les Nouvelles April 2020 Article of the Month
Licensing Invention Patents:
The Challenge Of TTOs

Gil Granot-MayerGil Granot-Mayer

Yeda Research& Development Co. LTD
Rehovot, Israel

Katharine KuKatharine Ku

Stanford University
Executive Director Emerita
Office of Technology Licensing and Wilson Sonsini Goodrich & Rosati
Chief Licensing Advisor
Palo Alto, California U.S.A.

Laurent MiévilleLaurent Miéville

University of Geneva/ University Hospitals Geneva
Director Unitec–Office of Technology Transfer
Geneva, Switzerland

A. Introduction

Universities, regions, and governments all over the world have become interested in university technology transfer because transferring the knowledge from basic research to industry is seen to be a key to developing an innovation economy. While to the outsider it may seem easy—"just find the gems and industry will grab them"—it is not that simple.

Corporations have their strategic plans, and current/future products to help them determine which inventions to invest in. University licensing offices have curiosity-driven inventions created by diverse university faculty, researchers, students and staff. While there are too many challenges to discuss them all in this paper, we picked several that may be of particular interest to LES members.

B. Getting researchers involved in technology transfer (TT) related activities

It is sometimes difficult to engage university researchers in technology transfer activities because many of them are more interested in publishing good research papers than commercialization. There is a clear balance to strike when engaging basic research scientists in translational research or more generally in Knowledge Technology Transfer (KTT) related activities.

As an example, the Technology Transfer Office (TTO) of University of Geneva looks for applied research groups able to collaborate with basic researchers in order to complement and strengthen their respective activities. In such an occurrence, a basic researcher in diabetes studies could provide a refined protocol of research compatible with high impact publications. On the other hand, the applied group was able to analyze blood compounds to an unpreceded level of detail, allowing a much finer and potentially more successful way of narrowing the search for potent diabetes drugs and compounds. In this instance the collaboration was a success due to the improvement of both basic and applied research activities.

When it is challenging to find such a suitable match, some researchers are able to use their negotiation power with companies to carve financial support for non-oriented research in parallel to the more applied projects they are willing to undertake. For example, the researcher would request an additional "basic research overhead" of 100 percent allowing him/her to spend the same amount as those of the applied project in an unrestricted project. This peculiar approach illustrates the interest of the researchers to benefit from unrestricted funds allowing them to pursue no-strings-attached basic research activities.

The University of Geneva has been further capitalizing on this strong incentive by providing a larger share of the licensing revenues as unrestricted research funds for its researchers. In a nutshell, net license revenues within research institutions are usually distributed between three groups: 1) the contributor(s) of the invention, 2) their research unit(s) and 3) the institution. Some of the contributors may decide to assign their share of revenue to the research unit in order to use them as additional funds for their research. In order to incentivize further TT related activities, the university decided a few years ago to match such assignment with a proportional allocation of its share to the research unit. If all the contributors assign their share to the unit, the University would do the same, resulting in 100 percent of the net licensing revenues being made available for further unrestricted research (subject to potential limitation for high amounts). This "creative" way of redistributing revenues from licensing intellectual property (IP) allows maximizing the incentive for researchers to engage in TT related activities.

Finally, when the research is by nature very basic and interdisciplinary, establishing research collaborations with companies as a way to transfer knowledge on a non-exclusive basis may offer a solution. This is the route taken by an integrative center in Geneva studying emotions which has become very successful in engaging around basic research with private partners. Instead of focusing on small bits of technology licensing, the private partners wish rather to be including in the development of research methodologies and early research results generated at the intersection of various research fields combining for example emotions analysis and face recognition software.

