University-Industry Partnerships:
Role of Intellectual Property
Dr. Guriqbal Singh Jaiya
Director
Small and Medium-Sized Enterprises Division
World Intellectual Property Organization
www.wipo.int/sme
KNOWLEDGE AGE
Universities and high schools
become the raw material of
economic development as coal
mines were the raw material of the
industrial age !
The 21st Century Context for Linking
Universities and the Economy
► The
Knowledge Economy – A world-wide
phenomenon
► Knowledge – The new raw material driving
innovation, competitiveness, and economic
development
► “Economic success is no longer determined by
possession (e.g., of raw materials or physical
prowess), but by capacity to generate new
knowledge and by the ability of the workforce to
apply this knowledge successfully” (M. Walshok,
Knowledge Without Boundaries, 1995)
The role of universities
in the Europe of knowledge
► Develop
effective and close co-operation
between universities and industry
 innovation
 start-up of new companies
 licensing of university intellectual property
 promotion of effective university-industry
relations
 better exploit the results of their knowledge in
relationship with industry
 evaluation criteria for the performance of
universities
SUCCESS FACTORS FOR TECHNOLOGY TRANSFER
Academic
Business
Government
Community
Talent
Technology
Capital
Know-How
Market - Need
Successful
Value-Added
Technology Transfer
G. Kozmetzky
UT-Austin
Ecosystem
Investors’s
[Thanks to Jeff Skinner, UCL]
Lawyers
Head
hunters
Other
start-ups
PR agents
Patent
Firms
Real
estate
Accountants
Leasing
Brokers
Itinerant managers
Consultants
Banks
Students
But why does the government
invest in research?
Government
Funding of
Basic Research
In Academia
Reservoir of
Knowledge
Increased
Efficiency
New
Industry
Taxes
Science, The Endless Frontier, 1945
New
Companies
(Jobs)
Vannevar Bush
Reservoir Theory of
Knowledge
The Business of Academic Research
Federal dollars
to Universities
have continued
to climb, even
while falling in
other sectors
Source: National Science Board Report 2002
Traditional academic roles
•
Research
• Creation of new knowledge
• Breakthroughs and basis research (about half of all basic
research in U.S. conducted by universities)
• Incremental technical advances
•
Education
• Dissemination of knowledge
• Graduation of students
•
Service
• Transfer of knowledge and transfer of technology
The Technology Transfer Process
7-12 YEARS
SCIENCE
&
TECH
MARKETING
Technology
Feasibility
Idea
Prototype/
Scale-up
INVENTION
Market
R&D
Pro-forma
Business Plan
FEASIBILITY
Product
Development
Initial
Manufacture
COMMERCIALIZATION
TRANSLATION
Applications
Marketing
Strategy
Business
Plan
MARKET
CAPTURE
MARKET & BUSINESS PLANNING
IPO
FINANCING
Tech Tfr
Funds Seed Capital
Expansion Capital
RETURNS
Technology Licensing at Stanford
► Notable
Inventions from Stanford Research
1971- FM Sound Synthesis ($22.9M)
1974 – Recombinant DNA ($255M)
1981 – Phycobiliproteins ($46.3M), Fiber Optic
Amplifier
($32M), MINOS ($3.4M)
1982 – Amplification of Genes ($30M)
1984 – Functional Antibodies ($120.6M)
1986 – CHEF Electrophoresis ($2.1M)
1990-1992 – DSL ($28.7M)
1996 – Improved Hypertext Searching (GoogleTM
($336.5M)
University-Industry partnerships:
Economic Advantages
► Licensing
agreements are only a small part
of the benefits university research
generates. Others include:
► Generation of new knowledge
► Creation of human capital
► Transfer of tacit knowledge
► Technological innovation
► Capital investment
► Regional leadership
► Production of knowledge infrastructure
► Influence on the regional milieu
SUCCESS FACTORS FOR TECHNOLOGY TRANSFER
Academic
Business
Government
Community
Talent
Technology
Capital
Know-How
Market - Need
Successful
Value-Added
Technology Transfer
G. Kozmetzky
UT-Austin
Conflicting Values - Common Interest
UNIVERSITY
Knowledge for
Knowledge’s Sake
INDUSTRY
Management of
Knowledge for Profit
Teaching
Research
Service
Economic
Development
Academic Freedom
Open Discourse
Profits
Commercialization
of New and Useful
Technologies
Product R&D
Confidentiality
Limited Public Disclosure
Blending the University Research
and Entrepreneurial Cultures
► Academics
► Industry
 research priorities
set by investigator
 research priorities
set by management
 grant-seeking
 profit-seeking
 publications
 proprietary
 patenting driven by
publications
 patenting driven by
business decisions
 serendipity
 control
 transfer at early
stage
 add value before
transferring
Blending the University Research
and Entrepreneurial Cultures
Academic perspective;
“Why partner with industry?”
► Application
► Exposure
to industry collaboration
► Additional
► Build
of research for public good
source of research funds
research endowment
► Reward
investigator/inventor
Blending the University Research and
Entrepreneurial Cultures
Industry perspective;
“Why partner with universities?”
► Research
institutions are rich source of
new ideas and technology
► Cheaper
to support research and to
license-in technology
► Biotech
industry looks to academic
collaborations for early stage technology
Blending the University Research and
Entrepreneurial Cultures
How do you begin to bring the two
cultures together ?
1. Employment Policy
