Dealmaking and Marketing Technology to Product-Development Partners
Summary and Overview
Krattiger A, RT Mahoney, L Nelsen, JA Thomson, AB Bennett, K Satyanarayana, GD Graff, C Fernandez and SP Kowalski. 2007. 12: Dealmaking and Marketing Technology to Product-Development Partners. In Executive Guide to Intellectual Property Management in Health and Agricultural Innovation: A Handbook of Best Practices (Krattiger A, RT Mahoney, L Nelsen et al.). MIHR (Oxford, UK), PIPRA (Davis, USA), Oswaldo Cruz Foundation (Fiocruz, Rio de Janeiro, Brazil), and bioDevelopments-International Institute (Ithaca, USA). Available online at www.ipHandbook.org.
© 2007. A Krattiger et al. Sharing the Art of IP Management: Photocopying and distribution through the Internet for noncommercial purposes is permitted and encouraged.
A licensing agreement establishes, in written form, the rules of an ongoing relationship, the success of which will depend on many factors. Mutual trust is one of the factors. Another is the development of a certain dependence based on the value that is being transferred between the parties. As Mahoney1 explains, one party may have a product that can potentially have a very large market, while the other party has research, manufacturing, or distribution capabilities essential to reaching that market. The key to successful negotiation is having a clear understanding of the value each party brings to the relationship. But value is multifaceted. There is an objective value, represented by, for example, how many units can be sold at a certain price yielding a certain level of profit. There are also qualitative values, for example, the additional value assumed to exist when one company feels that a particular product, owned by a second company, would enhance or complete a particular product line.
Perhaps the most important element in a negotiation is to be clear—internally and in discussions with the negotiating partner— about the benefits that will or could be realized through a license agreement. Only with a clear understanding of the transfer of value can both parties intelligently and fairly negotiate an agreement. Mahoney discusses this along with numerous suggestions for successful licensing negotiations, including the following:
- In general, the public sector organization should consider offering the first draft of a licensing agreement (the draft needs to cover a number of topics of particular concern to public sector organizations that would probably not be addressed by a company).
- The use of a term sheet that lists the major issues expected to arise in the negotiations should be shared ahead of time indicating the outcome that the proposing party hopes to achieve. Such a sheet could also include the needs and wants (in other words, the must-have terms and the desired ones) of each party.
Furthermore, says Mahoney, negotiating such agreements requires talent, expertise, and sound tactics that cover the following areas:
- business strategy. The business strategist is usually the lead negotiator with considerable experience in structuring business relationships, assembling the inputs of other experts, and maximizing the benefits to all parties.
- marketing. Market analysis is essential to negotiating a good agreement. Failure to carry out such an analysis is dangerous because it can lead either to overestimation or underestimation of the market potential, which, in turn, can lead to a suboptimal agreement or rejection of an agreement that could have been successful.
- legal inputs. A lawyer should be retained at least to review agreements and, more appropriately, to be part of the negotiating team and possess intellectual property (IP) expertise and valuation skills, understand knowledge of freedom to operate issues, and be able to access country-specific legal advice.
- scientific and regulatory. A negotiating team must have scientific expertise and detailed knowledge about regulatory issues, product safety, and related matters
- production. Staff members who can contribute their knowledge about required production equipment and good manufacturing processes as well as their understanding of time lines, cost implications of various manufacturing processes, and so forth should be involved in the licensing negotiation.
- finance. A careful financial assessment of the project is essential, even before negotiations. The assessment often can help the business strategist determine options for approaching a deal, to decide which new funds will be required to launch and sustain the project, and so forth.
In addition, Mahoney illustrates specific best practices for public sector entities to meet public sector goals. These are summarized in Table 1 and serve as guidelines for public sector organizations striving to widen and improve access to innovation through various licensing strategies. Price is probably the most difficult area for a licensor to get involved in.