There is however a growing concern that, when going too far, such relationships may distract the research group from its main focus: to engage in free and non-oriented research. This is particularly important for students who should have the possibility to grow and evolve in research frameworks allowing the largest freedom possible. Indeed, for these reasons, the Weizmann Institute of Science in Rehovot, Israel sticks to a very conservative policy. Students are not allowed to participate in industry-sponsored research projects. In addition, any commercial success cannot be directed to support specific research in any lab. The proceeds are divided between the Institute and the inventors, but the inventors are not allowed to contribute a share from their personal gain to their labs. The labs have to keep their focus on curiosity driven science and to seek support through competitive grants.

C. Evaluation

Evaluation is one of the most difficult challenges of university technology transfer. TTO's typically receive very early stage inventions, often with limited data and sometimes unclear commercial potential. In addition, for most universities, inventions come from broad, diverse academic disciplines that span the physical sciences, information technology and life sciences— many of them interdisciplinary in nature. Coupled with limited patent budgets, technology transfer offices must decide which inventions to invest both time and money into, with the hope that they will be licensed. If we choose too few to invest in, we will not have an inventory of inventions to license. If we choose too many to pursue, we will waste time and money on unlicensed technologies. No one knows the right percentage of disclosures that should be pursued and there is no sure way to pick "the right ones" (the "winning horses"). In all cases, once an office decides to invest resources in an invention, such disclosure takes on a life of its own.

The basic elements of any evaluation should include these factors:

1. Commercial Potential/Market

For life science inventions, the commercial potential/market is often definable as research, diagnostic and/or therapeutic products. However, for physical science inventions, commercial potential can be less obvious because there are more considerations, such as manufacturability, scalability, cost, and compatibility with existing systems etc. For some early stage inventions, it is not always clear what the market will be or how the market will develop because it does not yet exist. This is true for all fields of technologies. The "art" of being able to guess the future is the most challenging aspect of evaluation that university technology transfer professionals face every day.

2. Industry Receptivity to Licensing

Our experience is that small life science companies (i.e., "biotech") are generally the most open to university licensing. The commercial application for life sciences inventions can be easily discernable and the companies are interested in filling their product pipelines. In addition, life sciences companies understand risk, reward and the path for product development and can afford the big risks due to the potentially large profit margins.

In contrast, large physical science companies—particularly tech companies—do not embrace licensing university inventions. Many high-tech products contain hundreds of patents and industry cross-licenses patents, so large companies often do not recognize the value of any one patent from a university. Several universities have had to file lawsuits against large physical science companies in order to get them to take licenses. Many inventions are either not recognized by companies as seminal technologies or seen to be too early stage for a company to take on. Classic stories include Stanford's search engine that formed the basis of Google and the music chip that became a profitable business unit for Yamaha—both technologies were dismissed by other companies when Stanford marketed these technologies. Universities are therefore often less inclined to want to invest in physical science inventions, sometimes filing patent applications only on those that could be the basis of a start-up. In Switzerland, the Ecole Polytechnique in Lausanne decided, when collaborating with industry partners, to abandon negotiating royalties related to foreground IP in exchange of a higher overhead. This somewhat bold approach has not been followed by Swiss universities which deal with more basic research, including also life sciences.

3. Inventor Profile

University inventors come in all flavors—some are very sophisticated about commercialization and others are not as attuned to industry interests/priorities. There are inventors whose inventions are easily licensed; others disclose a lot but most are not licensed; and others disclose inventions that are never licensed, even though these inventions have seeming commercial potential. Other inventors are new to technology transfer and/or the university and there may be reasons to take on an invention for the sake of encouraging an inventor to work with the office. The challenge for technology transfer offices is to be able to develop a good enough relationship with inventors to understand which type of inventor the researcher is and to be able to work well with that inventor, regardless of their level of sophistication. Successful technology transfer offices take into consideration the inventor profile in making decisions about filing patents.

4. Scientific Merit

Clearly an invention must have scientific merit and it is important that there is sufficient data supporting the scope of an invention before filing. Many disclosures come in too early e.g., only one experiment, limited data or optimistic speculation. The technology transfer office should maintain close relationships with the inventors of these early disclosures to follow the research progress, but filing a patent application without sufficient description and support is not in the best interest of anyone and could likely be a waste of resources if additional data are not obtained during the priority year. Obviously the decision in this case is a hard one as scientific publication may dictate filing sooner than later. In that respect the TTO challenge in commercializing those technologies is bigger and the need to actively pursue ways to enhance the value of the technology and de-risk it, is stronger.

