Learn how to bring your University of Melbourne technology to life
This guide explains The University’s technology commercialisation process and the support available to staff and student researchers across all disciplines. It answers the most common questions that the Research, Innovation and Commercialisation (RIC) team field from those who are curious about how impact from their created intellectual property can be delivered.
What is intellectual property?
Intellectual property (IP) is the intangible product of the mind. It consists of creations and material that may be registered or protected under patent, trade mark or copyright laws or by legal contract. Non-patentable knowledge and know-how that cannot be protected under these laws also falls within this broad definition and includes databases, datasets, material on websites, blogs, wikis and podcasts.
Intellectual property arising from your research work may offer the potential for creating impact by making the world a better place and generating economic value. Such potential is realised through the technology commercialisation process.
What is technology commercialisation?
Technology commercialisation, also referred to as technology transfer or research translation, is the transfer of knowledge and discoveries to the broader community. It can occur through publications, educated students entering the workforce, exchanges at conferences, relationships with industry or other such interactions. In this guide, the term is used more specifically to refer to the formal licensing of technology to third parties who exploit the commercial value and other benefits of intellectual property created by The University’s researchers.
For those seeking to commercialise their IP, a variety of potential pathways exist. These include conventional licensing to established ‘for-profit’ companies, start-ups and spin-outs as well as royalty-free licenses, open-sourcing and transfer of knowledge to social enterprises or other ‘not-for-profit’ ventures. The University’s Research, Innovation and Commercialisation (RIC) team can assist with identification of the best commercialisation pathway and offers you, as a University researcher and IP creator, support along the way.
The University's technology commercialisation goals
The University engages in technology commercialisation to create impact from its research by changing the world for the better. Revenue generation is an important but secondary outcome that flows naturally from success in achieving these goals.
Introducing the Research, Innovation and Commercialisation Team
It is the role of The University’s Research, Innovation and Commercialisation (RIC) team to help transform ideas and creations into reality. We do this by providing expert services which help researchers navigate the technology commercialisation process. Our services include:
- Assistance with identifying, managing and protecting IP
- Marketing of new technologies to potential industry partners
- Technology licensing and commercialisation
- Facilitating revenue (royalty) collection arising from license agreements
- Managing the distribution of the net proceeds to IP creators and owners
- Assistance with seeking grants and other funding sources
- Guidance with formation of start-up companies and University spin-outs
- Help with research related contracts and consultancy agreements
RIC manages a portfolio of over 200 University innovations and maintains relationships with a diverse range of partners comprising multinational companies, government agencies, SMEs, University spin-outs and staff start-ups. We are experienced in patenting and other IP protection methods, identification of funding sources, creating and managing commercial partnerships, University policies and procedures and much more. We encourage you to contact us during your early research activities to ensure you are aware of the options that will best create impact from your research.
Your Faculty’s Business Development Manager is available to answer your questions and provide support. Additional information relating to the technology commercialisation process together with other helpful resources for researchers can also be found on the IP & Technology Transfer Services website.
Technology commercialisation - What's in it for me?
Beyond its contribution to knowledge creation, research may impact society more broadly through improvements to quality of life including, among other areas, health, culture, prosperity and security. You may be motivated to pursue such high impact goals or perhaps those more personally or narrowly defined which include:
- Feeling a sense of personal fulfillment
- Achieving peer or community recognition
- Generating additional lab, department or research centre funding
- Meeting the obligations of a research contract
- Attracting research sponsors
- Creating educational opportunities for students
- Exploring an alternative career to academia
- Potential to discover and lead new research ideas and directions
- Linking students to future job opportunities.
- Financial gain
Am I a researcher, a creator or an inventor? Is there a difference?
As a University researcher, you may be engaged in research work which may generate intellectual property. In such instances, a creator is defined by The University’s Intellectual Property Policy which states;
“Creator means any member of staff, students, honorary appointees or visitors who create any intellectual property whether or not in conjunction with other persons.”
By comparison, the term ‘inventor’ has particular meaning in patent law and is more narrowly defined. In this legal context it refers only to individuals whose names appear on a patent. In the spirit of encouraging entrepreneurship, The University’s view is that all contributors to the creation of intellectual property should be eligible to share in any benefits which flow, regardless of any formal patent status.
Hence, in this guide, the more broadly defined term, ‘creator’ will be used to describe a researcher who has generated intellectual property which may have commercial value.
The Technology Commercialisation Process
What happens in technology commercialisation? What are the outcomes?
Because most intellectual property developed by The University research is early stage and because The University is focused on research rather than product development, impact from such research is most often achieved via partnerships with third parties. By this commercialisation pathway, access to a new technology is typically transferred from The University to a partner through a License Agreement by which The University grants a right to use the defined technology to this third party (known as the licensee). Prior to this agreement, the underlying intellectual property is first protected by patent or other formal contract. The licensee might be an established company, a government agency, a statutory authority, a new start-up company or perhaps a ‘spin-out’ (a company at least partially owned and controlled by The University).
Under agreed terms, the licensee continues to develop the technology further, creating products or services and undertaking regulatory, marketing and any other required activities to offer them for commercial sale. Through this commercialisation yielding new products or services, the licensee enjoys the economic and any other benefits that the granted IP right may deliver. In return, The University receives compensation in the form of fees or royalties which are shared with IP owners and reinvested in further research, thus completing the cycle of technology commercialisation.
What are the steps in the technology commercialisation process?
The stages of technology commercialisation are summarised in Figure 1. Whilst the process may be considered as a stepwise cycle, these steps sometimes vary in sequence and may occur in parallel. RIC is constantly refining and streamlining the process to make it more efficient for creators and licensees. We encourage you to visit the IP & Technology Transfer Services website regularly to check for updates.
It is through research activities that discoveries are made and intellectual property is created. As such, research is the vital first step in the process. Without it, there is nothing of substance to commercialise. Whilst conducting your research at The University, you are encouraged to be aware of your role and obligations with respect to the intellectual property created. These are described in detail later in this guide.
Early contact with a RIC Business Development Manager to discuss the nature and potential impact of your intellectual property is strongly encouraged, even if your research is incomplete. This discussion is confidential. As will be explained in more detail in a later section, it is crucial that your intellectual property is protected before it is publicly disclosed in order for its commercial value to be preserved. The sooner in the discovery process you contact RIC, the sooner the IP assessment and protection process can start and the less likely it is that publications and other general or peer group communications are delayed.
Intellectual property disclosure
Submission of a completed Intellectual Property Disclosure Form discharges the creator’s IP disclosure obligation and begins the formal technology commercialisation process. This document, which remains confidential within The University, describes the intellectual property in sufficient detail for RIC to evaluate and consider which commercialisation option to pursue.
During the assessment phase, a RIC representative reviews the disclosure, conducts patent searches (if applicable) and analyses the market and competitive technologies to determine the commercialisation potential of the intellectual property. This assessment is undertaken in consultation with you and may take several months. It guides the strategy on whether to focus on licensing to an existing company or creating a new staff start-up or University spin-out.
