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Home > Tech Reiews > Japan Technology Review Last Updated: 15:24 03/09/2007
Japan Technology Review #12: August 9, 2001

Founding Technology Licensing Organization (TLO)

By Hajime Yamada (GLOCOM)

The Second Science and Technology Basic Plan repeatedly lays great emphasis on the necessity of industry-academia-government cooperation. In Japan, cooperation of industry-academia-government, especially that of industry-academia, has been stressed since the middle of the 1990s. In this report I will explain the TLO Law, approved and enforced in 1998, as well as the Technology Licensing Organizations (TLOs) formed in various parts of Japan under the provisions of the TLO Law.

In Japan, industry-academia cooperation has long been promoted with private enterprises offering funds to universities. Three major ways of providing funds have been adopted. They are in the forms of Joint Research, Commissioned Research, and Grants and Endowments. Grants and Endowments, which have been taken most frequently, refer to the financial donation made to national universities by private corporations or individuals for the purpose of scientific research or enhancing educational activities. However, it has been pointed out that by this scheme the achievements of research promoted by the donation are not returned to the donors in a definite way.

Technology Transfer is a system of transferring technological achievements of universities to private sectors and charging fees for such transfers. This system is superior to Grants and Endowments in two ways: it requires evaluation of research achievements upon deciding the transfer price, and the income from the transfer is returned to the researchers who conducted the Research and Development (R&D). Therefore, the Technology Transfer system can be said to be a solution to the problem the Grants and Endowments system has.

In the United States, Technology Transfer has been encouraged since the 1980s. In the1970s, the question of why achievements of R&D by the universities hadn't been put to practical use became a social problem in the U.S. In 1980, a law was enacted stating that patents should belong to the university as far as the research was carried out there, even though research funds were provided by private enterprises. At the same time, preparation of founding TLO as an organization for transferring such licenses to the private sectors progressed.

These days, TLO is even referred to as a driving force for creating new businesses such as information and biotechnology-related industries, which lead the U.S. economy. Income to the universities from this system is also increasing. For example, according to Stanford University's website at, its TLO earned as much as $36.9 million from licensing in the fiscal year of 1999 to 2000. Many private enterprises and venture capital firms gather around the university in quest for technology, and research resources are stored up through the TLO to create a new technology to promote industry, thus forming a circle.

The TLO Law was suggested in the hope of creating this virtuous circle in Japan. The Ministry of Education, Science and Culture and the Ministry of International Trade and Industry jointly made the proposal to the Diet in 1998. The law has two purposes: to develop industrial technology and to create a new industry by promoting transfer of research achievements from universities to industry; and to vitalize research activities at universities and research institutes.

TLOs approved by this law reap three benefits. First, activity costs are partly supported; second, examination fees for licensing are exempted; and finally, small or medium-sized businesses are also entitled to receive some financial support when TLOs transfer licenses to them.

The TLO Law was approved by the Diet in May of 1998, and enforced in August of the same year.

On December 4, 1998, the first four TLOs were approved. The University of Tokyo and Nihon University formed their own TLOs respectively, Kansai TLO was jointly formed by such universities as Kyoto University and Ritsumeikan University, and Tohoku Techno Arch Co., Ltd was jointly organized by Tohoku University and some other universities in the Tohoku area. Later, many more TLOs were approved, and by April 25, 2001, 20 TLOs were founded all over Japan.

As of the end of March 2001, about two years after foundation, the Center for Advanced Science and Technology Incubation, Ltd., organized by the University of Tokyo, had already transferred 13 licenses, and 15 projects were under licensing negotiation. It had also taken out 148 patents, and 74 other projects were under patent application.

As explained above, the TLO system has been growing steadily. It is expected that industry-academia cooperation will be further fortified in the process of Technology Transfer from universities toward private sectors through TLOs.

Some difficult problems, however, have been pointed out. The most serious one is that national university professors are prohibited to concurrently hold the position of executive director in the private sector. It is not possible for a university professor to transfer to a private enterprise together with the project he or she has been leading in order to ascertain that the industry makes the best use of the technology after transferring it through the TLO system. The restriction is based on the concept in the National Public Service Law that a government employee must serve the nation in whole.

It is probable, of course, if a researcher serves both as a professor of a national university and as an executive director of a private enterprise, that the obligation of functional concentration as a government employee and that of devotion to duty as a company executive sometimes come into conflict. For example, a university professor may exercise public authority when approving student graduations, and if the same professor bears profit-making responsibility, his or her official integrity as a public servant can possibly be damaged. However, the risk is only abstract and is avoidable without overly restricting all side jobs indiscriminately. There is enough room for balance. To start a venture business, allowing a professor leave of absence for a certain period of time, or allowing him or her to hold two jobs concurrently for certain days of a year are some examples. The number of criticisms against restricting national university professors' side jobs as applying the Law too rigidly is increasing, and since 2000 the trend is slowly moving toward easing the limitation.

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