More often than not, the Tech Transfer officer meets a biotechnology invention. It can be difficult for us non-scientists to really understand all the science involved.
The National Health Center (US) has created an interesting Graphics Gallery and a wider overview of issues in biotechnology and human health related issues.
Very useful to quickly get up-to-date on terms such as Retrovirus or details of Microscopy.
Well, in Mallorca, of course!
This weblog covers most of the topics of my "Where's the Beef" course - mainly a one-day course. More than 200 professionals have participated in one of these courses over the last 18 months. Here's the announcement of a new version: a week-long training camp:Click here to read more
Commercialisation CAMPus Workshops: 5 days of practical work in Mallorca in March and April 2006
“Where's the Beef” – the course and methodology on Evaluation of Commercial Potential in Inventions and Innovation projects - has been offered to many groups over the latest five-six years. The format is a one-day course covering cases, background theory and methodology, but little time for real exercises and discussion.Based on feedback, I have developed the concept of Beef CAMPus, a whole week concerned with building your own clear-cut action plans about how to commercialise a portfolio of concrete cases. How to build the business case of your own Technology Opportunities, and, as usual, a lot of learning.
Beef CAMPus will be offered on the island of Mallorca, which, apart from its natural beauty and friendliness, is easy and cheap to reach from almost anywhere in Europe. Together with local partners we offer the best training facilities.
The course is developed and managed together with Jacob Bar, the creator of the JBEngine.
NEW: Since Spring 2007 we have re-designed the format - have a look at our new BeefCAMPus website
Imprimatur Capital (IC) started a new line of business around 2005, namely to source IP from universities, fund proof-of-concept work and forward-license inventions to next stage investors. IC has recruited universities in Russia, Ukraine, Baltic States, Singapore and Spain. I met their name in Spain recently and tried to find out more because I see IC as a new trend which is already moving fast in the US (eg-. Bridgehead Group)(their web site doesn't always work), who bought a new Danish start-up company recently. Formerly, I have described how Cancer Research Technology in London works. Also you might wish to study a BioTech group with Danish founders but now based in London: Bridge Bioresearch .
I found (used JBEngine) some documents about IC's mode of work in the east. I note that they get a first right of refusal to commercialise against infusing proof-of concept funding for project in the order of 2-5k....and maybe also larger sums (<10k) (maybe this reflects the "eastern" prices??). First impression: universities pay a high price to commercialise....?
I then went to Companies House in the UK to see their ownership and financial background. The company is controlled by two persons who seemingly won a lot of money in the IT Bubble economy and then decided to invest in new ventures. They must have seen how lucky they were to get out of their individual ventures before the bubble burst?? And saw that portfolio management is better. The two invested 2,5 million € in 2005 and convinced Barclay's Bank and a few other minority investors to drop another 1 million (so it seems from the accounts).
With that money and an option programme they hire some good professionals to go on a "fishing expedition" in universities around the world, assuming that expert due diligence will do the rest (pick winners). Good luck: IC may find itself in another bubble experience soon and/or must attract even more capital to survive.
The model is great, but there is a point of warning to universities who sign up: the money you get for giving away your inventions may just be too small....But there is another even more alarming signals for the many new "Knowledge Transfer Offices" or tech transfer services in universities: for 5-10 years you have now tried to commercialise your universities' inventions but most of you have a low score on actual hits - and consequently spend more money than you cost etc. There is a danger that dismayed rectors will conclude that this business cannot be done inside universities - and, if it's outside, why not sell to companies such as IC.
I have downloaded the Background documents on my BeefBlog (for participants in my Where's the Beef Course).
We (me included, until now) often talk as if there is only a dichotomy between university and industry. Commercial means anything, which has left the university side. But is "commercial" really commercial?
Michael Kenward commented on my article on the "survey" of university commercialisation performance by writing:
A couple of points, do not lump all "European universities" together. In the UK at least it is not true that they have "only recently turned their focus on patents and licensing". You also miss another commercialisation route, the spin-out company. If anything, in the UK at least, this has been an overused option. Licensing can be a better bet. But it doesn't do to ignore spin outs.
