Technology Licensing at

Stanford University

Overview

• Background and Policies

• OTL Facts and Figures

• OTL Process: Invention to License

University-Industry Technology Transfer

MechanismsGraduated students

PublicationsSeminars, conferences, etc.

Faculty consultingIndustry sponsored researchIndustrial affiliate programs

Intellectual property licensing

Start-up companies andlarge corporations

Research resultsfrom lab

New products in marketplace

Intellectual Property Licensing

University-Government Interactions

Bayh-Dole Act• Created uniform patent policy regarding

inventions made under federally-funded research programs

• Encouraged universities to participate in technology transfer activities

GovernmentUniversity

Bayh-Dole Act (U.S. Public Law 96-517)

• University may elect to retain title to inventions developed under federally-funded research programs

• University grants royalty-free nonexclusive license to government

• Any company holding an exclusive license must substantially manufacture the product in the U.S.

• In marketing of an invention, University must give preference to small business firms (< 500 employees)

• University must share with the inventor(s) a portion of any revenue received from licensing

(Sources: COGR Publication “The Bayh-Dole Act: A Guide to the Law and Implementing Regulations”,37 CFR Part 401, 35 USC 200-212)

Stanford Facts for 2008

• 7 Schools – Business, Earth Sciences, Education, Engineering,

Humanities and Sciences, Law, and Medicine

• 1,829 Faculty members • Students (6,759 undergraduate and 8,186 graduate)• Finances (FY 2007-2008)

– $3.4 billion budget• $1.06 billion in sponsored research,

including SLAC (87% by federal government sponsors)

• additional $132.1 million in part through 55 industrial affiliate programs

– $17.2 billion endowment

(http://www.stanford.edu/home/stanford/facts/)

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 MaterialSemiconductor Maskworks

Stanford researcher discovers new invention &

submits disclosure

, ©

Company makes new products

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’s Intellectual Property 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

Stanford’s Royalty Distribution Policy

1/3 of Net Royalties to

Inventors

1/3 of Net Royalties to

Inventors' Department

1/3 of Net Royalties to

Inventors' School

• Cash Royalties from Issue, Minimums, Earneds• Net Royalties = Cash Royalties

minus 15% for administrative expenses

minus out-of-pocket expenses (e.g. patent costs)

OTL: Notable Stanford Inventions

1970 – OTL Established

1971 – FM Sound Synthesis ($22.9M)

1974 – Recombinant DNA ($255M)

1981 – Phycobiliproteins ($46.4M), Fiber Optic Amplifier ($40M), MINOS ($3.8M)

1982 – Amplification of Genes ($30M)

1984 – Functional Antibodies ($191M)

1986 – CHEF Electrophoresis ($2.25M)

1990-1992 – Discrete Multi-tone technologies for DSL ($29M)

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

2009 – the next big thing ???

Disclosures

Licenses*

Royalty Income

Staff

* Majority of disclosures are never licensed; many disclosures have one license; some disclosures have multiple licenses

OTL: Disclosure and Licensing History

1970

28

3

$50,000

2

Cumulative

7500

2800

$1.2 B

2008

430

107

$62.5 M

30

Active

~3000

~1000

OTL: The Upside

0

20

40

60

FY69-70 FY76-77 FY83-84 FY90-91 FY97-98 FY04-05

Fiscal Year

Roy

alty

($ m

illio

ns)

• In FY07-08, $62.5 million in royalties

• From 1970 through 2008, ~$1.2 billion cumulative royalties

• Typically, 10 to 15 years may elapse between initial invention disclosure and any significant royalties

0

50

100

150

200

250

300

FY03-04 FY05-06 FY07-08

Fiscal Year

# of

Dis

clos

ures

less than $10K$10K - $100K$100K - $1M$1M - $10Mgreater than $10 M

OTL: Looking Closely at Royalties

• In FY07-08, $62.5 million from 546 disclosures

– 33 out of 546 disclosures generated over $100,000 each

– 3 out of 33 generated over $1 million each

• From 1970 through 2008– 58 inventions generated

$1 million or more– 3 out of 7500 is BIG WINNER

• Royalties from large portfolio of inventions

OTL: Conversion Numbers

~ 50% of disclosures are filed as patent applicationssome disclosures potentially licensable as copyright or biological materials

