Technology Licensing
at
Stanford University
Overview
• Background and Policies
• OTL Facts and Figures
• OTL Process: Invention to License
University-Industry Technology Transfer
Research results
from lab
Start-up companies and
large corporations
Mechanisms
Graduated students
Publications
Seminars, conferences, etc.
Faculty consulting
Industry sponsored research
Industrial affiliate programs
IntellectualProperty
propertyLicensing
licensing
Intellectual
New products
in marketplace
University-Government Interactions
Government
University
Bayh-Dole Act
•
•
Created uniform patent policy regarding
inventions made under federally-funded
research programs
Encouraged universities to participate in
technology transfer activities
Bayh-Dole Act (U.S. Public Law 96-517)
• University may elect to retain title to inventions developed
under federally-funded research programs
• University grants royalty-free nonexclusive license to
government
• Any company holding an exclusive license must
substantially manufacture the product in the U.S.
• In marketing of an invention, University must give
preference to small business firms (< 500 employees)
• University must share with the inventor(s) a portion of any
revenue received from licensing
(Sources: COGR Publication “The Bayh-Dole Act: A Guide to the Law and Implementing Regulations”,
37 CFR Part 401, 35 USC 200-212)
Stanford Facts for 2008
•
7 Schools
– Business, Earth Sciences, Education, Engineering,
Humanities and Sciences, Law, and Medicine
•
•
•
1,829 Faculty members
Students (6,759 undergraduate and 8,186 graduate)
Finances (FY 2007-2008)
– $3.4 billion budget
• $1.06 billion in sponsored research,
including SLAC (87% by federal government
sponsors)
• additional $132.1 million in part through
55 industrial affiliate programs
– $17.2 billion endowment
(http://www.stanford.edu/home/stanford/facts/)
Office of Technology Licensing (OTL)
Mission
To promote the transfer of Stanford technology
for society’s use and benefit
while generating unrestricted income to support research and education.
Technology Transfer Portfolio
Patents
Copyrightable Material
Software
Biological Material
Semiconductor Maskworks
Licensing: Inventions to New Products
OTL decides IP protection
for invention and
markets invention broadly
Federal & industry
research money
Stanford researcher
discovers new invention &
submits disclosure
,©
OTL licenses invention
to Company
Additional
research funding
Company makes
new products
Company pays royalties
to University
Stanford’s Intellectual Property Policy
• Patentable Technology
University takes title to all inventions created with more than
incidental use of University resources
www.stanford.edu/dept/DoR/rph/5-1.html
• Copyrighted Works
University takes title to copyrightable works created with
significant University resources
www.stanford.edu/dept/DoR/rph/5-2.html
• SU-18 Patent and Copyright Agreement
www.stanford.edu/dept/DoR/rph/su18.html
Stanford’s Royalty Distribution Policy
•
•
Cash Royalties from Issue, Minimums, Earneds
Net Royalties = Cash Royalties
minus 15% for administrative expenses
minus out-of-pocket expenses (e.g. patent costs)
1/3 of
Net Royalties to
Inventors
1/3 of
Net Royalties to
Inventors'
Department
1/3 of
Net Royalties to
Inventors'
School
OTL: Notable Stanford Inventions
1970 – OTL Established
1971 – FM Sound Synthesis ($22.9M)
1974 – Recombinant DNA ($255M)
1981 – Phycobiliproteins ($46.4M), Fiber Optic Amplifier ($40M), MINOS ($3.8M)
1982 – Amplification of Genes ($30M)
1984 – Functional Antibodies ($191M)
1986 – CHEF Electrophoresis ($2.25M)
1990-1992 – Discrete Multi-tone technologies for DSL ($29M)
1996 – Improved Hypertext Searching - GoogleTM ($337M)
2009 – the next big thing ???