Whilst the IP may offer commercial value, in some cases RIC may conclude with input from you and potential licensees, that further development of the technology is necessary before it is ready to be licensed. In such cases, RIC will also provide advice on possible sources of funding for this development.
Intellectual property protection
If it is determined that the intellectual property has commercial potential, the process to protect it is initiated. Protection via patent is the most common method. This begins with the filing of a provisional patent application with IP Australia and when appropriate, foreign patent offices. Once a patent application has been filed, it will typically require several years and tens of thousands of dollars to obtain granted Australian and foreign patents. This is often done in conjunction with an industry partner. Patenting and other IP protection options are discussed in more detail later in this guide.
With your involvement, RIC staff identify candidate companies that have the expertise, resources and business networks to bring the technology to market. This may involve partnering with an existing company or forming a staff start-up or University ‘spin-out’. Your active participation will dramatically enhance the chances of success in this stage of the process.
Identify an existing company, or form a staff start-up or University spin-out
If an appropriate and interested existing company or companies are selected as a potential licensees, RIC licensing specialists work with those potential licensees to develop the appropriate financial and diligence terms to fully commercialise the technology.
Where creation of a new staff start-up or University spin-out business has been chosen as the preferred commercialisation path, RIC will assist the founders in planning and securing funding for the start-up or spin-out.
A license agreement is a contract between The University and a third party in which The University’s rights to a technology are licensed, without relinquishing ownership, for financial and other benefits. This agreement is used with both a new start-up business and with an established company. It defines the agreed conditions with respect to the field of application, the geographic region, the extent of exclusivity as well as the period for which the right is granted. In addition, performance obligations are usually included. For example, it is often incumbent on the licensee to continue development of the technology and achieve certain milestones in a timely manner, in order to retain the license. This ensures that The University can manage the risk of not maximising the impact of its research by reassigning the IP to other licensees if performance objectives are not met.
Prior to a license agreement, an option agreement is sometimes used to enable a third party to evaluate the technology and its market potential for a limited time before making a decision about licensing.
During this phase, the licensee continues the advancement of the technology and makes other business investments to develop commercial products or services based on the technology. This step may entail further development, regulatory approvals, sales and marketing, training and other activities.
The creator’s input and know-how are often needed at various stages. In particular, further development work is often contracted back to the creator’s laboratory, resulting in further valuable research funding and allowing additional IP to be created. However, in such circumstances, careful attention must be paid to The University’s policy with respect to conflict of interest.
In return for the right to commercialise the new technology and enjoy the economic benefits which may flow from it, the licensee pays compensation to The University. Such payments may be as a fixed fee or periodic ‘royalties’ based on an agreed percentage of a performance measure, sales revenue being the most common. In some cases, equity may be offered in the licensee company.
Once the commercialisation costs have been recouped, net license payments to The University are shared in proportion as follows: creators (40%), the creators’ Faculty (40%) and the central University administration (20%).
Funds received by The University and its Faculties are reinvested to encourage entrepreneurial endeavour and support further research and education, thus completing the cycle of technology commercialisation.
How long does the commercialisation process take?
The process of protecting the technology and finding the right licensing partner may take months or even years to complete. The amount of time will depend on the development stage of the technology, the market for the technology, competing technologies, the amount of work needed to bring a new concept to market-ready status and the resources and willingness of the licensees and the creators.
What is my role in technology commercialisation? How can I help in this process?
- Maintain detailed records of your research work
Well maintained laboratory notebooks and other experimental records are central to substantiating intellectual property ownership and priority date claims. The University’s Research Data Management web page provides further information.
- Establish early dialog with your RIC Business Development Manager
As soon as you believe you may have created or discovered something unique with potential commercial value, you are encouraged to make contact with your BD representative. It is far better to be too early than too late in doing so. Pre disclosure conversations are encouraged.
- Disclose your IP to The University.
Following consultation with your Faculty’s RIC Business Development Manager, complete and submit the IP Disclosure Form.
To avoid risking the patent protection opportunity and commercial value of your IP, it is very important that this is done at least several months in advance of any public disclosure such as submitting a manuscript for publication or presentation at conferences or other such peer group meetings in either written or verbal form. You are also encouraged to keep RIC informed well in advance of upcoming publications or interactions with companies related to your IP.
- Support the patent process
Respond promptly to requests for information from RIC and their external patent attorney. While some aspects of the patent and licensing process may require significant participation on your part, we will strive to make efficient use of your valuable time.
- Contribute actively to the search for licensees
Whilst RIC is experienced in identifying potential partners as licensees and creation of new companies, it is likely that through your research work, you will have a valuable understanding of the marketplace and its participants. Such information is of particular assistance.
- Support the licensee’s technology development
By mutual agreement, you may play a role on supporting the licensee’s development of the technology and creation of new products and services. Particularly in the early stages, your know-how may be an invaluable contribution to the overall success of the venture and may be well rewarded.
- Understand and adhere to The University’s Conflict of Interest policy
In the course of your research work involving creation of intellectual property and its commercialisation, you may find yourself in situations in which your personal interests are at odds with your professional obligations to your University employer. It is important that you recognise this conflict of interest and the risks involved. Information and resource links are provided here to help you manage such situations.
The University’s Office of Research Ethics and Integrity website presents a conflict of interest management strategy based around the “Six R’s”: Register, Restrict, Recruit, Remove, Relinquish, Resign.
Intellectual Property Ownership
Who owns the intellectual property I create?
Ownership of and obligations relating to intellectual property created by staff, student, honorary appointees and visitors are defined by University Statute and IP Policy. According to Section 13 of this statute:
“The University owns intellectual property created by staff in the course of, or incidental to, employment with The University, except copyright in scholarly works”
“The University owns intellectual property created by any student, honorary appointee or visiting personnel, whilst engaged in an activity which is the subject of a specified agreement or if that intellectual property constitutes teaching material.”
A specified agreement in this context, is a formal agreement between The University and any party defining the ownership and/or use of intellectual property. Most grant funding bodies, including ARC and NHMRC, require a specified agreement that obliges The University to manage the IP.
Put simply, if you undertake your research work as part of University employment or are a party to a specific agreement, The University owns the IP that you create. Importantly however, it does not follow that all the benefits from the created IP flow to The University alone. As stated previously, it is The University’s policy to share net proceeds with creators and the creators Faculty, consistent with its objectives of encouraging entrepreneurship and supporting further research.
I am a student. Can I contribute to intellectual property creation and if so, who owns it?
Yes, many students engage in research projects which result in IP creation. The University promotes student entrepreneurship. A student can be a sole contributor or creator, although most likely the student’s supervisor is found to be a co-creator.
Post graduate and other students who are not a party to a specified agreement, may wholly own the IP they create in the course of their research work. Regardless, as a student, if you own your IP and wish to take advantage of The University’s commercialisation support services, you will be asked to assign it to The University. In return, you will receive a share of any net license payments in the same way that a staff creator would. RIC will work with you to resolve any questions about IP ownership.
Who owns the rights to discoveries made while I am consulting?
The ownership of intellectual property created while consulting for an outside company depends on the terms of your consulting contract with the company. It is important to clearly define the scope of work within your consulting contract to reduce the likelihood of any potential disputes with respect to IP ownership.
