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Evaluation and Valuation of Technologies
Evaluation and Valuation of Technologies
Summary and Overview
Key Implications and Best Practices
 Abstract
9.1
Evaluating Inventions from Research Institutions
by Lita Nelsen
Abstract:
The patenting strategies of research institutions are based on three key decisions. The first involves whether or not to file a patent. This decision must be based on sound information about the market, the uniqueness and usefulness of the invention and/or technology, the likelihood of being able to obtain patent protection, factors related to the inventor, and the potentially paradoxical impact of patenting on the institution’s social and humanitarian responsibilities. The second decision involves whether to market the invention to established companies or to develop a spinout business. The third involves how much to charge for a license. Related to all of these decisions is the key question of whether patenting is the most effective route to global access. Negotiating licensing agreements that are fair to the research institution, the private company, and developing countries can be challenging because research institutions may have difficulty determining fair market values. In addition to outlining a process for obtaining these values, this chapter offers some rough numbers for guidance. In general, the author concludes that it is far better to conclude a deal than to wait for the best agreement while fighting interminably for perfect financial terms.
Abstract
9.2
Technology Valuation: An Introduction
by Robert H. Potter
Abstract:
This chapter explains the basics of the various ways of estimating value of a new technology, focusing on the importance of agreeing on the value before finalizing a technology transfer deal. Indeed, value is simply the negotiated amount arrived at between two parties. Although there are many ways to place a value on a technology, most licensing deals focus on royalty amount, since it spreads the risk between the technology provider and the developer. The percentage assigned to royalty has to be negotiated. Several factors will affect royalty value: level of market demand, the improvement the technology can bring to the final product, whether or not other investments will be needed to develop the final product, and, most importantly, the predicted rate of uptake in the marketplace. Some understanding of these factors, or at least the procedures used to estimate them, will enhance one’s ability to negotiate a deal that will both help bring the technology to market and nurture the relationship between the parties, thus facilitating any future technology transfer deals.
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9.3
Pricing the Intellectual Property of Early-Stage Technologies: A Primer of Basic Valuation Tools and Considerations
by Richard Razgaitis
Abstract:
This chapter introduces technology managers to certain key issues and to six methods of valuation and pricing. The value of a technology to a buyer (licensee) depends upon how it is to be commercially employed, taking into account the cost of development, the time the technology takes to generate returns, the extent of such financial returns, and the risk involved in the process. At the time of a licensing/sale transaction of an early-stage technology many, perhaps all, of such factors need to be assessed and quantified by making judgments about how the future will unfold with respect to the technology being developed. This assessment and forecast assessment are the essence of all pro forma business models. Valuing license rights for early-stage technologies is in this sense no different than making other future business forecasts, though the details may differ because the forecast time horizon may be longer, the uncertainties may be greater as to the market size and profitability, the operating performance of the technology as it will be used in commercial operation may be less well defined, and other factors. The price paid for a technology transferred between parties is the amount of money (present and future) and/or the financial value of noncash assets given in exchange for the transfer of the technology, which can only occur if both the seller (licensor) and buyer (licensee) have by some process reached a common, present understanding of value that makes agreement possible.
Abstract
9.4
Valuation of Bioprospecting Samples: Approaches, Calculations, and Implications for Policy-Makers
by William H. Lesser, Anatole Krattiger
Abstract:
In this chapter, the revenue consequences of varying collection fees and royalties with regard to germplasm prospecting contracts are demonstrated. Principal factors are the uncertainty of finding marketable products and the value of these products. Negotiation factors are finding a good balance between collection (initial) fees as opposed to royalty (delayed) payments. Emphasizing collection fees reduces total payments except when national interest rates are very high. Reducing the risk of failure through in-country screening, including the use of indigenous knowledge, is a potentially valuable activity. Issues for contract negotiators are outlined and the implications for biodiversity conservation discussed. Conceptually, the highest valuation approach, royalties, will most encourage conservation, but as the future is typically heavily discounted, collection payments may get more attention and be most effective. Policy considerations for national governments, nongovernmental organization (NGOs), and development agencies are reviewed and it is concluded that grants/loans and training/equipment for in-country screening should be given a high priority as a potentially viable activity in the long term.
It should be noted that the figures and calculations in this chapter are merely for illustration. The valuation of samples, and by extension a country’s biodiversity, is a negotiation and will depend on many factors, including alternative investment options by a company, alternative technologies that could be used for lead compounds, interest rates, and a range of risk factors, such as the political situation in a given country surrounding the national debate on bioprospecting. The latter point is a key factor: valuation is always a calculation that has important political consequences. Another complicating factor is the need for confidentiality with which a country and company will hold its overall business estimates. Neither a company nor a country will be likely to share their valuation basis purely for negotiation purposes and because neither want to tip off other entities about the opportunity. It is therefore concluded that, from a practical perspective, the proper valuation is the one that (1) provides the country with compensation and other benefits such that it does not feel taken advantage of and can withstand criticism from its constituents and (2) provides the licensee (typically a company) with a reasonable cost of obtaining the crucial raw or semifinished goods it requires as an input to its business.
Abstract
Deal Making in Bioprospecting
by Charles Costanza, Leif Christoffersen, Carolyn Anderson, Jay M. Short
Abstract:
There is an upward trend in demand for intellectual property protection in agriculture. While international agreements exist to protect agricultural biodiversity, the specific rights, benefits, and responsibilities of parties entering into commercial agreements that involve the use of genetic resources still must be clarified. This chapter provides practical guidance for creating agreements around the use of biodiversity resources, as well as guidance that may provide valuable insights for creating similar agreements on the use of unique agricultural resources.
