Dealmaking and Marketing Technology to Product-Development Partners

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: 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: 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 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: 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: 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: 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: 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: 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: 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: 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: 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:

1. to provide an introduction to options, and their uses, and including legal, practical, and negotiating issues
2. to provide suggested templates along with guidelines concerning completion of the templates
3. 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: 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.

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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 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: 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: 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: 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: 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: 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: 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.