Germany’s technology universities should be much bigger engines of innovation

Over the past decade, entrepreneurship education has gone mainstream at Germany’s leading technology universities, producing a growing number of spin-outs. But the flip side of the innovation coin – licensing and patenting intellectual property – remains under-developed.

“We have a position vis-à-vis industry that is unbelievably bad,” says Jörg Steinbach, President of the Technische Universität Berlin, one of the country’s top technology institutes. Fierce competition among the country’s top nine technology universities to collaborate with big industrial companies in R&D allows the companies to play one university off the other, he said, driving bids downward in a negative spiral.

In 2012, TU Berlin generated €1 million in revenues from patents and licenses for the first time – a figure Steinbach calls “nice but small” when compared with the average $20 million in annual revenues generated by Technion – Israel Institute of Technology in Haifa. German companies typically pay TU Berlin a meager flat fee of €2,000 for intellectual property rights developed in partnership, he said.

“We gave up a stronger position voluntarily – that was a big mistake.  Now it’s difficult to turn the wheel back,” says Steinbach, who favours creating an alliance among the country’s nine technical universities to negotiate intellectual property rights with a strong and unified voice. “If a university creates an invention, we are entitled to a reasonable reimbursement.”

Grace period

A grace period for patenting intellectual property would boost technology transfer at German universities, Steinbach said. The US and Japan, among many other countries, allow patent applicants a window of six to 12 months to file once they have discussed their invention in public or published an article about it.

A grace period is particularly important for academic researchers who are under constant pressure to publish in order to keep their careers on track, and for universities, which typically lack the legal resources of large companies to process a patent quickly. In Europe, academics that chose to publish first typically lose the right to protect a breakthrough technology with a patent. “What we have to develop is a mechanism to have short-term patent protection so we can have both benefits – a patent and a publication,” Steinbach said.

Germany’s technology universities also need to consider allocating more money for patents – and perhaps setting up a foundation as a source of funds. “With current budgetary constraints we have trouble to allocate money for this kind of purpose,” said Steinbach. “We need resources to establish such a system of rapid patenting.”

Creating global players

Another way to boost Germany’s innovation potential is helping young start-ups gain better access to growth capital. An increasing number of TU Berlin students now enroll in courses on entrepreneurship and TU Berlin has produced an average of 33 new start-ups a year over the past four years. But most remain small, highly specialised companies with 10-12 staff – and they don’t go on to become global players with 100,000-plus employees, says Steinbach. Some 80 per cent of TU Berlin start-ups have no external investment capital and most are still owned by their founders. 

To help start-ups think big and grow faster, TU Berlin’s Centre for Entrepreneurship has engaged business angels – as mentors and investors – building a pool of 60-70 alumni entrepreneurs and local business angels, to bridge the financing gap in a country that remains reluctant to be the first adopter of new innovations.

Angel investors are playing an increasingly important role in Germany where venture capital for start-ups has become scarce. “One of the biggest models of success established at TU Berlin is the model of business angels,” says Steinbach, who hopes to grow the existing pool of Berlin angels to a group of 200-strong.

Aversion to risk

In particular, Steinbach wants to see more engineers at TU Berlin launching their own companies. Information technology, biotechnology and economics students dominate the university’s current wave of spin-off founders. “We are not exploiting enough the ideas which are currently being developed in our engineering faculties,” says Steinbach, a chemistry professor who spent 11 years working in private industry.

One key problem is a traditional aversion to risk. Only 5 to 10 per cent of young Germans say they would consider starting their own company. “We are not good at taking risks and that is one of the key factors we are addressing at the university,” said Steinbach. “We need to tell students, ‘there is an alternative which may be very attractive – and we can provide you with a toolbox and a process which reduces the risk to a minimum if you take that [entrepreneurial] path.’”

But it’s vital to embed a new mentality toward risk in first year or second year students. “That is key,” Steinbach said, “that they become curious about these kinds of activities and engage in project work related to entrepreneurship – and that they become interested not only in biotechnology or IT but also in the basics of economics and how to commercialise science.”

Germany has produced one global technology success story wedding tech talent with entrepreneurial verve – the IT powerhouse SAP. “I think everybody’s dream is that one day, there will be a business model and invention at TU Berlin that will match the impact of SAP,” says Steinbach. “That is the dream.”

TU Berlin was one of the first three universities in Germany to be granted federal recognition as an “entrepreneurship” university. According to a 2012 survey, the growing pool of companies founded by TU Berlin alumni now generates revenues of €1 billion and employs 16,000. Most of the 349 companies included in the survey were founded after 2000 and 40 per cent were launched in the last five years.

One thing TU Berlin is still lacking is pre-incubator space. For now it relies on an off-campus incubator run by another organisation. “The dream would be to have an incubator that belongs to us completely,” said Steinbach. Tax incentives for entrepreneurs would help too. “The whole process could be enhanced and accelerated if strategic support from the government could be increased.”