This Guide is aimed at BBSRC-funded scientists. The aim is to provide the researcher, who is perhaps new to commercialisation issues, with a sound background to the major considerations. It will hopefully be of interest to all researchers, those who are interested in taking an idea forward commercially and those who simply want to be more aware of what’s involved. It is also hoped that this Guide may be useful to professional staff in university/institute technology transfer offices as a source of information and contacts relevant to the commercialisation of bioscience research. The emphasis in the booklet is on the issues that are most relevant in the initial phases of the commercialisation process.
This section covers how to determine the market potential for your business idea. It explains how to identify market opportunities and how to assess potential markets.
The market potential for your business idea is the most important issue to address. If no-one wants your product/service you have no business. If they’re not prepared to pay you an economic rate, you have no business. If others can satisfy your customers’ needs as well as or better than you, you may have no business either.
It is thus critical to have a good understanding of the market for your product or service from the outset of the commercialisation process. The better your understanding of the market environment the more likely you are to succeed and the less likely you are to make costly mistakes. It’s thus equally important once your business is underway to keep the market environment in which you operate under constant review.
In short, you must identify a unique position in the market which you can establish and defend.
This section of the Guide is not a comprehensive review of Intellectual Property (IP). Rather it builds upon the IP booklet produced by BBSRC and distributed to all BBSRC grant holders.
This Guide aims to provide you with a clear and concise outline of IP issues that are particularly relevant to bioscientists, concentrating on the practical aspects of how to protect IP and the value in doing so.
The key message is that appropriate protection of IP is fundamental to the successful commercialisation of technology. Unless you properly safeguard your IP you’re unlikely to be able to exploit your technology. Make sure, therefore, that you are aware of your funding body and university/institute’s policy on IP and the safeguards that should be put in place to ensure that an invention can be protected. In particular, make sure that you understand what constitutes disclosure of IP in to the public domain, and how to avoid it, as patent protection is not available once an invention has been publicly disclosed.
IP takes a variety of forms, but we will focus on patents, the form of IP protection that is probably the most relevant to the bioscientist.
This is probably the most important question to address because it is a challenging and potentially expensive process to go through. Moreover, the traditional measure of academic success - the publication of results - constitutes public disclosure and prevents the grant of a patent for that invention if it occurs before a patent application has been filed. There is, therefore, an inherent tension between the academic desire to publish and the commercial imperative to protect novel IP. So why bother patenting? Well, let’s take a look from a number of different perspectives:
From the academic perspective
Patenting your invention can be an extremely rewarding experience, financially, personally and intellectually. Without a secure patent position, it is unlikely that your research can be commercialised. Why? Because licensees and investors are very unlikely to fund the development of technology that has not been protected by a patent. At the same time, patents are, in effect, publications and carry their own level of kudos and recognition from universities and funding bodies.
From the university perspective
There is increasing pressure on universities and research institutes to show a commercial output from their research activities. There is more emphasis on this activity than ever before and universities are naturally keen to see a financial return on the investment put in. Your university, research institute or funding body will be interested in patentable research and may be able to provide funds to take the process forward. It is worth bearing in mind, however, that most institutions have very limited budgets for filing and maintaining patents. You will therefore need to provide a compelling case as to why your institution should finance the patenting of your invention rather than those of your colleagues. Alternative means of funding patenting costs may have to be sought .
BBSRC Policy on Intellectual Property
BBSRC delegates the responsibility for, and ownership of, IP to the host institution where the work is carried out. BBSRC advise that a flexible approach is adopted in subsequent commercialisation with ownership being best determined by individual circumstances. In virtually all UK universities and research institutes the IP you create in the course of your work belongs to your institution, rather than you. It’s thus essential that you contact your technology transfer office at an early stage to discuss the commercialisation of your research outputs.
What will you need to put an application together?
You will need to provide your technology transfer office/patent attorney with sufficient information to complete the following elements of the patent application:
Title: a short, clear description of the invention (note that the title may deliberately conceal the details of the patent to make it more difficult for competitors to identify patents in a particular area).
Background: This describes the ‘prior art’, all published work that forms the background research to your invention. Add references where possible and don’t try and conceal any published work that is close to your invention.
Summary of invention: Here is where you can explain what makes your invention patentable. Briefly describe the invention itself and, by comparison with the prior art, (see above) show its novelty. Show the ‘inventive step’, the features that distinguish the invention from the ‘logical step’ from the prior art. Finally, list as many of the applications of the invention as you can, with descriptions of further work that should be done to allow for the various applications. Specific description of the invention: Here, you can describe the invention in full and include research results.
Further work: Detail any further work that you intend to do, or would need to be done, to realise the applications of the technology.
