1. Dr. Ashley J. Stevens President, Focus IP Group, LLC
WIPO’s Enabling Intellectual Property Environment Project Topic 6: Overview of the IP / Technology Management and Pre-Commercialization Process Tehran, Iran December 9-10, 2017
Dr. Ashley J. Stevens
President, Focus IP Group, LLC

2. The Technology Transfer Process
WIPO EIE Project -- Tehran
The Technology Transfer Process

3. The Technology Transfer Process
WIPO EIE Project -- Tehran
The Technology Transfer Process
Licensing Strategy
Valuation
Disclosure
Evaluation
Marketing
Expression of Interest
Negotiation
Signed Deal
Ideation
Licensed
License Compliance
Product Launch
Licensee Developing

4. WIPO EIE Project -- Tehran
Ideation

5. Ideation Faculty identify inventive ideas
WIPO EIE Project -- Tehran
Ideation
Faculty identify inventive ideas
Not the TTO
TTO’s job is to help faculty
Generally occurs at the end of a research project
When the papers are being written

6. The Traditional Scientific Paradigm
WIPO EIE Project -- Tehran
The New Scientific Paradigm
The Traditional Scientific Paradigm
Scientific knowledge dissemination pathway
Commercial exploitation pathway

7. The New Scientific Paradigm
WIPO EIE Project -- Tehran
The New Scientific Paradigm
The “Patent-Paper-Pair”
Fiona Murray, MIT
50% of papers in Nature Biotechnology had a corresponding patent1
33% of biotech papers in Science and Nature had a corresponding patent2
Murray, F., Stern, S., Do Formal Intellectual Property Rights Hinder the Free Flow of Scientific Knowledge? An Empirical Test of the Anti-Commons Hypothesis, Journal of Economic Behavior and Organization (2007), doi: /j.jebo
Lebovitz, R. M. (2007). "The Duty to Disclose Patent Rights." Northwestern Journal of Technology and Intellectual Property 6 (Fall 2007):

8. Scientists Don’t Have to Get Involved in Commercialization
WIPO EIE Project -- Tehran
Scientists Don’t Have to Get Involved in Commercialization
Career Disclosures %
Never
64.2
Once
14.8
Twice
7.6
Three to five
11.4
Six or more
2.0
Thursby, J. G. and M. C. Thursby (2003). Patterns of Research and Licensing Activity of Science and Engineering Faculty. Working Paper. Atlanta, GA, Georgia Institute of Technology., available at:

9. But the Best Scientists Do
WIPO EIE Project -- Tehran
But the Best Scientists Do
My own anecdotal experience
Harvard Medical School
Boston University
MIT
Driven by societal benefits
Not by personal financial benefit
If you’re successful, that will follow
More later

10. But the Best Scientists Do
WIPO EIE Project -- Tehran
But the Best Scientists Do
Nobel Prize Winners* with Patents %
Physics
44%
Chemistry
77%
Physiology or Medicine
78%
* Winners of Nobel Prize from 2001 to 2013
Source: Qingzhi Zhang, Collette LaFlamme, Trent Merrell and Ashley J. Stevens, Unpublished Data

11. WIPO EIE Project -- Tehran
Disclosure

12. WIPO EIE Project -- Tehran
Disclosure
The institution needs to learn what the faculty have discovered
Faculty must come to the TTO
TTO can’t review every paper to look for inventions
In the early days, there will need to be lots of education
Change the culture
Stress that technology transfer is voluntary
But encouraged
And rewarded
Attend and present at faculty meetings whenever possible
Meet with Deans

13. Disclosure Any disclosure is a good start
WIPO EIE Project -- Tehran
Disclosure
Any disclosure is a good start
Phone call
Personal
After a faculty meeting
Proactive contact at suggestion of Dean
Important to follow up promptly
24 hours for initial response
Initial meeting within 3 days

14. Disclosure Must create systems that support the academic process
WIPO EIE Project -- Tehran
Disclosure
Must create systems that support the academic process
Cannot delay publication
Critical to be able to apply for patents before the initial publication appears
In print
Or on-line
In most parts of the world, there must be “absolute novelty”
A patent examiner somewhere must receive a patent application before it appears in print
U.S. and Canada allow one-year grace period
Japan 6 months

