Transcript VINNOVA Workshop February 2, 2006

VINNOVA Workshop, Part I
February 2, 2006
Building An Effective Technology
Transfer Function:
The Traditional View
Choosing the Right Model
 Three factors to consider
 Institutional mission and commitment
 How important is technology
commercialization to the mission of the
institution – what priority is given and what
dollar commitment is made to support it?
 Culture
 Entrepreneurial & positive/ivory tower &
resistant
 Research funding level
 Conventional wisdom (US). . . 1 disclosure
expected for each $2.0M of funding
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Choosing the Right Model
 Closer Look at Research Base/Disclosure Ratio
 A few figures from the 2004 AUTM Data
 UNC Chapel Hill – funding base of $327.6M produced
120 disclosures
 Similar funding bases ($320-$340M)
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U. of Maryland, Baltimore – 70 disclosures
Vanderbilt – 121 disclosures
University of Massachusetts – 141 disclosures
 And, consider . . .
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MIT - $1.0B produced 515 disclosures
Univ. of Wisconsin, Madison - $750M = 405 disclosures
Stanford - $700M resulted in 350 disclosures
UNC – Charlotte on $49M in funding led to 70 disclosures
U Kansas Medical Center on $69M in funding=4 disclosures
 Conclusions drawn?
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Choosing the Right Model
 Also factor in:
 Institutional fields of research excellence
 Life sciences more potential for high value
technology commercialization than
manufacturing
 ICT more potential for quick technology
commercialization than energy-related
technologies
 Number of faculty engaged in research
 Location (if you build it, will they come?)
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Choosing the Right Model
 Reviewing the Alternatives
 In-house except for writing patent applications
and/or using marketing consultants
 Out-sourced to affiliated organization
 University holding company
 Out-sourced to non-affiliated organization
 Research Corporation Technologies, BTG
 Hybrid
 Selective out-sourcing if organization staff is
small
 Cooperative among universities/institutes
 Co-located institutions
 Office established at anchor institution
 Centralized or wheel (hub/spoke) configuration
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4 Categories of Activity Needed for
Effective Commercialization Transfer
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Operational
Administrative
Educational
Crusading
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Operational Activities
 Evaluating invention disclosures
 Working with inventors to understand the discovery
 Determining who owns the invention
 A matter of law, regulation, organization’s policy and
facts contributing to discovery including contractual
obligations
 Determining encumbrances (strings attached by
funders, materials providers etc.)
 Making patent filing decisions
 Choosing patent attorneys & negotiating the costs
 Terms for waiving title to inventors
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Operational Activities (Continued)
 Marketing
 Finding licensees
 Opting for a start-up
 Finding venture or seed funding
 Assisting with business plans
 Assessing suitability for incubator
 Document drafting
 Licenses, options, NDAs, and maybe MTAs,
research agreements
 Negotiating the deal
 Evaluating licensee/start-up performance
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Administrative Activities
 Managing the paper flow (patent &
licensing management)
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Docketing disclosures
Reporting to funders
Ensuring assignments properly made
Tracking patent prosecution
Maintaining databases
Receiving/distributing royalties
Licensee compliance
 Royalty payments
 Annual reports
 Due diligence milestones
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The TTO as Educator
 Advising on & interpreting IP policy
 Teaching the teachers
 What is intellectual property all about?
 When does invention happen?
 How does the patent system work?
 Importance of maintaining lab notebooks
 What’s involved in the patenting process
 Getting comfortable with patent attorneys
 How does the organization’s tech
transfer system work?
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The TTO as Crusader
 Public Relations
 Establishing a visible presence on campus
 Broadcasting success stories
 Maintaining an Informative website
 Walking the halls
 Outreach/Developing an ecosystem
 Establishing linkages with others
 Internal- Business school, law school, industrial
development, entrepreneurship programs
 External - Business community, incubators,
mentors, vc’s, marketing consultants
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Pulling it All Together
(Making Tech Transfer “Happen”)
Identifying the commercializable assets
 Patents, copyrights, know-how, biomaterials,
other
 Determining who owns it
 By law or regulation
 By University policy
 By signed agreements (internal or external)
 Factoring in “encumbrances” – a/k/a/ the
elephants in the corner
 Obligations to Funders (pre-existing constraints)
 MTA terms
 3rd Party-owned IP used
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Pulling it All Together
(Making Tech Transfer “Happen”)
 Turning on the “commercialization” mechanisms
 Disclosure
 IP Assessment
 Patenting
 Copyright
 Other
 Marketing
 Determining strategy
 Finding the “right” licensee
 Evaluating as a start-up candidate
 Negotiating appropriate agreements
 Understanding royalty structures
 Closing the deal
 Administrative follow-up
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Establishing a Successful TT
Function: The Challenges
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IP policy
Law
Staffing
Reporting
Financial support
Culture
Building solid Linkages or ecosystem
– it takes a Village
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Developing a TT Business Plan:
Case Study
Black Box University (BBU) has become aware that many universities earn
significant revenue from commercializing innovations developed in their
laboratories through faculty and student research. Since BBU specializes in
cutting-edge research and is considered a leader in developing new
technologies, the senior administration has decided it is time to join in
promoting commercialization of its discoveries. BBU must take into account
these factors in deciding how to structure its commercialization activities:
1. It is located in the country some distance from a major city
2. Its research funding base is the highest of any university in the country.
Industry funds 50% of it.
