University Intellectual Property Transfer Mechanisms: Adaptation and Learning Maryann P. Feldman Johns Hopkins University

The Technology Transfer Landscape University Motivations Key Mechanisms –Licenses –Sponsored Research Agreements –University Spin-Offs –Equity Licenses Evolution Over Time Unanswered questions and concerns

Motivations Findings: All Universities

Licenses University Gains –Up-front Fee and Milestone Payments –On-Going Royalties –Knowledge Dissemination –Prestige Company Gains –Right to Use Intellectual Property Reactive Right Exclusive or Non-Exclusive

Sponsored Research Agreements University Gains –Research Funding and Faculty Support –Access to Industry Resources Knowledge Instrumentation Company Gains –Place at the Table Proactive Problem Definition Access to Tacit Knowledge Right of First Refusal Contacts

University Based Spin-offs University –Means to put licenses into play –Universities are seen as engines of local economic development Companies can further technology development –New sources of funding –Move closer to commercial value

University Equity Licenses University Gains –License in Play –Up-Side Revenue Potential –Provides Service to Faculty –Entrepreneurial Kudos Company Gains –Right to Use Intellectual Property –Conservation of Cash –Legitimacy –Aligned Interests

Diversity in Entry in Technology Transfer: Year of Establishment of Office Source: AUTM Licensing Annual Surveys N = 139 Universities

Licensing Revenues Source: AUTM Annual Surveys

Licensing Reconsidered A Few Big Hits... –Only Subset of Invention Disclosures Generate any Licensing Interest –And of Those That Do, Very Few Generate Returns Significant Lag Time Between License and Revenue Realization

Industry Sponsored Research Millions of Current 1992 Dollars Source: NSF Science and Engineering Indicators

Sponsored Research Revisited As Compared to Licenses –Immediate, Certain Income –Mechanism to Move Early Technology Forward (Thus increase potential IP Value) –Valued by Faculty But... –Limited Direct Up-Side Revenue Potential –Institutional Barriers to Leveraging

Increases in the Number of Spin-offs: Companies Formed around a University License

Increases in the Number of Spin-offs: Constant Set of AUTM Respondents (N=76) Source: AUTM Annual Licensing Survey

Year of First University Equity Deal Source: Research University TTO Survey N = 67 Universities

Equity Deals Per University Source: Research University TTO Survey N = 67 Universities

Status of Equity Deals Source: Survey of Research Universities 486 (74%) 81 (12%) 93 (14%) Source: Research University TTO Survey N = 67 Universities

Equity Revisited Now longer for start-ups Perceived as between Licensing and Sponsored Research in terms of: –Upside Revenue Potential –Alignment of Interests –Certification Effect Two-Thirds of our Survey Respondents Expect their University’s Involvement in Equity Deals will increase in the next 5 years

Reflective Conclusions The Cat is out of the Bag….. –More universities participate in tech transfer –More mechanisms are used and more creatively –Greater emphasis placed on universities’ role in economic development Tech Transfer Benchmarking has become important –Universities who lag their cohort made greater use of equity licensing agreements

Reflective Conclusions 2 Less about Material Transfer Agreements –Between universities –Between universities and corporate partners The numbers are only part of the story –mask great diversity in the organizational motives strategies and incentives at the various institutions

From Minds to Minefields: Negotiating the Demilitarized Zone Between Industry and Academia “Patent protection takes a lot of work. And time. And money. The dirty secret is that for many universities – perhaps most – they are not yet breaking even, much less making money on the proposition. And in some instances and some industries, patent protection may in fact be an oxymoron “Universities are designed to operate not-for-profit and usually do quite well at it. On the other hand, it is expected that they should benefit the public. What is that thin line between their benefit and our benefit, and how do we keep sight of it?” William Brody, President, Johns Hopkins University 1999