15. Disclosure Need form to capture key details Make available on-line
WIPO EIE Project -- Tehran
Disclosure
Need form to capture key details
Inventors, addresses, etc.
Source(s) of funds that led to invention
Publication plans
Stage of development
Ideas for applications
Ideas for potential licensees
Assignment of invention to institution
Make available on-line
Lots of examples available on-line

16. WIPO EIE Project -- Tehran
Evaluation

17. Evaluation Aka Triage Whole segment this afternoon
WIPO EIE Project -- Tehran
Evaluation
Aka Triage
Whole segment this afternoon
First Look Technology Assessment

18. WIPO EIE Project -- Tehran
Licensing Strategy

19. Different Degrees of Rights Can be Granted
WIPO EIE Project -- Tehran
Different Degrees of Rights Can be Granted
Degree of transfer of rights
Complete transfer
Limited transfer
No transfer -- immunity
Freedom from Suit
Assignment
License
Exclusive
Exclusive by Field Exclusive by territory
Non-exclusive
Degrees of Exclusivity

20. Some Key Strategic Questions
WIPO EIE Project -- Tehran
Some Key Strategic Questions
Value Chain Strategy
Licensing Strategy

21. WIPO EIE Project -- Tehran
Value Chain Strategy
Where in the supply chain does your technology fit?
How far forward in the supply chain does the technology’s value add let you integrate?
The further forward you go, the more value you capture
e.g., a new material
Most supply chains have been so disaggregated that you can usually find a contract manufacturer
Material
Component
of a
component
Component
Device

22. Licensing Strategy The fundamental question:
WIPO EIE Project -- Tehran
Licensing Strategy
The fundamental question:
Are we going to license this to an existing company?
Or a new company?
Truly revolutionary inventions frequently need a new company
Incremental inventions are often licensed to existing companies

23. Developing the Licensing Strategy
WIPO EIE Project -- Tehran
Developing the Licensing Strategy
Are there multiple products that come from the technology?
If answer is “Yes”, which market is most attractive?
Do we need separate sets of patent claims to protect each market?
Are the products used in the same industry?
If so, can the same company exploit them?
If answer to either is “No”, then we will need to license by field of use and find multiple licensees

24. Developing the Licensing Strategy
WIPO EIE Project -- Tehran
Developing the Licensing Strategy
The key question:
Does the license(s) need to be exclusive?
Maximizes the incentive to the licensee
Maximizes the risk to the licensor
Maximizes the potential return to the licensor
Does the technology provide everything that’s needed for a finished product?
If not, probably license non-exclusively, or exclusively by narrowly-defined field of use (“platform technology”)
Is there a clear market leader?
They may be the most attractive / only viable licensee
Is it a crowded market?
If so, #2 or #3 may be a more motivated licensee

25. Licenses Granted 18% start-up companies 47% small companies
WIPO EIE Project -- Tehran
Licenses Granted
18% start-up companies
47% small companies
35% large companies
34% exclusive
Start-Ups almost always need an exclusive license to all fields of use
66% non-exclusive
AUTM Annual Licensing Activity Survey 2015

26. Developing the Licensing Strategy
WIPO EIE Project -- Tehran
Developing the Licensing Strategy
What are the key steps the licensee needs to do to get a product into the market
These will become your due diligence mechanisms
Exclusive licenses only
Should have at least one milestone each year
Perhaps more in first year
Ensure that licensee is developing the technology
Terminate the license if not
Relicense it
If start-up, include corporate development milestones
Fund raising
Hiring of key individuals

27. WIPO EIE Project -- Tehran
Marketing

28. Marketing Technologies do not market themselves
WIPO EIE Project -- Tehran
Marketing
Technologies do not market themselves
Even at places like MIT, Harvard, Stanford, etc.
Critical to proactively seek licensees
Two approaches
Passive
Websites
Active
Targeted marketing to specifically identified companies
Detailed session on this tomorrow

29. WIPO EIE Project -- Tehran
Valuation

30. Valuation One of the most difficult parts of technology transfer
WIPO EIE Project -- Tehran
Valuation
One of the most difficult parts of technology transfer
I learned this the hard way
Completely messed up my first big negotiation
1991
Set out to research and learn
When I learned, I taught
Workshops, educational tracks and finally the AUTM Valuation Course
Since ~1993
First textbook on valuation in licensing not published until 1999

31. Valuation What is a technology worth that is: Unproven May not work
WIPO EIE Project -- Tehran
Valuation
What is a technology worth that is:
Unproven
May not work
We specifically say we MAKE NO PROMISES that it will work as intended
Has an unknown market
Will anyone buy it?
Can we make and sell it at an acceptable cost?
In an acceptable time?