5. Proprietary Position

Some universities (such as the University of Geneva) routinely do prior art searches in the course of the evaluation of an invention. Others are more confident in their assessment and will ask for a prior art search only for those inventions that appear to be in a crowded patent field or when additional investment in maturing the technology is needed. Technology transfer offices know that narrow patent protection is usually not useful because the competition will invent around the patent and it is important to educate inventors on this point. Inventors tend to focus on the "differences" of their invention compared to the prior art rather than the commercial impact of those differences. Particularly in the physical sciences, the advantages and benefits of an invention have to be convincing before a company will invest in its development.

6. Stage of Development

Most university inventions are very early stage but the likelihood of licensing increases in the later the stage of development. Thus, as discussed below, many universities have mechanisms and funds to mature/develop certain inventions further to interest potential licensees.

Taking into consideration these factors, technology transfer offices differ in how they handle evaluation of inventions. Some universities use committees to help decide which inventions to pursue or which patent to further maintain beyond a certain budget threshold. The advantage is that a group of people theoretically may be able to make a better decision because multiple perspectives can provide a more complete assessment of the invention. The disadvantage is that convening a group of people on a regular basis to deal with disclosures on a timely basis can be difficult. Because one person is often tasked with making a recommendation to the group, the group can sometimes become hypercritical or complacent in how it reacts to recommendations. It is easy for "group think" to take hold and no one person is responsible for the decision. In addition, the "objectivity" from a committee review may cause decisions to veer toward "conservative/safe" choices when "gut feel" may identify truly revolutionary inventions.

Other universities assign the inventions to one person to evaluate, as has been the case at Stanford. While ostensibly more efficient, people can become biased in their assessments or succumb to pressure by researchers to file a patent application. However, when one person is responsible for the decision, it is easier to assess if his/her decisions result in licenses or not.

Another model is to use outside "experts" to help in the evaluation. These external people may include scientists from companies, consultants, and market studies. Although many universities find external input to be useful, the unknown future is always hard to imagine for anyone. One should also be wary of potential conflict of interest since the most relevant inputs would be provided by experts active near or in the field.

All universities face the challenge of technology evaluation which as described above is not an easy one. To make it even more challenging this process needs to be addressed very early with scarce resources. Therefore, at Yeda our policy is to file a lot and kill many applications as we go along. We know that statistically very few patents generate the lion's share of income for those successful TTOs. This fact makes the decision process even more important and difficult. Therefore it is very important to have in place periodic reviews of the portfolio and the technologies to make sure that reasonable efforts are made and the right decisions are taken.

Freedom to operate issues are much less of a concern for a TTO as compared to a commercial company. If the TTO is engaged in venture creation or if it plans to invest resources to develop its technologies more attention should be put into those issues.

All these challenges make the evaluation process difficult for most offices. While we do the best we can, we will always miss some and invest in inventions that will go nowhere. There is not one "best way" to evaluate but it is always important to be thoughtful about how an office approaches this first step in the commercialization process.

D. Maturation

It is clear that commercializing technologies from universities and research institute is challenging. Indeed, the data collected over the last decade shows that less than 1 percent of all licenses across the industry eventually generated over 1 million USD in revenue for their home institution. One should note that these are the "success" stories of technologies that found their way to the market with a significant financial return. There are many more that didn't even get licensed!

In recent years universities started to utilize some creative strategies in an effort to tackle this huge challenge. Some of these strategies focus on the maturity level of the technologies that they hold. The rational here is clear—the more advanced the technology is the better chances there are to get it licensed. Many technologies fail to get licensed because they do not reach the level of maturity that the industry is seeking.

