Working with Start-ups at OTL

1. Kirsten Leute
kirsten.leute@stanford.edu

2. • Professor, Dean and
Provost
• Steeples of
Excellence
• Hewlett and Packard,
Litton
• Stanford Industrial
Park (now Stanford
Research Park)

3. Mission
To promote the transfer of Stanford technology
for society’s use and benefit
while generating unrestricted income to support research and education.
Technology Transfer Portfolio
Patents
Copyrightable Material
Software
Biological Material

4. Federal & industry OTL decides IP protection
research money for invention and
markets invention broadly
Stanford researcher
discovers new invention &
submits disclosure ,©
Additional OTL licenses invention
research funding to Company
Company makes
new products
Company pays royalties
to University

5. • Patentable Technology
University takes title to all inventions created with more than
incidental use of University resources
www.stanford.edu/dept/DoR/rph/5-1.html
• Copyrighted Works
University takes title to copyrightable works created with
significant University resources
www.stanford.edu/dept/DoR/rph/5-2.html
• SU-18 Patent and Copyright Agreement
www.stanford.edu/dept/DoR/rph/su18.html

6. • Use of Stanford funds to file a provisional patent
application
• Creation of physical prototypes
• Acquisition of data for invention or to develop an
invention
• Use of the Machine Labs

7. • Use of the library
• Use of computers resources available to all
students
• Email
• Dorm rooms
• Use of classrooms to discuss projects

8. 1970 – OTL Established
1971 – FM Sound Synthesis ($22.9M)
1974 – Recombinant DNA Cloning ($255M)
1981 – Phycobiliproteins ($46.4M), Fiber Optic Amplifier ($48.4M), MINOS ($4.1M)
1984 – Functional Antibodies ($318.9M)
1987 – Selective Amplification of Polynucleotides ($20.3M)
1990-1992 – Discrete Multi-tone technologies for DSL ($29.6M)
1993 – Microarrays ($2M), MIMO for Wireless Broadcast ($0.12M)
1994 – In vivo Bioluminescent Imaging ($7.2M)
1996 – Improved Hypertext Searching - GoogleTM ($337M)
2004 – Refocus Photography ($0.15M)
2012 – the next big thing ???

9. • Steps
– Disclosure (done online through Researcher Portal)
– Evaluation
– Licensing Strategy
• File patent?
• Market to potential licensees
– The License
– Maintaining the Relationship
• “Licensing Associate & Licensing Liaison” teams
– Technical degrees and marketing focus
– Responsibility for inventions from cradle-to-grave

10. • Disclose inventions
• Identify potential licensing prospects
• Participate in patent preparation
and prosecution
• Host visits and/or provide technical information to
potential licensees
• Provide input into the licensing strategy
• Sometimes consultant to licensee(s)

11. • Financial terms • Non-financial terms
– License issue fee – Definitions
– Annual minimum payments – Grant
– Earned royalties – Development milestones &
• % of Net Sales diligence provisions
• $ per product sold • Prototype
– Reimbursement of patent • First Commercial Sale
costs – Warranties and indemnities
– Equity in start-up companies – Infringement actions
– Dispute resolution

12. - Universities want to share in the upside and help
with economic development
- Conflict of interest issues are primary concern
- We avoid negotiating with the inventors who are
founders due to their conflicted positions
- Many start-ups first take option agreements for 6-12
months
- Most work with local VC firms

13. • Typical situation:
– Researcher discloses invention and states s/he would
like to found a company around the technology
– OTL markets technology
– Often start-up is the only interested party
– Start-up submits business plan
– Negotiate financial terms with business person
– OTL initiates conflict of interest review if inventor-faculty
member involved
– Remainder of agreement negotiated
– Often the first agreement is an option

14. • 6-12 months in duration
• Small payment plus reimbursement of patent
expenses incurred under option
• Short, easy to negotiate
• Gives startup time to seek funding, do more
research or prototyping, or other activities to get
the company off the ground
• Time to move the research out of the lab
• Template is on our web site

15. • Upfront consideration includes cash and perhaps
equity
• Annual minimums, ramping up over passing years
• Earned Royalties on Net Sales of products
• Milestone payments – often large towards time of
product sales to account for smaller upfronts
• Yearly diligence milestones
• Sublicensing – scaled down over time/development

16. • If the researchers are new to start-ups, we try to
help them use their attorney-time wisely
– Highlight clauses that are non-negotiable
– Keep tabs on “over-lawyering”
• Start-ups are evolving entities, so they need some
flexibility
– Diligence may be a moving target
– More renegotiation with start-ups
– Concentrate on the end goal – products to help people
• Startups often have many moving parts so need
efficiency and time-sensitivity from a TTO

17. • OTL does not have the goal of stimulating the local economy
• Stanford does not have an on-site incubator (although we
have other resources)
• Stanford never assigns patent rights to another party in a
license
• OTL does not help write business plans
• OTL can provide introductions to VCs and other funding
sources, but the start-ups usually use their own routes
• About 15% of our licenses each year are to start-ups

18. • Graduate School of Business (GSB) • Multidisciplinary
– Center for Entrepreneurial Studies – AIMS (Association of Industry-Minded Stanford
– Center for Social Innovation Professionals)
– Graduate School of Business (GSB) Entrepreneur Club – Cross-disciplinary Healthcare Innovation Partnership at
– GSB Energy Club Stanford
– Stanford Institute for Innovation in Developing Economies – European Entrepreneurship & Innovation
– Stanford Program on Regions of Innovation and – Hasso Plattner Institute of Design (d.school)
Entrepreneurship – Stanford IP Innovation Society
– Stanford Media X
• School of Engineering (SoE)
– Start X
– Asia Technology Initiative
– The Precourt Institute for Energy
– Epicenter (National Center for Engineering Pathways to
– Woods Institute for the Environment
Innovation)
– Product Realization Network • Student Groups
– Stanford Institute for Electrical and Electronics Engineers – Asia-Pacific Student Entrepreneurship Society
– Stanford Technology Ventures Program – Business Association of Stanford Entrepreneurial
– US-Asia Technology Management Center Students
– Society for Entrepreneurship in Latin America
• Graduate Program in Journalism: Digital Media
– Stanford Energy Club
at Stanford – Stanford Law & Technology Association
• Office of Technology Licensing – Stanford Venture Capital Club
– Stanford Women in Business
• School of Medicine
– Biodesign
– School of Medicine Career Center

19. otl.stanford.edu