〈日本知財学会誌〉Vol.5 No.2 ― 2008 : 36 ― 50

Large Companies’ Preemption of University Inventions by
Joint Research Is Strangling Japanese Entrepreneurshipand Contributing to the Degradation of University Science
Robert Kneller（Prof., The Research Center for Advanced Science and Technology, University of Tokyo）
Sachiko Shudo（Associate Prof., School of Law, Waseda University）

Joint research collaborations in Japan have increased dramatically. In major universities, most collaborations inadvanced science and technology involve large companies. Many have facilitated the development of university
discoveries. However, patent law and the system of university IP management have enabled large partner companies tocontrol（preempt）the majority of university discoveries that have commercial value. This limits growth opportunities
for new high-technology companies and, by by-passing TLOS and IP management offices, thwarts the development ofeffective technology management capabilities on the part of universities. This is a problem since new companies are
better at early stage innovation than old companies in many new fields of technology. Preemption exacerbates the
weakness of Japanese high technology entrepreneurship. Preemption of university discoveries by large companies is theresult of policies that make preemption easy, encourage university research in applied fields, and allow findings to be
kept secret thereby encouraging more applied research that is likely to be preempted. Whether the short-term benefits
for large companies justify the foregone opportunities for pioneering research and the undermining of entrepreneurshipand academic freedom is a question that needs serious consideration. This paper offers some recommendations to curb
the worst excesses of preemption and to reward pioneering university research.
■ KEYWORDS

University-industry Collaboration, Joint Research, Joint Patents, Ventures/Startups/Entrepreneurship, Science Policy

to the benefit of society.

1. Introduction

However, at least in the case of major Japanese
universities, large, established companies haveSince reforms of the university-industry

benefitted most. Access to university discoveries

cooperation framework began ten years ago, theof small companies, and in particular, newsteady expansion of joint research between

entrepreneurial high technology companies, hascompanies and Japanese universities has been the

been limited. This is due, in part, to large

most striking achievement. This expansion iscompanies being more suited than new companies

evident in increases in funding from companies,

to develop some university discoveries. However,numbers or projects, numbers of industry and

it is also due to the system of university IP

university researchers involved in collaborations,management that enables large companies toand transfers of university intellectual property

preempt university discoveries and thus limit（IP）to industry ― usually by joint patent

opportunities for new technology-based companies

applications. This expansion probably has

to grow. Here, preemption refers to the joint

provided substantial benefits to the partner

research partner receiving exclusive control overcompanies and resulted in the development andnot only discoveries definitely within the scope ofcommercialization of some university discoveries

the joint research project, but also a wider36

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ISSN 1349 ― 421X
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Large Companies’ Preemption of University Inventions by Joint Research Is Strangling Japanese Entrepreneurship and Contributing to the Degradation of University Science

penumbra of inventions related to the theme ofin pharmaceuticals, biomedical devices, mobile

the project ― discoveries that relied mainly on

telecommunications, internet related technologies,

government funding.

semiconductors, hard disk drives, materials andJapanese government research projects mayother industries（Christensen 1993, Goodman andthemselves facilitate preemption, because many

Myers 2005, Hall and Ziedonis 2003, Kneller

large government projects tend to address applied

2007a）. At least in pharmaceuticals, there is clear

research questions, and some（ particularly

evidence that new companies are more innovative

consortium projects）are aimed at increasing thethan established pharmaceutical companies. Butinternational competitiveness of large companies.

only in the US, Canada and Australia do new life

Thus the discoveries that emerge from such

science companies account for a substantial

applied projects often fall within the businesspercentage of drug discovery.

scopes of large companies. The current system

Particularly in Japan, new companies play aenables such companies to preempt thesesmall role in innovation. Outside of about 50

government funded discoveries. Sometimes

companies in the life sciences and a smaller

preemption extends beyond IP to include thenumber in software, the number of newtime, interest and energy of Japanese university

companies that are developing globally innovative

researchers.

technologies, and that have significant prospects

Thus preemption, and the system thatfor business growth, is small. This applies both toencourages preemption, hurts Japanese university

companies created to develop university

science by shifting its emphasis away fromdiscoveries（hereinafter startups）and even more

pioneering basic research to applied research that

so to independent companies “spun-out” ofis not groundbreaking but that responds to theestablished companies.