Up to this point we have dealt with the overall strategies and best practices used to meet public sector goals. The chapter by Mongeon3 provides a broad overview of marketing tactics as a way of understanding what buyers need and how to meet those needs. In essence, he invites the reader to think of marketing not as simply a way to push technologies into the market rather than a way of allowing the needs of buyers to pull them in. Indeed, marketing is not merely advertising or selling. Rather, marketing is a multistage process: first, the essential characteristics or benefits of a technology must be quantified; next, people who would find these characteristics or benefits desirable and therefore be willing to pay for them must be identified; and finally, the benefits of the technology must be communicated clearly and compellingly to those potential users. Mongeon offers five basic marketing questions that would-be licensors will need to address:
- Who will buy the technology? Will the purchasers be producers or consumers?
- What does the buyer of the technology want? What characteristics, qualities, or capabilities of the technology are valuable to the buyer, and how valuable are they?
- Why would a party choose to license or purchase a technology? What is particularly compelling about it?
- Where are potential users of the technology located? In which markets? Through which channels can they be reached?
- When can you sell the technology to buyers? Is the technology so new that the market is not yet receptive to it?
The answers to these questions should guide a marketing plan and be supported through market research. Such research may even reveal that a technology can be used in a completely new and unexpected way in a previously unanticipated market. Perhaps the most important advice this chapter has to offer scientists and technology managers is that the “unique selling proposition” of a technology—that is, the features, advantages, or benefits that it offers the user—is rarely the science behind the technology. Good marketing makes a technology understandable and attractive to buyers, then allows their demand to draw the technology into the market.
But how does one “find” potential licensees? And how should one approach them? Marketing workshops tend to suggest a haphazard mix of different tools and strategies that may or may not work. For these reasons, MacWright and Ritter4 offer a detailed and systematic approach to technology marketing (which is different from product marketing). The chapter contains many models for establishing contacts and prioritizing these according to specific criteria, as well as numerous worksheets that will help plan for different marketing approaches.
Source: Modified from Mahoney2
In essence, the marketing approach comprises four basic steps:
- Collect information about the invention from the inventors.
- Collect information from potential clients.
- Review and prioritize your prospective client list.
- Make contact with potential clients.
It is relatively easy to sell a finished product, such as shoes, and more difficult to sell a technology to make better shoes. It is even more difficult to sell (or license) the intellectual property for making better shoes, especially if the intellectual property has not yet been proven in a productive process. For this reason, university technology managers in particular often find it difficult to license individual patents. Burdon5 thus argues that universities could gain a lot by pursuing a portfolio approach, or rather, an integrated intellectual property management (IPM) approach that blends sophisticated IP data search-and-analysis techniques with continuous product improvement.
At the highest level, an integrated IPM approach is differentiated into strategic and tactical decision-making. Strategic decision-making is a broad analysis; tactical decision-making analyzes specific products or technologies in a known competitive landscape. Each approach to managing IP portfolios requires different types of tools, searches, and analyses, ranging from very broad technology scans to very specific patent infringement or validity searches. Importantly, attention should be paid to how data analysis can be integrated with a product innovation process, how to identify new opportunities or resolve old problems (that may also lead to the amendment of patent applications). Perhaps the most important reason for an IPM approach is that it enhances understanding of the processes in which licensees are engaged and how a licensed technology would support their endeavors, thus reinforcing Mahoney’s earlier points on the importance of integrating business strategy, marketing, scientific and regulatory expertise, and so forth.
Unfortunately, inventions by universities are generally not developed in response to market needs, which presents challenges for technology transfer offices (TTOs). Keiller6 addresses this challenge and stresses the importance of having a clear sense of the IP goals and IP strengths of one’s own institution. An IP audit7 is a useful way to improve an institution’s marketing prowess, because it identifies and classifies an institution’s intellectual property, whether it is owned, licensed, or simply possessed. Unless the technologies, their IP status, and their respective levels of development are known, at least to some extent, it will be difficult to persuade others to pursue a license deal. Keiller describes a range of marketing approaches and shares persuasion techniques. In short, marketing packages should be tailored to accommodate customers’ needs, the benefits of the invention should be emphasized, effective time management must be adopted, and above all, contacts must be followed up on.
