Planet Eureka!

In the category of solutions looking for problems to solve, Planet Eureka! is a new on-line marketplace for patents and other intellectual property rights by Eureka Ranch Technologies in Cincinnati, Ohio.

Planet Eureka! Offers the USA National Innovation Marketplace as a way to bring together buyers and sellers of intellectual property. The Marketplace offers a place where inventors, patent holders, and intellectual property owners can post ideas in search of partners, buyers, and licensees.

Access is free to sellers and buyers but future plans include charging for consulting and other services. This site is from Doug Hall of American Inventor infamy.

InnoCentive

Another site, InnoCentive, provides a way for companies, nonprofits, and government agencies looking for solutions to problems to find the people and organizations that have answers. Charges $15,000 to post a problem as well as 40% commission on amount paid to the solution provider.

InnoCentive’s Open Innovation community is a way to get large numbers of members to try to solve some of the problems facing the world today. Those who are successful can win cash awards of up to $1,000,000 for solutions to Challenges. The site is a spin-off of Eli Lilly.

WikiPatents Community

Yet another patent marketplace is WikiPatents Community, which claims to contribute to the US patent system by reviewing issued patents and pending patent applications. WikiPatents features a wiki-like interface to review, rate, and discuss patents — plus free patent PDF downloads, file histories, and advanced patent searching.

The site also offers WikiPatents Marketplace, where companies can list patents for sale. IP is listed using various package deals ranging from $89/month to $1999/year.

What’s not clear is how members are able to vote on the value of any particular invention. The numbers for estimated value, royalty rate, market share and market size seem to be pulled from thin air. My favorite is U.S. Patent 7,095,126, entitled “Internal energy generating power source,” which claims:

1. A system for generating energy such that a portion of the generated energy supplies power to the system that generated the energy comprising: an electric motor capable of producing electric energy; a power source for supplying an initial amount of power to said electric motor; an alternator power source connected to said initial power source and said electric motor for continuously supplying power to said electric motor; a first inverter system connected to said electric motor, said inverter having an input through which said inverter system receives energy produced by said electric motor, said first inverter system also having one output through which said first inventor supplies power back to said electric motor to supply said electric motor with power; a load connected to said first inverter system via an inverter system output to alter the electric current traveling from said first inverter system such that the current feeding into the electric motor 30 is not purely inductive.

I think I’ve seen this perpetual motion machine before. Expect many of these to show up on Geekologie.

Posted May 12th, 2008 by Stephen Albainy-Jenei in Ventures, Cool Tools, Licensing
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The San Francisco Business Journal ran a feature suggesting that biotech companies are running into hurdles in doing deals with universities, specifically the University of California System in this case. The article writes that the problem is that it simply takes too long to get the deal done — that agreements took months rather than weeks to complete. From the Journal:

“Most of us would prefer not to work with” the UC System, [Don] Francis [chairman and executive director of the South San Francisco nonprofit Global Solutions for Infectious Diseases and co-founder of Vaxgen, Inc. of South San Francisco] said at a recent UCSF forum on product development partnerships.

Another issue is (at least the perception) that the University is too risk-adverse:

Deals must pass “the Chronicle test,” said Jack Newman, a UC Berkeley graduate and now senior vice president of research at Amyris Biotechnologies Inc. in Emeryville. In other words, UC system lawyers want to be sure no one — those pesky media types, in particular — can accuse them of giving away too much value.

As with most axioms, there is some truth to these assertions. But, as they say, there are always two sides to every story. Since I used to direct patents and licensing at a major university technology transfer office and now work in private practice helping biotech companies deal with universities, I have the unique distinction of having been on both sides of the fence. And, like many things in life, it’s always easy to criticize the other side.

So, what is true?

1. Universities are risk-adverse. True. Now get over it.

Trying to get a nonprofit research institution — especially a public funded university subject to state laws and regulations, union agreements, freedom of information act requests, and general, all-around status as public punching bag — to strive to take business risks in the hopes of a big payoff is just not going to happen.

