2. research with commercial potential
DESCRIPTION
Research with commercial potentialTRANSCRIPT
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Delivered by: Panos Fitsilis ([email protected])
Date: 9-10 October 2014
Venue: American University of Beirut (AUB)
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This project has been funded with support from the European Commission. This publication reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained
therein.
This material has been developed in the context of IDEAL Tempus Project by
Panos Fitsilis ([email protected])
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Table of contents
i. How do we identify research that has commercial potential
ii. What strategies can we use to first protect it and then make use of it in the marketplace
Slide 3
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Chain-linked model of innovation (Rosenberg & Kline, 1986)
Source: www.uis.unesco.org
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– Originality of the innovation
– Scientific return/opportunities for the laboratory
– Project feasibility
– Potential users
– Scientific relevance of the project
– Team aspects
– Risk management
– Profile of the key researcher
– Business opportunity
– Market opportunities/threats
A lot of criteria …..
– IP (protection issues, prior art)
– Lab support
– Realism of the announced plan
– Potential applications
– Social & economical impact
– Positive ROI/NPV calculations
– Venture value
– Regulatory constraints
– Business model
– Financial return
– Production issues
• A lot of criteria for evaluation are proposed in the literature, such as:
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• According to MacMillan et al. the main criteria for selecting are:
– Characteristics of the market
– Characteristics of the product or service produced by research
– Financial impact
– Experience of research team
– Personality of the principal researcher
What are the criteria ?
Source: MacMillan, I. C., Siegel, R., & Narasimha, P. N. (1986). Criteria used by venture capitalists to evaluate new venture proposals. Journal of Business venturing, 1(1), 119-128.
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• The target market enjoys a significant growth rate?
• The research stimulates an existing market?
• There is little threat of competition during the first three years?
• The research will create a new market?
Μarket driven criteria
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Market(ing) Research: Definition
• The systematic design, collection, analysis and reporting of data and findings relevant to a specific marketing situation facing the organisation
• Main research activities (Source: British Market Research Association)
– Market Measurement
– New Product development/concept testing
– Usage and Attitude Studies
– Advertising developing and pre-testing
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Types of Market Research
By Source
- Primary
- Secondary
By Objectives
- Exploratory
- Descriptive
- Causal
(or experimental)
By Methodology
- Qualitative
- Quantitative
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Types of Market Research: By Source
Primary Collection of data specifically for the problem or
project in hand
Secondary Based on data previously collected for purposes
other than the research in hand (e.g. published
articles, government stats, etc.)
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Types of Market Research: By Methodology
Qualitative Quantitative
Type of Question Probing Simple
Sample Size Small Large
Information per respondent High Low(ish)
Questioner’s skill High Low(ish)
Analyst’s skill High High
Type of analysis Subjective, Objective,
Interpretative Statistical
Ability to replicate Low High
Areas probed Attitudes Choices
Feelings Frequency
Motivations Demographics
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Benefits of Qualitative Market Research vs Quantitative
Benefit Comment/Example
Cheaper
Probes in-depth motivations
and feelings
Often useful precursor
to quantitative research
Smaller sample size
Allows managers to observe (through one
way mirror) ‘real’ consumer reaction to
the issue - e.g. comments and
associations (e.g. Levis) regarding a new
product fresh from the labs
Gives the research department a low
cost and timely sense of which issues
to probe in quantitative research
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Types of Market Research: By Objective
• Exploratory Preliminary data needed to develop an idea
further. Eg outline concepts, gather insights,
formulate hypotheses
• Descriptive Describe an element of an ideas precisely. Eg
who is the target market, how large is it, how
will it develop
• Causal Test a cause and effect relationship, e.g. price
elasticity. Done through experiment
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The Market Research Process 1. Defining the
problem and
objectives
2. Developing
the research
plan
3. Collecting
the
information
4. Analysing
the
information
5. Presenting
the findings
Steps
Comments
Distinguish between
the research type
needed e.g.
