Office of Technology Transfer and Economic Development January 26, 2006 University of Hawai`i

Office of Technology Transfer and Economic Development (OTTED)  Revenue-oriented service center Help UH personnel identify, protect, and commercialize their inventions/creations Help build UH research enterprise Generate licensing income  Support State economic development initiatives

UH Business Plan Competition  OTTED offering up to $20,000 in additional prize money  Recipients must base their business plan on a UH technology available for licensing through OTTED  Recipient(s) must be 1 st, 2 nd, or 3 rd place winner(s)  Money must be used to help commercialize the technology generally means that winning team becomes a licensee  Award goes to highest placing winner

Technology Licensing

Evolution of the relative value of tangible and intangible assets to total value 100 years ago, tangible assets generally accounted for 90+% of a company’s value... 90% 10% Today, the value of many companies is derived from their intangible assets. 100 years agoToday

University technologies are valuable and will become more valuable as companies continue to leverage their R&D budgets through the acquisition of outside technologies

Technology Transfer Process Invention Disclosure Marketing & Protecting Legal protection available? Licensing UH ownership ? Yes No Yes No Commercial interest ? YesNo Return to inventor TLG activities Solicit, accept, administer invention disclosures TLG activities Evaluate, market, protect technologies TLG activities Negotiate, formalize, audit licenses Note: This chart is necessarily brief - it represents only the most basic functions of the technology transfer process. Please contact the Technology Licensing Group ( ) with questions or for further information about your invention and the technology transfer process. Stage 1 Stage 2 Stage 3

Licensing as a Business Model  Licensor – Inventor/owner of technology  Licensee – User  License – contract not to sue  Consideration – usually financial but may include other consideration, such as cross license

Why license university technologies?  Technologies – early stage, high risk Technological risk – it may not work Market risk – unknown demand  Licensee – reduces risk Reduces R&D expenses Proves concept, may provide working model  Permits end users to “kick the tires”, lowers market uncertainty Establishes relationship with University  Licensor – expands income potential Reduces/eliminates mfg., mktg., dist’n costs May help identify new income opportunities Establishes relationship with company(ies)

Possible Deal Structures  Traditional licensing w/fees, royalties  Equity participation Spin-offs/start ups  Sublicensing  Options  Sponsored research agreements With/without option to acquire license

Compensation, Diligence, Patents, and Liability

Compensation Structures and Alternatives  Up-front fees  Royalty arrangements  Milestone payments  Patent registration costs  Liability/indemnification

Up-front fees  Good for University Reduce University’s financial risk Offset University’s previous out-of-pocket expenses (research costs, patents, etc.) Generally not refundable nor creditable against future royalties  BUT … Increase licensee’s financial risk May reduce licensee’s research sponsorship commitment May “lock in” licensing rights

Royalty arrangements  Permits University to share in the success of commercialization  University’s increasingly willing to be flexible in their approach and royalty requirements  Equity can be exchanged for royalties

Milestone payments  Milestones should follow natural development of the technology  Often tied to diligence provisions  Levels revenue flow to University in early years  Equity can be exchanged for cash payments.

Payment of Patent Expenses  Licensed patent = licensee pays  Business expense  Cost sharing for multiple licensees each licensee pays 1/n of patent expenses licensor may limit licensee’s liability, cap or set n>1

Liability Issues and Disclaimers  Licensee takes all the blame and the responsibility and the cost  University takes all the credit and none of the responsibility …and wants to be paid for it

Liability Issues  Licensee assumes fitness for use  Licensee assumes product liability and names university as additional insured  Licensee/university each assumes liability for its own employees

Success Stories and Exemplary Technologies

Past Business Plan Participants/Winners  Pipeline Communications and Technology, Inc. telecommunications and antenna technologies company has 7 employees, is in pre-production phase  Hawaii Environmental BioSolutions dairy waste processing company has 0 employees, is in start-up phase  Research Analytical Labs diagnose and treat pre-term labor status of company unknown

Examples of UH technologies available for licensing  Hydrogen storage materials  Biodegradable biopolymers  Hydrogen/oxygen production from water  Acoustic wave micromixer  Wastewater treatment with zero valent iron  Ventilating roofing system

Contacting OTTED  Website  /Phone Richard Cox, Gaylene Anderson, Lisa Matsunaga, Ann Park, Jonathan Roberts, Andrea Yuen,