Table Of ContentOU/L
HOUSE OF LORDS SESSION 1990-91
| Ist REPORT
SELECT COMMITTEE ON
SCIENCE AND TECHNOLOGY
INNOVATION IN
MANUFACTURING INDUSTRY
VOLUME HUI—WRITTEN EVIDENCE
Ordered to be printed 29th January 1991
LONDON: HMSO
£24.00 net
HL Paper 18—III
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HOUSE OF LORDS SESSION 1990-91
Ist REPORT
SELECT COMMITTEE ON
SCIENCE AND TECHNOLOGY
INNOVATION IN
MANUFACTURING INDUSTRY
VOLUME HUI—WRITTEN EVIDENCE
Ordered to be printed 29th January 1991
INFORMATION CENTRE
13 OCT 1992
2031
Wellcome Centre for Medical Science
LONDON: HMSO
£24.00 net
HL Paper 18—III
© Parliamentary copyright House of Lords 1991
Applications for reproduction should be made to HMSO
WRITTEN EVIDENCE SUBMITTED TO
THE SELECT COMMITTEE ON SCIENCE AND TECHNOLOGY (SUB-COMMITTEE 1)
VOLUME III—CONTENTS
Page
Agricultural and Food Research Council
Association of British Pharmaceutical Industry
Association of Industrial Research and Technology Organisations .. . 12
W S Atkins Consultants Ltd i
Barclays Bank plc pets
Dr P Bate, School of Management, University of Bath . 18
Professor J Bessant, Brighton Business School, Brighton Polytechnic rR
BICC Group.. pS
British Petroleum .. . 41
Britax Automotive Components Division
British Clothing Industry Association Salk!
British Footwear Manufacturers Federation .. tay
British Radio and Electronic Equipment Manufacturers Association 0
British Steel .. beriy
Brown & Root (UK) Ltd .. es OL
Dr D W Budworth ae PA
Sir Charles Carter .. 84
Centre for Exploitation of Science and Technology .. 86
Chemical Industries Association Ltd os
Committee of Directors of Polytechnics .. cad
Committee of Vice-Chancellors and Principals gh
Defence Manufacturers’ Association Bi)
Defence Technology Enterprises Ltd a0
Department of Trade and Industry .. 102
Design Council’s Innovation Centre 103
Electra Innvotec .. 107
Electronic Components Industry Federation .. 108
Electronics and Business Equipment Association .. 112
Engineering Council 118
Engineering Employers’ Federation.. 121
Federation of British Electrotechnical and Allied Manufacturers’ Association 124
Flexible Manufacturing Technology Ltd 127
Food and Drink Federation 128
Sir Hugh Ford and Associates Ltd .. 130
GKN plc 131
2 WRITTEN EVIDENCE SUBMITTED TO
Glaxo 135
Che 142
Inland Revenue 148
Institution of Production Engineers.. £52
Institutional Fund Managers’ Association 156
Japan-Europe Industry Research Centre, Imperial College of Science,
Technology and Medicine [57
KPMG Peat Marwick McLintock .. 166
London Business School paw
Machine Tool Technologies Association.. 217
Manchester Business School 222
Medical Research Council .. 224
Professor J S Metcalfe 225
Ministry of Agriculture, Fisheries and Food .. 226
MSF Goto |
Dr R P Oakey, Heriot Watt University .. Lae
J P O'Connor 239
John Osola and Associates Ltd.. 240
Professor J M Owen, School of Mechanical Engineering, University of Bath 240
Professor K Pavitt, Science Policy Research Unit, University of Sussex .. 241
Mr James Pilditch 242
Queen’s University of Belfast Zoo
Quo-Tec Ltd... 261
Dr D H Roberts, University College London 262
Royal Society of Chemistry 263
Professor J Saunders, Loughborough University .. 264
Science and Engineering Research Council 266
Society of British Aerospace Companies Ltd.. 267
Society of Motor Manufacturers and Traders 269
LOG 271
Institution of Professionals, Managers and Specialists 277
University of Salford/CAMPUS 281
Dr C E Webb, University of Oxford 282
Professor J C Willmott, University of Manchester 285
Professor M Gibbons and Professor J C Wilmott 286
THE SELECT COMMITTEE ON SCIENCE AND TECHNOLOGY (SUB-COMMITTEE 1) 3
Memorandum by the Agricultural and Food Research Council
SUMMARY OF MAIN POINTS
1. The AFRC has effective mechanisms for the transfer of technology resulting from work
supported in its institutes and in HEIs to manufacturing industry.
