Commercialization of University Technology: Innovation, Technology Transfer, and Licensing Lauren Foster, Associate Director Deirdre Zammit, Technology Licensing Officer MIT Technology Licensing Office January 15, 2020 (IAP)

1 MIT Technology Licensing Office (TLO) Mission

We cultivate an inclusive environment of scientific and entrepreneurial excellence and bridge connections from MIT's research community to industry and startups by strategically evaluating, protecting, and licensing technology.

2 3 MIT IP Policy- Basics

• Ownership stems from use of MIT funds and facilities • MIT owns the or copyright except when: - Not invented under sponsored research, and - Made no significant use of MIT administered funds or MIT facilities

4 MIT IP Policy - Basics (continued)

• If government sponsored, MIT notifies sponsor of invention disclosure and MIT must decide if it will file a within two years - If “yes”, government has a royalty-free, government-purposes right to use - If “no”, MIT waives its ownership right to the government agency that sponsored research; the agency may decide to file a patent application on behalf of the US government • If industrially sponsored, sponsor(s) has the right to request a license • Non-exclusive license is royalty-free • Exclusive license, if available, is royalty-bearing

5 MIT IP Policy - Basics (continued)

• Inventors receive one-third of MIT’s share of net revenue (after recovery of patent and licensing costs and a 15% administrative fee) • The remainder is shared between DLCs and the MIT General Fund • In certain instances there may be revenue sharing obligations with co-owners and/or sponsors

6 MIT TLO Evaluation of Invention Disclosures

• Technology considerations: • What problem does the technology solve? • Is it disruptive technology or an incremental improvement? • Has proof of principle been demonstrated? • How does it distinguish itself from current ways of addressing the problem/need? • Are there clear applications of the technology and a definable market? • Is the technology scalable?

7 MIT TLO Evaluation of Invention Disclosures

• Market considerations: • What is the market size? • Is there an established market, or does the market need to be developed? • Are companies in the field investing in new and/or externally developed technologies? • Will the market support the cost of the solution? • Licensing considerations: • Is the technology jointly owned? • Do we have obligations to third parties, e.g., sponsors of the research?

8 MIT TLO Evaluation of Invention Disclosures

• Intellectual property considerations: • (, , non-obviousness) • If we file are we likely to get broad claims? • Is it possible to detect use of the technology in the final product? • Are there dominating that can block the practice of the invention? • Is it possible to gain access to blocking IP? • If patented, is the invention likely to draw investment needed for commercialization? • Is patenting the right route for maximizing access to the technology?

9 Patenting Process at MIT

• Invention report (Technology Disclosure Form) - Documents date of invention, inventors, sponsors, anticipated public disclosure - Provides no protection • search/patentability assessment • Patent application prepared and filed by external law firms § Patent Office responds (“office action“ or “examination report”) > one year to receive first “office action” § Reply to Patent Office - Usually results in additional “final office action” rejecting some of the claims - ≥ 3 years from filing to patent issuance

TOTAL PATENT COSTS per year - ~$21M, recover ~60% annually from licensees

10 MIT’s Technology Licensing Philosophy • Primary objective is to transfer technology transfer • Achieve commercial reality for invention • If licensee successful, everyone will win • Leverage intellectual property • Commitment to a rapid, fair process in licensing • Licensing approach and terms are designed to encourage broader and longer relationships between MIT, research partners, industry and the startup community Test your knowledge on University Licensing

Companies are eager to accept new technology from universities

12 Transitions from University to Commercialization May Have Challenges

Discovery Basic Applied Product Production Research Research Development

-Tech Fits Market Demand -Technology Development / Integration with other solutions - Volume Manufacturing Sustainable, MIT Invention - Supply Chain Profitable, - Approval Processes / Commercial Sales Compliance - Channel to Market - Access to Capital /

Resources / Talent 13 Test your knowledge on University Licensing

The majority of MIT licenses are to startup companies?

14 Exclusive and Non-Exclusive Licenses (2010-2019)

Exclusive Licenses Non-Exclusive Licenses

23 26 39

64 302 213 139

11

Startups Sponsors of R&D Non-sponsors, small cos. Non-sponsors, large cos.

