Development and Commercialization of U.S. University Research Robert Pozner, Ph.D. Beamish Development [email protected] At TUC: contact through Prof. A.

Development and Commercialization of

U.S. University Research

Robert Pozner, Ph.D.Beamish Development

[email protected]

At TUC: contact through Prof. A. Dollas (37228)

13 October 2010

© R. Pozner, 2010

U.S. Government Funding of University Research (2009) NIH research support at U.S. universities,

medical schools, research institutions, independent hospitals and non-profits: $21.48B; 50,033 awards Additional $4.82B in funding for 12,786

awards through American Recovery and Reinvestment Act of 2009http://report.nih.gov/award/organizations.cfm?ot=&fy=2009&state=US&ic=&fm=&orgid=

NSF U.S. university research support $5.67B; 21,512 awards

http://dellweb.bfa.nsf.gov/AwdLst2/default.asp

Total funding: $31.97B Total awards: 84,331

U.S. University T2 data (2008) 648 new commercial products

introduced 5,039 total license and options executed 595 new companies formed about 72 percent of new companies

formed with the primary place of business in the institution’s home state

3,381 startup companies still operating as of the end of FY2008

$51.47 billion total sponsored research expenditures (U.S Government plus other sources)Source: Association of University Technology Managers (AUTM) Survey (2008)

Why is Development and Commercialization Relevant?

University objectives Create and disseminate knowledge Contribute to improving quality of life and

economic growth Development and commercialization can

support mission for some research outcomes (5-10%) Alternate distribution channel for knowledge

created Other channels include: teaching, publications, open

source, Creative Commons (http:/creativecommons.org)

When Does This Make Sense?

Knowledge has commercial (financial) potential

Potential for intellectual property (IP) protection

Significant investment required to develop and bring to market (for public benefit) Software - exception

Opportunity to attract research funding

Stakeholders

Inventors University (owns IP) Corporate partners and

investors Government

As funding source As driver for economic

development Social benefit

What are the incentives?1. Inventors

Professors $ Fame & fortune Opportunity to move early research

forward Entrepreneurial interest COI

Students Jobs $ Entrepreneurial interest

What are the motivations?2. University

Distribute knowledge Social benefit (improve quality of life) New source of research funds (incl.

overhead) Economic development – new company

formation (local), job creation Attract and retain faculty Generate discretionary income if

successful commercialization (<10%) Recognition/reputation

What are the incentives?3. Companies and investors

Companies and investors Increase revenue and profits

Access to new technologies Strengthen existing market positions Develop new market opportunities Lower production costs

Limit competition Reduced development risk, cost

Specialized equipment, facilities Relationships with university, professors

New breed of “Social Investors” Green Tech

What are the incentives?4. Government

Value for taxpayer investment in basic research at universities New technologies for improving

quality of life Economic development

Job creation Taxes – corporate, individual Reduce unemployment burden

Infrastructure Supporting University Technology Transfer (1)

Holistic – all pieces in place … now Legal

Bayh-Dole Act (1980) Non-profit research organizations and small

businesses own IP created under U.S. Government funding

Must make effort to commercialize Inventors share in any income from commercialization U.S. Government rights

Infrastructure Supporting University Technology

Transfer (2) University attitudes, policies and resources Own (almost) all inventions (undergraduate

… except …) Investment in IP and reduction to practice Acceptable activity – with research and

teaching Consistent with institutional objective:

creation and dissemination of knowledge COI

Publication Use of University facilities and resources, incl.

students

Infrastructure Supporting University Technology

Transfer (3) Investment All stages

Pre-seed/proof-of-concept, seed (“Valley of Death”), angel, VC

Business expertise and experience Entrepreneurs IP management and business development

Trained workers “Knowledge Economy” - Product development,

production, business, legal Mentoring, networking

IP not owned by Universities Contractually obligated

Facilities use agreement, Consulting agreements, MTA

Made on own time without (significant) use of University resources or funding

Undergraduates Mosaic Netscape

Marc Andressen – Univ. of Illinois National Center for Supercomputing Applications

Browser graphical interface, inclusion of images, hyperlinks

PC and Mac versions (vs. UNIX)

Policies, plans and procedures (1) Ownership

You can’t transfer what you don’t own Disclosure forms

Inventors Funding Invention description and applications Prior art

Invention reporting to sponsors COI

Policies, plans and procedures (2) Triage

Informed decisions for investment (IP, T2 resources)

Inventor relationships INVEST OR RELEASE

Attorney selection Technical expertise Billing rate/cost management

Project management Income distribution

Development and commercialization

pathways Public domain publications, open source, Creative

Commons, GNU GPL Sponsored research agreement/option

Single company Multiple companies (research centers)

