An Industry Perspective on Technology Transfer & Dow Study of IP Terms

An Industry Perspective on Technology Transfer & Dow Study of IP Terms Susan Butts Sr. Director, External Science & Technology Programs The Dow Chemical Company 1

Modes of Technology Transfer from Universities to Companies Primary Publication/presentation of research in journals and at conferences Hiring graduates Secondary Research collaborations/sponsored research IP licensing August 28, 2008 NAS Committee on IP 2

Typical Stage Gate Process for New Product Development Discovery Gate 1 Idea Screen Second Screen Driving New Products to Market Go To Development Go To Testing Go to Launch Stage 1 Gate 2 Stage 2 Gate 3 Stage 3 Gate 4 Stage 4 Gate 5 Stage 5 Scoping Build Business Case Development Testing & Validation Launch Robert Cooper, Winning at New Products, Perseus Publishing, 3 rd Edition(2001), pg. 130 Post-Launch Review August 28, 2008 NAS Committee on IP 3

Why Companies Engage in External Research Partnerships External partnerships should: enhance the success in internal R&D improve profitability through the application of science & engineering to improve current processes/products or develop new processes/products increase understanding of relevant technologies provide access to capabilities or tools increase speed of research progress validate approach or suggest alternatives support workforce development improve competitive advantage (IP may be important) July 28, 2008August 28, 2008 SBButtsNAS Committee on IP 4

Stage Gate Approach Improved Risk Management Risk $$ Spent Time Assessment before Investment August 28, 2008 NAS Committee on IP 5

Stage Gate Approach Improved Risk Management Reduce risk & cost by weeding out ideas with lower potential at early stages Risk $$ Spent Time Assessment before Investment August 28, 2008 NAS Committee on IP 6

Stage Gate Approach Improved Risk Management Reduce risk & cost by weeding out ideas with lower potential at early stages Risk $$ Spent Need the right information at the right time Time Assessment before Investment August 28, 2008 NAS Committee on IP 7

Industry Concerns With Sponsored Research Agreements Uncertainty of access to foreground IP desire an assured right to practice Time to reach agreement balance protection of interests against window of opportunity Protection of confidential information preserve competitive advantage Access to university-owned blocking background IP (BIP) obtain right to use results of sponsored project August 28, 2008 NAS Committee on IP 8

Industry Research Sponsorship Involves More Than Just Dollars What corporate sponsor may be providing Context for the research project Framing the problem on the basis of: Product knowledge Market knowledge Process/manufacturing knowledge Non-commercial materials or prototypes Results from company-performed research Background knowledge & BIP Validation/testing of university results Funding August 28, 2008 NAS Committee on IP 9

Why Companies Worry About IP from Sponsored Research Projects Sponsor wants reasonable control of foreground IP because without this it may: August 28, 2008 NAS Committee on IP 10

Why Companies Worry About IP from Sponsored Research Projects Sponsor wants reasonable control of foreground IP because without this it may: Be unable to use technology developed with its R&D funding (bad research investment no value created) Have to pay licensing costs that make commercialization unattractive (bad business decision value not maximized) August 28, 2008 NAS Committee on IP 12

Dow Study of IP Terms in Sponsored Research Agreements 14

Purpose of the Study Get beyond anecdotal comparisons Generate meaningful data for discussion August 28, 2008 NAS Committee on IP 15

Background Information Data Set Used for Statistics Sponsored research agreements from Dow s central External Technology database includes only bilateral agreements with universities initiated during the period 1993-2003 excludes atypical agreements (e.g., where a separate license agreement was in effect) and agreements for testing services includes only agreements administered from the US for US-based clients from both corporate and business R&D groups August 28, 2008 NAS Committee on IP 16

Background Information Data Set Used for Statistics includes more than 100 agreements includes agreements from more than 65 universities, more than one quarter are foreign countries represented by foreign universities include Canada, UK, Belgium, Germany, Netherlands, Russia, Poland, China, Japan, Australia August 28, 2008 NAS Committee on IP 17