It is important with any IP management activity to be clear about the context in which it occurs. For example, dealing with a small company will require a fundamentally different approach than would be taken with a large one. Dealing with an agricultural company will require a different approach than would be taken with a pharmaceutical company. Neagley8 describes in-licensing strategies (and typical terms) as they apply to small agri-biotechnology companies that typically depend on strong IP portfolios. IP portfolios are the foundation for their R&D, encouraging outside investment and making product commercialization possible. In-licensing is especially important as it allows a company to obtain IP rights without having to invest in research.
Neagley discusses the entire range of provisions in a typical license agreement, including:
- exclusive versus nonexclusive
- enabling technologies versus traits versus plant materials
- rights granted to the licensee (covering such topics as sole licenses, coexclusive licenses and territoriality)
- compensation due to the licensor
- liability, diligence terms, and milestones,
- the licensee’s responsibilities vis-à-vis the patent
- license term and termination
- issues of assignability
Importantly, compensation may be a combination of fixed fees, which can be paid up-front and/or periodically, and earned royalty fees. Both the level and timing of compensation are important to the company with respect to its planning and budget. In determining what compensation it is willing to pay, the company will need to estimate the potential value of the licensed technology and assess the potential value of any commercialized products that might be developed under the license. But compensation may also take nonmonetary forms: stock in the licensee company, an exchange of license grants, a cross-license arrangement, or a grant-back to the licensor (grant-back is compensation that involves the licensee granting the licensor rights to future inventions made by the licensee using rights received from the licensor).
Dunn, Lund, and Barbour9 share the approaches of a multinational agri-biotech company with emphasis on market and policy factors that influence and constrain agricultural companies regarding how to market technologies to them, and on what these companies look for in terms of license agreements.
Early-stage agricultural technologies, whether they are genetically modified technologies or conventional ones, can be risky because they may not have commercial applications or they may fail to receive regulatory approval in the necessary markets. Gaining regulatory approval can be a slow and costly process. In addition, a low marginal revenue is made on agricultural inputs, and there are only a handful of crop species with sufficient acreage to generate the necessary returns to warrant significant investments in regulatory clearances. For these reasons, a few large corporations develop most transgenic technology; only they have the necessary capital and can assume the high risks involved.
For a university to market its technology successfully to a large company, it is useful to have good contacts inside the company, someone who is willing to accept the risk and “sell” the deals internally. Indeed, the value of networking cannot be overstated. For any company, though, the value of a new technological opportunity is determined by the risk involved, the additional investments required to develop the technology (and the corresponding opportunity costs), and the type of technology in question.
These concepts are further explored by Edwards10 who surveyed deals made by biotechnology and pharmaceutical companies during the last ten or so years and analyzed the types of alliances and their terms. The four characteristics of an alliance that generally defines the allocation of value of a technology between an originator and a commercial partner are:
- the stage of development of the technology
- the role retained by the licensor in product supply or other ongoing activities
- the size of the market opportunity
- the scope of the market granted to the development partner
Because biotechnology companies have become highly specialized, it is no longer necessary, or even possible, for any one company to be involved in every stage of the R&D process. Up to half of the product candidates in pharmaceutical companies’ R&D pipelines originate from elsewhere, and 60 to 80 percent of the leading therapeutics on the market were developed or distributed through some form of alliance.
Edwards shows that universities and research institutes are a significant source of early-stage technology, drug leads, and, occasionally, more mature technologies. A biotechnology company with the appropriate business model is most likely to find early-stage technologies and drug leads attractive. Once smaller biotechnology companies have developed technologies and drugs, they will probably need to enter into alliances with larger pharmaceutical companies in order to conduct clinical trials on, commercialize, and then market these products. A university developing a more mature technology might ally itself directly with larger pharmaceutical companies. Empirical evidence shows that the more mature the technology is when an alliance agreement is assigned, the more profitable that technology is for the technology provider.
Edwards goes on to discuss some of the fundamental terms found in biotechnology alliance agreements such as fixed fees, reimbursement of expenses, development milestones, equity investments, and royalties, as well as the terms for other, more specialized, types of postcommercialization payments. No matter whether a university wants to join a commercialization alliance itself or license an innovation to a biotechnology company that is allied to other companies, it is essential for university TTOs to understand and influence the terms of the alliance agreements in order to protect the value of their intellectual property.
