1 University Tech Transfer Process: Invention Commercialization The 4th Annual Conference on Technology Commercialization “Technology Transfer (R&D and IP Commercialization, Policies, and Investment)” Amman, Jordan (12 Nov 2008) Michael J. Martin President, TechTransfer Associates
4th Technology Commercialization Conference Amman Martin Invention Commercialization Ver 2
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University Tech Transfer Process: Invention Commercialization
The 4th Annual Conference on TechnologyCommercialization
“Technology Transfer (R&D and IP Commercialization,Policies, and Investment)”
Amman, Jordan (12 Nov 2008)
Michael J. MartinPresident, TechTransfer Associates
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Industry/University: Bridging Two Cultures
UNIVERSITY INDUSTRY
“To Create and Disseminate Knowledge”
To Maximize the Investment of Shareholders
ORGANIZATION
RESEARCH DISCOVERY DISCLOSURE FEASILBITY
PATENT APPLICATIONS APPLIED r&D MARKET TEST
LICENSES COMMERCIAL OPERATTION.
SOLUTIONS PROBLEMS
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Why IP: Bridging Two Cultures
University Industry
“To Create and Disseminate Knowledge”
To Maximize the Investment of Shareholders
ORGANIZATION
SOLUTION PROBLEM
• Different Missions, Measure Success Differently• IP: Dissemination for University, Competitive
Advantage for Business
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Why Manage IP in Universities• Disseminate Knowledge – “Public Good”
• Outreach mission (Economic Development): From Morrill Act to Bayh Dole Act – 1980
• Retain/Attract Faculty
• “Home Run” – Additional Source of Funds
• Results– $40 billion in economic activity that supported more than 270,000 jobs – 432 Start-ups and 4955 licenses in FY 2003
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University IP Policy/Practice
COI/COC
PatentCopyright
Law
Bayh-DoleLaw
InternalRevenue
Code
StateCode SCHE
Guidelines
University Tech Transfer Policy/Practice
Research ContractNegotiations
Ownership of Intellectual
Property
Commercialization of
IntellectualProperty
University Culture
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Invention
PatentingPatent Atty
DisclosureEvaluation
Marketing
Licensing
Protect if Publication is Imm
inent
TECH TRANSFER: COMPLEX SYSTEM
Products
BusinessSpin offs
Research Investment
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Evaluation then Valuation of Intellectual Property
Manufacturing and Marketing Expertise– Potential Customer
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Bootstrapping
• Belief is that income can fund growth• Have customers identified, even orders• Seek line of credit to provide working capital• Manage accounts receivable, Use the customers
cash • Be willing and able to turn down business
Angel Investor Basics
• Accredited investor defined by Regulation D under the Securities Act of 1933 or SEC Rule 501
• Must have a net worth in excess of $1M or annual salary in excess of $200,000 the past two years
• Typically considered an expert in a particular market
Investment Profile for Angel Investors
• Technology based (as opposed to service)• Strong barriers to entry for competition• High growth prospects (multiple million dollar market or
higher)• Strong management team or entrepreneur’s track
record• Viable exit opportunity for investors (acquisition or IPO)
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THINK LIKE A VC
• Skimming the cream, not playing the margins• First dollars in will want to own 40-60% of the company• The perils of common shares and cram downs• Perspectives on “investor hierarchy”• Faculty role and grad student role in start-up• When and what is the exit scenario?• Technology is 5% of the start-up
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Example: New Nanotechnology Material
• High VC Buzz Factor• Impact all markets• Basic Science is of High
• Prepare your position/Understand theirs• Request an offer• Listen Actively… and carefully• Probe their rationale and yours• Create options/make counter offers• Confirm agreement and benefits to each side• Close firmly, amicably, and define the next step.
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Negotiation - Valuation• Cost Approach - Cost to create and develop or to replace
the assets • Market Approach - Based on comparable transactions
between unrelated parties • Income Approach - Based on the present value of the
future income streams expected from the asset• Relief from Royalty - Measured by what the owner of the
property would pay in royalties
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Valuation – Cost Approach• Cost to create and develop or to replace the assets
• No party would pay more to use than to replace the asset in an arm's-length transaction
• Historical costs or the projected cost to develop an asset of similar value at similar level
• Appropriate– Embryonic, basic technology for which market applications
cannot yet be defined. – Technology is narrow in scope and easy to replicate or
"design around
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Valuation – Market Approach • Based on comparable transactions
between unrelated parties
• Factors to consider– Nature of the assets transferred, – Industry and products involved, – Agreement terms, and other factors
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Valuation – Income Approach• Based on the present value of the future
income streams expected from the asset• Forecasting the useful life of the property
– the service life of the asset– the legal life of the asset– the economic life of the asset – the functional or technological life
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Valuation – Income ApproachRisk Assessment for the Discount Rate
– Technical Risk: Stage of Development, $, Time, Obsolescence