Commercialization of university research the experience of the

Commercialization of university research: the experience of the United States and Russia

A University’s Dilemma – Somebody’s getting rich… and it isn’t you • Patents are expensive to get and maintain • Without a patent, others may use your invention without compensating you • Even with a patent, commercialization is difficult

Technology Transfer Process in USA Universities

Technology Transfer Process • IP Protection: When technology becomes Intellectual Property – Origins • Until the Age of Enlightenment, inventions were merely “ideas” and not property • The British Statute of Monopolies (1623) created the right to exclude others through “letters patent” • Soon thereafter, John Locke forever changed the conceptualization of “property” and private ownership • Today, patents can be privately owned, exploited and transferred – Economic Rationale • To “promote progress” by encouraging creativity and investment in invention • In exchange for certain exclusive rights for a limited period of time, inventors apply their creativity to solve a problem, invest in invention and compete to publicly disclose new technologies

Process (cont’d) • When does a technology become intellectual property? – Ideas are any conception existing in the mind as a result of mental understanding, awareness or activity – Not all ideas are inventions – An invention is the discovery of some new or improved process or machine that is both useful and not obvious to a person skilled in the particular field – If certain conditions are met, an invention may be patented – Patents are a subset of IP rights and are recognized globally

Почему так важно строить отношения с учеными • Осведомленность о проектах над которыми работают ученые • Возможность оказать помощь в достижении результатов которые будут наиболее патентоспособны – Оценка коммерческой ценности – Формула изобретения

«Раскрытие изобретения» : важный легальный документ «Раскрытие изобретения» является официальным и юридическим документом, в котором: • описывается изобретение • заявляются авторы изобретения • дата изобретения • принадлежность университету Этот документ инициирует начало просесса технологической оценки и выработки стратегии лицензирования и коммерциализации.

Рассмотрение и оценка коммерческого потенциала разработки Научная ценность и коммерческий потенциал Быть или не быть? Вот в чем вопрос! • маркет • патентоспособность Лицензировать или создавать компанию? Если лицензировать то за сколько

Process (cont’d) • Licensing – The license • Licensing occurs when a patent owner (such as a university) grants exploitation rights over a technology to a licensee • The license is a legal contract – sets out terms upon which the exploitation rights are granted, including performance obligations • Failure to comply with performance obligations may lead to termination of the license and the reversion of exploitation rights back to the licensor – Why license a technology? • Patent licensing is considered the most viable means of commercializing a patent • It is the principal method by which academic and research institutions (1) transfer technology for socially beneficial purposes and (2) generate revenue

Process (cont’d) • Revenue – Potential • With the transition to a knowledge driven global economy, patents have become fundamentally important to the creation and distribution of wealth • Patents have become the most valuable asset for many of the most successful companies, big and small • It is well known that many Silicon Valley companies got their start from university research – And it’s not just Silicon Valley…but worldwide • In 2006, tiny Stevens Institute of Technology in Hoboken, N. J. , took in $4. 5 million in research-related income while investing $28 million on research – a 16% yield • In the same year, Stanford University pulled in $62 million against $700 million investment in research – an ROI of 8. 7%

Process (cont’d) – How to generate revenue • Universities can generate revenue from patents in a number of ways – The principal method is licensing, which typically generates an ongoing royalty revenue » A license can also be made for a one-time payment – Lump sum sale of a patent – Start-up companies / spinoffs – Joint ventures

Process (cont’d) • Questions?

The practice of successful intellectual property LICENSING in the USA

Successful Licensing • What is “successful licensing”? – Depends upon where you sit • • Achieving the best price? Putting the technology to productive use? Benefiting society? Creating start-ups to foster competition? – More than one way to achieve ‘success’ • In Russia licensing to domestic start-ups + • Generating revenue abroad from licensing

Successful Licensing (cont’d) • In the USA, the primary method of commercializing university technology is through licensing – In contrast to Russia, only 10%-15% of patented technologies are licensed to USA start-ups • Don’t be afraid to fail – most successful USA entrepreneurs have failed before they ultimately succeeded • ~95% of start-ups that take American university licensed technology fail – primary reason for these failures is management – the leadership team is not qualified • Case study: Mitogenetics

