Technology transfer, or the process of converting scientific and technological advances into marketable goods and services, can be a daunting topic. This is the first in a series of articles which aims to demystify the topic and give you valuable insight into the key elements of technology transfer. A good technology transfer process will be self-sustaining, a form of virtuous circle starting with an innovation, then passing through the stages of technology evaluation, IP protection, technology transfer strategy, IP bundling and valuation, technology marketing, licensing, implementation and ultimately revenue generation, which in turn can support further innovation. This article picks up the story at the IP protection stage.
You or your team has made an innovation, evaluated it, and decided that you’ve developed something that could be of commercial interest. Together with your IP adviser you have considered what registered IP protection should be sought for this innovation and taken steps to apply for that protection. It is important to keep in mind that irrespective of whether or not registered protection is sought, know-how (or trade secrets or confidential information as it is sometimes called) is likely to be a key element of the innovation package, but will only be of value if it is properly recorded and kept confidential. Managing confidential information will be the subject of a later article.
Technology Transfer Strategy
There are many and varied reasons why an innovator, be they an individual, SME or large corporation, turns to technology transfer to monetise his innovation. These will be explored in a future article. Whatever those reasons, it is imperative to consider how technology transfer will help you to achieve your business goals and objectives. You will need to decide the market for your innovation, plan how to identify prospective licensees and then turn those prospects into signed licences, plan the negotiation process including developing a negotiation matrix to assist you to achieve the best possible outcome, plan how the technology will be transferred and what resources – internal and external – you are likely to need to get you through the process and achieve the best possible outcome for your business.
IP Bundling and Valuation
The transfer of technology is likely to involve a bundle of IP rights – possibly patents, registered designs, know-how/trade secrets, and copyright. Before approaching prospective licensees you should determine what will make up the IP bundle that will be licensed and ensure that registration is properly addressed and know-how/trade secrets have been recorded in a form that will assist their eventual transfer to licensees in the form of reports, design drawings and the like. Consideration should be given to whether key personnel will be made available to licensees to assist with the transfer process, and whether you will provide training and ongoing technical support to licensees.
Next you will need to consider the value of the licensing package to prospective licensees and how you will share in that value through lump sum payments, running royalties, rebates on purchased products, and other reward mechanisms.
Having a well-thought out licensing package, realistically valued, will greatly smooth the next stages of the technology transfer process.
Searching for prospective licensees requires a good analysis of the market for your innovation, assessing what it will allow others to do that they cannot do today, and identifying who can help you to access that market and those companies. Is the market national, regional or worldwide? Are there regulations governing the introduction and/or use of the licensed product or process in any country? If so, how will this affect the search for licensees? Doing this homework thoroughly will bring dividends later.
Negotiating the Licence Agreement
The final step before starting discussions with prospective licensees is to develop your negotiation matrix which identifies the key parts of the licensing arrangement and enables you to decide which parts are of most importance to you and those which are likely to be of importance to licensees. The matrix should set out for each part your best outcome, your ‘walk-away’ position, and the likely negotiated position. The services of a technology transfer specialist will aid you in this key task and enable you to table balanced and realistic draft licence agreement at the appropriate time.
Now the talking can begin. Prospective licensees will want to understand your innovation, its potential applications, and the intellectual property on offer. Much of this information will be your confidential information and you should decide what information to disclose at what stage of the licensing process, and in what form. You will need a carefully crafted confidentiality agreement between you and each prospective licensee to protect your information before any disclosure begins. Such agreements look deceptively simple, but the devil is in the detail and you would do well to seek help from a technology transfer specialist in preparing and negotiating such agreements.
Preliminary discussions with a prospective licensee should focus on the expectations of each party and their respective vision for the business relationship. Alignment between the parties at this stage is important if a mutually beneficial deal is to be struck and a lasting relationship developed. If there is a good level of alignment, then the draft licence agreement can be tabled and negotiations can commence. Negotiations are not for everyone, and even for those used to negotiating other types of business deals, the services of an experienced technology transfer specialist will be money well spent. The anatomy of a licence agreement will be discussed in a later article.
With the negotiations completed (probably after several months of hard graft!) and the ink dry on the licence agreement, attention must swiftly turn to implementation – completing the transfer of the technology, providing technical support and training, registering the agreement with the relevant national patent office, setting up the mechanisms to collect any lump sum payments, running royalties or other rewards that might have been negotiated, and generally managing the new business relationship between you and the licensee. Preparation and planning are key, and if executed professionally these early interactions with the licensee will set your new relationship off in a good direction.
Rob Carter 24 June 2014
This is part of a series of articles on technology transfer by Rob Carter, latterly Associate General Counsel, Intellectual Property at Royal Dutch Shell plc and now a consultant at K2, the network of patent and trade mark attorneys and IP consultants developed by Keltie LLP.