Early Stage University Technology Transfer and Commercialization Analysis

By John Leavitt, Ph.D. et al.

I. Impact of Technology Licensing on Regional Economic Development

Universities are hotbeds for innovation and entrepreneurship – take, for example, Stanford University, MIT, and Harvard. In the case of Stanford all you have to do is to look up Page Mill Road in Palo Alto, California, and the surrounding Silicone Valley to see the evidence of entrepreneurial activity that spread from Stanford; alternatively, look around Cambridge, Massachusetts, to see the monumental economic impact that these universities have spawned in their region. During the last decade we started to hear state governors1 advocate a role of economic development for their major state universities which in many cases have been very responsive to this call.

In 2011, a survey by the international Association of Technology Managers (AUTM) determined that universities in the generated $1.8 billion in revenues in the form of licensing royalties in that year.2 Some examples of modest successes are as follows: the University of Illinois in and Urbana– Champaign out-licensed 100 patented technologies to the private sector and spun off 21 new companies; likewise the two Iowa state universities out-licensed 70 technologies and spun off four new companies; and the University of Utah out-licensed 81 technologies and spun off 19 new companies in that one year alone.3 On a larger scale the University of California system with branches in San Diego, Irvine, Riverside, Los Angeles, Berkeley, San Francisco, and other locations out-licensed 292 technologies to the private sector in 2011 and spun-off 58 new companies; and the University of Texas system out-licensed 157 technologies and spun off 20 new companies.3 All of these examples are economic engines for their respective states. There are more than 100 state and private universities that have contributed to the economy of their region and state in this fashion. After all, hundreds of thousands of federal grant dollars are invested in these universities each year to promote discovery and innovation to achieve a better environment for those who live in the regions of these “centers of excellence” and, for that matter, all life on earth.

I have attended meetings of LES (Licensing Executives Society; about 5300 members) and AUTM (Association of University Technology Managers, about 3300 members). These are international organizations of technology managers that hold annual meetings to disseminate best practices in the field of university technology transfer. So through organizations like AUTM and LES, there is plenty of instruction on how to evaluate inventions, file patents, and then license technologies to companies. Evaluation of early

1 Accelerating Economic Development Through University Technology Transfer. Innovation Associates Inc. February 2005. http://innovationassoc.com/docs/CT_NatRpt.ExSumm.pdf 2 Universities Report $1.8-Billion in Earnings on Inventions in 2011, The Chronicle of Higher Education, http://chronicle.com/article/University-Inventions-Earned/133972. 3 Sortable Table: Universities With the Most Licensing Revenue, FY 2011. http://chronicle.com/article/Sortable-Table-Universities/133964/ Nerac Inc. www.nerac.com 1 Technology Drive 860.872.7000 telephone Tolland, Connecticut 06084-3900 860.872.6026 facsimile Early Stage University Technology Transfer and Commercialization Analysis 2

stage intellectual property comes into play in three ways: (1) when a disclosure of an invention is submitted to a tech transfer office at a university or a business development office within a company; (2) when a disclosure of an invention is received for evaluation by a second party for consideration of licensing; and (3) when litigation ensues after patent infringement or IP theft. This discussion will be limited to situations 1 and 2.

Royalty-producing inventions do not have to be blockbusters contrary to statements often made in the lay press.4 I myself had the experience of working with the Technology Licensing Office at Stanford University and benefitted from their successful licensing of a small genetic invention for 17 years. Since this was not a blockbuster, the main economic benefit from my share of the invention was that its royalties supported my coffee habit that benefitted coffee houses in the Palo Alto area for many years. The greater regional economic benefit went to Stanford and the Pauling Institute through their expenditures. But, of course, Stanford had bigger fish to fry with its licensing of the genetic engineering technology which ultimately generated hundreds of millions of dollars for that university each year until the patent expired. A similar situation exists for the University of Wisconsin that received $57 million in licensing fees in 2011 along with out-licensing of 62 technologies and spinning off four new companies that year. Closer by, there is the University of Massachusetts (UMass) with $35 million in licensing income; UMass out-licensed 25 technologies and spun off one company in 2011.3

II. Nerac’s Approach to Evaluation of Early-Stage University Inventions for Commercial Potential and Patentability

Nerac’s approach is to develop a stand-alone report that evaluates the commercial potential of the invention at an early stage in its development preferably before filing of a patent. In order to meet deadline imposed by the inventor’s desire to publish, this process has to be structured and swift. The immediate Aim 1 of this analysis is determination of whether or not to begin the patenting process. A second Aim 2 is to gain a handle on the commercial potential for the invention. The third Aim 3 is to determine which of two options for commercialization might be pursued after filing the patent, (1) licensing to a pre-existing company or (2) spinning off the technology to a start-up company.

Six parts of this analysis are discussed below which can be addressed in sequential step-wise phases. The client will have the option to select less than the full report to reduce the cost of this analysis.

