The annual budget of the Agricultural Research Service (ARS) of the U.S. Department of Agriculture amounts to $1.5 billion, which is one third of Armenia’s entire state budget. This American organization, which offers science-based solutions to global agricultural challenges, engages 2,000 scientists in more than 650 research projects. In 2020, its activity led to 3,933 published scientific articles and 50 approved patents.
Vardan Gevorgyan is the co-founder of Precision Sensors & Instruments (PSI), a deep tech company. He holds a PhD in physics and mathematics and has been studying, implementing and commercializing scientific innovations for 13 years. In 2017, he took part in training at the Office of Technology Transfer (OTT) of the U.S. Agricultural Research Service. This function, often called a Technology Commercialization Office, is common at institutions that are engaged in scientific research activities funded by governments.
The Origins of the Technology Commercialization Office
Over the last four centuries, the world has gone through several industrial revolutions, driven by new knowledge, technology and innovations. The fourth industrial revolution is currently underway, as artificial intelligence, biotechnology, quantum computing and other revolutionary technologies are laying the foundation for a new way of life.
Leading nations in innovation invest heavily in research and development, often in the range of 2% of GDP. Over the years, these investments have paid handsome dividends, not just in expanding scientific knowledge but also in the commercialization of its down-market applications.
Until 1980, intellectual property arising from U.S. federal government-funded research belonged to the state; that is the contractor did not have claim to ownership nor the exclusive right to utilize the patent for commercial purposes. As a result, the state held many patents in its name but did not have sufficient resources to commercialize them all. Senators Birch Bayh and Bob Dole, in particular, proposed a legislative solution to the issue, and the Bayh–Dole Act is named in their honor. This law, adopted in 1980, enabled universities and research institutes funded by federal government grants to own the intellectual property arising from their work, on the condition that they would themselves handle the commercialization of their scientific innovations. It is for this very purpose that technology commercialization offices were created to organize the process of turning the intellectual property of a scientist or research group into a new product in the market.
An Armenian Technology Commercialization Office
The Armenian Minister of Economy has tasked Vardan Gevorgyan with drawing on his years of experience in this field to establish a Technology Commercialization Office in Armenia. Currently, the National Center for Innovation and Entrepreneurship (NCIE)—a state-owned non-profit agency—is looking into changing its structure into an open joint-stock company (OJSC, i.e. a public corporation) or a foundation to give it the flexibility needed to operate as a Technology Commercialization Office.
“A new budget and new staff will be allocated for the establishment of this office. The legal work is already underway, and the issue is being circulated [for feedback] to different ministries,” says Gevorgyan.
If the process of changing the center’s structure is successfully implemented, the commercialization of scientific breakthroughs will become its main function. The center was originally established to foster innovation and entrepreneurship, a mission that it will continue to pursue as it is directly tied to technology commercialization.
Gevorgyan says that the idea has been well-received by the members of the scientific and educational community. He was actually looking forward to receiving some constructive criticism but says he hasn’t encountered any so far. They are currently waiting for the greenlight from the Ministry of Finance to allocate the necessary funding. When or if that happens, their vision is ready to go.
“The first step is to gather a knowledgeable team—intellectual property and license agreement lawyers, along with technology experts—to assess the scientific and technological potential of the applications submitted by scientists. Then, the team of market specialists needs to assess the vital importance of each technology, how applicable it is, how innovative it is,” explains Gevorgyan. According to his calculations, a staff of 20-25 people is needed to do the work properly. There will also be a need for subcontracted foreign specialists to help introduce the ready-made technologies to the market in their own countries.
When an inventor or a technology company has a marketable idea, they need to choose whether to patent it or keep it a trade secret. Sargis Knyazyan, an intellectual property law specialist, explains that patenting an invention requires fully disclosing it such that it becomes accessible to the public. Instead, a company could keep the innovation as a trade secret. In this case, it is disclosed only to other companies that intend to buy or use the invention or innovation. A contract concluded between the parties would regulate the area of use of the invention, the fee, the time frame, the exclusive or non-exclusive right of use, and other conditions.
When the decision is made to patent an invention, it is also necessary to choose which country to file the patent in, and understand the cost of the service, the length of the patenting process, whether or not it will be possible to protect the rights if they are violated in a given country, and so on. According to the Knyazyan, these meetings must be kept confidential, so that information is not leaked.