2. The protection afforded by patent law encourages investment in contract R&D with AFRC and
also encourages the take up by the private sector of intellectual property rights.
3. The involvement of UK research organisations in EC-supported programmes on innovation and
technology transfer is generally satisfactory.
INTRODUCTION
The AFRC supports exciting and innovative research aimed at providing the base of scientific enabling
technologies which are essential for the UK’s international competitiveness. While AFRC does not use
Science Budget funds to support research whose primary aim is the development of specific products or
processes for near-term commercial advantage, there are areas of basic and strategic research which are
exploitable. In the Council’s institutes, an increased proportion of funding for applied research comes from
industry, and both the researchers and the industrial partners share the task of identifying innovative ideas
that can lead to future economic benefit. The industrial relevance of research supported by the AFRC is
outlined in the Council’s Corporate Plan and summarised in Annex I. Examples involving the
manufacturing industries include generating the knowledge base to produce new pharmaceuticals,
expanding the potential for non-polluting methods of crop protection and using new approaches in
biotechnology and process sciences to improve food safety and quality. In the longer term AFRC research
in basic biology is likely to lead to discoveries that alter radically the production processes in, e.g., the
pharmaceutical industry. Advances have already been made through techniques of genetic modification
towards producing pharmaceuticals in sheep’s milk and in plants such as sugar beet. It is against this
background that AFRC presents its views on the pursuit of innovation in the manufacturing industry under
the Sub Committee’s headings 2, 4, 6, 7 and 8.
Q2 How active are UK companies in seeking out external technology, especially from overseas? How well
do they adapt and apply it?
In fields such as agrochemicals and veterinary products, UK-based companies seem active in acquiring,
developing or initiating new technology. Major companies can move rapidly if they consider the potential
reward worthwhile. For example, development of the world’s first vaccine against Marek’s disease in poultry
at the AFRC Institute of Animal Health evoked considerable commercial interest. On the other hand,
improvements to existing disease control methods met with a slower response. The enthusiasm of UK-based
companies in other research areas supported by the AFRC can be variable and although they are often
receptive to ideas generated within institutes the initiative almost invariably comes from the institute side.
Q4 How effective are the activities of Government departments in promoting and supporting innovation?
DES Science Budget allocations to the AFRC support the creation and maintenance of an innovative
science base. Such a base is a major means of generating ideas capable of exploitation by industry. The
DTI-LINK scheme is one element in this process. However, the recent Government withdrawal from
near-market research (which affects AFRC through MAFF commissioning) may have adverse implications
for technology transfer and the exploitation of innovation. Where pre-competitive studies are required
before ideas are taken up and utilised, there are now the responsibility of industry to develop arrangements
to fill this gap.
Q6 What is the effect of the legislative and regulatory framework concerning for example labour costs,
patent laws and tax concessions on R&D and the purchase of know-how?
Patent law has a direct effect on R&D and the purchase of know-how. The monopoly granted by patent
law is designed to foster industry and commerce within a secure and disciplined framework. By conferring
patent rights for a reasonable period of time, they encourage inventors and industry to take on the risks of
breaking new ground and, by insisting that details of inventions are made public, they stimulate the rapid
spread of technological knowledge.
The protection afforded by patent law encourages investment in contract R&D with AFRC and also
encourages the take-up by the private sector of intellectual property rights (IPR) and know-how arising from
the Council’s own programmes. Over the last five years AFRC has tripled its contract income from £5
million to £15 million, with over half coming from the industrial sector. During 1988-89 AFRC undertook
research for 316 organisations, of which 157 were direct contracts with private companies. Most of these
arrangements involve a degree of exclusivity based on patent protection.