Finally, Shotwell11 integrates the ideas of this section in a discussion of a core theme of the Handbook: how public sector and nonprofit efforts can utilize intellectual property to achieve their goals in serving society. To illustrate this important point, the chapter focuses on product development partnerships (PDPs) and their innovative IP strategies. PDPs, in essence, facilitate and accelerate the flow of public and philanthropic investment through the innovation pipeline, to a far greater extent than has been typical of universities alone.
With a two-pronged approach of product specialization and taking advantage of the efficiencies of the larger marketplace for technologies, PDPs strategically mobilize intellectual property. Investments are made in a new product technology to advance it through the stages of development. This happens within the overall marketplace through the selective targeting of projects based upon their risk–reward profile. Using this approach, the measure of “reward” is not returns to the organization, but rather the potential impact on social welfare that the new drug or vaccine might have.
There are certain similarities between PDPs and biotechnology companies. Both occupy a similar niche in the innovation pipeline. Both share many IP goals. Both seek to maintain an appropriate mix of access and exclusivity to innovations, in order to have sufficient freedom to operate and sufficient bargaining power to implement the overall strategy of their organizations. There are also similarities between the IP strategies of PDPs and public research institutions. Both PDPs and public research institutions use intellectual property to entice or leverage private investment, enhance access to other intellectual property, build partnerships, and cultivate political goodwill to advance their missions.
Just as there are several business models used by the biotechnology industry, so there are several business models used by PDPs. The business model that a PDP chooses will depend on the technologies it deals with, the stage of development of the technologies, and the nature of the market. One factor that determines which kind of business model a PDP or any other entity will adopt will depend on whether or not the product being developed is potentially profitable and can therefore attract the interest of for-profit companies. Sound IP strategies and product development partnering also will uncover opportunities to use new technologies to benefit those who are traditionally excluded from markets.
Endnotes
1 Chapter 12.1 by RT Mahoney titled Negotiating an Agreement: Skills, Tactics, and Best Practices, p. 1155.
2 Ibid.
3 Chapter 12.2 by MD Mongeon titled An Introduction to Marketing Early-Stage Technologies, p. 1165.
4 Chapter 12.3 by RS MacWright and JF Ritter titled Technology Marketing, p. 1173.
5 Chapter 12.4 by J Burdon titled IP Portfolio Management: Negotiating the Information Labyrinth, p. 1195.
6 Chapter 12.5 by TS Keiller titled The IP Sales Process, p. 1203.
7 See Chapter 5.6 by M Blakeney titled Conducting IP Audits, p. 515.
8 Chapter 12.6 by CH Neagley titled Patent Licensing for Small Agricultural Biotechnology Companies, p. 1213.
9 Chapter 12.7 by M Dunn, B Lund, and E Barbour titled Business Partnerships in Agriculture and Biotechnology that Advance Early-State Technology, p. 1221.
10 Chapter 12.8 by MG Edwards titled Biotechnology and Pharmaceutical Commercialization Alliances: Their Structure and Implications for University Technology Transfer Offices, p. 1227.
11 Chapter 12.9 by SL Shotwell titled Product Development and IP Strategies for Global Health Product Development Partnerships, p. 1247.
 Abstract
Biotechnology and Pharmaceutical Commercialization Alliances: Their Structure and Implications for University Technology Transfer Offices
by Mark G. Edwards
Abstract:
Understanding biotechnology and pharmaceutical commercialization alliances in the context of several evolving business models has implications for university technology transfer offices (TTOs), as well as for public policy-makers intending to promote biotechnology regionally. This chapter identifies the principal structural and economic elements of biotechnology and pharmaceutical commercialization alliances and the factors that influence partner selection for a particular alliance. The four characteristics of an alliance that generally define the allocation of value between an originator and a commercialization partner include stage of development, product supply, market opportunity, and scope. The chapter explains the types of economic terms typically found in biotechnology alliances and makes an empirical analysis of the economic terms from a sample of biotechnology alliances established between 1981 and 2000. Four specific alliances entered into at different stages of development are detailed as case studies. Several recommendations are provided for university TTOs, along with guidelines for drafting commercialization alliances.