Take a look at the UC System Mission Statement:

The distinctive mission of the University is to serve society as a center of higher learning, providing long-term societal benefits through transmitting advanced knowledge, discovering new knowledge, and functioning as an active working repository of organized knowledge.

Note that nowhere does it say anything about its mission being “making money for commercial ventures.”

Although, neither does Google’s but most mission statements are not terribly useful. As Guy Kawasaki noted:

The ultimate test for a mantra (or mission statement) is if your telephone operators (Trixie and Biff) can tell you what it is. If they can, then you’re onto something meaningful and memorable. If they can’t, then, well, it sucks.

In a university, there is very much an environment where no one gets fired if the deal doesn’t happen. You get fired when the deal causes a loss. In some public universities, there are even state laws that prevent the university from taking on any unfunded liabilities. All this aside, there is, in fact, always a fear of being at the center of an i-Team investigation for having given valuable university assets to a for-profit company — a loss at taxpayers expense. There are some newspapers that take particular pride in the sport of skewering public officials and employees be they in government or universities.

2. Universities take too long to get deals done. Half-true. Now get over that, too.

There are generally two causes of this effect: procedures and staff.

First, universities are risk adverse (see point 1) and hence, agreements have to be signed-off on by all the various stakeholders. This is where universities’ and private companies’ interest and expectations diverge the most. At a company, you have one stakeholder, the company (shareholders). At a university, there are many. For starters, any royalty received in a licensing deal is split between the inventor(s) and the university. In terms of the university’s portion, that revenue is generally split among the university, the college, and the department (or some sort of fee split). Hence, all of those parties are (usually) asked to initial their acceptance of the terms. Mostly, this is done because no one wants one of the parties involved to come back later to contest the deal.

Second, but perhaps more importantly, universities are typically not over-staffed. This has to do with mission priorities (see No. 1 above) and with budget restraints. University budget surpluses, like unicorns, sound nice but I haven’t seen one yet. This means that the personnel that must draft, review, negotiate and manage university licenses and contracts have an overflowing in-box. That’s just the way it is. Many universities are certainly improving and putting more resources into licensing and technology transfer but I would expect hiring to lag need.

However, there are ways to speed this up on both sides. Mainly, it helps to recognize university restraints and not try to negotiate points they won’t (or, more likely, can’t) negotiate like indemnification, disclaimer of warranties, retention of ownership, governing law, waiver of liability, and oh, did I mention indemnifications? Trying to argue over these types of provisions is, like cursing the darkness, a futile exercise (see No. 1 above).

3. The parties often have unrealistic expectations. True. Now let’s fix it.

Keeping the above points in mind, it is critical that companies and universities come into the process knowing the limitations of a university and work with the system, not against it. If you know it takes longer to get the deal done, start earlier. The number one offense? Waiting until the last minute to get a deal done. Don’t stop in on Friday afternoon saying you need this done before the weekend.

Also, as above, don’t come in expecting to get everything and give nothing. Too often, complaints about tech transfer offices come down to “They won’t give me everything I want! That’s so unfair!” Taking too long is often the result of too many back and forth negotiations as the parties try to get their way.

Of course, unrealistic expectations are a perennial problem with universities, too. There are still some universities that think that every invention is worth a fortune (”Why else would you be interested in it?“). Furthermore, tech transfer personnel are notoriously bad at understanding the realities of product research and development and the fact that a mere lead on an eventual product is not the total value of the end product.

University inventions are often early stage, undercooked ideas that more often than not fail to deliver and, even when things work out, need lots of development and still fail to delive a big hit. Universities often fail to fully appreciate the tremendous costs and risks involved with taking on a raw, undeveloped idea and trying to turn it into a viable product on the marketplace.

There is a lot of money to be made so I think it’s in everyone’s best interest to work well together. My number one tip for those working with universities is to be pleasant and treat the other side with the respect and dignity you would want to receive in return.  People are human and — while it may not be right — will often respond to a demanding jerk by acting the same.

If others have ideas on how to deal with universities and the length of time to get deals signed, please let me know.

See also:

Biotech Companies Running into Roadblocks in Entering into Deals with the UC System

Trouble With Tech Transfer…Or Expectations?