The most successful example of the use of the patent system in recent times is the protection of the results
of the AFRC Institute of Arable Crops Research’s programme on pyrethrin analogue insecticides with a
portfolio of more than 500 separate patents involving 34 basic inventions. This portfolio is British
Technology Group’s (BTG) second biggest income generator.
AFRC is monitoring the progress of a number of legal changes which are currently being proposed. These
include:
4 WRITTEN EVIDENCE SUBMITTED TO
— The new Food Bill which will reflect the very high level of consumer interest in matters such as
food safety and quality. The effect of regulations that may arise from this bill are as yet unclear
but they could have an impact on the exploitation of biological systems by UK agricultural and
food companies.
— The proposed EC Directive on the legal protection of biotechnological inventions which is
welcomed by Council. The authoritative guidance which should emerge on the protection of
genetically-engineered plant and animal life forms should further encourage take-up of AFRC
know-how in this area.
— The proposed harmonisation of patent law and plant breeders rights within Member States.
Q7 How effective are the mechanisms for technology transfer from HEIs, Research Councils and public
laboratories to manufacturing industry?
In 1985 the Secretary of State for Education and Science announced new arrangements for the
exploitation of government-funded research. This followed the earlier announcement by the Prime Minister
of the ending of the rights of first refusal to inventions enjoyed by BTG. In essence this meant that, in the
university support area, Research Councils were directed to allow ownership of IPR to remain with the
universities concerned, together with responsibility for exploitation and income so derived. Similarly,
Research Councils would be responsible for IPR, technology transfer and exploitation arising at their own
institutes.
TECHNOLOGY TRANSFER—AFRC INSTITUTES
Within AFRC the traditional route for technology transfer has been through the Agricultural
Development and Advisory Service (ADAS) of the Ministry of Agriculture, Fisheries and Food (MAFF).
ADAS has increasingly close links with AFRC and in exercising two of its principal functions, namely the
provision of advice to farmers and growers to help them develop financially sound businesses and to identify
problems requiring investigation and solution, it both stimulates agricultural R&D and helps disseminate
research findings directly into practical agriculture.
An increasingly important route for AFRC is by industrial contracts and by direct contact with the
commercial world, including venture capital companies, British Technology Group, etc. AFRC adopts a
flexible, case by case, approach to exploitation with the primary aim of achieving the most appropriate,
efficient and cost effective route. The underlying philosophy is that AFRC institutes should concentrate on
their scientific and technical skills leaving the private sector, as far as possible, responsible for development,
testing and marketing and to take the financial risks.
The AFRC is also actively involved in the Government’s LINK scheme. The Council injects funds as a
programme sponsor and AFRC institutes undertake projects as research partners. The Council considers
LINK to be a useful aid to technology transfer and a means of breaking down barriers between academia
and industry. In AFRC’s experience it is a particularly successful scheme when the relationship is with one
or two companies rather than large consortia. In some areas, however, industry has experienced difficulties
adjusting to the requirements imposed by the LINK criteria: a flexible approach is needed to maximise the
creative interaction of industrial companies with HEI’s and Research Councils.
Research on behalf of levy funded bodiesi s another key element of the AFRC’s technology transfer. The
existence of the levy body ensures that there is an immediate outlet for research targeted to, for example,
a specific crop. An example is the work on sugar beet at the Broom’s Barn Experimental Station, part of
the AFRC Institute of Arable Crops Research, which exemplifies the way in which technology has been
transferred to industry, resulting in more efficient production and manufacturing of the product. Work on
seed pelleting, aphid monitoring, weed beet and its control, and yield prediction, has been applied efficiently
and rapidly because of the co-ordination by the Sugar Beet Research and Education Committee and the fact
that the work has been targeted towards a single crop.
