Technology Transfer Program

Transcription

1 UNIVERSITY OF CALIFORNIA Technology Transfer Program Annual Report Fiscal Year 2004 Office of the President Senior Vice President -- Business and Finance Office of Technology Transfer 1111Franklin Street, 5th Floor Oakland, CA

2 2004 Technology Transfer Advisory Committee The general oversight of the UC Technology Transfer Program is under the purview of the Technology Transfer Advisory Committee (TTAC). This standing committee is chaired by the Senior Vice President of Business and Finance and includes representatives from the campuses and the DOE Laboratories managed by UC. The committee meets periodically to advise the UC President on technology transfer policy and guide the direction of the overall program. Richard E. Attiyeh Alan B. Bennett Carol Berman Beth Burnside Lawrence B. Coleman Vice Chancellor - Research, UCSD Associate Vice Chancellor - Research, UCD Contracts and Grants Coordinator, DANR, UCOP Vice Chancellor - Research, UCB Vice Provost, Office of Research, UCOP Sherylle Mills Englander Director, Sponsored Projects, Office of Research, UCSB Cheryl A. Fragiadakis Warren M. Gold* MRC Greenwood Susanne L. Huttner Charles F. Louis Karena McKinley Robert C. Miller Martin Moscovits Joseph P. Mullinix Andrew Neighbour Department Head, Technology Transfer, LBNL Professor, Medicine, UCSF Provost and Senior Vice President - Academic Affairs, UCOP Associate Vice Provost - Research and Director, Industry-University Cooperative Research Program, UCOP Vice Chancellor - Research, UCR Director, Industrial Partnerships and Commercialization, LLNL Vice Chancellor - Research, UCSC Dean, Division of Mathematical, Life, and Physical Sciences, UCSB Senior Vice President - Business and Finance, UCOP Associate Vice Chancellor - Research, UCLA Christopher J. Newfield Professor, English, UCSB Alan Paau David G. Schetter Hans Schollhammer* William T. Tucker Assistant Vice Chancellor and Director, Technology Transfer and Property Services, UCSD Assistant Vice Chancellor, Research and Technology Alliances, UCI Professor, Management, UCLA Interim Executive Director, Office of Technology Transfer, UCOP A. Eugene Washington Executive Vice Chancellor - Research, UCSF *Academic Senate representatives 2

3 Table of Contents Overview The University of California technology transfer program encompasses a range of activities carried on throughout the UC system to facilitate the commercialization of promising early stage technologies developed during the course of research. Increasingly, these activities are extending beyond the traditional patenting and licensing of UC inventions to the development of a variety of relationships with businesses, industry, and government that enhance the research and education missions of UC and contribute to the economic prosperity of the State of California. Fiscal Year 2004 was another outstanding year for UC s overall technology transfer program. Both the level of programmatic activity and the level of financial performance exceeded that of prior years. The addition of 1,196 new disclosures during the year, which was a 16 percent increase over the prior year, resulted in an overall portfolio of over 6,600 active inventions at year-end. In addition, FY2004 marked the 10th consecutive year that the University of California was named the leader among the nation's universities in developing new patents (USPTO report). Furthermore, UC entered into 373 new license and related technology transfer agreements, a 13 percent increase over FY2003. Systemwide revenues for the program topped $93.2 million, also a 13 percent increase from the previous year. These revenues represent income associated with licenses to over 1,000 inventions. Another key development in FY2004 was the inauguration of the Office for Management of Intellectual Properties at UC Santa Cruz under the management of Gerald Barnett. The establishment of this Santa Cruz office shows UC s commitment toward strengthening technology transfer operations on the campuses and recognition that campus-based technology transfer operations create value for all of UC s stakeholders. This process will continue as we work together to build other independent technology transfer offices. Sincerely, William T. Tucker Interim Executive Director Research Administration and Technology Transfer 3 Technology Transfer Advisory Committee Welcome from the Interim Executive Director Consider the Facts Introduction Part 1: The Campus Portfolios Technology Transfer Activity Invention Reporting Patent Activity Licensing and Related Activity Technology Transfer Revenues Total Licensing Revenues Royalty and Fee Income Payments to Joint Holders Revenue Associated with Patent/ Legal Expenses Technology Transfer Expenses Legal and Other Direct Expenses Operating Expense Income Available for Distribution Inventor Shares Research Allocation Share General Fund Share Campus Share Part 2: The DOE Laboratory-managed Portfolios Invention Disclosure, Patenting, and Licensing Activity 18 Financial Results 19 Technology Transfer Organization at UC UC Technology Transfer on the Web 20 20

