1. E102 January 31, 2012 Tech Transfer, IP, Licensing and Startups Fred Farina Chief Innovation Officer E102 January 31, 2012

2. E102 January 31, 2012 Founded in 1891 ~2,000 students (900 undergraduate + 1100 graduate) 280 professors and 130 research faculty 5,300 engineers/scientist at JPL 32 Nobel Prize Recipients among faculty and alumni 72 members of the NAS 35 members of the NAE $240M in Research Funding California Institute of Technology

3. E102 January 31, 2012 The Jet Propulsion Laboratory Founded in the 1930 ’ s when Caltech Professor Theodore von Karman conducted pioneering work on rocket propulsion. Founded in the 1930 ’ s when Caltech Professor Theodore von Karman conducted pioneering work on rocket propulsion. Chartered to Conduct Unmanned Robotic Exploration of the Solar System Chartered to Conduct Unmanned Robotic Exploration of the Solar System Federally Funded R&D NASA Facility operated by the Caltech Federally Funded R&D NASA Facility operated by the Caltech Annual Budget - Over $1 Billion Annual Budget - Over $1 Billion 5200 Employees 5200 Employees  1/3 PhDs, 1/3 MS, 1/3 BS & Other

4. Smart Lander Sample Return Bulldozer Mars Express Smart Rover Reconnaissance Orbiter Mars

5. E102 January 31, 2012 Scientists Invent in Research Labs Invention Disclosures to Technology Transfer Office Evaluation of Inventions/ Patent Filing Decisions Technology Licensing Startup CreationEstablished Company OTT’s Activities

6. E102 January 31, 2012 OTT ’ s Mission To facilitate the transfer of new technologies to the public so that it can benefit from new products and services based on inventions made at Caltech/JPL and resulting from federally funded research

7. E102 January 31, 2012  Relationships with Faculty  Aggressive patent filing  No marketing  Favor startup/equity deals  Two bites of the apple OTT ’ s Tech Transfer Model

8. E102 January 31, 2012 Start-up Report for the Past Decade (1995-2005) Definition of Start-up*:  License to Caltech IP  Caltech has equity interest prior to series A  Company had to raise not less than $500K

9. E102 January 31, 2012 Number of Start-ups: 78  37% VC backed  3Fs, Angels, Small Independent Investors, Small Public Companies

10. E102 January 31, 2012 AS = 5 T= 5 F= 8 ACQ =12 IPO= 5 ACT =43 23% 22% 55%

11. E102 January 31, 2012 Caltech OTT in Tech Transfer Elite A Global Analysis of University Biotechnology Transfer and Commercialization, includes the Milken Institute university Technology Transfer and Commercialization Index, which ranks universities at their ability to take world-class research and turn it into licensing income and business startups. The top five are: 1. Massachusetts Institute of Technology 2. University of California system 3. California Institute of Technology 4. Stanford University 5. University of Florida

12. E102 January 31, 2012 Caltech OTT in Tech Transfer Elite Five Universities You Can Do Business With From: Inc. Magazine, February 2006 “ … Just five schools, in fact, constitute the elite of the technology transfer world. They are Berkeley, Caltech, Stanford, MIT, and Wisconsin. The list of universities reporting new discoveries changes from one year to the next, but each of these five schools consistently garners around 100 patents per year. ” “ … Along with teaching and doing research, they seem to be in the business of inventing companies. ” “ … Administrators at the Big Five play their part in nurturing tech transfer by resisting the temptation to monitor and regulate business relationships aggressively. ”

13. PwC Step 2: Select 15 leading innovators and cancer centers Institutions were selected based on an analysis of~140 AMCs* to represent a mix of Efficiency and Financial Success... 13 * Analysis based on AUTM data; only top 35 are graphed ** Efficiency = Avg. Research Exp. per Invention Disclosure Ranking + Avg. Research Exp. per Startup Ranking + Avg. Research Exp. per Patent Application Ranking *** Financial Success = (Average Income per Active License Ranking Source: AUTM Licensing Survey 2007, PwC Analysis Draft

14. E102 January 31, 2012  Portable Inexpensive Personal Medicine Devices (Scherer)

15. E102 January 31, 2012  Dendrimer Nanotechnology for Water Purification (Diallo)

16. E102 January 31, 2012  Remote Measurement of Cardiac Waveforms (McGrath, JPL)

17. E102 January 31, 2012  New CFx Batteries: Primary and Rechargeable (Yazami)

18. E102 January 31, 2012  Micropumps for Chip Cooling & Biomed. Apps. (Gharib)

19. E102 January 31, 2012  Eye-Predict (Koch)

20. E102 January 31, 2012 Intellectual Property Primer Patents Copyright Trade Secret Trademarks Trade Dress

21. E102 January 31, 2012 US Patent Laws and Regulations 35 USC 37 CFR MPEP “ The Congress shall have power … To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries… ” U.S. Constitution, Article I, Section 8

