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University-Industry Partnerships: Role of Intellectual Property

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Presentation on theme: "University-Industry Partnerships: Role of Intellectual Property"— Presentation transcript:

1 University-Industry Partnerships: Role of Intellectual Property
Dr. Guriqbal Singh Jaiya Director Small and Medium-Sized Enterprises Division World Intellectual Property Organization

2 KNOWLEDGE AGE Universities and high schools become the raw material of economic development as coal mines were the raw material of the industrial age !

3 The 21st Century Context for Linking Universities and the Economy
The Knowledge Economy – A world-wide phenomenon Knowledge – The new raw material driving innovation, competitiveness, and economic development “Economic success is no longer determined by possession (e.g., of raw materials or physical prowess), but by capacity to generate new knowledge and by the ability of the workforce to apply this knowledge successfully” (M. Walshok, Knowledge Without Boundaries, 1995)

4 The role of universities in the Europe of knowledge
Develop effective and close co-operation between universities and industry innovation start-up of new companies licensing of university intellectual property promotion of effective university-industry relations better exploit the results of their knowledge in relationship with industry evaluation criteria for the performance of universities

5 SUCCESS FACTORS FOR TECHNOLOGY TRANSFER
Business Academic Government Community Talent Technology Capital Know-How Market - Need Successful Value-Added Technology Transfer G. Kozmetzky UT-Austin

6 Ecosystem [Thanks to Jeff Skinner, UCL]
Investors’s Lawyers Head hunters PR agents Real estate Leasing Banks Accountants Patent Firms Other start-ups Brokers Itinerant managers Consultants Students

7 But why does the government invest in research?
Funding of Basic Research In Academia Reservoir of Knowledge Increased Efficiency New Companies (Jobs) New Industry Taxes Vannevar Bush Reservoir Theory of Knowledge Science, The Endless Frontier, 1945

8 The Business of Academic Research
Federal dollars to Universities have continued to climb, even while falling in other sectors Source: National Science Board Report 2002

9 Traditional academic roles
Research Creation of new knowledge Breakthroughs and basis research (about half of all basic research in U.S. conducted by universities) Incremental technical advances Education Dissemination of knowledge Graduation of students Service Transfer of knowledge and transfer of technology Excerpted from: “Technology Transfer from U.S Universities — A Major Driving Force of U.S. Prosperous Economy,” presented by Terry Young, Texas A&M University System Technology Licensing Office.

10 MARKET & BUSINESS PLANNING
The Technology Transfer Process 7-12 YEARS SCIENCE & TECH INVENTION Idea Technology Feasibility TRANSLATION Prototype/ Scale-up Product Development Initial Manufacture COMMERCIAL- IZATION FEASIBILITY MARKET & BUSINESS PLANNING MARKET CAPTURE Market R&D Pro-forma Business Plan Applications Marketing Strategy Business Plan MARKETING IPO Tech Tfr Funds FINANCING Seed Capital Expansion Capital RETURNS 1

11 Technology Licensing at Stanford
Notable Inventions from Stanford Research 1971- FM Sound Synthesis ($22.9M) 1974 – Recombinant DNA ($255M) 1981 – Phycobiliproteins ($46.3M), Fiber Optic Amplifier ($32M), MINOS ($3.4M) 1982 – Amplification of Genes ($30M) 1984 – Functional Antibodies ($120.6M) 1986 – CHEF Electrophoresis ($2.1M) – DSL ($28.7M) 1996 – Improved Hypertext Searching (GoogleTM ($336.5M)

12 University-Industry partnerships: Economic Advantages
Licensing agreements are only a small part of the benefits university research generates.  Others include: Generation of new knowledge Creation of human capital Transfer of tacit knowledge Technological innovation Capital investment Regional leadership Production of knowledge infrastructure Influence on the regional milieu

13 SUCCESS FACTORS FOR TECHNOLOGY TRANSFER
Business Academic Government Community Talent Technology Capital Know-How Market - Need Successful Value-Added Technology Transfer G. Kozmetzky UT-Austin

