Intellectual Property Rights Exploitation - etp.eseia.eu fileImportance of intellectual property (IP) † Essential business asset in the knowledge economy – Swedish steel-maker

15.06.2010STYRIAN ACADEMY for Sustainable Energies

Intellectual Property Rights Exploitation

Thomas Bereuter, CLPJuly 15th 2010, 13:30-15:00

STYRIAN ACADEMY for Sustainable Energies

Technology exploitation

Professor Horst Cerjak, 19.12.20052

Copyright © 2010 Thomas Bereuter Graz, July 2010 IPRs as Value Drivers

Introduction of Thomas Bereuter

� Tasks at Graz University of Technology- Set up and manage Technology Exploitation Office (TEO)- CEO Forschungsholding TU Graz GmbH- CEO Molekulare Biotechnologie GmbH

� Key qualifications– Fundamental research (chemistry) at university and

R&D in private research labs– Commercialisation of own patents ->

Licensing, Start-up and sale of technology– Involved in Start-ups and Spin-offs– Experience as consultant and management in the

high-tech sector– Certfied licensing professional







Importance of intellectual property (IP)• Essential business asset in the knowledge economy

– Swedish steel-maker Sandvik: 20% of its value is from IP!

• Increases funding for innovative projects– Without IP many innovative projects would not be profitable because

anyone who wanted could simply copy the results

• Protects small innovative firms– Dolby® Laboratories

– W. L. Gore & Associates (Gore-Tex®)

• Needed to release IP into the public domain undercontrolled conditions:– Linux (GPL): improvements must be free too!

Core module 1 Protect your ideas

Further reading




Examples of valuable intellectual property

Coca-Cola®

Apple® iPod®

DNA copying process

Harry Potter

Instant camera





What not to do when considering filing a patent application

• No publication prior to filinge.g. no article, press release, conference presentation/poster/proceedings or blog entry

• No sale of products incorporating the invention prior to filing

• No lecture or presentation prior to filing except under a non-disclosure agreement (NDA)

• Seek professional advice soon!• File before others do!

NDA





Exploitable Intangible Assets

Intellectual property rights� Patents, Utility patents (Gebrauchsmuster),

Trade marks, Registered designs (Geschmacksmuster)...

� Know-how: Trade secrets� Software: Copyright, secret source code,

domains, in some cases utility patents or patents

Example for Patent: EP1538346A1 -> cf. ep.espacenet.com







Innovation = Idea + Invention + Diffusion

Reference: Tobias Müller-Prothmann, Nora Dörr: Innovationsmanagement. Strategien, Methoden und Werkzeuge für systematische Innovationsprozesse. Hanser, München 2009,

ISBN 978-3446417991

Trend to Open Innovation (Henry Chesbrough)

Universities as a Source of Innovations!







Duties & Responsibilities

CreatingOpportunities Selection IPRs Exploitation

Implementation of Guidelines & Processes: Increasing quality, transparency and efficiency

• Awareness creation

• Teaching & training

•Technology scouting

• IPR consulting

• Micro- or Seedfund

• Innovation awards

Chances/Risks profile

SWOT-Analysis

• Licensing• Spin-offs• Assignement/Sale• Business case R&D




Guidelines

Guideline for the exploitation of results of research and development

net-revenues shared:1/3 inventor(s) – 1/3 institute – 1/3 university

Guideline for the exploitation of IP generated as part of collaboration with business partners

Guideline for the use of the names and the trademarks of the Graz University of Technology

Further reading




Erfindungen TU Graz 2004 - 2009

24

41

53

41

77

71

14

18

29

15

41

42

1

9

12

8

16

15

7

17

32

50

36

41

0

1

2

3

23

9

0 10 20 30 40 50 60 70 80 90

ErfindungsmeldungenAufgriffe exkl. Übertr.ÜbertragungenPatentanmeldungenPatenterteilungen

2004

2005

2006

2007

2008

2009




Erfindungen TU Graz 2004 - 2009 nach Fakultäten

6

9

106

14

46

112

21

1

5

64

5

16

61

17

0

0

21

1

13

26

0

2

0

76

9

12

83

16

0

0

22

2

1

9

2

0 20 40 60 80 100 120

ErfindungsmeldungenAufgriffe exkl. Übertr.ÜbertragungenPatentanmeldungenPatenterteilungen