4 Consider the Facts UC leads the nation s universities in the number of inventions reported by researchers. In FY04, inventors from the nine existing campuses reported 1,196 new inventions more than three new inventions a day. (See p. 5) UC has received more patents than any other university in the world. UC has an active portfolio of approximately 6,600 inventions. From those inventions, more than 1000 generated fees and royalty income this year. (See p. 9) UC s total licensing revenue was $93.2 million in FY04. The top 25 commercialized inventions earned royalty income exceeding $62.2 million. (See p. 10) UC technology transfer activities in FY04, resulted in $19.5 million returning to the UC system for reinvestment in research and education through its General Fund and campus distributions. (See p. 14 & 15) UC researchers share in the royalty income generated through the licensing of their inventions. In FY04, a total of 1,172 inventors received a combined total of $25.3 million from UC inventions. (See p. 13 & 14) University start-ups are a significant component of technology transfer at UC. Well over 250 companies have been founded to commercialize technologies licensed from the UC campuses and UC-managed DOE laboratories. UC s impact on agriculture is recognized in California and around the world. At the end of FY04, UC had over 470 plant licenses in place worldwide. (See pp. 7 & 8) Introduction Activity and financial information in this Annual Report is divided into two parts. The UC Campus Portfolio section (pp. 3-24) presents results related to the patenting and licensing of inventions for the nine-campus system for the fiscal year ending June 30, This portfolio of inventions was managed by the Office of Technology Transfer (OTT) within the Office of the President (UCOP) and seven campus-based licensing offices. These include the Office of Technology Licensing at UC Berkeley, the Technology Transfer Services at UC Davis, the Office of Technology Alliances at UC Irvine, the Office of Intellectual Property Administration at UC Los Angeles, Technology Transfer and Intellectual Property Services at UC San Diego, the Office of Technology Management at UC San Francisco and the Office for Management of Intellectual Properties at UC Santa Cruz. The DOE Laboratory-managed Portfolio section (pp ) provides activity and financial information related to technology transfer at the three Department of Energy (DOE) Laboratories managed by the University. Information on the Laboratories is reported separately because certain aspects of technology transfer are different at the Laboratories as compared with the rest of the University. Among these differences is the reporting period, which covers the fiscal year ending September 30,

5 Part 1: The Campus Portfolios TECHNOLOGY TRANSFER ACTIVITY Invention Reporting During the twelve-month period ending June 30, 2004, a total of 1,196 inventions were disclosed by faculty and researchers at the nine UC campuses. This represents a 16% increase when compared with the 1,027 new inventions reported in FY03 (Exhibit 1). Exhibit 1 INVENTIONS REPORTED FY00 FY01 FY02 FY03 FY04 Inventions in life science disciplines including medicine and biotechnology accounted for over 70% of the new inventions, while those from the physical sciences and engineering accounted for most of the balance. Over time, the pattern of invention disclosure by broad technology area has approximated the distribution of extramurally-sponsored research at the University. The distribution of newly reported inventions by campus is shown in Exhibit 2. Exhibit 2 INVENTION DISCLOSURES BY CAMPUS* Year Ended June 30, 2004 UCSD 300 UCSF 133 UCSC 20 UCSB 81 UCR 76 UCB 124 UCD 145 UCLA 186 UCI 133 *Inventions having inventors from more than one campus are counted multiple times, once for each campus with an inventor. As of June 30, 2004, the systemwide invention portfolio was comprised of 6,618 active inventions. The size of each campus invention portfolio is indicated in the exhibit below. Exhibit 3 CAMPUS INVENTION PORTFOLIOS* Year Ended June 30, 2004 UCB UCD UCI UCLA UCR UCSB UCSC UCSD UCSF ,718 1,246 *Inventions associated with inventors from more than one campus are reported multiple times in this exhibit. 5

6 Patent Activity The University of California has received more patents than any other university in the world. A patent is a form of intellectual property protection granted by the US or a foreign government that gives the patent holder the right to exclude others from making, using, or selling the patented invention for a defined period of time, generally twenty years from the date the patent application is first filed. Both US and foreign patent rights often must be pursued for an invention in order to maximize the likelihood of successful commercialization. Exhibit 4 PATENT ACTIVITY Year Ended June 30, 2004 US Applications Filed First Filings 515 Secondary Filings 450 Total 965 First Foreign Filings* 243 US Patents Issued 270 Foreign Patents Issued 589 *An invention is counted only one time in the first foreign filings category regardless of the number of countries in which foreign patent protection is sought. Systemwide patent activity for FY04 is presented in Exhibit 4. Acquiring adequate patent coverage for all aspects of a new technology may require more than one patent filing for a given invention. Such secondary filings frequently lead to the issuance of multiple patents related to a single initial invention. The growth in the number of inventions reported throughout the UC system has resulted in an increase in both US and foreign patent filings (Exhibit 5). Several years typically elapse between the time a patent is filed and the date of issuance. Exhibit 6 shows the number of patents issued to the University in the past five years. Exhibit 5 TRENDS IN UC PATENT FILINGS U.S. First Filings U.S. Secondary Filings First Foreign Filings Exhibit 6 US PATENTS ISSUED TO UC At the end of FY04, there were 3,024 US and 2,837 foreign patents in the systemwide portfolio (Exhibit 7). The number of US patents in each campus portfolio is presented in Exhibit 8. 6