3. Some members of its faculty are entrepreneurial, but most are
interested only in doing “outside the box” research and publishing.
4. BBU has no IP policy
5. The University will support the effort on a fixed budget for 3 years. By
year 4 the program must become self-sustaining.
6. An international commercial technology broker (TT Finders, Inc.) has
expressed interest in managing BBU’s innovation portfolio.
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VINNOVA Workshop, Part II
February 2, 2006
Building an Effective TTO:
A Broader View of TTO Participation
The TTO as Research Broker
 Kinds of relationships most likely to become
involved in
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Exchanges of materials (MTAs)
Exchanges of confidential information (, CDA’s)
R&D collaborations
Material Development contracts
Alliances
Arms-length Licenses for pre-existing IP
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Maximizing Potential Means
Understanding Company Concerns
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The playing field becomes more complex as patented
technologies increase and access to un-patented materials
owned by Non-Profits becomes more tricky and/or costly.
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Have to be wary of multiple technologies/payments (stacking);
big picture
Challenge of keeping materials distinct from patented
technology;
Getting what you need/want on reasonable terms without
undue constraints - being creative.
Differing Experience & Expertise.
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Most Non-Profit tech transfer personnel (including directors)
are not I.P. attorneys or trained I.P. professionals - most are
scientists.
Pressure to stick to pre-scripted agreements that may not fit.
Somewhat of a “wolf-at-the-gate” view of corporations & what
“for profit” research means.
Control and Valuation issues often not realistic.
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Maximizing Potential Means
Understanding Company Concerns
 Non-profits Increasingly Interested in Profits!
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Often fail to remain true to “advancement of science”
Sometimes want ownership or share where not reasonable.
The desire to “hang on” to control can lead to absurd terms
and results.
Increasingly difficult to obtain research materials without
undue constraints.
 Style & Reasonableness of Non-Profits runs the
gamut.
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Big ones that make a lot of money (e.g. NIH, UCLA, Harvard)
can often push for terms that are deal breakers and are very
inflexible.
Others can be quite reasonable and provide deal terms and
structures that fit well and require little modification.
 There is NO such Thing as a “Standard” Tech. Transfer
Agreement.
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Leveraging Research:
The TTO as Active Participant
 Typical Terms of Industrial Agreements Involving
Technology Transfer
 IP ownership by university – if university or institute
does not own according to law, signed agreement or
policy, must ensure IP is assigned by inventor/author
if university to be an active party in the transfer
 Ownership by industry – if agreed, the transfer must
be by written assignment of party who has standing
according to policy – inventor/author or organization
 The parties (who will be the “licensee”) – is the
licensee competent to productize or does intend to
“pass through”/sublicense
 Publications clause (relationship to filing of patents) –
if commitments made for review of publications –
how is management handled?
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Leveraging Research:
The TTO as Active Participant
 Typical Terms of Industrial
Agreements Involving Technology
Transfer
 Definitions of “invention” and other IP –
definite enough to be ascertainable and
qualify for legal protection . . . Word
“discovery” example of ambiguous term;
“research results” another example
 Filing obligations; foreign filing elections
 Allocation of patent costs
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Leveraging Research:
The TTO as Active Participant
 Typical Terms of Industrial Agreements
Involving Technology Transfer
 License rights – patents/copyrights/software/trp
 Vesting under research contract (“hereby
grants” vs. “agrees to grant”)
 If grant or rights “vest” in research contract, 3rd
party licensing potential limited by terms in the
research contract
 Option periods for acquiring licenses
 Provide best potential for 3rd party licensing
opportunities
 License terms
 Importance of due diligence milestones can’t be
over-stated
 Termination provisions allow re-capture of license
rights
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Leveraging Research:
The TTO as Active Participant
 IP warranties, representations require
careful consideration
 Background rights
 Background rights – rights to university’s preexisting, concurrently developed and in some
cases “to be developed” IP outside of the scope of
the research program.
 Typical clause requires university to give/license
the funding company rights to use any other IP
owned by the university that is necessary
for/useful for practicing inventions/copyrights or
all research results developed during the project.
