Home > Topics > The Public Sector and Entrepreneurship > Dealing with Spinout Companies > Editor's Summary, Implications and Best Practices

This chapter provides a practical guide for organizations that want to transfer their IP rights to a spinout company (normally through a licensing agreement) that can convert the intellectual property into products or services for the public’s benefit. Based on three decades of experiences at Stanford University, the chapter identifies some key issues related to negotiating such transfers. These include:

• the general attitude towards spinouts held by a public research organization’s senior administration and governing board
• various licensing considerations
• the use of milestones
• the amount and kind of compensation that should be received for licensing a technology

The chapter also provides guidance on how to best reach a successful agreement. Definitions, infringement responsibilities, sublicensing, and warranties and indemnities are all carefully considered. It also tackles Conflict of Interest (COI) and Conflict of Commitment (COC) issues that inevitability arise when employees of public research organizations become engaged in spinout companies. Clear examples are provided to help policymakers and administrators better understand the issues involved.

Governments everywhere are encouraging the creation of spinouts from IP rights held by public research organizations. Successful spinouts create new jobs, contribute to economic development, and potentially grow into large multi-national corporations. Technology Transfer Offices are key players in this effort, but they should also balance the interests and mission of public research organizations with the objectives of the spinout and the needs of society.

Key Implications and Best Practices

Given that IP management is heavily context specific, these Key Implications and Best Practices are intended as starting points to be adapted to specific needs and circumstances.

For Government Policymakers

• Governments should recognize the long-term importance of technology transfer. Licensing to existing companies and creating new ventures can lead to regional economic development and job growth.
• The government should provide leadership and champion the cause of technology transfer through sound policies and favorable legislation. The 1980 Bayh/Dole Act in the U.S. and the subsequent policies and legislation may provide a useful model. Experience has shown, however, that even with favorable policies and legislation, it can be 10 years or more before significant results will be seen.

For Senior Management (university president, R&D manager, etc)

• Long-term support will be required in order to:
  • operate technology transfer offices or centers that will evaluate invention disclosures, obtain IP protection when appropriate, coordinate the search for people or companies who will develop the invention into products and services, and negotiate and prepare the necessary legal agreements (for example, license agreements for IP rights);
  • cover the costs of obtaining IP rights; and
  • provide funding to convert good ideas into working prototypes. A good idea not put into use is wasted.
• Leadership and public declarations of full support for technology transfer are essential for its success at any institution.
• Professors, scientists, and other sources of innovation should know that their invention disclosures and participation in the technology transfer process help to fulfill the institution’s public service mission.
• A designated professional should have the responsibility of negotiating and preparing industrial agreements for research funding, collaborations, and related relationships with industry.
• Clear, transparent written polices and procedures are needed to provide guidance and incentives so as to facilitate the process of technology transfer.
• To demonstrate the technology transfer office’s importance, it should report directly to upper level administration, for example at the senior vice-president level.

For Scientists

• To collaborate with an institution like Stanford University, you should make a personal contact with a Stanford professor in your area of study and convince this professor of the mutual benefits of such a collaboration. You will need to clearly explain the respective contributions of the parties, the expected term of the collaboration, and the hoped for results.
• If the professor wishes to collaborate, this person will go to the Stanford Industrial Contracts Office, which will prepare a draft Collaboration Agreement. This will propose the basis and terms of the collaboration and will be presented to your institution for review and comment.

For Technology Transfer Officers

• Your job is complex and challenging because you should balance the needs and expectations of many parties: inventors, your office Director, potential licensees, senior institutional management, and the government. Remain responsive to such needs and interests; keep people informed on progress and developments and effectively utilize available resources.
• Over the past few years, a number of helpful manuals and guidebooks have been published with sample forms, agreements and procedures. These include the Association of University Technology Managers “Technology Transfer Practice Manual” (www.autm.net) and the “Operations Manual for a Technology Transfer Organization” (www.techingroup.com).
• Your office should document standard office procedures for handling and processing information and should make use of computer tools wherever possible.
• Recognize the potential of spinout companies for moving university generated inventions and innovations towards commercialization.