Contributors: List all those involved in the invention and describe the nature of their involvement.
The first application establishes the ‘priority date’, the date that confirms in law when the patentable rights were created. The minimum that is required by the UK Patent Office at this initial application is a request to file a patent form 1/77, and a description of the invention. You then have twelve months to file the claims (the part of the patent application which describes the protected parts of the technology) and the abstract to your patent. During this time, further developmental work and market research may be carried out to see if the invention is indeed worth patenting. If it is decided before the end of the twelve-month period that the application is not worth pursing, the application may be abandoned without incurring any penalties.
Remember that once the patent application has been filed, the clock starts ticking! It is vital to seek professional advice on this issue so that you file at the right time; not too early so that there is insufficient time for reduction to practice and not too late that someone has got there before you.
If the decision is to go ahead, then a second application can be made, claiming the priority date of the first application. In this way, additional information that may have been generated in the year may be added to the specification and this second application becomes the substantive application (additional information cannot be added to the description in the first application).
A search request is also submitted at this time and within about twelve weeks the Patent Office will issue a preliminary examination and search report.
At eighteen months, your application will be published and within six months of this date, you must request an examination report, a more technical examination of the application. There will then be a period of working through the examination of the patent with your patent attorney and the Patent Office, until the examiner is completely satisfied with the application and the patent is granted. For UK patents this can be within four years of your initial filing date.
Patent filing in the UK only gives you patent protection in the UK, so you will need to file your patent in other countries if you wish to extend the geographic coverage of patent protection. This process has been made easier via the Patent Co-operation Treaty (PCT) which offers protection in member countries.
Filing outside the UK takes place up to 12 months after the initial filing in the UK.
The minimum costs are the fees payable to the UK Patent Office (for UK patents). However, you will need to use the services of a patent attorney during the patenting process. Drafting a patent specification is a skilled operation and the wording of the patent is crucial in defining the scope of protection. As a ball-park figure, initial filing can cost between £2-5k, the second application (PCT) can cost between £5-6k. Negotiations with the Patent Office over claims can cost anything between £10-20k, and costs increase considerably depending on the range of countries in which the patent is to be filed. This covers negotiations with local Patent Offices, local patent agents and translation fees.
Copyright, Design Rights, Trademarks are other forms of intellectual property that can be registered and protected. ‘Know-how’ is a valuable form of IP in its own right. However it cannot be registered and protected in the same way. It is therefore essential that ‘know-how’ is not disclosed to third parties except on an absolute need-to-know basis. This protection depends in a large part on maintaining good staff relations, backed formally through employment contracts and Non-Disclosure Agreements (NDAs).
This section explains the different routes to commercialisation that are open to the academic. Each one is discussed in terms of the potential benefits and drawbacks both from the perspective of the business idea and the personal perspective of the researcher.
There are various options open to the bioscience researcher for taking a business idea forward.
This section will cover each exploitation strategy in turn, discussing what is involved and some of the key considerations that should be taken into account.
The following factors will need to be considered in all cases:
There are many Research Council and other schemes to encourage and facilitate collaborative research between academia and industry. This may be by sponsoring the transfer of personnel between academia and industry through schemes such as BBSRC’s Industry Interchange Programme or the Royal Society’s Industry Fellowships scheme, or alternatively supporting collaborative research projects with industry through Industrial Partnership Awards or the LINK scheme (see the BBSRC Innovation Portfolio or website for a full description of schemes sponsored by BBSRC).
Working closely with one or more industrial partners offers a potential route for the commercialisation of any research outputs as there will often be the interest, financial resource and capacity from the industrial collaborators to fully exploit any new technology. Issues involving the ownership of IP should be agreed before the project gets underway (indeed this may be stipulated by the funding body). Model contracts - launched by the Department of Trade and Industry in 2004 to facilitate research partnerships between academia and industry and covering a range of IP ownership scenarios, exploitation of results and licensing rights issues - can be found at www.innovation.gov.uk/lambertagreements.
This route provides a low risk option for the academic partners to see the exploitation of research outputs. There is no financial risk as this is borne by the industrial partners. Given this, there is little financial return for the academic partners, though if the IP is retained by the academic institution, there may be future licensing opportunities. This route usually requires the ongoing involvement of the academic in further developing the technology.
Remember that collaboration is very much a two way process and depends heavily on developing constructive relationships between all the parties concerned.
Although similar in some ways to a collaborative research agreement, a strategic alliance tends to be more farreaching, involve a deeper commitment between the parties and will often operate over a longer timeframe. It will usually involve the commitment of resources, financial or otherwise, to the alliance by both parties. As with collaborative research, the terms of the alliance, such as ownership of the IP and split of revenues on commercial outputs, should all be negotiated and finalised before work begins. Funding schemes such as Knowledge Transfer Partnerships (www.ktponline.org) may be useful in this situation.