7 Exhibit 7 TOTAL UC PATENT PORTFOLIO U.S. Patents Foreign Patents Exhibit 8 CAMPUS US PATENT PORTFOLIOS* Year Ended June 30, 2004 UCB UCD UCI UCLA UCR UCSB UCSC UCSD UCSF * Patents associated with inventors from more than one campus are reported multiple times in this exhibit. Licensing and Related Activity A license agreement grants a licensee access to a University invention in exchange for the licensee s commitment to further develop and commercialize the invention. Utility licenses generally cover useful processes, machines, manufactured items, or compositions of matter protected by utility patents. Most utility patents are licensed exclusively to a single company for a defined use, although non-exclusive licensing of utility patents sometimes occurs. In contrast, plant licenses cover sexually and asexually reproduced plant varieties and are licensed non-exclusively to multiple growers and distributors worldwide. The provisions of the license define the rights and responsibilities of the two parties. In the typical license agreement, the licensee is granted access to an early stage invention that is protected by a University patent. In exchange, the licensee makes a commitment to commercialize the invention and pay the University agreedupon fees, reimbursement of patent expenses and royalty payments when products reach the marketplace. The specific terms of the agreement are determined through a complex negotiation process. Prior to the execution of a license, certain shorter-term agreements are sometimes executed. A secrecy agreement is used in conjunction with marketing and affords a potential licensee access to confidential information that assists the company in determining if it has an interest in pursuing a license for a given technology. Well over 900 secrecy agreements are entered into by the University system each year. A letter agreement generally is used to confirm a company's intent to negotiate a license and often commits a company to pay certain fees or patent costs while negotiations are underway. Option agreements are similar in scope to license agreements and protect a licensee's interest in an invention while more in-depth technical or marketing research is performed. In FY04, UC entered into 373 licenses and related technology transfer agreements. As indicated in Exhibit 9, these included 145 utility license agreements, 81 plant license agreements, 32 option agreements, and 115 letter agreements. 7

8 Exhibit 9 LICENSING ACTIVITY Year Ended June 30, 2004 Agreements Executed Letters 115 Options 32 Utility Licenses 145 Plant Licenses 81 Total Active Licenses Utility Licenses 983 Plant Licenses 473 At the close of the fiscal year, the systemwide portfolio totaled 1,456 licenses. In managing these agreements, the University must collect monies when due and monitor progress to ensure that the licensees exercise due diligence in developing inventions toward commercial application. Exhibit 10 TOTAL UTILITY LICENSES Exhibit 11 TOTAL PLANT LICENSES Exhibits 10 and 11 show the five year trend in the size of the portfolio of UC utility and plant licenses. Each year some agreements expire or are terminated. In general, the total number of active utility agreements has continued to rise due to increasing licensing activity throughout the system. In the plant area, a wide variety of fruits, vegetables and grasses were the subject of 473 agreements. Strawberry licensing continues as a strong component of the plant program and modifications in UC plant licensing practices overseas are being made in order to promote the more controlled distribution of a range of UC cultivars. Exhibit 12 shows the number of utility license agreements associated with each campus. In addition, the Davis campus has 368 plant licenses in its portfolio and Riverside has 107. Exhibit 12 TOTAL UTILITY LICENSES BY CAMPUS* Year Ended June 30, 2004 UCB UCD UCI UCLA UCR UCSB UCSC UCSD UCSF *Licenses associated with inventions that have inventors from more than one campus are reported multiple times in this exhibit. 8