- exploratory
- descriptive
- causal
Decide on
- budget
- data sources
- research approaches
- research instruments
- sampling plan
- contact methods
Information is
collected
according to
the plan (N.B.
it is often done
by external
firms)
Statistical
manipulation of
the data collected
(e.g. regression)
or subjective
analysis of focus
groups
Overall conclusions
to be presented
rather than
overwhelming
statistical
methodologies
If a problem is
vaguely defined,
the results can
have little
bearing on the
key issues
The plan needs
to be decided
upfront but
flexible enough
to incorporate
changes/
iterations
This phase is
the most costly
and the most
liable to error
Significant
difference in
type of analysis
according to
whether market
research is
quantitative or
qualitative
Can take various
forms:
- oral presentation
- written conclusions supported by analysis
- data tables
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Other market analysis tools - PESTEL
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Question?
• Can you produce the PESTEL analysis for a spin-off company to be created at Lebanon from your university in relation to your research?
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Market analysis for industry sectors
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The Five Forces Model of Competition / Porter
Source: Crafting and Executing strategy, A. Thomson, A.J. Strickland III, J. Gamble
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Factors Affecting Threat of Entry
Source: Crafting and Executing strategy, A. Thomson, A.J. Strickland III, J. Gamble
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Question?
• Can you identify the ENTRY threads for your spin-off company?
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Factors Affecting Competition From Substitute Products
Source: Crafting and Executing strategy, A. Thomson, A.J. Strickland III, J. Gamble
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Factors Affecting Bargaining Power of Suppliers
Source: Crafting and Executing strategy, A. Thomson, A.J. Strickland III, J. Gamble
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Factors Affecting Bargaining Power of Buyers
Source: Crafting and Executing strategy, A. Thomson, A.J. Strickland III, J. Gamble
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• According to MacMillan et al. the main criteria for selecting are:
– Characteristics of the market
– Characteristics of the product or service produced by research
– Financial impact
– Experience of research team
– Personality of the principal researcher
What are the criteria ?
Source: MacMillan, I. C., Siegel, R., & Narasimha, P. N. (1986). Criteria used by venture capitalists to evaluate new venture proposals. Journal of Business venturing, 1(1), 119-128.
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• The product may be described as “high tech.”
• The product is innovative
• The research product is proprietary or can otherwise be protected.
• The product enjoys demonstrated market acceptance.
• The product has been developed to the point of a functioning prototype.
Characteristics of the product or service produced by research
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Types of innovations
• Product innovation: introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics.
• Process innovation: implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.
• Marketing innovation: implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.
• Organisational innovation: implementation of a new organisational method in the firm’s business practices, workplace organisation or external relations.
www.uis.unesco.org
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Degree of novelty
• New to the firm: – A product, process, marketing method, or
organisational method can already have been implemented by other firms, but if it is new to the firm (or in case of products and processes: significantly improved), then it is an innovation for that firm.
• New to the market: – the firm is the first to introduce the
innovation onto its market. – The market is defined as the firm and its
competitors. – The geographical scope is subject to the
firm’s own view of its operating market and thus can include both domestic and international firms.
www.uis.unesco.org
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Degree of novelty (continued)
• New to the world: – the firm is the first to introduce the
innovation for all markets and industries, domestic and international.
– implies a qualitatively greater degree of novelty than new to the market.
• Disruptive innovations: – an innovation that has a significant
impact on a market and on the economic activity of firms in that market.
– focuses on the impact of innovations as opposed to their novelty.
– These impacts can, for example, change the structure of the market, create new markets, or render existing products obsolete. However, it might not be apparent whether an innovation is disruptive until long after the innovation has been introduced.
www.uis.unesco.org
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Product Differentiation
• Incorporate differentiating features that cause buyers to prefer firm’s product or service over brands of rivals
• Find ways to differentiate that create value for buyers and are not easily matched or cheaply copied by rivals
• Not spending more to achieve differentiation than the price premium that can be charged
Objective
Keys to Success
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Types of Differentiation Themes
• Unique taste – ???? • Multiple features – ???? • Wide selection – ????? • Superior service – ????? • Spare parts availability – ???? • Engineering design and performance – ???? • Prestige – ???? • Product reliability – ????? • Quality manufacture – ???? • Top-of-line image – ????
