The Tech Transfer Process

Inventor:  (n) someone who has produced or contrived (something previously unknown) by the use of ingenuity or imagination.

                                                                        The American Heritage Dictionary

The concepts of invention and inventorship are central to any discussion of Technology Transfer or Intellectual Property in an academic setting.  However, defining either is usually more difficult that one can imagine.  It is often easier to define what they are not.  Like Justice Potter Stewart attempting to define obscenity in 1964[i], you’ll know it when you see it.

Any time a discovery is made, or a new method is developed, or an improvement to an existing item or method is envisioned, it is a good idea to contact your Office of Technology Transfer.  A Licensing Manager will be happy to discuss your idea or discovery and counsel you on your next steps.

The University Policy on Intellectual Property and Technology Transfer covers all faculty, staff, and students and explains these matters in detail.  The Technology Transfer web site provides both a printable version of the IP Policy, as well as a navigable version.

In the pages that follow, I will attempt to illustrate the policy process in non-specific terms, using as an example Dr. Abigail Anchor, a fictitious researcher in the Department of Dermatology.  Dr. Anchor is studying the underlying mechanisms of the prescription drug Greatskin!® in the treatment of severe acne.  She is treating several patients with different dosages.

One day, one of her test subjects (KB) who had previously been resistant to the beneficial effects of Greatskin®! arrives for her routine treatment and Dr. Anchor is shocked to see that KB’s complexion is spotless.  After an exhaustive interview, Dr. Anchor learns that KB had started taking a new multi-vitamin, Good for You!® that week.

Additional experiments were conducted, combining doses of Greatskin®! with various OTC multivitamins.  Every subject tested in combination with Good for You!® showed dramatic reductions in their acne, while the other subjects fared much as they had before.

Dr. Anchor analyzed the ingredients in Good for You!® and isolated the only ingredient that separated it from its competitors:  “vitamin G4.”

Dr. Anchor began testing subjects without Greatskin!® and discovered that patients treated with only G4 responded as well, if not better than subjects treated with Greatskin!®  She had proven that vitamin G4 cured acne!  This unexpected result definitely qualifies as an invention.

Immediately after recording her findings in her laboratory notebook, Dr. Anchor went to the Technology Transfer web site and downloaded an Invention Disclosure Form (also available in Word format).  She completed the Invention Disclosure Form and sent it to the Medical Center Office of Technology Transfer.

The Disclosure was assigned an identifying number and given to the manager responsible for dermatological technologies:  Fionna Fountain, Ph.D.  Dr. Fountain reviewed the disclosure and met with Dr. Anchor to discuss it.  Of course, the vitamin G4 compound itself was covered by several patents owned by the multinational drug company, Good Health, and the University had no rights to use, distribute, or sell the compound.  However, none of the Good Health patents mentioned G4’s efficacy in the treatment of severe acne.  Dr. Anchor had discovered a new use for an existing product!

Dr. Fountain sends the disclosure to a patent attorney who specializes in writing new use claims (and also just happens to be trained as a dermatologist) for a second opinion.  The attorney, Murray Mills, M.D., J.D., concurs with Drs. Fountain and Anchor and is retained by the University to write a patent application related only to the use of vitamin G4 as an acne treatment.  Since Dr. Anchor wishes to conduct additional experiments, and since Dr. Mills thinks it would be helpful to have additional data for the patent application, the decision is made to file a Provisional Patent application at this time.

Dr. Mills drafts a thorough patent application, detailing why the G4 compound works on the condition.  The application only lacks the requested additional data.  The application is filed with the U.S. Patent and Trademark Office on 1 March 2005.  Henceforth, this is known as the Priority Date.  The University now can prove beyond all doubt that Dr. Anchor conceived of her idea at the very least no later than 1 March 2005.  If necessary, Dr. Anchor can present her properly prepared laboratory notebook to prove that she first made her discovery on 17 November 2004.  This is useful in case someone else ever claims to have discovered vitamin G4’s acne-fighting properties before Dr. Anchor.