Many spin outs, however, are not "commercial" at all! They have been "capitalized" by patient investors, but they don't make a profit. Recently I had an opportunity to review Geron Corp's Annual Reports: the company has "burnt" up to 30 million $ per year for more than 10 years. Look up any seed or venture capital fund and you will see the same picture. In my Danish home town, Østjysk Innovation in its 2005 annual report recorded losses in almost all of its portfolio companies. The same does
the largest Danish innovation fund. These companies are recorded as "hits" or successes in the survey statistics.
Add to this that many of these funds are initially or substantially publicly funded.
Commercial is not - always - commercial. One more reason to be extremely careful in the use of university commercialisation performance comparisons.
Two researchers from UNU Merit have made a report with the title: Developing internationally comparable indicators for the commercialization of publicly-funded research. Their basis for the report is that they have also conducted a survey for ASTP of ASTP members and their commercialization of research results and now they compare the survey and the use of indicators with four other surveys (AUTM in North America, one UK; a Canadian and an Australian survey).
The report got most attention because it concludes that European public research institutes outperform their US competitors on "licences executed" and start-ups created. 
Arundel and Bordoy mention the ProTon Europe Survey (led by my good collaborator from Valencia, Fernando Conesa and his team) but dismisses it because it uses a wrong denominator (academics per institution). It's a pity because that survey and the work behind it tell us that Europe hardly can be compared with the US. A&B see only two ways of how industry can gain from public research: either through formal arrangements involved in patenting and licensing or the "open science" of publications, seminars etc.
European universities have only recently turned their focus on patents and licensing, whereas collaborative and contract research contracts have accounted for the majority of activity and income for many years.
A&B mention insights into this point gained from their reading of research from the Uni of Sussex SPRU. Professor Sodi and before him Keth Pavitt recommended the UK government to be careful about focusing too much on the formal and technology routes of the impact of oublic research on the economy in a wonderful set of articles and lectures: Talent, Not Technology.
Conclusions: PROs should support creation of standardised indicators as is being produced by ProTon Europe and others, but policy makers should remember to take a balanced view on the results. And each PRO could find a group of peers with which to keep close relations in order to monitor their own performance, but be sure to keep their findings a secret! Use it for developing new strategy!
Multi-criteria decision-making tools (MCDM)
In view of the deficiency of economist method, another body of
thinking has developed, for instance in operations analysis, ending up
with alternative methods referred to as multi-criteria decision-making
tools (MCDM). They are multi-criteria in contract to econometric
theory’s single criterion: money. John Friend and Allan Hickling’s book
is one of the best and most pragmatic books on the topic of MCDM, and
they have even built a software tool to support their method. If you
search the web, you’ll find a host of competing projects and tools, so
have your choice.
John Friend and Allan Hickling
With the above mentioned elements of TIM, we try to create a toolkit. A toolkit is a container with different tools, which fit our purpose. I have already mentioned that I have little confidence in economic theory and methods in our profession. I shall refrain from a theoretical debate, but ask you to read John Friend and Allan Hickling’s excellent book on ”Strategic Planning Approach” in which they start with a good discussion of the ”philosophical” background.. "
We could say that the economist’s methods has only one tool and container, namely money. I -with many others- insist that we know too little about the numerical parameters of our opportunities, so we are forced to make assumptions about time ranges (what will the interest rate be over the next 10 years? What will the profit margin be in a given industry?). Try and read Ian Pearson’s interesting book: Business 2010 (see later) – and you’ll know what I mean! See the entry about Technology Timeline here on this weblog
Statisticians will tell you that when you do so, you increase the margin of insecurity in the power of prediction of your economic model. When you start to multiply and combine several such parameters, the precision of the model is lost – and the purpose of the exercise defeated. Furthermore, if we talk about something, which is truly new, how – from a philosophical point of view – can we say anything relevant about customer behaviour, readiness to pay etc. – other than gestimates? In my slide show I have some good examples of how poorly many well known businesses were ”capitalized” when they reached the market place.
In another wording, I suggest that horse-betting is easier or less risky than investing in new technology. With horse-races, we normally know who the actors are, we even get experts’ words concerning the odds for success. We also know the race-track, can foresee (weather) conditions etc. Compared to this, in betting on an invention we don’t know who the actors are, who the competitors might be, on which race-ground the race is to take place. In a way, the good practitioner attempts to increase his/her insight into an opportunity, so it becomes equal to the horse-betters.