9 TECHNOLOGY TRANSFER REVENUES Total Licensing Revenues Total licensing revenue, the income the University receives from its agreements with industry, was $93.2 million in FY04 (Exhibit 13). There are several components of total licensing revenue: Agreement issue fees, maintenance fees, and other milestone payments are received on specific dates or at specific points in the product development process. These payments encourage companies to diligently pursue product commercialization. Earned royalties account for the largest portion of revenues and are received once commercialized products and processes incorporate University inventions. Reimbursements, the final component of licensing revenues, represent the recovery of patent and legal expenses. Exhibit 13 TOTAL LICENSING REVENUE* (Millions) *In FY00, the University received a $200 million payment as settlement for a long-standing infringement suit involving the University's Human Growth Hormone patent. Because of the unique nature and magnitude of this settlement, monies attributable to the settlement are excluded from the year-by-year trend analyses in this and similar figures in the remainder of this report. If these settlement funds were included, FY00 total licensing revenue would be $278.7 million. Exhibit 14 shows the amount each campus contributed to FY04 total licensing revenue. Exhibit 14 TOTAL LICENSING REVENUES BY CAMPUS* Year Ended June 30, 2004 (Thousands) UCB UCD UCI UCLA UCR UCSB UCSC UCSD UCSF Other* $10,363 9,784 6,167 16,242 1,810 1, ,774 30,986 1,945 * Revenues primarily from a portfolio of 80 OTT-managed DOE Laboratory inventions, most disclosed prior to the establishment of the Laboratory-based licensing offices. Royalty and Fee Income Royalty and fee income in FY04 was $79.3 million. This income derived from 1,088 inventions. As compared with FY03, royalties and fees increased 18%, with many of the University s top inventions showing increases over the previous year. In FY04, $298,027 was realized from the sale of equity previously acquired under 9 license agreements. As a result of these transactions and the execution of 16 licenses and license amendments in FY04 that included equity as a partial consideration, at the end of the fiscal year the University held equity related to technology transfer activities in 65 companies. Income from the top five commercialized UC inventions (i.e. inventions that had reached the marketplace and were generating earned royalties) contributed $37.0 million in FY04, accounting for 46.7% of total royalty and fee income (Exhibit 15). The top twenty-five royalty-earning technologies collectively accounted for $62.2million or 78.5% of total royalties and fees. One invention, Urethane Topical Delivery Agent, appeared on the list of top-earning inventions for the first time in FY04. 9

10 UC is distinguished among universities in having a large portfolio of diversified inventions that generate substantial royalty income. It is of note, for example, that the Top-25 list remains strong even though several inventions, previously among the top five royalty generators, Process for Gene Splicing; Human Growth Hormone, and Radiographic Media have gone off patent in recent years. Exhibit 15 UC TOP-EARNING INVENTIONS* Year Ended June 30, 2004 (Thousands) INVENTION (CAMPUS, YEAR DISCLOSED) Hepatitis-B Vaccine (SF, 1979 and 1981) $18,910 Treatment-Intracranial Aneurysms (LA, 1989) 7,896 Energy Transfer Primers (BK, 1994) 3513 Interstitial Cystitis Therapy (SD, 1980) 3,469 Camarosa Strawberry (DA, 1992) 3,222 Subtotal (Top Five Inventions) $37,010 Dynamic Skin Cooling Device (IR, 1993) 2,966 Biodegradable Implant Coils (LA,1998) 2,867 Firefly Luciferase (SD, 1984) 2,756 Liposome Sizing Method (SF, 1977) 1,653 Radiographic Media (SD, 1979) 1,641 Cochlear Implants (SF, 1979) 1,460 Liposome Storage Method (DA, 1984) 1,337 Universal Oligonucleotide Spacer (BK, 1996) 1,317 Fluorescent Dyes-Calcium (BK, 1984) 1,185 Chromosome Painting (LLL, 1985) 1,129 Nicotine Patch (LA, 1984) 1,048 Feline AIDS Virus Diagnostic (DA, 1986) 985 Fluorescent Dyes-Calcium (BK, 1984) 916 Feline Leukemia Virus Diagnostic (DA, 1980) 866 Aids for Learning Disabled (SF, 1994) 751 Laser/Water Atomic Microscope (SB, 1989) 570 Diamante Strawberry (DA, 1997) 564 Novel Phosphorus Fertilizers (RV, 1990) 407 Magnetic Resonance Imaging (SF, 1976) 388 Urethane Topical Delivery Agent (IR, 1986) 383 Total Income (Top 25 Inventions) $62,199 Total Income (All Inventions) $79,265 % of Total from Top 5 Inventions 46.7% % of Total from Top 25 Inventions 78.5% *This list is limited to revenue-generating inventions that have been commercialized. Payments to Joint Holders When an invention results from collaboration between UC and non-uc researchers, multiple entities may become joint holders of the invention-related patents. In these instances, interinstitutional agreements are negotiated to establish which entity will manage the patenting and licensing of the invention and the collection and distribution of invention income; such collaborations are relatively common. In FY04, 277 of 1,196 new disclosures (23%) included non-uc inventors and 43 new interinstitutional agreements were signed. In FY04, $5.0 million was redistributed to other entities for 119 inventions covered by interinstitutional agreements. For financial reporting purposes, these monies are treated as an offset to income. The largest payment to a joint holder was $4.0 million to the University of Washington for the Hepatitis-B Vaccine. Over the past five years this invention has accounted for most of the UC payments to joint holders reflected in Exhibit

