So another thing to be thinking about is that how these things sort of work. So, example.

Um, things that could occur. is a colleague from another university, from their transfer office to call you.

He says, he or she says, one of our researchers is spinning out a company.

spoken to someone who likes this idea, they want to license the IP.

is asking for a term sheet. I call it 5% equity and 6% royalty.

If you say I'm way above what your university asked for, is that true? So part of that… The information here is that.

It's always good to sort of contact. And be in contact with colleagues.

Rather than necessarily going by what the latest rumor is, or.

internet discussion. And the truth is that your method should be consistent, but every deal is different.

There's not such a thing as standard, always standard terms that are always locked in place.

There's a lot of things that can vary situation to situation, and.

That's a little frustrating at times for those of us, you know, trained as scientists and engineers.

Not having an exact answer. or not have an answer that's.

a hard and fast rule, but that's really what we see here. There's a lot of things that.

We'll see… you can say, it depends. And we'll talk about some of those things today.

But, so, the first thing, then, you would want to do is to qualify the licensee, and then understand their business model, then propose terms. So, you know, again.

Understanding who the company is. The licensee, what the product is going to be.

How do they make money? And then based upon how that happens, then propose the terms for the license agreement.

The other thing to think about here is that what we call the long tail of IP values.

There's a lot of things here. Now, if you've got this kind of graph in a laboratory.

you would kind of think, well, what the heck is this? This, you know, this isn't really… Nothing too exciting. If I got this off my gas chromatograph, I'd be very suspicious of it, of course.

But what does this sort of tell you, and this is… Something that put together by… colleague at McMaster University a few years back was still very relevant for what we're going to be talking about today.

So here we have a graph with a very.

sharp spike right at the beginning. And then on the bit of a depression, way, way, way, way towards the end.

And it represents the long tail. But what do we mean by that?

Well, first of all, you can see for the first part is that our nice rule of thumb here is don't cap your upside.

There's going to be a few hits that create most of the value.

So, in terms of… you can see that. only a few of these agreements.

That they're licensed. And uh… there's a few that might… one or two, maybe, that do very, very well. Some do okay.

But in terms of there, there's relatively few numbers, so you want to be sure that when you do have a success.

There is a success story that you haven't inadvertently kept your success, so that's an important thing.

You're thinking about when negotiating. These terms and doing valuations.

The other thing is that there's a big section right here in the middle.

In terms of the number of disclosures that don't create any value.

Or… or maybe very minor ones that don't really raise.

the graph at all. So… What does that tell you is that you need to do a lot of deals because you don't know.

Which are ones going forward? At the very early stage of the technology are the ones in Category 1, in terms of going to meet successes.

If you did, you wouldn't need to be working at the university, you'd be.

You could certainly… you could pick the winners. But we can't really do that, we don't really know.

Science is tricky, business is tricky. A lot of things going on, so most… we don't know, so there's a big… but we do know that.

Most of them, they'll be situations that don't pan out.

For various reasons. Sometimes it's the science, sometimes it's the business.

There'll be a lot of things here that don't create value, so you want to be sure that you do a lot of deals.

Then the other thing is that you can see towards the end that you've got to cover your costs.

Because in the end, most of them, if they're not licensed, are gonna cost you money. These are your.

Only in terms of time, but in terms of expenses that you've outlaid for patent prosecution.

So again, um, you need to be able to cover costs, because a lot… not everything's going to make money, and not everything's going to be neutral.

A number that actually costs you money, and you want to be sure.

You're aware of that and limit those as much as possible.

So, in creating… looking at this, you know, in creating value, we have to think about.

Couple of questions here. How do you come up with these terms?

Um, you can see that mainly it's going to be the royalty rate, we'll talk about that, the main financial component.

It's gonna be the royalty rate, the earned royalty based on product sales, that's going to be the major component.

Particularly things that are successful. And then, other thing to think about.

Fear… being fair. Why is the fair royalty important for university licenses?

Consider how that's important. And then the third one.

Why does technology evaluation even matter, and why do you need a consistent.

Approach for doing this. So these are kind of questions that we'll try to cover today, and things you'd be thinking about as you go through your own projects.