Yeda, the commercial arm of the Weizmann Institute of Science, has been operating for the last four years a program for project maturation called IDEA (Innovation Development Enhancement and Acceleration). Yeda realized that some of its technologies, both in the life sciences and in the physical sciences, face challenges on the commercialization path. Being generated in an Institute which is focused on basic science, with no engineering faculty and no affiliated hospital it was clear that some of Yeda's technologies are very early stage technologies which the industry is not willing to develop or investors are not willing to invest in, unless those technologies will be further developed.

After trying for many years to do this maturation process with small support to the academic project Yeda decided to take the maturation task upon itself by having IDEA operating as a project management unit within Yeda. The projects pipeline is built upon selected technologies which are identified by the business units of Yeda, often following some feedback from the industry. The financial support can reach a total of one million USD per project. Normally a project can run up to three years. The major projects are selected with the help of two expert advisory committees. The projects are designed as regular milestones driven projects with the aim of doing much of the work out of the Weizmann labs. This has great value both in validating and de-risking the technologies, as well as in minimizing the effect on the Weizmann's campus which is focused on curiosity driven basic science. The majority of the maturation work is done by service providers or collaborators. The work at the Weizmann remains limited in scope and is focused on tasks that cannot be done outside. The project is built is coordination with the principle investigator, although it is all managed by a dedicated professional project manager. During the last four years over 25 projects entered the program, which was supported by a yearly budget of over $1 million USD. The IDEA program contributed in 2018 to a 50 percent increase of licensing activities and over 100 percent increase in spin-off generation, compared to 2016 results.

Stanford implemented in the past a similar program. The Stanford Innovation Project (SIP) was a limited time experiment to see if we could move the needle on certain inventions by investing money into further development, not research. The principles behind the Project were:

  • The invention had to have been disclosed to the Office of Technology Licensing (OTL),
  • External feedback was that further development would make the invention more licensable, and
  • The inventor would be actively involved in managing a development effort and give quarterly in-person reports to SIP.

There was no public announcement of the program—because it was not intended to be broadly available to all faculty but only to those projects endorsed by OTL. A very small SIP committee reviewed short proposals, which included a budget, milestones and a timeline. Keeping in line with SIP's goal of funding based on the project's need, they varied in timelines, from three months to two years, and budgets, from $2000 up to $573,000. Seventeen projects were funded over a four-year period. The success rate of licensing was higher than normal with 10 projects licensed to either an existing company or a faculty start-up. The Project has been suspended to give Stanford's relatively new president a chance to review the program.

These two examples from two world leading academic institutes illustrate the significant impact that can be achieved in advancing basic science technologies from early stage to more advanced stages. There are many challenges in doing so—the main one is the significant investment of time and resources by the university or its TTO that is needed to effectively implement a maturation program. It is also clear that the program needs to be well designed to fit the relevant university strengths as well as its academic focus and culture.

E. Conflict of Interest

One of the challenges that is unique to university licensing are conflict of interest concerns, which can be created as a result of technology licensing. When a researcher has a financial interest in a licensee, there can be both perceived and/or actual conflicts of interest. Because universities take their responsibility to maintain the public trust very seriously, they want to ensure that the integrity of the research is not influenced by personal gain. Technology transfer, however, is often more than the transfer of bare patent rights; many times, the inventor has intimate knowledge and understanding of the technology and can greatly help to improve the chance of a successful technology transfer if the inventor is involved in the further development of the technology. Understanding the delicate balance between the two public goods, universities seek to minimize/ manage any conflicts of interest.

Universities have developed policies and practices around conflict of interest. Depending on the university, there may be restrictions on how much involvement or financial interest the researcher can have in a licensee's commercialization activities. Some universities require clear separation of work done at the university from that done at the company. Others require a conflict of management plan, sometimes with a third party monitoring the activity.

Universities are particularly sensitive to perceived conflicts of interest when human subjects are involved and often take extra precautions to mitigate conflicts of interest.

