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FITT Toolbox: Exploitation Scenarios

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Exploitation is perceived as an output for any given technology coming from R&D. The objective is this practice is to suggest the drill to conclude a technology transfer agreement by giving a certain ...

Exploitation is perceived as an output for any given technology coming from R&D. The objective is this practice is to suggest the drill to conclude a technology transfer agreement by giving a certain number of basic rules related to ordinary, legal and other aspects, and related to negotiation process. It also regroups necessary initial first steps in order to lead to successful exploitation as follows: the valuation of the technology, then the elaboration of transfer scenarios and finally, management of financial compensation.

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FITT Toolbox: Exploitation Scenarios FITT Toolbox: Exploitation Scenarios Presentation Transcript

  • Exploitation Scenarios FITT– Fostering Interregional Exchange in ICT Technology Transfer – www.FITT-for-Innovation.euExcept where otherwise noted, this work is licensed under a Creative Commons Attribution 3.0 License.
  • Practice in general Exploitation – as a practice – is perceived as an output for any given technology incoming from R&D. This practice illustrates various possible exploitation scenarios:• The linear case consist in a technology coming from the research that is yielded at a given maturity stage to a company for the exploitation in the market.• A variant is the case of partnership research during a stage of maturation.• A particular case is the one of a spin-off creation. Practice also regroups necessary initial first steps in order to lead to successful exploitation:• Valuation of the technology.• Elaboration of transfer scenarios.• Management of financial compensation.2 | March 2010 Exploitation Scenarios
  • The context: Who ? When? Where? Why? This practice is the fruit of a workgroup established by UWE (the Walloon businesses union) and the LIEU network in 2009. The objective was to suggest the drill to conclude a technology transfer agreement by giving a certain number of basic rules related to ordinary, legal and other aspects, negotiation process. The importance of negotiation process cannot be underestimated. Indeed, the technology transfer creates a relationship which has to be enduring and harmonious for both parts, notably in term of pricing. Indeed, there is multiples causes of disagreements during discussions. Most of these can be avoided with a better understanding of the partners or by adopting the same time scale.3 | March 2010 Exploitation Scenarios
  • Parts of the practice: Valuation of the technology A necessary first step: a clear description of the technology. • The right-owner needs to describe his technology, ensure the traceability of of his works, estimate the different stages and position his technology compared with existing solutions on the market. Second step: Qualitative valuation/appreciation. • The right owner needs to identify all potential applications for the technology, necessary further development stages and valorisation strategic options. • For more information about qualitative valuation criterias, see the process “Preliminary evaluation of technology transfer projects” of the FITT toolbox. Third step: Quantitative valuation. • Various valuation methods exist, some based on past information (“costs” method), others on prospective apprehensions (“Market” or “Income” method). • For more information about quantitative valuation criteria, see the process “Valuation” of the FITT toolbox.4 | March 2010 Exploitation Scenarios
  • Parts of the practice: Elaboration of transfer scenarios 3 schemes are generally encountered: • Licence agreement: everything is clear. The licensee knows exactly what he receive, and the owner knows where the licensee wants to go. • Option to licence agreement: the licensee wants to test the technology in his particular context before he commits. • Temporary partnership during a phase of maturation.  An initial document : the term sheet. • During the definition of the exploitation rights, the bodies can agree on some. elements. The latter are listed in a short document: the term sheet, the synthesis of the main elements of a contract. • Term sheets are often the first support for negotiation before contractualization.5 | March 2010 Exploitation Scenarios
  • Parts of the practice: Elaboration of transfer scenarios Content of the licence agreement: • Licensing is a profession, but technology transfer officers can resume a list of several points (that can be the object of a term sheet). This list will be the base for jurists to establish the licensing document. • Key elements contained within a licensing contract/agreement: - Object of the licence (nature of asset/technology) - Identification of parties - Scope + Definition - Domain - Exclusivity - Territoriality - Duration - Patent management procedures - Improvement management procedures - Confidentiality and publications management procedure  The different elements can also be associated to deadlines or quantity objectives: • Due Diligence: it is the audit before the investment. It serves to confirm all material facts. • During the period of development, milestones are fixed, and during the commercialization period, minimum amount of royalties or prepaid royalties must constitute an incentive to commercialize the technology. • The non-respect of some objectives can lead to turn the license non-exclusive or even break the license.6 | March 2010 Exploitation Scenarios
  • Parts of the practice: Elaboration of transfer scenarios Option to license agreement• Option define the terms of the licence and condition the start to a particular result, a testing period.• Option duration is generally short: typically from 6 to 24 months.• Generally, option to licence include: - Cost coverage for the tests to realize, Cost coverage for protection, Compensation for exclusivity• If option is not exercised, owner must be allowed to get back all the data in order to be able to envisage other tracks for valorisation. Development Partnership• If ideas about the technical results of a project and/or the potential of the market are not clear, there is no choice than to enter a partnership.• The partners engage to discuss together at the end of the partnership.• In that case, project must be managed in a way that the partners are very motivated to bring in ideas, because there is a mutual trust and the willingness to find a fair deal. 7 | March 2010 Exploitation Scenarios
  • Parts of the practice: Financial compensations Pricing and financial compensations depend on the chosen valuation method and the exit of the negotiations. 2 approaches to pricing:• Each party makes his own projection & development plan.• Development plan is elaborated in common. Typical types of financial compensations: • Down Payments: Basic allowances which can be linked to several milestones: Contract signature, protection, step in the development, publication, start of the commercialisation... • Royalties: Compensations considered as a right of the owner on successful exploitation. • Equity: The owner receive shares. • Others: Technology cession with success fee, Exchange of technologies (cross-licensing),… 8 | March 2010 Exploitation Scenarios
  • Parts of the practice: Particular cases Particular case of research partnership: • Those cases will certainly develop because they are situated in the heart of the “Open Innovation” model supported by Europe. • The principles developed here are applicable to research partnership. The following points are those which deserve to be underlined: - Background: The background of a partner has to be licensed if a partner wishes to exploit it. - Results: each partner receives a fair return of the investment that he has provided to the project Particular case of a Spin-off creation: • All the previous information applies when the licensee is a spin-off. However, this is a particular case because this type of company is very close to the parent university. • By definition, a spin-off company can benefit, from the parent university, of an exploitation license, protected or not. This license is generally exclusive. • The spin-off, through a lack of money, cannot face the initial payments. This is why, the license (or the option) is generally brought in nature at the constitution with shares as initial payments and exploitation royalties.9 | March 2010 Exploitation Scenarios
  • Pro’s & Cons The present document does not aim to provide a list price for a technology. However, it gives necessary information to allow that partners facing the problem have a methodology to follow to reach by negotiation the consensus generally necessary to the success of the project. For some people, this type of discussion is usual. The national or international experience of some actors can benefit to others (new companies that are actors of the innovation), this is the objective of this document. By complying with the habits at the international level, this allows also to the companies to learn how to acquire new technologies elsewhere.10 | March 2010 Exploitation Scenarios
  • Suggested Reading Link to code book: exploitation, valuation, partnership, maturation, royalties, licensing, spin off, LIEU11 | March 2010 Exploitation Scenarios