You must also ensure the contract is not in conflict with the conditions of your University employment or Departmental and University policies and that there is no unmanaged conflict of interest. Consideration should also be given to, and if applicable, permission sought, for the use of any University owned equipment or facilities whist engaged in this consulting work. Under certain circumstances, this may result in The University having some claim to the IP. We recommend you contact your RIC Business Development Manager if you have any questions.
Who owns the rights to discoveries made while on sabbatical?
Generally, if you are on a sabbatical paid by The University, The University still retains rights to any discoveries connected to your scope of employment. You are encouraged to contact RIC prior to your sabbatical to ensure that ownership of any new IP which might be created is clarified and documented.
What rights does a research sponsor have to any IP associated with my research?
From time to time, external entities engage with University researchers to undertake sponsored research on their behalf. The agreed terms and conditions, documented in the form of a Research Contract must clearly specify the intellectual property (IP) rights of the sponsor. These rights vary widely from one contract to the next. In some cases, The University retains ownership of the intellectual property resulting from sponsored research and the sponsor has rights to obtain a license to the defined and expected results of the research in a nominated field. In other cases, research contracts may allow the sponsor a limited time to negotiate a license for any intellectual property developed as the result of the research.
RIC is available to assist you with initiating, understanding and dealing with research contracts.
Managing research for effective commercialisation
Why should I keep good records?
Apart from this being acknowledged research practice, well maintained laboratory notebooks and other supporting experimental records are central to substantiating IP ownership and critical priority dates during the patenting process.
May I publish the results of my research and still protect the commercial value of my intellectual property?
Yes, but since patent rights are affected by these activities, it is important to consult with your RIC Business Development Manager and submit an Intellectual Property Disclosure form well before publishing your intellectual property or discussing it with people outside The University. Through this disclosure process and given sufficient advance notice, provisional protection may be secured.
There are significant differences between Australia and other countries as to how prior publication affects patentability. Once publicly disclosed in either published or presented in some form, the intellectual property may have restricted or minimal potential for patent protection outside of Australia. Be sure to inform your RIC Business Development Manager of any imminent or prior presentation, lecture, poster, abstract, website description, research proposal submission, dissertation, publication, or other public presentation that includes the intellectual property.
May I use material or intellectual property from others in my research?
Yes, but it is important to document carefully the date and conditions of use so that we can determine if this use may influence the ownership and license rights of your subsequent research results. If you wish to obtain materials from outside collaborators, an incoming Material Transfer Agreement (MTA) must be completed.
May I share material, research tools or intellectual property with others to further their research?
Yes. However, it is important to document items that are to be shared with others and the conditions of use. If you wish to send materials to an outside collaborator, an outgoing Material Transfer Agreement (MTA) must be completed for this purpose. It may also be necessary to have a Confidentiality Agreement completed to protect your research results or intellectual property.
Intellectual Property Disclosure
What is an Intellectual Property Disclosure?
An Intellectual Property Disclosure is a written description of your discovery, creation or development that you provide to The University’s RIC office. The disclosure contains a description of the IP in detail, lists all contributors to its creation and outlines the problem that it solves. It also provides other relevant information necessary for RIC to assess IP ownership and its commercialisation potential. The disclosure is treated as ‘University Confidential.’
How do I submit an Intellectual Property Disclosure?
An intellectual property disclosure is submitted to The University’s RIC office via a completed Intellectual Property Disclosure Form .
Complete the form and email it to the RIC Intellectual Property and Licenses Manager, whose email address is included on the form. Your Business Development Manager can assist with any questions you may have relating to this process.
Performing a preliminary IP search
The University’s Intellectual Property Disclosure Form asks creators to list existing patents that are closely related to their creation. A full and comprehensive search for so-called prior art can take weeks and cost tens of thousands of dollars, if performed by a patent attorney. However, it is possible for you, as a researcher and IP creator, to perform a useful preliminary IP search yourself in a few minutes. This will streamline the process and assessment which follows your submission.
Conducting a preliminary IP search is often a valuable exercise for researchers since there are considerable research outputs found in patents which are not always found in general peer-reviewed research publications. Like a survey of the technical literature, the key to a useful IP search is the choice of keywords or search terms. As the IP creator, you are better equipped than anyone to identify the keywords that describe your creation.
It is recommended that you create a list of keywords and use the World Intellectual Property Organisation’s Patentscope search engine. This search will help you complete the IP Disclosure Form. It might also become a tool you use often in your research.
Why must I submit an Intellectual Property Disclosure?
Under obligations defined in The University Statute, researchers must disclose all new intellectual property to The University. Specifically, Section 13.6(c) states:
“Staff, students, honorary appointees or visiting personnel of The University who are involved in or contribute to the creation of intellectual property must disclose such intellectual property to The University where an invention, discovery or technology has the potential to be developed or exploited for commercial application.”
The disclosure offers benefits to both the IP creators and The University. It more formally opens the door to all the RIC support services available to you. This may in turn lead to the commercialisation of your discovery or creation and the benefits that flow from it which were discussed earlier. From The University’s perspective, the disclosure process supports its key objective to maximise the impact from its research programs by improving visibility of all potential commercialisation opportunities.
When must I complete an Intellectual Property Disclosure?
It is very important to complete an IP Disclosure well before presenting the discovery through publications, poster sessions, conferences, project reports, press releases or other such communications. Ideally disclosure should occur several months before doing so. In the case of publication for example, this should be at the draft manuscript stage. Once publicly disclosed either in published form or verbal presentation to non-University people or audiences, intellectual property may have restricted or minimal potential for patent protection and thus of diminished commercial value.
Regardless of the status of your disclosure, be sure to inform your RIC Business Development Manager of any imminent or prior presentation, lecture, poster, abstract, website description, research proposal, dissertation, publication or other public presentation which references the IP.
How do I know if my discovery or creation is intellectual property?
What makes a creation count as intellectual property and what makes it different from a discovery? A discovery reveals and describes the natural world. For example, the sequence of a gene or an observation of how a child acquires knowledge. Intellectual property is the new creation that makes use of that discovery such as a test for a genetic disorder or a tool to assess how well a child is learning.
The tipping point from discovery to intellectual property is not always clear. Furthermore, not all IP can be commercialised or used for social good. Thus it can sometimes be difficult to decide if a disclosure is warranted. This uncertainty is best resolved by chatting with your RIC Business Development Manager, even if you feel it might be too soon or perhaps the IP is not well resolved.
Must I list visiting scientists on my Intellectual Property Disclosure?
All persons who might have contributed to the ideas leading to a discovery must be mentioned in your disclosure, even if they are not University employees or students. RIC, along with patent attorneys if necessary, will determine the rights of such persons and institutions. It is prudent to discuss with RIC the nature of all working relationships to understand the implications for any subsequent IP.
Impact via provision of research tools.