Common (Business) Sense
However, the use of the methods I suggest does require some common sense of what business is and means. Business methods and perspectives have changed a lot over the last 20 years, so this cannot be learnt from a textbook or via courses like ours. The practitioner on a learning curve must try and try so as to develop his/her own ”gut feeling” for what works and what doesn’t.
For instance, one of COAP’s dimensions is ”ease of access to the market”, but what does this mean? Which sector is more monopolistic: the automobile industry or the power industry? I don’t think there is an objective answer to this question. The trained better at horse-races knows how to piece together his jigsaw before he puts his bet; the same goes for commercial appraisal of inventions.
I found this article on (good for overview)
Methods of Calculating Reasonable Royalty Rates: "
Some time ago, Stephen of Patent Baristas fame, wrote a very interesting article on calculating reasonable royalty rates called What’s a Reasonable Royalty Rate?. Although the article is in the context of royalty rates for licenses with universities for therapeutic technologies, I believe the objective points regarding calculating royalty rates are worth repeating here at IP Counsel Blog.
Three methods of calculating royalties were described:
1. The Market Method – royalty rate is based on what others have paid as a reasonable royalty for similar technology.
2. The Cost Method – royalty rate is based on the cost of developing or obtaining the technology or intellectual property.
3. Income Method - royalty rate is based on the total revenues the technology is likely to produce.
The article further mentions that a practical way of deriving a reasonable royalty rate is to first develop an economic model that factors in the cost to develop the technology and the overall revenues expected from sales of the technology. The model should also include risk factors, such as expensive processes that may also delay time to market, or any other potential risk factors. For example, sales my start out slow at first for a few years before reaching higher levels of expectations. Lastly, duration of patent terms should be included.
It seems to me that a good starting point would be to develop an economic model that utilizes information from all three methods of calculating royalties. Develop a model that takes into account estimated or realized revenues, cost of development and bringing the technology to market and compare royalty rates for similar technology under similar or related circumstances. From a more inclusive model, you can glean a great deal of information about the technology and what its ultimate value would be to you in order to determine what you are willing to pay and whether you can obtain alternative technology for less.
It is not surprising that a great deal of effort must be used to evaluate a license agreement before negotiating a reasonable royalty rate given the increasing costs and other pressures researchers and manufacturers face when developing new technology.
(Via IP Counsel Blog.)
ANOTHER GOOD OVERVIEW you can get from WIPO's web site with the same conclusions. "Valuation experts" walk you through these methods in more or less sophisticated ways, but the conclusions are always the same: valuation is more an art than a science. Conclusion on my side: the value of a patent/invention is what you can get for it. What you can get is what you negotiate. That puts increasing importance to Negotiation Skills, a topic I shall come back to in later articles. In negotiations, you can use all the arguments you may derive from the three mentioned methods.
Nothing is objective in this game, so you need to be able to communicate effectively with your counterpart/partner. I learned a lot from Neil Rackham's S-P-I-N methodology (get the book at Amazon), on how to sell complex products and projects. I'll return to S-P-I-N in a later article.
My good friend, Henning Sejer from the Danish Technology Institute has made a good book and a workshop series to teach some of the tricks.
Ernst Max Nielsen continues his series on "Where's the Beef?" (Click the Category on your right hand side: "Where's the Beef". The articles are numbered in Roman numbers: I, II, III etc. If you scroll down this site, you'll get the articles in reverse order)
This is another article in the series "Where's the Beef": quick-and-dirty methods to make a go or no-go decision regarding whether or not and how to try to commercialize an invention.
I have participated in a number of discussions about patent valuation. Here is a novel approach by two US patent attorneys.
GOFFMAN MARTIN (US); NEIFELD RICHARD (US) filed a patent in 2002 and have built a company, web site and software which automates patent valuation.