At your university. So, first of all, think about what kind of.

Terms are best for your license agreement. We kind of… in essence, this is kind of an exit strategy for those of us in federal labs or universities. We're kind of out-licensing.

Um, our idea is usually at a fairly early stage.

So these are kind of the exits. You can think about.

the type of agreement, exclusives versus non-exclusive. In the federal labs, we have preference for non-exclusive. We don't have that in… Universities have more flexibility.

You have options of time-limited exclusivity, co-exclusive. conversion from exclusive to non-exclusive, or maybe even the other way.

So there's a lot of things to think about.

In terms of the overall strategy that you have for your technology.

Other things are more specific to the contract. Or you can look at field-specific.

field of view-specific license agreements. Perhaps certain territories?

you know, US and Europe, maybe, versus other areas of the world.

Or perhaps it's something that's more appropriate for global access, in terms of maybe even having global access.

Related provisions in your agreement. And… Other things to be thinking about as you're… think about the strategy for your technology.

Another thing to consider is that. Are you going to be able to do sub-license?

Um, and the concern here would be, is it something that.

By granting the sublicensing rights. The licensee is really just a broker and going to flip the technology.

Or is it something where they're actually going to be developing it, and… being able to bring the product forward.

Using a sub-license is good news. more resources brought into the project.

broader distribution, but it's something to think about. In terms of that. And then, of course, the difference between a sub-licensing and distributor. A sub-licensee is somebody who's going to be developing.

As a distributor is someone who's just going to be distributing the finished product.

They don't really need a sub-license in the cases that we typically see.

So these are all things to be thinking about.

But a fundamental question, though, is that why is this.

Why does this matter? You know. Why don't we… why are we spending the time for a course on this?

And why is it always something that comes up all the time?

the discussions that universities and federal labs in terms of technology transfer.

Well, first of all, um… You think you need to have a process that's credible, and that's where.

Um, the credibility and the training and the professional background for the process is very helpful, particularly in dealing with other parties.

You want to make sure that your office has credibility, not only.

With the outside parties, the companies, with your internal.

scientists and administrators as well. Again. Showing that you're taking a professional approach of this, you're not just making this stuff up.

As you go along. It's kind of reality for your technology, um… Everything is, of course, immensely valuable.

Sometimes in the eyes of the inventor. But the valuation put on by a partner.

interest by a partner, that's really kind of the.

The truth serum, I guess, in terms of. being able to see really what the value of the technology really is.

Not the scientific value, but really the commercial value for the technology.

And in doing this. You're working to uncover the, you know, the basis for the royalty rate.

And if you're successful doing this, you'll be able to earn royalty income for your office.

Now, we all know that real income isn't the be-all and end-all.

And not the mission of technology transfer. Hope you are looking to cover costs.

particularly for patent prosecution, um, those costs, those expenses.

Because that's not something that universities or federal labs really need.

patents, it's really for getting those to transfer those to our partners. So you want to have the income to cover… hopefully cover some of those costs.

And of course, it's always a CYA in terms of.

If there's disputes or questions about how you've approached it, just make sure that you have a professional.

Uh, approach… approach that makes rational sense in terms of the practices of the industry.

And some patients, your boss, whether it's the. Your immediate supervisor or the VP of research is going to ask about that.

Because they are being asked that question by… Investigators or by leadership as well.

So that's why it values, and of course. You're also looking at, um, management of assets and thinking of… In our case, it is… they still remain government assets from the NIH.

But universities and grantees. Those were initial assets governance prior to Baidu.

So part of the… doing a good valuation is making sure that you're.

holding up to the values of the Baido Act.

And managing the assets properly and transferring them. Or a property for commercial development, successful development.

And so we're looking at sort of fare. And fear means something that's sustainable over a long period of time.

And where both parties can participate in the process.

And you want to avoid the problems in terms of, um.

Unfair evaluations or difficulty in the marketplace. Also, market feedback, you know, in terms of, are you getting good.

Good interest from partners. There's lots of people these days.

These are a little bit older. References. But there's certainly lots of interest in.

In terms of government, in terms of how the tech transfer process is working.