“Our companies in Armenia need consultants with whom they can meet and develop a strategy for the protection and commercialization of intellectual property rights,” shares Knyazyan. He adds, “If there are no specialists locally, we have no choice but to turn to external consultants, which implies immediately disclosing the innovation with foreigners. Naturally, all decent, honest lawyers are obliged to keep this information confidential and not disclose it to third parties, but different communication technologies may be subject to the leakage of information. The necessity of having such specialists locally in Armenia arises from this and other factors.”
It is desirable to register the invention in every country that is foreseen to be an important market in terms of consumption of the product or technology. “If the invention is registered in one country, then third parties in another country can no longer obtain a patent for the same invention, but they can still use it [in their own country] without violating the rights of the owner of the invention. If it is a product, it can be made and sold in any country where the invention is not patented. Only in countries where it is patented can the company prevent others from making and selling the invention. It is with this in mind that an intellectual property strategy is initially developed,” the lawyer notes.
Timelines and Costs
The registration of an invention is a time-consuming and costly process in most jurisdictions. In Armenia, it is actually much cheaper and faster to register; yet, nevertheless, very few people are currently interested in patenting an invention in Armenia. According to Knyazyan, this should not be considered a big problem; in a knowledge-based economy, technology transfer allows the export of intellectual property from one country and attracts financing from abroad. To maximize revenues from an investment, the new product needs to be commercialized in larger markets beyond Armenia anyway.
“First of all, we must understand which fields of science are important for Armenia to focus on. For example, these past few years have shown that health and safety is an important global priority. These two spheres alone include a large number of sub-spheres and connected spheres. In addition, it is necessary to understand the role of the state and the private sector in the development of these spheres. Until these questions are clearly and properly answered, it will be difficult to understand where our country stands and where it is going, especially in terms of building a knowledge-based economy,” says Knyazyan.
It is because Armenia receives a low volume of patent applications that its turnaround time for processing them is relatively quick, usually within six months, compared to 2-4 years in large Western economies. In terms of cost, assembling and submitting an application will likely cost about $500 in Armenia, compared to $25,000-$50,000 in the United States.
Patent Application Volume
According to the 2020 annual report of the Ministry of Economy of Armenia, 70 inventions and 29 utility model applications were submitted last year to the Intellectual Property Agency. 87 of these applicants were from Armenia, and 12 were from foreigners (Russia, Switzerland, Spain, U.S. and Singapore). About 10% of the applications were submitted electronically.
In the last five years, an average of 133 applications have been submitted per year. In 2020, the number of applications decreased sharply, by about 40% compared to 2019. At the same time, however, the number of foreign applicants tripled.
According to the same source, of the 3,424 invention patents in our country, 189 are being used in the territory of the Republic of Armenia. Of the 601 utility model patent applications, 109 are being used.
According to the World Intellectual Property Organization (WIPO), 70 applications for invention patents were submitted in foreign jurisdictions from Armenia in 2020; the average over the last 10 years is 61. Of these, 39 were issued licenses in 2020, with an average of 28 over the last 10 years.
In almost all countries, including Armenia, the law on inventions or patents requires that an application for an invention made in that country first be submitted in that country; only after being accepted at home can it be licensed in other countries. This is due to national security considerations. Applying for licenses on patents abroad can be a complicated and time consuming endeavor. According to Knyazyan, the situation in Armenia is different, easier: “The applicant applies to the Intellectual Property Office of the Ministry of Economy of Armenia, and if in a three month period no obstacles have been forthcoming, then they are free to submit an application in any other country.”
While this requirement of the law is justified, its implementation creates certain difficulties and expenses for applicants who have no interest in patenting their invention in Armenia, therefore, new legislative approaches should be considered. Companies operating in the field of information technologies, for which Armenia is not considered the primary market for the consumption of their product or service, are given as examples. Even if their rights are violated here, it does not matter to them.
Knyazyan explains that for these companies, it is essential that their rights are not violated in countries where their products are sold and generate significant revenue. However, by law these companies have to submit the application in Armenia first, to invest in human and financial resources and pay taxes to meet that requirement. “In other words, these IT companies in particular have additional costs to incur, which I think is not justified,” he says.
The technology created by scientists can enter the market and be used not only by licensing companies independent of them, but also by startups based on scientific groups (spin-offs). The commercialization office being formed in Armenia will also have support functions in this issue. The priority will be to establish these companies in Armenia.
“The main task of the center will be the commercialization of scientific innovations in Armenia in order to benefit the local economy. If it is possible to keep that technology in Armenia, establish its production here and sell it to the whole world, it will be done here,” says Vardan Gevorgyan. “But, for example, if a new automobile airbag technology is created and there is no automotive industry in Armenia, naturally it is necessary to go to foreign markets, find producers, sign contracts with them, but the income will still come to Armenia from license agreements and will reach the scientists.”
