Spinning Off in the U.S.

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Spinning Off in the U.S.

• Dr. Gary W. Matkin
• Associate Dean
• University Extension
• University of California, Berkeley

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University Technology Transfer Activities

• Patenting and licensing of university
  intellectual property
• Research Partnerships with industry
• Industrial affiliate or liaison programs
• Technical/managerial assistance programs
• Business incubators
• Research parks
• Venture capital/business start-up activities
• Continuing Education

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Taking Equity Model
Research Institution
For Profit Company
License
Equity
For Profit Company
License
Equity
For Profit Company
License
Equity
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Taking Equity Model

• Advantages
• Replication after established policy
• Diversification
• Equity build up
• No up-front investment
• Not dependent for return on one technology

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Taking Equity Model

• Disadvantages
• Little control
• Equity dilution
• Portfolio management overhead cost
• Case-by-case negotiations
• Messy (relations with inventors)

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Taking Equity Model

• Issues
• Inventor share distribution
• Degree of management involvement
• Exercising voting rights
• Board of Director membership
• Anti dilution opportunities
• Liquidation policy
• Limits to percent of ownership

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Non-Profit Buffer ModelAlternative 1
Assigns IP Ownership
Research Institution
Non-Profit Subsidiary
Receives share of profit equity buildup
Tech Licenses
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Non-Profit Buffer ModelAlternative 2
Selective Assignment
Research Institution
Non-Profit Subsidiary
Receives share of profit equity buildup
Tech License Office
License
Equity
For Profit Spin-off
Tech Licenses
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Non-Profit Buffer Model

• Advantages
• Maintains control
• Provides initial buffering
• Can provide markedly increased flexibility
• Disadvantages
• Still has non-profit status
• Hard to attract capital
• Still removed from marketplace

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For Profit Alternative One
Research Institution
For Profit Subsidiary
Creates Owns
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For Profit Alternative Two
For Profit Subsidiary
Research Institution
Investor(s)
Majority Owner
Minority Owner
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For Profit Alternative Three
For Profit Subsidiary
Research Institution
Investor(s)
Majority Owner
Minority Owner
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For Profit Alternative Four
Research Institution
For Profit Partner
Investor(s)
New For Profit Venture
Investor(s)
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For Profit Alternative Five
Research Institution A
Research Institution B
Investor(s)
New For Profit Venture
Investor(s)
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For-Profit Alternatives

• Advantages
• Immediate entry into market
• Can attract capital
• Rheostat on control
• Disadvantages
• Sometimes little buffering
• Often loss of control
• UBIT, legal costs
• Often high cost

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The Arms-Length For-ProfitIP Manager Model
IP
IP
Research Institution
For Profit IP Management Corporation
For Profit Spin-offs

Equity
IP
Tech License
Research Institution
IP


IP
Research Institution

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The Arms-Length For-ProfitIP Manager Model

• Advantages
• Little cost to institution
• Low risk (but low return)
• Arms-length deal with faculty
• Ability to gain critical mass, econ of scale
• Disadvantages
• Low return
• Cherry picking

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The Future of University IP Management

• University as beneficial holder/clearinghouse
• University as aggressive defender of IP
• Research universities united
• University IP policy as a condition of employment
• University IP policy and collaborative education
• Universities as heavies in national and
  international IP law development

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Gary W. Matkin Associate Dean/Director Technology
Initiatives UC Berkeley Extension gwm_at_unx.berkele
y.edu