Research tools that you have created in your lab might be very beneficial to other researchers and have significant impact, especially in the life sciences. These tools include materials such as antibodies, vectors, plasmids, cell lines, mice and a variety of others used in the research process. If you have mentioned tools that your lab has developed in peer-reviewed publications and this has led other researchers to request to use them (for example, via outgoing Material Transfer Agreements), there is probably potential for broader impact. RIC can help you make these tools available to a wider research audience, for instance by offering antibodies in catalogues or mouse models via suppliers like Jackson Labs. Many research tools do not need to be protected by patents in order to be licensed to commercial third-party providers. They can generate revenue for your laboratory, impact and reputation for The University. If you have research tools that you believe to be valuable, RIC will work with you to develop the appropriate protection, licensing and distribution strategy.
Is a grant application detrimental to patenting?
Grant reviewers for publicly funded grant providers in Australia such as the ARC and the NHMRC are under an obligation to maintain confidentiality and not make the details of the application publicly available. However, reviewers for other funding bodies might not have the same obligations and this might impact patentability. In addition, successful grants might be advertised online. It is therefore important to understand what information in the grant application might become public and when.
Assessment of an IP Disclosure
How does RIC assess IP Disclosures?
RIC Business Development and Technology Licensing representatives, with support from the creators, examine each disclosure with respect to a variety of IP and commercial criteria. Some of the key questions which are considered include;
- Is the IP novel and inventive?
- Is ownership clear with all creators and their contributions known?
- How can the IP be protected? Can the protection be enforced?
- What product and services can developed from the IP? Do they address an unmet need or solve a real problem in the marketplace?
- What is the size of the market and the commercial opportunity?
- Is further technology or other development required to create products or services from the IP
- What is the best pathway to market? License to existing company? Start-up?
What happens when The University decides not to patent or commercialise IP?
If RIC recommends that The University not proceed with patent protection and commercialisation of the disclosed IP, the RIC Business Development Manager will explain to you the underlying reasons for the decision. In most instances, this is because the IP needs further development before it is market ready. RIC will provide guidance as to what aspects of the IP require strengthening to increase its potential for impact. Assistance with identification of funding sources to support this additional development can also be provided if required.
It may be that The University elects not to pursue commercialisation any further for other reasons. In such circumstances, IP creators may request that the IP is assigned to them personally and if agreement is reached, ‘go it alone’. It is important to remember however, that The University is unable to provide any further support services or funding. Compliance to University policies including conflict of interest and conditions of employment must continue to be satisfied.
Intellectual Property Protection
What is a patent?
A granted patent gives the holder the right to exclude others from making, using, selling, offering to sell and import products and services underpinned by the patented IP. A patent does not necessarily provide the holder any affirmative right to practice a technology, since it may fall under a broader patent owned by others. Instead, it provides the right to exclude others from practicing the IP. Patent claims are the numbered paragraphs drafted by patent attorneys that provide the legal definition of a creator’s protectable IP.
What types of subject matter can be patented?
Patentable subject matter includes processes, machines, compositions of matter, articles, some computer programs, methods of making compositions, methods of making articles and even methods of performing business.
Can computer software be patented?
Most software cannot be patented. The most common method to protect software IP is to keep the source code as a trade secret. Of course, this is not possible with open-source software.
Computer software is treated under copyright law as a literary work, so it is protected by copyright. Under copyright law, the author of the source code is regarded as the creator of the software. Whilst there are some exceptions in which computer programs are protected as patents, these situations are complex. There is no agreed legal definition of a software patent.
In Australia, software patents are allowed in principle, but in several recent cases, applications to patent abstract ideas (e.g. algorithms) and business methods have been rejected. Some software patent applications have been allowed where the relevant court has been convinced that the patent is for a ‘manner of manufacture’, resulting in an ‘artificially created state of affairs’.
The Open Source Initiative defines open-source software (OSS) as “computer software with its source code made available via a license in which the copyright holder provides the rights to study, change and distribute the software to anyone and for any purpose”.
In making their code available through open-source mechanisms, software creators are motivated by the benefits of collaborative development of the software by many independent parties with many diverse perspectives. Also, the potential for enhanced affordability, transparency, customisation and interoperability of open-source software compared with conventional proprietary software is a path to significant impact. Open-source access to software reduces the project’s ability to differentiate but often increases its pool of developers, collaborators and users.
Your RIC Business Development Manager can help you understand the different forms of open-source licenses which provide varying degrees of restriction on the user.
RIC supports University software developers who choose a traditional licensing pathway to commercialisation. RIC will also support you if you choose to give the software away through open-source mechanisms provided that:
- The University retains the right to distribute the program freely
- Open sourcing is consistent with obligations to research funding sources
- Each developer’s department supports the decision.
If you are considering making your software available via an open-source arrangement, seek early assistance from RIC to choose the open-source license type that best aligns with both your long term project goals and The University’s research impact objectives.
Some specific patent cases
Protecting electronic circuit designs
A layout (photolithographic mask set) for an integrated electronic circuit (chip) is not protected under copyright law, nor can it be protected under patent law (although aspects of the process technology used to make the mask set, or to make a chip from the mask set, can be patented). However, specific protection for the IP contained in an integrated circuit design is available in most jurisdictions, including the US, Australia, Japan, and the EU. In Australia, such protection is automatic, as it is with copyright. In the US, this protection is referred to as “mask work” protection.
University researchers in the life sciences often ask RIC about commercialisation options for research aimed at discovering new drug targets. These are molecules, often proteins such as enzymes or cell surface receptors, that could potentially be manipulated by drugs or biological entities to treat disease. Unfortunately, a number of recent court cases in the major jurisdictions, US and Europe, have established that many typical claims in patents for drug targets are invalid. There are rare exceptions, but because of the strength of these precedents, The University will usually not proceed with applications to patent drug targets.
Drug target discoveries can however, still lead to significant impact and financial return whilst allowing researchers to continue publishing. The University, often via partnerships with industry, can help researchers who have made drug target discoveries, to further develop these discoveries to the point where they are patentable.
Although new and novel diagnostic tests to help diagnosis and early detection of disease have high commercial potential, several recent decisions by US courts have effectively prevented the patent protection of such diagnostics on the grounds that mere observation of natural phenomena, without any further inventive step, is not patentable.
The situation in Australia is uncertain. The High Court of Australia has recently ruled that one diagnostic was not patentable. However, several patent experts take the view that other diagnostic methods might be patentable in Australia, because the criteria for patentability are different from those in the US. In this country, successful patent protection might be possible based on the concept of ‘manner of manufacture’. RIC can provide you with more information and guidance if you are considering a patent for a diagnostic test.
Can a naturally occurring substance be patented?
Generally, no. A natural substance that has never before been isolated or known might be patentable in some instances, but only in its isolated form on the basis that this isolated form had never been known before. A variation of a naturally occurring substance might be patentable if a creator demonstrates modifications that offer significant advantages of using the variant.
What is the definition of an inventor on a patent and who determines this?
Generally, an inventor is a person who takes part in the conception of the ideas in the patent claims of a patent application. Thus, inventorship of a patent application may change as the patent claims are changed during prosecution of the application. An employer, company, collaborator, granting body or person who only furnishes money for research or to build or practice an invention is not an inventor. Inventorship is a legal issue and may require an intricate legal determination by the patent attorney prosecuting the application.
