Welcome

P&P Topics for GFY 2002

Patent Awards

Tech Transfer Cycle: Part III

FOOD!!!!

PATENTS & PIZZAJune 4, 2001

PATENTS & PIZZAJune 4, 2001

Licensingand

Royalty & Development Income

Wayne E. SwannDirector of Technology Transfer

&Francis A. CoochPatent Counsel

Introduction

• APL Technology Transfer Cycle• Outline of Presentation

APL Technology Transfer Cycle

Introduction (cont.)

Introduction (cont.)

Outline of Presentation•License Agreements•IP Policy Income & Distribution•Examples of Deals•Statistics•Definitions!

Structure of Standard Agreement•Standard Income Clauses•Roles in Negotiations

License Agreements

License Agreements

Structure of Standard Agreement

•Definitions•Grant•Development/R&D Funding•Fees/Royalties/Equity•Milestones•Term and Termination•Miscellaneous

License Agreements (cont.)

Standard Income Clauses

• Development/R&D

1. R&D for Licensee under BOA2. Protect APL TDA role3. APL employees as consultants

License Agreements (cont.)

Standard Income Clauses (cont.)

• Fees/Royalties/Equity

1. Option/License Fees• Cash/Equity• Nonrefundable• Not credited against

royalties

License Agreements (cont.)

Standard Income Clauses (cont.)

• Fees/Royalties/Equity (cont.)

2. Running Royalties• Percent of Net Sales• Unit Royalty

3. Annual Minimum Royalties• Credited against royalties

4. Milestone Payments

License Agreements (cont.)

Roles in Negotiations

•Office of Technology Transfer•Office of Patent Counsel•Inventors/Creators

IP Policy Income &Distribution

Types•Restricted•Unrestricted

Development (Restricted) Income•Mechanics•Restrictions

IP Policy Income &Distribution

(cont.)

Distribution of Unrestricted Income• Initial Share

1. $5,0002. “Off the Top”

IP Policy Income &Distribution

(cont.)

Distribution of Unrestricted Income• Reimbursement of Expenses

1. Patenting (not reimbursed)2. Licensing3. Litigation4. Development Fund Grants

IP Policy Income &Distribution

(cont.)

Distribution of Unrestricted Income• Net Unrestricted Income

1. 30% - Inventor’s Personal2. 15% - Inventor’s Professional

• For R&D• Accumulation Cap - $300,000• Expended within 2 years

IP Policy Income &Distribution

(cont.)

Distribution of Unrestricted Income• Net Unrestricted Income (cont.)

3. 15% - Department Share• Use for R&D, disclosure/

application preparation,support general Tech Transfer activities

• No cap

IP Policy Income &Distribution

(cont.)

Distribution of Unrestricted Income• Net Unrestricted Income (cont.)

4. 30% - Development Fund• Prototype Grants• Small Tech Transfer Grants• Business Plans• Partial Funding OTT/OPC• Patent costs

5. 10% - JHU

IP Policy Income &Distribution

(cont.)

•Multiple Inventors/Creators•Multiple Intellectual Property

Distribution of Unrestricted Income

Examples of Deals

•Option Agreement•Option & Tech Development•License (Straight License Agreement)•License and Tech Development•Spin-Off Company License Agreement

Option Agreement With Lakeshore Cryotronics

• Magnetometer – RTDC• Mature technology - requires a test and

evaluation period by company• Short term option reserves right to a license in

a specific field of use during evaluation• Small monthly option fee during a test and

evaluation period • Negotiate license terms during the option but

after valuation

Option & Technology Development Agreement

with B.F. Goodrich• Micro DSAD - Space Department • Mature but specific work was needed by

company for a business assessment• 6 Month Option - assess license interest• Option Fee and Tech Development (R&D)

during the evaluation period• Negotiate the terms for the license after

valuation• Evaluate other technology of interest

Straight License Agreement with Akorn

• Exclusive license for APL Technology for treatment of Age-related Macular Degeneration

• Mature technology and IP rights (US/world)• Further technology development - Human trials

done at/by company – not APL• Diligence by company to develop/sell products• Large License Fee split into payments• Royalty, Share of sublicensing fees, milestone

payments, reimbursement of IP costs• Company estimates market at $400 Million/yr

License and Technology Development with FutureHealth

• IT Solution - Risk Management for Healthcare Technology early stage - RTDC

• Exclusive license to joint technology being developed with company – APL’s share of IP

• License Fee (cash and stock), significant multi-year Technology Development agreement, royalty on sales of product/service

• Market potential being defined by company• Economic development impact – working with a

regional company

Spin-Off Company License Agreement with Syntonics

• Oscillators - Space Dept – mature technology • Exclusive license for space applications • License Fee (cash and significant equity in

LLC), multi-year two-way Technology Development agreement, milestones, royalty on sales of products, share of LLC earnings

• Market estimated at over $30 Million/year• Resident of NeoTech incubator – local

economic development impact

Statistics

•Option/License Agreements•Licensing Income•Equity•Technology Development Income

Option/License Agreements

• GFY 2000 – 12 separate agreements (35 invention disclosures - bundling)

• AUTM Statistics – Average = 24 agreements– Comparative Placement FY 1999 = 59th/137

Note: Invention Disclosures– APL 143 vs AUTM Average = 73– Comparative Placement FY 1999 = 20th/137

Licensing Income

• GFY 2000 - $2,046,615

• 16 license agreements generating income

• AUTM Statistics – Average Income = $4,930,431– Comparative Placement FY 1999 = 46th/137

Technology Development Income

• GFY 2000 - $1,886,005

• 5 different Projects

• AUTM Statistics – Average = $1,087,000– Comparative Placement FY 1999 = 23rd/137

Note: New Patent Applications– APL 84 vs AUTM Average = 36– Comparative Placement FY 1999 = 12nd/137

Equity

• Equity is held in 6 Companies (1-30%)– Option for an equity stake in an S Corporation– Stock as shares in C Corporations– Options for Stock in C Corporations– “Partnership” in an LLC

• GFY 2000 - Equity in 4 start-up companies and equity through license agreements

• AUTM Statistics – Average for start-ups = 2– Comparative Placement FY 1999 = 16th/137

NOTE: Agreements with Equity 6th

Summary

•License Agreements•IP Policy Income and Distribution•Examples of Deals•Statistics