VINNOVA Workshop, Part IFebruary 2, 2006

Building An Effective Technology Transfer Function:

The Traditional View

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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)

U. of Maryland, Baltimore – 70 disclosures Vanderbilt – 121 disclosures University of Massachusetts – 141 disclosures

And, consider . . . 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

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) 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

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 city2. 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.

VINNOVA Workshop, Part II February 2, 2006

Building an Effective TTO: A Broader View of TTO Participation

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The TTO as Research Broker

Kinds of relationships most likely to become involved in 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 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. 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.

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!

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. 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 pre-

existing, 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 Managed by the technology licensing operation

2. Conflict of Interest Leading to potential bias in research

Generally managed by central administration or academic department or laboratory

Leading to preferential treatment/bias as a result of Technology Transfer

Managed by the licensing group or an independent patent committee, or vice president

3. Private consulting as permitted by Institutional Policy

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 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 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 university2. Restrict/carefully monitor research funding from

licensee (any licensee, not just start-up); watch licensing of improvements

3. Limit start-up/licensee use of students4. Require faculty to tell students of start-up activities5. Insist upon arm’s length negotiations with licensee

(start-up) – no university employee interference6. 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