Cover Story: Turning Research Into Revenue – China’s Quest to Bring Lab Inventions to Market

China is currently leading the world in patent filings, but despite this achievement, transforming innovations from universities and research institutions into successful businesses remains a significant challenge. Huawei Technologies leads in international filings, with China maintaining the highest global patent filings since 2011 and surpassing 4 million patents by the end of 2023 [para. 1][para. 2]. Huawei and battery giant Contemporary Amperex Technology Co. Ltd. are prominent examples of Chinese companies converting research and development (R&D) into profitable ventures [para. 3].

Nevertheless, the industrialization rate of invention patents in China, including those from universities and research institutions, was just 39.6% in 2023, highlighting a major gap compared to successful U.S. companies like Cisco and Google that commercialized technologies from university research [para. 4][para. 6]. During the same period, fewer than 4% of patents held by Chinese research institutions and universities were converted into industrial applications, despite legislative efforts since 1996 aimed at promoting commercialization [para. 7][para. 8]. Several barriers, including complex bureaucratic procedures and stringent requirements at state institutions, deter researchers due to the associated risks, including potential criminal charges for financial losses [para. 9].

The government has implemented various reforms to address these issues. For instance, since 2019, universities have been allowed to manage the transfer and licensing of their scientific achievements independently. In October 2020, the Ministry of Science and Technology selected 40 universities for a pilot program granting researchers long-term usage rights for their job-related innovations [para. 12][para. 14]. Shanghai Jiao Tong University is at the forefront of these efforts, exploring radical approaches like granting research teams full ownership of their technological achievements and streamlining patent commercialization models [para. 16][para. 17]. The university also launched the country's first master's degree program in technology transfer, focusing on strategic technology planning and technological innovation financing [para. 21].

The "Inventor Implementation" model at Shanghai Jiao Tong enables patent inventors to establish or invest in businesses for commercialization, an approach designed to foster entrepreneurship among researchers. This model has shown promise; for example, Shanghai Shui Zhi San Man Aquatic Biotechnology Co. Ltd. signed an intellectual property transfer agreement with a research team from the university [para. 30]. Under this policy, inventors receive 70% of the intangible assets, with the university retaining 30%, thereby encouraging the conversion of academic work into commercial ventures [para. 32][para. 33].

However, clarifying property rights and addressing the fear of "loss of state assets" remain major hurdles. Researchers at state institutions face significant risks, including possible criminal charges for perceived mishandling of state-owned assets [para. 41]. Legislative reforms have gradually reduced some constraints, but more remains to be done to eliminate and clarify the "small ropes" still binding researchers in technology conversions [para. 49].

University-centric investment funds and private capital are crucial for supporting these entrepreneurial efforts through the challenging "death valley curve," a phase where early-stage tech ventures struggle with uncertain financial viability [para. 34]. However, Chinese university funds are relatively small compared to their international counterparts, and private capital is often more interested in mature technologies [para. 54]. Thus, government investment often becomes essential for sustaining long-term technology transformation projects at universities [para. 56].

Overall, transforming academic innovations into profitable businesses requires not just technical expertise but also strong market insights and business management skills, highlighting a crucial gap that still needs to be addressed for successful commercialization [para. 62].