Partnering with Academia: Leveraging Your University's TTO

Takeaway: For academic founders, leveraging your university's Technology Transfer Office (TTO) is a critical first step to assess your research's commercial viability, navigate complex intellectual property, and establish a strong foundation for your synthetic biology startup.

Starting a new business as an entrepreneur in life science and healthcare involves a unique set of legal and strategic considerations that are crucial from the earliest stages. Your initial decisions as a founder can have lasting implications. Therefore, establishing a clear strategy early on to protect your ideas, finances, and opportunities will better prepare your company throughout its lifespan. For academic founders, a key partner in this journey is your university's Technology Transfer Office.

The Pivotal Role of the Technology Transfer Office (TTO)

The first step in transforming your academic research into a viable synthetic biology startup often begins with an honest and in-depth assessment of your research's commercial potential. This involves identifying a market need, estimating the market size, and scoping out the potential "upside" of your business – factors essential for attracting investors and justifying your idea's overall value. Your university's Technology Transfer Office (TTO) is the usual place to start this assessment.

The TTO can assist with crucial evaluations, including:

• Commercial Potential Assessment: They help study the potential market need and size for your prospective product, identifying a viable and ultimately profitable customer base.

• Freedom-to-Operate (FTO) Search: The TTO can help determine whether your idea, product, or process might infringe any existing patents held by others. It is vital not to confuse the patentability of your own findings with FTO; your patents might block others, but an FTO search ensures you are not blocked by others. This search can also help identify workarounds if existing patents pose a challenge.

• Facilitating Discussion: The TTO can provide a collegial and confidential environment to discuss whether a viable new company (NewCo) opportunity exists based on the FTO and market analysis.

If the TTO's assessment is encouraging, this collaboration forms the crucial initial momentum for establishing your new company. Beyond initial assessments, TTOs can be a valuable resource for identifying potential leadership, such as an entrepreneur-in-residence or other credible individuals for a CEO position. It's important to note that if the TTO concludes there's insufficient opportunity (e.g., due to difficult-to-work-around patents or differing market interpretations), researchers may still have options to personally obtain IP rights, although this comes with obligations and potential investor skepticism.

Navigating Intellectual Property (IP)

Intellectual property (IP) discovered or developed at an academic institution is typically assigned to the institution itself, not the individual investigator. Therefore, your new company and its legal representatives will be responsible for negotiating a license for this IP with the institution.

Key aspects of IP licensing from a university include:

• Bayh-Dole Act Compliance: If your research was federally funded, the institution is required to include specific provisions in the license agreement to comply with the Bayh-Dole Act. These include granting the government a non-exclusive, irrevocable, paid-up license to use the invention worldwide, requiring substantial manufacture in the United States for any exclusive licensee, and allowing the U.S. government to exercise march-in rights.

• License Terms: While institutions may offer some flexibility on business terms, they have less leeway with diligence requirements and contractual stipulations that might compromise academic freedom or federal regulations. A typical license will detail upfront fees, reimbursement for previous IP payments, future costs, royalties, maintenance and milestone payments, and a percentage of any sublicensing income. Institutions will usually expect to be shareholders due to their historical contribution.

• Exclusivity: Investors in startups generally seek an exclusive worldwide license for patent-based technologies, which is what your company should aim to secure from your institution. For know-how (non-patented intellectual property), institutions typically offer non-exclusive licenses.

• Ongoing Process: IP protection is not a one-time event; it is an ongoing process that may require revisiting your IP portfolio as your business refines through research, testing, or clinical trials.

Managing Conflicts of Interest

As an academic founder, transitioning from research to business introduces potential conflicts of interest that must be managed. From the moment you decide to start a company, you are generally required to disclose this intent to your relevant compliance office so that a conflict management plan can be put in place. This disclosure should include the estimated equity you'll hold, your role in the company, and the time commitment required.

Important considerations for academic founders regarding conflicts include:

• Executive Roles: Many institutions prohibit or strongly discourage researchers from taking on executive positions within their own startups, or may require them to step down from such roles as the company progresses financially or operationally. While some researchers do leave their institutions to run startups, most remain involved in advisory capacities, such as chairperson of a scientific advisory board (SAB).

• Institutional Activities: Commercial activities on campus are carefully reviewed to maintain the institution's non-profit status. If your company funds research at the institution, there can be no restrictions on graduate students publishing their work or incorporating it into their theses. Confidentiality agreements for lab members may not always be accepted, and formal visiting scientist agreements are needed for company scientists visiting the lab.

• Physician-Scientists: If you are a physician-scientist, your activities related to the NewCo will face a higher level of scrutiny due to potential impacts on patient care.

• Agreement Review: Founders must share copies of any agreements (e.g., consulting or SAB member agreements) with the institution's conflicts office to ensure they do not conflict with your existing employment agreement.

By thoroughly assessing commercial potential, conducting a freedom-to-operate search, and engaging strategically with your university's TTO and specialized legal counsel from day one, you lay a solid foundation for your synthetic biology startup. This preparedness is essential for navigating the complexities of the industry and ultimately bringing groundbreaking innovations to market that can improve people's lives.