Everything You Wanted to Know
About Technology Transfer
(and then some)
Catherine Innes
Scott Forrest
UNC Office of Technology Development
Office of Technology Development
OTD’s Goal
OTD’s goal is to find the development path giving the best chance
of product(s) based on the technology getting to the market
University-based technology is always interesting, but does no good
unless it is successfully commercialized (products on the
market!)
Discovery of technology is just a first step, development is often
more costly, more risky and more involved than discovery—thus
choosing the proper development route is extremely important
Office of Technology Development
What?
Authorized managers of UNC’s intellectual property (IP)
“Cradle-to-grave” project management
Process disclosures made by UNC faculty
Decision -- file Intellectual Property?
Goal:
Bring UNC
technology to
market
Decision -- Collaborate? License? Startup?
• Negotiate the license
• B-plan, Fundraising, management searching
• Brokering interactions with potential partners
(pharma, service-for-equity, investors)
Office of Technology Development
Making Patent Decisions
• Inventions selected for investment have:
–
–
–
–
Solid technical merit
No unmanageable obligations to others
Strong patent protection available
Good prospects of a commercial market and business
opportunity
Office of Technology Development
Reasons Not to Patent
• Idea is not an invention
– Doesn’t qualify as eligible subject matter
– Publication created bar to patenting
• Idea is not fully developed
– Enablement issues
– Patent issuance unlikely
• Patent position is not commercially useful
– Narrow coverage
– Dominated by other patents
Office of Technology Development
Reasons Not to Patent
• No viable commercial market
– No promising application
– Small market for products
• No interested commercial investors
– Return on investment not sufficient
– Difficulties in making products
• UNC does not fully own the work
– Inventors haven’t assigned rights
– Commercial co-owner doesn’t want license
Office of Technology Development
Strategic Technology Transfer
• Commercialization Readiness Assessment
– Within 60 days of receipt of an ROI, OTD Project
Managers evaluate the following:
• Stage of development of the technology
• Strength of available patent protection or ability to
consolidate of copyrights
• Commercial opportunity
• Encumbrances
Office of Technology Development
Technology Licensing Basics
Licensing is the primary vehicle for commercializing
University-based technology
To understand licensing, we must understand:
•What a license accomplishes
•The role of a license’s different components
•How the nature of our partner (startup, big public
company) dictates some aspects of licensing
Office of Technology Development
What does a license accomplish?
A patent:
Allows holder to exclude others from making, using,
selling, importing/exporting the invention. Protects a
product/process.
A Copyright:
Allows holder to make/copy, distribute, display,
perform, import/export the work. Protects the tangible
expression of an idea.
A license:
Exempts our partner—the “licensee”—from the right
to exclude under a patent or permits them to
make/copy, etc. under a copyright (can be called
“covenant not to sue”).
Office of Technology Development
How do we end up at a license?
Marketing to
companies
Idea from
UNC inventor
Patent
protection
Negotiate major
deal terms
Company infringing
Office of Technology Development
License structure: Summary
Preamble/Definitions: Framework
Grant: What we’re allowing licensee to do
Compensation: What we get for allowing them to do it
Diligence: Mechanism for ensuring they work hard
IP: Who controls the process
Legal: What happens if things go awry
Office of Technology Development
Differences in licenses:
Licensing to an established company
Grant: Scope = Exclusive
Field = Generally limited
Territory = Varies
Ability to sublicense? = Yes
Compensation: Upfront = Cash (much discussion)
Milestone payments = spread out
Running royalty = Varies
% of sublicensing = Fixed
Diligence: Mix of early and later-stage diligence milestones
Office of Technology Development
Differences in licenses:
Licensing to a startup company
Grant: Scope = Exclusive
Field = Varies
Territory = Worldwide
Ability to sublicense? = Yes
Compensation: Upfront = Equity
Milestone payments = Back-loaded
Running royalty = Varies
% of sublicensing = Tiered
Diligence: Heavy! May include fundraising milestones as well
as early product development
Office of Technology Development
Differences in licenses:
Licensing non-exclusively
Grant: Scope = Non-exclusive
Field = Limited
Territory = Varies
Ability to sublicense? = No
Compensation: Upfront = Cash (less than exclusive)
Milestone payments = Varies (sometimes none)
Running royalty = Varies (sometimes none)
% of sublicensing = n/a
Diligence: Light. Sometimes non-existent, since rights are not
being “tied up.”
