Examination of Witnesses (Questions 1-19)|
OBE, PROFESSOR SIR
CBE, PROFESSOR JULIA
GOODFELLOW CBE, AND
MONDAY 11 MARCH 2002
1. Good afternoon, welcome to the Committee
of Public Accounts. Today we are discussing the commercialisation
of public sector science. We are delighted to have Mr Robin Young,
the Accounting Officer for the Department of Trade and Industry.
Would you like to introduce your colleagues?
(Mr Young) Directly on my right I have
John Taylor, who is the Director General of the Research Council
within OST, which is within the DTI. On his right Professor George
Radda, Chief Executive of the Medical Research Council and on
my immediate left Professor Julia Goodfellow, Chief Executive
of the Biotechnology and Biological Sciences Research Council
and Professor John Lawton Chief Executive of the Natural Environment
Research Council, these three research councils being the ones
looked at in this Report.
2. Thank you very much. Perhaps I can introduce
the questioning on behalf of my colleagues. Could you please turn
to page 15 and look at paragraph 1.7. There you have some pretty
general aims, "The government is keen to encourage them"
that is the councils "in cooperation with the private sector",
et cetera, et cetera. Very general objectives, what does it actually
mean? If you read 1.7 an objective observer may come away with
the conclusion that you can do whatever you like and it is very
difficult to measure what you have achieved. Is that an unfair
(Mr Young) I think it is a bit unfair, Chairman, and
I do not think it is one that the Report bears out. What the Report
has done is that it has described the Baker Report's recommendations
to government on carrying forward the commercialisation effort.
It then goes on to point out mainly how well the research councils
are doing in pushing forward that agenda. It then looks at the
various forms of commercialisation. If I can draw your attention
to the top of page 15, the very page you are on, to Figure 5,
where it points out that commercialisation reveals itself in a
variety of outputs, none of which are easily susceptible to magic
wands or simple targetary. What we are doing here in discussionsand
we will, no doubt, go on to describe to you during this sessionwith
the research councils is describing and working-up with them key
indicators of success in driving forward commercialisation. There
is no simple wand because the six things listed under Figure 5
are very different and they are applied differently in the different
research councils because of the different sectors which those
councils deal with. We have a system of output indicators, annual
discussions, annual reports, indicators of progress and we are
looking at various ways of charting that progress. All in all,
if I can refer you back to page 8, paragraph 24, what the Report
says is, "The Research Establishments we studied as a group,
have developed the full range of commercialisation opportunities,
from free dissemination of information to venture capital financed
spin out companies". That is more the picture, rather than
the way you described it.
3. Let us try and cut through this, we are talking
here about outputs and outcomes. The output is transferred intellectual
property to the private sector companies, the outcome is what
they make of it. Where and how is this being measured? How is
your success being measured in achieving what is essentially the
Government aim in this area?
(Mr Young) Let me start on that and then my colleagues
can help me as they think fit, if that is allowed. The key indicators
of progress, which we are discussing with each research council
as part of our annual report discussions and operating plan discussions
include the following: we look at the level of income; we look
at the value of the contracts and the collaborations which they
have with the private sector and others; we look at the total
number of their patents; we look at the number of their new patents
in the year; we look at the number of licensing agreements they
have achieved; the number of start-up or spin off companies they
achieve and the number of employees in those start-up companies.
There are a whole range of things, not one straightforward measure,
a whole range of measures which we think are necessary, and the
Report gives credit to that, to trace all of the research commercialisation
outputs listed in Figure 5 on page 15.
4. If you can now turn to page 5, please, and
if you look at paragraph 12 you will see there that, "The
Office of Science and Technology is revising the performance indicators
that apply to Research Councils to reflect this high level target".
Can you tell us a bit about how these indicators are being benchmarked
against other research councils and the university sector? Would
you like to comment on the anecdotal feeling that the university
sector may be better at doing this than the councils, or do you
(Dr Taylor) I begin by saying that I think that the
Report shows clearly that over the last three years, or so, we
have been in a very positive and fast-changing climate. Policy
has been coming from the top which says commercialisation, and
so on, is important. A lot of the things that have been in place
and picked up in the Report show that basically we are moving
very positively in the right direction. It is very important to
register that, and in this activity one size does not fit all.
