technology licensing at stanford university. overview background and policies otl facts and figures...
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Technology Licensing at
Stanford University
Overview
• Background and Policies
• OTL Facts and Figures
• OTL Process: Invention to License
University-Industry Technology Transfer
MechanismsGraduated students
PublicationsSeminars, conferences, etc.
Faculty consultingIndustry sponsored researchIndustrial affiliate programs
Intellectual property licensing
Start-up companies andlarge corporations
Research resultsfrom lab
New products in marketplace
Intellectual Property Licensing
University-Government Interactions
Bayh-Dole Act• Created uniform patent policy regarding
inventions made under federally-funded research programs
• Encouraged universities to participate in technology transfer activities
GovernmentUniversity
Bayh-Dole Act (U.S. Public Law 96-517)
• University may elect to retain title to inventions developed under federally-funded research programs
• University grants royalty-free nonexclusive license to government
• Any company holding an exclusive license must substantially manufacture the product in the U.S.
• In marketing of an invention, University must give preference to small business firms (< 500 employees)
• University must share with the inventor(s) a portion of any revenue received from licensing
(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 for 2008
• 7 Schools – Business, Earth Sciences, Education, Engineering,
Humanities and Sciences, Law, and Medicine
• 1,829 Faculty members • Students (6,759 undergraduate and 8,186 graduate)• Finances (FY 2007-2008)
– $3.4 billion budget• $1.06 billion in sponsored research,
including SLAC (87% by federal government sponsors)
• additional $132.1 million in part through 55 industrial affiliate programs
– $17.2 billion endowment
(http://www.stanford.edu/home/stanford/facts/)
Office of Technology Licensing (OTL)
MissionTo promote the transfer of Stanford technology
for society’s use and benefit
while generating unrestricted income to support research and education.
Technology Transfer PortfolioPatents
Copyrightable MaterialSoftware
Biological MaterialSemiconductor Maskworks
Stanford researcher discovers new invention &
submits disclosure
, ©
Company makes new products
Licensing: Inventions to New Products
Federal & industryresearch money
OTL decides IP protection for invention andmarkets invention broadly
OTL licenses invention to Company
Company pays royalties to University
Additional research funding
Stanford’s Intellectual Property Policy
• Patentable TechnologyUniversity takes title to all inventions created with more than incidental use of University resources www.stanford.edu/dept/DoR/rph/5-1.html
• Copyrighted WorksUniversity takes title to copyrightable works created with significant University resourceswww.stanford.edu/dept/DoR/rph/5-2.html
• SU-18 Patent and Copyright Agreementwww.stanford.edu/dept/DoR/rph/su18.html
Stanford’s Royalty Distribution Policy
1/3 of Net Royalties to
Inventors
1/3 of Net Royalties to
Inventors' Department
1/3 of Net Royalties to
Inventors' School
• Cash Royalties from Issue, Minimums, Earneds• Net Royalties = Cash Royalties
minus 15% for administrative expenses
minus out-of-pocket expenses (e.g. patent costs)
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 ???