short to mid-term needs of large companies.
However, this may hurt companies in the long

The reasons for this difference are complex, but
the likely leading causes are as follows:

term because capable Japanese university

1. The continued prevalence of lifetime employment

researchers probably are focusing less thanand low worker mobility in high technology

overseas colleagues on new areas of science that

manufacturing industries. This severely limits

might be the basis of commercial technologies

formation of spinouts, and deprives startups

twenty or more years in the future. It definitely

and other high tech ventures of managerial

hurts high technology entrepreneurship, because

and research talent. High labor mobility is

few discoveries remain that new companies canprobably one of the fundamental reasons for

exploit. Again, this probably hurts Japanesethe success of Silicon Valley. The reasonsindustry in the long term because new companies

behind continued low labor mobility inhave shown that they are often best able to

Japanese high tech industries are alsocommercialize discoveries in new fields of science.

complex, but corporate pension policies,
corporate job rotation and promotion policies,

2. The role of high technology ventures
in innovation

negative family attitudes towards husbands
and children working in ventures, obstacles totwocareerhouseholds,

laws

againstIn the US and a few other countries, newdisclosure of trade secrets, and the system of

1

graduate-level university education, probably

companies have played a major role in innovation

37

〈日本知財学会誌〉Vol.5 No.2 ― 2008

all are important factors.

and financial resources are locked up in large

2. The continuing tendency for autarkic innovation

organizations, leaving limited opportunities forin Japanese manufacturing companies. This is

new high technology companies to grow（Knellerchanging, but only slowly. Chesbrough’s

2007a）.

（2003）concept of open innovation
characterized by large companies actively

3. A deeper examination of preemption

seeking core technologies from many sources,
including independent small companies,

Of the four factors listed above, only the fourth

simply does not apply to most Japanesemight be amenable to change in the short term bycompanies. Japanese manufacturers may

government policy. Therefore, it is worthwhile topractice a variation of open innovation, but, assummarize the evidence that preemption ofdescribed

university discoveries is prevalent and also to

below,

thisislimitedtocollaborative research with universities thatallows the companies to exclusively control
IP.

2

consider how and why this preemption occurs.
As for evidence for preemption, in several
major Japanese universities, about half of patented

3. Demographics. Japan’s population is aging andinventions are attributed to joint research. Among

its immigration rates are low. In Silicon

the inventions that are actually transferred either

Valley, immigrants constitute about a third of

by license or by joint patent applications, joint

all researchers and venture company

research inventions constitute about three-managers, and the proportion of immigrants

quarters. However, in the case of the University ofin high tech ventures elsewhere in the US isTokyo, joint research from private companies

also high. In addition, there is evidence that

accounts for less than 7 percent of thatthe long hours and frequent job changes（notuniversity’s research budget not including salaries

always voluntary）associated with work inof permanent employees,3 and the average company

high tech ventures is probably more suited tofunding per project per year is less than $50,000

young persons who either do not have

USD.4 Interviews with Japanese companies thatchildren or whose children have some othersponsor research in both US and Japanesesource of financial support（e.g., anotheruniversities and with technology transfer officials

parent with a stable job）. In all these areas,in US universities indicate that average corporate

Japan is at a disadvantage.

funding for joint research projects is higher in US

4. T h e s y s t e m o f u n i v e r s i t y - i n d u s t r ythan Japanese universities. This is supported bycollaboration in Japan still is characterized by

OECD data showing that industry funded only 2.8

preemption by large companies of university IP

percent of Japanese university R&D in 2002

and the energies of academic researchers.

compared to 5.3 percent in the US in 2003（NSB2008）. The proportion of inventions from major

Other serious problems include a shortage ofJapanese universities that are transferred as joint

skilled managers for ventures, immaturity ofpatent applications has been rising since 2003, as

capital markets and difficulties in raising capital.

