Super ministry won't help R&D problems

Media release
16 April 2012

Super ministry won't help R&D problems: radical changes needed

The Government's creation of a 'super ministry' to oversee business innovation and employment doesn't address core issues around research and development in New Zealand, according to a commercialisation expert.

EverEdge IP Chief Executive Paul Adams says the Government spends $700 million annually on research and development and promises to spend more, yet too little R&D ends up being commercialised and access to knowledge gained from government funded projects is often restricted.

“The issues in R&D and innovation in New Zealand have little to do with ministry organisation structures; the problem is that we're burning too much money on R&D that generates no financial return for our economy,” he says.

Mr Adams says making four broad changes will maximise the return on tax payer funded investment in R&D by ensuring it is commercialised in a way that creates significant, sustained value for New Zealand.

1. Stop unfair tax treatment of patents
Patents are a crucial driver of commercialisation but New Zealand’s tax on patents is high compared to many other countries. Worse still, our law effectively taxes patents twice. The Income Tax Act (2007) requires patent owners to capitalise any patent expenditure (treating the patent as an asset) but if the patent is sold, the owner must pay income tax on the sale proceeds (treating it as income).

Mr Adams says this means innovation owners get the worst of both worlds and punishes them for innovating unless they move their intellectual property offshore. A consistent policy will encourage more local R&D growth and reward innovative companies.

2. Rationalise the incentive systems around public R & D
Public funding processes currently encourage perennial R&D. There need to be stronger incentives to commercialise R&D instead of endless research and multiple grant cycles.

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3. Be clear about expectations
There should be a clear delineation between funding for blue skies research and funding for projects where a commercial return is expected. This split should occur early in the funding cycle.

4. Increase government support for private sector R&D
Crown Research Institutes have a poor track record in moving from idea creation to commercialisation when compared to private sector firms like LanzaTech.

“‘Considering the billions of dollars spent on publicly funded R&D over the past two decades, the return on investment is astonishingly low,” says Mr Adams. “It’s time to move away from the default position of investing taxpayer money into the public sector and instead invest it into private sector projects that have a far better track record of success.”

“The ratio between public and private sector support should be reversed, and the results of public research freely opened up to commercial enterprise,” he suggested. “This will cause a storm of protest, and vested interests will fight it, but we’re at a point where the options for public research are to push it into the real world or write vast amounts of it off.”

Mr Adams says New Zealand is at a public research crossroads and bold action is urgently needed: “The current approach simply isn’t working: New Zealand scientists and innovators produce great ideas but most never get beyond the lab - the new super ministry by itself won't change that.

“Those ideas and technologies are more likely to make a difference to the world, more likely to generate wealth for New Zealand, when commercialised by private companies. There should be no apologies for fostering a powerful, private commercialisation sector.”

[Side bar]
Four actions that will help New Zealand become an ideas economy:
1. Stop unfair tax treatment of patents.
2. Rationalise incentive systems around public R & D.
3. Be clear about expectations.
4. Increase government support for private sector commercialisation.

ENDS

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