Office of Technology Development
Differences in licenses:
Licensing tangible property (ie. mouse lines)
Grant: Scope = Non-exclusive
Field = Limited (frequently to internal R&D)
Territory = Worldwide
Ability to sublicense? = No
Compensation: Upfront = Cash
Milestone payments = n/a
Running royalty = Varies (frequently none)
% of sublicensing = n/a
Diligence: None typically required.
Office of Technology Development
Start a Company…
…or Partner with an Existing one?
This is a choice that has to be made for commercially
attractive technologies
We will discuss:
•Requirements/demands of each development route
•Factors considered when deciding on a route
Office of Technology Development
Academia and startup companies
•Many large life science companies struggle to develop new
commercial products; fill the gap by purchasing/partnering products
developed by smaller players
•Passage of Bayh-Dole act in 1980 allowed academic institutions to
patent their inventions; a source of innovation for small companies
•Resultant environment supported new companies, rewarded the
investors that financed them and encouraged academics to think
about how to translate their research
•About 2/3 of life science-based startups originate from academia
Office of Technology Development
Start a Company…
…or Partner with an Existing one?
Before we begin to consider what technology lends
itself to each route, we must first understand what
each route entails.
Office of Technology Development
Starting a Company vs. Partnering:
Time Commitment
Starting a company requires lots of extra time
and effort from both Inventor(s) and OTD
(part of our job).
•Business must be incorporated and issue
shares, find a suitable business model and
craft a business plan, recruit management
and/or board members, raise money.
•Inventor will drive project development in a
startup company
•Investors will be betting on Jockey as well
as horse
Office of Technology Development
Starting a Company vs. Partnering:
Near-Term Financial Return
Starting a company requires both OTD
and inventor to sacrifice short-term
license fees (usually OK with OTD)
•All $ invested in a startup is spent on
essential costs (IP, development)
•No/low cash reserves
Office of Technology Development
Start a Company…
…or Partner with an Existing one?
Now that expectations are set, we can evaluate which
development route is more appropriate
Office of Technology Development
A startup is a good choice when…
…the technology base is broad
Multiple product opportunities!
-A must for investors
-More shots on goal = better chance of
getting a product onto the market
Examples:
-Novel drug vs. Novel drug + methods of
finding more (new assays, etc)
-Polymer chemistry with a wide range of
applications
Office of Technology Development
A startup is a good choice when…
…the technology is “disruptive”
Cutting edge: Sometimes established companies are slower to
accept—reduces chances that companies will put adequate
resources into the technology and increases development time.
Result = decreased chance of product reaching the market
Contrarian: Acceptance also difficult. Often times, this
type of technology is a new approach to an old problem
that companies have given up on.
Office of Technology Development
A startup is a good choice when…
…lots of “know-how” is involved
“Know-how” is generally unpublished, unpatented technical
information that conveys a significant advantage (research
technique, manufacturing process)
Know-how is more difficult to transfer to an established
company and evolves rapidly
If there is substantial value in the Know-how (cannot be
easily engineered), a startup may make more sense
Office of Technology Development
A startup is a good choice when…
Example: Vascular Pharmaceuticals
Recent UNC startup (Endocrinology) with a focus on
treatments for the vascular complications of diabetes
• Broad technology base—have a lead therapy, two
novel screens for finding more and a broad base of IP
• Disruptive technology—initial focus is a “discarded”
pharma target
• Valuable Know-how—trade secret toxicity assays to
differentiate Vascular’s approach from competition
Office of Technology Development
Partnering a good choice when…
…one has an improvement on existing technology
• Value of UNC technology is enhanced by existing technology
• Capitalizes on company Know-how, established
manufacturing, distribution, R&D infrastructure.
