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Varda N. Main
Director, Technology Licensing Office Rochester Institute of Technology
Licensing
In the broad sense, is a discipline that makes it possible to transfer technology from a proprietor (the licensor) to an interested purchaser (the licensee) in a well defined and effective manner
Trade Secret
Know-how Show-how
Emerging Trends
Technology development time decreasing Technology development costs increasing Growing importance of alliances Regulatory environment becoming more stringent Corporations licensing in more
Opportunity:
More customers for embryonic technologies
Global Issues
Knowledge moves quickly around the world Increase in industrial/academic espionage Trade agreements: GATT, NAFTA New trading blocks: EC, E. Europe, N. America Move to patent harmonization
Historical Context
Availability of R&D funds decreasing Competition for R&D funds increasing Universities seeking additional avenues to fund R&D
Result:
Emergence of Technology transfer function in university community
Why Interest in IP
IP protection adds value and increases lifetime of that value Communication between lab and marketplace
Idea >> concept >> reduction to practice >> prototype >> scale-up >> productization Direct application by IP owner Sale of IP to another entity who then productizes License of IP to licensee(s) Public disclosure of IP
Technology Transfer
Collaborative process whereby the products of R&D flow from a source to the (next) user Numerous transfer options including:
Types of Licensing
To sell
Types of Licenses
Exclusive - there can only be one licensee; the licensor has no rights to exploit the technology/product Sole - exclusive but for the licensor; i.e., the licensor has rights to exploit the technology/product Non-exclusive - there is no limit to the number of potential licensees
Licensing Strategy
Position in technology life-cycle Presence/absence of competition Technical, financial and marketing strengths of the parties Legal, political, and cultural environments Protection of proprietary information Grantsback Remuneration hoped to be realized over the term of the license
Types of Licenses
Irrevocable/Revocable for cause Territory: World-wide/Limited to named geographic regions Field of use: Market-specific Royalty-bearing/Royalty-free
Technical performance obsolescence Technical feature obsolescence Cost obsolescence Safety obsolescence Shifts in consumer preferences
Perception of business risk. Whos bringing what to the table? What are the 3 points of difference for the technology/opportunity? What would make a user switch to this product/process/service? What is needed to bring this to the commercial marketplace?
Importance of Timing
Commercialization and patent prosecution timelines must coincide - Window of Opportunity Understand the technology & IP life cycles Understand the impact of competing technologies (i.e., first to market) Durability of competitive advantage Fit with business or corporate strategy
Licensing need to be win-win situations What must the licensor do to ensure that the licensee will be able to fully use the licensed technology? How to identify all the know-how, show-how and technology needed by the licensee? What other information may be needed in negotiating a technology transfer?
There is no real strategy unless there are at least two interested parties Its all in packaging to attract partners Must find common ground Essential to understand needs of all parties Dont get caught up in but my needs are
Why License?
to make money to help sell products, services, equipment to obtain technology via grantback to secure a market to settle a patent dispute cross-licensing of other, existing technology rights to future technology to buy continued development of the licensors technology
Why License?
to acquire marketing strength, capital and market assets or an interest in them. to reduce capital requirements for reaching a market. to adapt a product to a local market to reach fields of use outside the licensors normal purview to avoid waste of by-product technology to profit from residual value in an old technology to fulfill local laws to avoid antitrust/anti-competition or trade regulation problems
Why License?
to obtain rights to technology to supplement the licensees R&D to obtain continuing access to technical help to benefit from the good reputation of the licensor by gaining ability to use its trademark to obtain quick entry without cost and technology risks to obtain access to the licensors facilities
tariff regulations taxes potential nationalization political instability capital to start foreign production foreign patent laws availability of materials and staff quick return to licensor access to/acceptance with foreign markets
To avoid risk of establishing a future competitor To make potentially bigger profits from direct sales at higher risk and capital cost To retain direct control over product liability exposure To retain direct control over product quality To retain direct control over know-how dissemination
Licensing
Licensors perspective
ensure that licensee is only acquiring those rights which are necessary and which do not restrict licensor from making other uses of the technology restrictions to be placed on use of technology is this an international transaction what protection exists for technology in foreign jurisdiction what rights does a foreign national have to enforce rights to the extent that any third party material is incorporated in the technology, does licensor have all rights required in order to grant license
Acquiring Technology
Licensees perspective
what is the intended use of the technology what form of legal protection exists in the technology being licensed is one acquiring all of the rights and information which they will require in order to do what they want to do with the property licensed in in what jurisdictions do the technology rights exist will licensee have to obtain rights from any other party in order to carry out intended activity
To clarify a win-win relationship To clarify intentions To provide a written statement To state what each party can and cannot do To describe tasks, budget, deliverables, responsibilities To protect against changes in involved personnel To refer to when there are misunderstandings and disagreements
Value in the eye of the beholder A portfolio is more than the sum of its parts Value depends on how the portfolio is protected and the strategy to sell it.