32. Valuation Very little So we don’t “sell” a technology
WIPO EIE Project -- Tehran
Valuation
Very little
But the value will grow
If it does work
And people do buy it
The value will grow enormously
If it works really well
And people buy a lot of it
So we don’t “sell” a technology
We don’t get paid a lump sum on the day we sign the deal
We structure a deal that reflects:
It’s not worth much today
The value will grow if it does work
The value may grow enormously
A deal that captures the upside

33. Valuation Pricing â Various techniques Different answers An opinion
WIPO EIE Project -- Tehran
Valuation â
Pricing
Various techniques
Different answers
An opinion
A negotiation
One outcome
A commitment

34. Valuation Pricing â With a valuation basis You negotiate the basis
WIPO EIE Project -- Tehran
Valuation â
Pricing
With a valuation basis
You negotiate the basis

35. Valuation Pricing â With a valuation basis Without a valuation basis
WIPO EIE Project -- Tehran
Valuation â
Pricing
With a valuation basis
Without a valuation basis
You negotiate the bases
You negotiate from emotion

36. What do we mean by a “Valuation”
WIPO EIE Project -- Tehran
What do we mean by a “Valuation”
A written analysis of what we believe the value of a technology to be
Prepared to:
Give it to the other side
Identify the sources of the data
Discuss the data
Modify based on discussions with the other side
Data
Valuation methodology used

37. What do we mean by a “License Valuation”
WIPO EIE Project -- Tehran
What do we mean by a “License Valuation”
Constructing the various financial elements of a proposed license
Upfront payments
Ongoing pre-commercial payments
Patent costs
Milestone payments
Annual Minimum Royalties
Research support
Sublicense income sharing
Manufacturing
Earned royalties or sales/profit sharing
i.e., the Term Sheet

38. WIPO EIE Project -- Tehran
Valuation Techniques
There are a number of specialized techniques for valuing technologies
Session on this tomorrow
Don’t get paralyzed over valuation
You will never know if you got it “right”
Just don’t give up on the upside
Always have running royalties
Don’t agree to a cap on running royalties
Always get stock in a start-up company
Learn
Try not to make the same mistake twice
You get a clean sheet of paper for each new deal
They won’t know what mistakes you made the time before

39. Expression of Interest  Negotiation  Signed Deal
WIPO EIE Project -- Tehran
Expression of Interest  Negotiation  Signed Deal

40. The Negotiation Process
WIPO EIE Project -- Tehran
The Negotiation Process
Make sure they’re really interested in the technology before you start to discuss price
Not just looking for a bargain
Negotiate in two phases
Agree on business terms first
Scope
Geographic
Area(s) of application
Money
Commitment / Investment
Then translate business terms into a contractual document

41. The Negotiation Process
WIPO EIE Project -- Tehran
The Negotiation Process
You will likely be in a relatively weak position
You will likely not have a viable alternative
We only license 25% of the disclosures we receive
“A hot academic technology is one two companies are interested in”
Lita Nelsen
Massachusetts Institute of Technology
Negotiating theory 101 says your strongest position is if you can threaten to walk away
And mean it
You probably won’t be able to
Important to know your negotiating authority
Can you agree to something on behalf of the institution?
Or will the Chancellor have to agree?
Don’t promise what you can’t commit

42. The Agreements The international language of business is English
WIPO EIE Project -- Tehran
The Agreements
The international language of business is English
Agreements between entities from different countries are done in English
Will go through stages
Confidentiality Agreement
Materials Transfer Agreement
Term sheet
Option Agreement
Optional
License Agreement
Sponsored Research Agreement
Consulting Agreement
Important to have good template agreements to start from
Session on this tomorrow

43. After the Deal The licensee starts to develop the technology
WIPO EIE Project -- Tehran
After the Deal
The licensee starts to develop the technology
They now have control
TTO much less involved
Annual progress reports
Faculty may be more involved
Consulting
Collaborative research
Grad students employed by company
Relationship starts to change
“Ours” starts to change into “Mine” as they invest more into developing the technology
They’ll start to look for ways to minimize the payments they owe

44. After Commercialization
WIPO EIE Project -- Tehran
After Commercialization
Stay on top of the market
Audit if sales and royalties are substantial
“Trust but verify”
Ronald Regan

45. WIPO EIE Project -- Tehran
Questions?