the total number of joint research projects has

However, these problems probably originate

risen. Outside of the life sciences, the patent co-largely from the first four factors mentioned

applicants

above. Simply put, much of Japan’s best human
38

are
5

usuallylarge

establishedcompanies. In other words, in return for aLarge Companies’ Preemption of University Inventions by Joint Research Is Strangling Japanese Entrepreneurship and Contributing to the Degradation of University Science

relatively small amount of research support thatconceivable that in many cases company

could not possibly cover most of the inputs that

researchers do actually contribute to thecontribute to discovery（especially salaries andinventions. In addition, university administrations

university infrastructure）, large Japanese

encourage increased commissioned and jointcompanies are obtaining exclusive control overresearch funding from industry, and while they

the vast majority of discoveries in major Japanese

may demand overhead payments as high as 30

universities.

percent, they are loathe to haggle with companies
about IP rights. Finally, many university TLOs

3.1. Preemption of IP

are not able to market inventions effectively, so

Licenses to large companies have increased,letting inventions pass automatically to research

while licenses to small companies have decreased

sponsors is the most practical method ofand total university license revenue has barely

technology transfer.

6

increased. Licenses of independently invented

In any case, the present system recreates theuniversity discoveries to companies not engaged

system of technology transfer that existed prior toin joint research are few, and such license to new

the incorporation of national universities in 2004.

and small companies are especially few.

Under this former system, university inventors

But more important than licenses is the lock onpassed rights to their discoveries to companies

IP rights that companies gain by co-owningthat gave donations to their laboratories. They

inventions. Under article 73 of Japan’s Patent Law,became used to dealing directly with companies

each co-owner has a de facto perpetual, royalty

on technology transfer issues. Today, when they

free, exclusive license that cannot be transferred

directly reach agreements with companies as tounless all other co-owners agree. It is very easy

which collaborations relate most closely to various

for partner companies to co-own joint research

discoveries, they are simply recreating theinventions. Professors and the companies usuallysituation that existed before TLOs began to be

decide whom to list as co-inventors, and company

established in 1998 as intermediaries between

researchers are listed as co-inventors on mostthem and the companies.

inventions attributed to joint research projects.

TLOs and IP management offices have been

Their role as inventors is hardly ever questioned.

established in most major universities, it is

Various other factors contribute to the above

unfortunate that they are being bypassed

However, now thatphenomenon. Companies probably expect they

increasingly

should co-own inventions arising under theopportunities to improve their competence.

frequently

anddeprivedofprojects they fund（and sometimes also related
research）as quid pro quo for providing joint
research funding. Professors usually support

3.2. Preemption of university researchers’
time and energy

companies’ co-ownership claims, partly to maintainIn theory startups can also play this game ―good relations with the companies and partly

i.e., they also can fund joint research and obtainbecause they believe that allowing companies to

exclusive rights to the IP by having their

become co-owners is the easiest method toresearchers listed as inventors. However, thistransfer their discoveries to industry and thus

game is less attractive for new companies because

increase the likelihood of commercialization.

they often have to transfer their technologies to

Because the research tends to be applied, it isother companies in the course of business deals,
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〈日本知財学会誌〉Vol.5 No.2 ― 2008

such as outsourcing of manufacturing. Also, theacademic freedom likely results in increasing

fact remains that, at least in major national

numbers of university researchers working on

universities, large companies engaged in joint

applied topics that are natural targets forresearch still greatly outnumber ventures. This

preemption. It is easy for companies to restrict

suggests that more than just preemption of IP is

publication

occurring. Joint research with large companies

collaborative research. For example, the standard

also preempts the interest and energy ofjoint research agreement of the University ofuniversity researchers.

Tokyo（ §30） gives joint research sponsors

ofinformation

arising

from

More specifically, at least in some cases, it saps

considerable leeway to review and request/demand

any latent entrepreneurial interests of university

changes to manuscripts prior to publication. In

researchers.

university

addition, it is common for professors and graduate

entrepreneurs, especially those outside of the life

students to sign separate non-disclosure

sciences, indicate that the demonstration effectagreements with joint research sponsors, giving

among a founder’s colleagues is small. The

the companies additional authority to delete

founder of a highly regarded startup remarked

information they consider sensitive. Although I

that few of his colleagues were following in his

know of only a few cases where deletions havefootsteps, because they saw how hard he and his

been demanded, many researchers are aware ofcompany have to struggle with issues such as

such provisions. Press reports have confirmed

finding competent staff, finding customers,that findings from collaborations between major

managing IP, and preventing encroachment on

universities and manufacturers sometimes are not

Interviewswiththe core business of his company from the various

published（Nikkei 2007）. I know of cases wherelarge companies that are collaborating with his

joint research sponsors have demanded tolaboratory. Most of his colleagues prefer touniversity administrations that joint patentcontinue their normal university research

applications not be filed, that the results besupported by grants from government and large

treated as trade secrets. In summary, it iscompanies.

