no equity in the company and no milestone fees, although in the event of a merger, stock or asset sale, or IPO, it takes a 0.75 percent payment on the company’s fair market value.
The idea of an express license agreement “had been discussed for a long time,” says venture capitalist Jean-Francois Formela, a partner at Atlas Venture. “So kudos to UNC for this.” But Innes is the first to admit she’s “getting a lot of flak” from tech transfer colleagues at other institutions. The comments she gets go along the lines of “Are you out of your mind?” and “This will never work,” she says. Her peers, she adds, “would want more” for the university, such as higher fees or royalties. “Some of my colleagues would not take less than 3 percent in running royalties,” she says.
The express license has been available at UNC since December and so far it has been used to launch six startups. Why, I asked Innes, would you take a bad deal upfront every time? She said, essentially, that the university is taking a bet on volume over margins. “Where we hope to gain is that if we get a lot of companies started, more of them will be successful and have more products on the market, so we’ll be more successful,” she said. “This university has been very consistent in its messaging [that] we’re not just trying to maximize cash. We need to get more things in the pipeline.”
I asked Lita Nelsen, director of the Technology Transfer Office at MIT—and, by many people’s accounts, one of the most respected technology transfer experts in the US—what she thought of UNC’s agreement. Let’s just say she wasn’t head-over-heels for this type of deal. “This is a massive change to what is not the hard part of the problem,” she said. “People seem to think that negotiating the agreement is the hard part of getting startups off the ground. The real issues are ones of investors, leadership and the like.”
A one-size-fits all agreement, Nelsen argues, takes away from the uniqueness of each technology. For example, terms for a license in the pharmaceutical space, where margins on future sales could be rather large, should be different from terms for an energy startup, since margins on sales of a commodity can be significantly smaller, she said. “Every deal is so different that [the express agreement] is going to cheat it at one end or the other,” said Nelsen. “It’s going to underprice sometimes and overprice other times.”
And how about the argument that the government’s investment, in the form of research grants, is being undermined if license terms don’t aim for a good return on inventions? Innes said getting a big return isn’t the government’s chief aim in giving grants. “The government does not say ‘Get the maximum dollar back into the inventor’s pocket,'” she replied. “It says, ‘Get your inventions commercialized.'”
