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Or get it by Mon, Sep 30 with faster delivery. Pickup not available. Spin-out companies from university science departments offer the hope of keeping Western economies viable at a time when manufacturing is being outsourced to developing countries, as well as sustaining university finances. This book teaches how to create business from university intellectual property. About This Item We aim to show you accurate product information.
Manufacturers, suppliers and others provide what you see here, and we have not verified it. See our disclaimer. Specifications Series Title Harriman House. Customer Reviews. Write a review. See any care plans, options and policies that may be associated with this product. Email address. Please enter a valid email address. The owner of IP rights may also grant any number of nonexclusive licenses covering rights within a defined scope.
A patent license is a transfer of rights that does not amount to an assignment of the patent. A trademark or service mark can be validly licensed only if the licensor controls the nature and quality of the goods or services sold by the licensee under the licensed mark. Under copyright law, an exclusive licensee is the owner of a particular right of copyright, and he or she may sue for infringement of the licensed right.
There are three kinds of patents in the United States: a standard utility patent on the functional aspects of products and processes; a design patent on the ornamental design of useful objects; and a plant patent on a new variety of a living plant. Patents do not protect ideas, only structures and methods that apply technological concepts.
Each type of patent confers the right to exclude others from a precisely defined scope of technology, industrial design, or plant variety. In return for the right to exclude, an inventor must fully disclose the details of the invention to the public so that others can understand it and use it to further develop the technology. Once the patent expires, the public is entitled to make and use the invention and is entitled to a full and complete disclosure of how to do so.
There is concern about the patenting of research tools, because such patents may inhibit the free undertaking of research. Your source for expert commentary on IP management issues. Go to the blog. Brown A and J Soderstrom.
Creating new businesses and helping new businesses to innovate
Available online at www. A Brown and J Soderstrom. Sharing the Art of IP Management : Photocopying and distribution through the Internet for noncommercial purposes is permitted and encouraged. Editor's Summary, Implications and Best Practices. This chapter is about university spinouts: why they are created, who founds them, and how they are developed.
It also considers many of the issues that a university and its faculty have to address to successfully launch and develop new for-profit ventures. Spinouts carry risks, but they may also be the best vehicle for developing early-stage university technologies and providing a host of other benefits. The chapter offers examples from the past five years at Yale University, as well as from the private sector, that suggest ways to minimize the risks and maximize benefits.
In the course of fulfilling university research and educational missions, faculty often create intellectual assets that can benefit society. These assets may include patentable inventions, copyrightable works, and ideas that form the basis for new products and services. As they emerge from university laboratories, these inventions are not mature commercial products. To fully realize their potential requires significant resources, both human and financial. These resources are not generally found within the university environment. Therefore, commercial development of the invention requires the participation of for-profit partners who possess the requisite resources.
The most common means available to universities for attracting such partners are licenses.
Spin-Outs: Creating Businesses from University Intellectual Property
In general, universities license technologies to three classes of private sector entities: established companies with more than employees large companies , established companies with less than employees small companies , and newly formed companies spinouts. The term university spinout refers to those companies that are formed around one or more faculty inventions, with involvement of the faculty inventors and the cooperation of the university licensing office, in the licensing of university assets.
The chapter also considers many of the issues that a university and its faculty has to address to successfully launch and develop new for-profit ventures. The academic mission and goals of major universities include engaging in research that is useful to society. To translate this research into beneficial commercial products requires a significant investment of human and financial resources. Commercializing inventions is generally not a central focus of academic or non-profit institutions; such endeavors are more central to the missions of companies.
However, in order for a company to justify making investments in the development of inventions from universities, the university typically must first protect its IP through patents, copyrights, or trade secrets. During the course of managing, protecting, and commercializing university discoveries, the technology transfer manager has many choices, and often there is no apparent best option. If an existing company has the interest, capability, capacity, and financial resources—and the intent to reach broad markets—a university might prefer to work with that company.
Sometimes, however, the market dictates that a spinout should be formed around a collection of technologies. Spinouts carry a number of risks that may exceed those found in established companies. Managers are often less experienced, and personnel may be working together for the first time. Company financing depends on funds from venture investors, who frequently react to environmental changes in ways that are not always in the best interests of the company.
For example, during periods of low economic growth, venture investors may elect to invest more in existing portfolio companies and in secondary and mezzanine financings of existing companies. During economic expansions, however, investors actively seek to invest in new companies—sometimes at premiums that hurt future financing. With certain factors in place, however, a spinout can represent the best opportunity for developing early-stage university technologies.