Abstract
Business Partnerships in Agriculture and Biotechnology that Advance Early-State Technology
by Martha Dunn, Brett Lund, Eric Barbour
Abstract:
Given the expertise of large agricultural companies with respect to product development from cutting-edge research, these companies often choose to in-license technologies from small biotechnology companies and universities rather than relying solely on in-house efforts. This chapter provides an overview of the interest of large industry players in sourcing early-stage technologies from companies, how best to communicate those opportunities to companies, and what to expect in terms of valuing the technology and structuring a licensing deal. Large companies are generally interested in creating new products or new technologies that are commercially viable and that help establish sustainable agricultural economies. But, in addition, they generally support providing products and technologies that bolster subsistence farming and humanitarian efforts, while recognizing the need to protect the company’s intellectual property against unauthorized uses for commercial or other unintended purposes.
Abstract
An Introduction to Marketing Early-Stage Technologies
by Marcel D. Mongeon
Abstract:
This chapter describes marketing concepts and how to use them to create marketing plans for newly developed technologies in the health and agricultural sectors. The traditional marketing model invokes the “four Ps” of marketing: product, price, place, and promotion. This chapter, however, concentrates on the “five Ws” of marketing, which are more relevant to early-stage technologies: who? what? where? when? and why? The author then discusses the concept of the unique selling proposition (USP) and, finally, considers the marketing of technology transfer activities, or internal marketing.
Abstract
IP Portfolio Management: Negotiating the Information Labyrinth
by Jeremy Burdon
Abstract:
The management of intellectual property is all about managing innovation with the procedures and processes that are required to turn that innovation into valuable patent rights. A truly strategic approach to IP management will span conception to product market release. Integrating IP management into the R&D, advance development, and product development cycles seamlessly provides opportunities to gain and enhance IP protection while offering the potential to reduce risk and lower costs. The following chapter discusses some of the key elements of IP portfolio management and how the combination of the right IP tools, procedural know-how, and organizational attributes and behaviors can contribute to successful implementation.
Abstract
The IP Sales Process
by Todd S. Keiller
Abstract:
Marketing an institution’s intellectual property (IP) is essential but challenging work. This chapter provides helpful information about how to locate potential licensees, how to determine whether or not they are qualified to manage a particular technology, and how to persuade them to begin licensing negotiations. The chapter stresses the importance of self-knowledge: having a clear sense of your institution’s own IP goals, as well as the institution’s strengths and weaknesses. Having this awareness makes it possible for a technology transfer office to choose wisely when it evaluates the strengths and weaknesses of potential marketing targets. Indeed, the chapter, rather than simply providing a basic overview of the marketing process, offers concrete suggestions and tough questions for those who aim to successfully market academic intellectual property.
Abstract
Negotiating an Agreement: Skills, Tactics, and Best Practices
by Richard T. Mahoney
Abstract:
License negotiations involve substantial real or potential value. They therefore should be supported by a team of experts. The essential skills and expertise needed for conducting successful negotiations include: business strategy and development for leading the negotiations, marketing for estimating commercial potential, law for evaluating IP and patents and carrying out a variety of related tasks, science and medicine for evaluating new and potential health products, manufacturing and production know-how to determine equipment and additional training needs, and finance for analyzing input from other experts on the team to combine into a comprehensive report. The strength of such a team is in its interdisciplinary composition; each of the skill areas can complement the other. From the perspective of international licensing, licensors can seek to improve the availability of health products in developing countries, possibly moving from the “traditional” approach to licensing toward one that incorporates public sector needs. The best approach for a public sector organization negotiating an agreement with a private sector entity is usually to offer initial terms that the organization would be willing to agree to if it were on the other side of the table. Negotiating a fair licensing agreement should not be seen as a process of “bargaining.” Rather, a licensing agreement is establishing, in written form, the rules of operation for an ongoing relationship where mutual trust and confidence will be necessary for success.
