Examination of Witnesses (Questions 60-79)
DR FRANCES
SAUNDERS, MR
PETER STARKEY
AND MR
MARK HONE
28 NOVEMBER 2006
Q60 Willie Rennie: So the activity
of Ploughshare is completely different.
Dr Saunders: It is completely
different. The Director of DDA, Damien McDonnell, has conversations
with Andy Tulloch, the Chief Executive, and they have looked at
how complementary their activities are. Indeed, before we got
approval to set up Ploughshare there was an investigation at the
previous Minister's request to look at any overlap between the
DDA and Ploughshare, and that concluded that they were doing very
separate tasks.
Q61 Willie Rennie: So why the proposal
to get rid of the DDA?
Dr Saunders: I think you really
do need to ask my colleagues.
Q62 Willie Rennie: If it is of benefit
to you—
Dr Saunders: We have never had
anything particular from the DDA that has benefited our business,
because, as I said, they have tended to work with SMEs. We have
had examples where they have come to us with an SME who would,
perhaps, like to have access to Dstl technology, but they have
not had any money in order to pay us to help them do that technology
transfer.
Q63 Willie Rennie: There has been
a connection with the DDA.
Dr Saunders: There has been a
connection over the years, and indeed some of our staff have been
working in the DDA. We currently have three staff on secondment
to the DDA, so there has been a relationship.
Q64 Willie Rennie: How would you
fill that gap if the DDA was no longer there?
Dr Saunders: As I said, we have
not been reliant on the DDA to bring in any particular technologies
that we were looking for, nor to exploit any of our IP. So we
do not see that there is actually a gap for us.
Q65 Willie Rennie: Some people say
that they should not be making any money from the technology that
they spin out on licence, or whatever, from the Dstl. Do you agree
with that? It should actually be for the benefit of the wider
economy rather than for the financial interests of the Dstl and
the Government.
Dr Saunders: It is one of those
interesting things, is it not? All public sector research establishments
have a charge, really, from the Treasury to make sure that we
maximise the value to the country of the IP and the research that
we do. One way of doing that is actually to make sure that technology
gets out there and is used. A lot of the things that we are exploiting
will have benefits to society: they are things like rapid MRSA
testing; they are new coatings that will, perhaps, help people
in the drug industry. We see those kinds of benefits. In some
ways the money is nice to have but it is kind of incidental; what
we will then use that money to do is to help make that become
a real virtuous circle. So with some of the money that we make
out of Ploughshare (we will have to negotiate this with the Finance
Director, of course) the intention will be to re-invest that in
making technology transfer work even better by putting it into
innovative work alongside our IP to help get that pull-through.
Q66 Willie Rennie: So you do not
think there has been technology that has been lost to the public
good because you have been trying to get too much money?
Dr Saunders: No, we are actually
really rather sensitive to that, to the extent that when we look
at Ploughshare's objectives they have some objectives that are
not purely financial; it is about trying to maximise some of the
benefit to the public, including thinking about: how many jobs
are we creating? How many relationships are we creating? So it
gives them more than just a financial imperative. Obviously, they
have to cover their costs but beyond that there is a richer set
of indicators.
Q67 Willie Rennie: Where do you see
the balance of your future income from this area coming? Is it
going to be from Ploughshare or is it going to be venture companies?
Dr Saunders: Ploughshare will,
effectively, manage all of this for us. One of the reasons for
setting this up was to allow the Dstl executive to focus on doing
things for the MoD and other government departments, and bring
in some expertise that can act as our agents to look at the exploitation.
In each area of IP they come up with a strategy and an approach,
depending on what that technology is likely to be. I would expect
that there is always going to be quite a strong balance between
licence revenue and income from joint ventures, because although
the potential rewards from a spin-out company could be very high,
rather few of them will actually deliver as much as you might
hope, and licensing and getting that technology out through existing
companies is also a very good way of making sure the technology
gets out there.
Q68 Willie Rennie: The Lambert Review
tried to give a big steer towards more licensing rather than spin-outs.
Are you following that route?
Dr Saunders: Absolutely. In the
early days of Dstl there was quite an emphasis on getting some
spin-outs going because we wanted to get some experience of doing
that and it made sense for the types of technology. However, now
there has been a very clear redressing of the balance and this
year the emphasis for Ploughshare has meant their target is to
increase their licence revenue, and they have been quite successful
in doing that.
Q69 Mr Jenkins: Before we leave Ploughshare
and the DDA, I have still got some confusion in my mind. As far
as I am aware, the DDA still owns intellectual property rights.
You say they were looking at SMEs. What is the difference between
your operation exactly and the DDA?
Dr Saunders: The DDA has no IP
rights over Dstl IP.
Q70 Mr Jenkins: And it has no rights
from anywhere else?
Dr Saunders: I do not know if
it has got rights from anywhere else; I can only comment that
it has no rights over our intellectual property.
Q71 Mr Jenkins: I believed their
role was to roll out intellectual property rights through industry
anyway; that is the "diversification" tag. Diversification
meant that defence stuff would have been rolled out to industry,
and you are claiming they only dealt with SMEs. What do you deal
with (insofar as Ploughshare is going to be dealing with SMEs),
why are you different, and why can we not be given a guarantee
that Ploughshare is not going to run round the same circuit as
the DDA?