14 Conflicting Values - Common Interest
UNIVERSITY INDUSTRY Commercialization of New and Useful Technologies Teaching Research Service Economic Development Profits Product R&D Knowledge for Knowledge’s Sake Academic Freedom Open Discourse Management of Knowledge for Profit Confidentiality Limited Public Disclosure

15 Blending the University Research and Entrepreneurial Cultures
Academics research priorities set by investigator grant-seeking publications patenting driven by publications serendipity transfer at early stage Industry research priorities set by management profit-seeking proprietary patenting driven by business decisions control add value before transferring

16 Blending the University Research and Entrepreneurial Cultures
Academic perspective; “Why partner with industry?” Application of research for public good Exposure to industry collaboration Additional source of research funds Build research endowment Reward investigator/inventor

17 Blending the University Research and Entrepreneurial Cultures
Industry perspective; “Why partner with universities?” Research institutions are rich source of new ideas and technology Cheaper to support research and to license-in technology Biotech industry looks to academic collaborations for early stage technology

18 Blending the University Research and Entrepreneurial Cultures
How do you begin to bring the two cultures together ? 1. Employment Policy 2. Policy of Intellectual Property 3. Revenue Sharing 4. Faculty Involvement

19 Employment Policy Employer (University/College/Research Institute) owns all property rights to any intellectual property conceived and/or reduced to practice by its employees Assignment form part of orientation Salary, supplies, space, other resources of the University are utilized

20 Policy on Intellectual Property
Ownership Transfer of ownership Rights and obligations of faculty (employee) Rights and obligations of the University (employer) Royalty sharing Waivers

21 The Bayh-Dole Act Public Law 96-517 Patent and Trademark Act of 1980
Allow small business and non-profit organizations to retain title to innovations made under federally-funded research programs Promote investment by the private sector in commercialization of federally funded research discoveries for the public good

22 In Passing Bayh Dole, Congress recognizes…
Creativity is truly a national resource The patent system in U.S. is the vehicle which permits delivery of the resource to the public It is in the public interest to place stewardship of research results in the hands of universities and small business Existing U.S. policy was ineffective at a time when intellectual property and innovation were becoming the preferred global currency As evidence of its scope, consider this: the law eliminated 26 different federal agency policies dealing with the use of the results of federally funded research and development. Source: Howard Bremer, University Technology Transfer Evolution and Revolution, COGR, 1999.

23 Bayh-Dole Provisions Encourage collaboration with industry to promote the utilization of inventions Disclosure to government within 2 months of invention Universities must file patents on inventions they elect to own, and share any monies with inventors Government retains non-exclusive license and march-in rights Requirement to attempt to develop the invention Preference to small businesses in granting licenses Products must be manufactured in the U.S.

24 Bayh-Dole Act 1980 Allows universities to own and sell/license inventions/novations generated with federal dollars. Motivation: Get ideas off the shelf w/o sacrificing university mission (synergies) Generate university income for more research Critique: Increased commercialization of university research agenda Distraction from basic research (tradeoffs) Hold-ups/Anti-Commons approach to research

25 Bayh - Dole Act Gives nonprofit organizations and small businesses the right to: retain title to inventions made in whole or in part with federal funds grant exclusive term-of-patent licenses

26 MARKET & BUSINESS PLANNING
The Technology Transfer Process 7-12 YEARS SCIENCE & TECH INVENTION Idea Technology Feasibility TRANSLATION Prototype/ Scale-up Product Development Initial Manufacture COMMERCIAL- IZATION FEASIBILITY MARKET & BUSINESS PLANNING MARKET CAPTURE Market R&D Pro-forma Business Plan Applications Marketing Strategy Business Plan MARKETING IPO Tech Tfr Funds FINANCING Seed Capital Expansion Capital RETURNS 1

27 One University [Thanks to Jeff Skinner, UCL]
Executive (policies) Tech transfer office Gene pool Commercially active scientists Other academics

28 Why Do Universities Transfer Technology
Generate licensing revenue and research funding Dissemination of new knowledge for the benefit of society Development of University technology into products Provide avenue for faculty members to interact with business Stimulate economic development Generate favorable publicity for the University