Gevorgyan says that the Technology Commercialization Office will work with scientific departments in Armenian universities to have them present their ideas for commercialization and the Center will support their work. They will also collaborate with the private sector to have them bring marketable applied scientific research to the universities who in turn can present solutions which can then be commercialized..
To the question of whether the center will search for and find the practical result to be commercialized or the scientific group itself will apply to the center, Vardan Gevorgyan answers that it is a two-way process. In one case, they will be applying to scientific institutes and universities to present ideas for commercialization, which will be brought to the necessary level of readiness with the support of the center; in the other case, they will be a mediator so that the order to create this or that technological solution comes from the private sector. “In the second case, you bring applied scientific research from the market to the university and say “if you solve this issue we will allocate money for it, and will commercialize it.”ւմ լաբորատորիա»:
In the future, they also plan on having representatives in the universities, who will be responsible for documenting the research conducted by scientific departments in those institutions, preparing them for presentation to the Center as proposals. After studying the proposals, the Center will either consider the application or reject it.
The Armenia-founded startup SuperAnnotate allows users to create high-quality training datasets for various computer vision tasks. It accelerates the cycle of training data creation by at last three times, without compromising the annotation quality. It was created thanks to the work of a technology commercialization office at a Swedish university.
Vahan Petrosyan, the co-founder and CTO of the start-up, was a postgraduate student at the KTH Royal Institute of Technology in Stockholm. He conducted research in the field of machine learning and developed several of his own algorithms. He had heard about the innovation department at the university and went over to present his idea.
“They kept in contact to find out what stage the work was at. They were interested in the research my friends were involved in, so that I could tell them about the department’s activities, too,” says Petrosyan.
Initially, this office tries to understand the practical significance of the idea, in what businesses it can be used, whether it is worth financing or not. When they are convinced that the idea is innovative and can become a valuable technology, they finance the creation of a prototype. This was also the case for Petrosyan.
“When they see that there is intellectual property developed in an algorithm, they seek a patent. They dealt with all those issues, which lasted for about four to five months. Patents there are quite expensive, and they bore all the costs. In addition, they provided $10,000-15,000 for the creation of the prototype,” says Petrosyan.
The rights to commercialize the patent belong to Petrosyan; unlike other countries, Sweden not only gives all the intellectual property rights, but also the commercialization rights, to the researcher who created it.
Clarifying Ownership of Intellectual Property Rights
In post-Soviet countries, intellectual property rights belong to universities and research institutes, which, as a rule, do not have the expertise and other necessary resources to commercialize them. In order to promote commercialization, it is necessary for the inventor to be given a role and a stake, to take the lead on building the team that will strive to make it a success. For that purpose, according to Sargis Knyazyan, more favorable regulations for the use and commercialization of intellectual property should be worked into legislation and university by-laws, especially to regulate the relationship between the university or research institute as an employer and the researcher or student as an employee regarding intellectual property rights and their commercialization.
Vardan Gevorgyan adds that the issue of ownership of intellectual property rights needs clarification; otherwise, the current situation could lead to many lawsuits. He says tha
The Institute of Molecular Biology
For the Technology Commercialization Office to actually work in Armenia, it must first try to understand the needs of business, and find the relevant scientists and experts working in that particular field. Arsen Arakelyan, director of the Institute of Molecular Biology of the National Academy of Sciences says that at the moment, supply exceeds demand, however, it is critical that those connections between the business community and the scientific community be made. He notes that there is an absence of desire or awareness on the part of businesses in Armenia to utilize innovations being developed in their own operations.
Speaking about the potential to commercialize Armenian scientific innovation, Arakelyan notes that this is another important issue that the Technology Commercialization Office should study and understand. “For any given scientist, his own research is the best research in the world, the most promising discovery. That is why it is very important to have a structure that will give an objective assessment and separate the fundamentally important research from the practical research that can be promoted and turned into a product.”
What will the Institute of Molecular Biology offer to the Technology Commercialization Office when the time comes? Research areas include the identification of diagnostic markers for various diseases, the development of diagnostic tests, the design and development of drugs, the development of big data analysis algorithms and services in the field of bioinformatics, according to Arakelyan.
In the field of agriculture, they have a large project for genetic mapping of grapes. The study could identify virus-resistant varieties of grapes that could be used by wineries as planting stock. Another area is the study of genome editing in collaboration with the Slavonic University. The Institute intends to work together with the Office to prioritize which advances to take forward first.