We note that the term ‘inventor’ has a legal definition used in patent terminology to mean the creator of patented intellectual property. As noted previously, in this guide we use the term ‘creator’ to include the inventor of patented intellectual property and also contributors to intellectual property that is not patented, such as copyright.
Who is responsible for patenting?
The University’s RIC office is responsible for all matters relating to IP protection, including patenting. RIC team members engage external patent attorneys with the appropriate technical background and oversee the patenting process which involves drafting, filing and prosecution. Creators work with RIC and the patent attorney in drafting the patent applications and responding to patent assessors in the countries in which patents are filed.
What is the patenting process?
Patent applications are drafted by a patent attorney. During this drafting process the patent attorney will work with you and your RIC representative to describe the invention, confirm its creators and define the application claims. You will also be asked to review the application before it is filed.
The initial ‘provisional’ patent application is followed a maximum of 12 months later with either a Patent Cooperation Treaty (PCT) application or direct ‘national phase’ applications in specific country jurisdictions. The PCT pathway allows a maximum of 30 months from the provisional application filing date in which to file national phase applications in any of the PCT signatory countries. This is followed by examination in each country, which if successful results in granting of the patent.
IP Australia is the Australian government agency that administers Patents, Trade Marks, Designs and Plant Breeder’s Rights on behalf of the government. This organisation employs examiners skilled in all technical fields in order to appraise applications for patents, trade marks, designs and plant breeder’s rights. The IP Australia website contains many resources to assist you in understanding and protecting intellectual property including a downloadable IP Australia Patent Guide which provides an excellent summary of the patenting process.
Is there such a thing as a provisional patent?
No. There is a provisional patent application. A patent application only becomes a patent after it has been examined and accepted by the patent office.
What is the difference between a provisional patent application and a complete patent application?
Provisional patent applications can provide a tool for preserving patent rights while temporarily reducing costs and providing extra time to refine, develop and test the invention before preparing a regular application. This occurs because the provisional application is not considered to have finalised claims. Either a PCT application or completed applications in Australia and any chosen foreign countries must be filed within one year of the provisional filing in order to receive the benefit of the provisional application’s early filing (priority) date. Note however, an applicant only receives the benefit of the earlier filing date for material that is adequately described and enabled in the provisional application.
What do I have to do after a provisional patent application has been filed?
To take advantage of the benefits of a provisional patent application, sufficient work must be undertaken in the 12 months after its filing to ensure that there is value in making the complete application. Ideally, additional data is acquired to support the patent claims, prove the technical feasibility of the invention and make rigorous comparisons to existing technologies. You are encouraged to develop the plan to acquire this data with contributions from the patent attorney and your RIC Business Development Manager.
What is different about foreign patent protection?
Foreign patent protection is subject to the laws of each individual country, although in a general sense the process works much the same as it does in Australia. In most foreign countries however, a creator will lose any patent rights if he or she publicly discloses the IP prior to filing of the first (or ‘priority’) application in one country. In contrast, Australia (and the US) has a one-year grace period after publication in which a patent may be filed. However, this has major drawbacks and must not be relied upon. For example, in such circumstances you must file a complete application. You lose the benefits of a provisional application. You will also lose patent rights in many countries.
is there such a thing as an international or world-wide patent?
Although an international patent does not exist, an international agreement known as the Patent Cooperation Treaty (PCT) provides a streamlined filing procedure for more than 150 of the most industrialised nations. For Australian applicants, a PCT application is generally filed one year after a corresponding Australian provisional application has been submitted. The PCT application must later be filed in the national patent office of any country in which the applicant wishes to seek patent protection, generally within 30 months of the earliest claimed filing date.
What is gained by filing an application under the PCT?
The PCT application provides two advantages. Firstly, it delays the need to file costly foreign applications until the 30-month date. During this time an applicant has the opportunity to further develop, evaluate and market the IP for licensing or alternatively decide not to proceed. Secondly, the international preliminary examination often allows an applicant to simplify the patent prosecution process by having a single examiner speak to the patentability of the claims, in a single language and for a single fee. This often saves significant costs in prosecuting foreign patent applications.
What is the timeline of the patenting process and resulting protection?
The length of time taken for a patent to be granted depends on the process followed, direct national-phase filing versus filing via the PCT. Typically it takes 3-7 years for a patent to be granted. Once a patent is granted, it is enforceable for 20 years from the initial filing of the application that resulted in the patent, assuming that maintenance fees are paid.
What does it cost to file and obtain a patent?
The process of obtaining an Australian standard patent typically costs between $6,000 and $10,000, including patent attorney fees. Filing and obtaining issued patents in other countries may cost $20,000 or more per country. Although more costly, foreign applications are important as they allow protection in markets considerably larger than Australia alone.
Once a patent is issued in Australia or in foreign countries, certain maintenance fees are required to keep the patent alive. Initial patent costs are covered by The University. If and when the IP is licensed to a third party, the license agreement usually requires the licensee to absorb the patent costs.
Why does The University protect only some intellectual property through patenting?
Some forms of IP protection, for example, by patent, copyright or trade secret, are often a requirement of a potential commercialisation partner (licensee) because it can protect the commercial partner’s often sizable investment required to bring the technology to market. In the absence of such protection, many technologies have minimal commercial value. Due to the expense and the length of time required to obtain a patent, applications are not possible or appropriate for all University IP. RIC carefully reviews the commercial potential for IP and considers other protection options before investing in the patent process. However, because the need for commencing a patent filing usually precedes finding a licensee, we look for creative and cost-effective ways to seek early protection for as much promising IP as possible.
What if I created the IP with someone from another institution or company?
Ownership of IP created with collaborators from another institution or company depends on the details of the agreement under which it was created and the policy of the other organisations. RIC will work with the other organisation(s) on your behalf to decide on management of the IP. Usually, if the other institution is a university or research institution, we will make an ‘inter-institutional’ agreement (IIA) that provides for one of the institutions to take the lead in protecting and licensing the IP and allocate any licensing revenues received. Often the commercialisation lead will assume the expenses associated with protection.
Will RIC initiate or continue patenting activity without an identified licensee?
If the IP is determined to have sufficient commercialisation potential and patenting is the preferred method of protection, The University accepts the risk and cost of filing a patent application before a licensee has been identified. After The University’s IP rights have been licensed, the licensee generally becomes accountable for the patenting expenses. If no licensee has been found after a reasonable period of searching, often two or three years, or if it is determined reasonable patent coverage cannot be obtained, we will make the difficult decision to abandon the patent application.
Other types of IP Protection
What is copyright and how is it useful?
Copyright is a form of protection provided by the laws of Australia and other countries to the authors of ‘original works of authorship’. This includes literary, dramatic, musical, artistic and certain other intellectual works, as well as computer software. This protection is available to both published and unpublished works. The Copyright Act 1968 (Cth) generally gives the owner of copyright the exclusive right to conduct and authorise various acts, including reproduction, publication, communication to the public, public performance and adaptation. Copyright protection is automatically secured when a work is fixed into a tangible medium such as a book, software code, or video, so unlike patents, there is no need to formally apply for copyright protection.