Abstract
Intellectual Property and Technology Transfer by the University of California Agricultural Experiment Station
by Gregory D. Graff, Alan B. Bennett
Abstract:
One of the primary missions of the University of California Agricultural Experiment Station (AES) is to create knowledge and develop technologies that improve the productivity and environmental sustainability of agriculture in California. In addition to the public release of information and the educational activities of cooperative extension services, the University of California places the inventions of AES faculty directly into commerce through the process of patenting and technology transfer. This channel is particularly useful—and often essential—when further financial investments are necessary to develop the technology for practical applications or to manufacture, market, and distribute new products that incorporate the new technology. This report documents the patenting and formal technology transfer activities of the University of California Agricultural Experiment Station over the last 40 years.
More than 800 inventions have been reported by AES researchers between 1960 and 2001. These inventions are categorized into the five broad technology areas: biotechnology (49%), plant varieties (19%), chemicals (14%), equipment/machinery (13%), and environmental (1%). Biotechnology inventions were entirely absent until the mid-1980s, but the category has grown rapidly over the last 15 years. The growth in the number of biotechnology-related inventions has occurred not at the expense of inventions reported in the areas of plant varieties, agricultural equipment, or novel chemicals, all of which have shown a relatively stable level of activity.
Financial returns from the licensing of AES inventions was US$1.4 million in fiscal year 1982 (2.5 million in 2001 dollars) but had grown to US$12 million by fiscal year 2001. After accounting for expenses associated with patenting new inventions and distribution of a share of income to inventors, AES inventions returned over US$6 million to the university in fiscal year 2001. Since 1982, the cumulative financial return has totaled US$105.2 million in fees and royalties. About 87% of that income has been derived from the licensing of plant varieties in spite of the fact that they compose only 19% of the AES inventions, indicating the commercial importance of UC plant varieties. To date, relatively few biotechnology- or environmental-related inventions have been commercialized, but the extensive and growing UC portfolio in these areas should provide a strong base for future licensing activity.
Abstract
Introduction to IP Issues In the University Setting: A Primer for Scientists
by Martha Mutschler, Gregory D. Graff
Abstract:
Intellectual property (IP) is inherent to many of the research, teaching, and extension functions of the university, and IP issues can occur in all phases of the corresponding programs. A research program may utilize IP generated and protected by others in its planning and execution phases. As a research program advances, decisions made regarding disclosure of results may affect whether or not discoveries made by the program can eventually be protected.
A successful research program will generate discoveries—and therefore IP—and decisions must be made regarding whether to protect, and how to deploy, those discoveries. The decisions must consider the management of IP as well as the goals and priorities of the research program and the university. It is also important to consider IP in the teaching and extension functions of the university, including the creation or use of written materials, software, networked resources, or designs.
IP and IP issues are not the sole or even the primary focus of a university. However, failure to properly consider IP issues can lead to frustrating and costly problems. Fortunately, realistic and efficient management of IP in research, teaching, and extension requires only a minimal working understanding of the issues and an ability to access on-campus assistance in dealing with them.
This chapter presents basic information that any scientist should know about IP, discusses the importance of IP management in a scientist’s work, and reviews additional sources of information regarding IP. We hope, this chapter will assist the reader in avoiding simple yet costly errors in IP management.
Abstract
IP Strategy
by Robert Pitkethly
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Lessons from the Commercialization of the Cohen-Boyer Patents: The Stanford University Licensing Program
by Maryann P. Feldman, Alessandra Colaianni, Connie Kang Liu
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The Cohen-Boyer licensing program, by any variety of metrics, was widely successful. Recombinant DNA (rDNA) products provided a new technology platform for a range of industries, resulting in over US$35 billion in sales for an estimated 2,442 new products. Over the duration of the life of the patents (they expired in December 1997), the technology was licensed to 468 companies, many of them fledgling biotech companies who used the licenses to establish their legitimacy. Over the 25 years of the licensing program, Stanford and the University of California system accrued US$255 million in licensing revenues (to the end of 2001), much of which was subsequently invested in research and research infrastructure. In many ways, Stanford’s management of the Cohen-Boyer patents has become the gold standard for university technology licensing. Stanford made pragmatic decisions and was flexible, adapting its licensing strategies as circumstances changed.
Abstract
Problems with Royalty Rates, Royalty Stacking, and Royalty Packing Issues
by Keith J. Jones, Michael E. Whitham, Philana S. Handler
Abstract
Specific IP Issues with Molecular Pharming: Case Study of Plant-Derived Vaccines
by Anatole Krattiger, Richard T. Mahoney
Abstract:
The public sector is making substantially increased investments in health technology innovation through public/private partnerships to bring improved health technologies to underserved people in developing countries. These product-development partnerships, however, face a common problem: how to manage intellectual property (IP). Such management involves many issues. In relation to a case study, presented in this chapter, of plant-derived hepatitis B virus vaccine, the challenges involve obtaining freedom to operate, securing new intellectual property, and deploying intellectual property to developing countries. We conclude that while challenges abound, the IP issues are fairly clear and can be addressed with straightforward IP management approaches. The cost of managing the intellectual property is expected to be minimal on the price of the finished vaccine. In the medium term, an IP protection strategy might offset costs and generate modest income. Most important for the partnerships is to develop a clear, transparent IP policy, with emphasis on the licensing principles, so that products can be made available to developing countries at affordable prices.
Abstract
Valuation and Licensing in Global Health
by Ashley J. Stevens
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