Posted April 25th, 2008 by Stephen Albainy-Jenei in Practice Tips, Technology Transfer, Licensing
| | 4 Comments »

After the Supreme Court decision in MedImmune, Inc. v. Genentech, Inc., et al. (S.Ct. No. 05–608) , licensees would now seem to have a chance to get out of bad license deals by challenging the validity of the underlying patents. This case asked whether companies can sue to invalidate another’s patent even when they don’t face an infringement suit, a case that may affect thousands of drug and biotechnology licenses.

Previously, a company had to stop paying royalties on a patent license to challenge the validity of the patent. In an 8-to-1 decision, the Supreme Court ruled that a licensee could sue to challenge the validity of the underlying patent even while it continues to pay fees to use the disputed technology.

In light of these developments, I think it is important to deal with the impact and decide where to go from here. Below, I have outlined a few points that should be considered in future licensing agreements.

Venue

There can be an issue where a big company licensee takes the license to remove the threat of treble (triple) damages for willful infringement and then turn around and sues in their hometown jurisdiction. The ability to select the venue is quite powerful, especially if the licensee is a small company that cannot afford higher legal bills to defend the suit. Plus, you do not want the other side to have a “hometown advantage” where all the potential jurors have a natural bias to “their” company. Therefore, a licensor may want to insist on a venue clause such as:

Jurisdiction. Licensee consents to the exclusive jurisdiction and venue of the federal and state courts located in Hamilton County, Ohio, United States of America, in any action arising out of or relating to this Agreement. Licensee hereby explicitly waives the rights to any other venue to which it might be entitled by cause of action, domicile or otherwise.

No Contest Clause

Licensors must take into account that if they agreed to license out their technology, especially to a large company or other deep pocket, they may have to spend millions just to defend their patent, all the while being prevented from suing for infringement or terminating the agreement — this is a huge risk for a small company without the resources to defend itself. Therefore, a licensor may want to include a clause that the licensee agrees not to contest the patent. This may not hold up but one could include a clause that the license terminates immediately upon any action taken against the patent. That way, the licensee at least has to think twice since, if they are unsuccessful, they’ll be left hanging without a license and you can bet any second license agreement will not be very favorable.

No Contest Clause. Licensee agrees not to directly or indirectly challenge or cause to be challenged the validity or enforceability of any Licensed Patent, or Licensor’s ownership of any Licensed Patent, before any court, agency or tribunal, unless Licensee is charged with infringement of any Licensed Patent by Licensor or its affiliates. Licensee acknowledges that any breach of this clause will be cause for immediate termination of this Agreement.

While agreements not to contest the validity of a patent have generally been held to be unenforceable, they have not been held to constitute an antitrust violation or misuse. Therefore, the best bet is a termination upon challenge.

Front Load Fees

A licensor may want to try to get as much money as possible up-front or early in a license so that in the event of a challenge and loss of patent, they have as much money in hand before the challenge. A licensor may want to ask for a large upfront payment coupled with lower royalty rates or yearly fees. The licensee will have less incentive to challenge if it has already paid a substantial fee and remaining fees are not a burden. Also, keep in mind that a license agreement with more modest terms overall may be less likely to be challenged. The more onerous the license terms, the more likely the licensor will have an incentive to challenge the validity of the patent.

Get Your Ducks in a Row

I can’t say it enough, the best, overall strategy is to not give the licensee a good reason to challenge the patent in the first place.  If the stakes are high, you can be sure that the licensee will seek out any weaknesses in the patent prosecution history or any clouds on the title.  Before you even get to the licensing stage, make sure to follow these critical rules to plug gaps that could occur in your IP protective armor:

1. Make sure you have all your agreements in place to ensure that your ownership rights are in place. The first questions is always “Who owns the IP?“, it is important to nail down ownership in writing. Look at the ownership of materials from outside entities and if a license is required for commercial use.

2. Make sure you know who the true inventors are of any patent. In the U.S., improper inventorship may invalidate the patent so make sure there are written records of who invented what, when and where. Be especially careful of IP arising during collaborations with people outside your organization and look for any avenues someone could claim to be a co-inventor.