11 Exhibit 16 PAYMENTS TO JOINT HOLDERS (Millions) Revenue Associated with Patent/Legal Expenses Because inventions are highly technical, the University uses specialized outside attorneys to draft and secure patent protection both in the U.S. and abroad. Costs to secure, maintain, and protect patent rights associated with an invention are substantial. Obtaining a licensee s commitment to reimburse these costs is a high priority objective of license negotiations, and reimbursements, therefore, are considered to be part of total licensing revenue. In FY04, the University received $13.9 million in licensing revenue from patent/legal expense reimbursements (Exhibit 17). Exhibit 17 REVENUE FROM PATENT/LEGAL REIMBURSEMENT* (Millions) *For financial reporting purposes, expense reimbursements are treated as an offset to legal and other direct expenses (see section on Legal and Other Direct Expenses). 11

12 TECHNOLOGY TRANSFER EXPENSES Legal and Other Direct Expenses Legal and other direct expenses totaled $28.7 million in FY04 (Exhibit 18). Most technology transfer legal expenses are associated with patent prosecution defined as payments to outside counsel for drafting patent applications as well as other costs for securing and maintaining patent protection for University inventions. The extent of reimbursement of legal and other direct expenses is a negotiated term of a license agreement and not all agreements commit the licensee to reimburse the University for these costs. In FY04, reimbursements of legal expenses totaled $13.9 million, resulting in net legal expenses of $14.8 million (Exhibit 18). Exhibit 18 LEGAL EXPENSES (Millions) Gross legal expenses Net legal expenses Exhibit 19 provides a breakdown of FY04 net legal expenses (i.e., legal expenses after reimbursements) by category. Patent prosecution accounted for $10.1 million of the $14.8 million in net legal expenditures. A single dispute was responsible for a major portion of $3.5 million in net legal expenses for legal defense. Although such disputes are often costly, their resolution may yield substantial revenues for the University. For example, the favorable settlement of a dispute in FY03 will enable the University to receive millions of dollars of future royalties which would have been lost without legal action. Exhibit 19 NET LEGAL EXPENSES Year Ended June 30, 2004 (Millions) Interference & Infringement 8% Legal Defense 24% Patent Prosecution 68% It is anticipated that University licensing personnel will continue to be successful in negotiating reimbursement of a substantial amount of patent costs. Nonetheless, it is expected that there will continue to be significant legal expenses associated with patenting and litigation as the technology transfer program matures, as patent activities continue to accelerate, and as relationships with inventors, sponsors and licensees become increasingly complex. 12

13 Operating Expense Operating expense rose to $14.3 million in FY04. This category of expenditures covers administration of the technology transfer program at OTT and the seven campus-based licensing offices, and primarily consists of employee salaries, benefits, and expenses for equipment and supplies. In some instances, rent is included as well. Because the scope of responsibilities and operations at campus-based offices vary substantially, what is included as technology transfer operating expense is not entirely comparable from office to office. The increase in operating expense seen over the last several years (Exhibit 20) is due to the expansion of campus-based technology transfer activities and the support of a more broadly distributed approach to technology transfer administration. Exhibit 20 OPERATING EXPENSE (Millions) $15 $10 $9.7 $10.8 $12.1 $12.8 $14.3 $5 $0 FY00 FY01 FY02 FY03 FY04 INCOME AVAILABLE FOR DISTRIBUTION Income available for distribution is the income that remains after payment of all direct and indirect program expenses. It is computed as income from royalties and fees less the sum of payments to joint holders, net legal and direct expenses, and program operating expenses. This income is distributed to inventors through inventor shares and to the University through the research allocation, general fund share and campus share. In FY04, income available for distribution totaled $45.1 million. The amount of program income available for distribution over the past five years is shown in Exhibit 21. Exhibit 21 INCOME AVAILABLE FOR DISTRIBUTION (Millions) Inventor Shares The University Patent Policy grants inventors the right to receive a portion of net income accruing to individual inventions. In FY04, 1,172 inventors received a total of $25.3 million based on invention financial activity through June Under current policy, inventors receive 35% of net invention income. Inventor shares are calculated based on invention income and expense activity through the close of the prior fiscal year. Thus, inventor shares distributed in FY04 were calculated based on invention financial activity through June 30, Trends related to the number of inventors paid shares and the amount of inventor share payments are reflected in Exhibit

14 Exhibit 22 INVENTOR SHARES* (Millions) Inventors ,129 1,196 1,172 Paid: * In order to facilitate trend analysis, this figure excludes an extraordinary one-time $73.8 million inventor share payment distributed in FY00 as a result of a $200 million legal settlement (see Exhibit 13, p. 8). Research Allocation Share The current Patent Policy requires that 15% of net royalty and fee income from each invention be designated for research-related purposes on the inventor s campus or Laboratory. These monies are used in accordance with plans developed at each campus and Laboratory. The research allocation, which is computed based on inventions disclosed on or after October 1, 1997, totaled $359 thousand in FY04. General Fund Share The portion of University technology transfer income allocated to the UC General Fund as part of the stateapproved budget totaled $8.2 million in FY04 (Exhibit 23). The General Fund share (previously called the state share ) is equal to 25% of the amount remaining after deducting payments to joint holders, net expenses, and inventor share payments from royalty and fee income. Exhibit 23 GENERAL FUND SHARE (Millions) Campus Share Campus share is the amount of technology transfer program income that is available to be redistributed to campuses to support ongoing research and education programs after the University has paid all direct and indirect program expenses and distributed additional income as required by policy. Campus share was referred to as net income in previous reports and is computed as income from royalties and fees less the sum of payments to joint holders, net legal and direct expenses, income distributions, and program operating expenses. Campus share totaled $11.3 million in FY04 (Exhibit 24). 14

