1. Unconventional Financing of Intellectual Property: Patent Donations Varda N. Main Associate Director, Intellectual Property Rochester Institute of Technology LES 2001 Annual Meeting

2. V.N. Main – RIT – LES 2001 Annual Meeting What’s driving unconventional financing of IP? Increasing importance of realizing shareholder value from ALL assets

3. V.N. Main – RIT – LES 2001 Annual Meeting Means of Leveraging IP Direct sale Use in product/service Expect to use in future product/service License out Depreciate asset Donate to a not-for profit Dedicate to the public

4. V.N. Main – RIT – LES 2001 Annual Meeting When to Consider Donating Patents Technology is not being used in a product or service Technology is not expected to be used by the company in future Licensing revenues do not (or would not) realize sufficient ROI Technology status after M&A activity

5. V.N. Main – RIT – LES 2001 Annual Meeting Patent Donor Eligibility Company must be profitable Company must have tax liability An independent party must conduct an IP valuation within 3-6 months Technology must be viable

6. V.N. Main – RIT – LES 2001 Annual Meeting Intended Use by Not-for-Profit Fit with existing research programs Complements existing IP portfolio Recipient must take undivided interest in donated patent Recipient must use the donated patent in accordance with its NFP status

7. V.N. Main – RIT – LES 2001 Annual Meeting Decision Considerations for IP Donor Perform due diligence to ensure – Not using the IP – Don’t intend to use the IP – Understand any encumbrances on the IP – Understand status of patent protection

8. V.N. Main – RIT – LES 2001 Annual Meeting Donor Benefit Corporate benefit = (Effective tax rate of corporation)(IP valuation) – (Costs of donation process)

9. V.N. Main – RIT – LES 2001 Annual Meeting Valuation of IP The fair market value of the patents to be donated must be established by an independent third party – Experienced in such valuations – Conducted typically within 3-6 months of execution of donation agreement

10. V.N. Main – RIT – LES 2001 Annual Meeting Benefits to Patent Donor Tax write-off based on estimation of fair market value Establish closer ties with faculty and students – Prospective future employees Enhance company image – In the community – With the university Enhanced ROI Alternate source of funds for technology development Release from payment of future maintenance fees

11. V.N. Main – RIT – LES 2001 Annual Meeting Decision Considerations for NFP Fit with current research areas Finding a technical champion Projected future patent expenses – Prosecution – Maintenance Expectation for revenue streams: – Licenses – Grants – Contracts – Sponsored Research

12. V.N. Main – RIT – LES 2001 Annual Meeting US Patent Maintenance Fees Year Large Entity Fee ($) Small Entity Fee ($) 3.5880440 7.520201010 11.531001550

13. V.N. Main – RIT – LES 2001 Annual Meeting Benefits to Recipient Additional technology in IP portfolio Complementary IP to existing IP Enhanced relationship with patent donor Potential source of research funds, equipment and technical consulting Prospect for enhanced revenue streams through technology transfer

14. V.N. Main – RIT – LES 2001 Annual Meeting Who Approaches Whom? Company >>> university University >>> company Local economic development organization >>> company >>> university

15. V.N. Main – RIT – LES 2001 Annual Meeting Soliciting Recipients Donor may choose to solicit recipient candidates – Establish bid process – Selection criteria – Typically require proposal from candidates

16. V.N. Main – RIT – LES 2001 Annual Meeting Recipient Candidates Universities NFP research institutions Think tanks Federal, State and Local technology transfer centers

17. V.N. Main – RIT – LES 2001 Annual Meeting What to Look for in a Recipient Technically qualified On-going research in the field Proven ability to bring technologies to the marketplace; specifically in that field Existence of a technical champion at the recipient organization

18. V.N. Main – RIT – LES 2001 Annual Meeting Parallel Donation In conjunction with donation of patents there can be parallel donations of: – Know-how – Show-how – Equipment – Trademarks – Copyright

19. V.N. Main – RIT – LES 2001 Annual Meeting Donation Agreement Resources to be provided by donor – Help with patent preparation, prosecution and enforcement – Payment of maintenance fees for limited period – Provision of funds for technology development, equipment and personnel at recipient

20. V.N. Main – RIT – LES 2001 Annual Meeting Donation Agreement Resources to be provided by recipient – Commitment to maintain patent for specified period – Agreement to assume/honor existing licenses/options – Indemnification of donor – Commitment to seek licensees – On-going research program

21. V.N. Main – RIT – LES 2001 Annual Meeting Patent Donation Patent donation can be a win-win situation for patent owners, not-for-profit organizations and the ultimate end-users of technology