Why our commercialisation related work is important to you
Commercialisation is the process by which Intellectual Property developed by academic staff or students in the course of their work is developed to a point where it can enter the market. Thus a kernel of an intellectual idea may be transformed into a product.
The University has an excellent record of commercialisation. Here are some examples:
Microwave technology developed by Professor Nigel Cronin (Physics) has generated devices that have been used in gynaecological and oncological operations and surgical procedures both in Europe and the USA and which are the subject of sales and development by Microsulis Medical Limited and Acculis Limited.
The former Dean of Science, Professor Dai Davies (who will be fondly remembered by many at the University) was one of the founders of Vectura Plc, a company specialising in the pulmonary delivery of pharmacological compounds. Vectura is one of the most successful University spin out companies in the UK.
Sterix Ltd (a joint spin out with Imperial College, London) was acquired by Ipsen Pharma with which the University has a continuing and significant research collaboration developing and enhancing the original inventions and delivering pharmacological treatments in the clinic (Phase II clinical trials).
All these successes give the academics well deserved personal satisfaction in seeing the technologies out in the world at large. They also bring the academics and the University a valuable equity stake or royalties. Finally, these successes are of the very nature that the Government is looking to in order to revitalise our economy and bridge the gap between academic prowess and industrial capability for the benefit of the UK.
So on a general level commercialisation is something that should engage the academic community.
Intellectual Property and Legal Services plays a pivotal role in the commercialisation process.
Working with Bath Ventures we will carry out a “due diligence” exercise on the IP which is the subject of a potential commercialisation. This is effectively a checking exercise ensuring that the type of questions that a potential investor or buyer of the technology is like to ask can be adequately fielded. We need to ensure that the University owns the relevant IP, the patents have been appropriately framed, that no further IP is necessary, that the technology works and that there are no third party rights.
Next we need to agree the essential terms of the deal with our potential commercialisation partners. This is an attempt to crystallise the main terms of the transaction which we intend to enter but on a non-binding basis and a written record of this, signed by the parties, is known as Heads of Terms. Confidentiality and/or Evaluation Agreements (which will be legally binding) may also need to be drafted and agreed around this point.
Where commercialisation has led to a licence IP and Legal Services will draft, negotiate and agree the relevant terms. We will need to ensure that the licensee is under an obligation to develop and make the very most of the licensed technology with a view to generating sales. We then need to ensure that our royalty entitlement is at the right level, affords the necessary safeguards (e.g. based on sales not profits) and that the licensee shouldn’t be able to skew figures so that income appears to come from another product. The issue of whether the licensee is entitled to sub-licence and how we reach through to sales of product made by such sub-licensee is another important issue. The Licensee must “use or lose” and we might want research rights and/or commercial rights in another field reserved to us. Invariably the Licensee will also be expected to bear ongoing patent prosecution and infringement costs.
We adopt a flexible and collaborative approach to these negotiations which take into account the legitimate needs and interests of the licensee but awards due benefit and minimal risk to the University.
Licensing is an attractive option where further development of the technology, by the formation of a spin out, is not going to add much value and/or this is not attractive to the academic creators. Also where the IP, the subject of the University’s commercialisation, requires access to a company’s existing IP (e.g. its patents) or where the company has a very established business in a specialised field which would be difficult to break into again a licence will be the best if not the only route to market.
However, given that IP comes out of academic research and papers it is usually quite “raw” and requires further development to prove that it works or can do so in a scaled up industrial process before it can have any prospect of entering the market. Clinical trials or CE markings may be necessary before any sales can be made and this can take years and vast sums of money. So a spin out company (essentially a new limited company set up by the University to house the IP) will be established. The University and academic team which created the IP will subscribe for shares and the spin out company will then issue more shares to investors in the company (usually the University of Bath Crescent Seedcorn Fund and IP Group Plc) who will invest cash, sometimes in staged payments, for shares in the company. The company can then appoint directors, a management team and consultants to purchase the necessary materials and employ the necessary staff to develop the technology in accordance with a Business Plan agreed by all shareholders.
Specialist legal advice is necessary throughout this process so that the basis on which the spin out company will operate and decisions will be made is agreed, each party has a fair and proportionate equity entitlement, the University's protocols and governances are appropriately followed and the University has sufficient ongoing access to the relevant IP to enable it to pursue existing and sometimes future research collaborations.
Intellectual Property and Legal Services can provide more than 20 years' valuable experience of venture capital transactions which will inform the drafting of the relevant agreements, including IP Licences and Assignments, Articles of Association and Shareholders' Agreements (regulating the shareholders' right inter se), Directors Service Agreements and Consultancy Agreements (which may entail academic staff) and Licences (for office or laboratory space) and Facilities Agreement (equipment and sometimes shared access rights).
It is important to bear in mind that in the life of the IP, the Spin Out or Licence is the beginning and not the end. Whilst the University's direct involvement with and responsibility for the IP will cease at that point in all likelihood the IP will continue to be developed over many years, necessitating further rounds of finance, joint ventures and sales. It is impossible to predict or plan precisely what might arise. Inevitably in the case of a Spin Out unless a trade sale or flotation arises in the very short term (the latter being most unlikely in the current climate, although in the past University Spin Outs have quickly floated on the AIM market) dilution of the portion of the Company which the University and the academics own will occur. Provided the business is growing that is a good thing! The trick is to get best terms at each investment round, but this will depend upon the success of business and external forces.