Abstract
Patent Licensing for Small Agricultural Biotechnology Companies
by Clinton H. Neagley
Abstract:
A small agricultural biotechnology (agri-biotech) company needs to establish a strong IP portfolio. Such a portfolio provides a foundation for R&D, encourages outside investment and funding, and supports product commercialization. An important step in establishing an IP portfolio is in-licensing patent rights from third-party patent holders. Nonexclusive licenses typically give a company freedom to operate and open up the possibility of creating commercializable products. Exclusive licenses give a company an exclusive position for commercialization under the patents in question.
This chapter discusses in-licensing as it applies to small agri-biotech companies. It describes the types of technologies that may be subject to in-licensing, the procedures attendant upon in-licensing, and the terms that may be delineated by in-licenses.
Abstract
Product Development and IP Strategies for Global Health Product Development Partnerships
by Sandra L. Shotwell
Abstract:
The mission of global health product development partnerships (PDPs) is to develop effective, affordable health products and make them available and affordable to those in need. The not-for-profit product development partnerships (PDPs) often seek for-profit partners to access essential technology, expertise, and resources. These may be early-stage companies, leveraging philanthropic and government resources to develop a platform technology or established companies building out from existing markets or testing new technologies. Such not-for-profit/for-profit partnerships require unique product development and IP (intellectual property) strategies that both recognize the company’s need for commercial benefit and deliver important health products to developing countries.
Abstract
Technology Marketing
by Robert S. Macwright, John F. Ritter
Abstract:
Finding out how to market your technology to potential licensees can be a perplexing process. There is no common consensus about how to approach technology licensing, and workshops on the topic tend to offer a haphazard mix of tools and strategies that cannot be applied generally. This chapter emphasizes the importance of actively marketing your technology. It offers a systematic marketing approach supported by numerous models for contacting and prioritizing your contacts. The chapter also includes numerous helpful worksheets to guide and focus your approach. By following the steps laid out in this chapter, you will have learned a great deal about the market for your “merchandise,” its potential licensees, and its value. You may have even found a licensee!
Abstract
The Activities and Roles of M.I.T. in Forming Clusters and Strengthening Entrepreneurship
by Lita Nelsen
Abstract:
This chapter describes the structure, policies, and operations of the Technology Licensing Office at the Massachusetts Institute of Technology (M.I.T.). The chapter emphasizes the licensing office’s role in generating spinout companies and considers the importance of the biotechnology cluster within the state of Massachusetts and it’s surrounding regions. Also discussed is M.I.T.’s approach to ensuring that licensing procedures maximize access to medicines and vaccines arising from M.I.T.’s research.
Abstract
A Checklist for Negotiating License Agreements
by Donna Bobrowicz
Abstract:
This chapter provides a road map for licensing professionals to identify the most common terms, contractual obligations, and other provisions that are likely to be encountered in crafting a license agreement. Emphasis is placed on agricultural technology licenses. Since most people engaged in deal making are involved in multiple deals at the same time, important aspects can be forgotten or overlooked at any time and for any deal. The checklist format allows the licensing practitioner to check off each item once it has been addressed to the parties’ satisfaction. While expansive, it does not necessarily fit all contexts and is therefore intended to serve as a basis from which institutions and individuals can develop their own checklists.
Abstract
Commercialization Agreements: Practical Guidelines in Dealing with Options
by Mark Anderson, Simon Keevey-Kothari
Abstract:
An option to acquire rights in university intellectual property (IP) may be encountered in several guises: as a stand-alone agreement, as a clause within an agreement (for example, a sponsored research agreement or a material transfer agreement), or as a “pipeline,” or IP framework, agreement for a university spinout company. Although the grant of an option may often form quite a small part of a larger agreement, the grant can raise important issues in terms of an organization’s IP commercialization strategy. This is especially true of pipeline agreements that are, effectively, a specialized form of option agreement. The purpose of this chapter is threefold:
- to provide an introduction to options, and their uses, and including legal, practical, and negotiating issues
- to provide suggested templates along with guidelines concerning completion of the templates
- to consider and discuss some of issues that are problematic or of particular concern to universities.