20 - 25% of disclosures, including those patented,

are licensed

~8 disclosures received per week

OTL: Revenue vs. Expenses

$0

$2,000

$4,000

$6,000

$8,000

$10,000

FY69-70 FY76-77 FY83-84 FY90-91 FY97-98 FY04-05

Fiscal Year

($ th

ousa

nds)

15% of Revenue Operating Expense

• OTL is self-supporting– 15% of revenue > operating expenses

• Operating budget of ~$4.8 million/year

• Patent expenses of ~$8.1 million/year

• OTL has given ~$43.5 million to Research Incentive Fund administered by Dean of Research

OTL: Equity from Licenses

0

5

10

15

20

FY91-92 FY96-97 FY01-02 FY06-07

Fiscal Year

# of

Lic

ense

s in

volv

ing

Equi

ty

• Stanford’s philosophy– Equity is one component of a whole

financial package– Historically, most income is

generated from earned royalties (~$836 M vs. ~$364 M)

– Equity is liquidated soon after IPO– We can’t hold equity if licensee

conducts clinical trials here

• Equity from licenses– ~171 companies cumulative– ~90 companies currently– Equity liquidated to date

~$364 million

Equity Cash-Out at Stanford*

0

2

4

6

8

10

12

FY94-95

FY96-97

FY98-99

FY00-01

FY02-03

FY04-05

*

FY06-07

Fiscal Year

Equ

ity C

ash-

out (

$ m

illio

ns)

• Equity distribution– 15% to OTL– 1/3 of net equity to inventors– 2/3 of net equity to

OTL Research and Fellowship Fund

• Equity liquidated to date ~$364 million– Amati (Texas Instruments)

$8.0 million– Abrizio (PMC-Sierra) $9.7 million– Google™ $336 million

*Graph does not include liquidation of GoogleTM equity in FY04-05

• Steps– Disclosure – Evaluation– Licensing Strategy

• File patent?• Market to potential licensees

– The License– Maintaining the Relationship

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

OTL: Invention to License

Evaluation

• Discuss with inventors– Inventor provides technical

expertise– Inventor may also provide

industry contacts

• Discuss with others at OTL• Contact industry experts

• Typical criteria– Invention development

status– Inventor profile– Intellectual property position– Commercial potential– Licensing potential

The Main Question

Does it have the potential

to create meaningful income for the University?

Licensing Strategy

• A license is a legal document regarding intellectual property rights in exchange for good and valuable consideration.

• Different inventions require different licensing strategies– “ basic new scientific tool” vs. “invention requiring extensive

development”– electronics industry vs. biotech industry

Licensor

IP rights

royalties

Licensee

Patenting Decision

• Can we license as tangible research property (TRP)?

• Can we license as it as copyright?

• Is it patentable and enforceable?

• Has it been publicly disclosed?

Patent Prosecution

• Licensing professional manages outside counsel– Technology expertise– Patent agent vs. Patent attorney

• Patent costs– Typically $25,000 to $35,000 over life of U.S. patent

• USPTO fees– if invention is not licensed, pay small entity fees

• Patent attorney/agent costs– Higher patent costs for foreign coverage

• PCT application preserves foreign rights while delaying costs• National phase entry if licensee reimburses costs

Marketing Strategy

• When do we start?– Waiting for publication– Waiting for data

• Individual vs. Portfolio • Contact companies and provide information

– Shotgun vs. Rifle approach– Sources of leads

• Steps– Create marketing content– Create list of potential licensees– Contact potential licensees– Follow-up

Types of License Agreements

• Option agreement

• Non-exclusive agreement

• Exclusive agreement– Limited by Field of Use– Limited Period of Time

(e.g. earlier of 8 years from Effective Date or 5 years from first commercial sale)

0

20

40

60

80

100

120

140

FY01-02 FY03-04 FY05-06 FY07-08

Fiscal Year

# of

lice

nses

exclusive nonexclusive option

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

Stanford researcher discovers new invention &

submits disclosure

, ©

Company makes new products

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