Successful Licensing (cont’d) • Successful licensing = finding a good “home” for a technology – What is a good home? • Technology specific decision • Depends upon your objective – profit? – confer economic benefit to the local community? – stimulate an industry? • Today, I will focus only on one metric – profit

Successful Licensing (cont’d) • First steps… – Understand the technology • Not only what the inventor believes the commercial application to be, but also what it might be – Case study: Highway. Master – Conduct a high level market analysis • Does the technology fill an existing market need? • Could this technology be a market maker? – Who are the dominant market players? • Could the technology be an extension of their current product(s)? • Could this technology give them a competitive edge? • Would this technology displace a current product? – Case study: University of Oklahoma

Successful Licensing (cont’d) • Obtain patent protection – Patent protection is essential to obtain value from a technology – But just having a patent doesn’t ensure that you will generate revenue – Key considerations • The “specification” must encompass the current and potential uses of the technology – your high level market analysis will be useful • The patent claims must cover the known and anticipated commercial implementation of the technology – quality and experience of patent counsel is critical – case study: University of Minnesota • File a PCT application • If the technology has great potential economic value, leave open the possibility to file divisionals and continuations

Successful Licensing (cont’d) • Key economic considerations – Field of use licenses • As the Germans are fond of saying, “you can slice the salami very thinly” – Exclusive versus non-exclusive licenses • In a single market • In the global market – Exclusive license for a limited period of time • Gives one market player a competitive advantage for a period of time – Generate a one-time upfront payment • Tends to drive maximum lifetime value – Concept of exhaustion

Successful Licensing (cont’d) • Find the best partner(s) – Once the first patent application is on file, you may begin licensing discussions • It is preferable (but not absolutely necessary) to obtain a confidentiality agreement – Create a value chain analysis for the technology • Don’t “drown” in opportunity…focus • Target the optimal point on the value chain for this technology – Rank order companies which could most benefit and decide which one to first approach – Learn its business so that you present the opportunity from their perspective • Discuss the value of the market opportunity for their company – Case study: University of Oklahoma

Successful Licensing (cont’d) • Revenue – There is no “right” answer • More art than science • Avoid standard financial terms – First question to ask yourself: what do I need? – The more money upfront, the lower the lifetime value from the technology • Maximum revenue tends to come from ongoing royalties

Successful Licensing (cont’d) • Protect yourself in the license agreement – Minimum annual royalty payments – Create incentives so that the licensor will not “sit” on the technology – Claw-back provision – Audits – Information rights – How much of the researchers time will be required? • Who gets the benefit from this? • Who pays for this?

Successful Licensing (cont’d) • Questions?

Finding the appropriate market opportunity for your technology

Market Opportunity • Achieving optimal value – Conceptualize the opportunity – Identify the market(s) that could benefit from this technology – Analyze the value chain – Who are the key market participants? – Understand the needs and economics of each target market – Create a marketing strategy to get the product into each market • Don’t be reluctant to change your strategy if need be • Case study: Swift Lift

Market Opportunity (cont’d) • Conceptualizing the opportunity – Inventor creates a solution to a problem • In this case, how to more efficiently and costeffectively move from one residence to another • Current process is relatively inefficient and costly – Immediately saw vast potential beyond residential moving

Market Opportunity (cont’d) • Explore the markets for the technology – Research the way business is currently being done – Identify the unique value of the new technology – Validate / refine the opportunity against the current landscape • Does this technology need proof of concept? – In the case of Swift Lift, yes!

Market Opportunity (cont’d) • Identify the markets in which your technology might have value – What are the adoption characteristics of each market?

Snapshot of US Market Hauling Specialized Freight • Short to medium- term potential lies in niche uses • Need a few reference customers Military & Emergency • Long lead time • Relatively price insensitive • Many hurdles to overcome Intermodal Transport • Must find the right partner Moving & Storage • Quickest penetration • Easily identified players • Key is likely to be duration of exclusivity

Market Opportunity (cont’d) • Analyze the value chain Field of Use Licenses to End. Users in Multiple Market Segments Direct Fleet Sales Dealers Trailer Manufacturers

Market Opportunity (cont’d) • Who are the key market participants? – Moving & Storage • United Van Line • Graebel • PODs – Intermodal • APL • Railroads – Hauling Freight • Specialty Haulers – – Construction Timber Waste Others • Retailers – Wal Mart – Home Depot – Lowes • OTR – All major TL truck carriers – Military • APL (as military’s logistics provider) – Emergency Management • FEMA • State agencies • Utilities

Market Opportunity (cont’d) – Understand the needs and economics of each target market • Why should Swift Lift appeal to them? – To what degree would Swift Lift increase » profitability » market-share • Why would they resist utilizing Swift Lift? – Do they already have a large sunk cost in a different technology? » If so, what is the replacement cycle? • How important is the competitive advantage? – That a target company might gain? – That a target company might lose if a competitor licensed the technology?

