Martin Invention Commercialization Ver 2

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4th Technology Commercialization Conference
Amman
Martin Invention Commercialization Ver 2

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  • Martin Invention Commercialization Ver 2

    1. 1. University Tech Transfer Process: Invention Commercialization The 4th Annual Conference on Technology Commercialization “ Technology Transfer (R&D and IP Commercialization, Policies, and Investment)” Amman, Jordan (12 Nov 2008) Michael J. Martin President, TechTransfer Associates
    2. 2. Industry/University : Bridging Two Cultures UNIVERSITY INDUSTRY “ To Create and Disseminate Knowledge” To Maximize the Investment of Shareholders O R G A N I Z A T I O N RESEARCH DISCOVERY DISCLOSURE FEASILBITY PATENT APPLICATIONS APPLIED r&D MARKET TEST LICENSES COMMERCIAL OPERATTION. SOLUTIONS PROBLEMS
    3. 3. Why IP: Bridging Two Cultures <ul><li>Different Missions, Measure Success Differently </li></ul><ul><li>IP: Dissemination for University, Competitive Advantage for Business </li></ul>University Industry “ To Create and Disseminate Knowledge” To Maximize the Investment of Shareholders O R G A N I Z A T I O N SOLUTION PROBLEM
    4. 4. Why Manage IP in Universities <ul><li>Disseminate Knowledge – “Public Good” </li></ul><ul><li>Outreach mission (Economic Development): From Morrill Act to Bayh Dole Act – 1980 </li></ul><ul><li>Retain/Attract Faculty </li></ul><ul><li>“ Home Run” – Additional Source of Funds </li></ul><ul><li>Results </li></ul><ul><ul><li>$40 billion in economic activity that supported more than 270,000 jobs </li></ul></ul><ul><ul><li>432 Start-ups and 4955 licenses in FY 2003 </li></ul></ul>
    5. 5. University IP Policy/Practice COI/ COC Patent Copyright Law Bayh-Dole Law Internal Revenue Code State Code SCHE Guidelines University Tech Transfer Policy/Practice Research Contract Negotiations Ownership of Intellectual Property Commercialization of Intellectual Property University Culture
    6. 6. Invention Patenting Patent Atty Disclosure Evaluation Marketing Licensing Protect if Publication is Imminent TECH TRANSFER: COMPLEX SYSTEM Products Business Spin offs Research Investment
    7. 7. Evaluation then Valuation of Intellectual Property <ul><li>Commercialization Decision </li></ul><ul><ul><li>Technical Merit </li></ul></ul><ul><ul><li>Commercial Opportunity </li></ul></ul><ul><ul><li>Protectable </li></ul></ul><ul><li>Licensing Negotiations </li></ul><ul><ul><li>Cost Approach </li></ul></ul><ul><ul><li>Market Approach </li></ul></ul><ul><ul><li>Income Approach </li></ul></ul><ul><ul><li>Relief from Royalty </li></ul></ul>
    8. 8. Assessment of Early Stage Discovery Technical Merit <ul><li>Stage of Development </li></ul><ul><li>Translate Science into Function into Benefit </li></ul><ul><li>“ Robust Solution” to “Important Problem” </li></ul><ul><li>Implementation Barriers </li></ul>
    9. 9. Assessment of Early Stage Discovery Commercial Opportunity <ul><li>Market Size and Growth </li></ul><ul><li>Identified Niche and Innovators </li></ul><ul><li>Market Entry Strategy: Product, Price, Promotion, Position </li></ul><ul><li>Competitive Advantage </li></ul><ul><li>Management Team </li></ul>
    10. 10. Assessment of Early Stage Discovery Protectability <ul><li>Appropriate Protection: Trade Secret, Patent, Copyright, Know How, Trademark </li></ul><ul><li>Broad v. Narrow </li></ul><ul><li>Freedom to Operate </li></ul><ul><li>Prior Art; esp. of inventor </li></ul><ul><li>Registration Requirements </li></ul>
    11. 11. Evaluation: Inventor - Degree of Interest, Attitude and Motivation <ul><li>Interest: IP is another publication or method to impact society. </li></ul><ul><li>Attitude: No time or willing to do what it takes </li></ul><ul><li>Motivation: $ or move invention from lab to marketplace </li></ul>
    12. 12. Invention Patenting Patent Atty Disclosure Evaluation Marketing Licensing Protect if Publication is Imminent TECH TRANSFER: COMPLEX SYSTEM Products Business Spin offs Research Investment Inventor/ Additional Develop