And… well, it's only been 45 years since the SPI dollar is still relatively young in terms of.

government. I guess we would be the way you put it. So, keep that in mind.

Here we have a quote from Joe Allen. Joe Allen, those of you who haven't met him.

the staffer for Birch Pi, they helped put together.

They, by dialect in 1980. And so you can see that this quote.

is from 2019, but still relevant today. in terms of being able to make sure that the process is successful.

And that, um… where you'll continue with the process that we've worked on so well since 1980.

So, let's kind of live in the background. As you get started, what are some of the questions?

That you need to ask your inventor, you need to ask yourself, you need to do a little bit of research.

These are some of the things that I would put on my list.

First of all. What is the product?

You know, is it something… a new product in a different area?

Is it a… is it something that… is it add-on to an existing product, a new function for it?

Is it… is it… is it something that could be disrupted in the market, or is it something that people are familiar with and could easily adopt a lot of things?

And the other thing is, what's the value. What's the feature? How is this really distinguishable for… over existing products.

It's sort of like… the first thing is sort of, what is it?

This is… so what? You know. Why… why… what's going on here that's really.

raising the value that's going to generate interest in the marketplace.

Third point's also important. What's the business model? How is a licensee going to be able to make money?

Or be successful developing this. You have to understand that. It's not for you, for you to create that model, that's for the company.

To come up with that. But resuming their interest is based upon.

some idea that they have for revenue generation. Other thing, think about what's existing market and competition.

And that's a little bit more than just prayer art, certainly as part of the patent review, you're looking at sort of prior art.

But in terms of the marketplace. Existing companies in that space.

What are some of the other products coming up?

Really, given that yours is probably early stage. Is it really sort of evolving?

It'd be still competitive. down the road with some other products that are also in development.

Another point here is how much value does your IP bring to the business?

And of course, here, I think we want to include not just patents.

But often materials that were provided, um. And for those of you who have legal authority to license know-how.

know-how as part of the process as well. So again.

What's the total package? It's not always just the bare IP that can be brought into the.

the valuation. And so we want to think about what other things that you have as part of the package that go forward.

And that's kind of the kind of assets you would think about.

And… and while it's not your… responsibly to finance the business, um.

How are they gonna be financed? Do they have… What kind of resources do they have? What kind of experience do they have raising money?

gonna be very, very important. Um, often they'll take your license agreement and then start raising money in terms of startup. Is that really going to be.

They have a chance of success? Is that likely going to go forward? Again.

And then, of course, if you have a choice between an existing licensee or a new venture.

Um, you have that option, which is the one that.

you'd want to choose. Often. Um, existing licensee has… brings a lot of things to the table. We don't always have that choice.

So sometimes it's a startup that we're working with, but again.

It's all something to be thinking about. As you enter into the negotiation.

So that's a negotiation. We had to think, though, a little bit also about.

the value of the IP to the university or to the federal lab.

Certainly, the most important thing is that we want to try to have impact and public impact.

Or the inventions coming from our program, being able to demonstrate that, it's really very important.

Particularly today. To show that the value of research funding.

showing the value of the public commitment through taxpayer dollars is important.

Other things that intellectual property is that it also.

Helps you track research sponsors. He's a corporate sponsors or foundations.

That see this activity. commercial activity, the successful development based upon.

discoveries, and success attracts success. So the idea that hopefully that will generate more and more interest.

It's also something to be thinking about, is that you do… Having the intellectual property, it does.

It does protect for defensive purposes, it protects that area.

From potential threats from other parties. Um, that's not such a major function so much in the academic research and the federal lab research, but it does.

It does have that value. There is some value there to be thinking about.

And in the fourth point here, I think we're seeing a lot more of this lately than the idea of.

a program with intellectual property and history of a strong tech transfer office.

Does help with faculty, uh, recruitment. And generates interest among students.

Often, faculty, uh, want to meet. As part of their future potential factory, they want to meet the tech transfer office as part of the facilities, the support.

Uh, that they would be potentially get if they would join.

The research institution. And students themselves now are more interested in entrepreneurial ideas, so we see a lot of things related to startup competitions.

