Commercialization of intellectual property – how to be successful?
Innovativeness of solutions is a basic and inseparable element of the functioning of technology startups. However, as emphasized by advocate Daniel Hasik from the office of intellectual property law ‘Hasik Rheims i Partnerzy’, you can have a good idea, but not implement it correctly. Find out how to commercialize technology to succeed.
What exactly is commercialization of intellectual property?
Simply put, commercialization aims to ensure that results of scientific research, which are developed in research and academic units, do not lie in enormous filing cabinets at universities, but come to light, can be used in practice, find market applications, and at the same time that a university get the most out of them. Commercialization of intellectual property is the entirety of activities related to making test results available to third parties for a free on the basis of, for example, lending, licenses or sales. When I am the owner of a technology or know-how, then by sharing it with third parties I actually commercialize it. The example referred to has a little narrower conceptual scope with regard to the environment of startups and the academic environment, and in the context of acceleration programs, which are aimed at stimulating cooperation on the part of both scientists and entrepreneurs, as well as investors, and business angels.
If, however, we would like to focus on startups: how can they commercialize their technologies?
There are numerous commercialization possibilities. The choice of the method depends on the needs of a given startup and on which stage of development an innovative idea actually is: whether it is a stage of calculation, whether it is suitable for implementation or is already being implemented. If the product is ready to be released on the market or is currently being introduced, you can go towards licensing agreements, under which the guarantee is that you will receive a license fee, and on the other hand you provide technology or part of knowledge. If the idea is not yet developed and at the moment you also need an investor who will be interested in further creation and development of this technology, then it is necessary to choose commercialization with the use of a structured entity, a separate special purpose company, for example, where the technology and knowledge is contributed-on-kind or lent to the special purpose company. In return, you have the opportunity to obtain shares, or remain a partner in a partnership – depending on the model chosen. In this situation, you have a third party, which on one hand obtains the right to use this technology and know-how, and on the other hand – receives financing for further product/service development or is still looking for funding and works constantly to prepare for the market entry phase.
How to avoid getting lost in the thicket of these possibilities and choose the way of commercialization adjusted to the needs of your startup?
There are various legal solutions that can help you choose a commercialization strategy adjusted to your needs. As part of direct commercialization, it may be the sale of the result of research on all development works, but also a license agreement, lease agreement, rent agreement – depending on a number of circumstances: factual, legal and tax, which will affect the final choice of your path. The second method is intermediate commercialization, when you deal with the acquisition of shares in the company in order to implement or prepare for the implementation of the results of scientific research or development works, as well as know-how. In this case, a special purpose company is established; most often it will be a limited liability company or a joint-stock company. In addition, there is the question of the need for valuation of the contribution-in-kind and for verification whether what you want to contribute has a contribution capacity.
The perfect moment when it is worth making a decision about commercialization…
It is difficult to determine unequivocally which moment is the best one to make a decision about commercialization. Look at it in two ways. If as a startup you are able to prepare your product or service to enter the market yourselves, it is only at the implementation stage that you can look for a buyer or a potential licensee. If you cannot wait because you do not have the resources needed for development or you are missing something to develop your technology, then you must look for an investor, invite someone to the table. It may turn out that this other entity, not necessarily an investor, will have something to say in legal matters and then there may be other legal solutions – a consortium agreement, i.e. a consortium, other cooperation agreements, collaboration, co-sharing, which would bind you and enable implementation.
What obstacles in light of commercialization of technology are faced by startups and how to overcome such obstacles?
Typical obstacles include the lack of funds, starting from financial resources, to human resources and premises, which impede further development. They may also involve the impossibility to obtain protection for the idea. What does it mean? Startups can look for different levels of protection. It is worth taking care of it to avoid situations in which someone uses your achievements, research results, reaching for them because they have not been properly protected. An obstacle may be the cost of obtaining legal protection when it comes to patenting costs, the cost of registering a utility model or an industrial design. Let’s also remember that as part of scientific research, different types of models, prototypes of products, chemical substances, technical parameters of production or technical drawings, production technology are created. You can try to protect all these elements with the help of intellectual property rights.
What kind of rights?
They may include copyrights, patents, utility models or industrial designs, trade secret – they can all be very helpful. At the same time, they constitute quite a significant threshold which may impede subsequent steps or constitute a certain kind of a “mine”. It is difficult to celebrate success, if let’s say in half a year, a competitor appears who using much larger funds will be able to quickly enter into a competitive fight and defeat you. Protection of your own know-how and innovativeness is extremely important. Another obstacle faced by startups involves improper competencies. You can have an idea, but you cannot implement it, e.g. as a result of the lack of organizational and market knowledge that would allow you to build a great product or service based on this great idea. There are numerous potential obstacles that prevent startups from entering the market, and statistics confirm that only a few startups succeed at a local or global scale. It is not impossible, but it is very difficult.
Companies from the academic environment constitute a large group of startups. What should they remember about if they wish to efficiently commercialize their technologies?
If a startup decides to use achievements of a given university or a scientist, verification or small due diligence, confirming the right of the scientist to a given idea, constitutes a very important matter. It may turn out that it is not the scientist who will administer the solution, but the scientific unit the scientist works for – it is very important to establish this to avoid later disputes. If several people from a university decide for commercialization or creation of a startup, several formal and legal matters should be addressed: it may be the requirement to obtain consent of the institute or the university authorities, which arises from the act on higher education, or the matter of financial thresholds which are entered into legal acts. Most of all, it is important – and we are returning to the question which appeared in the first variant – to verify who is entitled to the research results and know-how. A transfer of technology from the university to e.g. a company being established may be required.
What is the evidence of commercialization success?
In our world, most of all financial results constitute a reliable factor determining whether we have succeeded. Information whether a given product or service has found applications on the market also confirms successful commercialization. It may be a niche solution, which will however find a gap in a key industry.