Adequate financing must also be obtained; ideally, the business team will have experience and can convince others to invest at a premium to the initial financing of the company. Spinouts formed around university technologies have a vested interest in the success of those technologies.
Company management, consultants and science advisors, board members, and staff are recruited because they believe in, and are committed to, the success of university technologies. Initial investors are especially committed to the success of the initial technologies. In contrast, when technologies are licensed to existing companies, there is often strong initial support for a new licensed technology, although the commitment is rarely as strong and as lasting as it is with spinouts.
Existing companies may not identify as strongly with the recently acquired technology, and support may wane in the face of obstacles that a spinout might be able to overcome. New ventures formed to undertake the commercialization of inventions can promote the development of a local economy. However, the economy in New Haven, Connecticut, which declined significantly from through the early s, clearly benefited from the development of technologies created at Yale.
A regional economy can experience growth when spinout ventures decide to remain in the area. By , more than 30 companies had been formed around Yale technologies, with more than half locating in New Haven. These ventures provided more than one thousand jobs for highly skilled workers in the year alone. The ventures generated many joint-research projects undertaken by these companies and the university.
The companies have made New Haven both a bioscience center for the state and a magnet for the relocation of existing companies to the city and region. Faculty that are being recruited by Yale increasingly inquire about opportunities to become involved with existing and spinout companies in the area. A vibrant local and regional technology economy can provide significant job opportunities for the spouses of new faculty hires. Regional technology-based spinouts often have state-of-the-art research tools and expert staff that can be valuable to academic researchers, and faculty members often view the opportunity to collaborate with these ventures as necessary to stay ahead of rapid developments in their fields.
If spinouts remain in the region and faculty inventors remain active consultants and advisors to these companies, they can be a powerful force in keeping these inventors at the university. Equity, in the form of stock, options, or warrants, is frequently part of the consideration for IP licensed to spinouts; equity may also be granted as consideration for assisting in the formation of a new venture.
At Yale and many other institutions, equity-only licenses are rarely used. However, upfront fees are frequently reduced when equity consideration is part of the license package. Stock is viewed as a reasonable business solution to enhance the overall financial package—a solution acceptable to the company and its investors—while providing an opportunity for the university to increase its potential return.
A few universities view equity as a way to generate large amounts of revenue to benefit their program or the university. To date, this is not a proven strategy. Big winners in equity deals are perhaps even rarer than big winners in traditional licensing deals. While a major part of determining whether or not a spinout represents the optimal commercial path has to do with technology and market assessments, an equally critical aspect is finding an experienced business manager to join the founding team.
We often refer to this individual as an investable CEO , because he or she has a track record in the technology area that can create added value in the eyes of professional investors. Such an individual must be able not only to understand and communicate with the founding scientists and inventors but also be capable of strategic, tactical thinking and action. The investable CEO must have had operational, preferably profit-and-loss responsibility, in small high-growth technical companies and must be able to work successfully with university founders and scientists.
Such individuals are difficult to find. At Yale we succeeded by using the knowledge of industry professionals and senior managers of comparable companies to locate potential candidates. As existing bioscience companies mature in the New Haven area, these become an important source of next-generation CEOs. Fortunately, some of the best CEOs are serial entrepreneurs; once they have had a taste of success with a spinout, they are eager for another.
Furthermore, some individuals would prefer not to work at large bureaucratic organizations. There are two major questions that investors will almost certainly ask of the technology: 1 Are there technologies or products that can block the development and commercialization of your technology?
And 2 can your technology dominate and prevent others from entering the marketplace? While the OCR rarely commissions formal due-diligence opinions, which we consider to be the responsibility of the licensee, we do conduct literature and patent searches to investigate the relative strength of the IP. Although these searches often are initiated prior to identifying a CEO candidate, once such an individual has been identified, the office enlists him or her to assist with the assessment.
The key decision in determining the most appropriate path for commercializing any university-controlled IP is whether to license it to an established enterprise or to a new business venture. Regardless of the commercialization path, market and opportunity assessments are conducted on most technologies. Such an assessment looks to balance the perceived technical and market risks with potential return on the investment, for both the university and the potential licensee.
Conducting such an analysis includes considering the following questions:. All of the above questions help define a product scenario for the technology.
Spin-out versus Licence
Managers and staff need to know enough about the final product to be able to develop preliminary revenue and expense projections over the life of the IP. Obviously, assumptions must be made, and, to the extent possible, these assumptions need to be based on comparable product sales, margins, and expenses. However, when dealing with medical needs or technologies there are frequently no comparables, and sometimes an educated guess is all that is possible.
