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Kari Sipilä, Future Innovations 2007
Kari SipiläDirector, D.Sc.(Tech.)h.c. FUTURE INNOVATIONS
Past President of LES ScandinaviaFormer Director of the Foundation for Finnish
InventionsEspoo, Finland
TECHNOLOGY TRANSFER AND LICENSING
Damascus 15-17.5.2007
Kari SipiläDirector, D.Sc.(Tech.)h.c. FUTURE INNOVATIONS
Past President of LES ScandinaviaFormer Director of the Foundation for Finnish
InventionsEspoo, Finland
TECHNOLOGY TRANSFER AND LICENSING
Damascus 15-17.5.2007
Kari Sipilä, Future Innovations 2007
CONTENTSCONTENTS
• Intellectual assets, commercialization and competition
• Alternatives to get revenues • Commercialization of research results• Licensing and technology transfer in practise• Summary
Kari Sipilä, Future Innovations 2007
KNOWLEDGE AND MONEYKNOWLEDGE AND MONEY
IN EDUCATION :
- MONEY IS TRANSFERRED TO KNOWLEDGE
IN COMMERCIALIZATION :
- KNOWLEDGE IS TRANSFERRED TO
MONEY ( AND WELFARE )
IN EDUCATION :
- MONEY IS TRANSFERRED TO KNOWLEDGE
IN COMMERCIALIZATION :
- KNOWLEDGE IS TRANSFERRED TO
MONEY ( AND WELFARE )
Kari Sipilä, Future Innovations 2007
PRINCIPLES FOR SUCCESS
Focus the business
Identify other winners
Identify market requirements
Identify internal performance
Benchmark best competitors
Kari Sipilä, Future Innovations 2007
COMPARISON – HOW DO WE PERFORM?
Price
Quality
Fast delivery
Reliable delivery
Small lots/ customization
Design
Frequentproduct change
What the market wants Source LESI
“Not important” - - - - - - - - - - - - - - - - - - -“Very important”
How we actually perform
How well our best competitor performs
Kari Sipilä, Future Innovations 2007
WHAT INTELLECTUAL ASSETS SHOULD YOU WHAT INTELLECTUAL ASSETS SHOULD YOU CONSIDER?CONSIDER?
Marketing
Trademarks
Trade Names
Brand Names
Logos
TechnicalPatentsPatent applicationsTechnical DocumentsKnow HowTrade dress docsTrade secrets
CustomerListsContractsRelationshipsOpen purchase orders
ArtisticLiterary worksCopyrightsMusical compositionMapsEngravings
Data ProcessingProprietary SoftwareSoftware copyrightsAutomated data- basesIntegrated circuits
EngineeringIndustrial designProduct patentsTrade secretsEngineering drawingsSchematicsBlueprints
ContractFavorable supply
contactsLicensingFranchisingNon-compete agents
HumanTrained andAssembled work forceEmployment agentsUnion contracts
LocationLeasehold interestsMineral exploitation rightsEasementsAir rightsWater rights
GoodwillInstitutionalProfessional practicePersonal goodwill of a professionalCelebrityGoing concern value
Kari Sipilä, Future Innovations 2007
THE VALUE CHAIN IN THE USE OF INTELLECTUAL THE VALUE CHAIN IN THE USE OF INTELLECTUAL PROPERTYPROPERTY
Know HowIdea
Patent
Publish
Trade Secret
Utility Model & Design
Trade Mark
Copyright
Kari Sipilä, Future Innovations 2007
ALTERNATIVES TO MAKE BUSINESS ALTERNATIVES TO MAKE BUSINESS AND TO GET REVENUESAND TO GET REVENUES
Kari Sipilä, Future Innovations 2007
POSSIBILITIES TO GET REVENUESPOSSIBILITIES TO GET REVENUES FROM AN INVENTION FROM AN INVENTION
Start-up company
Production in a current company
Selling / purchasing
Licensing ( in or out )
Technology transfer
Franchising
Partnership arrangements
Collateral
Start-up company
Production in a current company
Selling / purchasing
Licensing ( in or out )
Technology transfer
Franchising
Partnership arrangements
Collateral
Kari Sipilä, Future Innovations 2007
HOW TO START AND CONTINUE?HOW TO START AND CONTINUE?
