Funding for Applied Funding for Applied ResearchResearch

Mike SzarkaMike Szarka

Manager of Technology Manager of Technology Transfer & CommercializationTransfer & Commercialization

Main Categories of Funding for Main Categories of Funding for Applied ResearchApplied Research

1.1. Funding for collaborative research Funding for collaborative research and consulting with industryand consulting with industry

2.2. Funding for independent technology Funding for independent technology development, technology transfer development, technology transfer and start-upsand start-ups

Applied ResearchApplied Research

Research directed at a specific Research directed at a specific commercial application commercial application

Requires awareness of market needsRequires awareness of market needs Requires consultation or Requires consultation or

collaboration with the private sectorcollaboration with the private sector Usually involves creation and Usually involves creation and

transfer of intellectual propertytransfer of intellectual property Managing IP rights are critical drivers Managing IP rights are critical drivers

of the funding processof the funding process

UOIT IP PolicyUOIT IP Policy

How does UOIT handle IP?How does UOIT handle IP? IP policy determines IP rights when IP policy determines IP rights when

you invent things with no contractual you invent things with no contractual obligation (Internal)obligation (Internal)

In contract research the contract In contract research the contract supersedes the policy (External)supersedes the policy (External)

UOIT IP Policy (Internal)UOIT IP Policy (Internal)

Inventors own IP, but owe 25% of net Inventors own IP, but owe 25% of net revenues to UOIT (not quite the Waterloo revenues to UOIT (not quite the Waterloo model)model)

Inventors are responsible for 100% of Inventors are responsible for 100% of costs and risk and receive no advice or costs and risk and receive no advice or support from UOITsupport from UOIT

All inventors including students and post-All inventors including students and post-docs have equal rights! Just because you docs have equal rights! Just because you are the boss does not make you the boss are the boss does not make you the boss on IP matters!on IP matters!

UOIT IP Policy (Internal)UOIT IP Policy (Internal)

Inventors can offer IP to UOIT. Revenue Inventors can offer IP to UOIT. Revenue sharing would be based on assessment of sharing would be based on assessment of risk (typically 50/50)risk (typically 50/50)

Assignment to university provides:Assignment to university provides:• Protection from COI and inventor disputesProtection from COI and inventor disputes• Saves timeSaves time• Reduces financial riskReduces financial risk• Opens the door to grant funding from TT officeOpens the door to grant funding from TT office• Expert advice on managing your IP – it is not Expert advice on managing your IP – it is not

trivial and is easy to screw uptrivial and is easy to screw up

UOIT IP Policy (External)UOIT IP Policy (External) University receives no funding from University receives no funding from

government to subsidize industry researchgovernment to subsidize industry research Correct pricing for contract research would Correct pricing for contract research would

include overhead at 65-100%, support of include overhead at 65-100%, support of faculty salary, plus a profit marginfaculty salary, plus a profit margin

Companies often say “we are paying for Companies often say “we are paying for the research, we should own the IP” but in the research, we should own the IP” but in reality they are only paying a fraction of reality they are only paying a fraction of what they would pay anywhere elsewhat they would pay anywhere else

The possibility of some rewards from IP are The possibility of some rewards from IP are only fair to the institution and the only fair to the institution and the inventorsinventors

UOIT IP Policy (External)UOIT IP Policy (External) If sponsor commercializes IP and makes If sponsor commercializes IP and makes

significant profit, some benefit should significant profit, some benefit should return to the university and inventorsreturn to the university and inventors

UOIT negotiates the terms of research UOIT negotiates the terms of research contracts; usually specify university contracts; usually specify university ownership of IP to simplify licensingownership of IP to simplify licensing

Granting programs will usually not accept Granting programs will usually not accept agreements with no benefit to U from IPagreements with no benefit to U from IP

$1,000 minimum for statistical measures$1,000 minimum for statistical measures IP rights can be waived in service IP rights can be waived in service

contractscontracts

University-Industry University-Industry CollaborationsCollaborations

Service AgreementsService Agreements• e.g. use of equipmente.g. use of equipment

Consulting AgreementsConsulting Agreements• e.g. personal arrangements with professorse.g. personal arrangements with professors

Research ContractsResearch Contracts• e.g. funding of student research with specific e.g. funding of student research with specific

deliverablesdeliverables Research GrantsResearch Grants

• e.g. funding of research in a general areae.g. funding of research in a general area

Service AgreementsService Agreements

Service contracts may include Service contracts may include charges for equipment, analysischarges for equipment, analysis

Main benefit are to help support Main benefit are to help support costs of expensive infrastructure, costs of expensive infrastructure, help attract partnershelp attract partners

Can involve a lot of work to manage Can involve a lot of work to manage equipment time, can increase equipment time, can increase downtimedowntime