The various mechanisms for technology transfer are already effective but will become even more so as
expertise in this area increases. AFRC set up a Commercial Policy Unit in 1986 to establish procedures and
co-ordinate activities. Research leaders and senior management at institutes attach considerable importance
to technology transfer and exploitation. Marketing managers are now being appointed for individual
institutes.
TECHNOLOGY TRANSFER—HEIs
Research Councils have adopted a common approach, by means of an Inter-Research Council
Exploitation Scrutiny Group, to the transfer of and responsibility for exploitation to universities and other
higher education institutions. These arrangements allow universities to retain the IPR and any income from
exploitation arising from AFRC research grants.
The Universities provide annual reports to the Scrutiny Group on the exploitation of discoveries and this
monitoring and review mechanism allows the Research Councils to assess the success of the arrangements
in use and if necessary suggest revisions or amendments to these. To date these arrangements are working
well and AFRC has no plans to change them.
THE SELECT COMMITTEE ON SCIENCE AND TECHNOLOGY (SUB-COMMITTEE 1) 5
OTHER TECHNOLOGY TRANSFER ROUTES INCLUDE:
(i) Publication in scientific and popular journals.
(ii) Written or oral presentations at national and international meetings.
(iii) Close association with the farming community by means of Institute Open Days and Subject
Days; and through Members and Friends Associations.
(iv) Training, sandwich-course and co-operative (AFRC/industry) research studentships.
Q8 Does the UK benefit sufficiently from EC support for innovation? How might it be improved?
The AFRC supports basic and strategic research in the biological and related sciences and “innovation”
defined as the application of new knowledge takes place downstream of the EC supported programmes in
which AFRC is most closely involved. EC support for innovation is located primarily in the Strategic
Programme for Innovation and Technology Transfer (SPRINT). We understand that the SPRINT
programme (located in Directorate General XIII) has been reasonably successful in promoting linkages
between the pre-competitive stage of research and the innovation stage. The UK is well represented in the
SPRINT-generated Transnational Technology Transfer Networks. As part of SPRINT, the Commission is
developing a comprehensive database of organisations supporting innovation in Europe, and the Second
European Technology Transfer and Innovation Opportunities Exhibition and Conference will be held in
Glasgow on 22-24 May 1990.
Improvements in EC support for innovation may be achieved in the future, through the new Valorisation
and Utilisation for Europe (VALUE) programme to promote the dissemination and utilisation of the results
of scientific and technical research; and by the likely increase in SPRINT activity. The involvement of UK
research organisations in these programmes is generally satisfactory, but the manufacturing sector may need
further encouragement to ensure that it uses the information and networks available via SPRINT.
EC is increasingly encouraging the use of the European Research and Co-ordination Agency (EUREKA)
for technology transfer. There has been little AFRC involvement in EUREKA since this programme
operates very close to the market place and is aimed at new product and process development. AFRC
Institutes are not eligible for direct funding through EUREKA but can be a sub-contractor for one of the
industrial partners.
Agricultural and Food Research Council
April 1990
ANNEX I
INDUSTRIAL RELEVANCE OF RESEARCH AT AFRC’S INSTITUTES
Plant Science
Generation of the knowledge base to produce improved crop varieties for plant breeders, including disease
resistant varieties, new pharmaceuticals and other bio-active compounds of agricultural and agro-industrial
importance, improved non-food products such as fibres and chemical feedstocks, and exploit further the
nitrogen fixation processes; to generate commercially important plants capable of growth in extreme
environments.
Arable Crops
To increase the efficiency and product quality of UK farming and provide a basis for better management
of the husbandry of crops. To achieve good agronomic practice for new and existing arable crops and
expand the potential for non-polluting methods of crop protection in Britain and abroad.
Horticulture
To enhance the competitiveness of the UK horticultural industry by providing a basis for improving crop
quality, extending the growing season and developing environmentally-sensitive methods of crops
management and pest and disease control that aim to reduce agrochemical inputs.
