1 Marketing of Licensing-Out Opportunities FPTT Conference Halifax, June 2004 Dave Tyrrell, Vertex Intellectual Property Strategies Inc.

Vertex Intellectual Property Strategies Inc. © This presentation provides guidance for the execution of a licensing-out business strategy Tactics and processes that can be employed in the marketing and sale of technology licenses will be discussed, and pointers for negotiating teams will be provided Practical, easy to apply licensing tips will be offered Overview

Vertex Intellectual Property Strategies Inc. © Topics Introduction – Why choose the licensing option? Implementation steps for a Licensing-Out Strategy Licensing Negotiation Tactics Five Licensing Tips Questions

4 Introduction Why Licensing?

Vertex Intellectual Property Strategies Inc. © Licensing is one Commercialization Option for New Technologies Options for Businesses – Use in existing business – Spin-off business – Joint Venture – License Options for Government Organizations – Licensing is preferred Could be a license to a spin-off start-up business

Vertex Intellectual Property Strategies Inc. © Comparing Licensing with Other Business Options

Vertex Intellectual Property Strategies Inc. © Some of the Business Conditions that Favour a Licensing-Out Strategy Provide a source of revenue and earnings in markets that are otherwise non-accessible, such as: Distant or international markets without a potentially risky capital investment. New or different applications for technology Utilize “orphaned” technologies – technologies that have either a poor fit or no fit with the business’ current portfolio and its business or research plans Can provide an opportunity for growth and the development of a high margin business without investment in a market where demand exceeds supply To obtain benefits from technology grantbacks or improvements

Vertex Intellectual Property Strategies Inc. © Some of the Business Conditions Not Favouring a Licensing-Out Strategy If the technology is truly a leading technology and greater value can be derived from it by protecting it and retaining confidentially through: Controlling a market niche with a highly profitable specialty product Retaining price premiums Maintaining a currently held major worldwide market share Maintaining barriers to entry The potential for high liability exists, such as with hazardous products Difficulty in providing an effective delivery and ongoing support due to such factors as: Safety Working conditions Distance Availability of appropriate personnel

Vertex Intellectual Property Strategies Inc. © When Licensing is Determined to be the Preferred Option The challenge becomes: – Who to approach – Setting the royalty rate – Negotiating the deal – Managing the deal So what do you do next?

10 Steps in the Marketing and Sale of a License Agreement

Vertex Intellectual Property Strategies Inc. © Steps in the Marketing and Sale of a License Agreement (1of 8) Define scope of technology to be licensed Assure technology ownership and understand the potential for patent infringement (of a third party’s patent) Consider strengths of the technology versus other technologies available in the field Develop a market segmentation strategy: – End use application, – Market segment, – Geographic territory

Vertex Intellectual Property Strategies Inc. © Steps in the Marketing and Sale of a License Agreement (2 of 8) Create a licensing team – Requires members with a variety of different skills and capabilities – expertise in the following areas will be required either on an ongoing basis or from time to time: Business / Technology Manager (Team leader) Technology Guru Patent Agent Lawyer Specific situations may require specialty services: – International business relationships – Translation service – Engineering services

Vertex Intellectual Property Strategies Inc. © Steps in the Marketing and Sale of a License Agreement (3 of 8) Add to the team the expertise of a licensing consultant – if not available in-house The consultant can be utilized for: Reviewing strategic direction Enhancing networks of contacts Advising on patent work Contributing to the technology evaluation process Setting of fee schedules Serving on the negotiation team

Vertex Intellectual Property Strategies Inc. © Steps in the Marketing and Sale of a License Agreement (4 of 8) Determine the profile of the desired licensee: – Marketing force, – Manufacturing capability, – Personnel, – Business fit Identify, locate and qualify list of potential licensees – existing contacts, networks and specialized computer searches can be utilized in this process

Vertex Intellectual Property Strategies Inc. © Consider why businesses licensing-in technology – In order to supplement research programs and unblock development projects by providing that missing link – Secure a technology where the required capabilities don’t exist or are not available in-house – Expediency – It can be quicker to license-in than to develop a specific technology oneself – Cost effectiveness – To understand the state of competitive technologies – To gain exclusivity for an attractive emerging or growth market Steps in the Marketing and Sale of a License Agreement (5 of 8)

Vertex Intellectual Property Strategies Inc. © Steps in the Marketing and Sale of a License Agreement (6 of 8) Investigate company culture and ethics of potential licensees Develop a proposed license package geared to meet the potential licensee’s needs and that can be delivered Establish a sales and marketing plan Establish a proposed fee schedule

Vertex Intellectual Property Strategies Inc. © Steps in the Marketing and Sale of a License Agreement (7 of 8) Prepare a draft agreement Setup product demonstration if appropriate Have a licensing negotiation team and strategy prepared Have a technology transfer delivery plan ready to go

Vertex Intellectual Property Strategies Inc. © Steps in the Marketing and Sale of a License Agreement (8 of 8) Prepare to deal with confidentiality / secrecy requirements: No nondisclosure agreement ─ Limit discussions to publicly available or non- confidential information Licensing negotiation stage ─ Additional information can be provided under terms of a non-disclosure agreement Upon the conclusion of a license agreement ─ All proprietary information made available to the licensee with a comprehensive secrecy provision included in the final agreement

19 Licensing Negotiation Tactics

Vertex Intellectual Property Strategies Inc. © Some Important Points in the Negotiation Process Team member participation will depend on the business situation Licensing negotiations should not be done on a solo basis Meeting responsibilities should be clearly understood. Leader should be designated. Also need to assign someone with the responsibility for taking detailed notes The team needs to have planned meeting strategies The team should caucus privately from negotiation discussions if necessary and not hesitate to excuse themselves for confidential discussions

21 Five Licensing Tips

Vertex Intellectual Property Strategies Inc. © Licensing Tip # 1 Consider technology licensing as a strategic option – it can be a valuable and powerful business tool and can help access global and or new application opportunities

Vertex Intellectual Property Strategies Inc. © Licensing Tip # 2 Effectively manage intellectual assets, so they can become the cornerstone of a licensing venture – areas to address include: Employment & Consulting Contracts and Agreements Identification / Cataloguing / Inventorying of IP Patent Strategy Invention Policy Non-Disclosure Agreements Proprietary Information Protection Licensing-Out & Licensing-In Opportunity Identification Other Organizational Specific Issues

Vertex Intellectual Property Strategies Inc. © Licensing Tip # 3 Clarify IP ownership issues up-front in all technology development activities including those that involve: – Employees – Contractors – Universities – Other businesses – Customers – Etc.

Vertex Intellectual Property Strategies Inc. © Licensing Tip # 4 Don’t loose sight that the essence of a licensing relationship is one that: Is a business partnership rather than the traditional supplier / customer relationship Focuses on WIN -WIN results and is not for those who operate with a ‘loophole’ mentality Is similar to a Strategic Alliance and exhibits the following characteristics: Two separate independent entities Working together to tackle specific objectives Sharing the risk and rewards Supplying resources on a continuous basis

Vertex Intellectual Property Strategies Inc. © Licensing Tip # 5 Identifying, selecting and working with the right licensee is probably the single most important ingredient to a successful licensing venture

27 Questions