Techn. Mathematik u. Techn. Physik

Techn. Chemie Verfahrenstechnik und Biotechnologie

Maschinenbau und Wirtschafts-wissenschaften

Informatik

Elektrotechnik und Informationstechnik

Bauingenieur-wissenschaften

Architektur




Erfindungs- und Patentierungsaktivitäten an Österreichs Universitäten 2005-2006

Jahresdurchschnitt

2

5

1

6

8

5

4

14

6,5

3

13

16,5

2,5

7,5

7

20,5

2,5

7

8

23,5

9

13

21

31,5

5,5

2,8

8,5

25

7

11,5

17,5

43

12,5

23

45,5

47,5

2

21,521,5

0 5 10 15 20 25 30 35 40 45 50

Uni Salzburg

Uni Wien

Uni Graz

Uni Linz

Uni Innsbruck

Vet Med Uni Wien

Med Uni Graz

Med Uni Innsbruck

Med Uni Wien

Montan Uni Leoben

BOKU

TU Wien

TU Graz

ErfindungsmeldungenAufgriffePatentanmeldungen




Erfindungsmeldungen an Österreichs Universitäten 2007-2008

Jahresdurchschnitt







Exploitation options

� Licensing� Selling (or hybrid with licensing)� Spin-offs or Start-ups� Own business case:

R&D, production, sales,…




Business case R&D




EntrepreneurPotential versus Risk

Spin-off Start-up

high

Potentialvalue

creation

low

Licensing

low Risk high

Sale

Own business case




Role of Stakeholders




University Law Implemented 2004

UG 2002 § 106 (3): Ownership of inventions

� Each service invention has to be diclosed immeadiately to the rectorate…

� If the unversity intends…, the rectorate has to …claim within three months…

� Otherwise the rights will belong to the inventors...




US Universities: Patents filed/issued since Bayh-Dole Act 1980




US Universities

Revenue To Licensees by Number of Fiscal YearsAfter License Agreement Date

0

50

100

150

200

250

300

350

400

450

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Fiscal Years After License Agreement Date

$M

Non-Exclusive

Exclusive




Motivation for Scientists

� Patent literature as research intelligence: state of the art searches [%]

� Identification of inventions� Business Development: collaboration with

third parties -> applied R&D� Intellectual capital report: patent as publication� Career options� „Making money out of technology“




State-of-the-art search

Patent office: any published information!– Patentes– Scientific literature and databases– Any popular literature– Mass media– Presentations– Discussion groups– Products– …

Further reading




Free Patent Database

INPADOC: ep.espacenet.comfor more information about various patent

databases see also www.ipr.tugraz.at

Further reading




Motivation for Inventors

� Career option: relevant experience� Making money out of technology� Succeeding with Vision:

�Enabling a lifestyle�For a better world�Science reduced to practice…




Motivation for CompaniesOutsourcing• R&D is expensive, risky and long term oriented• Product development costs e.g.:

0,5-2 Billion € for new drug? 1 Billion € for computer chip

IPRs• Monopoly -> innovator advantage and higher profits

-> ROI for R&D• Counterfeiting/copying costs:

1/10 to 1/100 of development costs*DiMasi J, Hansen R, Grabowski H (2003). "The price of innovation: new estimates of drug

development costs". J Health Econ 22 (2): 151–85. doi:10.1016/S0167-6296(02)00126-1




www.roche.com




Risk Reduction = Value Creation

Exploratory Research

Acceptable R&D Projects

Risk Reduction

Costsharing

Both

Potential Opportunities

Uncertainty

Euro Commitment

Prototype-Product




Selection Criteria – Risk vs. Potential

� Legal due diligence� Technical due diligence� Market analysis

� Strategic aspects� Finances




Stage Gate Process




Reduction of Legal Risk

• Patentability: novelty & inventive step• Inventors: listed correctly • Rights for ownership and commercialisation• Rights granted to third parties (options…)• Freedom-to-operate (FTO)• Legal enforceability of patent

Further reading




IP Score of EPO




Reduction of Technical Risk

• Unique technology• Superior to substitue technology• Technical development stage: theory – proof of

principle – lab prototyp – industry prototyp…• Technical enforeceability of patent

• Cf. strategic aspects: part of continuing research,…

Further reading







Reduction of Market Risk

• Technical advantages with economic relevancecompared to competition/substitutes ->„Killer application“ or „me too“ product?