22. E102 January 31, 2012 For the Patentee: Reward the Patentee with the right to exclude others from making, using, selling, offering to sell, in the US, or importing into the US, the patented invention. US Patent ’ s Main Purposes

23. E102 January 31, 2012 For Society: Put the public in intellectual possession of the invention so that it can (1) benefit from the invention after the patent has expired, (2) improve on the invention, and (3) design around the claims US Patent ’ s Main Purposes

24. E102 January 31, 2012 The right to exclude others from making, using, offering for sale or selling the invention. What is a Patent?

25. E102 January 31, 2012 The right to make, use, offer for sale or sell the patented invention. What a Patent is NOT

26. E102 January 31, 2012 Inventor = One who conceived the claimed invention (Not one who merely reduces the invention to practice). Inventorship

27. E102 January 31, 2012 Inventor owns her/his inventions However, Universities/Companies have employees sign Patent Agreement = Obligation to assign inventions to employer. Ownership of Inventions/Patents

28. E102 January 31, 2012 A process (software, chemical process) A machine (photocopier) An article of manufacture (laser) A composition of matter (chemicals, isolated genes) “ Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title. ” 35 USC § 101 What is Patentable?

29. E102 January 31, 2012 An Invention Must Be… Useful Novel Nonobvious … to be patentable.

30. E102 January 31, 2012 Provisional Nonprovisional (utility) Plant Design Types of Patents

31. E102 January 31, 2012 1 year pendency Never Issue No Claims Required Meet requirements of 35 USC § 112 Provisional Patent Applications

32. E102 January 31, 2012 Anywhere Printed Publication Patented In the U.S. On sale / Offered for Sale In Public Use These events, if they occur more than one year before filing, create a Statutory Bar: 35 USC § 102(b) Statutory Bars

33. E102 January 31, 2012 First to File Paris Convention Patent Cooperation Treaty (PCT) Can be filed within 1 year of priority Patenting Outside the US

34. E102 January 31, 2012 Drawing(s) (only required if necessary to understand the invention) Specification (description of the invention) Claim(s) (define intellectual property/scope of patent) Patent Application

35. E102 January 31, 2012 Title of the Invention Cross Reference to related applications (if any) Statement of federally sponsorship Background of the Invention Brief Summary of the Invention Brief description of drawing(s) (if any) Detailed Description of the Invention Abstract of the disclosure Sequence listing (if any) The Specification

36. E102 January 31, 2012 Written Description Enablement Best Mode 35 USC § 112, ¶ 1 Specification Requirement

37. E102 January 31, 2012 1.A method for identifying a chemical analyte, wherein said chemical analyte is a biomolecule, using a sensor array, said method comprising: (a) providing a sensor array, wherein each sensor comprises a conductive region and a nonconductive organic polymer region; (b) contacting said biomolecule with said sensor array to produce a response; and (c) analyzing said response thereby identifying said biomolecule. measuring apparatus. U.S. Patent 6,331,244 to Lewis, et al. Claims

38. E102 January 31, 2012 U.S. Patent 5,425,497 A cup and holder combination comprising: a cup for holding hot or cold liquids; and a holder defined by a band mounted on and encircling the cup, the band having an open top and an open bottom through which the cup extends and an inner surface immediately adjacent the cup with a plurality of discrete, spaced- apart, approximately semi-spherically shaped depressions distributed on substantially the entire inner surface of the band so that each depression defines a non-contacting region of the band creating an air gap between the band and the cup, thereby reducing the rate of heat transfer through the holder. The cup and holder combination of claim 1, wherein the band also has an outer surface opposite the inner surface, with a plurality of discrete, spaced-apart, approximately semi-spherically shaped depressions distributed on substantially the entire outer surface of the band. Claims

39. E102 January 31, 2012 Conception Reduction to Practice (actual or constructive) Filing Application Office Action (rejection) Response Allowance The Patent Process

40. E102 January 31, 2012 U.S. Filing Office Action Response Final Office Action Appeal Patent Issues Priority Filing (e.g., provisional) Publication at 18 months Patent Prosecution