2. Policy of Intellectual Property
3. Revenue Sharing
4. Faculty Involvement
Employment Policy
► Employer
(University/College/Research
Institute) owns all property rights to any
intellectual property conceived and/or
reduced to practice by its employees
► Assignment
► Salary,
form part of orientation
supplies, space, other resources of
the University are utilized
Policy on Intellectual Property
► Ownership
► Transfer
of ownership
► Rights and obligations of faculty
(employee)
► Rights and obligations of the
University (employer)
► Royalty sharing
► Waivers
The Bayh-Dole Act
Public Law 96-517
Patent and Trademark Act of 1980
►
►
Allow small business and non-profit organizations to retain
title to innovations made under federally-funded research
programs
Promote investment by the private sector in
commercialization of federally funded research discoveries
for the public good
In Passing Bayh Dole,
Congress recognizes…
►
►
►
►
Creativity is truly a national resource
The patent system in U.S. is the vehicle which
permits delivery of the resource to the public
It is in the public interest to place stewardship of
research results in the hands of universities and
small business
Existing U.S. policy was ineffective at a time when
intellectual property and innovation were becoming
the preferred global currency
Source: Howard Bremer, University Technology Transfer Evolution and Revolution, COGR, 1999.
Bayh-Dole Provisions
► Encourage
collaboration with industry to promote
the utilization of inventions
► Disclosure to government within 2 months of
invention
► Universities must file patents on inventions they
elect to own, and share any monies with inventors
► Government retains non-exclusive license and
march-in rights
► Requirement to attempt to develop the invention
► Preference to small businesses in granting licenses
► Products must be manufactured in the U.S.
Bayh-Dole Act 1980
►
►
►
Allows universities to own and sell/license
inventions/novations generated with federal dollars.
Motivation:
 Get ideas off the shelf w/o sacrificing university
mission (synergies)
 Generate university income for more research
Critique:
 Increased commercialization of university research
agenda
 Distraction from basic research (tradeoffs)
 Hold-ups/Anti-Commons approach to research
Bayh - Dole Act 1980
►Gives
nonprofit organizations and
small businesses the right to:
 retain title to inventions made in
whole or in part with federal funds
 grant exclusive term-of-patent
licenses
The Technology Transfer Process
7-12 YEARS
SCIENCE
&
TECH
MARKETING
Technology
Feasibility
Idea
Prototype/
Scale-up
INVENTION
Market
R&D
Pro-forma
Business Plan
FEASIBILITY
Product
Development
Initial
Manufacture
COMMERCIALIZATION
TRANSLATION
Applications
Marketing
Strategy
Business
Plan
MARKET
CAPTURE
MARKET & BUSINESS PLANNING
IPO
FINANCING
Tech Tfr
Funds Seed Capital
Expansion Capital
RETURNS
One University
[Thanks to Jeff Skinner, UCL]
Executive
(policies)
Gene pool
Commercially
active scientists
Other
academics
Tech
transfer
office
Why Do Universities Transfer
Technology
► Generate
licensing revenue and research funding
► Dissemination of new knowledge for the benefit of
society
► Development of University technology into products
► Provide avenue for faculty members to interact
with business
► Stimulate economic development
► Generate favorable publicity for the University
Patents as source of research
funding
► 25%
of life scientists have a patent
 Median patent holder owns 2 patents
► Patents
as the “academic’s lottery ticket”
 33% of patent holders receive licensing revenues,
representing 8% of all life scientists.
 Average royalties ~$16,500 per patent
 But in our sample:
► One
patent accounts for ~90% of those royalties
► Of 1200 patents there are only three that make ~$1million or
more.
► Median annual royalty income is $5,000
► License revenues account for less than 1% of research budgets
for those with patents
Is there a commercialization of
US university life sciences?
►
53% of life scientists in our survey have no
engagement with industry
 No patents, invention disclosures, industry
funding, service on industry boards,
collaborations, etc.
►
20% of life scientists report private industry
funding, accounting for 25% of research budgets
 They still get 54% from federal sources
►
Overall in the life sciences, 67% of all research
funding comes from federal sources, 15% from own
university sources, 10% from private foundations,
and only 5% from private industry.
Percent of lab funding from
different funding sources
Source
66.9
Scientists who
do 100% basic
research
71.2*
Own university
14.6
15.7
Foundations
9.5
9.7
Industry
State government
5.3
2.4
0.8*
0.9*
Federal
All life
scientists
(NIH, NSF, etc.)
* Significantly different at a 95% confidence level
Evidence on hold-up problems:
Percent of life scientists reporting constraints
Not
applicable
None or
minor
constraint
Some or
major
constraint
Affordability of licensing
intellectual property
61.5
33.6
4.9
Materials transfer
agreements from another
university
49.1
39.1
11.8
Materials transfer
agreements from private
industry
56.2
33.4
10.4
Funding Basic Research
Very difficult to fund without federal money
Patents unlikely to provide much help because
►
►