29 Patents as source of research funding
25% of life scientists have a patent Median patent holder owns 2 patents Patents as the “academic’s lottery ticket” 33% of patent holders receive licensing revenues, representing 8% of all life scientists. Average royalties ~$16,500 per patent But in our sample: One patent accounts for ~90% of those royalties Of 1200 patents there are only three that make ~$1million or more. Median annual royalty income is $5,000 License revenues account for less than 1% of research budgets for those with patents

30 Is there a commercialization of US university life sciences?
53% of life scientists in our survey have no engagement with industry No patents, invention disclosures, industry funding, service on industry boards, collaborations, etc. 20% of life scientists report private industry funding, accounting for 25% of research budgets They still get 54% from federal sources Overall in the life sciences, 67% of all research funding comes from federal sources, 15% from own university sources, 10% from private foundations, and only 5% from private industry.

31 Percent of lab funding from different funding sources
All life scientists Scientists who do 100% basic research Federal (NIH, NSF, etc.) 66.9 71.2* Own university 14.6 15.7 Foundations 9.5 9.7 Industry 5.3 0.8* State government 2.4 0.9* * Significantly different at a 95% confidence level

32 Evidence on hold-up problems: Percent of life scientists reporting constraints
Not applicable None or minor constraint Some or major constraint Affordability of licensing intellectual property 61.5 33.6 4.9 Materials transfer agreements from another university 49.1 39.1 11.8 Materials transfer agreements from private industry 56.2 33.4 10.4

33 Funding Basic Research
Very difficult to fund without federal money Patents unlikely to provide much help because “lottery” – unpredictable returns timing of liquidity (can’t borrow against expected licensing earnings). reinforced by basic nature of research that are less likely to generate valuable patents. Industry funding small and unlikely to ever be much more than that (time horizon) Good news that stem cells won’t likely be the Trojan horse that brings commercialization into the university Bad news that industry won’t fund enough of this research to make up for federal funding

34 Overview of the Technology Commercialization Pathway
Research IP Protection Invention Disclosure Licensing TTC Evaluation Strategy

35 Invention Evaluation Process
Disclosure Electronic Submission Technology Transfer Committee Technical Review Patent Search Market Analysis Patent Release to Inventor Hold for Further Evaluation Test Market

36 Invention Evaluation Process
Is it protectable? Patent, copyright, know how Is it enforceable? Infringement Is it licensable? The primary reason for investing in intellectual property protection is the ability to license the invention.

37 Evaluation Criteria Level of IP Protection
Related Industry R&D Activity Inventor Reputation and Participation Inventor R&D Activity Promised Benefits and Novelty Market Size Competing Products Development Status and Time to Market Validation and Performance

38 Overview of the Technology Commercialization Pathway
Research IP Protection Invention Disclosure Licensing TTC Evaluation Strategy

39 Licensing Strategy Intellectual Property Option Agreement License
Start-Up Company

40 Balancing Public Good vs. Practical concerns in IP Licensing
Internal tensions: $ vs. altruism Non-exclusive or exclusive? (widespread access vs. investment incentive) Exclusive: requires incentives/disincentives Significant upfront fees Effective royalties Appropriate minimums ** Patents costs Diligence milestones Legal and responsible use Exclusive variations Field of use Sublicense incentives Return of rights consortia Non-exclusive with “sliding scales” of terms

41 Licensing Strategy Option Agreement
Early stage technology that requires further development Proof of principle – add value or reduce risk Reach some minimal level of progress to be of interest to investors Does not give rights to develop or sell products Exclusive or non-exclusive Convertible to license agreement on agreed terms

42 Licensing Strategy License Agreement – Existing Company
Technology likely to lead to a single product Small number of large firms that dominate the field Exclusive or non-exclusive Capital requirements to enter the industry prevent startups from being competitive Existing company may be able to get the technology to market faster

43 Licensing Strategy Start-Up Company Formation
Platform or disruptive technology with broad patent protection Ability to generate interest from investors Market size sufficient Gross margins attractive Viable business model Begins with an option agreement conditioned upon milestones Investment Management team

