KUALA LUMPUR, May 25 — Universities are eagerly seeking ways to commercialise their innovations. 

Choosing the route to market for new technologies arising from universities requires making a set of intricate decisions that many universities and research institutions are not specifically equipped for. 

A frequently asked question by researchers is how do you decide whether to license a technology to an existing company or set up a new spin-out company to develop the technology? 

There are many factors to consider in identifying the best way to market for an early stage technology, and many points of view to take into account. It is vital to have a basic understanding of the meaning of licensing and spin-out. 

A licence and licensing refer in this context to a licence agreement which allows an existing company (the licensee) to use intellectual property rights owned by the university or its technology transfer company (the licensor). 

The licensee is an existing company, of any size, anywhere in the world. Usually the licensee will be reasonably well established to have reached the stage where it is licensing in new technology other than the technologies it is founded upon.

On the other hand, a spin-out is a new company formed specifically to develop technology arising from within the university, with the direct involvement of founding researchers from the university as shareholders. 

Initial shareholders typically include four groups: founding researchers, the university, investors and company management. In this case, the IP is transferred to the new company in the form of a licence.

The technology transfer office (TTO) is a part of the university responsible for commercialising university-owned intellectual property rights through the core activities of attracting and assessing invention disclosures; patenting and other forms of intellectual property protection; licensing; spin-out company formation; material sales; managing seed funds etc. 

The TTO may also incorporate a function that helps researchers sell their time as expert consultants.

Licences generally do not take very long to negotiate and conclude and then once the deal is signed, there is very little work involved on the researcher and TTO side until the money starts coming in from product sales. 

Whereas with a spin-out, it takes a much longer time to pull the team together, generating much heat and light, and then years for the technology to come to market. 

Things can play out differently. In some cases, licences taking a long time to settle, and then requiring re-negotiation, litigation, support from researchers, and taking years for any royalties to flow. 

There are other instances of new companies thriving with experience management, needing little input from researchers and generating decent shareholder return and exit opportunities in a few years.

The people in the TTO will be working with the researchers who invented the technology. In some universities, the TTO decides what to do with the technology and sets about executing its plan. 

In others, researchers are expected to tell the TTO what they want to happen. Usually, it is a joint decision; it is generally counter-productive for the TTO to try to achieve something the researchers do not want to happen.

However, this is only half the story, so far only considering the supply side or push side, from the university out to industry. What about the demand or the pull side? 

Successful technology transfer requires people in business to decide to take an idea on. The vital role of the TTO is trying to understand the possible routes to market and finding companies and investors willing to take on the challenge of developing a new technology.

"Licence or spin-out” has important implications for the researchers involved. The biggest difference is whether the researchers are shareholders in a new company or not, but even this can be blurred. 

A researcher may decide on not to be a founder shareholder in the spin-out. A researcher may be incentivised by an existing company licensee with share options or shares under a consultancy agreement alongside the licence. 

Researchers have very different views about how their technology is used. Some take the view that allowing someone else to take their idea forward is an honour whilst others are pleased to see any uptake of their research outputs.

In any case, it is extremely important to have full commitment from the researchers in both cases (licence or spin-out) and definitely in the case of the spin-out. The spin-out could be in jeopardy if the researchers lose their interest too soon when choosing to spin-out.

There is also variation in the objectives of those involved: the researchers, the university, the TTO, the investors, the company, the management. 

Researchers may be motivated to see their ideas out there, being used and to make as much money as possible. The university may be most interested in generating stories to tell about how well it is connected to the industry and benefitting the society whilst the TTO may not be well enough resourced and be hopeful on the financial return which only time will tell.

* Biruntha Mooruthi is vice president and head of IPR & Commercialisation Services of PlaTCOM Ventures Sdn Bhd — the national technology commercialisation platform of Malaysia — a wholly-owned subsidiary company of Agensi Inovasi Malaysia (AIM) formed in collaboration with SME Corp Malaysia.