A Provisional Patent application serves no purpose other than establishing the Priority Date.  The application will never be reviewed unless litigation arises over who invented what and when.  The cost of filing a Provisional application with the USPTO in 2005 was $110, since the University (because of its non-profit status) is considered a “Small Entity.”  A for-profit – or “Large Entity – would have paid $220.  The cost associated with drafting the application varies with the complexity of the application.  In this case, Dr. Mills was able to draft a concise — yet detailed — application in a few hours.  The bill from his firm is $1,200.  This cost is borne by the University.

This might be a good time to return to the Policy on Intellectual Property.  The policy explains that all intellectual property generated by faculty, staff, or students in the course of their employment belongs to the University.  Since Dr. Anchor’s discovery occurred during the course of her research, her discovery unambiguously belongs to the University.[ii]  As the Provisional Patent application is filed, Dr. Anchor is asked to sign a document known as an Assignment, in which she grants (assigns) her rights in the invention to the University.

In the next year, Dr. Anchor turns to new areas of research, but she continues to collect data on vitamin G4.  She works with Drs. Fountain and Mills to draft the next patent application, which must be filed before the twelve-month expiration of the Provisional application.  This application is more detailed than the Provisional because Dr. Anchor has a better understanding of the mechanisms underlying the compound’s interaction with acne.  They have additional data and even a few drawings to add to the application.

The new draft costs $9,000 and filing fees add another $550.  Again, the University pays these fees.

Dr. Fountain suggests that perhaps this use of vitamin G4 will have commercial potential outside of theUnited States, so she asks Dr. Mills to file the patent application internationally, as well.  Dr. Mills prepares what is known as a PCT (Patent Cooperation Treaty) application at an additional cost of $8,000.

The U.S. Utility and PCT applications are both filed on 1 March 2006.

The USPTO is a very busy place, so they only look at the application briefly to ensure that all of the required parts are present in the application and that the proper fees have been paid.  Dr. Mills does good work, and the application is considered to be complete.  Even so, a patent examiner may not read the application for several years.

Meanwhile, the PCT application is filed with the World Intellectual Property Organization (WIPO).  The application is examined briefly to ensure that all required parts are present and that the proper fees have been paid.  They order an International Search Report (paid for by the applicant) to locate any prior art on the subject.  Once references are collected, the application and associated information are published and made publicly available.  The public now has a period of time to make objections to the subject of the application.  The PCT application, like the Provisional before it, will not result in an issued patent.  It serves as a place holder, allowing time (eighteen months) for prior art to surface and objections to be raised.

The PCT application expired on 1 September 2008.  In the months leading up to that date, Drs. Fountain, Mills, and Anchor have discussed their international strategy.  They decided to move forward with patent applications inAustralia,Canada, Europe, andJapan.  These nations (For patenting purposes, the European Union is considered a single country.  This will be further explored in a moment.) were selected for two reasons:  they have populations likely to make use of any resulting products, and their governments are fairly capable of stopping cases of patent infringement.

On, or around, 1 September 2008, the PCT application enters into the National Phase in the aforementioned countries (for a slight fee, of course).  Once again, the applications will be forced to wait before being examined.  The fees, however, do not wait; and the University pays an annuity every year to keep the applications active.  When the time is right, the attorneys retained inAustralia,Canada, Europe, andJapanwill request examination, pay the appropriate fees, and address the patent examiners’ concerns as they arise.

In our example, the science is impeccable and the supporting data is compelling enough to see the application through the examination process with barely a catch.  The Australian Patent issues first, early in 2010 (for a slight fee, of course).  The Canadian and European patents issue in the fall of that same year.  The issued European patent is not a patent itself.  The applicant is notified that the patent is granted and asked in which member states is patent coverage desired.  Patents will automatically issue in each member state that the applicant selects (for a slight fee, of course).  The University selectsAustria,Belgium,Denmark,France,Finland,Germany,Ireland,Italy,Luxembourg, The Netherlands,Norway,Portugal,Spain,Sweden, and theUnited Kingdom.

The U.S. Patent issues in 2011.  The Japanese Patent Office is harder to convince, and the patent is not allowed until the summer of 2012.

The cost of acquiring these patents is $124,000.  To this point in our story, Dr. Anchor has not received any reward for her discovery, aside from her name on all of the issued patents and the esteem of her colleagues.  Nor has she been responsible for the patent expenses.  If nothing else were done, the University would be out $124,000 with nothing to show for it beyond nineteen fancy certificates locked away in a fire-proof safe.