    13. 13. Invention Disclosures: Solicitation and Information <ul><li>Walk the halls </li></ul><ul><ul><li>Identify Areas of Market Interest </li></ul></ul><ul><ul><li>Attend Department Meetings </li></ul></ul><ul><li>Industry Forums, Invite Speakers </li></ul><ul><li>Create Events for Interaction </li></ul><ul><ul><li>Workshops on IP and Research, etc. </li></ul></ul><ul><ul><li>Patent Award or Invention Recognition Ceremonies </li></ul></ul><ul><li>Manage Expectations </li></ul>
    14. 14. Invention Patenting Patent Atty Disclosure Evaluation Marketing Licensing Protect if Publication is Imminent TECH TRANSFER: COMPLEX SYSTEM Products Business Spin offs Research Investment Inventor/ Additional Develop
    15. 15. Intellectual Property Protection <ul><li>Appropriate Protection: Trade Secret, Patent, Copyright, Know How, Trademark </li></ul><ul><li>Timing: Status of Publications </li></ul><ul><li>If Patent: </li></ul><ul><ul><li>Select Appropriate Counsel </li></ul></ul><ul><ul><li>Docket Management System </li></ul></ul><ul><ul><li>TTO is facilitator not legal resource </li></ul></ul>
    16. 16. Invention Patenting Patent Atty Disclosure Evaluation Marketing Licensing Protect if Publication is Imminent TECH TRANSFER: COMPLEX SYSTEM Products Business Spin offs Research Investment Inventor/ Additional Develop
    17. 17. Marketing <ul><li>Analysis – Expand Evaluation </li></ul><ul><li>Potential Licensees – Qualification </li></ul><ul><li>Contact – Prepare Story, Personnel </li></ul><ul><li>Confidential Disclosures – Expand Interest </li></ul>
    18. 18. Develop Contacts <ul><li>Inventor network </li></ul><ul><li>Business network </li></ul><ul><li>Internet Listings, Web Site </li></ul><ul><li>Industry and Professional Associations </li></ul><ul><li>Trade Shows </li></ul><ul><li>Patent Citations </li></ul><ul><li>Technology Management Firms </li></ul>
    19. 19. Start-ups: Culture and Support <ul><li>Where is Leadership: Creative Destruction, Permission to Fail </li></ul><ul><li>Conflict of Interest: State Law, University Policy, and Shareholder Value : </li></ul><ul><li>Access to: Patient Risk Capital; Business Start-up Services; Appropriate Risk Management. </li></ul>
    20. 20. $ needed at the stage of Business Development Pre-Seed <ul><li>Invention/Raw </li></ul><ul><li>Technology </li></ul><ul><li>Technologist / </li></ul><ul><li>founder/business development </li></ul><ul><li><$500K </li></ul><ul><li>Identifying technology via relationships </li></ul><ul><li>Determining commercial viability </li></ul><ul><li>Accessing </li></ul><ul><li>rights </li></ul><ul><li>Dev. business strategy </li></ul>Seed Early Stage Mid-Stage Exit Description Team $ Needed Keys to Success <ul><li>Prototype/ Product-in-development </li></ul><ul><li>Plus first senior mgmt team member </li></ul><ul><li>$250K to $1M </li></ul><ul><li>Finding development partners </li></ul><ul><li>Developing business strategy </li></ul><ul><li>Recruiting BOD & SAB </li></ul><ul><li>Recruiting CEO </li></ul><ul><li>Product at beta clients </li></ul><ul><li>Senior mgmt team formation </li></ul><ul><li>$1M to $5M </li></ul><ul><li>Growing the sales pipeline </li></ul><ul><li>BOD and SAB in place </li></ul><ul><li>Full customer pipeline </li></ul><ul><li>Senior mgmt team in place </li></ul><ul><li>$2M to $20M </li></ul><ul><li>Managing growth </li></ul><ul><li>Achieving profitable </li></ul><ul><li>Identifying exits </li></ul><ul><li>Business Expansion </li></ul><ul><li>Public Markets </li></ul>
    21. 21. Access to Capital: Technology Policy Framework Source: Richard Palmer, Business Specialist Advanced Technology Program National Institute of Standards and Technology . <ul><li>Friends and Family </li></ul><ul><li>SBIR/STTR </li></ul><ul><li>Corporate Funding </li></ul><ul><li>Bootstrapping </li></ul><ul><li>Angel Investors </li></ul><ul><li>Venture Capital </li></ul>The Valley Of Death Availability of Capital Basic Research Development & Scale-up Commercial Operation
