Spinning Off in the U.S.

1. Spinning Off in the U.S. Dr. Gary W. Matkin Associate Dean University Extension University of California, Berkeley

2. University Technology Transfer Activities • Patenting and licensing of university intellectual property • Research Partnerships with industry • Industrial affiliate or liaison programs • Technical/managerial assistance programs • Business incubators • Research parks • Venture capital/business start-up activities • Continuing Education

6. Taking Equity Model Research Institution License For Profit Company Equity License For Profit Company Equity For Profit Company License Equity

7. Taking Equity Model Advantages • Replication after established policy • Diversification • Equity build up • No up-front investment • Not dependent for return on one technology

8. Taking Equity Model Disadvantages • Little control • Equity dilution • Portfolio management overhead cost • Case-by-case negotiations • Messy (relations with inventors)

9. Taking Equity Model Issues • Inventor share distribution • Degree of management involvement • Exercising voting rights • Board of Director membership • Anti dilution opportunities • Liquidation policy • Limits to percent of ownership

10. License Equity For Profit Spin-Off Non-Profit Buffer ModelAlternative 1 Assigns IP Ownership Research Institution Non-Profit Subsidiary Receives share of profit & equity buildup Tech Licenses

11. Non-Profit Buffer ModelAlternative 2 Selective Assignment Research Institution Non-Profit Subsidiary Receives share of profit & equity buildup Tech License Office License Equity For Profit Spin-off Tech Licenses

12. Non-Profit Buffer Model Advantages • Maintains control • Provides initial buffering • Can provide markedly increased flexibility Disadvantages • Still has non-profit status • Hard to attract capital • Still removed from marketplace

13. Equity License For Profit Spin-off For Profit Alternative One Research Institution For Profit Subsidiary Creates & Owns

14. License Equity For Profit Spin-off For Profit Alternative Two For Profit Subsidiary Research Institution Investor(s) Majority Owner Minority Owner

15. License Equity For Profit Spin-off For Profit Alternative Three For Profit Subsidiary Research Institution Investor(s) Minority Owner Majority Owner

16. License Equity For Profit Spin-off For Profit Alternative Four Research Institution For Profit Partner New For Profit Venture Investor(s) Investor(s)

17. License Equity For Profit Spin-off For Profit Alternative Five Research Institution A Research Institution B New For Profit Venture Investor(s) Investor(s)

18. For-Profit Alternatives Advantages • Immediate entry into market • Can attract capital • “Rheostat” on control Disadvantages • Sometimes little buffering • Often loss of control • UBIT, legal costs • Often high cost

19. The Arms-Length For-ProfitIP Manager Model IP IP Research Institution For Profit IP Management Corporation For Profit Spin-offs $ $ + Equity IP Research Institution Tech License IP $ $ IP Research Institution $

20. The Arms-Length For-ProfitIP Manager Model Advantages • Little cost to institution • Low risk (but low return) • Arms-length deal with faculty • Ability to gain critical mass, econ of scale Disadvantages • Low return • “Cherry picking”

21. The Future of University IP Management • University as beneficial holder/clearinghouse • University as aggressive defender of IP • Research universities united • University IP policy as a condition of employment • University IP policy and collaborative education • Universities as heavies in national and international IP law development

22. Gary W. Matkin Associate Dean/Director Technology Initiatives UC Berkeley Extension gwm@unx.berkeley.edu