ttos becoming more industry friendly

1© 2010 Innovaro, Inc.

© 2010 Innovaro, Inc.

TTOs Becoming More Industry Friendly

BILL CAWLEY

SR. VICE PRESIDENT


Commercializing university research is important because it… Provides a return for public investments in research

– Ensures that new & promising ideas are not trapped in the university laboratory

Drives new research funding– Creates tangible outputs from public investments

Provides a source of new start-up companies & technology related jobs– Contributes to economic renewal & competitiveness

Provides skills to companies within the innovation marketplace– Fosters resources needed for driving innovation


However, we may have a problem

“Typically at present, negotiating a contract to perform collaborative research with an American university takes one to two years of exchanging emails by attorneys, punctuated by long telephone conference calls involving the scientists who wish to work together. All too often, the company spends more on attorneys’ fees than the value of the contract being negotiated. This situation has driven many large companies away from working with American universities altogether, and they are looking for alternate research partners.”

Stan Williams

Director, HP Quantum Science Research


And there is global competition

Japan is restructuring its innovation system

China is focused on becoming leading edge in the R&D space

India is pursuing dramatic growth in IP related services

European countries are strategizing on how to provide alternatives to US university research


“Of 3200 universities, perhaps 6 have made significant amounts of money from their intellectual property rights.”

John C. HurtNational Science Foundation

Let’s begin with understanding that the business models and drivers are different…


A business model has some of the following major components:

Markets Risk Cost

Products Commercialization

Revenues


“Innovation is the specific instrument of entrepreneurship: The act that endows resources with a new capacity to create wealth.” (Peter Drucker)

“Innovation is the central issue in economic prosperity” (Michel Porter)

“Continuing to innovate and staying closely connected to our consumers are key components in P&G’s strategy to continue growing in the face of toughening economic times.” (A.G. Lafley, 2009)

“Innovation matters because it can deliver better products and services, new, cleaner and more efficient production processes and improved business models. For businesses, innovation means sustained or improved growth. The innovative company or organization delivers higher profits for its owners and investors.” (DTI: Innovation Report, 2003)

“Look at the product pipeline, look at the fantastic financial results we've had for the last five years. You only get that kind of performance on the innovation side, on the financial side, if you're really listening and reacting to the best ideas of the people we have.” (Steve Ballmer)

Notice the focus on economics and wealth generation


A university model has some of the following major components:

Faculty Investigators Students Research

Peer Reputation Publications

Grants


University research receives funding primarily from the federal government

Funding Source

Mill

ion

s o

f U

SD

(ye

ar 2

000)

Sources: National Science Foundation, Division of Science Resources Statistics (NSF/SRS), Research and Development in Industry 2007; Academic Research and Development Expenditures: FY 2008; Federal Funds for Research and Development: FY 2007–09


The university has a mission

To Recruit, Reward, and Retain Faculty and/or Researchers

Maximizing Public Good (social return)– Transfer of technology for society’s use

and benefit

Publish, Publish, Publish

To Teach and to Learn

Fulfil Legal Obligation Under Bayh-Dole


The Bayh-Dole Act

The Bayh-Dole Act has allowed universities to own the inventions they make leveraging federal funds.– May issue exclusive licenses

One of the key drivers was to encourage federally funded projects to be made available to the public through licensing to businesses.– University is obligated to commercialize

Small business preference Job creation & economic development focus Revenue received

– Share portion with inventors– Remainder goes into research


The university has incentives

Follow-on technology development

Recognition

Additional sponsored research

Royalty income– Recover patent costs– License fees– Equity

Employment opportunities for graduates

Local economic impact

Political support: local, regional, national


You can be more “industry friendly” without changing your mission! Understand your prospect’s unique business

drivers and processes– What are their value propositions

Knowledge, Service, Ease, Security

What is their interest in your technology?– Source of new technology– Lower cost product development– Patent position – exclusivity– Easier to raise investment capital– Shorter time-to-market– Low-cost access to technical expert


Know your client’s decision-maker

Industry Persona– Wei-Li, Head of Global

R&D– Future CEO– Tasked with defending

and spending an R&D budget to maximize shareholder value

– P&L Responsibility Hurdle rate for projects Annual P&L for R&D

Best kind of projects: High return, low risk

Wei-Li’s options– Fund internal projects– License university tech– Buy an IP spinoff– Invest in a startup– Hire a research team– Order an external

research competition


Technology - its really about the value proposition Take the time to investigate the

technology value as perceived by the potential client– Consider the odds of obtaining a patent– Value of risk still existing after you patent?– How many technologies does a company

have to invest in to fill their pipeline?– How many technologies move into a

company’s stage-gate process?– How many technologies make it through

the stage-gate process to become a product?

– How many products make money for the company?

– What are the odds of success?


Why is industry risk-adverse?

50-65% of invention disclosures from U.S. universities are converted into U.S. Patent applications. (Association of University Technology Managers, AUTM Licensing Survey (various years) and Science and Engineering Indicators 2008)

30-50% of U.S. Patent applications are converted into Utility Patents. (Association of University Technology Managers, AUTM Licensing Survey (various years) and Science and Engineering Indicators 2008)

99.8% of inventions fail. Only 3,000 patents out of 1.5 million are commercially viable. (Richard Maulsby, Director of the Office of Public Affairs for the U.S. Patent and Trademark Office)


Perform your due diligence

Universities expect due diligence on the part of Industry partners to bring new university-created technology and intellectual property to the market.

Universities do not want to license new technology only to see it put on hold in order to force the market or protect the company’s market share for an existing product.

Ask - Do they have the ability to commercialize your technology?


