EXPRESS LICENSE AGREEMENTS Ted Hagelin Crandall Melvin Professor of Law Kauffman Professor of Entrepreneurship and Innovation Director, NY Science & Technology Law Center Syracuse University College of Law Technology Transfer Tactics Webinar January 19, 2011

Views Expressed Do Not Represent Those of the New York State Foundation for Science, Technology and Innovation Or Those of the New York State Science & Technology Law Center

Introduction –Two technology transfer business models –Express license agreements within these business models –The Carolina Express License Agreement (CELA) –Comments on CELA

Two TT Business Models –Volume Model Maximize number of licenses Minimize license complexity Accelerate commercial handoff –Home Run Model Maximize return on licenses Minimize risk of license underpayment Decelerate commercial handoff

Express License Agreements Within TT Business Models –Express license agreements: Prioritize actual revenue over potential revenue Prioritize economic development over licensing revenue Prioritize fair return on research investment over whatever the market will bear

Carolina Express License Agreement (CELA) –Only available to UNC faculty, staff and student company founders – CELA execution procedures Detailed business plan Conflict of interest review Acknowledgement of UNC’s IP rights Acceptance of license fees, patent costs and royalty rates Inventor statement regarding student employment, research and publication

Detailed Business Plan –Type of organization and management Advisors and management team Already in place and needed in future –Market opportunity Market needs; barriers to entry; development status; business model –Risk assessment and milestones Technical; competition; contingency plans –Development timetable & financial plan Budgets and cash flow Sources and timing of funding

Conflict of Interest Review – Applies to all UNC inventors receiving equity Differentiate between duties to UNC and duties to licensee/company Anticipate conflict of commitment in licensee sponsored research Provide for disclosure, monitoring and management procedures

Goal to review and complete license process within 2 weeks –Single UNC OTD point of contact Collect documents for due diligence Interface between UNC and company Manage IP matters related to company sponsored research Verify company is in compliance with license –Single company point of contact Not UNC founder/faculty member

Monetary terms –Patent costs paid by company beginning 1 year after license agreement –License fee.075% of company fair market value at time of company first Liquidation Event IPO, merger, acquisition, etc. –Royalties 1% net sales for clinically approved product 2% net sales for other products –Annual maintenance fees 3 rd year - $15,000 or $5,000 6 th year and thereafter - $30,000 or $10,000

Comments on CELA –Clearly prioritizes economic development over licensing revenue –CELA expressly intended to: Promote deal flow Help start-up companies secure financing and management Encourage entrepreneurship on UNC campus Recruit faculty to UNC interested in entrepreneurship activities Make UNC spin-outs attractive to venture investors Amplify impact of UNC on regional economic development, and improvement of health and well being of society –CELA expedites licensing process by having all forms and documents prepared beforehand and having one single point of OTD contact

Comments on CELA – Continued –Required business plan especially important For UNC, it provides some assurance of company success For faculty/founder it provides some idea of challenges ahead –A few reservations Will UNC faculty have right of first refusal if a larger, established company is interested in licensing technology? Can start-up companies afford to pay patent costs even after a 1 year grace period? Will other universities be willing to wait for a liquidation event to receive license fees? Will other universities be willing to accept royalties in the 1% - 2% range?

Thank You! Questions?