Case Study in Potential Conflicts of Interest for Startup Companies J. Mark Meacham, CEO OpenCell Technologies October 20,

Conflict of Interest Whenever it reasonably appears that a significant financial or other interest could affect the design, conduct, or reporting of activities funded or proposed for funding by a sponsor, a conflict of interest exists. The personal interest of an employee or his or her family may prevent or appear to prevent the employee from making an unbiased decision with respect to the employees employment with the institution. 2

Conflict of Commitment Whenever an individual's outside activities interfere with professional obligations to the Institute a conflict of commitment may exist. The primary guide should be the intention to promote the interests of the Institute as a place of education, learning and research. 3

Definitions Significant Financial Interest – Anything of monetary value, including, but not limited to, salary or other payments for services – Equity interests – Intellectual property rights Substantial Interest – the direct or indirect ownership of more than 25 percent of the assets or stock of any business. – An Employee may not have an ownership interest of more than 25% of the assets or stock in any business that transacts business with the State of Georgia including GT 4

Highlights of GT COI Policy Framework (Discuss details with OSP or Office of Research Compliance) Activities which constitute a Conflict of Interest where there is Significant Financial Interest are prohibited unless a plan to reduce, eliminate or manage the Conflict of Interest has been expressly approved pursuant to the provisions of this policy Activities which constitute Conflicts of Interest where an employee has a Substantial Interest are unlawful 5

University Concerns Exploitation of students for private gain Use of GT resources for private gain Undue personal gain from public funds Compromise of GT priorities Unfair access to information or technology Compromise of controls in research conduct Adverse effect by those in leadership roles on the professional or academic advancement of colleagues, staff or students as a result of outside interests 6

COI Management Plan Management Plan: A written agreement that sets up a structure so that situations with potential conflicts of interest are monitored and managed to ensure that inappropriate actions or the perception of impropriety are prevented. 7

COI Management Plan Limit who may serve as PI Distinguish between activities appropriate for consulting and sponsored projects Limitations on ownership Provisions for tech. transfer and licensing Provisions for usage of GT facilities Provisions for student employment Disclosure requirements Relationships between projects Designation of parties responsible for review 8

Case Study: OpenCell 9

Background: Technology Development : Academic research – Established technology feasibility/operating principles – Fabricated/tested numerous test setups (prototypes) – 3-4 PhD students, 2-3 undergraduate students – 2 faculty members (inventors, advisors, & co-founders) – 3 patents covering core technology (filed ; issued ; assigned to GTRC) 2007: Demonstrated Life Sciences (LS) use – 1 postdoctoral researcher – 1 patent covering specific field of application (filed 2006; issued 2010; assigned to GTRC) 10

Background: Technology Development, Cont : LS Prototype Improvements – Enhanced design of prototype – Mix of GT/company effort (3 co-founders) – 1 patent application covering improvements (filed 2010; assigned to GTRC/OpenCell; 3 co-inventors) 2010-Future: Commercialization – Most LS application development performed in-house (company) – Some concept development (translational research) through state-funded work performed at GT – Mix of GT/company IP 11

OpenCell: Virtual Existence (2008) Organized as an LLC – Simple, inexpensive – 3 co-founders (1 postdoc CEO, 2 ME professors) – 60/20/20 ownership split NO COI management plan * Note: COI management required for >25% ownership No physical headquarters – Legal, but NOT recommended – Prohibited by university housing and most apartments Applied for federal (SBIR) and state (EmTech Bio) commercialization grants 12

OpenCell: Real Existence (2009) SBIR Phase I Award from NIH (federal) – Postdoc (me) became full-time – ME professors became uncompensated advisors – Set up contracts with GT and Emory for prototype development and testing support * Note: must have means of billing company (formal mechanism, e.g., cost center) Leased a physical office/general lab space GRA Phase Ia Award from VentureLab (state) – ME professor is PI, GT is grantee (NOT company) – GT owns all resultant IP/prototypes – Used for business development (Opportunity Analysis) 13

OpenCell: Product Development (2010) Additional SBIR Phase I Award (federal) – Continued with 1 full-time employee – Continued contracts with GT and Emory for prototype development and testing support GRA Phases Ib-c Award from VentureLab (state) – More business development (IP review, market analysis, commercialization plan) – Testing performed by 2 undergraduate students (NOT advised/supervised/taught by co-founders) – NO company locations used for state-funded work Moved into ATDC 14

OpenCell: Commercialization (2010-Forward) Will incorporate as C-Corp (required if GT license agreement includes equity) Will license IP from GTRC – Only attorney and full-time employee will negotiate – GT employees have COI SBIR Phase II (federal) GRA Phase II (state) Centers of Innovation (state) – Similar to GRA rules – Non-founder ME professor will be PI, and will oversee graduate student (NO direct role by co-founders) 15

Summary: What are/were potential pitfalls 16

GRA: State Funding for Translational Research Phases 0 through II are GT funds and must be spent for translational research Must maintain separation between GT activities and those associated with a company in which they have an interest Projects must also be separated (firewall) Funds cannot compensate founders IP is assigned to GTRC 17

COI: State Funding for Commercialization GT funds and must be spent for translational research PI is not founder: avoid adverse effect on advancement of colleague Graduate student is not advised by anyone with COI Funds cannot compensate founders IP will be assigned to GTRC 18

SBIR & STTR Funding Management plan to address: – PI for the company – PI if sub-award to GT – Students: advisees/supervisees should not be involved – Level of ownership by GT faculty members/families Relationship to other ongoing GT research – Design of projects – Conduct: allocation of resources – Reporting of research results Time and effort reporting 19

Startup Company Roadmap Avoid substantial conflicts of interest and conflicts of commitment Firewall ongoing research from company/ translational research Do not involve advised or taught students (unless they are inventors) Faculty members may consider leave of absence Outside entities cannot use GT facilities without compensation (use formal mechanism) DISCLOSURE, DISCLOSURE, DISCLOSURE! 20

Questions? 21