Result = increased chance of product reaching the market
• Often, UNC technology will be “dominated” by existing IP.
Then, partnering isn’t the better choice, it’s the only choice.
Office of Technology Development
Partnering is a good choice when…
…a company is well-positioned to develop the technology
• Complimentary R&D efforts
• Established expertise in area
• Large amounts of early R&D required in an area that
investors shy away from
--development financed via product sales/cash on
hand vs. via money raised from investors expecting a
fixed return amount/timeline
Office of Technology Development
Partnering is a good choice when…
Example: immuoproteasome inhibitors
Novel class of drugs discovered by Lineberger research
group
• An improvement—more specific versions of existing
drugs
• Company was well-positioned—Development partner
performed chemistry that enhanced the drugs, had
established means for assaying them and Know-how
related to approaches that have failed
Office of Technology Development
Summary:
Goal = find commercialization route most likely to
result in products on the market
•
•
•
•
Startup:
Broad IP
Disruptive
UNC Know-how
Partner:
Narrow/dominated IP
Improvement
Company well-positioned
• Lots of time/effort
• Low initial $ return
Less effort
Typically some $ upfront
Office of Technology Development
What do I get out of it?
• Universities are required to share at least 15% of
income with inventors
• UNC policy mandates 40% of the income is
shared with the inventor (among highest in the
country)
-- 40% to inventor’s department, 20% to OTD
Office of Technology Development
Licensing expectations: University as Licensor
Need to understand motivations of the TTO:
•Bayh-Dole requirements
•University priorities
•Time constraints
•Realities of investment climate
•Return on investment
Office of Technology Development
Licensing expectations: University as Licensor
Bayh-Dole act requirements
Bayh-Dole act (1980) allowed institutions to patent
discoveries made with federal $--but caveats
attached to licensing those patents:
1.
2.
3.
4.
5.
6.
Preference for US companies; small business over
large
No assignment of rights (license instead)
Grant non-exclusive rights to US Gov’t
US manufacturing requirements (flexible)
Distribution of $ to inventors (UNC 40%)
Actively promote commercialization of inventions
(diligence, non-exclusivity)
Office of Technology Development
Licensing expectations: University as Licensor
University priorities
Many schools seek to use technology licensing,
in part, as a tool to:
•Retain best faculty
•Increase research sponsorship
•Promote regional economic development
•Generate publicity (smaller schools)
•Benefit society
Office of Technology Development
Licensing expectations: University as Licensor
Time constraints
•Many TTOs are very busy (OTD has):
-200+ cases per Project Manager
-4 “interference” proceedings with USPTO
-10 to 20 ongoing negotiations at a time
•Result:
-Most of us can size up a potential license deal
quickly (have your s**t together)
-Most of us would rather close on a reasonable
deal that is less that what we were after then
haggle forever
Office of Technology Development
Licensing expectations: University as Licensor
Reality of Investment Community
•Most larger TTOs will have reasonable idea of
what terms will be acceptable / unacceptable to
institutional investors
•Deals too slanted to the TTO (inexperienced
company negotiator) will have to be renegotiated later (time constraints!) or will
prevent investment and company viability
•Deals too slanted away from the TTO leaves us
without “skin in the game,” which can worry
investors (not always…)
Office of Technology Development
Managing conflicts of interest
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1.
2.
3.
4.
Conflicts of interest refer to outside
activities that may:
Interfere with an employee’s duty to
carry out primary UNC duties
Involve inappropriate use of UNC
resources
Misuse the name of UNC
Claim UNC responsibility for
conduct/outcome of such activities
*All of the above are not permitted*
Office of Technology Development
Conflicts of interest - Permitted activities
If managed properly, UNC faculty may, with appropriate oversight:
1.
2.
3.
Accept sponsored research $ from a company in which they
have equity
Serve as an officer in a company in which they have equity
and which is based on UNC technology
Consult for a company in which they have equity
*Many institutions prohibit these activities (eg. Stanford)*
Office of Technology Development