Market Opportunity (cont’d) – Create a marketing strategy to get the product into each market • Each field of use is a different market opportunity and may require a different strategy • For Swift Lift, markets like China and India require unique marketing strategies – these markets require intimate knowledge of how business is done – inability of foreigners to enforce patents in local courts

Market Opportunity (cont’d) • Valuation approaches – For China and India • Find a local partner that will become an exclusive licensee to license in that market • Shape valuation strategy around this reality – For the US • Narrow field of use exclusive licenses for a short period of time – ROW

Market Opportunity (cont’d) • Questions?

Introducing “risk sharing” Turning inventions into profit with no cost to the university

The ‘Bastille Program’ • We created the Bastille Program to help academic and research institutions overcome the obstacles to commercialization • We offer a unique Program that combines legal and business expertise to identify, patent and commercialize promising technology

The ‘Bastille Program’ • Our Goal: To be the long-term IP partner of universities and researchers • We offer the full gamut of services: – Initial screening of ideas for patentability – Assessing commercial potential – Filing patent applications – Aggressively commercializing your technology • You pay us nothing. We split the net revenue 50%/50%, ensuring an alignment of interests

One-Stop Solution • Researchers and universities often lack: – Relationships with highly qualified international legal counsel – Expertise in commercializing technology – Financial resources to do it yourself – Business expertise – Access to companies that might benefit from your technology • We can provide the legal, business and financial support needed for a robust patent program

Bastille Program Advantages • Your technology will be carefully vetted for: – Patentability – Commercial potential • Patents will be prosecuted by the world’s preeminent IP law firm, Fish & Richardson – Prosecution by Fish’s subject matter experts helps ensure the maximum value for your technology • Bastille’s team will build a business case for optimizing value and aggressively commercializing your technology • Through your patent, you will receive financial reward, in addition to the recognition you deserve

How To Partner • Step 1: Your institution enters into an agreement with Bastille that sets forth the terms of our relationship • Step 2: Your institution also enters into a legal engagement with Fish & Richardson • Step 3: Propose technology for the program to Bastille/Fish – Contact Bastille – Complete the short information form – Bastille and Fish & Richardson will review the materials

How to Partner (cont’d) • Step 4: If the technology qualifies for the Program, work with Bastille/Fish to pursue patent protection • Step 5: Bastille starts working to commercialize your technology

The Team • Bastille • Fish & Richardson

About Bastille • Bastille is a world class intellectual property development and management company • Our mission is to assist universities and researchers realize substantial value from the technologies they create • We virtually eliminate the burden of commercializing your technology by providing all the necessary services • Bastille is expert at multi-jurisdictional patent commercialization

About Fish & Richardson • Fish & Richardson is the oldest IP law firm in the USA – Founded in 1878 – Initial clients included Alexander Graham Bell, Thomas Edison and the Wright Brothers • Today, Fish is the world’s preeminent IP law firm – – 11 USA offices plus an office in Munich With 375 lawyers, it is the largest IP law firm 75 staff Ph. D’s Many technology specialists

Risk Sharing Can Be Very Rewarding • Technology invented by academic researchers can be enormously valuable • Without patent protection, your technology can be used by companies without any requirement to compensate you – And, generally, they claim the invention as their own • Obtaining patent protection is expensive and the process fraught with risk • Even if you get a patent for your technology, how do you commercialize it?

Risk Sharing (cont’d) • The Bastille Program was created to overcome the many obstacles and mitigate the risks of obtaining a patent • We take on 100% of the financial risk in exchange for 50% of the reward • We want to be your long-term partner

The word patent originates from the Latin patere, which means "to lay open" (i. e. , to make available for public inspection).