[Commons-Law] Working in Govt labs, scientists can now set up their own firms, get equity

[Prashant Iyengar]

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Working in Govt labs, scientists can now set up their own firms, get
equity - IndianExpress.Com

Tue May 20 2008 09:13:26 GMT+0530 (India Standard Time)
Working in Govt labs, scientists can now set up their own firms, get equity

AMITAV RANJAN

Posted online: Tuesday, May 20, 2008 at 0031 hrs IST

New Delhi, May 19
Until 1997, graduates and faculty of Massachusetts Institute of
Technology set up 4,000 firms employing 11 lakh people and generated
$232 billion in worldwide sales. If they had formed an independent
nation, it would be the world's 24th largest economy.

Taking a cue from this, the government will soon endorse a plan to
"unleash the entrepreneurial skills" of its scientists, engineers and
professors by permitting them to float private firms — while retaining
their government jobs — to develop globally competitive technologies,
processes and products.

This proposal from the Council for Scientific & Industrial Research
(CSIR) for the Cabinet's OK has been approved by the Prime Minister's
Office who had first suggested this at the CSIR Society meeting in
January 2007.

As per the proposal, the research community will be freed from Central
Civil Service Conduct Rules and be allowed to dip into the technology
or knowledge pool of state-run organizations such as universities,
academic institutions and research labs. In return, the start-up
company would have to pay premium and royalty to the organisations
which could opt for equity in lieu of the intellectual material.

The scientist would be permitted hold equity — even up to a majority —
in the company which has to be funded entirely by the promoters. To
maintain "balance between public responsibility as an organisation
employee and private responsibility as owner of the company," the
scientist will not be involved in day-to-day management but could
either be a chairman or non-working director.

Professional staff will be engaged for managing the company.

His carrot would be the option to quit the service and join the
company on commercial success.

The community would have the option to take up a stint with another
academic institution, research unit or private industry but within the
country. "One of the most effective mechanisms for developing
entrepreneurial skills in scientists working in public institutions is
prior exposure to industry environment,"

So far, scientists have preferred to cocoon themselves in safe
government jobs not taking the risk to translate their research into
commercial products. The choice before them was to quit service to
start a development firm or join a private firm.

CSIR says now is the time to lend a helping hand to the researchers in
setting up science-driven enterprises. It has outlined steps which
hinge on public-private partnership and call for a Scientific
Entrepreneurship Scheme where a scientist would be permitted to set up
a firm alone or in partnership with other scientists or private firms,
while continuing to be in government service.

"Such a measure will encourage creation of a new breed of
innovators-entrepreneurs among scientists working in publicly funded
R&D organisations, universities and help create new businesses,
employment for highly skilled technical and scientific personnel,"
says CSIR.

State-run organisations will also be allowed to set up Technology
Incubation Centre within their premises for leasing out to private
firms.

The organization could use its spare built-up area or construct extra
space to house these independent entities. Each of these centres would
have to tie up with venture capital funds for financing start-up
companies at the centre so that they become a "self-sustaining entity
within 5 years".

As for mobility of the scientists, the CSIR has suggested that any
person who has served five years in the public-funded organization
would be eligible to move to another organization for research,
teaching, R&D etc.

Each researcher may spend up to 10-15 percent of his service on
mobility, but in small tranches of a minimum of two months and a
maximum of two years.

While the basic salary would be provided by the parent organization,
the borrowing entity would have to pay a minimum dislocation allowance
of 20 percent of the basic salary as well as dearness allowance and
travel allowance. He would be allowed to retain government
accommodation as well as be provided medical and other applicable
facilities.

The Scientific Entrepreneurship Scheme

• Freed from Central service rules

• Can set up a firm alone or in partnership with other scientists or
private firms, while continuing to be in govt service

• He would be permitted hold equity — even up to a majority — in the
company which has to be funded entirely by the promoters. But he can
only be non-executive chairman or non-working director with no say in
day-to-day management.

• Parent organisation can take equity in lieu of intellectual capital

• Start-up can tap state-run universities, centres and lab by paying
premium and royalty

• Organisation can use spare built-up area or construct extra space to
house these independent entities