Office of Technology Development Everything You Wanted to Know About Technology Transfer (and then...

Office of Technology Development

Everything You Wanted to Know About Technology Transfer

(and then some)

Catherine Innes

Scott Forrest

UNC Office of Technology Development


OTD’s Goal

OTD’s goal is to find the development path giving the best chance of product(s) based on the technology getting to the market

University-based technology is always interesting, but does no good unless it is successfully commercialized (products on the market!)

Discovery of technology is just a first step, development is often more costly, more risky and more involved than discovery—thus choosing the proper development route is extremely important


What?Authorized managers of UNC’s intellectual property (IP)

“Cradle-to-grave” project management

Process disclosures made by UNC faculty

Decision -- file Intellectual Property?

Decision -- Collaborate? License? Startup?

• Negotiate the license

• B-plan, Fundraising, management searching

• Brokering interactions with potential partners

(pharma, service-for-equity, investors)

Goal:

Bring UNC technology to market


Making Patent Decisions

• Inventions selected for investment have:– Solid technical merit

– No unmanageable obligations to others

– Strong patent protection available

– Good prospects of a commercial market and business opportunity


Reasons Not to Patent

• Idea is not an invention

– Doesn’t qualify as eligible subject matter

– Publication created bar to patenting

• Idea is not fully developed

– Enablement issues

– Patent issuance unlikely

• Patent position is not commercially useful

– Narrow coverage

– Dominated by other patents


Reasons Not to Patent

• No viable commercial market– No promising application– Small market for products

• No interested commercial investors– Return on investment not sufficient– Difficulties in making products

• UNC does not fully own the work – Inventors haven’t assigned rights– Commercial co-owner doesn’t want license


Strategic Technology Transfer

• Commercialization Readiness Assessment

– Within 60 days of receipt of an ROI, OTD Project Managers evaluate the following:

• Stage of development of the technology

• Strength of available patent protection or ability to consolidate of copyrights

• Commercial opportunity

• Encumbrances


Licensing is the primary vehicle for commercializing University-based technology

To understand licensing, we must understand:•What a license accomplishes•The role of a license’s different components•How the nature of our partner (startup, big public company) dictates some aspects of licensing

Technology Licensing Basics


What does a license accomplish?A patent:Allows holder to exclude others from making, using, selling, importing/exporting the invention. Protects a product/process.

A Copyright:Allows holder to make/copy, distribute, display, perform, import/export the work. Protects the tangible expression of an idea.

A license:Exempts our partner—the “licensee”—from the right to exclude under a patent or permits them to make/copy, etc. under a copyright (can be called “covenant not to sue”).


How do we end up at a license?

Idea from UNC inventor

Patentprotection

Marketing to companies

Company infringing

Negotiate major deal terms


License structure: Summary

Preamble/Definitions: Framework

Grant: What we’re allowing licensee to do

Compensation: What we get for allowing them to do it

Diligence: Mechanism for ensuring they work hard

IP: Who controls the process

Legal: What happens if things go awry


Differences in licenses:Licensing to an established company

Grant: Scope = ExclusiveField = Generally limited

Territory = VariesAbility to sublicense? =

YesCompensation: Upfront = Cash (much discussion)

Milestone payments = spread out Running royalty = Varies % of sublicensing = Fixed

Diligence: Mix of early and later-stage diligence milestones


Differences in licenses:Licensing to a startup company

Grant: Scope = ExclusiveField = Varies

Territory = WorldwideAbility to sublicense? =

YesCompensation: Upfront = Equity

Milestone payments = Back-loaded Running royalty = Varies % of sublicensing = Tiered

Diligence: Heavy! May include fundraising milestones as well as early product development


Differences in licenses:Licensing non-exclusively

Grant: Scope = Non-exclusiveField = Limited

Territory = VariesAbility to sublicense? = No

Compensation: Upfront = Cash (less than exclusive) Milestone payments = Varies (sometimes none)

Running royalty = Varies (sometimes none) % of sublicensing = n/a

Diligence: Light. Sometimes non-existent, since rights are not being “tied up.”


Differences in licenses:Licensing tangible property (ie. mouse lines)

Grant: Scope = Non-exclusive

Field = Limited (frequently to internal R&D)

Territory = Worldwide

Ability to sublicense? = No

Compensation: Upfront = Cash Milestone payments = n/a

Running royalty = Varies (frequently none) % of sublicensing = n/a

Diligence: None typically required.


Start a Company……or Partner with an Existing one?

This is a choice that has to be made for commercially attractive technologies

We will discuss:•Requirements/demands of each development route•Factors considered when deciding on a route


Academia and startup companies

•Many large life science companies struggle to develop new commercial products; fill the gap by purchasing/partnering products developed by smaller players

•Passage of Bayh-Dole act in 1980 allowed academic institutions to patent their inventions; a source of innovation for small companies

•Resultant environment supported new companies, rewarded the investors that financed them and encouraged academics to think about how to translate their research

•About 2/3 of life science-based startups originate from academia



Before we begin to consider what technology lends itself to each route, we must first understand what each route entails.


Starting a Company vs. Partnering:Time Commitment

Starting a company requires lots of extra time and effort from both Inventor(s) and OTD (part of our job).

•Business must be incorporated and issue shares, find a suitable business model and craft a business plan, recruit management and/or board members, raise money.

