Licensing to Startups
Not all technologies or market opportunities can support a startup company, but when they can, startups can be a more rapid, powerful and rewarding way for a technology to impact the public when compared to trying to license to existing companies. There are many key differences between a new, untested business venture and an established business, such as structure, culture and financial capability. In recognition of these differences, the Purdue Research Foundation (PRF) uses a success-based model to license Purdue University technologies to new startup companies with minimal fees taken from the startup company during development. Every effort is made to ensure that a startup company is given the greatest chance to thrive, and that PRF and the innovators can share in the company’s later success. To that end, PRF has created a variety of policies and agreements designed to get startup companies access to the technology they need to develop without hindering their ability to succeed.
All startup companies require a well-developed business plan or business model to demonstrate that the founders have thought of the critical issues surrounding the market opportunity of interest. PRF understands that this plan is a living document that will change based on the contemporary fact pattern. PRF and Purdue have dedicated a number of resources that are made freely available to Purdue faculty, staff and students to educate and assist them in the process of developing a business plan or model. For more information, contact OTC and the Purdue Foundry.
As with licensing to existing companies, there are some terms in PRF licenses to startup companies that are still non-negotiable, but agreements can be crafted to fit the particular needs of the startup company and circumstances of the license. Startup company licenses are generally exclusive, meaning the technology cannot be licensed to another party and often have broad scope in terms of the technical field of use and geographic territory to give the startup company the greatest flexibility in identifying and pursuing the appropriate market opportunity. The business plan of a startup company should describe how opportunities in all the identified market segments will be pursued.
There are several specific agreements that PRF has made available, under defined conditions, to Purdue faculty, staff and student innovators in an effort to give Purdue entrepreneurs the greatest chance of success in commercialization of Purdue technologies.
Examples of Startup Licensing Agreements Offered by PRF
SBIR/STTR Option: PRF offers a zero-initial fee option for startups with direct involvement from Purdue innovators that are awarded Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) funding, and use at least 30 percent of the granted budget to support further R&D at Purdue.
Express License: Purdue innovators who are founders of the first new venture formed to develop and commercialize their innovation may be eligible for an exclusive express license with preset terms. This license has no upfront fees, defers reimbursement of patent costs and provides a quick and easy option for licensing innovations that are not encumbered by third-party obligations.
Startups are important to PRF, both as a key indicator of PRF’s success in developing the entrepreneurial ecosystem at Purdue and in their economic impact on the region and State of Indiana. It is PRF’s clear intention to make the process of starting a new venture based on a Purdue technology as simple and transparent as possible, while providing the support necessary through OTC and the Foundry for entrepreneurs to develop their ideas into prosperous companies.
Outside Activity Policies
For Purdue faculty and staff considering forming a startup, it is important to remember Purdue’s Policy III.B.1: Conflicts of Commitment and Reportable Outside Activities. The primary intent of this policy is to avoid conflicts of commitment arising between the outside activity and the faculty or staff member’s responsibilities as a Purdue employee and to protect the academic experience of any students involved.
“Reportable outside activities” generally are considered to be anything that could give rise to a conflict of commitment, such as any work, advice or service to an entity other than Purdue, including to a startup. Reportable outside activities and conflicts of commitment are managed by Purdue’s Office of the Vice President for Ethics and Compliance, as set forth in Purdue policy III.B.1. This policy describes outside activities in more detail and gives instructions on how to ensure that startup-related activity is managed appropriately to avoid any possible conflicts of commitment. Since a Purdue faculty or staff member’s primary commitment is to Purdue, one key area in which conflicts of commitment can arise is in license negotiations between PRF and a faculty or staff member acting as a representative of a company.