License to existing company Start-up

IP transferred through license agreement

What constitutes “success”? Research results and ideas generated by

university technical staff are nascent Science vs. technology Very high risks

Technology Financial Market

Often stepped development and investment Driven by market opportunity, technology

and business development requirements, resource requirements and availability

Successful outcomes for Universities and inventors

No interest from “market” (potential licensees and/or investors) Feedback Does not reduce scientific value or legitimacy May provide direction for future research Increase understanding of what is commercially

interesting

Interest SRA/option/consulting License to existing company (with/without SRA) Form new company

What makes a good partnership

(win-win transactions) Parties get their needs met Critical issues identified “Satisfice” rather than

maximize multiple objectives

Communication Before the deal During negotiations After the deal is done

Good faith

License Agreements License vs. assignment “In the Public Interest: Nine Points to Consider in

Licensing University Technology” (2007) 1. Universities should reserve the right to practice licensed

inventions and to allow other non-profit and governmental organizations to do so

2. Exclusive licenses should be structured in a manner that encourages technology development and use

4. Universities should anticipate and help to manage technology transfer related conflicts of interest

9. Consider including provisions that address unmet needs, such as those of neglected patient populations or geographic areas, giving particular attention to improved therapeutics, diagnostics and agricultural technologies for the developing world

Success stories Better World Project (2006 -2009+)

http://www.betterworldproject.org/reports.cfm University of Florida: Gatorade

Know-how license (no patents) to existing company Wake Forest University: vacuum assisted wound

closure Patent portfolio – license to existing company

UNC Chapel Hill: gene therapy vectors Patent portfolio – Asklepios BioPharmaceutical (start-up

company, non-traditional funding ) NC State University: SiC/GaN devices and

process technology Patent portfolio – Cree Research (start-up company)

Gatorade®

University of Florida (“Gators”) Sports Physiology Football players suffering heat-related injuries and problems Fluids and electrolytes the lost through sweat , and carbohydrates used

for energy were not being replaced Scientifically formulated a new, precisely balanced carbohydrate-

electrolyte beverage – Gatorade®

Players were better able to deal with heat during practice and games; started winning more games

Inventors deal with Stokley-Van Kamp – eventually acquired by Pepsico

Ownership dispute – lawsuit University gets 20% of sales - $100MM from 1972 until 2004 U.S. Government required publication of formula to foster competition

Gatorade® is currently available in 80 countries; more than 30 flavors available in the U.S.; more than 50 flavors available internationally.

Vacuum Assisted Closure (VAC) of wounds

Wake Forest University School of Medicine Negative pressure and sealed bandage

Wounds heal 50% faster Licensed to Kinetic Concepts, Inc. (KCI) in 1993 Commercial launch of VAC Therapy System in 2005 2008 market size: ~$4.5B; KCI 9month revenue:

$1.4B Wake Forest received between $70MM and

$90MM in royalties 5 patent infringement lawsuits, validity challenges

in U.S. Germany

Gene therapy vectors Correction of single gene defect (mutation) Delivery of payload without disruption of cell membrane Viral vectors Some genes too large to insert in viruses UNC Gene Therapy Center developed hybrid

(“chimeric”) viruses capable of carrying larger payloads Asklepios BioPharmaceutical spun out of university

~2004 Targeted Duchenne Muscular Dystrophy – mutation of gene on X chromosome

(males) Symptoms (due to death of muscle fibers) < age 5 Average life expectancy: late teens to mid twenties Treatment consists of managing symptoms

Funded by MDA (non-profit organization) Currently in clinical trials Facilities use agreement with UNC

Wide bandgap semiconductors

Formed in 1987 as Cree Research by grad students from the laboratory of Dr. Robert Davis at NCSU

Wide bandgap semiconductor materials (SiC), processes and structures

Application in semiconductor devices for high RF, high temp, high voltage applications

U.S. Government funded research IP owned by NCSU

Cree, Inc. IP and Technology Transfer Patent applications

Owned and filed by NCSU Cost reimbursed by Cree under license

agreement License agreement

Exclusive rights – worldwide, all fields of use Right to sublicense

Equity (shares of company) Royalties on sales of products Other U&C terms, including development

and commercialization milestones

Cree, The Early Years F&F seed funding Develop process technology to produce 3”

boules of defect-free SiC Sold wafers for research to universities and

corporate research labs R&D to increase boule diameter (economics)

and develop devices for U.S. Government customers (funded by U.S. Government) Reduced risk for private investment

Raise first round of funding

Cree sees the light LEDs

SiC as substrate for GaN LEDs Low energy consumption, long life Tailor color of emitted light by doping and

epitaxial coatings Displays (cellphones, arenas)

Blue, green ***Consumer and commercial lighting***

White! Approximately 2% of worldwide lighting

market now LED

Cree todaywww.cree.com

FY 2010 revenue: $867.3MM US (+53% year-to-year)

FY 2010 net income: $152MM (+402%) 4Q 2010 revenue: $264MM (+79%)

LED products: $240MM RF products: $24MM

4Q 2010 net income: $52.8MM (+445%) Market capitalization: $5.7B Operations in USA (NC and CA), China, Hong

Kong Total employees worldwide: 4,300

Source: Cree 2010 Annual Report