44 Technology Marketing Inventors are the single most important step in marketing 70% of licensing leads come from the inventor Identify companies in technology area Network at scientific and industry conferences Respond in a timely manner Have a plan for next steps in research Forward all licensing interest to the OTM

45 Technology Marketing OTM Marketing Efforts
Technologies available for licensing are on the OTM web site Focused business development relationships in specific technology areas Relationships with local and national venture capital groups Industry conferences

46 Overview of the Technology Commercialization Pathway
Research IP Protection Invention Disclosure Licensing TTC Evaluation Strategy

47 Licensing Process Identification of interest
Confidentiality agreement for scientific and IP due diligence Discussion of license type Option versus license agreement Exclusive versus non-exclusive Negotiation of financial, business, and legal terms

48 License Agreement terms
License grant Exclusive or non-exclusive Field of use Territory License term License Consideration Upfront fee Maintenance fees / Minimum annual royalty Royalties Other – Milestones, equity

49 University Approach to Start-Up Company Formation
PLATFORM TECHNOLOGY CORPORATE PARTNER/ SOPHISTICATED VC LEAD MANAGEMENT SEED FUNDING

50 Faculty Involvement with Start-Up Companies
Permitted activities Holding of equity Sponsored research from company Consulting relationship Scientific Advisory Board Entrepreneurial leave Prohibited activities Holding of greater than 20% equity Serving as PI for sponsored animal research or clinical study Holding Board of Directors seat Holding management position in licensing company

51 Faculty start‐ups: “Best Practices”
Faculty must • Separate their on‐going University research from company work • Understand that their primary commitment is to the University – Only advisory/consulting roles with the company – Limit consulting for the company to 13 days a quarter, per University policy • Take a leave of absence if engaging in a management role Faculty must not • Negotiate with the University on behalf of the company • Receive gifts or sponsored research from the company • Involve University staff in activities at the company • Involve company personnel in Stanford research • Involve current students in company activities • Involve junior faculty who are in a dependent role in company activities • Use University facilities for company purposes • Undertake human subjects research or supervise faculty who are human subjects protocol directors for work related to the company’s interests

52 Background/Context Faculty Consulting
Rationale – having faculty engaged with the corporate community may provide important opportunities to advance science and research and quality of medicine and patient care BUT there are issues and problems that must be addressed. Responsibilities Faculty Member’s responsibilities Understand University policies relating to conflict of interest, intellectual property, time allowed for consulting, etc. Understand what you’re signing ! University’s responsibilities Disclosure obligation What’s the norm for consulting in Industry?

53 Issues – The Consulting Plus Dilemma
Conflicts of Interest and conflicts of commitment – Consulting + sponsored research Consulting + equity ownership Consulting + management position Consulting + clinical trial (human subjects) Use newspaper test

54 Issues Intellectual Property: Company’s general rule: The company owns any intellectual property created by the consultant that relates to the research he/she does for the company” How does this impact the Consultant’s research with the University: Scope of work – length of time (e.g. broad vs. narrow scope, one-day speakers’ board versus two year consulting relationship) IP ownership – (remember: disclosure to UR). If Company owns it, you lose the right to use it in your research Potential to compromise future research work or funding Terms suggested by industry are getting broader and broader

55 Issues Confidentiality and Publication Rights
Is it clear what information is considered to be confidential? Freedom to publish Indemnification and Limitation of Liability General comments on liability Consultant indemnifying Company Company indemnifying Consultant Try to limit your liability for the work you perform

56 Issues Exclusivity Does the contract provide that you can’t do “overlapping” or “related” research for others? Other language purporting to restrict you or the University? Use of University resources in the consulting arrangement (includes space, equipment, students, etc.) Tax Issues related to receipt of consulting income

57 TECHNOLOGY TRANSFER, INTELLECTUAL PROPERTY AND EFFECTIVE UNIVERSITY-INDUSTRY PARTNERSHIPS: The Experience of China, India, Japan, Philippines, the Republicof Korea, Singapore and Thailand


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