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University-Industry Engagement Advisor
University-Industry Engagement Advisor
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Streamlined contracting models an investment in future sponsored research deals

This article appeared in the November 2017 issue of University-Industry Engagement Advisor. Click here to subscribe.

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Building a better industry-sponsored research contracting process — easing one of industry partners’ key pain points by streamlining contracting and licensing — shows a university’s willingness to be flexible when it comes to making industry-academia collaboration happen, and it’s a reputation enhancement more and more potential partners are looking for.

Observers say the advent of simplified contracting models will not have a dramatic, immediate impact on university deal-making, but it will certainly improve your school’s reputation with industry partners and over time will likely bring financial returns as well.

“One thing that I think has been demonstrated is schools that have adopted programs to modify contracting and IP management have not seen any huge windfall of companies selecting those new program over the traditional programs,” comments Anthony M. Boccanfuso, PhD, president of the University-Industry Demonstration Partnership, Columbia SC. “It’s an additional option, but not one that companies are all running to — because each situation is unique.” He adds: “If you think it’s going to generate a ton of new contracts, it’s not. But it is leading to greater interest.”

Making negotiations smoother and speedier “plays a very important part in showing companies that schools that adopt new programs are willing to be creative and flexible in finding ways to come to an agreement,” Boccanfuso says. A school’s willingness to “institutionalize greater options for working with companies” has, he adds, “a lot of value.”

A case in point

A perfect illustration of that has evolved over the past six years at the University of Minnesota, which pioneered a novel set of contracting options for industry partners with its Minnesota Innovation Partnerships (MIP) program, says Leza Besemann, technology portfolio manager in UM’s Office for Technology Commercialization. The initiative, launched in 2011, is designed to “improve access to university-developed technology while reducing the risk and cost associated with exclusively licensing IP and sponsoring lab and clinical research,” she says.

The results haven’t been overwhelming, Besemann reports, but the easier access offered by the contracting approach has had a positive impact. “The number of deals hasn’t changed that dramatically, but the amount of funding has,” she says. “That means the number of [companies] sponsoring multiple projects or larger dollar value projects has increased.” Specifically, she reports, “funding since the inception of the MN-IP Create program for industry sponsored research has gone up pretty significantly. In 2012, it was just over $40 million, and in 2017, purely under MN-IP, it’s just over $70 million — a clear uptick.” Those numbers, she notes, “are for industry-funded projects excluding clinical trials.”

The original MN-IP program, now called Create, “streamlined the process of sponsoring research and licensing the resulting technology” by establishing intentionally industry-friendly terms up front. It also gave sponsors control of all patent filings associated with technology developed during the project, while also allowing the company to wait until project completion to license the technology. It includes exclusive or nonexclusive worldwide rights; a one-time, upfront fee; and, for exclusive licenses, royalties of 1% if product sales exceed $20 million a year.

The Try & Buy program, added in 2014, provides a low-risk method for licensing technologies, letting companies take them for “a low-cost test run” — or even a fee-free spin for some qualified entities — under pre-set licensing terms, for a fixed fee, to test whether the technologies fit their product development plans. This program also features no royalties on the first $1 million in product revenues and an exclusive worldwide license. Minnesota companies are eligible for discounts.

“The number of Try & Buy deals is smaller than the number of Create deals,” Besemann reports. “But folks license through Try & Buy, to take advantage of the ‘Try’ part, and then, in a number of situations, the company will sponsor research because it needs to know more before commercializing it. So they [start with] Try & Buy, and then they go on to sponsor research with the inventor.”

The advantage for those inventors is pretty clear: “It’s great for researchers to develop strong partnerships with the companies,” she explains. “Then they have a known relationship, and known possibilities for additional research funding.” The Try & Buy program also represents increased opportunities for students. “One of the main things industry comes looking for is students to hire,” she says. “This helps them find the ones they’re looking for.”

UM adds royalty-free option

The two programs — Create and Try & Buy — are not always paired. “There are very different steps in the innovation process,” Besemann points out. “The Create part is usually funding some research that might be based on either existing university IP or the company’s IP — or on a collaborative idea developed by the company and the researcher together.” It’s generally based on fundamental scientific inquiry or basic science the company’s interested in.

Try & Buy, on the other hand, is designed for technologies the company wants to license rights to that may or may not lead to a MN-IP Create project. “They’re two separate tracks,” she says; the latter, she adds, “hasn’t really been tweaked at all.”

Create has been tweaked, though. In January 2016, UM added “Option C” for research sponsors, Besemann reports. “We did that based on feedback from industry,” she says. “In four-plus years of negotiations with companies, and seeing their different requests, we realized that some software and semiconductor and chemical companies wanted broader freedom to operate.” They didn’t want research dollars creating IP with any restrictions, she notes, so Option C offers a non-exclusive royalty-free license. “It’s used in a very small percentage of total deals,” she adds. “In just 2% of research projects, companies choose Option C.” But it’s “very useful for those very specific industries in certain cases” — depending on the company’s specific business strategy and the project at hand.