Consulting AgreementsConsulting Agreements

Literature reviews, calculations, Literature reviews, calculations, advisory servicesadvisory services

Usually done for cash, no university Usually done for cash, no university involvement (negligible use of involvement (negligible use of university infrastructure)university infrastructure)

University does not sign off or review University does not sign off or review the contractthe contract

Usually give up control of IPUsually give up control of IP

Research Service ContractsResearch Service Contracts

Basically consulting deals that are Basically consulting deals that are run through the universityrun through the university

No use of students, usual university No use of students, usual university IP terms may not applyIP terms may not apply

University will charge overheadUniversity will charge overhead University facilities can be usedUniversity facilities can be used University manages the contractUniversity manages the contract

Research Grants (Industry)Research Grants (Industry)

Industry cash is provided with no Industry cash is provided with no expectation of IP rights beyond a “first expectation of IP rights beyond a “first look”look”

May be to answer questions that are May be to answer questions that are pre-competitive, for PR purposes or to pre-competitive, for PR purposes or to interact with studentsinteract with students

Lower overhead charges (20% instead Lower overhead charges (20% instead of 40%)of 40%)

No PI stipendNo PI stipend

Research ContractsResearch Contracts

Well-defined projects with industry Well-defined projects with industry control over IP (although not control over IP (although not necessarily everything for free)necessarily everything for free)

Overhead will usually be 40% on TDCOverhead will usually be 40% on TDC May or may not include PI stipendMay or may not include PI stipend

Leverage OpportunitiesLeverage Opportunities

OCEOCE NSERCNSERC IRAPIRAP SR&EDSR&ED ORFORF CFICFI Name your acronym!Name your acronym!

Ontario Centres of ExcellenceOntario Centres of Excellence

Materials & Manufacturing, ICT, Materials & Manufacturing, ICT, Photonics, Earth & Environment, Photonics, Earth & Environment, EnergyEnergy

Interact program - $13.5k requires Interact program - $13.5k requires industry cash + in-kindindustry cash + in-kind

Collaborative program - >$100k Collaborative program - >$100k requires cash + in-kind, ratio depends requires cash + in-kind, ratio depends on size of companyon size of company

Get OCE personnel involved up frontGet OCE personnel involved up front ““Benefit to Ontario”Benefit to Ontario”

NSERC CRDNSERC CRD

Matches cash + in-kind (in-kind ≤ Matches cash + in-kind (in-kind ≤ cash) (doesn’t match overhead)cash) (doesn’t match overhead)

Very high success rateVery high success rate Can apply after the project has been Can apply after the project has been

funded (short back-dating allowed)funded (short back-dating allowed) Can leverage against Ontario first Can leverage against Ontario first

then against NSERCthen against NSERC Similar CIHR programsSimilar CIHR programs

IRAPIRAP

IRAP cash goes to the companyIRAP cash goes to the company Usually used to offset costs of Usually used to offset costs of

personnel in high-risk R&Dpersonnel in high-risk R&D Can help company place more Can help company place more

money into university, but must money into university, but must respect stacking rulesrespect stacking rules

SR&EDSR&ED

CCPC can get 35% of R&D spending CCPC can get 35% of R&D spending back from CRA even if the company back from CRA even if the company is not taxable (no profit)is not taxable (no profit)

Public companies 20%Public companies 20% University projects will almost always University projects will almost always

qualifyqualify No effect on stackingNo effect on stacking

ORF & CFIORF & CFI

Large-scale infrastructure proposals Large-scale infrastructure proposals beyond the scope of NSERC or OCEbeyond the scope of NSERC or OCE

Usually > $1 millionUsually > $1 million Require significant institutional Require significant institutional

commitmentcommitment Very time-intensive, usually multi-Very time-intensive, usually multi-

institutionalinstitutional

How to Get an Industry PartnerHow to Get an Industry Partner Usually personal relationshipsUsually personal relationships Talks at conferences, networking Talks at conferences, networking

eventsevents ““Planned serendipity”Planned serendipity” Tech transfer office can help Tech transfer office can help

occasionally but PI will generally have occasionally but PI will generally have more success on their ownmore success on their own

Companies will rarely discuss their Companies will rarely discuss their technology gaps until they trust youtechnology gaps until they trust you

Rules for External RelationshipsRules for External Relationships

Rule #1: Remember that all research Rule #1: Remember that all research proposals MUST go through ORS.proposals MUST go through ORS.

