Deng Xiaoping once said “the Middle East has oil, China has rare earths”. Both dug them out of the ground.
The UK tried that — we drilled the same 40bn barrels that built Norway their $400k-per-citizen that can underwrite a new AI-propelled entrepreneurial age. That we refuse to drill further probably makes no difference — our state will blow it anyway.
But here’s what we do have: a massive well of un-dug IP. Sadly, it’s dying almost as son as it’s created. We have a university system that hugs the newly-born IP so tight, it kills the thing it means to protect.
When new IP dies as a founder from the lab seeks to spin it out into a company through our university “tech transfer offices”, there’s no counterfactual. You very obviously can’t prove a multibillion dollar company was killed — the thing never came into being.
So no one’s ever called to account.
Recall the disaster of fibre optic in the 1990s: the US monetised it and its UK inventors did not, despite the amplifier that unlocked it being invented in Southampton (David Payne, Ian Jauncey, and others). Inventions of potentially comparable magnitude are facing the same death right now. Meta will own the upside and return it to the US taxpayer, not to us.
It’s time we fix this. The UK may be historically cash-strapped, but we can pull the straps off GDP accelerators for zero cost to the Exchequer. Making the UK the global No 1 jurisdiction for IP mobility must be top of our list.
I recommend we put every university on notice: to maintain public funding, they must hit fast timetables for spinouts.
Here’s how we can and must take the negotiating power out of their hands.
The UK has a Massive IP Reservoir
Here are the numbers:
Research quality: UK has highest FWCI (citation impact) amongst peers; 1.55, vs US 1.35, China 1.11, India 1.03. Rate/quality of ideas is exceptionally high
Research volume: 4th globally in 2019–23 behind China/US/India
Highly cited papers: 12% of papers, 3rd globally (proxy for frontier research)
Citable-document H-index: WIPO ranks UK 1st globally (proxy for “deep knowledge inventory”)
But UK Technology Transfer is Slow
Spinning out IP is subject to approvals from the “Technology Transfer Office” of each university: an asynchronous web of officers, administrators, legal counsel, and politically active professors who all get involved at different times.
They’re mainly incentivised to show deep process: the lengthier the diligence and the more negotiation with the founder, the more pious their paper trail. They look like they are guarding the assets well.
Meanwhile, in a world where technology moves fast, the value of that IP can halve or worse in 12 months as the rest of the world motors on.
Spinout times frequently run to 12 months or more: an officer will approve bespoke spinout terms per founder, then counsel intervenes and rewrites approved trading countries for the startup. They negotiate whether the materiality threshold for reputational impact on the university. Six months in, a professor on the approvals board asked for greater information rights. An administrator at month eight questions whether an extra university director should really sit on the startup’s board. It’s rarely done in parallel, and therefore each adds weeks or months to the exit process.
The spinout experience varies wildly between universities, and even sometimes within them, depending on which officer’s on your case.
Other negotiating levers include:
Anti-dilution protections (hurts fundraising credentials for the company)
Equity stakes: 20-50% in worst cases, impairing the cap table and ability to incentivise future joiners / attract capital
Royalties: I’ve seen as high as 20% - the university would be paid a % of revenue before any profit hits the cap table. This affects the competitiveness of the company later on, and again hits fundraising.
When negotiations wear on, fundraising momentum is lost.
Investors: “We are excited, but first, what are your IP terms?”
TTO: “Well done on the investor interest; before discussing your terms of exit, show us your offers first.”
Dealmaking requires certainty and simplicity.
Why do the universities do this?
Two reasons: incentives of the TTO officers, and overrating IP for the long run success of the company.
Charlie Munger said it: show me the incentives, and I’ll show you the outcome. A TTO officer has to report how much equity / upside did you secure for the university What’s immeasurable is how much value did you add or destroy in the process? You cannot ever prove the counterfactual. If a TTO asks 50% equity and investors never come in, the dead company is never really visible.
The startups that died or flew a low flight due to bad terms are invisible to the public, and even to the university / TTO itself. The only way you could estimate the death rate is by having much more transparency over the whole IP exit process, and that is what I propose here.
And quoting James Regan of Oriole, “universities tend to overrate IP in building a company”. IP is a decaying asset, the first leg up on a long journey that is full of death risks, one after the next. TTOs tend to view IP as a golden ticket to success, so they over-negotiate and kill the thing they’re supposed to guard.
We need to raise our ambition
Americans will tell you IP drag is an uniquely British pathology. But it isn’t.
Yes, Stanford and MIT do fast, clean spinouts on the whole. But I’ve seen famous US being more painful or worse than UK peers.
In any case, parity with America is the wrong target.
The aim should be a UX upgrade across all our universities, and for every UK TTO to operate better than the best US TTOs.
The Solution
The UK IP Amnesty Act would comprise two components:
Universal Exit Terms for Startups and allow IP evacuation within 30 days, removing the negotiating power of UK TTO
Maximum 30 Days to Approve
Here’s how you would implement:
Eligibility: Named inventor on a UK university patent or filed invention disclosure can invoke the Act by sending a Request for Intellectual Property Exit (RIPE) to their university TTO
Trigger: The Technology Transfer Office is cc’d, starting a 30-day clock (AI monitoring makes this highly scaleable)
Deadline: At Day 30 the university must either approve or explain refusal direct to the Ombudsman and the founder. Otherwise, deemed assignment to a nominated new UK-registered company. The founder is ready to incorporate and raise a round without back and forth between TTO and investors
Universal Exit Terms: 10% ordinary equity, fully dilutable. No royalties, milestones, no other rights. Company must repay patent costs on raising capital. University holds pro rata rights, non-transferrable from their own endowments
Sovereignty: The IP must remain UK-bound in a UK-controlled vehicle. We may borrow British Business Bank criteria to ensure the upside IP deriving from the company ultimately accrues to a UK-headquartered entity.
Background IP: Not formally registered but presumption of rights analogous to easements in land.
International: The university may need to execute corresponding assignments in overseas jurisdictions, details to be worked out.
Fundraising Condition: £1m SAFE or equity funding must occur within 12 months of assignment, or else reversion to the university. Biotech / hardware spinouts may apply for a single 6-month discretionary extension from Ombudsman.
Protection Against Flipping: We should consider a multi-year (say, four year) earn-out period on founders in the case of early acquisition. An exit at e.g. year 2 would result in more founder equity reverting to the university. Founders must fully declare all interests with warranty.
Reversion: If the condition unmet, the IP reverts to the university free of any encumbrances created by the company (this removes the historical rationale for TTOs seeking royalties)
Multi-inventor: Any single qualifying inventor may invoke the Act. Co-inventors must be notified by the registering inventor. Their economic terms will need to be guaranteed in the spin-out entity, details to be fleshed out.
Ombudsman: A statutory IP Ombudsman within DSIT mediates disputes
Transparency: Every denial is filed with the Ombudsman and aggregated by AI into an annual public report ranking universities on:
approval ratio, median days to assignment
follow-on funding raised by assigned spinouts
Spinout survival % and outcomes (Series A, Series B funding etc) is already quite well tracked by companies e.g. Beauhurst.
Concluding Remarks
I hope some or all of the above will be adopted by the UK government and make us the global No 1 destination for IP mobility.
Thanks to Lawrence Lundy-Bryan for helpful comments