15 Exhibit 24 CAMPUS SHARE* (Millions) *In order to facilitate trend analysis, this exhibit does not reflect the campus share distribution related to an extraordinary $200 million legal settlement for Human Growth Hormone. If included, FY00 campus share distribution would be $135.1 million. Exhibit 25 SYSTEMWIDE TECHNOLOGY TRANSFER ACTIVITY FY00 FY04* Fiscal Year Ended June 30 (Thousands) FISCAL YEAR COMPARISONS FY00 FY01 FY02 FY03 FY04 % CHANGE (FY03 FY04) Invention Disclosure Inventions Reported ,027 1,196 16% Total Invention Portfolio 4,481 4,982 5,472 5,948 6,618 11% Patent Prosecution US Applications Filed First Filings % Secondary Filings % Total % US Patents Issued % Total Active US Patents 1,976 2,267 2,502 2,753 3,024 10% First Foreign Filings % Total Active Foreign Patents 1,634 1,780 2,051 2,364 2,837 20% Licensing Agreements Issued Options % Utility Licenses % Plant Licenses % Total Active Agreements Options % Utility Licenses % Plant Licenses % Exhibit 25 only reports activity governed by the UC Patent Policy. It does not include copyright and material transfer agreement activity that also is carried out by campus-based technology transfer offices *Activity related to the invention portfolio managed by OTT and seven campus-based licensing offices on behalf of nine UC campuses that together with newly established UC Merced comprise the UC system. Activity related to a small number of DOE Laboratory inventions managed at OTT also is reflected in these figures. See pp for activity pertaining to the operation of the DOE Laboratory-based technology transfer offices. 15

16 Exhibit 26 SYSTEMWIDE FINANCIAL ACTIVITY FY00-FY04 1 Fiscal Year Ended June 30 (Thousands) FISCAL YEAR COMPARISONS FY00 2 FY01 FY02 FY03 FY04 (FY03 - FY04) % CHANGE Income from Royalties and Fees $267,765 $72,899 $88,148 $67,019 $79,265 18% Less: Payments to Joint Holders (6,243) (6,174) (6,072) (5,854) (4,990) -15% Adjusted Gross Income (A) 261,522 66,725 82,076 61,165 74,275 21% Legal and Other Direct Expenses 20,018 22,274 25,205 27,929 28,761 3% Less: Reimbursements (10,911) (9,979) (11,845) (14,300) (13,916) -3% Net Legal Expenses (B) 9,107 12,295 13,360 13,629 14,845 9% Operating Expenses 3 (C) 9,677 10,832 12,135 12,749 14,260 12% Income Available for Distribution (A-B-C) 242,738 43,598 56,581 34,787 45,170 30% Inventor Shares 101,661 33,062 26,028 32,357 25,310-22% Research Allocation % General Fund Share 5,898 5,143 10,558 3,608 8, % Campus Share 135,072 5,155 19,589 (1,713) 11, % Exhibit 26 only reports financial activity governed by the UC Patent Policy. Campus-based technology transfer offices also generate income through copyright licenses, material transfer agreements and through research support committed in conjunction with technology transfer activities. This income is not included in this report 1 Financial activity related to the invention portfolio managed by OTT and seven campus-based licensing offices on behalf of the nine UC campuses that together with newly established UC Merced comprise the UC system. Financial activity related to a small number of DOE Laboratory inventions managed by OTT also is reflected in these figures. See pp for financial data pertaining to the operation of the DOE Laboratory-based technology transfer offices. 2 In FY00, UC received a one-time $200 million legal settlement related to its Human Growth Hormone invention. Inventor shares distributed as a result of the settlement totaled $73.8 million. If monies attributable to this extraordinary settlement had been removed from the table above to more realistically convey year-to-year trends, the following amounts (in thousands) would have been reflected in the FY00 column: Income From Royalties & Fees - $67,765; Inventor Shares - $27,922; and Campus Share - $8, Includes operating costs for OTT and seven campus-based licensing offices as well as a UCOP budgetary assessment equal to 1% of Adjusted Gross Income for cases under OTT financial administration. 16