Rule #2: Don’t present a draft project Rule #2: Don’t present a draft project budget to a partner without running it by budget to a partner without running it by ORSORS

Rule #3: Don’t sign anything unless it is Rule #3: Don’t sign anything unless it is already signed off by the AP Researchalready signed off by the AP Research

Rule #4: Refer discussions of any IP matter Rule #4: Refer discussions of any IP matter to the Manager of Technology Transfer and to the Manager of Technology Transfer and make no promisesmake no promises

Funding for IP DevelopmentFunding for IP Development

Governments want to see university Governments want to see university inventions commercializedinventions commercialized

UOIT has significant federal and UOIT has significant federal and provincial grants to support this provincial grants to support this functionfunction

New programs provide lots of money New programs provide lots of money to cross the “valley of death”to cross the “valley of death”

University InventionsUniversity Inventions Arrive as a result of organized searching or Arrive as a result of organized searching or

as a stroke of luckas a stroke of luck Typically at a very early stage Typically at a very early stage May or may not have any obvious receptorMay or may not have any obvious receptor Most universities patent fewer than 50% of Most universities patent fewer than 50% of

the inventions received and only a fraction the inventions received and only a fraction of these are ever licensedof these are ever licensed

About five years is a typical delay before About five years is a typical delay before any revenues are receivedany revenues are received

Profits are usually only very large in life Profits are usually only very large in life sciences, occasionally ITsciences, occasionally IT

Why Bother With Tech TransferWhy Bother With Tech Transfer

Most inventions (and tech transfer offices) Most inventions (and tech transfer offices) don’t make money, so why bother? don’t make money, so why bother?

Technology transfer:Technology transfer:• Increases research impact beyond journalsIncreases research impact beyond journals• Helps promote the value of university research Helps promote the value of university research

to the public and governmentto the public and government• Helps to capture the value of research for Helps to capture the value of research for

economic growtheconomic growth• Can reward researchers who put effort into Can reward researchers who put effort into

applied researchapplied research• Is being used as a metric by governments and Is being used as a metric by governments and

funding agenciesfunding agencies

Tech Transfer Agenda at UOITTech Transfer Agenda at UOIT

Increase awareness of IP and Increase awareness of IP and encourage disclosure of inventionsencourage disclosure of inventions

Initiate program for IP managementInitiate program for IP management Protect IP in industrial collaborationsProtect IP in industrial collaborations Facilitate collaboration with industryFacilitate collaboration with industry Goal for UOIT to be the #1 performer Goal for UOIT to be the #1 performer

in Ontario relative to our research in Ontario relative to our research basebase

Addressing the Pre-Commercialization Finance, Skills and Technology Gaps

OntarioResearch

Fund(Research Institutions)

$31.4Ontario

ResearchComm.

Program(Tech

Transfer)

Global Markets

Later StageFinancing($100 M +)

Early StageFinancing($5 -15M)

Angel/SeedStage

VC

SalesEarly

ProductionEngineering

ManufacturingR&D Project

Lab PrototypeIntellectualProperty

FundamentalResearch

Market NeedsAnalysis

Skills Gap

Product Strategy/Early Management

$29M Investment Accelerator Fund

(pre-seed)

$17MBusiness Mentorship and

Entrepreneurship Program

$90MVentureCapital

(seed stage$1-5 M)

Financing Gap

Technology Gap

Addressed via ORIC* Efforts

*Ontario Research & Innovation Council

RIN /

OCN

Program

Types of IPTypes of IP

CopyrightCopyright PatentsPatents Trade-marksTrade-marks Trade Secrets & Know-HowTrade Secrets & Know-How Industrial DesignIndustrial Design IC topographiesIC topographies miscellaneousmiscellaneous

CopyrightCopyright Protects an original written or artistic workProtects an original written or artistic work Copyright means the sole right to produce Copyright means the sole right to produce

or reproduce a work or a substantial part or reproduce a work or a substantial part of it (including computer programs)of it (including computer programs)

Very inexpensive to registerVery inexpensive to register Titles, names and short word combinations Titles, names and short word combinations

are usually not protected by copyright are usually not protected by copyright Facts, ideas and news are all Facts, ideas and news are all

considered part of the public domainconsidered part of the public domain

PatentsPatents

Patent system was created to Patent system was created to promote sharing of knowledgepromote sharing of knowledge

Confers a 20 year monopoly on the Confers a 20 year monopoly on the right to practice an inventionright to practice an invention

Technically not a right to practice, Technically not a right to practice, but a right to exclude othersbut a right to exclude others

Criteria for a PatentCriteria for a Patent

New – not previously available to the New – not previously available to the publicpublic

Useful – not a theorem or a discovery Useful – not a theorem or a discovery of a part of nature with no of a part of nature with no application (e.g. genes)application (e.g. genes)

Unobvious – not an obvious Unobvious – not an obvious extension of knowledge to a extension of knowledge to a practitioner “skilled in the art”practitioner “skilled in the art”

