBL age
Warm up
age
1200
STBL age
1146
960
1000
862
821
735
800
600
Patents
Start up
400
200
8
766
559 537
447
368 381
TSMC
15
548
274
27
37
59
78 178
14
20
41
51
134
186
521
523
488
277
229
188 223
291
328 326
289
441
Inventions
0
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Figure.2 The numbers of patents and inventions in three ages of ITRI
Apart from the apparent increase in the number of patent, the number of
technology transfer and industry service increases as well (Table.2). If the year 2000
is used as a benchmark, the numbers after 2000 are generally larger. This is a clear
manifestation of ITRI’s success in the warm up period as well as the power of the
Science and Technology Basis Law.
Table.2 the numbers of technology output in ITRI
Patents Awarded
Tech. Transferred
98’
99’
2000
01’
02’
03’
04’
559
361
537
353
960
471
862
337
821
414
776
520
1146
712
25,410
27,825
42,646
30,427
25,812
25,846
27,282
Services to
Industry
(companies)
3.3 Current backdrop and ITRI’s inner regulations
Although the Science and Technology Basis Law symbolized the initiation of
Taiwan’s version of Bayl-Dole Act, the importance of the law lied in the exclusion of
the application of Government Property Management Act which is an inadequate
burden for intellectual property transfer.
Another policy reform right after the passage of the Science and Technology
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Fundamental Law lied in the transformation of independent research institutes such as
ITRI. The new policy asked those research institutes to finance themselves in a short
run, which pressed them to pay more attention to their own stock of previous and
current intellectual property and to wisely get value from them. These two relevant
developments drove ITRI further to devote itself to intellectual property management
and commercialization.
Having a close look at the current intellectual property management rules issued
by ITRI, it shows that ITRI has built up a system based on rewards to individual
inventor. If the technology in question has a chance be commercialized, the inventors
can share a reasonable portion of the royalty income.
A good intellectual property management not only deals with profit creating.
Apart from educating its employees and explicitly ruling that employees shall keep
the confidentiality of their new inventions, ITRL established a peer supervision
system to monitor employees’ act and thus protect its own trade secrecy. On the other
hand, ITRI started to actively license its current technology and filed litigation against
those who used ITRI’s intellectual property without being licensed. By these steps,
ITRI generated remarkable revenue from licensing.
3.4 Intellectual property management structure
3.4.1 The establishment of technology licensing office
The various research units inside ITRI can be viewed as intellectual property
creating units. Because the great number of technologies has reached economy of
scale, ITRI established technology transfer office in charge of legal affairs,
information provision, and patent prosecution. ITRI’s current organizational chart can
be depicted as Figure.3).
Research & Service Organization about professional
Board of
Directors
Chairman
technology (12 units)
President
Nanotechnology Research Center (NTRC)
Industrial Economics Knowledge Center (IEK)
Executive
Creativity Laboratory (CL)
ITRI College (IC)
Vice President
Vice President
Technology Services Center (TSC)
Technology Transfer Center(TTC)
Information Technology Service Center (ISC)
Administrative Services Center (ASC)
Accounting Resource Center (ARC)
Figure.3 The The framework for IR management in ITRI
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3.4.2 Information network for intellectual property commercialization
As far as the demand side is concerned, in order to give ITRI’s inventions a
quick access to product commercialization, a good control of the supplier’s
information is paramount. To echo such need, Industrial Technology Intelligence
Services was set up to provide the information of market analysis, technology analysis
and patent survey.
As far as the supply side is concerned, in order to have a good control over its
current technology development, ITRI established a platform for invention disclosure.
Even though ITRI has some edge-cutting technology, if the markets fail to know that,
the important invention may turn out to be useless. Nevertheless, ITRI is a huge
organization with numerous research centers. It is important to place an integral
information gathering system for every unit in ITRI. The overall information
management structure of ITRI’s technological marketing can be illustrated in
Figure.4.
Technology Producer
Technology Demander
The bulletin for Technology
Populace
The Database of Technology
The members
Technology Reveal
Information Management
Technology Requester
Negotiated Price
The Center of Incubation in ITRI
To Confirm Commercialization and Market Information
Successful Start-up
Figure.4 the Information management for technology marketing in ITRI
By the successful functioning of the matching system, the supply and demand
side of technology market can easily meet at a far less transaction cost. It could be one
of the important reasons underlying ITRI’s success over these years.
3.5 Professional development
Since ITRI has viewed itself as a professional research and development institute,
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it has long been devoted to further professional training. For example, ITRI highly
encouraged its employee to actively participate in relevant seminars in order to
accustom them to the latest technology development. Besides, since most seminars
have a diversity of audience ranging from research institute to market. It also forms a
platform for the exchange of market information. The growing trend of seminar
attendance can be illustrated in Table.3.
Table.3 the numbers of professional training in ITRI
98’
Conferences
914
Sessions
Conferences and
Training Programs 60,567
(attendees)
99’
2000
01’
02’
03’
04’
1,104
1,463
933
956
1,136
n/a
82,225
96,900
78,336
90,594
94,534 114,315
The continuing emphasis on intellectual property management was also
incorporated into the professional training. Intellectual property trainings sometimes
took the form of weekly or monthly regular training and sometimes were initiated
after certain important legal or business development.
Apart from the enhancement of general understanding, successful intellectual
property management also requires “experts” in this area to take charge of important
decisions. A number of well recognized exerts of intellectual property management in
Taiwan were recruited to join ITRI, such as DR. Yeou-Gong Hsu, Dr. Pan-yao Wang,
Dr. Alxe Fan and the former Chief Legal Office in Foxxcomm, Mr. Y.P. Jou. This
could also be taken as a substantial improvement to the line-up of ITRI’s professional
expert.
3.6 Summary
In a nutshell, ITRI’s experience shows us a good control over the whole process
of R&D management, disclosure, intellectual property protection and
commercialization within a sound environment of incentive structure and information
exchange platform. If any construct or linkage in the system fails to function, the final
performance will absolutely be negatively affected. The overall structure of IRTL’s
intellectual property management can be diagramed as Figure.5.
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Service Invention Management
The System of Motivation
IPR
Flow
R&D
Disclose
Protect
Commercialize
The System of IPR Education
The System of IPR value added
Figure.5 The Successful Intellectual property commercialization
4. Conclusion- the implication of ITRI’s successful experience
As a successful model of intellectual property commercialization in Taiwan
where the macro technology transfer environment is still under development, ITRI’s
success sheds a light on other research institute or big enterprises in similar conditions.
The most important factors underlying ITRI’s success can be summarized as (1) a
clear policy of intellectual property commercialization in the organization；(2) a clear
incentive and punishment structure toward inventions and infringement ； (3) a
professional team of intellectual property commercialization experts as well as the
provision of continual training；(4) a successful platform to match the demand and
supply side of technology market.
Another important character of ITRI lies in the fact that it was viewed as a quasi
government sector in the past. Therefore, it seemed strange for a government like
research institute to file litigations against the general people. This unique scenario
hugely hampered the development of intellectual property management. The
experiences of ITRI show that such a distorted belief shall be altered. The strategy of
active licensing not only benefits the industry, but ITRI itself also maintains a
successful management and a stable cash inflow. This shall be another important
implication ITRI can bring to other government sponsored research institutes.
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