• Markt: size, growth, entry barrier, head start against competition…

• Costs for IPR, product development and sales/marketing vs. margin

• Investments/Risks vs. Potential/Value (SWOT)• Product life cycle

Further reading




Clear View of Critical First Steps

Identification of� Potential licensees with commitment

to invest in development and marketing� Agents, Technology- or Auction-platforms� Co-opetitors: Cooperation with potential

competitors� Reference (early adopters) or keycustomers (friendly customers)













Trends in Licensing• Not-invented-here (NIH) Syndrome• Economic pressure: „faster, cheaper, simpler“ ->

increased awareness for external & complementing technology

• Strong increase of in- and out licensing activities: Cross licensing and Open Innovation

• Small and Medium Companies (SMEs) -> agility for competitive advantage!




Business case iPod




Business case iPod - conclusion




Business Case Design

Non-exclusive license: Entree license or free license or open access

Licensing strategy as part of Business model Examples:– Pichia pastoris -> Invitrogen/RCT -> open model– Hans enula -> closed model

– Acrobat reader = for free but not open source; – Acrobat profesional = regular product




Royalties Depend on Industry9.0%

7.6% 7.5%

5.5%5.0% 5.0% 5.0%

4.5% 4.5% 4.3%4.0% 4.0% 4.0%

3.5%

2.8%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Intern

et (10

0)

Media

& Enterta

inmen

t (28)

Software

(187

)

Pharm

aceuti

cals &

Biotech

nolog

y (65

6)

Consum

er Goo

ds, Reta

il & Leis

ure (1

14)

Medica

l/Heal

th Prod

ucts (

394)

Energy

& Env

ironm

ent (1

32)

Teleco

m (91)

Machine

s/Too

ls (91

)

Electric

al & Elec

tronic

s (12

8)

Chemica

ls (83

)

Automoti

ve (6

9)

Compu

ters &

Offi

ce Equ

ipmen

t (80)

Semico

nduc

tors (

83)

Food (

43)

Med

ian

Roy

alty

Rat

e(%

of

Sal

es)

Overall Median: 5.0%

Sample Size: 2,279




Variability within Industries

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Intern

et (10

0)

Media

& Enterta

inmen

t (28)

Software

(187

)

Pharm

aceuti

cals &

Biotech

nolog

y (65

6)

Consum

er Goo

ds, Reta

il & Leis

ure (1

14)

Medica

l/Heal

th Prod

ucts (

394)

Energy

& Env

ironm

ent (1

32)

Teleco

m (91)

Machine

s/Too

ls (91

)

Electric

al & Elec

tronic

s (12

8)

Chemica

ls (83

)

Automoti

ve (6

9)

Compu

ters &

Offi

ce Equ

ipmen

t (80)

Semico

nduc

tors (

83)

Food (

43)

Roy

alty

Rat

e(%

of

Sal

es)

Overall Median: 5.0%

Sample Size: 2,279

MaxMedianMin




0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

Advice of Expert

Convoyed Sales

Enforcement Burden

Licensor's Anticipated Profits

Competition/Commercial Relationship

Licensor Commitment

Foreign v. Domestic

Support/Training

Licensee's Anticipated Profits

Minimum Royalties

License Duration

Refinement/Stage of Development

Comparable Industry Rates

Commercial Success

Utility/Advantages

Exclusivity

Protection

5.0

1 = Not Important5 = Extremely Important

Value Drivers

Further reading




25% Rule

Average Operating Profit MarginMedian Royalty Rate

RoyaltyRoyaltyas % ofas % of

profit margin: profit margin:

26.7%26.7%

15.9%

4.3%

(% of Sales)




The Four Classic Methods for IP Valuation

• Market comparables• 25% rule• Income: Value over time

discounted for� risk� time value of money

• Cost to recreate




Best partner?