Here is the Abstract of WO0075851 A computer system implementing a macro economic model based upon macroeconomic data and relative value characteristics data of patents that determines nominal values for (1) goods and services and (2) profits generated by sales that are covered by the rights of a patent, implements an income value theory to value the patent based upon the predicted values of profits or goods and services covered by the patent, determines patent terms from patent filing, publication, and issue dates, determines patent assignees from patent data, and uses the value of a company's patents, the patent issuance data and term date data, to determine trends versus time in: the number of a company's enforceable patents; the number of a company's patents obtained; the nominal value of net earnings and of goods and services sold that are covered by the company's patents; the nominal value of the sum of the company's patents, and provides comparisons of those trends between companies, regions, and economic sectors, providing the results of the analysis to users of the computer system. The computer system employs a user database enabling a novel electronic accounting model enabling payment by affiliates, programmed securities trading, and accrediting of investors.
HERE IS THE TEXT FROM THEIR WEB SITE:
This paragraph provides a SIMPLIFIED explanation of how we value patents and companies. Patents are a right to exclude others from making, using, or selling a product or service covered by the claims of the patent. Patents are awarded by the Federal Government for new and useful products or services. A good deal of the Gross Domestic Product (GDP) of any industrialized country, particularly the US, is covered by claims in patents. Why? Because every company knows that it is important to get patents covering new products to prevent competition, thereby resulting in a large profit margin. We model this situation by assuming a substantial fraction of GDP is covered by all patents, and then estimating the fraction of the GDP covered by each patent using sophisticated data analysis and additional modeling based upon macro economic data and financial data. We model the profit associated with a patent to be the fraction of the GDP covered by the patent (i.e., the nominal sales of product that our model predicts to be covered by the patent) times the profit margin. From that information we obtain the annual profit protected by the patent. Patents are each in force for a term of about 17 years. We calculate the current value of the patent to be value of the annual profit for the estimated remaining term of the patent. Adding up the valuations for patents owned by a company, we arrive at the company's current patent valuation. Based upon trends in the company's patent acquisition, we can extrapolate to their future patent valuations. We can compare a company's patent valuation to its sales to obtain a measure of how much of the company's sales are protected by its patents, - and therefore a measure of how well the company's profit margins are protected. We are or will shortly be able to provide all this information - and more - for all companies that own patents - and for companies that are listed on stock exchanges.
Ernst Max Nielsen continues his series on "Where's the Beef?" (Click the Category on your right hand side: "Where's the Beef". The articles are numbered in Roman numbers: I, II, III etc. If you scroll down this site, you'll get the articles in reverse order)
This is another article in the series "Where's the Beef": quick-and-dirty methods to make a go or no-go decision regarding whether or not and how to try to commercialize an invention.
This model explains a simple way to value a start-up company when working with investors. It is provided courtesy of Joe Ollivier of First Capital Development, a private investment and hard money lending firm based in Provo, Utah.
Valuation Model: "Company Valuation Model / Ownership Percentage Offered This model explains a simple way to value a start-up company when working with investors. It is provided courtesy of Joe Ollivier of First Capital Development, a private investment and hard money lending firm based in Provo, Utah. Explanation Example of XYZ.com 1. Assumptions Investors will want somewhere between 50-100% annual return on their investment (ROI). The market will value the company on a P/E basis somewhere between 8-15 times earnings if it was a public company. While some internet companies have outrageous price to earnings ratios, you are better off to use a conservative price to earnings ratio. XYZ.com Assumptions ROI per year Investors want on their investment: 100% The market will value XYZ.com somewhere around 15 time earnings. Third year after tax earnings: $1,650,000 Initial Investment Needed: $1,000,000 2. Valuation Multiply the p/e ratio by the third year after tax expected profit. This number gives yo"
This is the seventh article in the series "Where's the Beef": quick-and-dirty methods to make a go or no-go decision regarding whether or not and how to try to commercialize an invention.
Ernst Max Nielsen continues his series on "Where's the Beef?" (Click the Category on your right hand side: "Where's the Beef". The articles are numbered in Roman numbers: I, II, III etc. If you scroll down this site, you'll get the articles in reverse order)
Copy-Cats
Personally I have had a lot of benefit from
using the perspectives I learnt from Porter and Pavitt’s work. The
underlying assumption is that the innovator, the pioneer, will capture
competitive advantages by being smarter, faster etc. Basically this is
why we are interested in the ”knowledge economy”.