3. Keep very good records. Since inventorship is dictated in the united states by the first to invent rule (invention is conception coupled with reduction to practice), invention is proven by due diligence and good record keeping. Make sure all development records are permanent + complete + continuous.

4. Check compliance with regulatory procedures, e.g., government reporting for inventions made with government funds.

Let’s be careful out there.

Posted January 17th, 2007 by Stephen Albainy-Jenei in Licensing, Current Affairs
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Dennis Crouch over at patently-o has posted on his great blog the briefs filed in a patent case soon to be heard in the Supreme Court.  The Court and parties believe the issue is whether there is Article III jurisdiction over a declaratory judgment action brought against the licensor of a patent by the licensee where the licensee is still paying royalties, and so on.  There were lots of amicus briefs, and I wrote one in which I argued on behalf of several law professors that Congress had simply not enacted statutes that granted this jurisdiction — the Article III issue isn’t to be reached.  He posted all the briefs, including my brief which focused principally on statutory interpretation.  Others mention the statutory issue, too.  I’m betting that my position wins 5 votes… Stay tuned!

David Hricik
Mercer Law School
(I’m not affiliated with the firm that owns this site)

Posted September 7th, 2006 by Stephen Albainy-Jenei in Licensing
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Recently, I had a client that was about to license a biotech invention for development as a therapeutic. In the course of discussions, we found that in order to bring the product to market, the licensee may need to obtain rights from various other rights holders. As a result, the licensee may be faced with more than one royalty to pay.

However, the economics of the product may be such that a combined royalty cannot be sustained. For example, the maximum royalty that can be sustained and be paid upon a product may be 8%, with any greater royalty rate putting at risk the economic viability of exploiting the product at all. This is where royalty anti-stacking provisions can be used.

Royalty stacking occurs when a number of separate royalty obligations, in relation to the same product, but pursuant to separate licenses to separate licensors, are stacked or layered, each upon the other. A product may rely upon a number of separate technologies to be combined, each being critical to the product, and without which there would not be a product for sale. For example, in the case of a pharmaceutical product, a compound may be licensed in from one licensor, and a delivery system for the compound may be licensed in from another. Both licenses may be required to enable the product to be produced and sold.

A licensee will want its licensor or licensors to share some of the burden of this stack of royalties by requesting a deduction of some or all of the royalties paid by a licensee to third parties, from amounts payable to its licensor. A licensor will, of course, want to minimize that loss of royalties.

The licensee may wish to stack, or layer the royalty to the two parties, so that the aggregate of them reduces the total royalty obligations for a particular product, and reduces correspondingly the possibility that the sum of all royalty obligations may put the economic viability of the product at risk.

One mechanism used to reduce the total royalty burden is to include a clause that the royalty rate will be reduced by a percentage (say, one-half) of the second royalty rate. For example, where a first royalty rate is 8% and a second license includes a rate of 4%, the resulting royalty rate may be:

Royalty rate is 8% - (4% x 0.5) = 6%

Sometimes, a royalty stacking mechanism will refer to a minimum royalty rate, so that despite all royalty stacking calculations, particularly where there may be more than one other parcel of intellectual property to be licensed in, there would always be a minimum rate.

An example clause would be along the lines:

If, at any time, LICENSEE discovers that any Licensed Product or the use thereof in the Field or the practice of any Licensed Technology infringes claims of an unexpired patent or patents other than those in the Patent Rights, LICENSEE may, if it has not already done so, negotiate with the owner of such patents for a license on such terms as LICENSEE deems appropriate. Should the license with the owner of such patents require the payment of royalties or other consideration to such owner then the royalties otherwise payable under this Agreement shall be reduced by the dollar amount of the royalties or consideration paid to the owners of such patents; provided that in no event shall the royalty payable under this Agreement be less than one percent (1%) on the first $50,000,000 in Gross Sales and two percent (2%) on the any Gross Sales above $50,000,000.

A licensee will want to build into any license a level of flexibility to ensure that it is not limited to claiming deductions only for third party royalties or license fees that it is aware of at the time of entering into a license.