17 Exhibit 27 FY04 CAMPUS TECHNOLOGY TRANSFER ACTIVITY Year Ended June 30, 2004 UCB UCD UCI UCLA UCR UCSB UCSC UCSD UCSF Invention Disclosure Inventions Reported Total Invention Portfolio ,718 1,246 Patent Prosecution US Applications Filed First Filings Secondary Filings Total US Patents Issued Total Active US Patents First Foreign Filings Total Active Foreign Patents Licensing Agreements Issued Options Utility Licenses Plant Licenses Total Active Agreements Options Utility Licenses Plant Licenses Exhibit 27 only reports activity governed by the UC Patent Policy. It does not include copyright and material transfer agreement activity which also is carried out by campus-based technology transfer offices. Note: A number of inventions involve inventors from multiple UC campuses. Activity statistics for these inventions are reported multiple times, once for each campus involved. Thus, for any given measure of activity, the sum of individual campus numbers may be greater than the systemwide totals reported elsewhere in this report. Exhibit 28 FY04 CAMPUS FINANCIAL ACTIVITY Year Ended June 30, 2004 (Thousands) UCB UCD UCI UCLA UCR UCSB UCSC UCSD UCSF Income from Royalties and Fees $ 8,756 $ 9,241 $ 4,877 $13,964 $ 1,190 $ 857 $ 79 $11,473 $27,029 Less: Payments to Joint Holders (73) 0 (1) (33) 0 0 (3) (277) (4,604) Adjusted Gross Income (A) 8,683 9,241 4,876 13,931 1, ,196 22,425 Legal and Other Direct Expenses 3,044 3,143 2,409 4, , ,434 5,736 Less: Reimbursements (1,607) (543) (1,290) (2,278) (620) (432) (150) (2,896) (3,957) Net Legal Expenses (B) 1,437 2,601 1,119 2, ,538 1,779 Operating Expenses (C) , , ,661 Income Available for Distribution (A-B-C) 6,731 5,538 3,337 10, (508) (216) 5,781 18,986 Inventor Shares 2,035 3,444 1,409 4, ,629 9,644 Research Allocation General Fund Share 2 1, , (140) (10) 1,007 2,751 Campus Share 3,332 1,281 1,326 4,187 (242) (1,085) (229) 2,062 6,551 Exhibit 28 only reports financial activity governed by the UC Patent Policy. Campus-based technology transfer offices also generate income through copyright licenses and material transfer are not covered by the UC Patent Policy. This income is not included in this report. 1 Reflects recharges to individual campuses of OTT operating expenses and a UCOP assessment equal to 1% of adjusted gross income for cases under OTT financial management. Does not include operating expenses associated with technology transfer program administration at the individual campuses. Campus-based licensing offices reported FY04 operating expenses as follows: UCB - $1,213,471; UCI - $667,055; UCLA - $1,238,352; UCSB - $20,000; UCSC - $285,608; UCSD - $1,584,311; UCSF - $783, When Net Legal Expenses and Inventor Shares exceed Adjusted Gross Income, the General Fund share is represented as a credit (negative amount). 17

18 Part 2: The DOE Laboratory-managed Portfolios Background Since 1988, technology transfer for the DOE Laboratories has been under the purview of Laboratory-based offices at Los Alamos National Laboratory (LANL), Lawrence Berkeley National Laboratory (LBNL), and Lawrence Livermore National Laboratory (LLNL). The licensing function is managed within the context of larger departments responsible for fostering a variety of partnerships with industry: LANL's Industrial Business Development Program Office, LBNL's Technology Transfer Office, and LLNL's Industrial Partnerships and Commercialization Office. In addition to patent licensing, these offices direct substantial resources toward the licensing of software and the negotiation of Cooperative Research and Development Agreements (CRADAs), technical assistance, and other agreements with industry. Although these DOE Laboratory offices manage most Laboratory inventions, OTT oversees a small portfolio of 80 Laboratory inventions, most disclosed prior to Occasionally, more recent cases, such as those having co-inventors from the UC campuses, are added to the OTT-managed group. Certain aspects of technology transfer processes differ at the DOE offices as compared with OTT and the campuses. For example, after an invention is disclosed and a determination is made to pursue a license, there are some cases where the laboratory may be able to elect title to an invention on behalf of the University under the federal Bayh-Dole legislation, just as a campus does. In other cases, however, there must be a special request to DOE to enable The Regents to retain or be assigned title to the invention. Requests to assert copyright in software also must be made to DOE. In addition, whereas OTT and campus offices contract with attorneys at outside law firms for all of their patent prosecution activity, the Laboratories manage most US patent filings internally through their own legal departments and contract out only for selected matters, particularly foreign prosecution. In addition, the fiscal year at the Laboratory offices ends September 30 in contrast to the June 30 end date for the fiscal year at OTT and the campus offices. Information in this section pertains to the activities of the technology transfer offices of the Laboratories unless noted otherwise. In FY04, DOE Laboratory researchers disclosed 340 inventions and filed a total of 224 patent applications. Onehundred-eighty-nine (189) US patents issued on DOE inventions. The Laboratories completed 24 new options and licenses for patentable inventions and tangible research products (TRPs) in FY04, bringing the total number of active license and option agreements to 266 at the close of the fiscal year (Exhibit 29) Licensing of other types of intellectual property (e.g., copyrighted software) represent a significant additional element of current licensing activity. 18