OTL: Disclosure and Licensing History
1970
2008
Cumulative
Active
Disclosures
28
430
7500
~3000
Licenses*
3
107
2800
~1000
$50,000
$62.5 M
$1.2 B
2
30
Royalty Income
Staff
* Majority of disclosures are never licensed; many disclosures have one license; some disclosures have multiple licenses
OTL: The Upside
• In FY07-08, $62.5 million in
royalties
Royalty ($ millions)
60
• From 1970 through 2008,
~$1.2 billion cumulative
royalties
40
20
0
FY69-70 FY76-77 FY83-84 FY90-91 FY97-98 FY04-05
Fiscal Year
• Typically, 10 to 15 years may
elapse between initial invention
disclosure and any significant
royalties
OTL: Looking Closely at Royalties
300
•
# of Disclosures
250
In FY07-08, $62.5 million from
546 disclosures
– 33 out of 546 disclosures
generated over $100,000 each
– 3 out of 33 generated over
$1 million each
200
150
•
100
From 1970 through 2008
– 58 inventions generated
$1 million or more
– 3 out of 7500 is BIG WINNER
50
0
FY03-04
FY05-06
Fiscal Year
less than $10K
$10K - $100K
$100K - $1M
$1M - $10M
greater than $10 M
FY07-08
•
Royalties from large portfolio of
inventions
OTL: Conversion Numbers
~8 disclosures
received per week
~ 50% of disclosures are filed as patent applications
some disclosures potentially licensable as
copyright or biological materials
20 - 25% of disclosures,
including those patented,
are licensed
OTL: Revenue vs. Expenses
•
$10,000
OTL is self-supporting
– 15% of revenue > operating expenses
($ thousands)
$8,000
•
Operating budget of ~$4.8 million/year
•
Patent expenses of ~$8.1 million/year
•
OTL has given ~$43.5 million to
Research Incentive Fund
administered by Dean of Research
$6,000
$4,000
$2,000
$0
FY69-70 FY76-77 FY83-84 FY90-91 FY97-98 FY04-05
Fiscal Year
15% of Revenue
Operating Expense
OTL: Equity from Licenses
•
# of Licenses involving Equity
20
Stanford’s philosophy
– Equity is one component of a
whole financial package
– Historically, most income is
generated from earned royalties
(~$836 M vs. ~$364 M)
– Equity is liquidated soon after IPO
– We can’t hold equity if licensee
conducts clinical trials here
15
10
5
•
0
FY91-92
FY96-97
FY01-02
Fiscal Year
FY06-07
Equity from licenses
– ~171 companies cumulative
– ~90 companies currently
– Equity liquidated to date
~$364 million
Equity Cash-Out at Stanford*
• Equity distribution
Equity Cash-out ($ millions)
12
– 15% to OTL
– 1/3 of net equity to inventors
– 2/3 of net equity to
OTL Research and Fellowship Fund
10
8
6
4
• Equity liquidated to date
~$364 million
2
FY
94
-9
5
FY
96
-9
7
FY
98
-9
9
FY
00
-0
1
FY
02
-0
3
FY
04
-0
5*
FY
06
-0
7
0
Fiscal Year
*Graph does not include liquidation of GoogleTM equity in FY04-05
– Amati (Texas Instruments)
$8.0 million
– Abrizio (PMC-Sierra) $9.7 million
– Google™ $336 million
OTL: Invention to License
• Steps
– Disclosure
– Evaluation
– Licensing Strategy
• File patent?
• Market to potential licensees
– The License
– Maintaining the Relationship
• 7 “Licensing Associate & Licensing Liaison” teams
– Technical degrees and marketing focus
– Responsibility for inventions from cradle-to-grave
Evaluation
• Discuss with inventors
– Inventor provides technical
expertise
– Inventor may also provide
industry contacts
• Discuss with others at OTL
• Contact industry experts
• Typical criteria
– Invention development
status
– Inventor profile
– Intellectual property position
– Commercial potential
– Licensing potential
The Main Question
Does it have the potential
to create meaningful income for the University?
Licensing Strategy
• A license is a legal document regarding intellectual property
rights in exchange for good and valuable consideration.
IP rights
Licensor
Licensee
royalties
• Different inventions require different licensing strategies
– “ basic new scientific tool” vs. “invention requiring extensive
development”
– electronics industry vs. biotech industry
Patenting Decision
• Can we license as tangible research property
(TRP)?
• Can we license as it as copyright?
• Is it patentable and enforceable?
• Has it been publicly disclosed?
Patent Prosecution
• Licensing professional manages outside counsel
– Technology expertise
– Patent agent vs. Patent attorney
• Patent costs
– Typically $25,000 to $35,000 over life of U.S. patent
• USPTO fees
– if invention is not licensed, pay small entity fees
• Patent attorney/agent costs
– Higher patent costs for foreign coverage
• PCT application preserves foreign rights while delaying costs
• National phase entry if licensee reimburses costs
Marketing Strategy
• When do we start?
– Waiting for publication
– Waiting for data
• Individual vs. Portfolio
• Contact companies and provide information
– Shotgun vs. Rifle approach
– Sources of leads
• Steps
–
–
–
–
Create marketing content
Create list of potential licensees
Contact potential licensees
Follow-up
Types of License Agreements
• Option agreement
140
120
• Non-exclusive agreement
# of licenses
100
80
• Exclusive agreement
60
40
20
0
FY01-02
FY03-04
FY05-06
FY07-08
Fiscal Year
exclusive
nonexclusive
option
– Limited by Field of Use
– Limited Period of Time
(e.g. earlier of 8 years from
Effective Date or 5 years from
first commercial sale)
Key License Terms
• Financial terms
– License issue fee
– Annual minimum payments
– Earned royalties
• % of Net Sales
• $ per product sold
– Reimbursement of patent
costs
– Equity in start-up companies
• Non-financial terms
– Definitions
– Grant
– Development milestones &
diligence provisions
• Prototype
• First Commercial Sale
– Warranties and indemnities
– Infringement actions
– Dispute resolution
Licensing: Inventions to New Products
OTL decides IP protection
for invention and
markets invention broadly
Federal & industry
research money
Stanford researcher
discovers new invention &
submits disclosure
,©
OTL licenses invention
to Company
Additional
research funding
Company makes
new products
Company pays royalties
to University