And help your partner perform theirs

Industry is in complete agreement on both points– They want to understand the value of their options– They want to avoid unnecessary costs

Assist them with ready documentation, notes, drawings, publications, patent info

Work to meet their timelines and be available for questions, teleconferences, site visits


Market forces drive technology decisions

Society Inputs

Economic Inputs

Technology Availability

Now to x Years x Years to y Years x Years to y Years x Years +

Base Line

Consumer Needs Green Needs Price Consciousness Fashion Obsolesce XXX

Degree of Change & Impact Effect

No Toxicity Low Water Use No Petroleum Low Waste

Improvement toward desired material characteristics

Current Statistics Manufacturing Limits Costs XXX

Technologies Used Late Stage Technology

Development Research Programs

Early Stage Development Mature Research

Independent Research Sponsored Research

Desired Technologies

Environmental Inputs

Geopolitical Inputs

CompetitiveInputs

Initiate now to create desired materials



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+ + ++ + ++ + +- - -- - -- - -

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+ + ++ + ++ + +- - -- - -- - -- - -- - -- - -- - -- - -

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or

+ + ++ + ++ + ++ + ++ + ++ + ++ + ++ + ++ + ++ + ++ + +

- - -- - -- - -- - -- - -- - -- - -- - -

or

Green Requirements Waste Factors Water Consumption Recycling XXX

Alignment?Alignment?Alignment? Alignment?Alignment?Alignment?

Government Regulation Emerging Economies Global Unrest XXX


Focus areas Leaders & lagers Cost positions XXX



Immature Technology Immature Research










Decision CriteriaDecision CriteriaDecision CriteriaDecision Criteria


Don’t destroy the prototype!– Ask the inventor: Can you build a more advanced

prototype?

Understand material testing requirements

Provide data if available– Ask the inventor: Can you provide test data?

Evaluate the technology– Federal grant priorities do not reflect market priorities– Leverage tools and resources available to the commercial

market

Incubate the technology

De-risk to assist your industry partner


Apply IP valuation techniques Cost Approach

– Historical development costs

Market Approach– Market comparables, Fair Market Value pricing between a

willing seller and buyer.

Income Approach– Present Value of Discounted Cash Flows, Venture Capital

Method (fixed non-market discount rate)

Relief from Royalty Approach– Income deprival of not owning the IP

Real Options Method– Black-Scholes Option Pricing Model


Utilize free technology evaluation resources Harvard Business School Baker Library

– http://www.library.hbs.edu/guides/– Industry research guide to free and pay sources

Patent Lens– http://www.patentlens.net/– Find competing inventions; print family diagrams

Web search for industry players– “market share” and [product category]

Trade magazines, Wall Street analyst reports– Does your university give you free access?


License terms: flexibility is key It’s not us versus them

Some caution is OK, but start early to develop trust

Your potential partner understands your desire to publish your work

Your potential licensee does not want to steal your work, they want a product that enables them to grow in the marketplace at a reasonable price and minimal risk

Leverage your agreements and agree to the best terms available

Preparation includes market analysis and current deal structures– You’re the seller, shouldn’t you know what it’s worth?


Collaboration - an ongoing relationship

Develop long term relationships– Be willing to accommodate the changing research

needs of the industry client

Offer alternative research

Successful partnership should support the ongoing missions of both parties and is best done with a long term relationship that fosters these missions.


After the deal – stay connected

Remember Business drivers change– Both negatively and positively

Companies prefer to work with what they understand

To manage costs, companies have to manage resources

You’re in a good position to find new opportunities to work together


University incubators & start-ups 2006 US incubators 1,115 up from 12 in 1980

555 U Start-ups formed in 2007, 595 Start-ups in 2008, 7.2% growth in a slowing economy.

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

Historically, 87% of incubator graduates stay in business

8 percent of all university startups go public compared to 0.07% for other US enterprises

Technology based incubators account for 39% of the 1400 total in North America in 2006


Int. J. Entrepreneurship and Innovation Management, Vol. 3, Nos. 1/2, 2003

US Incubator Growth

12 40

595

850

1115

0

200

400

600

800

1000

1200

1980 1985 1995 2003 2006


University of Washington TTO Model Announces in 2010 name change to the University of Washington Center

for Commercialization (UWC4C). ”A name can simply mean a lot about a mission” Linden Rhoads, Vice Provost for UWC4C

Their attitude: “We want to help researchers engage with industry early; perhaps long before any intellectual property has been developed. We want to help researchers understand industry needs in their field of research” Fiona Wills, Director of Technology Licensing

Hiring Industry Relations Managers to bridge the communication gap between UW research and industry.

New Programs: – Entrepreneur-In-Residence to support the migration of technology

from research labs to commercial endeavors.

– Commercialization Gap Fund to fund and support projects that the UWC4C believes have a high chance of being commercialized and where gap funding can accelerate the commercialization process.

Information taken from University of Washington Center for Commercialization website and press releases.


Success Stories

Recombinant DNA Technology– Developed at Stanford and UC, San Francisco by Stanley Cohen and Herbert

Boyer in 1974– Has been licensed to over 200 companies, generating over $100 million in

royalties– Catalyzed the first successful biotech company, Genentech.

Allegra– Popular antihistamine developed by Georgetown University’s Raymond

Woosley in 1992– Global sales of $1.87B USD in 2004

Cochlear Implants– Hearing device developed by Michael Merzenich at UC, San Francisco– Led to the founding of Advanced Bionic in 1993– Advanced Bionic currently remains a world leader in cochlear implant

technology

ttos becoming more industry friendly

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