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Types of Differentiation Themes
• Unique taste – Dr. Pepper • Multiple features – Microsoft Windows and
Office • Wide selection – Amazon.com • Superior service – Ritz-Carlton • Spare parts availability – Caterpillar • Engineering design and performance – BMW • Prestige – Rolex • Product reliability – Johnson & Johnson • Quality manufacture – Toyota • Top-of-line image – Ralph Lauren, Starbucks,
Chanel
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32
Two other factors also influence an industry attitude to innovation and
technology
•The Technology adoption Cycle - which describes the enterprise attitude
to technology (and possibly change in general)
•The Product life-cycle (if we can possibly imagine such a thing!)
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• According to MacMillan et al. the main criteria for selecting are:
– Characteristics of the market
– Characteristics of the product or service produced by research
– Financial impact
– Experience of research team
– Personality of the principal researcher
What are the criteria ?
Source: MacMillan, I. C., Siegel, R., & Narasimha, P. N. (1986). Criteria used by venture capitalists to evaluate new venture proposals. Journal of Business venturing, 1(1), 119-128.
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• Return of Investment equal to at least IO times the initial investment within 5-10 years.
• Requires an investment that can easily be liquefied (e.g., new company goes public or acquired).
• It is not be expected to make subsequent investments
Financial impact
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Financial evaluation methods
Liljeblom, E., & Vaihekoski, M. (2004). Investment evaluation methods and required rate of return in Finnish publicly listed companies.
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Stage Of
Business
Expected Annual Return
on Investment
Expected Increase
on Initial Investment
Start-up business
(idea stage)
60% + 10–15 × investment
First-stage financing
(new business)
40%–60% 6–12 × investment
Second-stage financing
(development stage)
30%–50% 4–8 × investment
Third-stage financing
(expansion stage)
25%–40% 3–6 × investment
Turnaround situation 50% + 8–15 × investment
Source: W. Keith Schilit, “How to Obtain Venture Capital,” Business
Horizons (May/June 1987): 78.
Indicative ROI (example)
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• According to MacMillan et al. the main criteria for selecting are:
– Characteristics of the market
– Characteristics of the product or service produced by research
– Financial impact
– Experience of research team
– Personality of the principal researcher
What are the criteria ?
Source: MacMillan, I. C., Siegel, R., & Narasimha, P. N. (1986). Criteria used by venture capitalists to evaluate new venture proposals. Journal of Business venturing, 1(1), 119-128.
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• The research team has substantial expertise
• The research team has a well established reputation and track record
• Research team has good collaboration and
• Research team has links with industry
Experience of research team
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• Capable of sustained intense effort.
• Able to evaluate and react to risk well.
• Articulate in discussing venture.
• Attends to detail.
• Demonstrated leadership in past
• Thoroughly familiar with market
Personality of the principal researcher
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Roles and Tasks of principal researcher
40
• He is responsible for organizing, staffing, budgeting, directing, planning, and controlling the project. – shape goals
– obtain resources
– build roles & structures
– establish good communication
– see the whole picture
– move things forward Buchanan & Boddy, (1992)
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Types of competence
20 Technical competencies
15 Behavioural competencies
11 Contextual competencies
=> 46 competencies
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Common activities and skills
42
• Leadership
• Management
• Customer Relations
• Technical problem solving
• Conflict Management
• Team Management
• Risk and Change Management
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• Introducing our research to the market is a
new project
• We need to put all data, information and research together as check
is the project
FEASIBLE
Project feasibility
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05 44
CONCEPTION
FEASIBILITY
IMPLEMENTATION
OPERATION
TERMINATION
Define the Project
Design the Project Process
Deliver the Project
EVALUATION Develop the Process
Reminder
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Feasibility Analysis
1. Technical Feasibility;
2. Financial Feasibility;
3. Risk & Uncertainty Feasibility.
4. Environmental feasibility
The most frequently used evaluates these
three key areas, BUT others might well be
used!