“lottery” – unpredictable returns
timing of liquidity (can’t borrow against expected licensing
earnings).
reinforced by basic nature of research that are less likely to
generate valuable patents.
Industry funding small and unlikely to ever be much
more than that (time horizon)
►


Good news that stem cells won’t likely be the Trojan horse
that brings commercialization into the university
Bad news that industry won’t fund enough of this research to
make up for federal funding
Overview of the Technology
Commercialization Pathway
Research
IP
Protection
Invention
Disclosure
TTC
Evaluation
Licensing
Strategy
Invention Evaluation Process
Invention
Invention
Disclosure
Electronic
Submission
Technology
Transfer
Committee
Technical
Review
Patent Search
Market Analysis
Technology
Transfer
Committee
Patent
Technology
Release to
Inventor
Hold for
Further
Evaluation
Test
Market
Invention Evaluation Process
► Is
it protectable?
 Patent, copyright, know how
► Is
it enforceable?
 Infringement
► Is
it licensable?
 The primary reason for investing in intellectual
property protection is the ability to license the
invention.
Evaluation Criteria
► Level
of IP Protection
► Related Industry R&D Activity
► Inventor Reputation and Participation
► Inventor R&D Activity
► Promised Benefits and Novelty
► Market Size
► Competing Products
► Development Status and Time to Market
► Validation and Performance
Overview of the Technology
Commercialization Pathway
Research
IP
Protection
Invention
Disclosure
TTC
Evaluation
Licensing
Strategy
Licensing Strategy
Intellectual
Property
Option
Agreement
License
Agreement
Start-Up
Company
Balancing Public Good vs. Practical concerns in IP Licensing


Internal tensions: $ vs. altruism
Non-exclusive or exclusive?
(widespread access vs. investment incentive)


Exclusive: requires incentives/disincentives







Exclusive variations





Significant upfront fees
Effective royalties
Appropriate minimums **
Patents costs
Diligence milestones
Legal and responsible use
Field of use
Sublicense incentives
Return of rights
consortia
Non-exclusive with “sliding scales” of terms
Licensing Strategy
► Option
Agreement
 Early stage technology that requires further
development
 Proof of principle – add value or reduce risk
 Reach some minimal level of progress to be of
interest to investors
 Does not give rights to develop or sell products
 Exclusive or non-exclusive
 Convertible to license agreement on agreed
terms
Licensing Strategy
► License
Agreement – Existing Company
 Technology likely to lead to a single product
 Small number of large firms that dominate the
field
►Exclusive
or non-exclusive
 Capital requirements to enter the industry
prevent startups from being competitive
 Existing company may be able to get the
technology to market faster
Licensing Strategy
► Start-Up
Company Formation
 Platform or disruptive technology with broad patent
protection
 Ability to generate interest from investors
► Market
size sufficient
► Gross margins attractive
 Viable business model
 Begins with an option agreement conditioned upon
milestones
► Investment
► Management
team
Technology Marketing
► Inventors
are the single most important step
in marketing
 70% of licensing leads come from the inventor
► Identify
companies in technology area
► Network at scientific and industry
conferences
► Respond in a timely manner
► Have a plan for next steps in research
► Forward all licensing interest to the OTM
Technology Marketing
►OTM
Marketing Efforts
 Technologies available for licensing are on
the OTM web site
 Focused business development
relationships in specific technology areas
 Relationships with local and national
venture capital groups
 Industry conferences
Overview of the Technology
Commercialization Pathway
Research
IP
Protection
Invention
Disclosure
TTC
Evaluation
Licensing
Strategy
Licensing Process
► Identification
of interest
► Confidentiality agreement for scientific and
IP due diligence
► Discussion of license type
 Option versus license agreement
 Exclusive versus non-exclusive
► Negotiation
terms
of financial, business, and legal
License Agreement terms
► License




