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TTOs eliminate barriers, expedite the licensing process for start-ups

With a few years of experience with various types of streamlined licensing procedures, most experts say it is still unclear what overall impact they have had on the creation of university start-ups or their overall return-on-investment. However, debate still rages over just how streamlined such licensing processes should be. Some university TTOs remain firmly behind their traditional approach to negotiating each deal on a case-by-case basis while others aim to expand their use of one-size-fits-all templates.

In between these two perspectives is a middle ground where most TTOs are finding their way. In some cases, they’re saying goodbye to up-front revenue in exchange for an uptick in activity, and in others they’re making a bet that the long-term gains will be far greater if they facilitate more entrepreneurial activity on the front end. Beyond these perspectives, there are practical steps that virtually any TTO can take to expedite deals.

Certainly, increasing deal-flow was one of the essential, motivating factors behind the “quick start” licensing initiative, launched in 2015 at Washington University in St. Louis (WUSTL), a bastion of biomedical research in St. Louis, MO. However, the Office of Technology Management (OTM) was also focused on making it easier for start-up companies to achieve lift-off.

“We came up with a draft version that was then vetted through outside community partners, venture firms that we worked with, licensing partners we worked with and contract attorneys in the St. Louis region,” explains Leena Prabhu, associate director of the OTM. “Once we did that, we came up with what you see now on our website: a backend-loaded agreement with clear terms that are deemed reasonable and fair to a start-up entity. (Click here.)

While the quick start, ready-to-use approach is only available to WUSTL employees, it offers an exclusive license with the right to sublicense in exchange for very attractive financial terms. There are no up-front fees, no annual fees and no milestone fees. Further — and this is big — start-ups do not need to repay past patent costs, although they are responsible for future patent expenses. The university asks for a fixed 2% patent royalty rate on the sales of any produces and a 0.95% success fee upon an exit event; however WUSTL takes no equity position in the company. In addition, there is a sliding royalty for sublicensing starting at 15% and decreasing to 5% over five years.

“It is for WUSTL inventors who are also cofounders of the companies and want a license from the university,” notes Prabhu. “The technology has to be solely owned by the university, so it cannot be a jointly-owned technology with another university.”

Prabhu says the quick start process was designed with therapeutics in mind, but it can be used as a template for other assets as well. “In the future we are going to be giving some thought to [developing] a quick start approach for other assets,” she says. “It could be for a software asset or a diagnostic asset where the terms and considerations may be a bit different depending on the stage of the technology and the type of asset, but for now it is a one-size-fits-all.”

Given the goals of the quick start approach, it has certainly delivered. Prabhu notes that the number of start-ups spun out of the university has doubled from four to eight per year since the streamlined license was implemented, but it has also presented challenges. For instance, while the quick start process is only available to WUSTL inventors, the approach has exerted downward pressure on the financial considerations for all the other OTM deals. “The other entities look at the quick start license and want the same terms from the university,” observes Prabhu.

A detailed article on express licensing programs appears in the February issue of Technology Transfer Tactics. To subscribe and get the full article, plus access the publication’s entire 10+ year archive of best practices and success strategies for TTOs, CLICK HERE.

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