In conjunction with:In conjunction with:The Arizona Department of CommerceThe Arizona Department of Commerce

Office of Technology & InnovationOffice of Technology & Innovation

Commercializing New Technology: Not so fast !!!Commercializing New Technology: Not so fast !!! How to Succeed in Business (or NOT)How to Succeed in Business (or NOT)

with a New “Whiz-Bang” Idea!with a New “Whiz-Bang” Idea!

Al Poskanzer, Ph.D.Al Poskanzer, Ph.D.Poskanzer & AssociatesPoskanzer & Associates

www.Poskanzer.comwww.Poskanzer.com

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Nothing like a revolutionary new Nothing like a revolutionary new

invention!invention!

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Topics to Discuss Today?Topics to Discuss Today?

Intellectual property & protection?

Market assessment?

Competitive analysis?

Market entry?

Manufacturing & Distribution?

Licensing & Strategic Partnering?

Negotiating?

Finance?

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Commercialization RoadmapCommercialization Roadmap

Is there a market?Is there a market?

You need to make what You need to make what you can sell!you can sell!

NOTNOT

try to sell what you can try to sell what you can make!make!

Determining the MarketDetermining the Market

Market size

Competition

Competing technologies

Who are the players?

Who are the buyers?

What are the unmet needs?

Feasibility of Feasibility of CommercializationCommercialization

State of the technology

Technical hurdles

Capital required

Window of Opportunity

SWOT Analysis

Projected market share & revenues

Interested investors?

PROTECTION !!!PROTECTION !!!

FundamentalsFundamentals

of of

Intellectual PropertyIntellectual Property

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PatentCopyrightTrademark

Trade Secret

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U.S. Standards of

Patentability An invention must be novel, useful, and non-obvious.

• Novelty means that the invention is new, and was not known, sold or used by others, nor was it patented or disclosed in a printed publication (more on publication below).

• Utility means that the invention must have a useful purpose and be operational. Thus a device that does not operate for its intended purpose would not be granted a patent.

• Non-obviousness requires that the invention must be sufficiently different from what has been known to others in the field.

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How Publication or Product Sale Affects Patentability

• The patent laws provide for limitations on patent rights as a result of prior publication or sale of a product.

• You retain U.S. patent rights for one year from the date of publication or sale.

• You lose any rights to a foreign patent immediately upon publication or sale.

• Foreign patent rights are preserved for one year IF a U.S. patent application has been filed before an enabling publication appears in print.

• The applicant has one year from the date of a U.S. patent application to file foreign applications.

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Sources of InformationSources of Information

• www.uspto.gov

– General Information Concerning Patents– Provisional Application for Patent Brochure– Guide to Filing a Utility Patent Application– Forms, Current Fee Schedule– Searchable U.S. Patents Database

• General Information Services Division & Patent Assistance Center– 800-786-9199 (800-PTO-9199) or– 703-308-4357 (703-308-HELP)

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Now What ?• You have new & novel

technology• There is a market.• You have protected it.• You want to build a business

– Will you manufacture & sell product?

• Will you seek a partner to commercialize?

– Or will you simply license?– Or will you do both?

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Manufacturing & Selling

• Requires significant investment capital

• Requires facilities

• Engineering & development

• Pilot testing & commercialization

• Requires distribution system

• Product liability insurance

• Etc. etc.

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Licensing• The purpose of a patent is to provide the owners with exclusive rights to

use the invention for profit.

• A company may wish to practice its own invention by manufacturing & selling a unique product to the exclusion of all others.

• There are many inventors or patent owners who cannot or will not commercialize their own inventions. These are often individuals, Universities, small companies without sufficient capital. or large companies whose business interests do not include their invention.

• The owners may then allow someone else to commercialize the invention in exchange for royalties.

• The legal contract that defines the recipient's rights and the owner's compensation is called a license

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Doing Both

• Technologies usually have multiple applications

• Not all applications are used by a business

• Commercialize for some applications • License others

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Technology & Market Assessment• Full market assessment• Market drivers• Market entry – which applications?• SWOT analysis• Entry barriers• End-user needs (what needs are

unmet?) • Entry strategy• Competitive advantage• Competitive landscape: threatening

products & technologies (technology roadmaps)

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Market Entry

• Application(s) you are comfortable with:• End-user needs• Weaknesses of current technology• Improvements offered by this technology

• Other applications:• Most technologies have other applications unless they are very

specific

• Competitive advantages

• Focus! Don’t get spread too thin!

