Commercialization Basics

Is Your Discovery an Innovation?

If your research discovery could potentially form the basis of a product or service that addresses a problem in the world, then our team can help you.

Innovations may:

• lead to commercial products and processes
• occur in any field and encompass many areas
• address a market or technical need

If you’ve created something “new,” we’re ready to work with you to determine if your innovation has commercial potential.

Rewards of Inventorship

Technology commercialization offers many potential benefits to the inventors. First and foremost, it offers the opportunity to make a positive impact on society through broad deployment of your research discovery or new technology. Technology commercialization offers opportunities to collaborate with industry, which may result in sponsored research opportunities. This collaboration can also provide students in your laboratory with invaluable experience, and open up potential future career paths.

In addition, Inventors receive a share of the monetary compensation received by U-M in the form of royalty payments. Your department and college also receive a share of these revenues. The economy benefits as well. In the last 15 years, licensing of U-M inventions has resulted in the introduction of many new products in numerous markets and in the creation of more than 200 new companies.

Why Protect Your Innovation through Intellectual Property Such as Patents or Copyrights?

Intellectual property protection for your research discovery creates an economic incentive for a company to invest time and resources in developing that discovery into a product or service. Most academic research innovations are considered to be very “early-stage.” Therefore, an industry partner or startup investor will want to know that they will have intellectual property protection if they invest in bringing that early-stage research discovery to market as a product or service.

Commercialization activity does not interfere with your ability to publish. For patentable inventions, we must file for patent protection before publication in order to be eligible for patent protection outside the U.S. Therefore, If the market for your invention is global, this is an important consideration as you plan publications and public presentations. 

After Innovation Partnerships files a patent application, you may exhibit or publish your work without the loss of patent protection for the inventions claimed in the application.

Patents can provide a strong economic incentive for a company to license U-M technology. Patents give U-M and its licensees the right to exclude others from practicing the invention for a period ending twenty years from the patent application’s filing date. This period of exclusivity presents a barrier to entry to other companies, allowing the firm that licenses the invention an incentive to invest the significant time and resources needed to bring the discovery to market.

Some technology lends itself to copyright protection, such as software, educational materials, multimedia presentations, etc. In these cases, copyright protection is provided at creation, but we may also elect under certain circumstances to register the copyright with the U.S. Copyright Office.

One may protect other types of technologies, such as data collections, methods, and models, through a combination of know-how and trade secrets. These two forms of intellectual property protection depend heavily on specific knowledge that a researcher has gained through experimentation and trial. Therefore, an industry partner can typically only access this intellectual property via direct dialogue with the inventor. This is fertile ground for developing research collaboration opportunities. Other innovations such as optimized parameters, weights or configuration of a model can be kept proprietary with specific licensing language. All of these options can be explored and used in combination with traditional forms of intellectual property where appropriate.

Other materials such as vectors, plasmids, cell lines, and animals (mice, rats, etc.) may be maintained as proprietary materials. Often these “research tools” are licensed non-exclusively to multiple companies in order to ensure the broadest possible research availability.

License to an Existing Entity

The majority of U-M inventions are licensed to existing large and small companies. Innovation Partnerships is connected to decision-makers across all industries. When we don’t have an existing connection, we will work to find a potential licensee who can talk to you about your innovations. An existing company may be an ideal commercialization partner because they can leverage existing infrastructure, channels, and expertise.

License to a Startup

Sometimes commercialization of the invention is best suited via the creation of a startup company (a new company created to commercialize a particular technology). Inventors may participate in these startup companies in a variety of ways, and Innovation Partnerships is available to discuss all aspects of company formation with you.

Innovation Partnerships structures licensing agreements with U-M startups with an emphasis on helping the company become viable, while also ensuring that the invention is diligently developed and commercialized and that the university receives a fair return should the company be successful. Innovation Partnerships takes pride in its startup-friendly licensing framework, which has been recognized by startup founders and investors as being unique among peer universities.

For assistance with forming a startup, please visit the Startups section of our website, or click here to connect with one of our Ventures professionals.

Opening Pathways for Your Innovation to Change the World

Innovation Partnerships is able to ensure compliance with any obligations owed to the entities that sponsored the underlying research partners. For innovations arising from federally-funded research, we can ensure that you comply with all obligations owed to the federal government.