What is an adaptation?
An adaptation (referred to in the US as a derivative work) is a work based upon one or more pre-existing copyright works. Adaptation includes translation into other languages, derived object code from the source code of a computer program, creation of a film or play from a novel, musical remixes and memes. In each of these cases, the copyright owner of the original work has the exclusive right to make adaptations that include recognisable or substantial portions of the work.
How do I represent a proper University of Melbourne copyright notice?
Although copyrightable works do not require a copyright notice, we recommend that you use one. For works owned by The University, use the following notice: "© 200X [year of first publication] The University of Melbourne. All rights reserved."
Where do I learn more about University of Melbourne copyright policies?
For information relating to The University’s Copyright Office web site contains information about the copyright policy.
What is a trade mark and how is it useful?
A trade mark is a word, name, symbol, device, colour, shape, sound, movement, scent, or combination of these that is used in commerce to identify and distinguish the goods of one manufacturer or seller from those manufactured or sold by others. It may also indicate the source of the goods. Trade marks may be used unregistered (™) or registered (®).
What is trade mark registration?
Trade mark registration is a procedure in which IP Australia determines if the trade mark application meets the requirements of the Trade Marks Act 1995. If your trade mark is accepted for registration, it is published in the Official Journal of Trade Marks. There are then three months for other parties to oppose your trade mark registration. If there is no opposition during this term, or the opposition is unsuccessful, then the trade mark will be registered once the registration fee is paid. This registration only applies to Australia. It is not necessary to register a trade mark to prevent others from infringing it, although it is strongly advised as this provides other avenues for enforcement. An Australian registered trade mark may be used as a basis for filing corresponding applications in other countries.
Marketing to find a licensee
How does RIC market the IP?
RIC uses many strategies to identify potential licensees and market the IP to them. Existing creator relationships, those of other researchers and established RIC networks usually provide a starting point for the search. Formal market research including examination of complementary technologies may also be undertaken.
In addition, the IP can be featured on the RIC web pages which list technologies available for licensing. This which offers the advantage of ‘global reach’ to prospective licensees unknown to RIC or the creators. We also attend conferences and industry events. Faculty and departmental publications and presentations are often excellent marketing opportunities as well.
How are most licensees found?
Many licensees are already known to the IP creators. So your research and consulting relationships are particularly valuable. Since licensees often license more than one technology from The University, previous licensing relationships cultivated by RIC are also beneficial.
How long does it take to find a potential licensee?
It can take months and sometimes years to locate a potential licensee. The time taken depends on the commercial attractiveness of the IP which includes consideration of, for example, the size and growth potential of the market, the number and strength of competitors with established technologies and the capital investment required. Since most University IP tends to be in the early stage of the development cycle, it usually requires substantial commercialisation investment. This often limits the number of prospective licensees.
How can assist in marketing the IP?
Your active involvement will dramatically improve the chances of matching IP to an outside company. Your research and consulting relationships are often helpful in identifying both potential licensees and technology champions within companies. Once interested companies are identified, the IP creator is the best person to describe the details of the IP and its technical advantages. The most successful technology commercialisation results are obtained when you and your RIC representative work together as a team to market and promote use of the technology.
What is a license?
A license is a permission that the owner of the IP, without relinquishing ownership, grants another party (licensee) the right to use the IP for commercial or other agreed purpose. Licenses granted for exploitation of IP developed at The University are expressed in written form as a legally binding license agreement.
What is a license agreement?
A license agreement is a contract which defines the IP rights being granted by The University to the licensee. It is used with both established businesses and new start-up companies. In addition to the many general clauses present in legal contracts, it contains specifically agreed conditions such as the field(s) of application, the geographic region(s), the extent of exclusivity as well as the period for which the right is granted.
All performance obligations incumbent on the parties involved are noted in detail. For example, University license agreements usually stipulate that the licensee must diligently seek to bring the IP into commercial use in a timely manner. This usually requires the licensee to invest in development of products or services and engage in regulatory, marketing and sales activities to bring these to market. Milestones are set to monitor progress. If necessary these can form a basis by which the license may be revoked, enabling The University to award it to another party. Thus the risk that The University’s primary objective to maximise the impact of its research for public good is not achieved, can be mitigated.
As a party to the agreement, the licensee enjoys the economic and other benefits which flow from application of the granted IP for commercial outcome. The nature and amount of agreed compensation to be received by The University in return is specified in the license agreement. This may be in the form of a fixed fee or periodic royalties based on a percentage of a performance measure such as revenue derived from new products developed from the IP.
More information regarding University of Melbourne license agreements is available on the IP & Technology Transfer Services website.
How is a company chosen to be a licensee?
Consistent with its overarching research objective, The University choses a licensee who is deemed the most capable for commercialising the IP for maximum impact to the broader community, i.e. the most benefit to the public good.
Often, an established company with experience in similar technologies and well developed channels to market is the best choice. In other cases, for example when the new technology can potentially disrupt a large and mature market, the focus and intensity of a start-up company is a better option since established companies with existing earnings at risk, may be compromised in their commitment.
Can there be more than one licensee?
Yes, IP can be licensed to multiple licensees, either non-exclusively to several companies or exclusively to several companies, each only for a unique field-of-use (application) or geography. The University may adopt a multiple licensee strategy in order to maximise the benefits of IP commercialisation concurrently. It is only in rare cases, usually with larger global entities, that a single licensee has sufficient resources to pursue all opportunities together.
What other types of agreements and considerations apply to commercialisation?
In addition to the license agreement, there are a number of other contracts which are used to manage aspects of technology commercialisation.
- Confidentiality Agreements, also known as Non-Disclosure Agreements (NDAs), are often used to protect the confidentiality of IP during evaluation by potential licensees. Confidentiality Agreements also protect proprietary information of third parties that University researchers need to review in order to conduct research or evaluate research opportunities.
- Material Transfer Agreements (MTAs) are used for incoming materials to and those outgoing from The University. These agreements describe the terms under which University researchers and outside researchers may share materials, typically for research or evaluation purposes. IP rights can be endangered if materials are used without a proper MTA.
- Inter Institutional Agreements (IIAs) define the terms and IP management when two or more institutions, generally two universities, co-own the IP. In particular, an IIA indicates which party will lead the commercialisation process.
- Option Agreements or Option Clauses within research agreements, describe the conditions under which The University preserves the opportunity for a third party to negotiate a licence for intellectual property. Option clauses are often provided in Research Contracts involving corporate research sponsors at The University. Option agreements are entered into with potential licensees wishing to evaluate the technology prior to entering into a full license agreement.
- Sponsored and Collaborative Research Agreements describe the terms under which sponsors provide research support to The University. It is important that these agreements include clear definition of IP ownership which may be created as well as any agreement regarding its management, costs and commercialisation.
Your RIC Business Manager is experienced with creation and execution of these agreements and is happy to assist you with response to questions or required support.
Licensing to a start-up company
What is a start-up and why chose to create one?
For the purposes of this guide, a staff start-up is a new business entity formed by the creators to commercialise their IP. Thus for creators, a start-up business is an alternative to helping RIC license the IP to an established business. Choice of a start-up as the preferred pathway to commercialisation depends on a number of key factors including:
- Development risk.
