Spinning out IP from Stellenbosch University, and Why It’s a Big Deal for Innovation in South Africa
In 2014 Stellenbosch University became the first university in Africa to file a patent for a blockchain technology. The core Custos technology — the process of embedding blockchain bounties in media to stop piracy — was developed in the MIH Media Lab at Stellenbosch University. The IP was patented and owned by the University until recently when we managed to transfer the patents to Custos. This might seem trivial — but it’s a massive deal for innovation in South Africa. Let me tell you why…
Where innovation happens
Silicon Valley has Stanford. Silicon Fen has Cambridge. Silicon Wadi has Tel Aviv University. Silicon Cape? Stellenbosch University and the University of Cape Town. We are past the age of the single inventors developing cutting-edge technologies in their garages — to really push what is possible you need labs, funding, and masses of smart and innovative people. Universities form the nucleus of these clusters.
Stellenbosch University holds the most patents of any organisation in South Africa. These patents range from everything from satellite components to biotech to blockchain technologies. The reason they hold so many patents is twofold. Firstly, Stellenbosch University has world-class staff and facilities that attract students from all over the world that produces incredibly innovative research. Secondly, by law, all IP generated at public institutions is owned by the institution. (This is very similar to the US Bayh-Doyle Act.)
Why the University owning your IP is not always great
The Custos technology was developed at a lab at Stellenbosch University, and as such was owned by the University. They patented the technology for us, licensed it to us on great terms, and have been an incredible partner for us since we spun out from the lab to establish the company. It was amazing having the University pay for and manage the development of our IP globally — the Custos portfolio now boasts patents everywhere from the US to Russia — something we definitely could not afford as a newly established startup.
The big stick in the mud, however, has always been that local investors were convinced that you cannot EVER get the IP out of the big bad Universities. This has in some cases limited the scope for investment to more local-focused deals (“we sell stock insurance to spaza shops”) or imitated/imitable concepts (“Groupon, but for SA”) when there’s some really world-class stuff being generated by universities.
Meanwhile, Innovus, the technology transfer office of Stellenbosch University (the organisation that does all the IP stuff) has a broad international network, massive portfolio, and an incredible team. Anita Nel, the CEO of Innovus, and her team has really pushed innovation in this country over the last couple of years. Recently, Anita was recognised as one of the 50 most inspiring female role models in the technology industry.
How we spun out the IP and what it means
Anita and her team’s latest achievement was helping Custos spin out our technology from the University. Innovus, together with NIPMO, the National IP Management Office, decided to use Custos as a case study to quell any fears in IP transfers from a publicly funded institution to a private one. An agreement was signed to assign all Custos IP from Stellenbosch University to Custos.
We are now the proud owners (and the reluctant payers of maintenance fees) of the Custos IP portfolio.
The reason this is a big deal is because it significantly de-risks the business in the eyes of an investor. A startup, by definition, is a very risky endeavour. While the main avenue of de-risking is getting a great product-market fit, there are many other factors that can pose a value or existential risk to a startup. This includes staff risks (losing a key person means losing a lot of embedded knowledge), legal risks (taking liberties or not having proper contracts in place), but also IP risks, in that you might not have the freedom to operate or might not have the right to sell your IP. Showing that university IP can be spun out significantly reduces the latter risk for companies building on innovations developed at universities in South Africa.
We at Custos are super happy and proud to be the owners of the IP, but even more proud to be part of this push to streamline innovation in South Africa. There’s always an abundance of negative news available, it’s so great being part of a positive story!