Pharmaceutical and biopharmaceutical companies should also consider other options such as the use of clearing houses, consortia and cross-licensing to help overcome royalty stacking problems. Patent pools, payments other than royalties and risk-adjusted royalties are possible alternatives.

Posted March 10th, 2006 by Stephen Albainy-Jenei in Licensing
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Among the most frequently asked questions I get from start-up companies is: How much should I pay for licensing in a technology? Answer: As little as possible. Kidding aside, this is really a very complicated question that cannot be answered without a lot of homework. While most companies seem to use a valuation method I like to call “pulling a number out of the air,” there are three primary methods used by licensing professionals to assess the value of IP assets. These are the Cost Method, Market Method and Income Method. With all of these methods, good data and data projection are critical in determining the appropriate numbers.

In the Cost Method, the value is the cost incurred in developing or purchasing the relevant technology or intellectual property. But what if, as a result of changing markets or new information, you determine that the present value of the total revenues/return expected from this technology is less that the cost?

In the Market Method, the method for determining value is to learn what comparable technologies have licensed for recently. Of course, to do this you’ll need to (a) determine what transactions are comparable and (b) obtain current, reliable data. Usually, this is through compiled data reports.

In the Income Method, value is the estimated revenues the technology is likely to produce (and savings it is likely to generate) and comparing this to the estimated cost to generate the same revenues or savings from other sources, that is, total annual returns. Basically, it’s a method of determining what you can afford (or not afford) to pay in the end.

This issue came up while I was on a panel discussion at the BioOhio conference last week (although I was in pain from my broken shoulder). It did provide some interesting insights in the need for obtaining information relating to royalty rates.

One audience member stated that he felt universities or research institutions collaborate and share licensing information, essentially leaving a potential licensee at a disadvantage with little or no information as to what the “proper” royalty rate should be for a given technology. The audience member thus posed the question: Are there sources of royalty data available to a licensee to figure out the “appropriate” royalty amount to pay (i.e., the Market Method)?

The short answer is “Yes” but I find such royalty rate sources particularly unhelpful. We didn’t have time to get into details at the time but I think that finding out the range of average royalty rates for particular products is interesting in the sense of providing a general “ballpark” range — but not really helpful for your particular product and agreement.

Organizations like the Association of University Technology Managers (AUTM) and the Licensing Executives Society (LES) publish lists and statistical analyses of royalty rates (many industries use about 5% of the selling price as a typical rate) but rates can vary from 0.1 to 25% or more and depend on the industry.

Often, such royalty guides provide some range of royalty rates for certain technologies, e.g., a rate of 4%-12% for technologies related to therapeutic products. I would argue: So, what? What does that tell you about your therapeutic? Should it be 12%? Or only 4%? Or do you split the baby and call it 8%?

Granted, using an established royalty rate shown in certain guides sounds good since these are derived from prior actual licenses for comparable products. The rates in the guides come from negotiation and paid by a sufficient number of licenses. As with reasonable royalty, an established royalty rate derives from the outcomes of willing parties licensing without the threat of a suit, or resultant from litigation. These rates are reflective of the profitability of industry segments. Correspondingly, what might pass muster for an established royalty depends upon the definition of a market segment. Commodity items tend to garner a relatively low royalty rate, just shy of 3%, consumer goods 5%, while software garners around 7-8%. But generalities don’t tell you anything about your particular deal.

Very often, universities rely on the 25% Rule. It’s often accepted (as a rule of thumb) that a royalty rate equalling about one-quarter of the licensee’s anticipated pre-tax profits derived from the technology is a fair rate. Of course, one needs to then determine net profits. Thus, the rates depend on the market forces of each particular product. For example, if the licensee will have profit margins of 80%, the royalty paid to the licensor should be about 20% of pre-tax, net revenues. Conversely, if profits of 4% are expected, the royalty should be within the range of 1-1.5% of net revenues earned.