Business plan competitions coming from students. So again, it remains, um… an asset, and also a resource that you can tap into to help with some of the projects in your office.

Also, you know, for a university's perspective, attracting employers for graduating students, the idea that.

Employers are familiar with work coming from. Uh, research university, and often the graduating students, particularly the postdocs, are the ones that take the.

the key ideas, the know-how. Key ideas to companies. So the idea that intellectual property is part of the transfer, but also.

Also, students that can come and actually do the work in developing the ideas further.

We're seeing a lot of also interest in, by state and regionals, uh, organizations for economic development aspect. That's kind of an important aspect now.

And certainly related to the original. filings and legal aspects of Baidole and Stevenson Wilder.

Again, economic development support is part of the interest that Congress is funding this type of work.

And last but not least, oh yes, it does make some money for the university.

Again, to reward inventors and support activities related to sick transfer.

So again, um… Well, it's not the major focus, it is an important aspect, and that's where it's certainly very related to valuation.

So, what's the value of… to the licensee? Obviously, intellectual property can block competition.

And sort of support the activity. That's needed to, uh, attract investment.

Um, and certainly the work by the university. is at least in the initial stages, so is the, um… In some cases, it's proof of concept, or at least demonstrates that the idea is workable.

And so the company will then, of course, have to do scale-up.

And further, um… For their work on the technology, but the.

Fundamental discovery by the university in initial studies are very important.

There's also then the idea that they can work with.

University researchers through collaboration agreements or in the federal labs with creatives.

Again, just sort of help refine the ideas and move it on maybe to second-generation type products.

The fact that they're working with a federal, famous federal laboratory or university that does add prestige.

and credibility to a company, particularly a startup company that's trying to raise funds.

And then, of course, there's the collaboration is… can provide some sort of training.

and access to other expertise. And again, as I mentioned, it's part of the fundamental ideas of fundraising for startups.

So that's that aspect. Again. Another thing to be thinking about… Before you negotiate the license agreement, is it.

What are some of the steps here? Of all, we mentioned, talking about understanding the product.

And also, but thinking about the product from a perspective of a customer.

What would a customer… how would a customer evaluate.

product and see. The market competition, the business model.

And why is this important to the licensee? Is this a fundamental new product line for them, or is this.

We've seen sometimes is that our technology comes in, it's one of six different approaches.

by the company, and they're going to work with 6 and then only pick one. So we have to think about where does this fit in terms of the overall.

portfolio of the company. And then think about some of the other things listed here in terms of intellectual property for the business.

Um, what are the… and also, what are the success milestones? Is it something.

that this company's going to bring to market. Or is it something that this company is going to be sub-licensed or be acquired?

somewhere down the road as part of the development strategy for this. Again.

You want to make sure that your license agreement reflects that… those approaches, whichever one you think is.

Most likely. So, what are some of the factors, um… that go into this. This is something from litigation, so it's not always directly related to, sort of, initial evaluation.

But there's some of the things to be thinking about, and these are the famous Georgia Pacific factors from the.

Georgia Pacific case. And… I don't know that we necessarily… Always directly connect these to valuation for early stage technologies. Again, this reflects more, uh.

Patent litigation, but you can see that these are.

Excuse me, all things that are relevant. And certainly, you know, the history of.

What the licensee has done, either with your organization or with similar technologies at other organizations.

is very relevant. You can think about some of these.

aspects, um… And some of these are… we've talked a little bit about before.

But these are all sort of things we sort of think about that can go into the.

to the overall mix of what you're considering. As you were looking at the valuation. Again, things to be… things to be thinking about.

Some of the main ones, though, that we want to be thinking about is our stage of development.

And typically, for federal labs and universities, these are pretty early. It's conceptual, maybe a prototype, maybe some in vitro, in vivo work. Again.

Rarely clinical studies. So we're talking about early stage, high-risk technologies, and then.

That's kind of reflected in the valuations. The other thing about plans for continued internal development, often.

Um, our investigators are interested. in that, but their focus is usually more on discovery or early-stage work, and so.