Comparison of Terms: US Universities Versus Foreign Universities August 28, 2008 NAS Committee on IP 18

Ownership of Inventions Resulting from Sponsored Research US Universities Foreign Universities 15% 31% 69% 85% Sole university inventions assigned to Dow or owned jointly Sole university inventions solely owned by University August 28, 2008 NAS Committee on IP 19

Cost of Practicing University Inventions Resulting from Sponsored Research US Universities Foreign Universities 37% 45% 55% 63% Dow has royalty-free right to practice sole university inventions Dow must pay fee or royalties to practice for any of commercial sole university inventions August 28, 2008 NAS Committee on IP 20

Comparison of Terms for US University Agreements August 28, 2008 NAS Committee on IP 21

Royalty Free Nonexclusive License (RFNX) % of US Agreement with Provisions Shown 30% 25% 26% 20% 15% 13% 10% 10% 5% 0% RFNX outright RFNX for modest fee or paying patent costs RFNX only as fallback in special limited cases August 28, 2008 NAS Committee on IP 22

Exclusive (EX) Option Periods (% of US Agreements with Provisions Shown) 30% 25% 25% 24% 20% 15% 10% 8% 8% 7% 7% 5% 2% 0% EX option expires after disclosure of invention EX option expires after filing patent application EX option expires after termination of research period EX option expires after first office action on claims EX option expires after final notice of allowance of claims EX option expires after patent is granted EX option expiration not stated, presumed evergreen Least Favorable Most Favorable August 28, 2008 NAS Committee on IP 23

Agreement Terms Catalogued and Scored Terms Rights to University Inventions Assignment of Inventions (ownership) Right to Practice (Licenses, Options) Process for Negotiating Licenses Length of Option Periods Right of First Refusal Scoring - Discrete values in the range 0 to 10 0 = weakest position for sponsor 10 = strongest position for sponsor August 28, 2008 NAS Committee on IP 24

Ownership of Sole University Inventions Invention Assignment Score 70 Percent 60 50 40 30 20 10 0 university owns joint ownership sponsor owns field specific 0 5 7 10 Assignment score sponsor owns August 28, 2008 NAS Committee on IP 25

Right to Practice Scores Right To Practice 35% 34 43 45% No right to practice (0 points) A ssured right to practice (5 points) Royalty-f ree right to practice (10 points) 20% 19 August 28, 2008 NAS Committee on IP 26

Option Deadline Scores F re q u e n c y C u m u la tive % O p tio n D e a d lin e Frequency, % 5 0 4 5 4 0 3 5 3 0 2 5 2 0 1 5 1 0 5 0 1 0 0 % 9 0 % 8 0 % 7 0 % 6 0 % 5 0 % 4 0 % 3 0 % 2 0 % 1 0 % 0 % Cum % 1 2 3 4 5 6 7 8 9 1 0 O p t i o n d e a d l i n e s c o re August 28, 2008 NAS Committee on IP 27

Right of First Refusal Scores Frequency C umulative % Right of First Refusal Frequency, % 40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 100% 80% 60% 40% 20% 0% ROFR score August 28, 2008 NAS Committee on IP 28

Figures of Merit Numerical Scoring for Scatter Plot of Agreements (Quality of Terms) Rights to University Inventions (y-axis) Assignment of Inventions 0 10 Right to Practice 0 10 Fair Process for Negotiations (x-axis) Option Deadline 0 15 Right of First Refusal 0-5 August 28, 2008 NAS Committee on IP 29

Scatter Plot of all Scored Agreements Quality of Terms 20 Assignment & Right To Practice 10 0 0 10 20 Deadline + ROFR Deadline & Right of First Refusal August 28, 2008 NAS Committee on IP 30

Historical Trends Median effective date = January 1, 1997 Compared early half vs recent half Avg. Score 10 8 6 4 Early Recent change 2 0-2 Assignment Right to Practice Option Deadline ROFR August 28, 2008 NAS Committee on IP 31

Questions? August 28, 2008 NAS Committee on IP 32