If development of this early stage IP into new products or services is of high risk, established companies may be unwilling to take the risk of commercialising unproven technology. Thus a suitable licensee may be difficult to find. A start-up company may therefore be required in order for the IP potential to be realised.
- Business sustainability.
Whilst the IP may in itself be innovative and solve a relevant problem, formation of a start-up company is only a viable option if the IP can sustain and grow the business into the future. For example;
- Does the IP offer a sufficiently large competitive advantage and target market?
- Is there potential for multiple products or services from the same technology? Few companies survive on one product alone
- Does the business have access to financial and human resources?
- Creator commitment.
Commercially viable IP and available resources alone do not ensure a winning venture. Perhaps even more important is the absolute commitment and dedication required of the company’s creators. Even successful start-ups endure difficult times. Without this commitment the start-up will almost certainly fail.
Your RIC Business Development representative can provide information and assist you on the path to forming your start-up company.
Where can I get more information about forming a start-up?
RIC has published a Start-up Guide for The University’s IP creators which can be downloaded from the IP & Technology Transfer Services website.
What is the difference between a staff start-up and a University spin-out?
In special cases, The University might decide itself to establish a new company that is at least partially owned and controlled by The University in order to commercialise the IP. Such a company is referred to here as a University ‘spin-out’ to distinguish it from a staff start-up. The University might create a spin-out in circumstances when:
- The University sees potential for significant commercial return from its IP and the creators do not want to become personally involved in commercialising it and/or
- the IP is a platform technology and the creators are focused on generating impact and return in only one of its potential applications and
- it is clear that a new entity, a staff start-up or University spin-out, rather than a license to an existing company, is the right commercial vehicle to create impact.
This guide is primarily focussed on staff start-ups, not University spin-outs.
Who decides if a start-up should be formed?
The choice to establish a new start-up company for commercialising IP created at The University depends on decisions made by RIC in consultation with the IP creators. For a staff start-up to be the preferred commercialisation path, you, the creator, must be willing to take the lead in founding the start-up and RIC must decide that, after assessing other possible options, a license to your start-up is the best option to create impact with the IP. If this is the case, your RIC Business Development Manager will assist you and the other founders with meeting potential investors and accessing other resources to help you in founding the company. Then, RIC will negotiate with a representative of your start-up company to grant a license to the company.
In order to consider all commercialisation options for its IP, including your proposal to commercialise the IP via your start-up, The University needs to understand your plans in some detail and have confidence in them. Your plans for your start-up are typically summarised in a commercialisation plan and a business plan. A commercialisation plan is a step-by-step plan to develop a saleable product or service from IP generated by your research as it currently exists. A business plan is a detailed financial analysis showing what the company will do to develop a profitable business based on this product or service. The ideal scenario is that you develop these plans in consultation with RIC. A clear discussion in your business plan of your competition (your customers’ alternatives) and the reasons your customers will choose your product rather than theirs, will help The University understand the advantages of the proposed start-up commercialisation pathway versus other alternatives.
Detailed discussion of these and other topics related to staff start-ups are included in the Start-up Guide which will help you refine your start-up business concept and prepare required documentation for your ‘pitch’ to The University.
What role does a creator usually play in a staff start-up company?
University creators who found or co-found a start-up to generate impact with their research typically serve as the start-up company’s Chief Scientist, Chief Technology Officer, technology consultants or in some other technical developmental capacity. Occasionally, academics choose to temporarily or permanently leave The University and join the start-up full-time. In many cases, the creator’s role is proposed by the start-up’s investors who identify the best role based on the creator’s expertise and interests.
As the company matures, and additional investment is required, the creator’s role may change. Involvement of any kind in a start-up must also comply with The University’s Conflict of Interest Policy.
How much of my time and effort will it take?
Starting a company requires a considerable amount of time, effort, passion, and persistence. Until the start-up team is identified and engaged, you will need to champion the formation effort. After the team is in place, effort is required for investor discussions, formal responsibilities in or with the company, and University processes such as conflict of interest reviews.
Will The University take equity in a staff start-up?
In some instances, The University will take equity in a staff start-up company as part of the financial compensation for the license to use the IP. Equity may be substituted for other cash considerations that are often difficult for start-ups. It is also a way for The University to share some of the risk associated with the start-up and effectively become an investor in the start-up. An equity agreement might also include governance rights for The University, i.e. membership of your start-up’s board of directors and thus a say in your company’s strategy. A decision to take equity must make sense for both The University and the company.
Will The University pay for incorporating a staff start-up company?
Regardless of any equity taken in your start-up, The University has chosen your start-up as its partner to achieve impact with its IP. So The University has a strong interest in helping your start-up to succeed. Historically, The University has not paid start-up incorporation costs. However, University policy on assistance for start-ups is evolving. You are encouraged to visit the IP & Technology Transfer Services website for the latest information.
What professional assistance is needed to create a staff start-up company?
The start-up will need its own legal advice to support license and other negotiations with The University. The start-up’s founders will also need financial advice. In addition, the start-up might need its own patent attorney to assist with patent strategy, especially if the company will be involved in a patent-rich area. Although it is advisable and recommended that they coordinate activities, the start-up’s patent attorney must be separate from The University’s patent attorney.
What is Uniseed?
Uniseed is a $50 million venture capital fund operating at the Universities of Melbourne, Queensland, Sydney and New South Wales and the CSIRO. Investment capital is provided by the five partner organisations. Since October 2000, the Uniseed mandate has been to make targeted investments into the partner research organisations’ staff start-ups and University spin-outs. Uniseed works with RIC to identify technologies to be transferred into the next staff start-ups and University spin-outs, and then supports the development of these technologies through investment into these new entities. Uniseed is one potential source of funding for your staff start-up.
What is Biocurate?
Biocurate Pty. Ltd. is an independent joint venture founded by The University of Melbourne and Monash University, two of Australia’s leading biomedical research institutions and supported by the Victorian State Government. Operating as a ‘venture catalyst’ and technology accelerator, its purpose is to facilitate the transition of early stage discoveries from the lab into new therapies, a stage which often presents barriers which impede new technologies in the biomedical field. BioCurate provides the commercial focus, expertise and funding necessary to address these barriers to success.
What is The IP Group?
UK technology investor IP Group (IPG) is investing $A200 million over ten years into spin-outs focused on translation of research from the Group of Eight universities, including The University of Melbourne. IPG funding in Australia is competitive, based on research excellence and commercial potential. There are no per-University allocations.
IPG was founded in the UK in 2001 and started US operations in 2013. According to its December 2016 annual report, its market capitalisation was £980 million with investment in 113 companies and a portfolio valued at £614 million. IPG is listed on the London Stock Exchange, so is subject to stringent governance. Through its partnerships with Oxford, Cambridge, Berkeley, Columbia and other top-tier universities, IPG is well positioned to see the best inventions from around the world. IPG’s Australian fund is one of the five largest academic-specific IP funds in the world and represents the first major investment in Australian university research from overseas venture capital.