•Inventor will drive project development in a startup company•Investors will be betting on Jockey as well as horse


Starting a Company vs. Partnering:Near-Term Financial Return

Starting a company requires both OTD and inventor to sacrifice short-term license fees (usually OK with OTD)

•All $ invested in a startup is spent on essential costs (IP, development)•No/low cash reserves



Now that expectations are set, we can evaluate which development route is more appropriate


A startup is a good choice when……the technology base is broad

Multiple product opportunities!-A must for investors-More shots on goal = better chance of getting a product onto the market

Examples:-Novel drug vs. Novel drug + methods of finding more (new assays, etc)-Polymer chemistry with a wide range of applications


A startup is a good choice when……the technology is “disruptive”

Cutting edge: Sometimes established companies are slower to accept—reduces chances that companies will put adequate resources into the technology and increases development time. Result = decreased chance of product reaching the market

Contrarian: Acceptance also difficult. Often times, this type of technology is a new approach to an old problem that companies have given up on.


“Know-how” is generally unpublished, unpatented technical information that conveys a significant advantage (research technique, manufacturing process)

Know-how is more difficult to transfer to an established company and evolves rapidly

If there is substantial value in the Know-how (cannot be easily engineered), a startup may make more sense

A startup is a good choice when……lots of “know-how” is involved


Recent UNC startup (Endocrinology) with a focus on treatments for the vascular complications of diabetes

• Broad technology base—have a lead therapy, two novel screens for finding more and a broad base of IP

• Disruptive technology—initial focus is a “discarded” pharma target

• Valuable Know-how—trade secret toxicity assays to differentiate Vascular’s approach from competition

A startup is a good choice when…Example: Vascular Pharmaceuticals


• Value of UNC technology is enhanced by existing technology

• Capitalizes on company Know-how, established manufacturing, distribution, R&D infrastructure.

Result = increased chance of product reaching the market

• Often, UNC technology will be “dominated” by existing IP. Then, partnering isn’t the better choice, it’s the only choice.

Partnering a good choice when……one has an improvement on existing technology


• Complimentary R&D efforts

• Established expertise in area

• Large amounts of early R&D required in an area that investors shy away from

--development financed via product sales/cash on hand vs. via money raised from investors expecting a fixed return amount/timeline

Partnering is a good choice when……a company is well-positioned to develop the technology


Novel class of drugs discovered by Lineberger research group

• An improvement—more specific versions of existing drugs

• Company was well-positioned—Development partner performed chemistry that enhanced the drugs, had established means for assaying them and Know-how related to approaches that have failed

Partnering is a good choice when…Example: immuoproteasome inhibitors


Summary:Goal = find commercialization route most likely to

result in products on the market

• Startup: Partner:• Broad IP Narrow/dominated IP• Disruptive Improvement• UNC Know-how Company well-positioned

• Lots of time/effort Less effort• Low initial $ return Typically some $ upfront


What do I get out of it?

• Universities are required to share at least 15% of income with inventors

• UNC policy mandates 40% of the income is shared with the inventor (among highest in the country)

-- 40% to inventor’s department, 20% to OTD


Licensing expectations: University as Licensor

Need to understand motivations of the TTO:

•Bayh-Dole requirements•University priorities•Time constraints•Realities of investment climate•Return on investment



Bayh-Dole act requirements

Bayh-Dole act (1980) allowed institutions to patent discoveries made with federal $--but caveats attached to licensing those patents:

1. Preference for US companies; small business over large

2. No assignment of rights (license instead)3. Grant non-exclusive rights to US Gov’t4. US manufacturing requirements (flexible)5. Distribution of $ to inventors (UNC 40%)6. Actively promote commercialization of inventions

(diligence, non-exclusivity)



University priorities

Many schools seek to use technology licensing, in part, as a tool to:•Retain best faculty•Increase research sponsorship•Promote regional economic development•Generate publicity (smaller schools)•Benefit society



Time constraints

•Many TTOs are very busy (OTD has): -200+ cases per Project Manager -4 “interference” proceedings with USPTO -10 to 20 ongoing negotiations at a time•Result: -Most of us can size up a potential license deal quickly (have your s**t together) -Most of us would rather close on a reasonable deal that is less that what we were after then haggle forever



Reality of Investment Community

•Most larger TTOs will have reasonable idea of what terms will be acceptable / unacceptable to institutional investors

•Deals too slanted to the TTO (inexperienced company negotiator) will have to be re-negotiated later (time constraints!) or will prevent investment and company viability

•Deals too slanted away from the TTO leaves us without “skin in the game,” which can worry investors (not always…)


Managing conflicts of interest• Conflicts of interest refer to outside

activities that may:

1. Interfere with an employee’s duty to carry out primary UNC duties

2. Involve inappropriate use of UNC resources

3. Misuse the name of UNC

4. Claim UNC responsibility for conduct/outcome of such activities

*All of the above are not permitted*


If managed properly, UNC faculty may, with appropriate oversight:

1. Accept sponsored research $ from a company in which they have equity

2. Serve as an officer in a company in which they have equity and which is based on UNC technology

3. Consult for a company in which they have equity

*Many institutions prohibit these activities (eg. Stanford)*

Conflicts of interest - Permitted activities

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