Exclusive or non-exclusive
Field of use
Territory
License term
► License




grant
Consideration
Upfront fee
Maintenance fees / Minimum annual royalty
Royalties
Other – Milestones, equity
University Approach to StartUp Company Formation
PLATFORM
TECHNOLOGY
LEAD
MANAGEMENT
CORPORATE PARTNER/
SOPHISTICATED VC
SEED
FUNDING
Faculty Involvement with
Start-Up Companies
► Permitted





activities
Holding of equity
Sponsored research from company
Consulting relationship
Scientific Advisory Board
Entrepreneurial leave
► Prohibited
activities
 Holding of greater than 20% equity
 Serving as PI for sponsored animal research or clinical
study
 Holding Board of Directors seat
 Holding management position in licensing company
Faculty start‐ups: “Best Practices”
►
►
►
►
►
►
►
►
►
►
►
►
►
►
►
►
Faculty must
• Separate their on‐going University research from company work
• Understand that their primary commitment is to the University
– Only advisory/consulting roles with the company
– Limit consulting for the company to 13 days a quarter, per University
policy
• Take a leave of absence if engaging in a management role
Faculty must not
• Negotiate with the University on behalf of the company
• Receive gifts or sponsored research from the company
• Involve University staff in activities at the company
• Involve company personnel in Stanford research
• Involve current students in company activities
• Involve junior faculty who are in a dependent role in company
activities
• Use University facilities for company purposes
• Undertake human subjects research or supervise faculty who are
human
subjects protocol directors for work related to the company’s interests
Background/Context
►
Faculty Consulting
 Rationale – having faculty engaged with the corporate community
may provide important opportunities to advance science and research
and quality of medicine and patient care BUT there are issues and
problems that must be addressed.
 Responsibilities
►
Faculty Member’s responsibilities
 Understand University policies relating to conflict of interest,
intellectual property, time allowed for consulting, etc.
 Understand what you’re signing !
University’s responsibilities
► Disclosure obligation
►
►
What’s the norm for consulting in Industry?
Issues – The Consulting Plus
Dilemma
►Conflicts
of Interest and conflicts
of commitment –
 Consulting + sponsored research
 Consulting + equity ownership
 Consulting + management position
 Consulting + clinical trial (human
subjects)
 Use newspaper test
Issues
► Intellectual
Property:
Company’s general rule: The company
owns any intellectual property created by the consultant that relates to
the research he/she does for the company”
► How does this impact the Consultant’s research with the University:
 Scope of work – length of time (e.g. broad vs. narrow
scope, one-day speakers’ board versus two year
consulting relationship)
 IP ownership – (remember: disclosure to UR). If
Company owns it, you lose the right to use it in your
research
 Potential to compromise future research work or
funding
 Terms suggested by industry are getting broader and
broader
Issues
►Confidentiality and Publication Rights
 Is it clear what information is considered to be
confidential?
 Freedom to publish
►Indemnification and Limitation of Liability
 General comments on liability
 Consultant indemnifying Company
 Company indemnifying Consultant
 Try to limit your liability for the work you perform
Issues
► Exclusivity
 Does the contract provide that you can’t do
“overlapping” or “related” research for others?
Other language purporting to restrict you or
the University?
► Use
of University resources in the
consulting arrangement (includes space,
equipment, students, etc.)
► Tax Issues related to receipt of consulting
income
TECHNOLOGY TRANSFER,
INTELLECTUAL PROPERTY AND
EFFECTIVE UNIVERSITY-INDUSTRY
PARTNERSHIPS: The Experience of
China, India, Japan, Philippines,
the Republicof Korea, Singapore
and Thailand
► http://www.wipo.int/freepublications/en/int
property/928/wipo_pub_928.pdf