What is appropriate for medical research council institutes might
be quite different from what is appropriate for other institutes.
They are at different stages and different market places with
different kinds of science. What we are doing at the moment is
revising the way in which we try and measure and assess the kind
of activities that are going on, knowing that they are all moving
in a very positive direction. That is a process that we will be
pulling together, now that the Quinquennial Review has been completed,
as we look across the councils and their institutes to try and
get a feel for the set of activities that are in place. This is
very much an opportunistic activity and it is driven by our science
research programme and then a very good process for spotting first
class opportunities for commercialisation that come from that.
5. Can I refer you, Mr Young, to page 2, paragraph
4, please. This is what we all know about, that the United Kingdom
has a strong record of innovation but it is widely considered
to be less successful in capturing the economic benefits of scientific
advances. That is very true and we all want to encourage commercialisation,
which we are talking about today. How can you ensure that the
public service priorities of these councils are not distorted?
We do not want a situation where we are affecting the ability
of these councils to do blue sky research because they are plodding
after some commercial opportunity?
(Mr Young) I could not agree more, which is why the
government position is that we only want to encourage commercialisation,
broadly speaking, as it says in paragraph 4, as long as that does
not compromise the research establishments core scientific role.
I should say that in most cases commercialisation very much supports
and complements, I would argue, the core scientific roles of these
establishments and several people on this table will confirm that.
In all of the discussions which John Taylor, the Director General
of the Research Council, had with each research council, a key
component of that discussion is how they are hitting their core
mission, how they are achieving their core mission objective and
how commercialisation is being used to support that and not detract
6. Can I refer you to page 22, please, paragraph
2.18, there is rather a noble statement here, "Scientists
responding to our survey said that they were not primarily motivated
by the potential to make money for themselves". I wanted
to pursue this, and this might interest the Committee as well.
There are some complaints from dons, particularly in the arts
sectorthese may be very unfair complaints but I have to
put them to youthere are some scientists in the more biology
sectors than scientific sectors who are quite good at setting
up research projects, getting into intellectual property, transferring
them into private companies in which they may have some stake
and thereby deriving some personal benefit which may not be in
their personal interest. Can you comment on that? Is that an unfair
(Mr Young) The position started with the recommendations
of the Baker Report, which are summarised on page 16, which said
that they were clear that the opportunities for commercialisation
were held back by perceived bias to commercial exploitation. In
other words, there are opportunities going missing because there
were no opportunities for individual scientists to benefit. That
said, the Government only did something about that, namely by
changing the Civil Service Code and issuing other guidance to
councils on the basis that such exploitation by individual scientists
is carefully managed and controlled. If I may, I will ask any
Chief Executives here to give examples of that. The government
response to the Baker Report recommendations, was quite clear
that a key barrier to successful commercialisation, the subject
of this Report, was rules preventing individual scientists from
7. This never happens, a scientist does not
transfer his intellectual property, which he developed with the
help of public money, by some sleight of hand into a private company
in which he has some stake, it has never happened?
(Mr Young) "Never" is a difficult word to
use in this Committee. Our guidance is quite explicit on how to
manage the risk of that happening. Equally, we did deliberately
change the Civil Service Code to allow some of that to happen
because we were told some exploitation
8. That seems to be a rather contradictory answer,
other colleagues can come in on that if they want to. Can I ask
all of your colleague to now turn to page 21, paragraph 2.12.
"The senior managers of the Research Establishments covered
in this study also recognise that commercialisation should form
part of their personal objectives". Can I ask your colleagues
if their personal remuneration contains a variable element linked
to successful commercialisation by their research establishments?
(Professor Sir George Radda) The answer is no. Our
personal remuneration is not linked to any commercial success
in my organisation. Incidentally, our commercial exploitation
is centrally managed rather than by each institution, which is
different from the other research councils, because we have a
different relationship between our institute units and the MRC
9. Is anybody's remuneration dependent on successful
(Professor Lawton) If I can take the Natural Environment
Research Council, Chairman, the directors of all of the NERC establishments,
the British Geological Survey, and so on, have the implementation
of the recommendations of the Baker Report in their annual performance
objectives, ie one of their performance objectives is to implement
the Baker Report. That is also in my objectives. As part of the
overall assessment of their performance over the year that will
be one of the issues that will be taken into account.
