An Industrial Perspective for Technology Licensing Matthew Henry James Daly Simran Trana Dow AgroSciences LLC The Dow Chemical Company

Licensing serves the need of both the public and private sector Development of Federal Investment into the Public Sector The Bayh-Dole Act provided an avenue to encourage public development of tax funded research Industry cannot do it alone and needs the creativity and free thinking of institutional intellectual incubators

Managing the Technology Licensing Myths Myths This technology will make Millions $$$!!! This invention is ready to sell The patents on this provide exclusive rights Development will be simple Industrial partners have deep pockets Truths Most technology licensing deals never make money Early proof of concept results, does not a product make IP is usually more complicated, ambiguous and expensive than first believed Development often encounters delays and challenges particularly with regulated products and costs more than expected Industrial partners have limited funds and must make money to stay in business

Adopted from Gene Slowinski, The Strongest Link Forging a Profitable and Enduring Corporate Alliance Alliance Framework Adopted from Gene Slowinski, The Strongest Link Forging a Profitable and Enduring Corporate Alliance 3 Elements for Success Strategic Both must clearly understand own “business” strategic plan and ties between plan and alliance Same basic principles hold for company collaborations as well as with institutions Honest Both must reveal strategic plan clearly and honestly to other party Mutually Compatible Agreement Both must agree on alliance intentions, commitments, rights and limitations that satisfy the strategic plan of both firms

Industry’s Goal Develop and commercialize products with improved proprietary technology that meet unmet needs in the marketplace Shift from independent inventors and developers to establishing co-dependent alliances Develop a flexible product pipeline that can adapt to changes in technical and commercial trends Identify key collaborators with technology and collaboration mentality

What are the objectives of the technology provider (University)? Fund Research Educate Students Provide Trained and Educated Workforce Establish Networks for Information Flow and/or Identify Market Needs Identify Development Partners Identify collaborators willing to take on the commercial risk

Linking the Two Strategies Strategies cannot be either too vague or overly detailed Identify early if two parties strategies needs cannot link Avoid deal fever if strategies do not link Path of dependence must benefit your business strategy? Limiting flexibility must not be a negative Contractual constraints Market Reactions Agree that positives are greater than sum of the two if strategies fit.

Revealing Business Strategies Contrary to normal negotiation strategies Overexposure risk if negotiation fails Identify business overlap concerns Need to understand business weaknesses as well as strengths Certain level of interpersonal trust required

Agreement Issues Intentions Commitments, Rights and Limitations Identify difficult issues early Conflicts or ”Bad Deals” will not be worked out during implementation Avoid “deal fever” which ignores conflicts If these issue cannot be resolved then the relationship is not going to work

Approaching Potential Partners : Strategic Fit Assessment Strategic Fit How well the partners align strategically Resource Fit How well complement each partner Focus on Strategic Assessment Elements Objectives Roles Overall Resources Boundaries Market Model Strategic Exclusivity Intersections If do not share common vision of alliance then may part as friends

Managing Three Alliances in One Marketing R&D Manufacturing Administration R&D Education Alliance #1Alliance #3Alliance #2 Party A Party B

The Process Varies Agreements Related to IP Exchange of Information CDA, NDA, Secrecy Agmt. Consulting Agreement Exchange of Materials MTA Options Licenses Research License Creation of New IP Visiting Scientist Collaboration Agreement Inter-Institutional Agreement Sponsored Research Agreement Consortium Agreement Access to Existing IP Option Agreement License Agreement Copyright Patent Equity Agreement

Selecting Partner Results as a result of assessment of Strategic Fit Both parties must see mutual fit of strategic needs Resource Fit The joint of resources must compliment not duplicate what each party already has. If Potential Partner has right fit, move to Negotiation stage

Negotiate Agreement Use Common Elements to Negotiate Terms Framework Document gives structure to Process

Strategic Assessment Elements Objectives Specific statements from each party that identify the goals of each party and how it ties to strategy Roles Who does what Define tasks Degree of control Overall Resources A qualitative assessment of who brings what to the alliance. e.g. IP, manufacturing and sales, R&D competence, funding. Boundaries Define Scope inside and outside Technology Products and Processes Applications/Markets Geographies Trigger points to expand scope

Strategic Assessment Elements cont. Market Model Examine from customer’s perspective Who will be seen as the marketing and sales partner? Whose brand will be seen on product? How will partners brand be communicated on products and communications Who will the customer contact for customer and technical support How to handle billing warranties, and commercial functions Strategic Exclusivity Independent and Third Party involvement “Earned Exclusivity” “Parking Protection” Intersections Existing commitments or conflicts

Negotiating Value 25% Rule If a party brings a finished proprietary technology for licensing to a third party and that party manufactures and sells that technology then the offering party deserves 25% of the profit. 50% Rule (50/50 JV) If each party invests equally in the discovery and development of the products and equally supports the manufacture and sales of the product then each party share equally in the profit.

Value is product and market dependent Managing the Risk and Reward 100%25% Reducing the Risk by Degree of Enablement 25% 0.1% Increasing share of value $100MM $1MM Investment Proof of Concept Reduction to PracticePre-Development Development Launch

Rights to IP Negotiated Up Front New Developed IP If industry funds research and IP development cost then must have rights to the invention Cannot justify paying twice Cannot be exposed to unreasonable post invention royalty rates Background IP If gaining rights to background IP then willing to negotiate reasonable licensing rates

Managing the Alliance Deal completion is only the beginning Best practices tools to manage alliance is essential to obtain expectations of agreement. Collaborations that are merely cash grants rarely yield useful results Engagement with partner is essential