The chapter attempts to provide information that is useful for both the beginner and the experienced research-contracts or technology transfer professional. The breadth of material covered may give the mistaken impression that university contracts are wrought with legal and commercial difficulties. Usually, this is not the case. But sometimes differences of expectation, practice, or legal culture can arise between parties negotiating an agreement, particularly in international transactions.
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
IP Strategy
by Robert Pitkethly
Abstract
Lessons from the Commercialization of the Cohen-Boyer Patents: The Stanford University Licensing Program
by Maryann P. Feldman, Alessandra Colaianni, Connie Kang Liu
Abstract:
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
The Making of a Licensing Legend: Stanford University’s Office of Technology Licensing
by Nigel Page
Abstract:
The history of technology transfer at Stanford goes back to an initial pilot program launched by Niels Reimers in 1970, a program that put the university in an excellent position to take advantage of the Bayh-Dole Act. Enacted in 1980, the act gave U.S. universities ownership of any patents developed using federal funds. Today, Stanford University and successful technology transfer are almost synonymous. But success is more than just a matter of timing. Stanford’s Office of Technology Licensing (OTL) takes a flexible, broad outlook on the development of its intellectual property that has made Stanford a favorite business partner. This chapter reveals the secrets behind the success of Stanford’s OTL.
Abstract
The New American University and the Role of “Technology Translation”: The Approach of Arizona State University
by Peter J. Slate
Abstract:
This chapter provides a conceptual overview of Arizona State University’s mission, and explains how the university’s “technology translation” efforts support that mission. The chapter offers a rationale for why effective technology translation and commercialization are economically and socially relevant. A case study illustrates how a program established by Arizona State University’s technology commercialization group has led to significant returns for the university and the local community. The authors conclude that public and private institutions in both developed and developing countries can implement the concepts and strategies for technology commercialization described in the chapter.
Abstract
Parallel Trade: A User’s Guide
by Duncan Matthews, Viviana Munoz-Tellez
Abstract:
This chapter provides guidance about parallel trade to developing country policy-makers and other stakeholders in intellectual property. What is parallel trade? And how can it be utilized to promote access to medicines and support poor farmers in developing countries? Engaging in parallel trade is an option provided by the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) under the World Trade Organization. Furthermore, the 2001 Doha Declaration on TRIPS and Public Health confirmed that developing countries could use parallel imports to support public health. As a result, developing countries can ensure access to lower-priced patented and/or branded products, such as medicines and basic agricultural inputs, by incorporating legislation to allow for parallel imports. When implementing measures to facilitate parallel trade, developing countries can establish and maintain an effective system by adequately regulating the quality, safety, and health of parallel imports. At the same time, developing countries need to prevent low-priced patented products available in their countries from entering high-priced developed country markets.
Abstract
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
The Role of Technology Transfer Intermediaries in Commercializing Intellectual Property through Spinouts and Start-ups
by Tim Cook
Abstract:
Intellectual Property (IP) can be commercialized via free distribution or licensing, or through new companies that develop and exploit it. These new companies are called spinouts, or start-ups. Establishing successful spinouts and start-ups requires a solid business plan, coordinated teams of professionals who share a common vision, a respected managing director, and technology transfer intermediaries. Intermediaries help bridge the cultural divide that often exists between the generators of intellectual property and the new companies.
Abstract
Successful Commercialization of Insect-Resistant Eggplant by a Public–Private Partnership: Reaching and Benefiting Resource-Poor Farmers
by Akshat Medakker, Vijay Vijayaraghavan
Abstract:
This chapter looks at the results of a unique public–private partnership instituted to provide resource-constrained farmers in the developing world with access to proprietary agri-biotechnologies. Eggplant, a widely consumed vegetable crop in the tropics, is commonly infested by the eggplant fruit and shoot borer (EFSB), which devastates both plants in the field during development and eggplant fruits after harvesting. The chapter considers the application of insect-resistance technology (based on the Cry1Ac protein from Bacillus thuringiensis) in eggplant, focusing on its sublicensing from a private company to a partnership of public institutes and agricultural universities in Bangladesh, India, and the Philippines.
Abstract
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.
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