It is well known that the University of Toronto (U of T) has historically played an important role in scientific innovation. This is embedded in history books and remembered in campus commemorative plaques marking numerous scientific advances, including the discovery of insulin at the university’s Connaught Laboratories. However, the privatization of Connaught Laboratories, which developed many world-changing public health inventions and vaccines during the mid-twentieth century, ushered in a new era at U of T. Now, intellectual property is sold off to private and often foreign companies with little benefit to the Canadian public who fund the infrastructure, scientists, and research that made these discoveries possible.
Similar shifts have happened at university campuses across Canada. In this article, we examine the changes that occurred at U of T following the sale of Connaught Laboratories.
Following decades in operation, U of T’s Connaught Laboratories was sold to the federal government in 1972 and then slowly privatized, with the Mulroney government finishing the job in 1985.
Following the sale of Connaught Labs, federal pressure to strengthen university-industry linkages led to the creation of the University of Toronto Innovations Foundation (UTIF) in 1980. From the beginning, UTIF’s purpose was to incentivize faculty to market and commercialize university inventions, products, and processes to industry—rather than furthering the university’s own development of campus-based inventions. At this time, U of T started to use a new term to describe its commercialization efforts: “technology transfer.” The term is telling; it indicates that U of T did not prioritize exercising the rights to the intellectual property it developed. Today, this mindset has become entrenched amongst university administrators and government who believe that university research should be sold off as quickly as possible to the private sector, without mechanisms to ensure that the university and public who fund the research share in the proceeds of intellectual property.
In 1990, a new Inventions Policy was established by U of T, with improved financial incentives for inventors who chose to forego the UTIF model and, instead, retain ownership of their inventions. Inventors who developed and commercialized inventions received 75 per cent of the revenue with 25 per cent going to U of T; inventors who chose to use UTIF would receive 25 per cent of the revenue with 50 per cent going to UTIF and 25 per cent to U of T. However, these percentages are misleading because they often apply only to the price of the initial sale of the intellectual property, not to the far higher amounts earned over time through ongoing royalties and licensing income.
In 1998, UTIF underwent another restructuring, led by entrepreneur and Governing Council member Joseph Rotman, who later donated to the business school in return for it being named after him. UTIF recruited staff with experience in supporting start-up companies, collaborating with the Rotman School of Management in doing so.
However, UTIF would not survive. In 2004, a panel commissioned by U of T’s Governing Council and chaired by former federal cabinet minister and Governing Council member John Manley found “a widespread feeling that UTIF is not performing optimally” and that UTIF “is not giving the university the stature it should have (and is increasingly expected to have) as a superb research organization.” The report recommended that U of T should dismantle UTIF and create a new entity physically and administratively separate from the university.
Manley’s report laid the foundations for future U of T intellectual property policies and partnership arrangements. It claimed that the university should not see these partnerships in financial terms but focus on maximizing invention disclosures. In other words, the more inventions commercialized the better, regardless of who was benefiting financially. To the report’s authors, the MaRS Discovery District (MaRS) project, then in its infancy, provided the perfect opportunity for U of T “to refocus its commercialization efforts and to work closely with the affiliated hospitals and the city’s financial and business communities.”
And so, U of T dismantled UTIF and, in 2005, replaced it with MaRS, which “would be allowed to play host to the inventions generated by the university.”
At over 1.5 million square feet, the MaRS Discovery District is one of the world’s largest urban innovation hubs, supporting over 150 organizations and 6,000 employees. MaRS, originally an acronym for “Medical and Related Sciences,” was created to foster Ontario’s knowledge economy by boosting the next generation of hi-tech Canadian companies through the commercialization of university-based inventions.
MaRS has probably helped to limit the brain drain of U of T-trained inventors to Silicon Valley—especially in Artificial Intelligence. However, the continued flow of intellectual property and wealth to the United States continues.
Money for MaRS
There has been no shortage of funding for MaRS, with both levels of government and U of T committing significant amounts of money to accelerate the commercialization of research. In 2002, Progressive Conservative Premier Ernie Eves committed $20 million in funding for MaRS, which was matched with similar funding from the federal government. The funding was supposed to be matched by investments from private donors, but it is not clear that the private sector has been sharing its profits with MaRS, much less U of T.
Upon taking office in 2003, Liberal premier Dalton McGuinty named himself the inaugural Minister of Research and Innovation and quickly moved to invest $13 million to establish Ontario’s Regional Innovation Networks (RINs)—non-profit networks driven by the private sector and aimed at accelerating local technology start-ups. By the time MaRS opened its doors in 2005, the McGuinty government had invested over $50.5 million into the MaRS project.