If your invention is created under a sponsored research agreement, Innovation Partnerships will review and manage any reporting obligations to the sponsor.

If your invention uses materials from a third party, your licensing professional will also review any constraints based on the Material Transfer Agreement (MTA)

Universities Are Non-profit and Serve the Public

Universities have three basic missions: education, research, and serving the public. It is important to recognize that the foremost objective for an institution in a licensing discussion is to ensure that the university’s technology reaches the marketplace in a timely manner for the benefit of the public. Achieving a fair return on the university’s (and taxpayer’s) investment also is an important objective.

Universities Own Their Technology

The Bayh-Dole Act of 1980 provides universities with the right to maintain ownership of inventions made by their employees using federal funds. The vast majority of U.S. universities also have policies providing for ownership of all inventions made by their employees except for a historical exclusion of scholarly works of authorship such as textbooks. Generally universities will maintain ownership of technology (vs. assigning rights) and provide license rights (exclusive or non-exclusive) while controlling the protection and maintenance of patents or copyrights. This strategy ensures that the university can pursue other commercialization partners if a first licensee is unable to bring a product or service to market.

Reimbursement of Patent Costs

While universities are often willing to take the upfront financial risk to obtain patent protection for their technology, once a third party elects to commercialize the technology, it will be required to take over the financial risk from the university. Typically, an exclusive licensee reimburses the university for all its costs associated with the preparation, filing, prosecution, and maintenance of the licensed patents.

Obligations to the Government

Government funding carries a number of obligations that must be met by the university. First, the university must report to the government all inventions, patent applications and licenses of federally funded technologies. Patent applications and subsequent issued patents must recognize the government funding in writing. In addition, the university must give the federal government a royalty-free non-exclusive license to federally funded technologies for government purposes. This government license will be referred to in the license agreement. Depending on the particular funding agency, the license must require that licensed products are substantially manufactured in the United States. Some agencies permit the university to seek a waiver of this manufacturing requirement, for example upon a showing that either: (1) the university made “reasonable but unsuccessful efforts …. To grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States,” or (2) “that under the circumstances domestic manufacture is not commercially feasible.”

Diligence

Because the university’s overriding objective is for its research innovation to be developed into a product or service that reaches the public, the license agreement will provide for certain diligence milestones that a licensee must meet to ensure that the innovation is being diligently developed and commercialized. For pharmaceuticals, these are often clinical trials milestones; for other products, diligence terms might include first prototype, first sale, etc. Sometimes diligence terms or milestone terms include financing or business formation milestones (typically with startup companies) or issuance of first patent.

Fair Return

A license agreement should provide for a fair return to the university if the product is successful in the marketplace. When the technology is licensed to a startup company, most universities are willing to participate in the early risk by taking equity to reduce upfront cash payments. However, once the licensee is obtaining revenues on a product, and the university intellectual property protects the core aspects of that product, the university will typically expect a portion of these revenues. Typically revenues back to the university are provided as royalties on sales. The negotiated percentage is generally based on a number of factors including: the relative profit margin for the particular product, investment required to commercialize the product, competing technologies, strength of patent and copyright protection, and type of license rights (non-exclusive vs. exclusive). License agreements may also provide for the university to receive other payments such as license fees, milestone payments, annual maintenance fees, and minimum royalties. Any licensing revenue received by the university is shared with the inventors in order to incentivize participation in this commercialization activity and the remaining revenue is reinvested in future research activity.

Product Liability, Insurance, Indemnification, Warranties

The licensee will indemnify the university, its employees, regents, trustees, etc. against all claims, proceedings, demands, and liabilities of any kind whatsoever. Universities will also require that the licensee obtain appropriate amounts of product liability insurance prior to commercial sale or use of a product. The university will not make any warranties as to the fitness, merchantability, validity of patent rights, etc. It is the licensee that is responsible for designing and developing the ultimate product that will come to market. Accordingly, the licensee assumes all risk associated with the licensed technology.

Sublicenses

If the license is exclusive, the university may allow the licensee to enter agreements with other third parties through sublicense agreements. The university will expect certain requirements of the license to pass down to the sublicensee and the university will share in sublicense revenues received by the licensee.