The commercialisation of academic research is an active topic in Finland. Due to the new legislative change in Finland, Finnish universities may hold shares in companies and also establish university-based companies.
The new legislation will come into force this autumn. In addition, there is also another legislative proposal already pending.
In December 2004, the Finnish government submitted a proposal for a new Act on university inventions, aiming to solve difficulties concerning the distribution of intellectual property rights in research projects undertaken by universities and other institutions of higher education and commercialised in collaboration with industrial partners. This article discusses different aspects related to these reforms.
University-based companies
The present legislation in Finland does not allow universities to hold shares in companies. Therefore, the Finnish technology transfer practice differs quite considerably from that in, for example, the US. The aim of this new legislation is to promote effective technology transfer within universities. Naturally, the change also increases the economic autonomy of the Finnish universities. As the Minister of Education and Science Ms Tuula Haatainen has stated, this is a rather significant change and it will open new possibilities to universities.
In order to establish a company in which the university is a shareholder, a separate resolution by the Ministry of Education is still required. Furthermore, the university has to plan its strategy and assess its role in such university companies. One of the most important questions is the role of the university’s personnel in those companies. For instance, problems may arise when the same person is employed by the university but also by the university company. In such cases, one has to establish a clear policy, which defines the work duties in relation to both entities.
Of course, new rules give a number of different possibilities for universities to develop their activities as well as to strengthen their relationships to the commercial world. It is often criticised that pure commercial technology transfer operations do not belong to the main functions of a university – basic research and education. Under these new rules universities are able to respond to this criticism.
By establishing separate technology transfer units and service providing companies, universities can focus on their core functions. Nevertheless, it will be seen whether universities take an active role in this respect.
University inventions
In accordance with the proposal for an Act on university inventions, the Finnish universities would be able to acquire rights to inventions from researchers by virtue of law. The new Act would be applicable to inventions created not only by teachers and researchers who currently are exempt from the application of the Finnish Employee Inventions Act, but also by all other persons employed by or in the service of all institutions of higher education, including ‘polytechnics’. Under the new Act, the institution would always have to be notified of an invention, thus ensuring that new inventions are effectively monitored and administered.
As noted above the current Employee Inventions Act does not apply to university researchers. Therefore, the starting point is that they own all the rights to inventions conceived during the research activities. However, university researchers and research groups often participate in many kinds of collaboration projects and other activities. In such cases, this exemption requires considerable administration and management of intellectual property rights from the universities, since they have to agree separately on rights to inventions.
The proposal for the new act on university inventions aims to provide a solution to this problem. The scope of the rights that an institution can acquire would depend on the nature of the research leading to the invention. The employee or researcher would always be entitled to reasonable compensation for the transfer of rights to the invention. "Reasonable compensation" would not correspond to the value of the invention itself, but should be seen to represent an appropriate incentive for researchers. The bases for determining the amount of compensation would be somewhat different from the bases used for determining the compensation under the Employee Inventions Act.
The research would be categorised as open or contract research depending on whether an outside party – in practice a financier – participated in the research project. The research would always be characterised as contract research when an agreement has been concluded, providing for the full or partial transfer of rights to any party outside the institution of higher education. After receiving the invention notification, the institution would have six months to decide whether to acquire the rights to it or not.
If no outside parties have participated in the research, it would be classed as open research. In this case, the institution would have the right to acquire the rights only if the inventor has no plans to utilise the invention. Rights to inventions ensuing from other activities would remain with the inventor, but the institution would have the prerogative to negotiate a deal for the transfer of rights with the inventor. The new Act would also limit the right of the inventor and the institution of higher education to disclose information concerning the invention, if such a disclosure would endanger the utilisation of the invention in the future.
It is argued that the new legislation would simplify difficulties concerning the transfer of rights between universities and companies. The proposal would enable these parties to concentrate their efforts on other key questions, such as project management, determining the compensation level and licence and nondisclosure provisions. The proposal appears to emphasise the importance of agreeing on various issues and details regarding research projects, and thus these proposed reforms would also have a profound positive impact on companies cooperating with universities.
Exclude pitfalls
As noted above, the new act on university inventions is still pending and one may still expect some changes to the actual wording. It must also be stressed that despite these quite significant changes to Finnish law, all the parties involved in university-related technology transfer should always ensure the intellectual property rights have been accurately assigned and other legal pitfalls in relation to the university, researchers, companies and investors have been excluded.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.