10. If they successfully commercialise they
get paid more, they get some sort of bonus?
(Professor Lawton) They are on performance-related
bonuses across a whole series of activities, and that will be
one of the activities that will be taken into account by the Remunerations
Committee in assessing their annual performance bonus, yes.
11. How are you and your colleagues ensuring
the integrity of the system so that the public service objectives
of your council is not distorted by the desire of your staff to
exploit commercial opportunities and, therefore, to be paid more?
How do you insure the integrity of your council against this?
(Dr Taylor) Let me summarise for you the top level
sets of checks and balances from OST to the research councils.
First of all, each council is required to produce a five-year
strategy, a one-year operating plan and a one year annual report
and that contains a set of objectives, including activities in
the area of commercialisation, as called for in this Report. Their
personal objectives are set by me and they have performance-related
bonuses which are set by a Remuneration Committee, involving me
and some of the research council members, reflecting how well
they have implemented those objectives. In addition each research
council has an Audit Committee which is responsible for overseeing
the processes and the outcomes of what it is doing. Between those
three sets of things we seek to encourage a reasonable commercialisation
programme, very much along the lines recognised in the Report,
but keeping it under the right set of checks and balances. That
is one of the reasons why we steer away at the top level from
very specific numeric targets which can, indeed, affect the wrong
kind of behaviour, a curious kind of behaviour and why the whole
question of metrics and measures in this area needs considerable
12. Other colleagues can deal with that further.
Can I approach this question from another direction and refer
you to paragraph 2.17. "Our survey indicated that this is
frequently not done and that scientists believe that their career
paths discourages involvement in commercialisation activity".
How big a deterrent is this? Scientists believe that how they
get on is doing original research, getting academic papers published
and if they are asked to do commercial stuff they are simply not
progressing in their career. Is that a fair comment?
(Professor Goodfellow) When we review our institutesand
you have to remember that BBSRC has eight independent instituteswe
review these every four years in detail. They have annual reviews
throughout that as well, and we look at knowledge transfer as
one of the things the staff are doing and we also look at the
quality of the science and how it is working as an institute,
is it fulfilling the strategic aims. It is one of a number of
indicators that we are looking at.
(Dr Taylor) The population of scientists in any laboratory
is not uniform. There are various different mixes of styles of
people involved in any sizable research group. Again, one size
does not fit all in this case.
13. Can I ask a question based on paragraph
1.9 on page 15 now. I think you have there your three research
councils receiving a total of £17 million from commercialisation.
What sort of figure would satisfy you as having met your objectives?
What are you aiming at?
(Mr Young) We have deliberately and explicitly offered
no such figure. What we are doing is setting each chief executive
a target and constantly increasing and learning from the commercialisation
opportunities, bearing in mind warnings that you yourself set
us not to detract from the core objective of the core scientific
benefit, but equally being keen within that context to maximise
opportunities. Each research council is very different. The figures
in 1.9 make clear both the different history and also the different
opportunities in different areas. We are working away year-on-year
looking at the amount of income each earns and we will be tracking
in a previous answer I listed, I will not repeat it again, about
seven things which we are tracking to indicate progress on commercialisation.
Income is but one thing, numbers of employees in start-up companies
is as important an indicator, some would say, of commercialisation
progress as income. Income is one important thing we are tracking,
but there are lots of others to show to what extent people are
doing the commercialisation things listed in Figure 5 on page
14. In terms of the intellectual seed corn,
how far are we losing the battle before we get in there and start
fighting? How far are the Americans able to poach our best research
students before they even reach the stage where they are possibly
going to be attracted by anything that you are offering?
(Mr Young) I will make a general response and ask
one of my colleagues to fill it in. You are quite right, Mr Williams,
intellectual property and the control thereof is absolutely key
to this and is right at the forefront of our concerns. For what
it is worth, we issued, via the Patent Office, guidance in December
2001 as to how to balance this very difficult scale.
15. You have not answered the question I asked,
which is to you because you are in charge of education, which
is, how far are we losing the battle before the education stage,
before we reach the productive research stage? How far are the
Americans pinching our best young scientists? MIT and Harvard
offer very generous inducements to promising people from all over
the world. Is there any evidence we are losing any in this way?
