Working with start-ups at OTL

Kirsten Leutekirsten.leute@stanford.edu

Frederick Terman

• Professor, Dean and Provost

• Steeples of Excellence

• Hewlett and Packard, Litton

• Stanford Industrial Park (now Stanford Research Park)

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 Material

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 researcher discovers new invention &

submits disclosure

, ©

Company makes new products

Stanford IP 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

More than incidental use examples

• Use of Stanford funds to file a provisional patent application

• Creation of physical prototypes• Acquisition of data for invention or to develop an

invention• Use of the Machine Labs

Incidental use examples

• Use of the library• Use of computers resources available to all

students• Email• Dorm rooms• Use of classrooms to discuss projects

OTL: Notable Stanford Inventions

1970 – OTL Established

1971 – FM Sound Synthesis ($22.9M)

1974 – Recombinant DNA Cloning ($255M)

1981 – Phycobiliproteins ($46.4M), Fiber Optic Amplifier ($48.4M), MINOS ($4.1M)

1984 – Functional Antibodies ($318.9M)

1987 – Selective Amplification of Polynucleotides ($20.3M)

1990-1992 – Discrete Multi-tone technologies for DSL ($29.6M)

1993 – Microarrays ($2M), MIMO for Wireless Broadcast ($0.12M)

1994 – In vivo Bioluminescent Imaging ($7.2M)

1996 – Improved Hypertext Searching - GoogleTM ($337M)

2004 – Refocus Photography ($0.15M)

2012 – the next big thing ???

• Steps– Disclosure (done online through Researcher Portal)– Evaluation– Licensing Strategy

• File patent?• Market to potential licensees

– The License– Maintaining the Relationship

• “Licensing Associate & Licensing Liaison” teams– Technical degrees and marketing focus– Responsibility for inventions from cradle-to-grave

OTL: Invention to License

Inventor’s Role in the Process

• Disclose inventions• Identify potential licensing prospects• Participate in patent preparation

and prosecution• Host visits and/or provide technical information to

potential licensees• Provide input into the licensing strategy• Sometimes consultant to licensee(s)

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

Start-up illustration

- Universities want to share in the upside and help with economic development

- Conflict of interest issues are primary concern- We avoid negotiating with the inventors who are

founders due to their conflicted positions- Many start-ups first take option agreements for 6-12

months- Most work with local VC firms

OTL Interactions with Start-ups

• Typical situation:– Researcher discloses invention and states s/he would

like to found a company around the technology– OTL markets technology– Often start-up is the only interested party– Start-up submits business plan– Negotiate financial terms with business person– OTL initiates conflict of interest review if inventor-faculty

member involved– Remainder of agreement negotiated– Often the first agreement is an option

Option Agreements

• 6-12 months in duration• Small payment plus reimbursement of patent

expenses incurred under option• Short, easy to negotiate• Gives startup time to seek funding, do more

research or prototyping, or other activities to get the company off the ground

• Time to move the research out of the lab• Template is on our web site

Important terms with startups

• Upfront consideration includes cash and perhaps equity

• Annual minimums, ramping up over passing years• Earned Royalties on Net Sales of products• Milestone payments – often large towards time of

product sales to account for smaller upfronts• Yearly diligence milestones• Sublicensing – scaled down over time/development

Considerations when licensing to start-ups

• If the researchers are new to start-ups, we try to help them use their attorney-time wisely– Highlight clauses that are non-negotiable– Keep tabs on “over-lawyering”

• Start-ups are evolving entities, so they need some flexibility– Diligence may be a moving target– More renegotiation with start-ups– Concentrate on the end goal – products to help people

• Startups often have many moving parts so need efficiency and time-sensitivity from a TTO

Keep in mind…

• OTL does not have the goal of stimulating the local economy• Stanford does not have an on-site incubator (although we

have other resources)• Stanford never assigns patent rights to another party in a

license• OTL does not help write business plans• OTL can provide introductions to VCs and other funding

sources, but the start-ups usually use their own routes• About 15% of our licenses each year are to start-ups

SEN Members• Graduate School of Business (GSB)

– Center for Entrepreneurial Studies– Center for Social Innovation– Graduate School of Business (GSB) Entrepreneur Club– GSB Energy Club– Stanford Institute for Innovation in Developing

Economies– Stanford Program on Regions of Innovation and

Entrepreneurship

• School of Engineering (SoE)– Asia Technology Initiative– Epicenter (National Center for Engineering Pathways to

Innovation)– Product Realization Network– Stanford Institute for Electrical and Electronics Engineers– Stanford Technology Ventures Program– US-Asia Technology Management Center

• Graduate Program in Journalism: Digital Media at Stanford

• Office of Technology Licensing• School of Medicine

– Biodesign– School of Medicine Career Center

• Multidisciplinary– AIMS (Association of Industry-Minded Stanford

Professionals)– Cross-disciplinary Healthcare Innovation Partnership at

Stanford– European Entrepreneurship & Innovation– Hasso Plattner Institute of Design (d.school)– Stanford IP Innovation Society– Stanford Media X– Start X– The Precourt Institute for Energy– Woods Institute for the Environment

• Student Groups– Asia-Pacific Student Entrepreneurship Society– Business Association of Stanford Entrepreneurial

Students– Society for Entrepreneurship in Latin America– Stanford Energy Club– Stanford Law & Technology Association– Stanford Venture Capital Club– Stanford Women in Business

Web Page

otl.stanford.edu