Licensee

Business intelligence: Market research,Patent-DB, Network, Company profiles-DB, Google & Co.,Conferences, NPOs,…

OrganisationenAUTM Association of University TechnologyManagers, LES Licensing Executive Society,…Alumni,…

Long list -> Priorities -> Short list




Lead Generation

56 % Inventors19 % Agents (Technologytransfer,…)10 % Contact by licensee7 % Research sponsor8% Rest

Journal of the Association of University Technology Managers, 1999 (1140 licenses surveyed)




LicenseeIdentification of departmentsBusiness Development (BD), Corporate Development, Strategic- & BD, Technology Sourcing, Technology Transfer & Licensing, Licensing, Marketing, Product Management, R&D, ...

Job titlesManager Licensing, Manager Business Development, Patent Manager, CSO, CEO,…




Direct Marketing

• Cold-call: „Elevator pitch“

• Direct-mail: Technology offer

• Follow-up: phone call, e-mail

• Meeting: NDA/CDA

• Evaluation of technology

• Negotiation of term sheet

• Deal closing (attorneys)

• Implementation…




• Decision = dominated by emotions!!!• Emotions are supported by rationality!!

Marketing has to create a positivesales atmosphere…

Investment Decision in Case of Intangible Assets




Direct MarketingPull




The Deal




Win-win by applying options…• Exclusive license vs.• Non-exclusive license• Restrictions:

� Regional and/or temporally� R&D, production, sales� Limited of certain applications, products etc.

• Right to sublicense• Right for improvements: Right-of-first refusal/view,

Options,…• Anti-stacking regulation• Crosslicensing

• Technology sale




Win-win by applying options…• Option fee & upfront/technology access fee• Royalties: based on percentage of volume of sales or

paied per piece sold or lump sum; minimum royalties• Fee for sublicense• Milestone payments• Licensing of Know-how• Payments for Technology transfer, improvements,

services• Costs for revision/controlling, value retention by index

linking• Services, in-kind contributions,…




Exclusive LicenseUpfront/Issue Royalty

This is considered a measure of the licensee’s commitment to the license. We can accept equity as a part of the upfront consideration, but there must also be a cash component.

Annual MinimumsAnnual Minimum payments are required as a measure of diligence. These payments require the licensee to make a conscious decision each year whether or not they are developing the product. These payments are fully creditable against earned royalties.

Earned RoyaltiesEarned Royalties are required so that Graz University of Technology can share in the revenues of the product that was developed from or with technology of Graz University of Technology.

Diligence MilestonesThese milestones are mutually agreed upon by Graz University of Technology and the licensee. They should provide a realistic and reasonable development plan and ensure that the licensee and Graz University of Technology both have similar expectations regarding the development of the technology. Such milestones may or may not have a financial component.

Further reading




Exclusive LicensePatent Expenses

Exclusive licensees are required to pay patent expenses, both past and future. However, all expenses can be built into the upfront payment instead of continuously billing the licensee.

SublicensingExclusive licensees are granted the right to sublicense the technology. Graz University of Technology shares in the income received for such sublicenses as recognition that the technology originated from Graz University of Technology. The percentage received by Graz University of Technology can vary in recognition of sublicenses that may be for a combination of Graz University of Technology and licensee technology.

*The financial parameters above should be considered as a whole package. A licensee may prefer to pay higher upfront and annual payments so that they can in turn reduce the earned royalty, or a licensee may prefer to back end load the license, reducing the upfront payment and annual payments for the first few years, and paying more at the later stages of development in the form of higher annual payments in the later years, diligence milestone payments and/or higher earned royalties.

Further reading




Thomas Bereuter, CLPForschungsholding TU Graz GmbH

Mandellstr.15, 8010 GrazT: 0316/ 873 5430

F: 0316/ 873 [email protected]

www.forschungsholding.tugraz.atwww.ipr.tugraz.at

Documents

Intellectual Property Rights Exploitation - etp.eseia.eu fileImportance of intellectual property (IP) † Essential business asset in the knowledge economy – Swedish steel-maker