19 Exhibit 29 PATENTING AND LICENSING ACTIVITY: DOE LABORATORY OFFICES Year Ended September 30, 2004 Disclosure and Prosecution 1 LANL LBNL LLNL Total Inventions Reported US Applications Filed First Filings Secondary Filings Total US Patents Issued First Foreign Filings Marketing and Licensing New Agreements Issued Secrecy ,074 Option License Total Active Agreements Option License Fiscal Year Comparisons (Thousands) FY03 FY04 %Change Disclosure and Prosecution 2 Inventions Reported % US Applications Filed First Filings % Secondary Filings % Total % US Patents Issued % First Foreign Filings % Marketing and Licensing New Agreements Issued Secrecy 1,076 1,074 0% Option % License % Total Active Agreements Option % License % 1 In addition to the patent activity reported in this table, 80 DOE laboratory inventions managed by OTT were associated with 67 US patents, 1 option agreement and 16 licenses at the close of FY04 2 Data reflect patent prosecution initiated on behalf of either DOE or the University. Financial Results The DOE Laboratory-managed portfolios generated a total of $6.4 million in income during FY04, an increase of 2% over the prior year. Patent income for the Labs increased 19% as compared with FY03, while copyright income increased by 8% (Exhibit 30). Information on DOE Laboratory patenting and licensing expenses is not provided in this report. Patent expenses are allowable costs under the University s current contract with DOE and are not readily separable from other expenses of the legal departments. Similarly, operating expenses related to the licensing function are not readily separable from other expenses of the technology transfer departments. Finally, income generated by the DOE Laboratories is not subject to the General Fund share assessment. 19

20 Inventor share payments of $2.1 million included $295 thousand paid to authors of software. These payments were based on financial activity through September 30, 2004 for LBNL, and September 30, 2003 for LANL and LLNL. Exhibit 30 FINANCIAL ACTIVITY: DOE LABORATORY OFFICES* Year ended September 30, 2004 (Thousands) LANL LBNL LLNL TOTAL Income from Royalties and Fees Patents and TRPs 984 1,935 2,769 5,707 Copyrights/Software Total $1,165 $2,096 $3,161 $6,441 Inventor/Author Shares Paid $451 $536 $1,116 $2,103 Fiscal Year Comparisons FY03 FY04 %Change Patents and TRPs $5,638 $5,707 1% Copyrights/Software % Total $6,315 $6,441 2% Inventor/Author Shares Paid $2,879 $2,103-27% *In addition to income reported in this table, the OTT-managed DOE portfolio collectively generated $1,131,819 in FY04 royalty and fee income, including ($25,580) for LANL, $183,649 for LBNL, and $974,750 for LLNL inventions. Technology Transfer Organization at UC The UC Technology Transfer program operates under a model of distributed responsibilities and authorities that balances activities carried out at the central Office of Technology Transfer (OTT) with those at the individual UC campuses and UC-managed DOE Laboratories. Under this approach, campuses and Laboratories develop and shape technology licensing programs to fit their unique needs as put forth in memorandums of understanding negotiated with the UC Office of the President (UCOP). In all instances, OTT retains responsibility for certain functions, such as policy development and guidance, legal oversight, legislative review, information management, and a variety of other services in support of the overall program. OTT also provides comprehensive management of approximately half of the 6,600 inventions in the systemwide invention portfolio. Internet links to UC OTT, campus, and Laboratory-based licensing offices are provided below. UC Technology Transfer on the Web UC Office of the President: Office of Technology Transfer (OTT) UC Berkeley: Office of Technology Licensing (OTL) UC Davis: Technology and Industry Alliances (TIA) UC Irvine: Office of Technology Alliances (OTA) UC Los Angeles: Office of Intellectual Property Administration (OIPA) UC Riverside: Office of Intellectual Property Services (OIPS) UC Santa Barbara: Sponsored Projects Office UC Santa Cruz: Office of Sponsored Projects UC San Diego: Technology Transfer and Intellectual Property Services (TechTIPS) UC San Francisco: Office of Technology Management (OTM) Los Alamos National Laboratory: Industrial Business Development Program Office Lawrence Berkeley National Laboratory: Technology Transfer Office Lawrence Livermore National Laboratory: Industrial Partnerships and Commercialization Office Industry-University Cooperative Research Program (Prefix with otl.berkeley.edu research.ucsb.edu invent.ucsd.edu uc-industry.berkeley.edu Acronyms are provided for OTT and campus-based licensing offices. 20