It's… this kind of means… some needs for handoff, those often, some organizations.

do have translational programs, for example, the National Cancer Institute here at NIH, and also NCATS, particularly along some other institutes as well.

have translational programs that can take things through often through up to early clinical trials.

So again, if those types of assets are available or relevant, that will help boost the overall valuation of the technology.

interest in funders, uh… Other things to think about is ownership status, uh, making sure that you do own what you think you own.

Um, in this day of collaborative science. Often we find ourselves.

Finding out that there's other institutions that are co-owners.

And of the technology. And of course, then that means you probably need to do an interstitutional agreement to sort of unify it with one party.

in order to really have a strong valuation. and interest by a company, so the company can just deal with one party rather than multiple owners.

Thinking about then also here, the technology itself, is it a standalone.

technology… is it a platform? Is it a portfolio? Is it a methodology?

There's a lot of different things that can go into that, and some of it's going to be reflected in sort of the claims that you have in terms of your intellectual property.

Another point here, here on our list is that.

a product opportunity, some products. are more valuable than others. You think about.

Vaccines and life sciences at least, vaccines and therapeutics who are valuable than diagnostics that are more valuable than the resource tools. It's very simplistic example.

Begin thinking about what the product opportunity is, and maybe there's multiple ones. Sometimes it's both human.

And veterinary, for example, but you have to kind of think about that. What are the product opportunities?

Again, the licensability of technology, what's the business opportunity?

Our shape of your IP, often we're licensing before the patent issues, so what's the likelihood of.

and issuance, what's the coverage you have, in terms of what jurisdictions.

And last but not least is the support from the inventors, you know, the collaboration.

Yes, it's the intellectual property, but. Um, there's collaboration of the inventors and their laboratory or their institute is very important.

in the overall process as well.

So, what would we… here's kind of a nice diagram of choosing. I mentioned before.

There's often a debate, an internal debate. in an office as to.

What's the best choice for the technology? Is it with a startup? Is it with an established company?

And sort of here's a nice single page. It gives you kind of the outline of it.

So, for example, the… looking at just the technology strength, you can see for… That established company.

would be probably the choice for an improvement fitting within their existing product line.

With well-defined applications, because established companies are usually not going to.

I'll be looking to minimize risk. So, for a component, that might be the choice, but if it's a standalone product.

a platform, a new product category. A broad, emerging, and very engaging application that's probably a startup because.

They are more risk tolerant. We stage high-risk technology, early stage high-risk companies is usually the working… working mantra for there. So again.

It's kind of… that might help you decide on that aspect.

In terms of intellectual property, again, establish a single product.

Maybe it's very neural claims, but if it's broad claims, little prior art.

a big portfolio that they can use to raise funding. Maybe that's more of a startup.

The market established companies are better at mature markets.

Dear, if it's strictly ones with large players. Again, difficult market entry, but an emerging market.

No established players, low barrier to entries, that's a startup can handle that, so that might be more appropriate there if that's your assessment.

of the market. Looking at some of the R&D requirement, industry has.

resources. Um… They can do a lot of what they have, and.

But they're looking for things that… Relatively close, or closer.

To being market ready than we would typically have coming from our laboratories or our research programs.

So then maybe if it's something that requires a lot more research.

A lot, uh, development and scale of partnerships. And again, that might be a startup.

Opportunity more than established company opportunity. And the team, um… What's your team looking to do?

Um… If your investigator is looking for more sponsored research.

Not really interested in running a company. part of an entrepreneurial team.

Um, that's a good partnership for that technology with an established company.

But if your investigator is interested in those types of entrepreneur activities.

And sort of looking to see more impact, more control.

More engagement with the technology goes forward. A startup would be an opportunity for there.

Again, more for universities, um… in the federal web system.

Our investigators, if they want to be engaged with a startup, they have to leave.

federal service, so… A little bit different, depending on the rules of engagement at your institution.

Would be the thing to think about there.

So let's jump into something, um, a basic term for valuation, and that's, we're talking about running royalties.

Often, we call it earned royalties, earned royalties on sales.

So it's a royalty rate times the royalty base, so there's two questions we have here.

What's the rate, and what's going to be the royalty rate?

So here, the example here… Here is your IP is a formula to make an industrial chemical?