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SWOT AnalysisStrengths, Weaknesses, Opportunities, Threats

• Strengths: • Goodwill of the customer• intrinsic merits of the technology

• Weaknesses:• opposite of strengths• Poor quality products• Poor image

• Opportunities:• external and come from alignment of the technology with end-user needs and from market drivers• Pending government regulation • Changing demographics • Competitor's patent expiring

• Threats:• New competitors • incompatibility with needs • adverse market drivers • barriers to entry• failure to meet standards or regulations• Raw material shortages • Costly government regulations.

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Entry Strategy

Strengths Weaknesses

Opportunities Implications Implications

Threats Implications Implications

Capitalize on Strengths

Strengthen weaknesses

Exploit opportunities

Avoid threats

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End-User Needs

• Who are the end users?• Are the needs important?• Are the needs unmet?• How would an end-user specify the perfect product?• Pricing factors• Who does the end-user see as competitors?• How competitive would they see this technology?

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Competing & Competition

• Key Specifications and Characteristics to Emphasize:

– Most important End-user needs!– Which are unmet? – Defines your niche

• Price and Pricing Factors for this Niche– Current pricing & value models

• Other emerging technologies?– Recent competitive patents issued?– Pending patent applications published?– Can be found at www.uspto.gov

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Competitive Landscape

• Competition:– number of competitors– who dominates (also how much of the

market major competitors control) – how they operate– Goodwill– Brand loyalty (repeat purchasing)– End-user purchasing decisions

• Other relevant products or services available:

– Manufacturer / supplier– Relevance or similarity– Characteristics / strengths / weaknesses– Market shares?– Which are dominant & why?– Understand & be familiar

Competition is always lurking out there!

You have to find it!

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Market Assessment

• Market size– Number of people– Rate of buying– Number of cases per year– Indirect factors

• Growth rate• Market phase

– Emerging – Growth – mature– declining

• Basis for estimate• Basis for competition

– Technical performance– Price– Value

• Use market studies & research

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Market Studies & Information Sources• Frost & Sullivan:

– www.frost.com– Subscription required– Individual studies can be purchased– Excellent source of market information in a broad variety of

industries

• Use Google!

• Hoovers– www.hoovers.com– Subscription required– Yields names of companies in any field

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Market Size Can be Elusive

Can anyone determine the market for human growth hormone?

Why not?

Emerging market:

Too many unanticipated applications.

1998 US market was projected at $366 Million

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Establishing the Value Proposition

• Identify end-users • Involve selected end-users in design

and test• Validation:

– FDA approval– UL approval– EPA approval– Focus group testing

• What is the secret sauce it offers that meets their needs?

• Exploit unmet end-user needs• Capitalize on competitive advantages of

your product or service • Remember: make what you can sell!

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Strategic Partnerships / Licensing

• Usually bigger company / major player• Provides needed capital for

commercialization• Pilot testing (engineering technologies)• Clinical development (healthcare

technologies)• Marketing & distribution• Partners will take IP rights (licensing)• May conflict with investor interests• Partners may be competitors (neutralizes

competition)• Reduces needed capital• Also reduces projected revenue

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How to Find the Right Partner or Licensee• Your knowledge of the business is invaluable• Talk to known experts• Use of on-line information services

– Google

– US patent database (who holds patents in the area?)

– Frost & Sullivan

– Hoovers

– PubMed

– Medscape

– Others

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US Patent Database

• Free!• http://www.uspto.gov/patft/index.html• Use various keyword combinations• Keep it simple• Review abstracts• Look for most recent patents• You can search published applications as well as issued patents• Note the inventors• Note the assignees• Use assignee information to identify companies, then use other

information systems to find the right people.

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Frost & Sullivan

• Subscription required – Not Free!• www.frost.com• Founded in 1961 to research and analyze new opportunities for

corporate growth. • One of the world leaders in research, training, consulting and

corporate strategy• Positioned as a resource in helping to create growth strategies with its

25 global offices and more than 1000 analysts and consultants worldwide

• Most comprehensive market reports available • Search by keywords or combinations

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Hoovers

• Subscription required – Not Free!• www.hoovers.com (can take free tour)• www.premium.hoovers.com• delivers comprehensive company, industry, and market

intelligence • Used to research companies & industries• Used to find business people & key decision makers • Comprehensive database of corporations • Can search by many criteria• Provides lists of key personnel

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How to Find the Right Person !!!