This may be the most appropriate option in some cases. For example, where the academic has no continuing interest in developing the technology, or where the institution has neither the resources nor the inclination to fund or maintain patent protection, or where the prospect of an immediate cash receipt is more attractive than a longer-term, albeit higher, return.
A licence grants a third party the right to utilise your IP for a defined purpose. Licensing will generally provide some financial return to you as the inventor whilst leaving you free to continue your academic career.
Multiple licences allow the exploitation rights for your technology to be divided into parcels and licensed to different parties, depending on their areas of expertise, level of interest and resources, thus maximising the upside for you and your institution. This tends to be the exception rather than the rule however, as the challenge is often to find a licensee at all rather than choose between potential licensees. Care needs to be exercised in selecting the licensee as commercialisation of your technology will only occur if the licensee actually exploits it. Assessing the licensee’s commitment is thus a critical part of the due diligence and negotiating process. The terms of the agreement should protect against a company simply sitting on your technology, usually by revoking the licence and allowing your institution to grant a new licence(s) to someone else.
There are different types of licences: exclusive, non-exclusive and sole.
An exclusive licence gives the licensee exclusive rights to the technology (including exclusion of the licensor from exploiting the technology).
A non-exclusive licence enables the licensor to license the technology to more than one party.
A sole licence permits only one licensee to exploit the technology, but retains the right for the licensor to use the technology as well.
The terms of a licence, as with any commercial deal, are infinitely variable, so it’s vital to seek professional help.
Key points to consider:
The terms of the deal are thus crucial. Your technology transfer office and its advisers will have experience of negotiating such deals and be able to advise on the most appropriate terms.
This section covers not only where to find sources of finance but also when to look, how much to look for and how to attract investment for your business idea.
The commercialisation of new technology is likely to require significant financial investment. How much you, as the inventor, will be required to raise yourself will depend on the exploitation route you choose. The different exploitation routes carry different levels of financial risk; from an industrial partner in a research collaboration bearing the full cost of commercialisation through to the inventor and management team ‘going it alone’ with a new start-up company and raising finance from equity investors.
This section of the Guide focuses on the various commercialisation routes and the funding sources that are likely to be most appropriate.
With these types of arrangement there is little or no financial risk to the academic partner. Financial resources are usually provided by the industrial partner. The key challenge is to find a partner who is committed to the technology, able to maximise its potential and with whom you can forge a close working relationship.
As with other exploitation routes, your first step will be to assess the market for your licensing opportunity, so you may need to commission a market study (see Evaluating Market Potential). This is likely to focus on two key topics. First, identifying the nature and scale of the market opportunity. Secondly, identifying potential licensees. Although potential licensees will have their own views on the commercial potential of your technology you need to have an informed view in order to be able to strike an appropriate deal. The greater the market opportunity of your technology, the greater its value and the better the deal you will be able to strike. Good market research is therefore vital, and various sources of funding are available for this purpose. For example, several of the RDAs set aside monies to support market assessment and feasibility studies.
If a licensing partner is found after your patent application has been filed the licensee may be prepared to bear the ongoing costs of obtaining and maintaining the patent, which can be very significant. In return, though, the licensee will expect to pay lower up-front and ongoing payments than would otherwise be the case, so there’s a careful balance to be struck.
Plant Bioscience Limited (www.pbltechnology.com) has a remit to assist in the commercialisation of plant and microbial sciences technologies developed by BBSRC institutes. Much, but not all, of its work is focussed on licensing activity. It has access to funds to assist in the further development and marketing of plant and microbial technologies with either licensing or spin-out potential.
The Research Councils’ Follow-on Fund is similar in that it aims to support the further scientific or technical development of recent RC-funded research activities to the stage where commercial opportunities such as licensing, seed or venture finance can be obtained. The Fund typically makes grants of up to £100k.
A spin-out company may require substantial investment. It may be possible to raise much of the initial funding for patenting costs and market evaluation from your university/institute or from your own sources. After this though, you will probably need to raise substantial amounts of investment to start and run a successful company.
There are two key types of funding for a spin-out company: grants and equity. As will be seen, debt finance is less likely to be an option.
The advantage of grants is that you don’t have to repay them and you don’t have to give up shares in your young company. The RDAs administer two grant schemes in England (Scotland, Wales and N Ireland have similar schemes):
Grant for Investigating an Innovative Idea help finance a feasibility study and action plan for businesses who have an idea to develop an innovative product, process or service, but are not sure whether they are ready to take it forward successfully.