relatively easy for Japanese companies to turn to

In addition, large companies have used their

universities for applications-oriented research,

rights under article 73 to cut off businessbecause they know that information they consider

opportunities for startups, particularly to prevent

sensitive will probably be kept secret. The morethem from dealing with competitors. I know ofthey do so, the more university research is likely

some cases where large companies engaged in

to be oriented to the needs of particular

joint research with a founding professor havecompanies, rather than being pioneering researchclaimed co-ownership of discoveries made in thethat might be the basis for new companies.

founder’s laboratory that cover important
applications of the startup’s technology. Moreover,they refuse to let the university license these

3.3. System-wide factors fostering
preemption

inventions（on which the professor is co-inventor）

Although cross national comparisons areto the professor’s startup unless the startup

difficult, on the basis both of a comparison ofagrees that these inventions will not be

major funding programs and an examination oftransferred to the large company’s competitors.

individual projects in cutting edge fields ofFailure to rigorously uphold principles of40

science, government funded research projects

Large Companies’ Preemption of University Inventions by Joint Research Is Strangling Japanese Entrepreneurship and Contributing to the Degradation of University Science

probably are generally more applied in Japan thanproblems than in the US where research funding

the US（Kneller 2007a&b）, at least with respect

is more evenly distributed over about 100

to those funded by NIH and NSF. Because theresearch intensive universities（Takeuchi 2003,

potential commercial applications of large applied

Kneller 2007b）.

projects usually are fairly obvious, the companies
that are most likely to develop such applications
will be, in most cases, large companies.

Together these factors probably result in lower
priority being placed upon innovative scientific

Moreover, Japanese government funding for

research in Japanese universities. Again, theconsortium projects involving large establishedresults are more likely to meet the needs ofcompanies and universities accounts for aestablished companies than to be pioneering

substantial portion of government funding in

discoveries that might be more suited topioneering fields of science（Kneller 2007a）.

development by new companies.

Again, the results of such projects are more likely
to be of interest to a few established companies.
Peer review of grant applications is not as

4. Making joint research more proscience and pro-innovation

careful or expert-based as that conducted by NSF
and especially NIH. Although the NIH and NSF

In light of all the barriers to the growth of new

systems are not perfect, more careful peer review,high tech companies, as well as the extent tois probably more likely to detect innovative,

which the present system probably benefits

promising proposals, especially from younger

established companies, maybe it is foolish to evenresearchers and researchers from less prestigious

contemplate trying to change it. The arguments

universities. Reforms to the system of peer review

in favor for maintaining present policies are

might include larger numbers reviewers withstrong and possibly overwhelming.

expertise in the fields of proposals, open

But as mentioned at the beginning, in somediscussion among the reviewers and meaningfulindustries, startups and spinouts are innovation

feedback to applicants. Effective peer review

leaders. Also a university system that provides acannot be done “on the cheap,” as is the case withfavorable environment for startups is probably

many Japanese government funding programs. It

also an environment that promotes pioneering

requires appropriate budgeting of administrative

scientific discoveries（provided conflicts ofand financial resources and reviewers’ time.

interest issues are appropriately managed）. In

In addition, competitive funding for young

contrast, a university environment that is oriented

researchers that would enable them to have their

to serving the research needs of large establishedown laboratories and to pursue independentcompanies probably is not conducive toresearch is inadequate（CSTP 2003, Normile

pioneering, Nobel-level research.