The licensee will sell the chemical and also sell products manufactured using the chemical.

The licensee wants the royalty base to be the manufacturing cost of chemical.

That they produce. So they're saying the cost of goods.

Manufacturing costs, actually. is the base.

That you would multiply the rate on. What do you think? Is that going to be fair?

Not exactly. I think your royalty base should be the value that their customers receive.

So, if… and… If it's going to be… If they're selling the product, it's going to be the sales product of.

That incorporates the chemical. That's certainly going to be a fair assumption of the value.

The impact from a customer what a customer's going to be paying.

It's going to be based upon the value they receive, not from the manufacturing process, but the actual product itself.

So, ideally, that's what you'd want to be thinking about for the royalty base.

is the sale. So… my royalty base, again, it's… again, as I mentioned here in the slide.

It's the value custom receives. It's usually… Net sales is the best value.

That's what their customer pays. And there's certain deductions.

from that, for… Great.

things that are other items on the invoice, and we'll be talking a little bit more about that during the course.

But typically that sometimes. We do use units.

Um, instead of royalty-based, often that's… could be software.

That's… Added to a very large machine or something.

So sometimes a unit… Um… would be a good proxy for it.

If it's something that's not really directly connected to the overall sales of the whole… of the whole.

But, um, the gold standard is net sales. Some would ask about, well, what about profits, costs?

Well, we've all heard those stories about those famous Hollywood movies, right?

Everyone went to see. Right, profitable… but then, for some reason or other, there was… there were no profits. And so, I think… And that's because profits, it's not something that's always directly connected to the product.

You know, profit's going to be things that related to other expenses at the business.

you know, leasing, um… property, uh, having trucks and owning cars and things like that.

Not always things directly related to your product or your invention.

So that's not really a good choice. Um, cost, again.

It's, again, something you'd, like… like profits, you have no control over their costs.

Um, it's… and the cost isn't always directly connected to your invention. So again, that's something that you can't really control either.

Um, and it's not really reflected in, sort of, the value.

So that's… so we want to stay… if it can, stay away from those two… choices. Again, net sales, or maybe unit sales in certain circumstances.

You can adjust. For… Things that have other… components to it, a multi-component product.

Where there's… each component has separate activity. We have combination products, or you could have royalty stacking, and we'll talk a little about that during the course as well.

Where there's multiple third-party IP, not the license or IP, but third-party IP.

It reads on the product as well, so there's multiple parties that the licensee has to pay.

So again, there could be some adjustments to the royalty rate.

Based upon royalty stacking. Or adjustments to the royalty base based upon a combination product.

So, here we have a little bit of a quiz.

You have two different… two products. One is, um… A two-way valve.

It's part of the valve stem. Another is a, um… earpiece.

And the idea… your piece that has access to Bluetooth.

Both these are a little bit older in terms of the technologies, as you've.

As you've seen, but they're very, very good. Cases to be thinking about here for… For us today. So let's take a look at the first one.

Who thinks that this one… is a combination product. Again, it's a.

Plumbing with, with a 2-way valve stem. Well, the truth is that the two-way valvesum is an additional optional feature.

The main unit should not be included in the royalty base.

It's basically, it can be sold separately. Without… without that.

So again, that would be an example of a combination product.

would abound the earpiece, uh, the Bluetooth earpiece. Here, the answer is no, because.

Bluetooth module has no utility by itself, it should be included in the royalty base. So here.

It's not two things that are separately usable. It can only use a single unit, so this is not a combination product.

So again, we have court cases backing these up.

As well, in terms of the outcome. So, those are some of the things to think about. So, again.

Excuse me, how do you want to be thinking about this?

In terms of the valuation process, again. Collaborative with the licensee.

The idea that together. Working together, you're creating the value.

Or the overall process. First of all… You want to qualify the licensee?

Again, who are they? What kind of capabilities do they have?

Where are they based? You know, information… It gives you some confidence that.

They can be a going concern. And actually have the… technical capabilities to do the work as planned.

Second part, then, is that. understand their business models.

How are they going to be doing… making money?

and profits the company, how is the company going to be growing?