Dr Saunders: Because Ploughshare
actually have a licence from us to license on our technology or
to develop our technology, which I do not think the DDA had, but
you would probably need to ask our colleagues in the MoD what
they had. So they have, if you like, a clear route to market for
our IP and their main remit is to find people who want to license
that technology or to find alternative routes to get it exploited.
My experience with the DDA (and this is only my experience) is
that they were working much more as a brokerage organisation brokering
a relationship between SMEs and organisations that had research
capability that could be applied to the products the SMEs were
trying to develop. That is more like brokering for a contract
research arrangement than an IP exploitation for research that
has already been done.
Q72 Mr Jenkins: You have got seven
joint ventures at the present time?
Dr Saunders: Yes.
Q73 Mr Jenkins: If you have got seven
joint ventures and Ploughshare going on, how much effort have
you been directing into that activity rather than your main "we
only work for the Government" activity? What guarantee do
I have that in future information will not be slipped out by these
joint ventures that are funded by the British Government only
to be found later on being utilised by some other organisation?
Dr Saunders: I will try and explain
a little bit about how this whole governance arrangement works.
Firstly, having established Ploughshare, then the oversight of
these start-up companies, these joint ventures, is being done
by Ploughshare. So we, as Dstl, have stood back from that now
and we have employed Ploughshare to do that on our behalf. So
we are not being diverted into those sorts of areas. In order
for technology to be released from Dstl to Ploughshare and then
on to these joint ventures we have to get agreement from the intellectual
property group in the Defence Procurement Agency. So anything
we release has been approved by them; anything that might be potentially
controversial or sensitive we also have a technology transfer
oversight group that includes people from CSA's organisation,
who can look at whether or not they think there are some sensitivities
in the technology that we have not picked up. Obviously, our security
people also vet this before it goes out. So we have a very tight
regime to make sure that any IP that we release is ready to be
released and is fit to be released without it coming back and
potentially causing a threat to us in the later stages. So we
have a very strong governance regime for this.
Mr Jenkins: I am beginning to understand
the relationship between the DDA now and why the DDA has not gone
down this route. You cannot answer that but the MoD can.
Chairman: We can ask that later.
Q74 Mr Hancock: Where is your part
in this negotiation for the transfer and selling on of intellectual
property rights? Where do you come in on the pricing of it?
Dr Saunders: Actually we now do
not do anything on pricing. We expect Ploughshare to do that.
Ploughshare has its own board, which includes non-executive directors
who have worked in the licensing and entrepreneurial areas to
provide them with guidance as to the kind of prices that might
be sensible to enter into a negotiation. For example, recently
they, effectively, ran a competition for a licence for one of
our areas of technology to see what the market would be prepared
to pay for this, so they are using those kinds of mechanisms to
set the price—a combination of having expertise on what
this might mean plus some experience of doing these kinds of deals
in the past. Andy Tulloch, the Chief Executive, has been very
experienced at licensing deals in his previous career.
Mr Hancock: If it is anything like
getting rid of our property that we own then God help you! You
will be giving it away.
Q75 Chairman: Does Ploughshare's
board include any directors who work at Dstl?
Dr Saunders: Yes, it does. At
the moment, it includes myself and Mark. However, it is dominated
by non-executives and it is chaired by a non-executive.
Q76 Chairman: Have you considered
the experience of the Met Office?
Dr Saunders: Yes, we have.
Q77 Chairman: How are you guarding
against conflict of interest?
Dr Saunders: The important thing
here is that Ploughshare is 100%-owned by MoD and Dstl on behalf
of MoD. So it has not got any other investment coming in from
outside organisations into Ploughshare itself.
Q78 Chairman: And you would not expect
that to happen.
Dr Saunders: And we would not
expect that to happen. Indeed, when we talked about the ways of
funding Ploughshare we came to the conclusion it would not have
been a wise move to bring investment into Ploughshare itself.
We used to have Dstl directors on some of the joint ventures but
we have gradually been removing them from that role and requiring
Ploughshare to provide directors in their own right rather than
us to provide the directors. That, I think, helps put these things
more at arm's length and get rid of any chance of conflict of
interest.
Q79 Linda Gilroy: The Defence Technology
Strategy puts a lot of emphasis on the need for Dstl to recruit,
retain and develop staff. How do you go about that and how challenging
is it? In particular, perhaps you could cover any particular challenges
arising from what we believe is an ageing profile, and, also,
of recruiting the best of young British scientists?
Dr Saunders: We do a lot of graduate
recruitment and we have got some very good relationships with
the universities; we have people from our younger cadre who actually
go out and build relationships with the universities. We aim to
recruit about 100 graduates a year and since we have been set
up that is the kind of level of recruitment that we have been
going for. We are in The Times top 100 of graduate employers
(I think we were 76th in the last round), and so we have got a
reasonably good profile as a recruiter of graduate scientists
and engineers. I think the standard of people we are getting in
looks very healthy. In addition to that we also do quite a bit
of work with pre-university students. We are very active sponsors
of the "Year-in Industry" scheme, we provide a prize
every year but, more than that, we actually employ of lot of "Year-in
Industry" students, and to some of those we will offer the
equivalent of scholarships to go off to university and then come
back and work with us during their vacations. I think at the bottom
end of the scale it is actually a very healthy picture; we are
getting some very good graduates.
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