Note, however, that this rule-of-thumb doesn’t take into account specific circumstances determining the value of your particular technology. Therefore, the 25% Rule is only a starting number before looking at many other factors that should be taken into account in the final determination of value/rate. One needs to consider: Is the technology a breakthrough or core product? Is it merely an ancillary product or minor improvement? Is the intellectual property (patents, copyrights, etc.) strong enough to make the final product unique and valuable? Is the technology ready to be used immediately or will it require substantial R&D or regulatory clearance to be commercialized? Is there a high risk of failure? Can you maintain a high profit margin or will others eat your lunch? Therefore, royalties for pharmaceuticals in the pre-clinical stage may be from 0-5%, while royalties in Phase I may be 5-10% and royalties for launched products may top 20%. Again, guidebooks and rules-of-thumb will only get you so far.

If you want to strike a deal in which the licensor thinks the price is too low, you need to provide a basis for your numbers. I recommend to clients that, if necessary, they show their business plan to the licensor under a nondisclosure agreement. That often helps the other side understand that the offer is dictated by the business model and not just an offer to get the lowest royalty rate in order to keep more of the profits for itself. For example, substantiate an expected profit percentage by preparing a manufacturing cost estimate and then apply percentages customary in the specific industry for overhead items like R&D, engineering, marketing and sales, etc. Then the total cost per unit is deducted from the expected selling price per unit to establish a gross profit.

What is more difficult is deciding how much, if any, the royalty rate should be discounted based on risk factors. It is not impossible for discount factors to be in the 25-35%/year range. To determine the ultimate reasonable royalty rate, you need to consider extraneous factors (e.g., how soon until you will be ready to sell a product and gain revenue, the exclusionary position of the patents, the competitive products, market share, etc.).

I say that the “correct” royalty rate is the maximum royalty rate that the licensee is willing to pay that meets the minimum royalty rate the licensor is willing to accept. If you are only willing to pay 3% and the university will only accept 6%, then you’ll have no deal (and I’d argue you shouldn’t!). Why front your capital on a business venture that you can’t afford to pursue?

A reasonable royalty rate is often based on economic sense by utilizing a financial model which relates the investment required to develop a therapeutic technology to the income generated by such technology. What does that mean? It means you have to have a good business plan in place before you can talk turkey on royalty rates. And I don’t mean those wildly inflated fluffy business plans that companies create showing revenue in colorful logarithmic growth charts to impress potential investors. No, I mean a real, down-to-earth, cold shower type of business plan that takes into account all of the pain and suffering that could be encountered along the way.

For example, with a novel early-stage therapeutic technology that is licensed by a university to a commercial company, one has to look at the development of such technology. Entrepreneurs who intend to market a new drug must go through a very complex and expensive process. Bringing a new drug to market can take a company 10-15 years at a cost of over $800 million.

The first step in obtaining FDA approval for a new drug is to submit an Investigational New Drug (IND) application to the FDA that contains preclinical information including animal pharmacology and toxicology data. When the FDA has cleared the IND application, the drug manufacturer can conduct clinical trials in three phases:

Phase I: Study of the drug in 20 to 80 healthy human volunteers for up to one year to provide information on the drug’s toxicity and potential side effects.

Phase II: This type of study is conducted on patients with the targeted disease that the drug is intended to treat over two years to test the drug’s safety and efficacy.

Phase III: This is the most comprehensive of the investigational studies focusing on a large number of patients for approximately two to four years, depending on the drug and the patient population.

Once you have successfully completed three phases of clinical studies on an investigational drug, you submit the information as part of a New Drug Application (NDA). The submission is reviewed by the FDA. If the drug is granted NDA approval, the FDA may require that the company engage in a Phase IV clinical study.

At each step in the path, there is a substantial risk that the drug will fail. Even drugs that complete Phase III clinical trials will go on to gain FDA approval about half the time. And, after clearing all of these hurdles, sales may increase gradually and not reach full scale until many years after marketing approval. The total cost of production, marketing, selling, etc., (excluding royalty payments) may be 80-90% of sales value. Keep in mind, depending upon when patents were filed, a licensee may have only 10-12 years of patent-protected sales in which to recoup investment expenses.