Make an inventory – what do you own or have?
Identify the goals and needs for your company
Evaluate the resources, environment and competition
Determine gaps, threats and opportunities Fill the gaps
it needs human resources, funds and hard work it takes time and requires patience
Check and evaluate results
Kari Sipilä, Future Innovations 2007
BUSINESS VIEWPOINTS OF AN INVENTIVE BUSINESS VIEWPOINTS OF AN INVENTIVE PRODUCTPRODUCT
• Who are your customers and what are your channels of distribution?
• Does your profitability analysis look promising?
• How important is the product to your business and to your image?
• Do you have the requisite intellectual and economic resources for product development?
• How will the product impact to your operations and bottom line?
• Who are your customers and what are your channels of distribution?
• Does your profitability analysis look promising?
• How important is the product to your business and to your image?
• Do you have the requisite intellectual and economic resources for product development?
• How will the product impact to your operations and bottom line?
Kari Sipilä, Future Innovations 2007
NETWORK FOR COMMERCIALIZATION OF NETWORK FOR COMMERCIALIZATION OF INVENTIONSINVENTIONS
Inventor
Marketing organization
ManufacturerFinancer
Kari Sipilä, Future Innovations 2007
COMMERCIALIZATION METHODS COMMERCIALIZATION METHODS FOR INVENTIONS, NEW PRODUCTS AND SERVICESFOR INVENTIONS, NEW PRODUCTS AND SERVICES
• Direct business contacts
• Licensing bulletins
• Prototypes
• Videos, CDs, DVDs
• E-mail and Internet
• Electronic marketplaces
• Commercialization projects
• Entrepreneurship education
• Cooperation contacts
• Direct business contacts
• Licensing bulletins
• Prototypes
• Videos, CDs, DVDs
• E-mail and Internet
• Electronic marketplaces
• Commercialization projects
• Entrepreneurship education
• Cooperation contacts
• Legal services
• Fairs, meetings and exhibitions
• Professional publications
• Legal services
• Fairs, meetings and exhibitions
• Professional publications
Kari Sipilä, Future Innovations 2007
INTERNATIONAL NETWORKS ARE USEFUL AS INTERNATIONAL NETWORKS ARE USEFUL AS INFORMATION SOURCES, IN EDUCATION INFORMATION SOURCES, IN EDUCATION
AND IN NETWORKINGAND IN NETWORKING
For instance:1. WIPO, EPO and local patent offices offer large sources of
information in addition to their main activities2. Associations of technology, IPR, innovation and licensing
professionals around the world like- LES (Licensing Executives Society International Inc.) and its regional LES societies- TII (Transfer of Technologies, Innovation and Industrial Information) - AIPPI (The International Association for the Protection of Intellectual Property), etc.- Inventors’ associations
3. Universities and domestic and international educational institutes and organizations
4. Internet is a huge library, information and contact source
Kari Sipilä, Future Innovations 2007
SOURCES FOR IP BASED BUSINESS
IP and innovation sources for future business:
Internal sources
- Tacit knowledge
- Internal R&D
External sources
- Purchasing
- Licensing
Combination of internal and external
- Strategic partnership
- Cross licensing
Kari Sipilä, Future Innovations 2007
BUSINESS FROM LICENSING AND BUSINESS FROM LICENSING AND TECHNOLOGY TRANSFERTECHNOLOGY TRANSFER
Kari Sipilä, Future Innovations 2007
BUSINESS FROM LICENSING
• ADVANTAGES & BENEFITS- Costs and risks less than internal R&D- Less time to market- Implementation support available
• DISADVANTAGES & RISKS- May not have exclusivity- Implementation risks, costs- Do not develop internal capability
• COST FACTORS- Up-front and royalty payments- Implementation costs
Kari Sipilä, Future Innovations 2007
LICENSELICENSE
License is an agreement, by which the licensor grants permission to the licensee to use intellectual property rights, owned by the licensee, for whatever mutually agreed purpose, which the licensor normally has the power to prevent or stop the licensee from doing. A licensing contract specifies the terms and scope of the agreement.Source: Fahllund-Wik 200 and, WIPO
Kari Sipilä, Future Innovations 2007
LICENSING IS ADVANTAGEOUS FOR COMPANIESLICENSING IS ADVANTAGEOUS FOR COMPANIES
• Shortage of research and development activities as well as new products
• Fast and easy possibilities to new products• Entrepreneural, manufacturing and logistics skills
exist already in SMEs• Own manufacturing and licensed products give
more revenues• Goals may be specialization and subcontracting• Steps to internationalization
Kari Sipilä, Future Innovations 2007
VALUATION METHODS TO CALCULATE THE VALUE OF IPVALUATION METHODS TO CALCULATE THE VALUE OF IP
• Cost Approach - based as realised costs or by comparing costs of a similar patent or product
• Market Approach- based on selling or buying of patents, comparing similar technologies or products
• Income Approach- based on a licensed IP and estimate of future cash flow over time, including estimates of success and risks. Popular method.