And therefore, the idea is that. You'll be sharing that.

However, their model… their business model goes. You know, the different markets, different approaches, different companies, different approaches, again.

How are they approaching it? And then be able to share, find a way to share.

That income and revenue and profits that they're coming in.

Third point here would be. What are some of the critical success? We would call these milestones, it's part of the diligence.

What are sort of steps along the way? That they'll need to accomplish, and to bring the product to market.

Classically in life sciences, it's initiating various phases of clinical trials.

But it could be something even as simple as raising certain amounts of money right at the beginning in order.

Just being able to start operations, or getting operations fully underway.

So again, think about where some of the milestones, because you want to have.

It could be part of a royalty sharing, value sharing.

Or it could be a basis of success or failure in learning that you could be able to, if they failed a diligence milestone.

Could be grounds for termination, and maybe you could find a different licensee. Again, very important here.

Fourth part, a little harder. Sometimes to agree on the contribution of the IP.

to the value, so what's… What's the overall part that you're providing to the company?

Where does it fit into the overall project? Is it the be-all and end-all?

Or is it one of… 10 or 12 different things that are going and difficult to accommodation product, and.

having a good understanding of where your IP fits into the product and its overall place in the market.

And then, of course, that leads you to propose. Again, you're the property owner, you have to make the offer.

and negotiate terms that she agreed on the shared value.

So it was 5 steps… Not everyone is an easy step, obviously.

But things you want to go through as you sort of.

work through this. Again, qualifying. Understanding and agreeing on the value of the… profit and royalty model… Excuse me, revenue model.

What are some of the success factors? contribution, and then the proposal, the term sheet, or the draft agreement, however you approach it.

So that's how we'll be approaching it, so that, um… The focus, again, for the course.

We'll be spending time on the creating value. Measuring value, sharing value.

And then the, um, startups, so those are the four modules at that time.

And then we have a valuation case study that I mentioned before.

That will sort of… Everyone will have the same case study, and will hopefully be… You'll have elements of both life science and physical science in it.

And hopefully we have some interesting discussions about how to proceed with.

That technology. So here's some of the folks that you'll be able to meet.

In Seattle, um… So Ruben is my co-chair for this particular program, and so we have.

Also joining us would be Seth L. Alibe from Nixon Peabody.

Atri Varma from AstraZeneca. And Debbie Rose from Invotex IP, so you're not… nice mix.

Pharma, Beagle. CPA, Federal Labs.

A nice sort of perspective on sort of the overall valuation process. I think you'll get a lot out of the course in Seattle.

So that will wrap it up for today. We have some time for some questions, perhaps, Ashley?

Yes, there's one in the chat I see so far.

Um… what is meant by qualifying… qualifying the license?

What is meant by qualifying the licensee, um… is really kind of finding out who it is that you're dealing with.

Um, and understanding. A little bit about them in terms of, is it a startup, is it an existing company?

kind of success have they had to date? Uh, what's the experience in a particular area?

Um, of technology. And… Hopefully you've seen a little bit of a business plan from them. I mean, in the federal labs, we require a licensed application.

My statue, but I often tell them that it's… this is this… See some sort of business plan or business plan summary.

Um, because these things are kept confidential, they're business confidential, when they're by the federal lab, or… at the university as well. And so we'd like to have the same understanding.

It's your… about the project. That you're giving to your investors or your senior leadership, the idea being.

That, as… Kind of like an investor, a little bit. We're investing.

turning over our intellectual property. Or you have an exclusive license, or… Letting the company use intellectual property. So we'd like to know where it is.

Where it's going, and I was going to go forward, so… So qualifying is sort of improving your comfort level.

Moving forward. And these days, you know, in terms of, uh.

What kind of success have they had in the marketplace? What kind of experience do they have? What kind of resources?

Or they have, and do they just… They sound like they can get it done, I mean.

We don't always have a lot of choices of companies, you know.

qualifying, but at least enough of a confidence level to move forward.

That's the most important part.

If we have any more questions for Steve? I dropped over in the chat if people would like to learn more. Um, two links, one to Autumn's, um, annual meeting registration for the.