Drug development (or other high-tech product development) is a high-risk venture and such risk should be reflected in the company’s required rate of return. In any event, the rates of returns will depend to a large extent on the maximum royalty rate, payable to the university, which will enable the company to achieve its desired rate of return.

A university will often push for a higher royalty rate based on the appeal of the technology (cutting-edge technologies deserve higher royalty rate), its proximity to human trials and the extent of the patent coverage, etc. The company usually bases its royalty rate by considering the amount of investment required for the development and the extent of patent coverage.

The expected sales volume is often a key determinant of the economically reasonable royalty rates. Thus, the factors that determine the expected sales volume such as the potential market, possible competition, the expected product price and the geographical coverage of the patents should be seriously considered while determining such rates.

Considering that the total investment required for the development can be hundreds of millions of dollars, in many cases only a small royalty rate is economically reasonable depending upon the expected sales volume. If the expected sales volume doubles, the reasonable royalty rate payable will likewise increase. However, as the amount of investment capital increases, the maximum royalty rate payable to the university will decrease. In that case, the range of reasonable royalty rates can easily vary from 1%-12% (or even well outside this range) depending upon the expected sales.

In light of this, guide books of reasonable royalty rates don’t seem all that helpful.

Posted November 17th, 2005 by Stephen Albainy-Jenei in Licensing
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IP management is of strategic importance for universities since they can derive significant benefits from an effectively-managed IP portfolio.  According to a survey published by the Association of University Technology Managers (AUTM), the fiscal year 2002 saw over US$37 billion in sponsored research expenditures at 212 member institutions responding to the survey.  During the same period, over 3,600 US patents were issued bringing in US$1.267 billion in licensing revenue and 450 new companies were formed to develop and commercialise some of these inventions.

I just published an article entitled "Building and managing university patent portfolios," IP Value 2005: Building and Enforcing Intellectual Property Value. An international guide for the boardroom, Ed. Joff Wild, published by Globe White Page Ltd. (London, UK);  www.buildingipvalue.com.

I point out that the great potential for universities to generate revenue from IP is less likely to be realized unless universities adopt an aggressive stance towards exploitation.

My recommendations include:

1.  Develop university seed funds to perform the applied research necessary to bridge the gap for high potential, embryonic technologies.

2.  Encourage faculty start-ups to take research outputs closer to market, thereby reducing the risk attached to its exploitation.

3.  Manage IP costs by developing an IP management plan that includes an explicit review process for all inventions, under which technical and business managers, along with outside patent counsel, periodically evaluate each invention to determine if patent protection is cost-effective.

4.  Manage IP donations by requiring, if applicable, the financial resources necessary to maintain the patent(s) for a period of at least two years following the donation as well as financial support for further research and development of the donated IP.

5.  Watch your own IP use since the recent case Madey v Duke University, 307 R 3d 1351 (Fed Cir 2002), has set off a debate about research at federally-funded universities and their right to conduct research without the worry of infringing the IP rights of others.

6.  Continually evaluate performance to demonstrate to external organizations that the university is capable of managing IP effectively and to assist university managers to identify problems and opportunities relating to IP management.

You can see the entire article here.  If you need assistance with University licensing, you can contact me at salbainyjenei@fbtlaw.com.

Posted December 7th, 2004 by Stephen Albainy-Jenei in Licensing
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Of note for those of us that regularly deal with university inventions, and inventors, a Chemistry professor has filed a lawsuit against the University of Pennsylvania alleging that it deprived him of profits from technology he developed. Professor Michael Therien accuses the University of failing to live up to its obligation to commercialize his technology, which led to 10 patents in fields ranging from telecommunications to medical imaging and diagnostics. The suit alleges that Therien suffered lost profits and damages to his reputation exceeding $100,000.

The University has filed a motion to dismiss the case, which is currently pending in the Pennsylvania Eastern District Court. In a response filed with the court, University officials said Therien has "no right" to the technology and the University has "discretion" over whatever technology its employees develop.

Since I was previously the Interim Director of a tech transfer office, I will be particularly interested in seeing how this plays out.   See the entire article here.

Posted November 22nd, 2004 by Stephen Albainy-Jenei in Licensing
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