Portfolio Valuation
What is the competition? Is your portfolio unique? Who is willing to buy? Different Parties = Different values How critical is technology/portfolio to the outside? What are they willing to pay?
Pricing Technologies
Market value of technology Uniqueness of technology Competitive position Type of protection for the technology Stage of technology development Improvement provisions of license Exclusivity Field of use geographical market sector
the income that can be earned from its employment the cost to replace it with equivalent
Payment Terms
Types of Payment
up front, paid-up licenses running royalties minimum annual royalties sliding scale based on performance net sales net profits percentage of service work percentage of R&D contracts
Portfolio Valuation
Commercial cost to use facility or equipment (analogs) Commercial value of patents (price) Investment in personnel to develop skill and knowledge (replacement)
Escrow
Required by licensee for protection in the event that licensor should go out of business Licensor agrees to place confidential and other proprietary material in escrow and allow for its release only in the event of catastrophe Usually a three party agreement, but can be done by having each party have an agreement with escrow agent
License Administration
Establishing the licensing relationship Maintaining the relationship throughout the term of the license agreement Diverse aspects of the relationship
financial payment/audit rights technology transfer to/from reporting tracking performance/deliverables joint development/exploitation
The ideal licensing person has a technical education and background, legal training, market research and technical research experience, a knowledge of patents, the ability to get along with people, salesmanship, and enjoyment of negotiations, foreign language abilities, negotiation experience, resistance to jet lag and physical stamina. Technical ability is more important than legal ability. Marketing ability is more important than both.
LICENSING
REMEMBER
The technology goes through the entire innovation/commercialization process (from concept to end user); people typically dont go through the entire process
Know your strengths and weaknesses Know when to say no Know when to exit
Non-Disclosure Agreements
Secrecy agreement Confidentiality agreement Non-disclosure agreement When disclosing confidential information When receiving confidential information
Principles of NDAs
Use is typically limited to purpose of disclosure Amount of disclosure is controlled by disclosing party Information must be kept confidential by receiving party
Employment Contracts
What agreements will you sign when you work for a company?
Employment Contracts
By specific contract; embedded in offer letter; through acceptance of policies IP ownership by employer (24/7) Keep confidential in perpetuity Need-to-know Non-compete IP exit interview
INTELLECTUAL PROPERTY
Background Intellectual Property Arising Intellectual Property Sole Inventions Joint Inventions Ownership of Intellectual Property Rights to Intellectual Property
Grants
Typically most terms are non-negotiable; one applies for a specific grant understanding the terms that will be required Many terms are negotiable; including IP ownership and rights
Contracts
Marking portions of proposals, reports and other correspondence Certain information on grants is routinely published by each agency Freedom of Information Act (FOIA) requests Disclosures can bar patenting
REPORTING REQUIREMENTS
Licensing activity Licensee reports Job creation and net economic benefits realized Royalty payments, if required
Stipulates that all IP developed by a university using federal funding is owned by the university
To meet government needs for a technology solution to a problem To assist in economic development by helping bring new technologies to the marketplace To provide a return to the US taxpayer from the technology through:
Job creation in the US Substantial manufacturing in the US Net economic benefit to the US
IP protection (e.g. patents and copyright) permit technology owners to disclose their technologies without losing value in the marketplace
REQUIRED TERMS
The government gets a non-exclusive, royalty-free right to use technologies developed with federal funds for all government purposes This includes the ability of the government to grant licenses to government contractors to use the technology when doing work for the government
REQUIRED TERMS
As the government wants to see technologies brought to the marketplace it can require the owner of a technology funded with federal dollars to license out that technology if the owner is not actively bringing the technology to the marketplace
REQUIRED TERMS
US Competitiveness Requirements
The government wants to see technologies utilized to the benefit of the US economy over that of foreign economies. Typically a technology owner will need to seek out US owned (preferably) or US based licensees and show that the licensee will use the technology to benefit US competitiveness
REQUIRED TERMS
As with US competitiveness, the government wants to see technologies primarily manufactured in the US, thus resulting in US job creation and net economic benefit to the US
REQUIRED TERMS
Any use of federally funded technologies or licenses granting rights to those technologies must comply with all relevant US export requirements and licenses
Additional avenues to perform research Career opportunities for students >>>>> publications and presentations >>>>> source of research funding >>>>> enhance reputation of institute and individuals
RESOURCES
Resources
US Copyright Office
Good IP Sites
To share an asset, usually it must first be divided. But knowledge is one of the few assets that multiplies as it is shared.
. . . . . Indian proverb