Right is usually open-ended – no time limit on the
obligation or exercise of it
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Leveraging Research:
The TTO as Active Participant
 The Problem with Background
Rights
 Impossible to speculate what university IP
will be encumbered because:
 Invention to which background rights are tied
hasn’t been made yet
 Impossible to know how the company may at
some future time use an invention, copyright or
other research result
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Developing a Capability as
“Research Broker”
 Must establish clear communication lines with
organizational units that link to industrial funders
 IP education is an imperative
 Seek authority to negotiate the IP terms
 If permitted to find funders, make sure all
stakeholders are in the loop
 Balance . . . Rights/Interests of all stakeholders
 Don’t make promises you can’t keep
 Definitive research results
 Transfers of IP ownership if you don’t own
 Exclusive licenses if there is a non-exclusive already
granted
 Rights to improvements
 Background rights
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Managing Multi-party Relationships to
Enhance Transfer
 Work with scientists to establish project –
“backing in” never works
 Find compatible parties . . . best if vertical
interests/if horizontal avoid competitive
players (interests in different applications)
 Funding source issues
 If governmental/non-player . . . All participants
will have to “fit” into the prescribed “sandbox”
 Better bet: Collaborators provide funding (price
of admission to program)
 Setting up the relationship: All sign
w/university – decision point: Same agreement
or tailor to different players
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Managing Multi-party Relationships to
Enhance Transfer
 Maximizing Commercialization Potential
 IP terms set the stage
 Ownership issues
 Mine, yours, ours/cross-licensing terms necessary
 Licensing issues
 Scope of rights: all get access non-exclusively or
exclusive by field only; Exclusive w/w not possible
 Royalties: Royalty-free – nothing for university or
inventors; flat fee fully paid up; running royalties
based on product sales
 Paying for patents
 Everyone pays: pool made up of % of funding
 Companies electing licenses pay
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Managing Multi-party Relationships to
Enhance Transfer
 Bottom line Expectations from Multi-party
Collaborations
 If all players want access, university payback
will only come from charging royalty on some
basis. Royalty-free means no commercial
payback. Only benefit research funding
 Start-up potential very unlikely
 Late-joining parties create problems
 Structure should accommodate higher entry
fees
 Payment for back patents if access needed
 Cross-licensing ensured for later-joiners’
background IP needed by first joiners
 TTO representation managing IP indispensable
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The Entrepreneur on Campus/Dealing
with Conflict of Interest
1. Inventor Start-ups
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Managed by the technology licensing operation
Conflict of Interest
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Leading to potential bias in research
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Leading to preferential treatment/bias as a result of
Technology Transfer
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Generally managed by central administration or
academic department or laboratory
Managed by the licensing group or an independent
patent committee, or vice president
Private consulting as permitted by
Institutional Policy
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Often managed through academic department/lab
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The Entrepreneur on Campus/Dealing
with Conflict of Interest
A. Researcher Financial Conflict of Interest
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Financial interests of the researcher may give the
presumption of bias in carrying out the research, i.e.
will the personal financial interests of the researcher
have a potential effect on the quality, outcome
and/or dissemination of the research undertaken
B. Senior Officer/Supervisory COI
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Influence of senior officers representing their self
interest or interest on behalf of the institution may
favor one research program over another or favor
one research sponsor over another; senior officers
may also try and influence technology licensing
negotiations where they have an interest in the
prospective licensee; faculty supervisors may cause
confusion for students who are conducting research
under their supervision
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Recognizing the Potential for Conflicts
 Inventor with dual commitments (start-up
and university)
 University as Start-up shareholder
 University as Start-up board member
 University managers as individual
shareholders in start-ups or in potential
licensees
 University Licensor as royalty beneficiary
 Licensee as sponsor of research
 Technology Transfer Office as “dealmaker”
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Containing Potential Conflicts
 Commonly-used management tactics
1. Limit activity w/start-up if inventor stays at university
2. Restrict/carefully monitor research funding from
licensee (any licensee, not just start-up); watch
licensing of improvements
3. Limit start-up/licensee use of students
4. Require faculty to tell students of start-up activities
5. Insist upon arm’s length negotiations with licensee
(start-up) – no university employee interference
6. Limit university’s board/management participation
7. Require firewall between university equity-holder and
technology transfer, research etc.
8. Conflict avoidance policy for technology transfer
professionals, i.e. no personal investing or recuse
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Faculty Consulting
 Consulting activities are a matter of
university policy
 Commonly, faculty may consult one day a week
 Extent of institutional involvement in
consulting activities – split practice
 Some institutions require review and sign off
 Some require only annual reporting
 Due to conflict of interest reporting
requirements, all institutions should be
managing conflicts in consulting & research
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Faculty Consulting: A Potentially Risky
Business for Faculty and the Institution
 Use of university facilities for consulting: issues of
overlap w/faculty, student research, COI, use of
students
 Definitions in consulting agreements generally broad –
Company will “own” all discoveries, ideas, information
 Faculty may set off areas of innovation for consulting
 Faculty accept personal liability for consulting
obligations
 University sign-offs may expose university to liability
to company and risk breaching existing or future
agreements with funding sources
 For TTOs: Develop a management plan for consulting
 Develop template consulting agreements for faculty
 Institute tracking system
 If party to agreements, understand the risks
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