Although there can be conflicts of interest when the licensee is a large, publicly held company, there is heightened scrutiny when the licensee is a small start-up. The perception of the potential for significant financial gains is one of the concerns when it comes to the reporting of research results that may affect stock price. Each university must find the balance of encouraging technology transfer without compromising the public trust.

The Weizmann has had in place for many years an IP and conflict of interest rules. On a very high level it can be stated that the general approach in the Weizmann's rules is to avoid conflicts altogether (as opposed to managing the conflict). Accordingly academic personnel are not allowed to take managerial positions in for-profit organizations, and they are also very limited in their ability to hold equity in a non-public company. The level of scrutiny is higher when the company is financing research or when it took a license from Yeda. The rules also deal with consultancy services and are aimed to preserve the integrity of the researcher's work, to keep the researcher focused on his or her rule as a scientist in the Institute and to avoid leak of the IP.

The University of Geneva also established rules defining which role and responsibilities the academic personal is able to maintain when dealing with a for-profit entity. With regards to start-ups, academic founders (e.g. professors remaining at the University or postdocs planning to move to the company full time), have to commit in writing to maintain a clear separation between their academic activities and those done as consultant or active start-up members. Aspects such as a full transparency when entering into agreements with the start-up, avoidance of using phone or academic infrastructure when doing business for the start-up or more generally taking all necessary measures to avoid confusion between their two roles. This allows not only to assure that academic personal is aware of such measures but also it protects them from potential critics from within their academic environment blaming a lack of transparency.

F. Start-ups

In some cases, the technologies are so disruptive that large companies are not willing to take the risk in developing such cutting-edge technologies. In many cases these breakthrough technologies pose a real challenge, as the application is not even clear. This challenge is more evident in the physical sciences technologies. Creating a company around such technologies is probably the best way to actually give them a chance. Two prominent examples from the Israeli academia are the creation of NDS that licensed from the Weizmann an identification and encryption algorithm and used it for satellite TV service. NDS was bought by Cisco for $4 billion USD. The second one is Mobileye, a world leader in collision avoiding systems, that developed the computer vision technology out of the Hebrew University in Jerusalem. Mobileye was bought by Intel recently for about 15B USD.

We all realize that the traditional work of a TTO has changed and that we are required to take more and more active approach in our efforts to disseminate the IP created in academia. Finding complimentary technologies within one institute is a very rational idea however it is not easy to implement and it requires the ability of two laboratories to work together. In many cases the value from such collaboration is significant. For example, four years ago Yeda's team realized that if we combine the capabilities of two labs at the Weizmann Institute of Science we may establish a new company that will be able to develop targeted phage cocktails for treatment of microbiome driven medical condition. This vision materialized in a new company— Biomx—that was formed by Futurx (a leading Israeli incubator). Bimox has over 60 employees and it has few clinical programs under its development. In some sense this process of finding synergistic technologies is the exact process that takes place in start-ups as they in-license or develop their technologies.

G. Summary

University technology transfer is challenging because our offices serve many constituents: the inventors, the university, the government, small and large companies, the start-up community including many kinds of investors. We also have a dual mission: to transfer the technology to the private sector as effectively as possible and to receive a fair return if the technology is successfully exploited.

Sometimes scientists are reluctant to get involved with technology transfer activities, feeling that such activities are a distraction from research or that publication is sufficient. Engaging with basic research scientists requires technology transfer offices to be flexible and to adapt to different situations with creative solutions. One-size-fits-all is clearly not applicable here. When done correctly, it offers a clear added value to engage basic researchers in technology transfer activities. The role of the TTO is twofold, first to be knowledgeable about the good practices and second, to provide guidance to the basic science researchers when dealing with private partnerships.

Universities—just like companies—differ in their philosophies and approaches toward technology transfer. Ultimately, however, the purpose of technology transfer is to share the fruits of academic research for the benefit of humanity. ■

Available at Social Science Research Network (SSRN):

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