On the other hand, experience is a good teacher. Through my years of practice, I have come to work with cases and hear and read about other cases, which have made me doubt the blue-eyed innovation naivism of some TIM researchers. We see many cases in which the pioneer gets punished for being first.
Steven Schnaars has written an extremely insightful book (”Managing Imitation Strategies”)
on how ”copy-cats” win over the pioneers, in other words that
plagiarism and even outright theft of ideas (not well enough protected)
and inventions is more profitable than being a pioneer. Mr. Schnaar’s
gives 65 good cases to prove his point. The BIC ball point pen case is
a classic, see this teaching material from Tulane .
I have tried it myself both in the loser’s and the winner’s role. In the ”Where’s the Beef” method this means that it makes sense to always think of how a good opportunity may be copied, and try to think smarter of how to prevent copying or make it too unprofitable by putting obstacles on the copy-cat road. I look for substitutes for the invention: how could the same function be performed in slightly different ways or how could the same objective be reached by totally different technologies (I call these functional and substantial substitution forms).
An interesting case is my good friend Manfred R. Kuehnle, a genius, who has been granted more than 600 patents to his name. Have a look at Daimler-Benz’ patent US5817407 and you will see that the good car-maker got all they needed in terms of insights from working with Manfred to slightly improve his discovery and claim a new patent. Who has money to take Daimler to court?
Another good case is that of the world’s real cancer drug blockbuster, Taxol (I ask you to read the case story of Taxol, an extremely successful case from Prof Holton of Florida State University in the US ). Read how Bristol-Myers Squibb developed their own version of the technology they licensed from FSU.
Nanotechnology, the next industrial revolution, is going to cause even more such legal wrangling, see the interesting article from Lux Research about how around 3,000 US nano-patents in 2005 show ”vulnerability” for weak IP positions, thus opening the field for copy-catting.
Ernst Max Nielsen continues his series on "Where's the Beef?" (Click the Category on your right hand side: "Where's the Beef". The articles are numbered in Roman numbers: I, II, III etc)
This is the fourth in my series of articles about valuation methods. I have been half-mocking what I framed "American"-style economist methods. Now I have to take that back and call it "Danish"-style, as my compatriots from the Copenhagen Business School and the Danish Patent Office have developed a new software tool which will answer all our questions, it seems. In Patent Information News 1/2006 the European Patent Office reports on the tool and wishes to use it. Johannes Schaaf writes:
IPscore 2.0 was developed by the Danish Patent Office in co-operation with the Copenhagen Business School and industry. Similarly to the income theory, it analyses each patent using 40 different parameters relating to legal status, technology, market conditions, finance and alignment with overall business strategy. The results are illustrated using spider charts. Applied to a patent portfolio, it gives an overview of the opportunities (eg winning new markets)
I will have a look and give you my opinion. This is the link: for IPScore
It's an interesting web site. It doesn't give you much information about the IPScore software. But you can pay 2,500€ to get it. But there are other ways to find information, as one of my later articles will show:
I Googled it and used the search string: site:.IPscore.dk filetype:pdf and found what I looked for: the Manual. The software asks the company and patent owner(s) to answer no less than 40 questions, of which a number are guestimates and the rest are qualitative. So in a way, IPScore seems to mix an approach developed by Warwick Ventures (called COAP: Commercial Appraisal of Opportunities, see later articles) with the economist's Net Present Value methods. IPScore's developers have then created a model where all these-now numerical- factors are brought together to create great looking graphs, which could convince everyone that this must be right.
In my eyes, the level of secutiry in estimates, which are made up of 40 factors, and which are all assessed in an artful manner, is low. It mocks the user to believe in it, because it is numerical (and therefore "objective"). I fear that such software only serves to "quantify" all the biases and (mis)information of the assessor: where do you get the data from to support your assessments? Especially the future aspects cannot be derived from past performance.
Nevertheless, software such as IPScore serves a good function, namely to try to make an assessment, which could be the START of a real due diligence. And it does a great job of RECORDING your guestimates and assumptions. The faulty part is the attempt to model the future....
I'll follow up on this debate. Comments please.
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