A patent, in itself, has no value.  It is simply a license to a limited monopoly for a period of time.  In our example, the University has the right to prevent others from capitalizing on Dr. Anchor’s invention in nineteen countries.

Fortunately, the University OTT has not been idle.  Dr. Fountain has left the University to pursue other opportunities, but her successor, Dr. Steven Sudcliffe, negotiated a license agreement with none other than Good Health — the manufacturer and owner of the G4 compound.  Good Health has agreed to pay the University a 2% royalty on the sale of every G4 capsule prescribed to treat severe acne in the U.S., and 1% on worldwide sales.  (This is a grossly over-simplified example of license terms.  A typical license agreement will be much more complex than this illustration.)  The drug maker has conducted clinical trials and secured FDA approval to use G4 for this new purpose.  They call the “new” drug Good for Your Skin!® and the first sale is in July of 2011.

Good for Your Skin!® is a huge success.  The first royalty check arrives at the University in January 2012 in the amount of $3.2 million.  The University claims the first $124,000 to cover past patent expenses.  The remaining $3.076 million is distributed according to the IP Policy.  The distribution is on a sliding scale based on the amount of royalty income, so a detailed description may be in order:

For the first $50,000, 50% is shared among the inventor(s).  The inventor’s department gets 20%, the School gets 10%, and the remaining 20% goes into the “IP Pool” to defray future patenting expenses, as well as providing gap-funding to advance future product development.

                                    Dr. Anchor                                $25,000

                                    Dept. of Dermatology             $10,000

                                   SchoolofMedicine                      $5,000

                                    IP Pool                                          $10,000

For the next $200,000 of royalties, 40% is shared by the inventor(s).  The inventor’s department gets 20%, the School gets 15%, and the IP Pool gets the remaining 25%.

                                    Dr. Anchor                               $80,000

                                    Dept. of Dermatology            $40,000

                                   SchoolofMedicine                     $30,000

                                    IP Pool                                         $50,000

For royalties beyond $250,000, 35% is shared by the inventor(s).  The inventor’s department gets 20%, the School gets 20%, and the remaining 25% goes to the IP Pool.

                                    Dr. Anchor                                $989,100

                                    Dept. of Dermatology             $565,200

                                   SchoolofMedicine                      $565,200

                                    IP Pool                                          $706,500

From the first royalty check, Dr. Anchor receives $1,094,100.  The Department of Dermatology receives $615,200.  TheSchoolofMedicineand Dentistry receives $600,200.  The IP Pool receives $766,500.

For the duration of the patent protection, Good Health continues to pay the University royalties on a semi-annual basis.  All additional funds received are distributed according to the third formula shown above.  Dr. Anchor works a few more years and takes an early retirement.  She establishes a charitable foundation and moves to Antigua, where she starts a company that manufactures her Easy Cheeze!® cheese slicers.  The University uses its share of the royalties from Good for Your Skin!® to fund research in dermatology, and for many other worthy endeavors.

*          *          *

Of course, this is an extreme example.  Not all inventions will meet with success.  Some very good science will have limited commercial potential.  It is often in the best interests of the public good to transfer these technologies freely into the public domain.  It is a rare technology that meets with both scientific and commercial success.  Rarer still are the hugely successful technologies such as described in our example.

[i] “I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description [of obscenity]; and perhaps I could never succeed in intelligibly doing so.  But I know it when I see it, and the motion picture involved in this case is not that.”  Jacobellis v Ohio 378 U.S. 184 (1964).

[ii] Note the following distinction:  One evening, while preparing for a party in her home, Dr. Anchor becomes disgusted with the quality of the cheese she is getting from her present cheese slicer.  She envisions a new device that should provide flawlessly sliced cheese (invention).  A few days later, she produces a prototype of her device and it works (reduction to practice).  To be safe, Dr. Anchor describes the cheese slicer to the Office of Technology Transfer in an Invention Disclosure.  After review, OTT determines that the slicer was not developed using University resources (including salary), and waives all rights to the invention.  It belongs to Dr. Anchor to do with as she sees fit.


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