Patent ProtectionPatent Protection

Patent claims denote intellectual territoryPatent claims denote intellectual territory National patents denote market territoryNational patents denote market territory US patent $10-$20kUS patent $10-$20k Foreign patents require expensive Foreign patents require expensive

translationstranslations Can easily exceed $50-$100k for Can easily exceed $50-$100k for

worldwide coverageworldwide coverage Wide protection usually only sought for Wide protection usually only sought for

extremely valuable patents, e.g. drugsextremely valuable patents, e.g. drugs

Profiting from PatentsProfiting from Patents

Can be sold outright (rarely done by Can be sold outright (rarely done by universities)universities)

Can be licensedCan be licensed• ExclusiveExclusive• Non-exclusiveNon-exclusive

Considerations can include:Considerations can include:• RoyaltyRoyalty• Lump sumLump sum• CombinationCombination• EquityEquity

LicensesLicenses

Royalty negotiations are very complexRoyalty negotiations are very complex• % of sales% of sales• % of profits% of profits• Per unit feePer unit fee• Annual feeAnnual fee• Thresholds and rangesThresholds and ranges

Performance criteriaPerformance criteria MilestonesMilestones Cross-licensing and standardsCross-licensing and standards

Start-UpsStart-Ups Two types of start-up:Two types of start-up:

• Venture capital – high dilution, fast growthVenture capital – high dilution, fast growth• Bootstrap – low dilution, “organic” growthBootstrap – low dilution, “organic” growth

VC funding requires:VC funding requires:• Very large marketsVery large markets• Strong IP positionStrong IP position• Stand-alone market opportunityStand-alone market opportunity• Viable management and business plan (rapid Viable management and business plan (rapid

growth)growth) Bootstrap start-up requires:Bootstrap start-up requires:

• Low cost of market entryLow cost of market entry• Immediate revenue opportunities to generate Immediate revenue opportunities to generate

cash-flowcash-flow

Opportunities for FundingOpportunities for Funding

OPIC POP programOPIC POP program OCE Market ReadinessOCE Market Readiness NSERC I2I, CIHR POPNSERC I2I, CIHR POP Accelerator fundingAccelerator funding Venture CapitalVenture Capital

OPIC POP ProgramOPIC POP Program

Phase 1 $15k, Phase 2 up to $50kPhase 1 $15k, Phase 2 up to $50k Earliest stage – prove it works, prove it Earliest stage – prove it works, prove it

has relevance to industryhas relevance to industry May include IP searches, market May include IP searches, market

researchresearch Usually an external reviewUsually an external review Outcome will be answers to questions Outcome will be answers to questions

that can lead to more fundingthat can lead to more funding May be pre-IPMay be pre-IP

OCE Market ReadinessOCE Market Readiness

$50k - $70k$50k - $70k Basic principles should be Basic principles should be

demonstrated, need to answer critical demonstrated, need to answer critical technical questionstechnical questions

Usually some IP protectedUsually some IP protected Outcome will usually be to position for Outcome will usually be to position for

more fundingmore funding Need to show relevance to an Ontario Need to show relevance to an Ontario

companycompany

NSERC I2I/CIHR POPNSERC I2I/CIHR POP

Phase 1 $125,000 for one yearPhase 1 $125,000 for one year Usually need significant background IP Usually need significant background IP

(patent application)(patent application) Need industry support – “we will invest Need industry support – “we will invest

if PI can demonstrate XYZ”if PI can demonstrate XYZ” Phase 2 bigger money but requires Phase 2 bigger money but requires

industry matchindustry match Desired outcome of Phase 1 is Phase 2Desired outcome of Phase 1 is Phase 2

AcceleratorAccelerator

$250,000 seed funding for start-ups$250,000 seed funding for start-ups Start-ups may be “Plan B” if no Start-ups may be “Plan B” if no

company is willing to take a risk on company is willing to take a risk on the technologythe technology

Require strong IP position, Require strong IP position, reasonable business planreasonable business plan

Desired outcome is to position for VC Desired outcome is to position for VC financingfinancing

VC fundingVC funding

Require bulletproof IP positionRequire bulletproof IP position Require REAL managementRequire REAL management Require huge market opportunity Require huge market opportunity

(>$100 million)(>$100 million) Most will want a controlling share in Most will want a controlling share in

companycompany Most will want to see rapid Most will want to see rapid

development of cash flow and an exit development of cash flow and an exit in 2-3 yearsin 2-3 years

Who to Call?Who to Call? For discussions of:For discussions of:

• InventionsInventions• Student rights to inventionsStudent rights to inventions• Industrial collaborationsIndustrial collaborations• Non-disclosure agreementsNon-disclosure agreements• EntrepreneurshipEntrepreneurship• Educating students on IP issues (lectures, seminars)Educating students on IP issues (lectures, seminars)• Anything else that involves IPAnything else that involves IP

Mike SzarkaMike SzarkaExt. 2523Ext. 2523

mike.szarka@uoit.camike.szarka@uoit.ca