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46
Process
Project Brief Generate Scenarios
Undertake Feasibility Studies for Each Scenario
Technical Feasibility Study
Financial Feasibility Study
Risk & Uncertainty Feasibility Study
Collate Results
and Select Best
Scenario by
Weighted
Analysis
Comprising of:
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47
Project Brief
Generate Scenarios
Feasibility Study
Technical Feasibility
Financial Feasibility
Risk & Uncertainty
Feasibility
Feasibility Study Feasibility Study
Technical Feasibility Technical Feasibility
Financial Feasibility Financial Feasibility
Risk & Uncertainty
Feasibility
Risk & Uncertainty
Feasibility
Select Best Option by Weighted Analysis
Project Brief
Generate Scenarios
Feasibility Study
Technical Feasibility
Financial Feasibility
Risk & Uncertainty
Feasibility
Feasibility Study Feasibility Study
Technical Feasibility Technical Feasibility
Financial Feasibility Financial Feasibility
Risk & Uncertainty
Feasibility
Risk & Uncertainty
Feasibility
Select Best Option by Weighted Analysis
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48
Technical Feasibility
• A Technical feasibility study can only be based upon current information concerning the product, material, or services life. Information availability stages are:
– Fully mature – considerable data is available for evaluation of new proposal.
– Semi-mature – limited data available to be used in feasibility study.
– New Technology – at prototype stage, limited information available.
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The PMBOK
• “Project Management Body of Knowledge”
– sum of knowledge within the profession of project
management
– used to document and standardize generally accepted
project management information and practices
• produced by the Project Management Institute
(www.pmi.org)
• revised and reprinted every 4 years – fifth edition is
the current one
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The 10 subject areas of PM
• an area of project management defined by its knowledge requirements and described in terms of its associated process, practices, inputs, outputs, tools and techniques
• identified subject areas 1. Project Integration Management 2. Project Scope Management 3. Project Time Management 4. Project Cost Management 5. Project Quality Management 6. Project Human Resource Management 7. Project Communications Management 8. Project Risk Management 9. Project Procurement Management 10. Stakeholder Management
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CRITERIA FOR EVALUATING VENTURE OPPORTUNITIES
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Attractiveness
Criterion Higher Potential Lower Potential
Market Issues
Need Identified Unfocused
Customers Reachable; receptive Unreachable or loyal to others
Payback to user Less than one year Three years plus
Value added or created High Low
Product life Durable; beyond time to recover investment plus profit
Perishable; less than time to recover investment
Market structure Imperfect competition or emerging industry
Perfect competition or highly concentrated or mature industry or declining industry
Criteria for evaluating venture opportunities
Source: Entrepreneurship, Miroslaw Malek
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Attractiveness
Criterion Higher Potential Lower Potential
Market Issues (continued)
Market size $100 million sales Unknown or less than $10 million sales or multibillion
Market growth rate Growing at 30% to 50% or more
Contracting or less than 10%
Gross margins 40% to 50% or more; durable
Less than 20%; fragile
Market share attainable (year 5)
20% or more; leader Less than 5%
Cost structure Low cost provider Declining cost
Source: Entrepreneurship, Miroslaw Malek
Criteria for evaluating venture opportunities
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Criteria for evaluating venture opportunities
Attractiveness
Criterion Higher Potential Lower Potential
Economic/harvest issues
Profits after tax 10% to 15% or more; durable Less than 20%; fragile
Time to:
Break even Under 2 years More than 3 years
Positive cash flow Under 2 years More than 3 years
ROI potential 25% or more/year; high value 15%-20% or less/ year; low value
Value High strategic value Low strategic value
Capital requirements Low to moderate; fundable Very high; unfundable
Exit mechanism Present or envisioned harvest options
Undefinded; illiquid investment
Source: Entrepreneurship, Miroslaw Malek
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Attractiveness
Criterion Higher Potential Lower Potential
Competitive advantages issues
Fixed and variable costs:
Production Lowest Highest
Marketing Lowest Highest
Distribution Lowest Highest
Degree of control:
Prices Moderate to strong Weak
Costs Moderate to strong Weak
Channels ofsupply/resources
Moderate to strong Weak
Channels of distribution Moderate to strong Weak
Source: Entrepreneurship, Miroslaw Malek
Criteria for evaluating venture opportunities
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Attractiveness
Criterion Higher Potential Lower Potential
Competitive advantages issues (continued)
Barrier to entry:
Proprietary protection/ regulation advantage
Have or can gain None
Response/lead time advantage in technology, product, market innovation, people, location, resources or capacity
Resilient and responsive; have or can gain
None
Legal contractual advantage
Proprietary or exclusive None
Contacts and networks Well developed; high-quality; accessible
Crude; limited inaccessible
Source: Entrepreneurship, Miroslaw Malek
Criteria for evaluating venture opportunities
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Attractiveness
Criterion Higher Potential Lower Potential
Management team issues
Team Existing, strong proven performance
Weak or solo entrepreneur
Competitor`s mind set and strategies
Competitive; few; not self-destructive
Dumb
Fatal flaw issue
Fatal flaws None One or more
Source: Entrepreneurship, Miroslaw Malek
Criteria for evaluating venture opportunities
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Source: Stanley Rich and David Gumpert, Business Plans That Win $$$ (New York: Harper & Row, 1985), 169.
