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Technology Licensing at Stanford University (PDF) by runout

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									Technology Licensing
         at
 Stanford University
         David Ai
            at
      Keio University
      March 17, 2009
                   Overview

• Background and Policies

• OTL Facts and Figures

• OTL Process: Invention to License

• OTL Challenges
             Personal Background

• MBA (Stanford); M.S. Computer Science (Indiana Univ.)
• Venture Capital Investment:
   – 4+ years at Hitachi Corp VC; 1 year at SUNeVision Ventures
• Corporate R&D / Marketing / General Management:
   – VP/GM at Varian Oncology Systems; Project Manager at H-P
• Entrepreneurial Startup Operations:
   – Cofounder/CEO of JK123, consumer health website in China
   – VP Marketing & acting VP Engineering of Cirque (now ALPS)
       University-Government Relation:
            Bayh-Dole Act (1980)
• University has title to inventions funded by federal government

• royalty-free nonexclusive license to government

• exclusive licensee must substantially manufacture in U.S.

• preference to small business firms (< 500 employees)

• must share licensing revenue with inventor(s)

(Sources: COGR Publication “ The Bayh-Dole Act: A Guide to the Law and Implementing Regulations” ,
    37 CFR Part 401, 35 USC 200-212)
Stanford Facts Feb-2008
     •    7 Schools
            – Business, Earth Sciences, Education, Engineering,
              Humanities and Sciences, Law, and Medicine
     •    1,878 Faculty members (16 Nobel Winners)
     •    Students (6,812 undergraduate and 8,328 graduate)
     •    Finances (FY 2008-2009)
            – $3.8 billion budget
                    • $1.06 billion (28%) from sponsored research,
                      including SLAC (87% by federal government)
                    • additional $150 million in part through
                      55 industrial affiliate programs
            – $17.2 b endowment’s income provides 26% budget
            – $785 m new donation in year 2007-2008

     (http://www.stanford.edu/home/stanford/facts/)
Stanford’s Royalty Distribution Policy
•   Cash Royalties from Issue, Minimums, Earned Royalties
•   Net Royalties = Cash Royalties
                         minus 15% for administrative expenses
                         minus out-of-pocket expenses (e.g. patent costs)
                                        1/3 of
                                   Net Royalties to
                                      Inventors




                     1/3 of                                1/3 of
                Net Royalties to                      Net Royalties to
                  Inventors'                            Inventors'
                 Department                               School
OTL: Notable Stanford Inventions

 1970 – OTL Established
 1971 – FM Sound Synthesis ($22.9M)

 1974 – Recombinant       DNA ($255M)
 1981 – Phycobiliproteins ($46.4M), Fiber Optic Amplifier ($40M), MINOS ($3.8M)
 1982 – Amplification of Genes ($30M)

 1984 – Functional     Antibodies ($191M)
 1986 – CHEF Electrophoresis ($2.25M)
 1990-1992 – Discrete Multi-tone technologies for DSL ($29M)

 1996 – Improved     Hypertext Searching - GoogleTM ($337M)



 2009 – the next big thing ???
     OTL: Disclosure and Licensing History

                                 1970                   2008                 Cumulative                     Active

Disclosures                        28                     430                       7500                     ~3000

Licenses*                           3                     107                       2800                     ~1000

Royalty Income                 $50,000                 $62.5 M                     $1.2 B



Staff                               2                      30
* Majority of disclosures are never licensed; many disclosures have one license; some disclosures have multiple licenses
OTL: Looking Closely at Royalties

                 •   FY07-08, $62.5 m from 546 cases
                      – 33 out of 546 disclosures (6%)
                        generated over $100,000 each
                      – 3 out of 546 (0.5%) generated
                        over $1 million each

                 •   From 1970 through 2008
                      – 55 among 7500 inventions (7%)
                        generated $1 million or more
                      – BIG WINNERS: 3 out of 7500 !

                 •   Small royalties from most cases
                    OTL: Conversion Numbers



                        ~ 50% of disclosures are filed as patent applications
                        copyright or biological materials also license-able
  ~8 disclosures
received per week                                                             20 - 25% of disclosures,
                                                                              including those patented,
                                                                                     are licensed
                               OTL: Revenue vs. Expenses

                $10,000                                                •   OTL is self-supporting
                                                                            – 15% of revenue > operating expenses
                 $8,000

                                                                       •   Operating budget of ~$4.8 million/year
($ thousands)




                 $6,000



                 $4,000
                                                                       •   Patent expenses of ~$8.1 million/year

                 $2,000                                                •   OTL has given ~$43.5 million to
                                                                           Research Incentive Fund
                    $0                                                     administered by Dean of Research
                     FY69-70 FY76-77 FY83-84 FY90-91 FY97-98 FY04-05

                                       Fiscal Year
                              15% of Revenue     Operating Expense
                                                   OTL: Equity from Licenses

                                 20                                                   •   Stanford’s philosophy
                                                                                           – Equity is one component
                                                                                           – Historically, most income is
                                                                                             generated from earned royalties
# of Licenses involving Equity