(Mr Young) I am so sorry, I missed the point that
it was education you were talking about. I do not think there
is any evidence of that.
(Dr Taylor) I think what we have seen over the last
few years is an intensification of the battle to get people in
various leading economies, the Germans, the Americans, and so
on, and that is a battle in which we have to be continually be
engaged with schemes like the Wolfson Foundation and Royal Society
Scheme, part funded by OST, which we launched last year, to actively
top-up the remuneration and the packages that we could offer to
keep people who are in the United States or anywhere else and
to bring them back. I will ask George Radda to tell you about
some of the successful refreshments he has managed.
16. I went to MIT and Harvard about a year ago
and I was very impressed by the packages they could cobble together
if they really wanted somebody. Are we able to match them?
(Professor Sir George Radda) Could I just say that,
for example, in an organisation like the laboratory of molecular
biology in Cambridge a large percentage, I do not know the exact
figure, but it is more than half, of the post-doctorate fellows
are non-United Kingdom scientists linked here, rather than going
the other way round. We still have no difficulties in filling
the studentships with outstanding graduates in our institutes
and units. Recently we have been successful in recruiting people,
both at junior and senior level, back to this country, either
expatriate or to this country from the United States and Germany.
We are still competitive, partly in terms of the commercialisation
activities, the incentives we can offer, which are also helpful.
I happen to have the figures that the MIT invest in research which
is something like £515 million per annum compared to our
investment which is £180 million, and they will have an income
from commercialisation of 4.4 per cent against the MRC income
of 9.9 per cent. Actually we compare very favourably on a number
of counts with major institutions like MIT.
(Dr Taylor) The other thing that happened very recently
is the change made in 2001 to the ability for foreign PhD students
to get work permits if it turns out there are commercialisation
prospects in the work that they are doing, I think that is a very
important step forward to help retain the very best of overseas
talent to continue working on projects in England.
17. That does not preclude the possibility that
we are losing our top quality people to America and keeping not
such high quality people from other countries. That would equally
explain the situation you just described. You can put in a note
if you wish to, it would be very welcome. How far does the American
practice of patenting everything that moves inhibit what we are
able to do in this country? I know the two patenting systems are
very different. I know the Americans are now, at last, coming
into line with the rest of the world and Europe, in particular.
Is there a threat to us in their approach to patenting?
(Professor Lawton) I will pick this up as the research
council with the least number of patents, because the nature of
the environmental work we do does not lend itself as much as it
might in the medical area. The Report, of course, does not discuss
these issues, Mr Chairman, so the arguments are not necessarily
pertinent to the discussions that are in the Report.
18. It does refer to intellectual property as
part of the process of preserving intellectual property. There
is a fierce difference between us and the Americans, where they
are quite parasitic in their approach to it, so we cannot brush
(Professor Lawton) Where the opportunities exist we
do enter into patents quite aggressively within the United Kingdom
and within Europe. There are others ways of protecting intellectual
property apart from patents.
19. When you have something that is worth developing
and you see how far have we developed it. There is considerable
reference here to the venture capital involvement. This, again,
is something, as you would anticipate, the Americans have been
way ahead of us in and how far are we now able at this stage to
match them in the appropriateness and the timeliness and the scale
of the intervention by venture capital support?
(Professor Sir George Radda) Could I say that several
years ago we recognised the difficulties of getting some of the
United Kingdom venture capital people to invest in start-up companies
in biotechnology, particularly on the biomedical side. This is
one of the reasons why we have set up our own venture capital
company entirely from private funds, initially £40 million
a few years ago and we are now repeating that and have already
collected £41 million, and we expect to have more, for what
is called MVM Limited.
This is a wholly owned venture capital company that the MRC set
up. This has been extremely successful in providing venture capital
and, more importantly, management advice in setting up enough
companies. In relation to the US threat that you implied before
I think it is important to recognise that the threat is in the
volume of research that is being carried out in the US, not in
the ease or difficulty of getting patents.
1 Note by Witness: MVM Limited acts as the general
partner to the UK Medical Ventures Fund (the first fund) and the
MVM International Life Sciences Fund II (the second fund). Back