• Big companies have multiple sites & convoluted organization

• Not easy to find who is who or where to go• Look for corporate business development people• Look for members of the Licensing Executives Society

(LES)• Go to conferences: NETWORK & ask questions!• Look in “Hoovers” • Make phone calls / ask questions

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Licensing Executives Society (LES)

• Membership required (not expensive)• www.usa-canada.les.org/• www.lesi.org (international)• Worlds largest professional organization for

licensing & business development professionals• Membership directory available to members• Identify a company, then you can use the directory

to find LES members within that company

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Marketing

• List of targets from research• Prepare marketing “package”

– Cover letter– One page non-confidential summary– Manifest of intellectual property– Journal articles

• Follow up phone calls• Secrecy Agreements• Teleconferences with subject matter experts• Technology evaluation & due-diligence by interested targets

– May take a few months• Maintain close liaison

– Be prepared to respond to problems & answer objections• Be ready for negotiations

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Licensing & Partnering

• Once you find a partner or licensee

• Getting a deal done• What kind of a deal?

– Development partnership?– Marketing & distribution?– Technology license?– Acquisition?

• Negotiating!

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Types of Deals

Development partnership

Marketing & distribution

Technology license

Acquisition

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Strategic Partnerships

• Similar to a license in that IP rights are conveyed• Sets forth negotiated division of IP ownership and IP

rights• Establishes responsibilities & rights of both parties• Due-diligence & achievement milestones are critical• Investment by larger partner will impact royalties & license

revenue of smaller partner where IP originated.

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Research Collaboration

• Types of intellectual property:– Background: owned by a party before agreement– Foreground: developed by a party under the agreement– Ownership is often an issue– Right to practice is an issue

• Sets forth negotiated division of IP ownership and IP rights

• Establishes responsibilities & rights of both parties

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Licenses

• Conveys rights to use intellectual property

• Types of licenses

– Exclusive– Non-exclusive– Co-exclusive– Field of use limitation

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Licensing Fundamentals

• Business terms:– What is licensed?

• Patents • Copyrights• Trademarks• “know-how”

– Type of license: scope of rights– Term of the license– Territory– Consideration

• Royalties• Up front licensing fees• Maintenance fees• Milestone payments

• Other terms:– Due-diligence

obligations– Insurance– Indemnification– Choice of law– Termination

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The Dog Eat Dog World of Intellectual Property & The Dog Eat Dog World of Intellectual Property & Licensing!Licensing!

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• Preparation:– What are your objectives ?– What are the other sides objectives ?– Market assessment is important– What kind of a deal?

• Big Picture:– Why are we going into business together?– There must be benefits for both parties– Possible synergies

• General Strategy:– Negotiation is usually not adversarial– Know your Needs vs. Wants– Know your partners Needs vs. Wants– Deal With Decision Maker when possible

• Do Your Homework:– Companies in the area– Market phase– Market landscape– Typical royalties– Why do they want the license?– What are their values?– Other deals they have done?

Negotiating!

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Completing the DealCompleting the Deal

• Trade issues or find middle ground• Should be inquiring not adversarial• Be a “principled” negotiator

– Not Hard– Not Soft– Be honest– EARN RESPECT!

• Working toward agreement– “What is it going to take?”

• Remember that this is a long term commitment

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FINANCING• Grants

– SBIR: One of the most successful small business government grant programs

• SBA Loans (local business banks)• Angel Investors

– Less formal– Private– Presentation opportunities– Local angel groups– Venture capitalists

• Venture Capital– Formal– Due-diligence– Equity transfers– Each firm has its own charter– Seeking higher amounts of capital– You need a business plan & a great & compelling presentation.– Must focus on business opportunity – not technology

• For loans & investment, you need a business plan!• For grants, you need a proposal

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Arizona Resources

• Arizona Department of Commerce– http://new.azcommerce.com/BusAsst/Technology/

• Programs dedicated to providing techpreneurs the tools necessary to evaluate, develop and commercialize their technology under development

• Access to the Arizona Angel Investment Tax Credit Program• A statewide index of technology commercialization related assistance

programs and Arizona technology related events• A statewide network of industry partners, university leadership and

professional organizations that provide expertise to startup technology businesses

• Information and referrals from a wide spectrum of financial resources that provide capital for growing technology businesses

– www.AzTechBizDev.com – access to a wide range of technology business development resources, programs and services.  This site is a collaborative effort between the Governor's Council on Innovation and Technology, Arizona Department of Commerce, Arizona Technology Council & Southern Arizona Tech Council

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Arizona Resources Continued

Other Resources:

• Northern Arizona Technology and Business Incubator: www.natbi.org

• Arizona Technology Council: www.AzTechCouncil.org

• ASU Business Portal: www.asu.edu/business/index.html

• ASU Technopolis: www.ASUTechnopolis.org

• ASU – Arizona Technology Enterprises (AZ Tech): www.azte.com/

• Southern Arizona Tech Council: www.satc-az.com

• UA Office of Technology Transfer: www.ott.web.arizona.edu//

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Why We Live in Arizona!