Um, event taking place in Seattle, and also some more information regarding the valuation course, if anyone's interested.

Oh, looks like we have a question… couple questions… Yes, these slides will be available. Um, they will be posted to the Autumn Learning Center and Autumn On Demand within 30 days after this presentation.

And it looks like there's one there for years… for you, Steve, from Benjamin. Do you see that?

question, or would you like me to read it?

Uh, if you could read it, please.

Sure. Some TTOs have internal valuation models for certain tech industries, others do not. Are there industry standards?

for pharma or licensing.

Well, there are, to some extent, there's something, and we'll talk a little bit about it in the course.

called the 25% rule. Um, the idea that has come up.

through empirical studies that the idea that the licensor.

should receive roughly 25% of the overall profits. from the sale of the product.

So, it's not a, um. It's not a rule of science, and… The courts had not really allowed it as sort of a fundamental fact.

But what has happened is, across a number of years, a number of industries.

Um, studies have shown that that's where things kind of end up.

So, that's one aspect of it. The valuation models, you know, are really, um… It's really kind of frustrating, I think.

for us. We're trained as scientists, change as engineers.

With… we'd like an answer to, you know, the 5 decimal places for… For scientific aspects, I mean, we expect that for valuation.

It's really more of a soft science, so… It's sometimes useful to have more than one valuation model or idea.

And certainly, the other model that we'll talk about in the course as well is comparable.

the idea, like, what did that company pay, or what did similar companies pay?

Or some technology that's… you'd say would be a comparable idea.

See, the idea is that you come up with a number of data points, and you can get a rough idea of where you're going.

Which, what you don't want to do is just sort of make things up, because then if you're challenged, you don't have any basis.

So, you could… There's also economic models that people can have, but you have to have a lot of data for that.

Usually, it's usually more for a sale of a company, or a sale of a product line. We have.

full, um, income statements related to individual products. for a couple… for a few years, at least.

So there's that aspect, but often for early stage technologies, we don't have that available to us.

particularly some of the discoveries they have where it's going to be first in class, first in its field.

So that's certainly possible for later stage or more mature technologies.

That's not often a relevant example. I think. The best examples are probably going to be comparables, and that's where I'm using.

some of the autumn resources are very helpful. We're calling autumn colleagues.

Um, to get some ideas of what they may or may not have done in a particular area.

are the most useful. You could also, in the 25% rule, and then maybe the, um… Doing net present values and sort of economic models. Again, if you have.

have that data, or can make some reasonable assumptions. So those are probably the three.

Three set ones. And then, of course. My favorite one for research tools.

is just $5,000, because that's… No matter how much time you spend on it, it's usually $5,000 for a research tool.

Bit of a joke, but that's… that's sometimes, uh… All these things work out.

All right, so you've got another one for you. How do licensors.

Practically verified net sales are unit-based royalties when licensees control the reporting.

Oh, and that's why I think you'll love the course, because we have Debbie Rose.

Invitex on it, because that's her. That's her main job, is to do royalty audits, and.

The truth is, is that. Licensee will be reporting that, usually on an annual or semi-annual basis, to you.

But you don't have any way to verify it, necessarily, unless you do an audit, so you want to have a.

As part of a licensing program, you want to be sure you have an audit and verification program.

Now, of course, there are some danger signals that you… that sometimes are warnings to you that.

Um… that sometimes occur. And that's, for example, for public companies, are they reporting the same number to you as that they're reporting in their Security and Exchange.

Commission filings for that particular product. Or is there wild fluctuations in the numbers?

That they report from year to year. Without a good rationale or explanation. You should always ask, of course, when you start to see something that looks a little funky.

Um, but sometimes it's good to… Make sure you have an audit programs.

For that. So that's… That's very important, because what we find is that you do the agreement, but it may be.

8 or 10 years later before the product launches, so it's different people, different systems sometimes.

And so, um… The information doesn't always… transfer correctly at the company, so sometimes it's just mistakes.

and translation in, um… accounting at the company, not really anything that's evil intent.

Or trying to sneak one by you. But again, need to have.

As well as an active program, have some sort of idea about how you're going to.

Monitor and force your activities. on post-licensing.