15 Startups from MIT Licensing by Fiscal Year 30

25

20

15

10

5

0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -5

-10 Inactive Active

16 Licensing to Startups Startups are often good fit for a To consider with a startup: technology when: • Advantages: • Not yet “ready for prime time” • Focus/commitment • Technology platform v. a single • Flexibility of small organization product • Upside potential • (s) support transfer to • Bridge between “university stage” and startup industrial adoption • Balanced with… • High risk: financial, technical, people • Conflicts of interest (real/perceived)

17 What TLO Looks for in a Licensee • Proposed Solution addresses Market Need • Model to Market Marketing • Potential for sustainable profitability • Channel/Access to Market

Resources / Assets • Capital • Production Capability • Supply Chain Talent • Business • Intellectual Property • Technical • Certifications • Experience • Realism

18 License Often Preceded by an Option Agreement

• Provides rights solely in connection to evaluation of MIT IP; no rights to support commercial activity • Provides right to negotiate a commercial license contingent upon diligence • Provides optionee time to: • Hire management and technical teams • Raise capital • Fortify business plan including: • Specifying capital required to support development & commercialization milestones • Timeline for fundraising, product development, team development, strategic milestones including first commercial sales

19 Key Elements of a License Agreement • Grant of rights • Diligence • To make, have made, use, sell, lease and import • Execution on business plan products and/or services • Capitalization ($M) • To sublicense (if exclusive license) • Direct capital to R&D • Exclusivity • Development milestones by a certain date • Specific to a field of use • First commercial sale by a certain date • Examples: • Cumulative sales by a certain date (annually) • Sensors to detect alcohol • Coaxial cables operating at ≥ 3GHz • Consideration • Delivery of mRNA therapeutics • License issue fee • Limited term • Equity • Geographic • License maintenance fees • Retained rights • Sharing of sublicensing income • Research, teaching and educational purposes for • Development milestone events non-profits • Running royalties on sales • US Government use • Patent cost reimbursement • Sponsor rights/terms, as applicable

20 License Factors

• Tailor terms to fit technology and licensee business plan • Shared risk • Reasonable royalty rates • Diligence provisions • Investment, personnel, milestones (development and sales), sublicensing requirements • Particularly for startups: • Low initial fees; highly back end loaded • Equity in partial-lieu of upfront fees • Flexibility • Potential to renegotiate as nature of the business evolves

21 Test your knowledge of University Licensing

Royalties from license agreements are a significant source of revenue for the university

22 Reality

• With the exception of the occasional "blockbuster," licensing revenue is small • Often from one time events, e.g., litigation settlement, royalty monetization

• A very small percentage of license agreements generate significant income • The share of licenses generating more than $1 million remains less than 1 percent (AUTM U.S. Licensing Survey FY 2016)

23 MIT New License and Option Agreements

180 160 140 37 30 35 31 120 33 100 31 31 48 29 21 80 35 123 124 60 112 112 95 105 83 90 92 86 40 70 20 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Licenses Options

24 MIT License and Option Agreement Revenue

160.0 0.25 140.0 120.0 100.0 3.30 3.59 80.0 0.40 1.10 0.63 $ M 137.0 60.0 0.75 0.58 5.60 0.84 2.70 40.0 69.6 66.3 59.8 66.1 67.2 48.7 44.0 20.0 33.9 37.4 29.4 0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Royalties Equity

25 Impacts of MIT Technology Licensing

• Convert inventions to solutions that benefit society • Supply of commercially available solutions to US Government • Support local economy (and beyond); job creation • Enhance MIT educational experience/attract faculty and student talent • Support entrepreneurship/training future business leaders • Encourage industry collaborations • Revenue from options/licenses shared among MIT DLCs, Inventors

26 Test your knowledge on University Licensing

There’s a quick return of technology transfer investment

27 Licensing Revenue for HDTV Patent Portfolio $100,000,000 $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 patent filed st patent issued $10,000,000 invention1 disclosure to TLOst st 1 patent to expire 1 Last patentHDTV filed standards established st $0 Last patent issued1 Last patent to expire

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

28 29 Thank you!

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