    22. 22. Friends and Family <ul><li>Easiest to approach </li></ul><ul><li>Need to advise risk </li></ul><ul><li>Have plan prepared </li></ul><ul><li>Can distract from business </li></ul>
    23. 23. Is SBIR the Way to Go? <ul><li>Plus Side </li></ul><ul><li>“ Free” R&D </li></ul><ul><li>Income on the P&L </li></ul><ul><li>Leverages other investment </li></ul><ul><li>Potential customer in funding agency </li></ul><ul><li>Minus Side </li></ul><ul><li>Doesn’t advance Business Development </li></ul><ul><li>Government accounting </li></ul><ul><li>Can be distracting </li></ul><ul><li>Can get HOOKED! </li></ul>
    24. 24. Corporate Opportunities in the Valley of Death <ul><li>Reduce Risk to Corporation by Leveraging University Equity/Gap Fund Screen </li></ul><ul><li>Potential Relationships </li></ul><ul><ul><li>Equity Investment </li></ul></ul><ul><ul><li>Strategic Partnership: Corporation brings Manufacturing and Marketing Expertise </li></ul></ul><ul><ul><li>Potential Customer </li></ul></ul>
    25. 25. Bootstrapping <ul><li>Belief is that income can fund growth </li></ul><ul><li>Have customers identified, even orders </li></ul><ul><li>Seek line of credit to provide working capital </li></ul><ul><li>Manage accounts receivable, Use the customers cash </li></ul><ul><li>Be willing and able to turn down business </li></ul>
    26. 26. Angel Investor Basics <ul><li>Accredited investor defined by Regulation D under the Securities Act of 1933 or SEC Rule 501 </li></ul><ul><li>Must have a net worth in excess of $1M or annual salary in excess of $200,000 the past two years </li></ul><ul><li>Typically considered an expert in a particular market </li></ul>
    27. 27. Investment Profile for Angel Investors <ul><li>Technology based (as opposed to service) </li></ul><ul><li>Strong barriers to entry for competition </li></ul><ul><li>High growth prospects (multiple million dollar market or higher) </li></ul><ul><li>Strong management team or entrepreneur’s track record </li></ul><ul><li>Viable exit opportunity for investors (acquisition or IPO) </li></ul>
    28. 28. THINK LIKE A VC <ul><li>Skimming the cream, not playing the margins </li></ul><ul><li>First dollars in will want to own 40-60% of the company </li></ul><ul><li>The perils of common shares and cram downs </li></ul><ul><li>Perspectives on “investor hierarchy” </li></ul><ul><li>Faculty role and grad student role in start-up </li></ul><ul><li>When and what is the exit scenario? </li></ul><ul><li>Technology is 5% of the start-up </li></ul>
    29. 29. Example: New Nanotechnology Material <ul><li>High VC Buzz Factor </li></ul><ul><li>Impact all markets </li></ul><ul><li>Basic Science is of High Interest </li></ul><ul><li>Virginia Tech </li></ul><ul><ul><li>Improved Yield </li></ul></ul><ul><ul><li>Inventor Published </li></ul></ul><ul><ul><li>Attract Grants </li></ul></ul>
    30. 30. Ideas & Funding LUNA nanoMaterials Acquisition & IPO Universities Industry Government Private & Industrial $
    31. 31. Invention Patenting Patent Atty Disclosure Evaluation Marketing Licensing Protect if Publication is Imminent TECH TRANSFER: COMPLEX SYSTEM Products Business Spin offs Research Investment
    32. 32. Negotiation - Style <ul><li>Prepare your position/Understand theirs </li></ul><ul><li>Request an offer </li></ul><ul><li>Listen Actively… and carefully </li></ul><ul><li>Probe their rationale and yours </li></ul><ul><li>Create options/make counter offers </li></ul><ul><li>Confirm agreement and benefits to each side </li></ul><ul><li>Close firmly, amicably, and define the next step. </li></ul>
    33. 33. Negotiation - Valuation <ul><li>Cost Approach - Cost to create and develop or to replace the assets </li></ul><ul><li>Market Approach - Based on comparable transactions between unrelated parties </li></ul><ul><li>Income Approach - Based on the present value of the future income streams expected from the asset </li></ul><ul><li>Relief from Royalty - Measured by what the owner of the property would pay in royalties </li></ul>
