Tech Transfer eNews Blog

Experts urge TTOs: Don’t leave know-how royalty dollars on the table

By Jesse Schwartz
Published: May 22nd, 2019

If your TTO is not routinely seeking know-how royalties when negotiating license agreements – particularly with faculty start-ups — then you are almost certainly leaving dollars on the table. In some cases, big dollars.

That’s according to a panel of tech transfer leaders speaking at the AUTM annual meeting in Austin, TX, led by Ofra Weinberger, director of licensing with Columbia Tech Ventures and associate VP for tech transfer and intellectual property at Columbia University. She was joined on the panel by tech transfer leaders from NYU, Yale, Mount Sinai, Penn, and Washington University in St. Louis, each of which is benefitting from incorporating know-how into their licensing tool box.

It’s not a simple or easy sell in many cases, but these experts point out that know-how is of great value to many university start-ups and other licensees, and it should be treated as such in licensing negotiations. In some cases — particularly in life sciences with its long time to market and circuitous development path — know-how may be the only royalty-bearing asset that survives once commercialization occurs.

It’s true that licensees may push back, but the panelists presented strong counterarguments that you just might want to keep in your back pocket for your next negotiating session.

At Columbia, Weinberger says, “literally millions of dollars have come back to the university from this category of sales — from know-how royalties.”

That level of success is likely one of the reasons for an increase in know-how licensing, along with a steady increase in the percentage of licensing done with faculty start-ups, where know-how is often a critical factor.

At institutions represented on the panel, the percentage of licenses that incorporate know-how range from a low of 20% to a high near 80%. “Of our start-ups I would say about 80% to 90% contain a know-how component. Across the board for exclusive licenses, maybe it’s around 70%,” reports Abram M. Goldfinger, executive director of NYU’s Office of Industrial Liaison.

For the University of Pennsylvania, while know-how licensing is “not standard practice,” about 20% of licenses contain a know-how component, says Ben Dibling, PhD, executive director of licensing at the Penn Center for Innovation. Most of those are start-up licenses, he adds.

Yale and WUSTL are in the middle of the continuum. “For exclusive licenses typically about half of those include some kind of knowhow component,” notes John Puziss, PhD, director of business development in Yale’s Office of Cooperative Research. Echoing several other panelists, he says “typically these are either start-ups where we know the faculty member is going to be very intimately involved with the company, or with an early-stage collaboration in pharma. Those are typically the ones where we include know-how.”

Leena Prabhu, associate director in WUSTL’s Office of Technology Management, says the OTM refers to know-how deals as “non-patent royalties” and told attendees that “it is standard practice” to request a know-how royalty. After researching the school’s license agreements completed in the past five years, she found that 65% of exclusive licenses contain a non-patent royalty.

Lisa Placanica, PhD, CLP, managing director of business development and licensing for Mount Sinai Innovation Partners, put the rise in know-how as a critical component into sharp focus, describing her review of 10 years of data from MSIP’s exclusive licenses. She wanted to determine whether there had been any trends related to know-how, and what she found “was really remarkable.” In 2009, Placanica discovered, between 20% and 30% of exclusive licenses included know-how, “and in 2018 it was much closer to 80%.”

The know-how royalties began to increase based on a simple solution, she explains. “We started to just ask for know-how royalties, so the first step is to just ask, and often times your counterparties will agree to it in some fashion.”

An in-depth article detailing these universities’ know-how licensing strategies appears in the May issue of Technology Transfer Tactics. To subscribe and access the full article, as well as the publication’s subscriber-only, 12-year archive of best practices and proven success strategies for TTOs, CLICK HERE

Don’t miss tomorrow’s webinar: Licensing Know-How: Capture the Full Value of Your Technologies and Foster Supportive Relationships with Licensees. For details and to register, CLICK HERE.

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