Grant for Research and Development helps individuals and small and medium-sized businesses research and develop technologically-innovative products and processes. Awards can be anything from up to £20k for low cost development projects, through to £500k for strategically important development projects.
Such awards add credibility to your business and, more importantly, should add value to your company. However, they are unlikely to be sufficient for your company to gain real momentum, particularly if it is focused on the healthcare sector.
For more substantial amounts of money, you will need to tap into equity finance – that is money given in return for shares in your company. Different sources of equity are available at different stages in a company’s development.
The main early stage sources of equity, other than family and friends, are Business Angels and specialist seed-corn funds. Seed-stage investments tend to be between £50k and £250k, sometimes more.
Business Angel funding
Business Angels are usually successful business people in their own right with funds to invest in new businesses that offer the potential of a high and tax-efficient return on their investment. They operate individually or as part of an investor collective. Many Angels prefer to invest in their sector, and thus bring significant industry knowledge to their investments. They usually require a sizable equity stake to reflect the high-risk nature of their early-stage investment and often take quite an active role in the company. Their business skills, industry knowledge and contacts can be invaluable in helping you get your business on the right track and, importantly, making it attractive to subsequent investors.
A number of technology transfer groups and many universities and institutions now have access to their own professionally managed seed funds, many of which were established through the OST University Challenge Initiative. The Rainbow Seed Fund was formed to support the formation of businesses based on research developed by the research establishments of a number of public sector bodies, including the BBSRC (see www.rainbowseedfund.com).
This section looks at where to find specialised help and guidance throughout the commercialisation process and advice on how to use these resources effectively.
Your technology transfer office (TTO) should be your first port of call whenever you are considering commercialisation. As noted earlier, the technology you have developed will usually belong to your institution, so its technology transfer managers will be closely involved in decisions regarding how it can best be exploited. They will be able to advise on commercialisation issues, put you in touch with advisers such as patent attorneys and solicitors, guide you through the process and play a central role in deciding the best way forward.
In particular, it is essential that you consult your TTO before engaging in any form of commercial discussion with third parties. They can help you ensure that information isn’t inadvertently disclosed that prevents the subsequent patenting of your invention and provide appropriate forms of confidentiality agreement to protect your interests.
Most institutions have an intellectual property budget which you may be able to tap into. Some also have additional funds to support early-stage commercialisation activities (for further information on this, see Funding and Investment).
Resources do, however, vary from institution to institution. Most TTOs are over-worked so you may, with their encouragement, need to rely more upon some of the other sources of support described below. Bear in mind that you will be competing with other academic colleagues for a share of your TTO’s time and resources. The advice below about meeting preparation applies just as much to your interactions with your technology transfer personnel as to any other meeting.
There is no substitute for effective networking. It is the best way of making useful contacts, surfacing opportunities, and finding out market sentiment and what is happening at the coalface of commerce in general. The ‘clustering’ of biotechnology-related industries in certain areas (such as Oxford, Cambridge and the North-West) has spawned regional networks and associations. They bring together scientists, entrepreneurs, business managers, property developers, financial investors, IP specialists and other interested stakeholders via regular networking events.
Your institution’s business development unit may also organise networking events as part of the process of marketing the institution’s services to local industry and encouraging academic/industrial liaison. So tap in to their knowledge of the marketplace and network of contacts too.
There are many specialist professional service providers, such as accountants, lawyers and patent agents, active in the biosciences. Your TTO should be able to recommend suitable firms. If not, consult your regional networking association who will be able to identify suitably qualified firms. Ensure that you consult experienced advisers; bioscience commercialisation is a highly specialist field, and not one in which the average High Street firms is qualified to advise.
The formation of Biotechnology ‘clusters’ has seen the development of biotechnology incubators. There are now many such operations around the country. Their managers know what it takes to make it happen commercially, have excellent networks of contacts and will be happy to speak to aspiring tenants. They are thus well worth investigating if your chosen business strategy is to form a spin-out company.
Incubators provide office and laboratory space within a specialised environment with the flexible rental agreements that a young spin-out company requires. There is usually access to shared facilities. Such premises allow for a supportive environment to a young company (a ‘can-do mentality’), and exposure to other entrepreneurial scientists with excellent networking opportunities.
There are many workshops/seminars on commercialisation issues that you might attend. For example, BBSRC supports universities to hold IP Workshops, many of which cover other topics on commercialisation in addition to IP information. Many technology transfer and industrial liaison departments in universities run similar events to raise awareness of commercialisation. They often involve external speakers from industry and professional organisations such as patent attorneys, a useful way to make contacts. Regional networking bodies and associations run similar events at modest cost and are an excellent way of meeting people in your region who may be able to help you crystallise your plans and move forward.