• Other methods- Business Results Method is based on calculated or
estimated cash flow and revenues of business and estimated role of the patent in it. This value changes according to time and business. It may also include the influence of goodwill or value of other IPR
- Monte Carlo is a simulation method.
Kari Sipilä, Future Innovations 2007
IMPORTANCE OF THE PATENTS IN A COMPANYIMPORTANCE OF THE PATENTS IN A COMPANY
0% 5% 50%
Val
ue
Portfolio Source Intellectual Ventures
High Value Patents
Defensive PatentsOverhead Patents
Often these patents are bought or sold
Kari Sipilä, Future Innovations 2007
MAIN PARTIES OF A LICENSE AGREEMENTMAIN PARTIES OF A LICENSE AGREEMENT
Licensor- inventor- company- other owner of the IPR
Licensee - company (usually in the field of the invention)
A
Kari Sipilä, Future Innovations 2007
GOALS OF THE LICENSORGOALS OF THE LICENSOR
• Revenues, income• Larger possibility for marketing• Larger possibility for manufacturing• Larger possibilities for distribution• Internationalization• Collaboration• Specialization• Social values
Kari Sipilä, Future Innovations 2007
GOALS OF THE LICENSEEGOALS OF THE LICENSEE
• Revenues• Better or more business• Manufacturing• Technology• Specialization• Rights to use IPR • Collaboration
Kari Sipilä, Future Innovations 2007
PARTIES IN LICENSINGPARTIES IN LICENSING
• The seller ( the licensor ), the owner(s) of the invention (or patent )
• Purchaser ( the licensee ), often a manufacturing and marketing company in the field of the invention or technology
• Collaboration partners• Financiers, investors• Technical specialists, subcontractors• Lawyers ( IPR, business, international business)• Marketing and other consultants
Kari Sipilä, Future Innovations 2007
LARGE POSSIBILITIES FOR LICENSINGLARGE POSSIBILITIES FOR LICENSING
A license or technology transfer agreement may be based on:• A patent, an utility model ( like technical solution )• Trademarks, brands• Copyright ( like software )• Know-how, business secrets• Business methods ( the whole business or parts of it like
processes, research and development, testing. materials, logistics, e-business B2B ja B2C, formats, etc.)