The effort to streamline research agreements is paying off for UM. When Try & Buy was added in 2014, the then-three-year-old MN-IP program, now known as MN-IP Create, had resulted in 83 partnerships in some of UM’s key research fields, including biotechnology, pharmaceuticals and medical devices, with enterprises ranging from small Minnesota start-ups to large multinational companies. There are now over 350 agreements under the MN-IP Create program.

A response to industry complaints

MN-IP came about the way most such restructurings do. “The original Create was developed in response to industry,” Besemann comments. “Companies said it was difficult to do business with the university. Negotiating sponsored research agreements was long and protracted, and they weren’t getting what they wanted.”

Other institutions, she notes, “heard these same complaints as well. We were trying to be responsive to industry, to meet their needs and become a better business partner.” One specific gripe, she adds, was having to negotiate a license after the research agreement was done. “They didn’t know the financial terms [in advance], so there was a lot of uneasiness,” she says. “They didn’t know what to expect, but we addressed a lot of their concerns by giving them a choice of IP terms and making it easier to do business with us.”

Because “different choices on the table eliminate the financial uncertainty,” Besemann continues, UM “clearly spelled out what a sponsor’s financial liability would be with Create. Then Try & Buy came about as a way to make it clearer that the university is truly interested in advancing the technologies that come out of our research enterprise, in making it easier for companies of all sizes to access them, creating new possibilities for innovation to boost the economy.” She adds: “Try & Buy is like the Saturn model for selling cars. We put the price tag right there on our website. Companies know they’re not going to have to haggle.”

Other schools following suit

UM is not alone, she says, noting that “there are lots of folks following suit.” Here are a few recent examples:

  • Oregon State University (ISRM May 2017) introduced an Alternative IP Contracting Model under Oregon State University Advantage that offers a prepaid licensing option; the fee covers royalty compensation if necessary. When it can, OSU will negotiate using a sponsor’s contract proposal instead of its own templates, and will “accept unique compliance requirements and develop process plans for them.”
  • The University of Waterloo (ISRM Aug. 2017) implemented a simplified term sheet for contract negotiations, showing which points are negotiable, like IP, and which are not, like publication rights. The Office of Research also revamped the contract research template, creating four versions based on the IP structure — whether creator-owned, university-owned, sponsor-owned or jointly owned.
  • Iowa State University (ISRM May 2017, Aug. 2017) offers the Flexible Solutions program, which features a non-exclusive royalty-free license and option to negotiate up; a pre-negotiated exclusive license for a 10% upfront fee or, for a larger fee, IP ownership. The Specialty Solutions menu features customized agreements for projects that don’t anticipate any new intellectual property, like field and clinical trials and technical services. ISU says “we start with what we think the industry partners are expecting.”
  • Oregon Health & Science University (ISRM May 2017) looked to UM, ISU, OSU and the University of Arizona for ideas and established Improved Access to Technology, or IMPACT. Sponsors can choose standard IP and license terms or an upfront non-exclusive or exclusive license with no pre-existing IP involved. The school and the principal investigator must sign off any deals. “One of the outcomes we’re hoping for is reduced negotiating time,” OHSU says.
  • Colorado University-Boulder (ISRM Oct. 2017) emphasizes Master Research Agreements to facilitate broader relationships with organizations that expect to fund multiple research projects; they streamline opportunities for students and faculty to work with sponsors and “increase CU-Boulder’s awards and associated funding by solidifying and expanding longstanding relationships.” The school’s Office of Industrial Collaboration and Office of Contracts and Grants collaborate on the MRA push.

Benchmark for success

Schools that want to streamline sponsored research contracting need to pay attention to what others have already accomplished, Besemann says. “I tell [my colleagues] to benchmark all the other institutions,” she says, then use the best ideas in your own shop. “The most important thing is to understand the 80% of businesses you work with, what their needs and expectations are, and tailor the program to those folks,” she advises. If regional economic development is especially important, for example, look at programs that satisfy companies’ needs and wants in that regard.

And be sure to actually talk to the companies you’re trying to make things easier for. “To be honest, there’s nothing we fell flat on our faces on,” Besemann comments. “We did a lot of due diligence and vetted the program with companies in the state. We talked to small companies, big companies, multinationals and enterprises in different industry sectors. You need to satisfy your clients’ needs.”

UIDP’s Boccanfuso agrees with that. “Each school is different,” he says, “and each needs to do its own due diligence. If you’re considering streamlining IP management and sponsored research contracting — or, frankly, any contracting — do your due diligence and make sure that whatever you do aligns with your strategy for doing industry collaborations.”

Be sure to vet it through the university, too, Besemann adds. “Make sure the deans and department heads and the Vice President for Research are all on board,” she urges. “If they don’t buy into it, they may rebel against it.”

That buy-in is often facilitated by a champion, she adds, noting that UM’s were Tim Mulcahy, who was the VPR at the time, and Jay Schrankler, director of UM’s OTC. “Without the two of them, MN-IP would not have gotten off the ground,” she says. “These changes are often driven by somebody in the administration who believes in them. They require a champion to get across the goal line.”

Contact Boccanfuso at tony@uidp.net and Besemann at 612-625-8615 or besem007@umn.edu. u

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