                                 15

                                                                                             (~$836 M vs. ~$364 M)
                                                                                           – Equity is liquidated soon after IPO
                                 10
                                                                                           – We can’t hold equity if licensee
                                                                                             conducts clinical trials here
                                 5
                                                                                      •   Equity from (exclusive) licenses
                                                                                           – ~171 companies cumulatively
                                 0                                                         – ~90 companies currently
                                      FY91-92   FY96-97           FY01-02   FY06-07
                                                                                           – Equity liquidated to date
                                                          Fiscal Year
                                                                                             ~$364 million (Google™ $336M)
                         Evaluation

• Discuss with inventors           • Typical criteria
   – Inventor provides technical      –   development status
     expertise                        –   Inventor profile/track record
   – Inventor may also provide        –   Intellectual property position
     industry contacts                –   Commercial potential
• Discuss with others at OTL          –   Licensing potential
• Contact industry experts


                     The Main Question
                  Does it have the potential
       to create meaningful income for the University?
                Patent Prosecution

• We use outside counsel (agents & attorneys)
   – Technology expertise
   – Patent agent vs. Patent attorney
• Patent costs
   – Typically $25,000 to $35,000 over life of U.S. patent
      • USPTO fees
          – if invention is not licensed, pay small entity fees
      • Patent attorney/agent costs
   – Higher patent costs for foreign coverage
      • PCT application preserves foreign rights while delaying costs
      • National phase entry if licensee reimburses costs
                    Marketing Strategy

• When do we start?
   – Waiting for publication
   – Waiting for data
• Individual vs. Portfolio
• Contact companies and provide information
   – Shotgun vs. Rifle approach
   – Sources of leads
• Steps
   –   Create marketing content
   –   Create list of potential licensees
   –   Contact potential licensees
   –   Follow-up
                                Types of License Agreements

                140                                                    • Option agreement
                120

                100                                                    • Non-exclusive agreement
# of licenses




                80

                60                                                     • Exclusive agreement
                40                                                        – Limited by Field of Use
                                                                          – Limited Period of Time
                20
                                                                            (e.g. earlier of 8 years from
                 0                                                          Effective Date or 5 years from
                      FY01-02     FY03-04      FY05-06       FY07-08
                                                                            first commercial sale)
                                       Fiscal Year
                           exclusive    nonexclusive     option
                      Key License Terms

• Financial terms                   • Non-financial terms
   – License issue fee                 – Definitions
   – Annual minimum payments           – Milestones & Diligence:
   – Earned royalties                     •   Prototype
      • % of Net Sales                    •   First Commercial Sale
      • $ per product sold                •   Patent Issuance
                                          •   FDA Approval
   – Reimburse patent costs
   – Equity in start-up companies      – Warranties and indemnities
                                       – Infringement actions
                                       – Dispute resolution
 Challenges: Licensing Strategy
o Exclusive or non-exclusive
   - Selecting exclusive licensee(s): co-exclusive?
   - Prefer to license more than one company, if practical
   - Large company vs. Small/Start-up company
o Field of use
   - Applications: too wide? Too Narrow?
   - Diagnostics vs. Therapeutics
o Geographies: limited or worldwide
o Only ~ 10% cases licensed to startups
   o Inventor-entrepreneurs often involved
   o Conflict of Interest can be a challenge
   Challenges: The Patenting Decision
o Is it patentable?
   o 3 requirements for a patent: Useful, Novel, Non-Obvious
       o Status after 2007 (KSR v Teleflex): now 60% rejections cite KSR
   o Business Method Patents
       o 2008 Bilski case: not patentable if not tied to a machine and did not
         result in a transformation; impact on software & biotech processes
o Is it worth it, and is it enforceable?
   o USPTO wants much narrower applications (Restriction Req’s)
   o Methods are harder to enforce
   o Lawsuits are expensive, time consuming and risky
o Is it marketable?
   o Many inventions are very early stage
   o Some inventors push patents as trophies
   Challenges: Marketing Strategy
o Timing of Marketing
   o Is the Market Ready?
   o Waiting for publication or data
o Shotgun vs. Rifle? Hard to Get People’s Attention!
o Portfolio Marketing vs. Individual Outreach Effort
   o Email: How to keep contacts updated
   o How to get their attention (frequency & amount)
   o Keyword Matching: still exploring
o Everybody is Poor – less $, longer negotiation cycle
o Sandisk v. ST Micro: must be careful with “ threats”
       Challenges: Sponsored Research

• Sponsored Research Provides Significant Funding
   – $1.06 billion (28%) of university budget
• Researchers Eager to Receive Money for Research
• “ Background IP” Needs Careful Attention
• “ Free License” May Seem Reasonable
   –   But, Sponsors Did Not Support Years of IP Accumulation
   –   May Not Be Fair To Other Contributors (Government, etc.)
   –   Common Solution: Free Nonexclusive License Only
   –   Cannot offer free exclusive license in advance (tax free bonds)

								
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