A. Brief Statement about the Invention and Creation of a Value Proposition

The Nerac analyst will provide a descriptive title for the invention that goes beyond the disclosure title provided by the inventor. The idea of the expanded title would be to concisely hint at the market potential of the invention. A “value proposition” follows the title that in a few sentences or less conveys the importance of the technology from a marketing perspective. This value proposition is based on the novel features and benefits of the invention. This step and the next step in the process familiarizes the analyst with the invention.

4 UConn Bets On Tech Transfer | New Farmington Center Key To Future Returns. HartfordBusiness.com, 2012. http://www.hartfordbusiness.com/article/20100830/PRINTEDITION/308309993 Nerac Inc. www.nerac.com 1 Technology Drive 860.872.7000 telephone Tolland, Connecticut 06084-3900 860.872.6026 facsimile Early Stage University Technology Transfer and Commercialization Analysis 3

B. Description of the Invention

The analyst will then provide a non-enabling description of the invention with the industry problems that the invention addresses. This description is be based upon the inventor’s disclosure and includes a more detailed listing of novel features and benefits of the invention (developed by the analyst) as well as information provided by interviewing the inventor directly. It has been said that this interview can be very important, but the added value of the analyst will be in broadening the scope of the invention from a market perspective and presenting the invention more from its market value rather than its scientific novelty.

C. Patentability Analysis

The analyst will perform searches in patent and non-patent literature to identify potential prior art. If potentially interfering patent literature is found, the analyst will provide a discussion of what the claims say and an illustrative claims analysis. The analyst will provide an opinion on the patentability of the invention with the qualifier that a legal opinion and ultimate decision should come from consultation with a patent attorney.

D. Market Assessment and Competing Technologies

The analyst will provide a discussion of the overall size of the market to be entered into, the potential impact of the invention on the market, and the overall growth rate of the market.

E. Prospective Licensees

Here the analyst lists the players in the market, and other potential licensees along with key contacts within these companies. If there was a particularly appropriate licensee, then the analyst will include information on that company such as news, patents, and other literature on the company that explains why the company may be most appropriate.

F. Summation & Recommendations

The analysis ends the report with a summation of the novelty of the invention, its marketability, and its commercial potential. Here the analyst will suggest that it’s a “GO” or a “NO Go” and/or suggest whether the invention might be licensed or used as the basis for a new company (NewCo).

About the Analyst

John Leavitt, Ph.D.

During the course of his research and consulting career spanning the last four decades, Analyst John Leavitt, Ph.D., has collaborated with scientists, inventors, technology innovators, entrepreneurs in businesses and university technology transfer offices. Dr. Leavitt helps life science companies develop solutions to critical problems and pursue novel business strategies, applying his expertise in the biotech fields of diagnosis and treatment of human diseases, genetics, and cell and molecular biology to help companies make informed decisions. Dr. Leavitt’s academic career as a molecular and cell biologist started Nerac Inc. www.nerac.com 1 Technology Drive 860.872.7000 telephone Tolland, Connecticut 06084-3900 860.872.6026 facsimile Early Stage University Technology Transfer and Commercialization Analysis 4

as a graduate student in the Department of Biochemistry at the University of Pittsburgh School of Medicine, then as a postdoctoral fellow at Johns Hopkins University in cancer research. He was a senior fellow at the National Institutes of Health and a career civil servant with CBER, a part of the FDA located on the NIH campus involved with regulation of vaccines and biologic drugs. Later, as a senior scientist at the Linus Pauling Institute in Palo Alto, Calif., Dr. Leavitt cloned and characterized several important human gene families linked to the development of cancer. After six years at the Pauling Institute, he became Scientific Director at the California Institute for Medical Research, and then Director of Research at Adeza Biomedical. During his academic career, Dr. Leavitt was responsible for the isolation of four fundamental human genes and the development of two powerful gene promoters for genetic engineering of cells and tissues. His research was supported with grants and contracts from the National Cancer Institute, American Cancer Society, the U.S. Air Force, and private foundations. Dr. Leavitt has published over 60 research papers. He also has three patents, one of which Stanford University successfully licensed to the biotech industry.

Credentials Senior Fellow, National Institutes of Health (FDA) Postdoctoral Fellow, Johns Hopkins University Ph.D., Biochemistry, University of Pittsburgh School of Medicine B.S., Chemistry, Bethany College

About Nerac

Nerac Inc. is a global research and advisory firm for companies developing innovative products and technologies. Nerac provides expert insights that equip clients with the knowledge to develop or refine a technology, explore market growth opportunities, evaluate intellectual property strategies and respond to regulatory changes. Nerac has approximately 1,000 clients worldwide and a long, successful consulting history in a wide-range of industries with a strong focus in the areas of pharmaceutical, medical devices, engineering, energy, food and nutraceuticals and specialty chemicals.

Nerac Inc. www.nerac.com 1 Technology Drive 860.872.7000 telephone Tolland, Connecticut 06084-3900 860.872.6026 facsimile