TTOs Becoming More Industry Friendly

1. TTOs Becoming More Industry Friendly Bill cawley sr. vice president

2. 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

3. 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

4. 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

5. Let’s begin with understanding that the business models and drivers are different… “Of 3200 universities, perhaps 6 have made significant amounts of money from their intellectual property rights.” John C. Hurt National Science Foundation

6. A business model has some of the following major components: Revenues Products Commercialization Markets Risk Cost

7. Notice the focus on economics and wealth generation •   “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)

8. A university model has some of the following major components: Grants Peer Reputation Publications Faculty Investigators Students Research

9. University research receives funding primarily from the federal government Funding Source Millions of USD (year 2000) 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

10. The university has a mission • To Recruit, Reward, and Retain Faculty and/or Researchers • Maximizing Public Good (social return) • Transferof technology for society’s use and benefit • Publish, Publish, Publish • To Teach and to Learn • Fulfil Legal Obligation Under Bayh-Dole

11. 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 Bayh-Dole Act

12. 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

13. 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 You can be more “industry friendly” without changing your mission!

14. 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

15. 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? Technology - its really about the value proposition

16. 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)

17. 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? Perform your due diligence

18. 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 And help your partner perform theirs

19. Market forces drive technology decisions

20. De-risk to assist your industry partner • 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

21. 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

22. 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? Utilize free technology evaluation resources

23. 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? License terms: flexibility is key

24. 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. Collaboration - an ongoing relationship

25. 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 After the deal – stay connected

26. 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

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

28. 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.

29. 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