Welcome P&P Topics for GFY 2002 Patent Awards Tech Transfer Cycle: Part III FOOD!!!! PATENTS & PIZZA June 4, 2001

PATENTS & PIZZA June 4, 2001 Licensing and Royalty & Development Income Wayne E. Swann Director of Technology Transfer & Francis A. Cooch Patent Counsel

Introduction APL Technology Transfer Cycle Outline of Presentation

APL Technology Transfer Cycle Introduction (cont.)

Outline of Presentation License Agreements IP Policy Income & Distribution Examples of Deals Statistics Definitions!

Structure of Standard Agreement Standard Income Clauses Roles in Negotiations License Agreements

Structure of Standard Agreement Definitions Grant Development/R&D Funding Fees/Royalties/Equity Milestones Term and Termination Miscellaneous

License Agreements (cont.) Standard Income Clauses Development/R&D 1.R&D for Licensee under BOA 2.Protect APL TDA role 3.APL employees as consultants

License Agreements (cont.) Standard Income Clauses (cont.) Fees/Royalties/Equity 1.Option/License Fees Cash/Equity Nonrefundable Not credited against royalties

License Agreements (cont.) Standard Income Clauses (cont.) Fees/Royalties/Equity (cont.) 2. Running Royalties Percent of Net Sales Unit Royalty 3. Annual Minimum Royalties Credited against royalties 4. Milestone Payments

License Agreements (cont.) Roles in Negotiations Office of Technology Transfer Office of Patent Counsel Inventors/Creators

IP Policy Income & Distribution Types Restricted Unrestricted Development (Restricted) Income Mechanics Restrictions

IP Policy Income & Distribution (cont.) Distribution of Unrestricted Income Initial Share 1.$5,000 2.“Off the Top”

IP Policy Income & Distribution (cont.) Distribution of Unrestricted Income Reimbursement of Expenses 1.Patenting (not reimbursed) 2.Licensing 3.Litigation 4.Development Fund Grants

IP Policy Income & Distribution (cont.) Distribution of Unrestricted Income Net Unrestricted Income 1. 30% - Inventor’s Personal 2. 15% - Inventor’s Professional For R&D Accumulation Cap - $300,000 Expended within 2 years

IP Policy Income & Distribution (cont.) Distribution of Unrestricted Income Net Unrestricted Income (cont.) 3. 15% - Department Share Use for R&D, disclosure/ application preparation, support general Tech Transfer activities No cap

IP Policy Income & Distribution (cont.) Distribution of Unrestricted Income Net Unrestricted Income (cont.) 4. 30% - Development Fund Prototype Grants Small Tech Transfer Grants Business Plans Partial Funding OTT/OPC Patent costs 5. 10% - JHU

IP Policy Income & Distribution (cont.) Multiple Inventors/Creators Multiple Intellectual Property Distribution of Unrestricted Income

Examples of Deals Option Agreement Option & Tech Development License (Straight License Agreement) License and Tech Development Spin-Off Company License Agreement

Option Agreement With Lakeshore Cryotronics Magnetometer – RTDC Mature technology - requires a test and evaluation period by company Short term option reserves right to a license in a specific field of use during evaluation Small monthly option fee during a test and evaluation period Negotiate license terms during the option but after valuation

Option & Technology Development Agreement with B.F. Goodrich Micro DSAD - Space Department Mature but specific work was needed by company for a business assessment 6 Month Option - assess license interest Option Fee and Tech Development (R&D) during the evaluation period Negotiate the terms for the license after valuation Evaluate other technology of interest

Straight License Agreement with Akorn Exclusive license for APL Technology for treatment of Age-related Macular Degeneration Mature technology and IP rights (US/world) Further technology development - Human trials done at/by company – not APL Diligence by company to develop/sell products Large License Fee split into payments Royalty, Share of sublicensing fees, milestone payments, reimbursement of IP costs Company estimates market at $400 Million/yr

License and Technology Development with FutureHealth IT Solution - Risk Management for Healthcare Technology early stage - RTDC Exclusive license to joint technology being developed with company – APL’s share of IP License Fee (cash and stock), significant multi- year Technology Development agreement, royalty on sales of product/service Market potential being defined by company Economic development impact – working with a regional company

Spin-Off Company License Agreement with Syntonics Oscillators - Space Dept – mature technology Exclusive license for space applications License Fee (cash and significant equity in LLC), multi-year two-way Technology Development agreement, milestones, royalty on sales of products, share of LLC earnings Market estimated at over $30 Million/year Resident of NeoTech incubator – local economic development impact

Statistics Option/License Agreements Licensing Income Equity Technology Development Income

Option/License Agreements GFY 2000 – 12 separate agreements (35 invention disclosures - bundling) AUTM Statistics –Average = 24 agreements –Comparative Placement FY 1999 = 59 th /137 Note: Invention Disclosures –APL 143 vs AUTM Average = 73 –Comparative Placement FY 1999 = 20 th /137

Licensing Income GFY $2,046, license agreements generating income AUTM Statistics –Average Income = $4,930,431 –Comparative Placement FY 1999 = 46 th /137

Technology Development Income GFY $1,886,005 5 different Projects AUTM Statistics –Average = $1,087,000 –Comparative Placement FY 1999 = 23 rd /137 Note: New Patent Applications –APL 84 vs AUTM Average = 36 –Comparative Placement FY 1999 = 12 nd /137

Equity Equity is held in 6 Companies (1-30%) –Option for an equity stake in an S Corporation –Stock as shares in C Corporations –Options for Stock in C Corporations –“Partnership” in an LLC GFY Equity in 4 start-up companies and equity through license agreements AUTM Statistics –Average for start-ups = 2 –Comparative Placement FY 1999 = 16 th /137 NOTE: Agreements with Equity 6 th

Summary License Agreements IP Policy Income and Distribution Examples of Deals Statistics