Level 4 Fully developed product/service
Established market
Satisfied users
4/1 4/2 4/3 4/4
Level 3 Fully developed product/service
Few users as of yet
Market assumed
3/1 3/2 3/3 3/4
Level 2 Operable pilot or prototype
Not yet developed for production
Market assumed
2/1 2/2 2/3 2/4
Level 1 Product/service idea
Not yet operable
Market assumed
1/1 1/2 1/3 1/4
Level 1 Individual founder/
entrepreneur
Level 2 Two founders
Other personnel
not yet identified
Level 3 Partial
management
team—members
identified to join
company when
funding received
Level 4 Fully staffed,
experienced
management team
Riskiest
Riskiest
Status of Management
Stat
us
of
Pro
du
ct/S
ervi
ce
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Concluding – Top 10 criteria Criterion Percentage
Capable of sustained intense effort 64
Thoroughly familiar with market 62
At least ten times return in five to ten years 50
Demonstrated leadership in past 50
Evaluates and reacts to risk well 48
Investment can be made liquid 44
Significant market growth 43
Track record relevant to venture 37
Articulates venture well 31
Proprietary protection 29
Source: MacMillan, I. C., Siegel, R., & Narasimha, P. N. (1986). Criteria used by venture capitalists to evaluate new venture proposals. Journal of Business venturing, 1(1), 119-128.
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STRATEGIES FOR INITIAL PROTECTION OF RESEARCH
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What is intellectual property?
• Intellectual properties are intangible products of the mind. These include:
– inventions (devices, compositions, plants, designs)
– publications
– Software
– works of art.
Must be tangible in order to be protected.
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How do we protect intellectual property?
Source:http://melfiassociates.com/which-is-which-copyright-patents-trademarks-trade-secrets/
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What we can do in advance?
• Create protection practices such as
– Establish correct employment agreement
– Have a well established and royalty policy
– Enforce physical and electronic security guidelines
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Employment Agreements
• Typically are a condition at hiring & include salary, benefit details.
• Often include trade secret & confidentiality language for a term that exceeds termination from the company.
• Includes IP ownership information.
• May include non-compete language to prevent you from working for a competitor for a period of time.
http://www.egr.msu.edu/egr/research/techtransfer.php
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Example Royalty Policy
• First $5000 goes to the inventor(s).
• Patent expenses are then recovered.
• Net Royalty Inventor(s) Academic University
Next $100,000 33.3% 33.3% 33.3%
Next $400,000 30% 30% 40%
Next $500,000 20% 20% 60%
Excess >$1M 15% 15% 70%
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Physical and electronic security guidelines
• Control physical access
– Notebooks
• Control electronic access
• Do Have ALL Entries in the Notebooks Witnessed and Dated
• Do Implement Document Control/Destruction Policy
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Follow course on coursera Technology Commercialization, Part 1: Setting up your Idea Filtering System From: University on Rochester https://www.coursera.org/course/techcommercialpart1