Your source for expert commentary on IP management issues.
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Editor-in-Chief, Anatole Krattiger
Why This Topic Is Important
This section addresses the crucial step of determining what, if anything, the commercial use and value of
a piece of IP-protected technology or genetics might be. The primary lessons of this section are that such
value is highly uncertain and difficult to assess. Yet, an understanding of the issues and methods involved
provides central insight into the nature of the problem of transferring technology from a scientific
laboratory to the market.
Key Implications and Best Practices: Section 9
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.
- A combination of royalties and equity stakes is a particularly effective way of splitting risk between two parties. If a technology does not deliver, then the seller receives only the equity stake, and the buyer does not need to pay any future cash. Another way to distribute the risk fairly is to discount expected returns with an appropriate milestone rate.
- Many valuation approaches exist. none is perfect. Considering that each deal is highly context specific, each technology transfer office should be able to select the best approach and adapt it to the specific circumstances.
- Licensing is always risky and no deal will be perfect. it is often better to make an imperfect deal than none at all.
- When devising a patenting strategy, you will need to make three decisions: First, should you seek patent protection? Second, what is the best patent-marketing approach? Third, what license fees or royalties ought to be levied?
- Since there is no single best way to assess the value of a technology, all parties should agree on the valuation method to be used.
- Probabilistic modeling software can aid pricing efforts. The most effective software is expensive and may not be a good investment if fewer than 100 deals are made per year. Quite often the best approach is to get as many licenses as possible completed in a short period of time, even if an individual license does not provide the maximum possible income. The more licenses, the higher the probability that one, or a few, will generate returns.
- Putting a “price tag” on an invention early on is difficult, if not impossible. Fortunately, the full value of an invention need not be determined when the invention is transferred or licensed, as value can be realized later through the use of running royalties, fixed payments, common stock (equity), R&D funding, lab equipment, consulting services, grant backs, or access to other proprietary resources. For public sector organizations, in-kind contributions may sometimes be particularly appealing.
Evaluating Inventions from Research Institutions
by Lita Nelsen
Pricing the Intellectual Property of Early-Stage Technologies: A Primer of Basic Valuation Tools and Considerations
by Richard Razgaitis
Technology Valuation: An Introduction
by Robert H. Potter
Valuation of Bioprospecting Samples: Approaches, Calculations, and Implications for Policy-Makers
by William H. Lesser, Anatole Krattiger