2004）. Recruitment and promotion in major

Finally, approximately fifteen recent interviews

universities is still largely based upon patronage,with large established Japanese companies havewith little reliance on assessments by outside

detected a surprising degree of ambiguity about

experts（Coleman 1999, Kneller 2007a）. Finally,

the value of collaborations with universities. If

the concentration of Japanese government fundinglarge companies are not benefitting from a system

7

in a small number of universities probably resultsthat is so partial to their needs, is maintaining thein less diversified approaches to scientificsystem worth the costs in terms of stifled41

〈日本知財学会誌〉Vol.5 No.2 ― 2008

entrepreneurship, limitations on academic

contracts. It is all right for companies that

freedom, and foregone opportunities to pursue

sponsor research in universities to have an

pioneering science?

automatic non-exclusive license to inventions
directly arising from the research. But if they

The problems listed in 3.3 should be addressed

desire exclusive rights, they ought tofor the sake of improving university science. A

negotiate for such rights on a case by caselikely side effect will be greater entrepreneurshipbasis. Permanently overriding §73 would also

and more opportunities for world class startups tomitigate the current sweet-heart practice of

emerge. In addition, it might make sense to makeprofessors inserting the names of company

the following changes, not out of expectation that

researchers as co-inventors, because without

ventures would suddenly begin to flourish inthe §73 requirement that all co-owners agree

Japan, but to level somewhat the playing field forto any transfer, co-inventorship would haveaccess to university discoveries between large

much less importance for companies.8

companies and would-be entrepreneurs and also

3. Continuing efforts must be made tostrengthen the invention management

to improve the quality of science.

capabilities of Japanese TLOs and university
1. The ability of sponsoring companies to

IP management offices. Their main missions

restrict publication by university researchers

should be to decide which inventions needshould be very limited. Of course, confidential

patent protection to encourage private sector

information that comes from companies

development, and then to find companies thatshouldHowever,

are willing and able to pursue development.

information arising in university laboratories

They also ought to be able to determine

using company funding should in general bewhich inventions fall within the scope of joint

publishable without restrictions, other thanresearch projects, to make sure thatallowing the companies one or two months toinventors are not erroneously included or

make sure their internal confidential

excluded, and to determine which inventions

information is not revealed and to decideare suitable for development by ventures.

whether to apply for patents. If companies

Building these capabilities will take time, but

insist on the right to censor publications, theyin the long run, universities and academic

must pay almost all costs（including salaries

researchers should benefit by receiving aand fair market value for use of university

more equitable share of returns from theirinfrastructure）and students’ thesis research

inventions, by ensuring greater rewards forcannot be subject to censorship. The

ground breaking discoveries, and by

fundamental missions of universities are researchencouraging entrepreneurship.

not

be

published.

and education for the public good. Research thatneeds to be kept secret violates these objectives andought to be performed by companies in-house,rather than subsidized by taxpayers.
2. The requirement of Patent Law §73 that all
co-owners must agree to any transfer shouldbe irrevocably overridden in all joint research
42

Acknowledgement
Robert Knellre gratefully acknowledges grants-in-aid from theJapan Society for the Promotion of Science and that faciliatedresearch reflected in this article.
Note
1 “Innovation” is here defined as commercially relevant
discoveries and their development to approximately proof ofconcept stage.
2 This insistence on exclusive control also contrasts with theopen collaboration concept advocated by the Kauffman

Large Companies’ Preemption of University Inventions by Joint Research Is Strangling Japanese Entrepreneurship and Contributing to the Degradation of University Science345Foundation and companies such as IBM, under which theresults of sponsored research in universities will be madefreely available for any company to use. So far, however, theopen collaboration movement is limited mainly to open source
software.
In other words, if salaries for administrators and faculty thatare attributable to research are included among total R&D
expenses, corporate joint research funding would constituteconsiderably less than 7 percent.
University of Tokyo Data Book, 2007.
As shown in Kneller 2006, preemption by joint research isless frequent in the case of life science inventions, and whensuch inventions are attributed to joint research, the partner isequally likely to be a startup or another SME, as a large

6

7

8

company.
The increase in licenses to large companies is probably due,in large part, to companies negotiating for exclusive rights touniversities’ share of joint research inventions, as provided forexample under article 17 of the standard joint researchcontract of the University of Tokyo.
Where, for example, the Universities of Tokyo, Kyoto andOsaka typically account for at least one quarter of total
funding for any particular program.
Some universities have demanded that joint research
partners compensate them for giving up their right under
Patent Law §73.2 to commercially exploit jointly owned
inventions（so-called fujishi hoshou）. This article does notsupport such compensation agreements.

43