    34. 34. Valuation – Cost Approach <ul><li>Cost to create and develop or to replace the assets </li></ul><ul><li>No party would pay more to use than to replace the asset in an arm's-length transaction </li></ul><ul><li>Historical costs or the projected cost to develop an asset of similar value at similar level </li></ul><ul><li>Appropriate </li></ul><ul><ul><li>Embryonic, basic technology for which market applications cannot yet be defined. </li></ul></ul><ul><ul><li>Technology is narrow in scope and easy to replicate or &quot;design around </li></ul></ul>
    35. 35. Valuation – Market Approach <ul><li>Based on comparable transactions between unrelated parties </li></ul><ul><li>Factors to consider </li></ul><ul><ul><li>Nature of the assets transferred, </li></ul></ul><ul><ul><li>Industry and products involved, </li></ul></ul><ul><ul><li>Agreement terms, and other factors </li></ul></ul>
    36. 37. Valuation – Income Approach <ul><li>Based on the present value of the future income streams expected from the asset </li></ul><ul><li>Forecasting the useful life of the property </li></ul><ul><ul><li>the service life of the asset </li></ul></ul><ul><ul><li>the legal life of the asset </li></ul></ul><ul><ul><li>the economic life of the asset </li></ul></ul><ul><ul><li>the functional or technological life </li></ul></ul>
    37. 38. Valuation – Income Approach <ul><li>Risk Assessment for the Discount Rate </li></ul><ul><ul><li>Technical Risk: Stage of Development, $, Time, Obsolescence </li></ul></ul><ul><ul><li>Market Barriers: Concentration, Distribution, Diffuse </li></ul></ul><ul><ul><li>Management Team: Fit, Expertise, Core Competencies </li></ul></ul><ul><ul><li>Protection: Type, Breadth, Strength, Blocking </li></ul></ul>
    38. 39. Valuation - Relief from Royalty <ul><li>Measured by what the owner of the property would pay in royalties </li></ul><ul><li>Assumes: </li></ul><ul><ul><li>Stage of Development: products could be produced within a reasonable period of time. </li></ul></ul><ul><ul><li>Sufficient data to develop reasonable estimates of the royalty base (i.e., projected revenues). </li></ul></ul><ul><ul><li>Data to support the determination of a reasonable royalty rate. </li></ul></ul><ul><ul><li>Accounts for market conditions, the economic life of the Technologies and the risk associated with receiving future economic benefits. </li></ul></ul>
    39. 40. Royalty Rates for In-Licensing by Industry Rose Ann Dabek Procter & Gamble Industry 0-2% 2-5% 5-10% 10 -15% 15-20% 20-25% >25% Aerospace 50% 50%           Automotive 52.5% 45% 2.5%         Chemical 16.5% 58.1% 24.3% 0.8% 0.4%     Computer 62.5% 31.3% 6.3%         Electronics   50% 25% 25%       Energy   66.7%       33.3%   Food/Consumer   100%           General MFG. 45% 28.6% 12.1% 14.3%       Gov't/University 25% 25% 50%         Health Care 3.3% 51.7% 45%         Pharmaceuticals 23.6% 32.1% 29.3% 12.5v 1.1v 0.7% 0.7% Telecommunications 40% 37.3% 23.6%        
    40. 41. License Agreements <ul><li>Start with your boilerplate. </li></ul><ul><li>Focus on Definitions, Grant, and Consideration </li></ul><ul><ul><li>- Make sure they are clear </li></ul></ul><ul><li>Read and Think about ALL of the Clauses </li></ul><ul><ul><li>- Pay attention to the “little clauses” </li></ul></ul>
    41. 42. Conclusions <ul><li>Always Keep in Mind the Mission of the University vs. the Company </li></ul><ul><li>Companies </li></ul><ul><ul><li>Remember Boundaries of Law and Policy </li></ul></ul><ul><ul><li>Understand How Success is Measured </li></ul></ul><ul><li>Universities </li></ul><ul><ul><li>Remember why interested in industry </li></ul></ul><ul><ul><li>Appreciate the goals of business and measures of success. </li></ul></ul><ul><li>Maintain Good Lines of Communications </li></ul><ul><li>Try to Build Long-Term Relationships </li></ul>
    42. 43. Invention Patenting Patent Atty Disclosure Evaluation Marketing Licensing Protect if Publication is Imminent Questions ????? Products Business Spin offs Research Investment

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