• Different combinations
Kari Sipilä, Future Innovations 2007
LICENSING AGREEMENT, MAIN CONTENTSLICENSING AGREEMENT, MAIN CONTENTS
• The title• The parties and contact information• What will be licensed and related IPR ( product, for what
purpose, copyright, patent, trademark …)• Extent of rights ( exclusive, territory, sublicenses…)• Life of the agreement, date of effectiveness• Commercial considerations ( lump sum, fees, royalties,
annual minimum royalties, payment terms…)• General considerations ( applicable law, confidentiality,
infringement, failure to perform, disputes, termination…)• Concluding comments, date and place, signatures
Kari Sipilä, Future Innovations 2007
EXAMPLES OF LICENSE FEESEXAMPLES OF LICENSE FEES
• Initial fee: at least the amount of sunken costs ( patenting, plans, R&D, prototypes…)( plus profit? )
• Royalty: 0.5…5…10 % ( depending on the product, its quality, life span, mass product or unique…) ( % or amount )
• Minimum royalty: annual amount to protect the licensor if product not manufactured
• Other fees: consulting costs of development work, possible additional royalties…
Kari Sipilä, Future Innovations 2007
EXAMPLES OF THE VALUES OF ENGINEERING PATENTSEXAMPLES OF THE VALUES OF ENGINEERING PATENTS
University
Number of active licenses
2002 license income
Number of US patents
Mean income per U.S. patent owned
MIT 776 $28,706,848 1,475 $19,462
CMU 105 $3,750,000 255 $14,706
CIT 239 $11,218,000 1,112 $10,088
Va Tech 113 $2,348,680 264 $8,897
Rutgers 232 $4,017,620 555 $7,239
Georgia Tech 173 $2,242,319 473 $4,741
UCF 18 $279,028 176 $1,585
NJIT 4 $44,826 64 $700
NMSU 23 $8,938 42 $213
RPI 20 $8,000 139 $58
Mean 273 $5,262,426 456 $6,769
Median 232 $2,295,500 260 $5,990
Standard Deviation 277 $8,905,825 478 $6,631
Source: Intellectual Ventures 2006
Kari Sipilä, Future Innovations 2007
Success = Product x Passion2
Source: Olavi Linden, Fiskars
Kari Sipilä, Future Innovations 2007
SUCCESS IN LICENSINGSUCCESS IN LICENSING
• Know your technology transfer environment ( including countries, laws and taxation)
• Know your partners and their strengths and weaknesses• Strong IPR usually gives better business• Prefer finished products/processes instead of prototypes• Know your minimum business and price limits• Evaluate risks and avoid or manage them• Use experts in technology and legal matters• Remember the human factors
Kari Sipilä, Future Innovations 2007
POSSIBLE PROBLEMS IN LICENSING AND POSSIBLE PROBLEMS IN LICENSING AND TECHNOLOGY TRANSFERTECHNOLOGY TRANSFER
• Not enough resources for commercialization• Demand and supply do not meet• You do not find the other party• Reasons in IPR or in the company management strategy• Pricing or value of the invention or patent• Technology is still in the development stage• The invention is not much better than existing products • NIH ( not invented here ) – principle• Deatails in the contract• Culture, language, human factors
Kari Sipilä, Future Innovations 2007
RISKS IN LICENSING AND TECHNOLOGY RISKS IN LICENSING AND TECHNOLOGY TRANSFERTRANSFER
• Markets – price, quantity, quality• Political risk• Technology risk• Financing risk• Environment• Schedule• Operational risk• Risks in the organization, cooperation and in
human factors• Force majeure
Kari Sipilä, Future Innovations 2007
Innovations have the possibility to become successful around the world, if they:
• Are commercially strong
• Develop the society
• Are good for the environment
• Can use advantages of the information technology
• Are friendly and easy to the users
Innovations have the possibility to become successful around the world, if they:
• Are commercially strong
• Develop the society
• Are good for the environment
• Can use advantages of the information technology
• Are friendly and easy to the users
CHALLENGES FOR THE 21. CENTURY
Kari Sipilä, Future Innovations 2007
COMPETE AGAINST TIME:
TODAY´S INVENTIONS HAVE TO BEON THE MARKET
BY TOMORROW MORNING,
OTHERWISE OTHERS WILL CONQUER THE MARKETS FIRST
COMPETE AGAINST TIME:
TODAY´S INVENTIONS HAVE TO BEON THE MARKET
BY TOMORROW MORNING,
OTHERWISE OTHERS WILL CONQUER THE MARKETS FIRST
Kari Sipilä, Future Innovations 2007
THANK YOU!
Kari Sipila, Helsinki / Espoo, Finland
www.futureinnovations.fi
www.les-scandinavia.org