Creating a Creating a Commercialisation Commercialisation Company by gyvwpsjkko



    Creating a Commercialisation

        A case studied approach to the issues

                    Chris Bull
                    May 2009

                                       Chris Bull’s CV

• Chairman of the Executive Committee of Spoor & Fisher
• Head of Spoor & Fisher’s IP commercialisation practice
• Advisor to IP commercialisation companies and start-ups
  in South Africa, the USA, the United Kingdom and
• Former Director of IP Commercialisation at KPMG in
  London (largest IP commercialisation practice in Europe)
• BSc (Chem Eng) LLB
• Patent Attorney and attorney/solicitor admitted to
  practice in South Africa and England/Wales
• Currently sits on the board of four start-up companies in
  which he has invested

 An issue of harnessing skills and capital

  “In both the life sciences and physical sciences
  sector, many organisations find that they lack the
  complete set of skills or resources…..necessary to
  successfully commercialise these (IP) assets”
                                 Source: British Technology Group


    An issue of harnessing skills and capital

    A patent is “really not much more than a certificate
    that you can frame and put on the wall and tell your
    children about it”
                               Source: General Patent Corporation

                             IP - Value Realization

     •   Sale of assets or portfolios
     •   Licensing
     •   Joint venture
     •   Spinout
     •   Litigation
     •   Securitising assets
     •   Venture funds, incubators, public private

                A Case Study of UK Portfolio IP
                       Exploitation Companies
    Public companies
•   IPGroup plc
•   Axiomlab
•   BTG
•   Generics
•   Scipher
•   Torotrak

  Private companies
• Accentus
• Angle Technologies
• ipValue


                                    IPGroup plc
• Initially negotiated access to IP from Chemistry
  Department at Oxford (until 2015) and Southampton
  Universities (until 2027)
• Invested GBP 20 million to “access” the IP rights
• 50% of the value that would accrue to University
  from this IP
• Encapsulate the IP in spin-out companies
• Cambridge deal turned down:
   • structure and quantum of payments
   • access to researchers in spin-outs
   • valuation an issue
   • ownership structure of IP rights at university

                                    IPGroup plc

                                    IPGroup plc


                                     AxiomLab plc

  Market Value: R120 million

• Provision of capital and services to early stage
  technology companies
• Actively involved in the management of the
  companies it invests in
• Value creation through the disposal of equity stakes
  in portfolio companies
• > 20 investments

                                            BTG plc

• Funds raised: R1,5 Billion
• Global technology investment and development
• Sources leading edge life sciences and physical
• Economic return through a blend of licensing
  revenues, outright sale and venture creation
• Market is still awaiting a significant return on
  investment of funds despite it being the leader in
  this space in the United Kingdom

                             Generics Group AG
  Model based on encapsulating IP in spin out
  companies followed by equity sales to realise
  Also provides technology consulting to cover some
  operational costs


                                         Scipher plc

• Commercialises both proprietary and third party
  technologies, for example
   • CRL is the former EMI research laboratories
   • Wavelength Digital with a communications
   • TSSI with security products
   • Sensaura with 3D sound technology
   • CRl Opto with liquid crystal on silicon displays
   • Monox with consumer CO sensors
   • QED licenses third party intellectual property


  Spin out from BTG
  Developed an infinity variable transmission for use
  in cars and SUV’s
  Licensing out model

• Wholly owned by iFormation Group (Goldman
  Sachs, The Boston Consulting Group and General
  Atlantic Partners
• Mission was to work with Global 2000 companies to
  exploit their under-utilised patents
• First mandate to exploit 14,000 patents held by
  British Telekom in North America and Japan (Paid
  GBP 7million for these rights)
• Strengths:
   • Strong backers
   • High quality senior management team in London,
     New York and Silicon Valley
   • Access to capital


      IP in Vogue: Exploitation Companies out of Vogue

      IP in Vogue: Exploitation Companies out of Vogue

•   Portfolio IP companies defy traditional valuation
    methodologies, as not currently profitable (Issue: Undervalued
    and creates difficulty raising capital)
•   Each of the companies in this case study uses a slightly
    different model/approach to exploitation of intellectual property
    (Issue: Which model do you follow – too soon to judge)
•   IP exploitation requires patience; long term returns (Issue:
    require substantial cash resources (“cash runway”) to reach
    these returns)
•   IP exploitation requires a diverse experienced team with a
    track record of extracting value from IP (Issue: Those with
    better management teams with at least a decade of
    experience in venture capital work and value extraction from IP
    are better placed than those which have less experienced

               Key Indicators of Likely Success

•   Portfolio IP companies: not linked to a single technology as
    otherwise succeed greatly or fail e.g. Torotrack with patent
    portfolio aimed at automotive transmissions vs BTG with over
    1000 patents
•   Multiple Sources of Value Creation: e.g. Generics Group AG
    uses venture creation which relies on trade sales and IPO’s vs
    Scipher and BTG which use licensing, venture creation and sales
•   Balance Sheet/Cash Generation: Those companies with either
    a strong balance sheet (e.g. BTG, IP2IPO, ipValue) or an ability to
    generate cash from operations (Scipher, Accentus) or BOTH are
    best placed to succeed
•   Management Team: Flexible, capable and resourceful
    management not simply those who know something about IP or
    have a research but no commercial background. A long,
    consistent track record of commercialising IP for profit is required


             Lessons from this for South Africa

•   Access to skills is essential:- having a patent attorney or IP
    manager who has done licensing for a few years is not sufficient
    (Issue: Need to draw on skills and experience in a creative way.
    Unaffordable to try and establish company with all skills in-house)
•   A judicious blend of equity deals and licensing deals is
    required, with the blend favouring licensing deals until the
    company is well funded (Issue: Funding and cash burn rate will
    dictate strategy from the start)
•   Strong pipeline of patents required; guideline often applied is
    that require access to at least 1000 patents as a bare minimum
    (Issue: Need to collaborate. No single institution in South Africa
    has the weight of IP alone to sustain an IP exploitation company)
•   Pipeline should be focused around commercially significant
    technologies (Issue: Much of the patent portfolios in research
    environments are not driven by international market research or
    awareness of freedom to operate issues)

                Additional issues in South Africa

• State funded IP legislation
      • Limits flexibility on transactions
      • Adversely impacts ability to attract foreign
        capital into projects and valuations that are
• Exchange control legislation
      • Adversely impacts ability to attract foreign
        capital into projects and thereby the
        valuations that are achievable
• Researchers being “lost” to spinouts
      • Limited pool of scientific, engineering and
        research talent


At the outset:
    • Resolve issue of access to capital as this will
      dictate ability to implement a more diverse model
      with greater probability of success
    • Management Team, Management Team,
      Management Team!
    • Get advice from people who have a track record
      of success applying these models rather than
      people who are compelled by what the model
      has to offer.


“The Empires of the Mind are
  the Empires of the Future”

Winston Churchill (a quote from 1943, the
          year is significant)


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