Disclosures
Licenses*
Royalty Income
Staff
* Majority of disclosures are never licensed; many disclosures have one license; some disclosures have multiple licenses
OTL: Disclosure and Licensing History
1970
28
3
$50,000
2
Cumulative
7500
2800
$1.2 B
2008
430
107
$62.5 M
30
Active
~3000
~1000
OTL: The Upside
0
20
40
60
FY69-70 FY76-77 FY83-84 FY90-91 FY97-98 FY04-05
Fiscal Year
Roy
alty
($ m
illio
ns)
• In FY07-08, $62.5 million in royalties
• From 1970 through 2008, ~$1.2 billion cumulative royalties
• Typically, 10 to 15 years may elapse between initial invention disclosure and any significant royalties
0
50
100
150
200
250
300
FY03-04 FY05-06 FY07-08
Fiscal Year
# of
Dis
clos
ures
less than $10K$10K - $100K$100K - $1M$1M - $10Mgreater than $10 M
OTL: Looking Closely at Royalties
• In FY07-08, $62.5 million from 546 disclosures
– 33 out of 546 disclosures generated over $100,000 each
– 3 out of 33 generated over $1 million each
• From 1970 through 2008– 58 inventions generated
$1 million or more– 3 out of 7500 is BIG WINNER
• Royalties from large portfolio of inventions
OTL: Conversion Numbers
~ 50% of disclosures are filed as patent applicationssome disclosures potentially licensable as copyright or biological materials
20 - 25% of disclosures, including those patented,
are licensed
~8 disclosures received per week
OTL: Revenue vs. Expenses
$0
$2,000
$4,000
$6,000
$8,000
$10,000
FY69-70 FY76-77 FY83-84 FY90-91 FY97-98 FY04-05
Fiscal Year
($ th
ousa
nds)
15% of Revenue Operating Expense
• OTL is self-supporting– 15% of revenue > operating expenses
• Operating budget of ~$4.8 million/year
• Patent expenses of ~$8.1 million/year
• OTL has given ~$43.5 million to Research Incentive Fund administered by Dean of Research
OTL: Equity from Licenses
0
5
10
15
20
FY91-92 FY96-97 FY01-02 FY06-07
Fiscal Year
# of
Lic
ense
s in
volv
ing
Equi
ty
• Stanford’s philosophy– Equity is one component of a whole
financial package– Historically, most income is
generated from earned royalties (~$836 M vs. ~$364 M)
– Equity is liquidated soon after IPO– We can’t hold equity if licensee
conducts clinical trials here
• Equity from licenses– ~171 companies cumulative– ~90 companies currently– Equity liquidated to date
~$364 million
Equity Cash-Out at Stanford*
0
2
4
6
8
10
12
FY94-95
FY96-97
FY98-99
FY00-01
FY02-03
FY04-05
*
FY06-07
Fiscal Year
Equ
ity C
ash-
out (
$ m
illio
ns)
• Equity distribution– 15% to OTL– 1/3 of net equity to inventors– 2/3 of net equity to
OTL Research and Fellowship Fund
• Equity liquidated to date ~$364 million– Amati (Texas Instruments)
$8.0 million– Abrizio (PMC-Sierra) $9.7 million– Google™ $336 million
*Graph does not include liquidation of GoogleTM equity in FY04-05
• Steps– Disclosure – Evaluation– Licensing Strategy
• File patent?• Market to potential licensees
– The License– Maintaining the Relationship
• 7 “Licensing Associate & Licensing Liaison” teams– Technical degrees and marketing focus– Responsibility for inventions from cradle-to-grave
OTL: Invention to License
Evaluation
• Discuss with inventors– Inventor provides technical
expertise– Inventor may also provide
industry contacts
• Discuss with others at OTL• Contact industry experts
• Typical criteria– Invention development
status– Inventor profile– Intellectual property position– Commercial potential– Licensing potential
The Main Question
Does it have the potential
to create meaningful income for the University?
Licensing Strategy
• A license is a legal document regarding intellectual property rights in exchange for good and valuable consideration.
• Different inventions require different licensing strategies– “ basic new scientific tool” vs. “invention requiring extensive
development”– electronics industry vs. biotech industry
Licensor
IP rights
royalties
Licensee
Patenting Decision
• Can we license as tangible research property (TRP)?
• Can we license as it as copyright?
• Is it patentable and enforceable?
• Has it been publicly disclosed?
Patent Prosecution
• Licensing professional manages outside counsel– 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
• Option agreement
• Non-exclusive agreement
• Exclusive agreement– Limited by Field of Use– Limited Period of Time
(e.g. earlier of 8 years from Effective Date or 5 years from first commercial sale)
0
20
40
60
80
100
120
140
FY01-02 FY03-04 FY05-06 FY07-08
Fiscal Year
# of
lice
nses
exclusive nonexclusive option
Key License Terms
• Financial terms– License issue fee– Annual minimum payments– Earned royalties
• % of Net Sales• $ per product sold
– Reimbursement of patent costs
– Equity in start-up companies
• Non-financial terms– Definitions– Grant– Development milestones &
diligence provisions• Prototype• First Commercial Sale
– Warranties and indemnities– Infringement actions– Dispute resolution
Stanford researcher discovers new invention &
submits disclosure
, ©
Company makes new products
Licensing: Inventions to New Products
Federal & industryresearch money
OTL decides IP protection for invention andmarkets invention broadly
OTL licenses invention to Company
Company pays royalties to University
Additional research funding
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