Besides funding for university spin-outs, IPG provides translation expertise including market identification, business planning and executive recruitment. IPG’s strategy is to fund commercialisation via university spin-outs of very early stage creations that might otherwise “languish on the bench,” and thus help this IP reach the stage where other investors are interested. IPG focuses on four investment areas: healthcare (medical devices), technology (electronics and software), cleantech (energy, resources and sustainability), and biotech (pharmaceuticals and diagnostics). IPG’s Australian operating company is headquartered in Melbourne, and staffed with sector experts in IPG’s investment areas, who work with RIC to help researchers develop their inventions.
Uniseed, Biocurate and IP Group offer significant translation and impact opportunities for you as a University researcher. However, you are reminded of your obligation to disclose all new inventions to The University via your Business Development Manager. It is important that you do this before talking to external parties, especially these and other prospective investors.
What activities occur during commercialisation?
During the commercialisation stage, licensees continue to develop and enhance the technology, ultimately creating products or services for offer to the marketplace. This involves prototyping for manufacturability, proof of reliability, further cycles of development to improve performance and most importantly, refinement to ensure that the products or services meet the customer’s need with the anticipated competitive advantage. Benchmarking tests are often required to demonstrate the advantages of the product or service and to position the product in the market.
Where necessary, regulatory approvals must be secured. For commercialisation of IP in life sciences in particular, ongoing development might include pre-clinical safety and toxicology testing as well as clinical trials. Product user documentation and training programs are also generated during this phase. Marketing programs are developed and executed to maximise revenues which flow to the licensee from product or services sales.
The commercialisation stage actions outlined here are the same for all licensees, i.e. established companies, as well as start-ups and University spin-outs. Given the critical nature of this stage for full realisation of the research impact, the preparation of detailed commercialisation and business plans is essential.
What is my role during the commercialisation stage?
Your role may vary in scope and time invested, depending on your interest in being involved and the desired level of support expressed by the licensee. In cases where the licensee is an established company, often your role as creator of the IP is technical support particularly in the early stage. This might be in a consulting capacity or perhaps further contract based research. Initially at least, your extensive know-how will be of invaluable. However, as the established company, with available resources, becomes more familiar, this level of support may no longer be required.
If the licensee is a start-up and you as the creator are fully engaged with this entity, you might serve as Chief Scientist or Chief Technology Officer. Again, your know-how becomes a key contributor to the success of the company. In addition, as the company matures you may become involved in more of the business related activities, although this too would depend on your level of interest and capability to fulfil such roles.
What revenues are generated for The University if commercialisation is successful?
Revenues which flow to The University as compensation for the IP license are defined in the license agreement. Depending on the commercial potential, these can range from a modest, up-front fixed fee to periodic royalty payments, the magnitude of which depend on the degree of commercialisation success. Since most royalties are structured as percentage of sales from products underpinned by the licensed IP, they may be as little as zero if the venture fails or easily exceed hundreds of thousands of dollars over the life of the agreement with a major success.
Most licenses do not yield substantial fee or royalty based revenues. A recent study of technology transfer at US universities revealed that less than 1% of all licenses yield over $1 million. However as stated earlier, The University engages in technology commercialisation primarily for societal impact through research to improve the world we live in and enhance its reputation. As described earlier, the rewards for IP creators too are often more diverse than those which are purely financial.
In some instances, an agreement which involves The University holding equity in the commercialising company may be negotiated. Whilst this may yield financial return though an increase in company valuation, the increased equity can only be released via an event such as a public equity offering or a sale of some or all of the company.
What will happen to my IP if the start-up company or other licensee is unsuccessful in commercialising the technology? Can the IP be licensed to another entity?
Licenses typically include performance milestones based on the impact and enhancement to The University’s reputation that the licensee achieves. If these milestones are unmet, The University usually has the right to terminate the license which then allows subsequent licensing to one or more other businesses. This right to terminate provides The University with a mechanism to manage its risk. If the original licensee fails after a reasonable and agreed period of time, other licensees can be enabled to achieve greater impact from the research.
How are license revenues distributed? What do I receive as an IP creator?
RIC is responsible for managing the expenses and revenues associated with license agreements. After deduction of expenses incurred, the proceeds received by The University from such agreements, are shared with the creators. In the absence of any other specific agreement, 20% is retained by The University central administration, 40% is distributed to the creator’s Faculty and 40% is distributed to creators in proportions agreed amongst themselves.
What if I receive equity (shares) from a company?
It is University policy that University creators of IP owned by The University, share in any financial rewards resulting from the commercialisation of this IP. This includes:
- a share of the 40% of net proceeds flowing from the license to the creators and
- any equity taken by creators in a company (e.g. a staff start-up) commercialising the IP.
Note that in line with The University’s Contract and Conflict of Interest Policies, any IP creator who holds equity must be excluded from any negotiation or providing instructions to RIC and/or University Legal Services.
What are the tax implications of any revenues I receive from The University?
License revenues paid to creators are generally taxable as income. Sales of equity in companies may also incur capital gains tax. We advise you to contact a taxation agent for specific personal advice.
How are revenues distributed to creators if there are multiple creators and/or multiple items of IP in a license?
It is The University’s opinion that the creators should share the revenue returns in proportions equal to the relative contributions made to creation of the IP, including contributions that are not recognised in formal application for IP protection. However, these proportions are defined by written agreement made solely between all creators in which the recognised contributions together with the agreed distribution of the proceeds are stated. If the relevant parties do not agree, then these issues may be referred to the creators’ Head of Department and/or to the Faculty’s Dean. Ultimately, if still unresolved, the final decision will be made by the Vice-Chancellor.
How are proceeds from equity held by The University from a license distributed?
In some instances, particularly with staff start-ups, a license might carry an equity component such that The University owns shares or options in the licensee company. Unlike net fees and royalties which can be distributed on receipt, the equity is typically held by The University in a commercialisation trust until a liquidity event occurs, for example when the company becomes listed on a stock market and the shares are sold, or the company is purchased outright by another company. At this point the proceeds can be distributed in the same manner as license revenues.
What does The University do with the revenues from commercialisation?
Annual revenues generated from licensing of IP created at The University are measured in millions of dollars. Much of The University’s share of this revenue is reinvested in additional research and education which in turn, fosters the development of the next generation of research, researchers and entrepreneurs. Thus the cycle of technology commercialisation is completed. Benefits which flow from IP created are reinvested to achieve future impact.
In addition to the financial returns, the cycle of technology commercialisation also results in new relationships and partnerships being created and strengthened. From these relationships, additional research projects, broader educational opportunities and collaborative investments are encouraged and supported.
By encouraging entrepreneurial endeavour, reinvestment in research and a focus on building strong relationships with its researchers, industry and other partners, The University of Melbourne pursues its objective of delivering societal impact through research to improve the world we live in and thus enhance its reputation.
University of Michigan
This guide is based on The University of Michigan’s “Inventor’s Guide to Technology Transfer,” with adaptations for The University of Melbourne. We are very grateful to Ken Nisbet and the staff of the UM Office of Technology Transfer for their kind permission to use their excellent material and to The University of Michigan for permission to use its copyright.