The money didn’t stop there. From 2008 to 2014, the Liberal Government of Ontario spent approximately $392 million on MaRS’ Phase 2 development—a move that Ontario Auditor General Bonnie Lysyk described as a “bailout of a private sector development.” In 2019, MaRS received another $19.3 million in provincial funding, but the Auditor General found that MaRS failed to disclose the recipients of the grants made possible by this money.
Current activity suggests that MaRS has drifted from its initial mission to commercialize research carried out at the university and affiliated hospitals. Instead, its most visible success in recent years has been as a landlord for well-established multinational companies. Its current tenants include Facebook, Autodesk, Johnson & Johnson, PayPal, IBM, and Merck. These foreign companies act as commercial predators—paying market rent, sharing labs and spaces with smaller businesses and start-ups, and then buying them up the moment they show potential. An article in Ottawa’s The Hill Times did not mince words:
Selling out to foreign multinationals seems to be encouraged by one of Canada’s leading incubator/accelerator centres for high-tech companies, MaRS, in Toronto. In its start-up toolkit it extols the benefits of linking up with US venture funds since these are a quick pathway to eventual sale. In fact it boasts, of 183 Canadian tech start-ups sold over a five-year period, nearly 70 percent were acquired by US corporations, including six by Google and three by Twitter.
In September 2018, MaRS announced that it had partnered with U of T and developer Menkes to lease 24,000 square feet of space in Waterfront Toronto’s 400,000 square-foot Waterfront Innovation Centre (WIC) now under construction and scheduled to open in 2021.
Along the way, concerns surrounding institutional integrity, corporate influence, and research accessibility were discussed by members of U of T’s Governing Council. However, the official view became that MaRS was the appropriate way to help U of T partner with existing for-profit corporations and with university-originated start-ups to bring inventions to the broader world.
Using publicly available documents, it is not possible to precisely evaluate the university’s partnership with MaRS. Each year, the university lumps together its income with the revenues received by inventors, MaRS, and other affiliated institutions—both for-profit and non-profit—under the banner of inventions and innovation. U of T’s report to the province’s 2020 expert panel on university and college technology transfer offices provides examples of commercial ventures involving IP but no detailed statement of revenues to the university. This same expert panel noted that intellectual property income has been decreasing in Canada, even as Canada produces more innovations.
It would not be helpful, or fair, to impugn the motives of colleagues who might be receiving benefits from MaRS. If these affiliated institutions are able to provide the latest software, powerful computers, and world-class data sets (data sets being crucial inputs for today’s machine-learning and AI research), researchers will gravitate to them rather than remaining a rank-and-file professor. However, there are important ethical questions to be asked about the sales of intellectual property generated by university researchers employed by external bodies that are largely dependent on public funding.
Universities are not always as transparent about their finances as we would like them to be; but private corporations are, by definition, opaque to the outside world. As a result, the partnerships between universities and private corporations become opaque. Despite these limitations, our research indicates that neither U of T nor the province’s taxpayers have adequately shared in the financial windfall that has resulted from the research and intellectual property generated by the university, MaRS, or other affiliated institutions dependent on public dollars.
In a media interview, U of T innovation expert Dan Breznitz referenced the university’s stellar reputation in artificial intelligence and the fact that the lion’s share of the intellectual property and wealth generated by this work ends up leaving the country. “We’re waking up after our own crown jewels have been stolen,” he said.
Universities, such as U of T, are facilitating this theft and are unlikely to stop on their own—for fear of losing eminent scientists or prestige corporate partnerships to other Canadian universities or to the US. Since the 1970s, Canadian universities have not shown any desire to ensure that publicly subsidized university-based research generates reasonable returns for the public sector. Instead, senior administrators have purposefully and repeatedly worked to conceal the nature of their private partnerships by obscuring important financial details and creating a new language that masks their true intentions. Clarity in language is as important as transparency in financial details. To bring much needed transparency and accountability to these relationships, both federal and provincial levels of government (responsible for intellectual property and postsecondary education respectively) need to set rules to prevent intellectual property theft and to ensure that money for university infrastructure and research results benefits the public at large.
Chelsea Tao has a BA in Criminology and Sociolegal Studies from the University of Toronto and is currently a Legislative Intern at the Legislative Assembly of Ontario. Mariana Valverde is a Professor in the Centre for Criminology & Sociolegal Studies at the University of Toronto.