41. E102 January 31, 2012 Government Publications 35 United States Code (35 USC) (http://www.access.gpo.gov/uscode/title35/title35.html) 37 Code of Federal Regulations (37 CFR) (see Appendix R of the MPEP below) Manual of Patent Examination Procedure (MPEP) (http://www.uspto.gov/web/offices/pac/mpep/mpep.htm)http://www.uspto.gov/web/offices/pac/mpep/mpep.htm Key Web Sites http://www.uspto.govwww.uspto.gov http://www.european-patent-office.org http://www.law.emory.edu/fedcircuit/ Court decisions by the U.S. Court of Appeals, Federal Circuit Patent Resources

42. E102 January 31, 2012  Prospective licensee evaluates technology, (under NDA if necessary)  Licensee expresses willingness to undertake commercialization of invention  Negotiation of terms of the license  Boilerplate agreement provides legal framework of the agreement  Closing the deal  Managing the relationship with the licensee The Licensing Process

43. E102 January 31, 2012  Upfront fees  Minimums  Royalty rate  Equity  Diligence and Milestones  Patent Costs Main Terms Subject to Negotiations

44. E102 January 31, 2012  Special case of the Option: An option gives the right to acquire a license during the option period  Exclusive: agreement not to grant further licenses.  May be limited time, territory and field  Implied obligation to exploit  Nonexclusive: licensor may grant other licenses Types of License Agreements

45. E102 January 31, 2012  A License is an enforceable contract  Licensor waves its right to exclude licensee to make, use or sell patented invention, in exchange for consideration (usually financial)  Can be based on patents, know-how or combination What is a License

46. E102 January 31, 2012 Preamble:  Identify the parties  Effective date Anatomy of a License

47. E102 January 31, 2012 Definitions:  Defines terms essential to the agreement  Avoids ambiguity from inaccurate repetition  Aids in achieving conciseness and clarity Anatomy of a License

48. E102 January 31, 2012 Grant:  Character of license: exclusive, non-exclusive  Make, use, sell, offer for sale, Import: separable rights  Licensed Patents Rights Anatomy of a License

49. E102 January 31, 2012 Grant (cont ’ d):  Geographic scope of license grant  Term of the grant (implied life of patents)  Right to sublicense (must be explicit) Anatomy of a License

50. E102 January 31, 2012 Patent Prosecutions and Patent Costs:  Responsible party to prosecuting patent apps.  Payment of patent costs  Schedule for reimbursement of patent costs Anatomy of a License

51. E102 January 31, 2012 Royalty:  Consideration for the license  Upfront fees  Royalty rate (e.g., percentage of sales)  Minimum annual royalty  Escalation provision  Paid-up Anatomy of a License

52. E102 January 31, 2012 Equity Interest:  Startups only  Number of shares of common stock, or percentage of total number Anatomy of a License

53. E102 January 31, 2012 Due Diligence:  Minimum standard effort to to commercialize  Milestones:  funding level  deadline for first commercial sale  Minimum annual sales Anatomy of a License

54. E102 January 31, 2012 Royalty Reporting:  Record keeping  Audit of records: licensor entitled to audit  Reports by licensee of royalties due (periodic, provide payment at time of report, post-termination report) Anatomy of a License

55. E102 January 31, 2012 Infringement by Third Party:  Nonexclusive licensee: No right to bring suit on its own  Exclusive licensee  May bring suit on its own  Licensor is indispensable party Anatomy of a License

56. E102 January 31, 2012 Term and Termination:  Absent term: life of patents  Termination on breach  Material breach only to heart of agreement  Notice and cure period  Automatic vs. second notice  Licensee termination without cause (minimums) Anatomy of a License

57. E102 January 31, 2012 Net Present Value and other calculations  Complicated  Unreliable  Crystal ball often more effective Early stage: many unknowns by definition Determining the Value of an Invnetion

58. E102 January 31, 2012 The market drives the value IP is worth whatever a buyer is willing to pay for it  Negotiation Determining the Value of an Invnetion

59. E102 January 31, 2012  Rule of thumb: a share of 25% of profits for the licensor is generally accepted as reasonable  However, using profits as a basis for royalties is problematic (many accounting ways of representing costs)  Net sales are commonly used as basis for royalty payments (e.g., 4% of net sales). Royalty Rate Determination

60. E102 January 31, 2012  Licensees know best their profit margin  When negotiating, let licensee make first offer  U.S. courts have awarded royalty rates varying from 2 % to 20% of the selling price of infringing products Royalty Rate Determination