Evaluating a Report of Invention & Licensing Technology Development Boot Camp Peter Liao March 25, 2013
Technology Transfer at UNC Is. The process of forming partnerships with industry for the purpose of developing useful products or services based on UNC research and innovation.
Role of OTD in Technology Transfer Assess new innovations for commercial readiness Establish ownership rights in the innovation Invest in patent protection for promising inventions License rights to companies for further development Manage complex ongoing relationships Ensure diligent development of products Reinvest licensing proceeds
Sources of Innovation Results of research important scientific results useful tools solutions to known problems Educational materials software course materials collections of knowledge
Role of Patents in Technology Transfer Establishes ownership of innovations Provides right to exclude others from using the innovation without a license Creates value to transfer to others Provides incentive for investment in product development
Commercial Mindset Consider the business opportunity: potential for return on investment one product or foundational technology investment required to create products stage of development size of the market likely competition time to market value of IP protection
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
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 x
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 Do not fully own the work Inventors haven t assigned rights Commercial co-owner doesn t want license x
UNC Technologies
UNC Technologies OTD FY2012 Statistics 160 Reports of Invention 70 Provisional patent applications filed 46 PCT applications filed 52 US National applications filed $2.4 million revenue
UNC Innovation Profile For every ~100 reports of invention: 5-10 are ready to license or form a company 30-40 have solid potential, but may need: Entrepreneurs to form company Interest from commercial partner Translational research funding 20-30 are best suited to direct distribution to users Databases Publications Research tools Some software
Intellectual Property Property right created by law to protect intangible assets Trademark License grants the right to use trademark in commerce Copyright License grants the right reproduce, distribute and display copyrighted works Patent License grants the right to make, use and sell patented inventions
Intellectual Property License Transfer of property rights without transfer of ownership Trademark License grants the right to use trademark in commerce this name on any device to be sold as a Kindle TM Copyright License grants the right reproduce, distribute and display copyrighted works reproduce and distribute this book to be read on any device Patent License grants the right to make, use and sell patented inventions manufacture and sell this device
Why License Intellectual Property? Universities develop novel ideas and inventions but have limited capacity to distribute them in a format useful to the public Companies develop and manufacture useful products but have limited research capacity for developing new or improved products A Marriage Made in Heaven?
Licensing: The Dating Game ( how do we end up with a license?) Idea from UNC inventor Patent or Copyright Marketing to companies License
Licensing: The Prenuptial Agreement ( negotiating the license) Discussions with a prospective licensee will attempt to: Memorialize the business relationship Clearly define rights and obligations Convey intentions as to future events
Licensing: The Marriage ( living with the license) University requires of Company: Product development Payment of money owed under the agreement Company requires of University: Good faith accommodation of delays for reasons outside of Company s reasonable control
Licensing: Divorce ( terminating the license) Active Termination Company may elect to abandon development at any time (product failure or change in business strategy) University may terminate for breach Company and University may negotiate access to product development data and documents
Licensing: Divorce ( Terminating the License) Passive Termination Sometimes companies just disappear! Bankruptcy bankruptcy court controls termination Merger or acquisition acquiring company may just ignore unwanted assets
Negotiation Issues: Valuation Determined by the invention stage/cost of development (as Company adds value University share decreases) Upfront payments (cash, equity) Milestone payments (triggered by valuecreation milestones) Running royalties (a % of product sales) Percentage of revenue generated by sublicenses
Negotiation Issues: Due Diligence Determined by the invention type/stage of development Resource allocation Prototype development Validation Sale
Balancing Valuation and Due Diligence MUST BE WIN:WIN FOR BOTH PARTIES! Fair return on investment What is fair requires good faith negotiation and communication
Licensing Issues: Disputes, Performance Disputes For University typically over failure to pay or perform For Company typically over improvements, patent prosecution Good faith negotiation is key, litigation is rarely of value One sided solutions are not conducive to maintaining an ongoing relationship
Licensing Issues: Disputes, Performance Remedies for failure to perform Termination: typically University s primary recourse Monetary damages: a remedy that can arise out of litigation Forced performance: negotiated only (in litigation, performance is not an available remedy); a threat to terminate may result in performance only if product line is in fact of value to company
Licensing Issues: Breadth An invention becomes fixed in the form of a patent or copyright Rights to minor improvements (patent continuation-in-part or copyright derivative works) often granted as part of the license agreement Rights to major improvements/new inventions are not granted as of right, they may be subsequently licensed for a fee or may end up licensed to a competitor Managing expectations is key!
Questions? Peter Liao Office of Technology Development University of North Carolina at Chapel Hill Phone: 919-966-3929 Web: otd.unc.edu peter_liao@unc.edu