Innovations on the leftover principle

The staff of Ukraine’s National Academy recently picketed the Verkhovna Rada building. Their demand was to increase spending for science in the draft national budget for 2013: the total sum provided in the draft was only around 2.57 billion hryvnias, which is 29 million less than labor costs alone. The labor union of the National Academy of Sciences insisted that a minimum of 3.2 billion hryvnias was slated for the Academy for 2013 – this is the sum earmarked for the Prosecutor General’s Office and the Security Service of Ukraine.

The academicians’ demands were partly granted: the budget allocates 3.15 billion hryvnias for the Academy. However, it is still below the necessary minimum.

The labor union head Anatolii Shyrokov emphasized that, according to law, research, scientific, and technical activities should be financed at 1.7 percent of the country’s annual GDP. Today this figure is much lower, only 0.3 percent which Shyrokov calls “the level of vegetation for Ukraine’s science.” Meanwhile, the staff of the National Academy of Sciences has shrunk by half: if in 1991 it had nearly 89,000 staff, now there are fewer than 32,000. Overall, academic and research staff of Ukraine used to number 494,000, while today only about 150,000 remain.

We would not say that the government does not understand the importance of research and science for the country’s progress. The success depends not so much on the industrial output as on its added value – and this is something that only knowledge can augment. Therefore the talk of switching to an innovative mode of development and establishing Ukraine as a high technology country has lasted for years, and scholars are absolutely essential to the process. Yet each year Ukraine faces the challenges of budget gap, and each year science is financed on the leftover principle.

Thus it comes as no surprise that the government tries to shift a part of the load to business. Numerous statements made by various officials can serve as proof. For one, earlier this year Volodymyr Semynozhenko, director of the State Agency for Science, Innovation and Informatization of Ukraine, said that “the promotion of research at the present stage stipulates for both an increase in state financing for the sphere of science and technology and attracting additional funds from the private sector of economy.” Meanwhile, the then minister of education, science, youth, and sports Dmytro Tabachnyk emphasized the need to increase the share of private financing for education and science, since it is these factors that stimulate the growth of national economy.

BUSINESS TO SCIENCE: NO DIALOG?

Actually, even the richest economies are probably incapable of financing all research projects exclusively from the public budget (the ratio will be 50/50 at best). Moreover, there is a challenge of handpicking the promising research from a wealth of others. This is what screening companies exist for: they listen to the craziest ideas to see if there is any point in financing a particular startup. On a higher level you will find the so-called business angels, who deal with more or less improved projects. On the very top are venture companies, which finance large-scale research and place the company on stock market to make profit.

However, Ukrainian researchers complain that domestic business structures are virtually unreachable – especially if you lack funds to prove the efficiency of your invention. Big companies buy innovations from Western counterparts, which can provide guarantees and test ideas. But experts warn that the purchased cutting-edge technologies become obsolete, and the most recent ones are predominantly used by the developers, due to tough competition in the market.

Besides, business is often frustrated with the sluggishness of science and scholars’ lack of market business skills. Ukrainian market players share a story about the tycoon Dmytro Firtash, who offered to sponsor a few selected projects at a research institution. However, the scholars preferred financing on a permanent basis, so that in future they would provide the sponsor with promising results. But this scheme did not interest the businessman: he was obviously interested in definite results and revenues.

REACHING OUT TO GOVERNMENT STRUCTURES

It is seldom that researchers can reach out to government structures, too. Therefore, the public financing of science does not always promote the implementation of the results. For instance, Ukrainian experts long ago developed a unified governmental system for monitoring the production, supply, shipment, consumption, and payments for fuel and energy resources and utility services. Such a system prevents charging consumers for unused products or services. But the promotion of the project was progressing very slowly. On February 8, 2012, Ukraine’s Prime Minister Mykola Azarov said at the government meeting that the country needed a thorough energy audit, which requires a relevant legislative foundation. “It turns out Russia has passed such legislation already. Moreover, it is based in the concept developed by the Ukrainian Academy of Sciences,” said Azarov. He also confessed that he “felt ashamed that we do not know how to use our own potential, in particular, the intellectual potential.”

Officials also noted the absence of coordination between science and production, orientation of the science and technical activity towards economy’s needs. Instead, there is competition between state and commercial science in developed countries, therefore, promising scientific projects are implemented as soon as possible.

At the same time, science is unpredictable. As Volodymyr Semynozhenko remarks, it often happens that “a researcher or a whole institute may spend years trying to solve some problem, yet never achieve the ultimate result. But it happens even more often that working in one direction, a scientist makes a ‘side’ discovery that changes scientific concepts of the whole humankind, or even changes people’s lives forever.” That is why the government is more patient than business structures that strive to gain profit as soon as possible. Besides, business is interested in financing applied science, but it will never invest in fundamental science, this has to be done by the government. In the middle of September, the Verkhovna Rada of Ukraine passed the draft law on making amendments to the Law of Ukraine “On State Regulation of Activities in the Sphere of Technology Transfer.” The draft law No. 10686 proposes to define legal, economic, organizational, and financial foundations of state regulation of activities in the sphere of technology transfer. It is aimed at the provision of effective use of scientific, technical, and intellectual potential of Ukraine, technological production of goods, protection of property rights on domestic technologies and their compounds on territories of the countries where their implementation is planned or already conducted, and expansion of international scientific and technological cooperation in this sphere.

So, according to changes in the Law of Ukraine “On State Regulation of Activities in the Sphere of Technology Transfer” (Article 11, Part 2), property rights on technologies created thanks to state funding are given to the state government bodies. Many people were not enthusiastic about this innovation. “First of all, this will negatively affect scientists and researchers who work at state research institutes, which exist mostly thanks to state funding. I can predict that they will no longer be motivated to work on new inventions. The results of their work will belong to the state anyway. The author will only receive money reward which will correspond to the economic value of an invention. Again, I can predict that this reward will be many times smaller than the one investors would offer,” said Vasyl KOTLIARENKO, Ph.D., director of the Investment Center of Intellectual Property, and economist, as he commented on the new regulations.

The path that Ukraine chose for settling arguments about property rights has precedents in international legal practice. However, countries with market economy demonstrate a different attitude towards inventors’ property rights. In the US, scientific research can be financed from the federal budget, but property rights for invention will belong to the organization in which it was created. The state only has a claim on non-exclusive free license for the new technology use. In Germany, a system of “professor’s privilege” functioned until recent times. The rights for invention belonged to neither state nor institution, but to a specific person, the inventor. It is clear that the living standards for doctors of science in those countries are much higher than in Ukraine.

“With the adoption of new amendments to domestic legislation, it becomes unclear who possesses property rights for an invention. According to the Civil Code, they belong to an organization or a natural person. But the law gives these rights to the state. Such ambiguity impedes scientific and technical progress and limits scientists’ revenues. The officials do not have the ability, resources, and adequate level of knowledge required to commercialize inventions. In the US, this practice was abandoned back in the 1980s, which stimulated growth in the quantity of innovations. But in Ukraine, an inverse process takes place,” summed up Pavlo Tsybuliov, Ph.D., Doctor of Technical Sciences, professor, director, Institute of Intellectual Property at the National University “Odessa Law Academy.”