Engineering
To provide more efficient methods, with cost benefits to industry from improved product quality and
reduced input costs; whilst safeguarding the environment and improving the health and welfare of workers
and livestock. To prove the feasibility of scaling up biotechnological discoveries and to generate
fundamental process engineering data.
Grassland and the Environment
To provide environmentally acceptable options for sustaining production from grassland and for
alternative land use, by improving plant breeding methodology and exploiting new sources of genetic
variation. To provide principles for improving nutritional efficiency and predictability in livestock. To
develop immunological and microbiological tools for enhancing meat and milk production and quality.
6 WRITTEN EVIDENCE SUBMITTED TO
Animal Physiology and Genetics
To apply the discoveries in embryo manipulation, gene transfer and expression, and the molecular
identification of performance traits to livestock improvement. To use knowledge of how internal and
external signals influence brain function in providing for an animal’s wellbeing within its environment.
Animal Health
To apply newly acquired knowledge on the diseases of agricultural importance to the development of new
or improved methods of diagnosis, control and prevention, and to impove food safety and quality.
Food
To provide a framework for exploitation of these scientific advances, through new approaches in
biotechnology, biophysics and process sciences (a) to improve the safety, quality and nutritive value of foods
for consumers and (b) to generate and evaluate new options for safe and efficient food manufacture.
Memorandum by the Association of the British Pharmaceutical Industry
SUMMARY
Q1 It is pointed out that the activities of UK pharmaceutical companies are not confined within the
shores of the UK. As a result company policies, for example, on investment in research and development
are flexible and activities can be situated in locations where the most favourable conditions exist.
The cost of discovering a new medicine is extremely high, on average £100 million. The benefits of
investment in R&D of sums of this size to the national economy are readily apparent and it is important
that the climate for investment in the UK is such as to encourage pharmaceutical companies to invest here.
Q2 UK companies are active in seeking out external technology which they can use and adapt in
compliance with their particular overall strategies. The source of the technology is unimportant, be it found
in the UK or overseas.
Q3 The term “product development” has a special meaning in the pharmaceutical industry. The
development phase of a medicine is made up of safety and efficacy testing before administration to the
patient, and the consequent formulation of the medicine into a form suitable for human administration. It
includes also the stage of clinical evaluation.
Q4 The response to this question on the effectiveness of Government departments in promoting and
supporting innovation has been broken down into observations on each of the relevant departments
separately. Brief comments are set out below.
The Department of Trade and Industry is praised for its support in amending the provisions in the Patents
Act 1977 whereby, originally, licences of right were automatically available on pharmaceutical patents
during the last four years (16-20 years inclusive) of a patent’s life. Additionally, the Department has been
largely supportive of the EC initiative to restore the patent term of pharmaceutical patents, i.e., to restore
some of the patent period lost while a product passes through the regulatory process, often as much as 8-12
years. Patent term restoration is absolutely fundamental to the future health of the UK pharmaceutical
industry.
It is felt that the sponsorship role of the Department of Health towards the industry has become less
effective in promoting and supporting innovation during the last five years. The operation of the
Pharmaceutical Price Regulation Scheme (PPRS) has been such that there is less encouragement than
formerly for the locating of new technologies in the UK. Government sponsorship of the industry is
perceived as being less than that in France and Italy, for example.
Insofar as the Department of Education and Science is concerned, the industry has noted the apparent
drift away from science subjects in schools. There is also a concurrent shortage of science teachers and there
will, as a result, be fewer science graduates of high quality available to UK industry in the future. Good
science graduates are the life blood of the pharmaceutical industry. There is also concern about the low level
of funding for postgraduate students, a factor which will mitigate against the best graduates undertaking
research. The Association has produced a report on skills shortage in the industry, which is annexed to the
full submission.
The attitude of certain Inland Revenue inspectors to the financing of R&D is causing concern to some
companies. Some inspectors are seeking to re-define R&D, splitting research from development with the
result that tax relief on capital spent on development will not be available. In their activities the inspectors
are seeking to limit the scope of the statutory definition of scientific research, something which only
Parliament has the right to do.