For every spinout where Yale is the founder, the licensing office puts together a set of financials that capture the basic elements of the business. Linked spreadsheets are an ideal tool for this purpose.
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Spreadsheets include numbers of customers, product scenarios, revenue, expenses including personnel, administrative, equipment, and marketing , and cost of goods sold. We use a summary sheet to roll up all of the individual sheets. Identifying key variables such as numbers of customers and pricing and linking related elements of the plan such as numbers of employees or the development status of a new product can greatly facilitate scenario testing and useful projections. We have found that these projections are of great value in developing product scenarios and business and operational plans, but that they often contain more information than is required by prospective investors—at least for initial meetings.
In our experience, business plans are most useful to the founders and company management, while investor presentations are directed to the potential funding audience. While investors will use business plans to challenge the thinking and assumptions made by the founding group, they will most generally use the investor presentation to make the initial decision on whether or not to pursue an opportunity. Accordingly, we use the business plan as a management tool to profile the business opportunity, and we use the investor presentation to raise capital.
The investor presentation does, however, usually flow from the business plan, or, at least, makes use of the thinking and assumptions that went into the business plan. We have found that the ideal investor presentation is 20 minutes long and contains no more than about a dozen overheads or computer-driven slides. The logic is that most investment groups allocate about an hour for the initial meeting, and about half of that time is usually taken up by questions.
Assume another ten minutes for introductions and setup and only about 20 minutes are left for the actual presentation. Box 1 presents the elements of a successful presentation used by our group. For a number of important reasons, the preferred approach in recent years at Yale has been an intensive, hands-on approach to founding companies around university technologies. To be clear, two things we have not done are to invest university funds in spinouts, or to personally take equity or any other incentives from these spinout companies.
There was also the desire to both maximize the success of Yale technologies and to expand the economy of New Haven and the surrounding communities. Another very important lesson that we have learned from these activities is that when the office undertakes a leadership role in founding these companies—particularly when recruiting management—the companies should locate close to New Haven.
This is especially important for the founding scientists and inventors who consult for the company, since it reduces travel and facilitates company—university interactions. During the early years of establishing spinout companies at Yale, the hands-off approach produced variable results, and certainly few successes. Companies still surviving from these times are frequently considered to have persisted despite the activities of the licensing office, rather than as a result of them.
By policy, many universities assume a much less proactive role in forming companies. In many cases, institutions market spinout activities for example, license opportunities by sending out mass mailings; in other. This is comparable to reverse engineering the technology—what market opportunities does the technology meet? What is the technology, and how will it result in new products, or how will it be incorporated into new products? What products will result from the technology? What will the business look like, in one-year intervals, during the initial funding period and for the remainder of the first half of the business cycle?
Discuss initial product-development plans, partnering and hiring strategies, and market and revenue opportunities. What is the current status of the IP licensed or developed by the company, and how will the IP be protected in the future? Discuss freedom to operate versus the ability to exclude others from the marketplace.
What are the plans for acquiring or developing proprietary IP in the future? What is the current competition, and what will be the competition when the technology is commercialized? Distinguish the company from the competition. Who are the scientific founders? Who is the management? Who are the anticipated scientific and business advisors? What are the capital needs for the first two years or for the initial funding period? What are the expected funding needs after the first two years but prior to exit, initial public offering, or profitability?
What are the specific accomplishments that will enhance valuation of the business during the first two years or the initial funding period? Our office has adopted a proactive approach with respect to spinouts.
University spin-out companies perform poorly in bid to create wealth | EurekAlert! Science News
We take founders equity in the new company separate and distinct from consideration for technologies that are being licensed to the spinout. When we initiate the hands-on activities described above, we negotiate an agreement with the other founding members of the company that delineates the roles of the respective parties and the compensation founders equity that each party will receive.
The value of the equity when the initial founders agreement is made, before the company has any IP assets or capital, is negligible. Therefore, it is best to deal in percentages of founders equity rather than absolute amounts. In our experience, not all university inventors are founders and not all founders are university inventors. This may seem inconsistent with standard licensing practices, where university inventors are generally treated equally under university patent policies.
But not all inventors choose to be entrepreneurs, so our approach benefits both those who want to be founders and those who do not. Founders equity is generally issued as common stock, and although the various founders may have different vesting parameters, all have similar shareholder rights. Our experience has been that founders equity is frequently confused with equity that may be granted as consideration for technology rights.
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At Yale, we have a policy against all-equity license deals, and typical terms for licenses to university spinouts are similar to those that would have been negotiated with existing companies.