Intellectual Property Guidelines

IPG03 What to Expect When Licensing a Penn State Technology into a Start-Up Company (Formerly RAG14)

Policy Status: 

Active

Policy Steward: 

Vice President for Research

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Contents:

INTRODUCTION:

Forming a company is a demanding and challenging undertaking requiring a significant commitment of both time and money. While forming a company can be a positive and rewarding experience, it is not for everyone. If you are considering becoming involved in a start-up company, please review these guidelines carefully and then schedule a meeting with the Office of Technology Management to discuss the process.

GUIDELINES:

  • The Penn State Office of Technology Management (OTM) negotiates license and option agreements on behalf of The Penn State Research Foundation (PSRF), which is responsible for administering the financial and business aspects of technology transfer for Penn State University.
  • Faculty are required to be highly cognizant of, and address any conflict of interest issues that arise due to their involvement in companies, and to be particularly sensitive to issues surrounding human effects inventions. Strict compliance with the conflict of interest policies delineated in the following is essential:
    • AD83 - Institutional Financial Conflict of Interest
    • IP06 - Technology Transfer and Entrepreneurial Activity (Faculty Research)
    • RA20 - Individual Conflict of Interest Policy
    • HR91 - Conflict of Interest
  • Universities are obligated by federal law to find the best possible route to commercialization for their technologies. Therefore, the OTM must consider and evaluate all reasonable licensees. Companies sponsoring research will be considered as likely successful commercial outlets because of their demonstrated resources and interest in the work.
  • Negotiations will be conducted impartially and objectively. Faculty companies cannot receive any preferential treatment on licensing terms. Agreements with companies in which faculty are involved will receive the same level of review and scrutiny as would any other agreement. It is highly recommended that faculty not directly participate in negotiations with the OTM.
  • The OTM, in conjunction with the Office of General Counsel, is responsible for protecting the interests of the University and University inventors who are not participating in the company to whom the technology is being licensed.
  • There are extensive resources available in the Technology Transfer Office in addition to the OTM to support and assist companies formed from University technology. It is the responsibility of the companies to avail themselves of those resources.
  • University inventors who are principals, founders, or participants in the company being licensed must realize that their business interests may not completely align with the University's and as such, are responsible for all aspects of their own interests including financial and legal implications of stock ownership. Separate legal counsel and financial advice is recommended. Founders are responsible for the legal expenses associated with forming a company. It is advisable to obtain estimates of these expenses in advance.

MINIMUM REQUIREMENTS FOR A START-UP COMPANY TO BE CONSIDERED AS A LICENSEE

  • Professional operating management of the company at the level of CEO/COO. Faculty should not attempt to manage start-up companies. Although positions such as Chief Technical Officer may be appropriate, most venture capital firms will not invest in start-ups that have faculty members as operating management. Faculty need to be cognizant of the highly competitive and complex nature of the business world and the level of effort and commitment which will be required for a company to be successful.
  • A thorough and comprehensive business plan. Typical business plans address the following:
    • Mission statement and strategy
    • Objectives
    • Service/Product description
    • Market analysis
    • Competitive analysis
    • Key management
    • Financial projections
      • Capitalization schedule
      • Projected profit and loss
    • Exit strategies
  • A reasonable level of capitalization to support the initial operations of the company and a plan for approaches to subsequent financing.
  • Ability and commitment to reimburse all current and future patent expenses. It is not unusual for patenting costs for domestic and international filings to quickly exceed $100,000. The IPO maintains records of current patent expenses and will estimate future patent expenses based on defined patent protection strategies upon request.

FURTHER INFORMATION:

For questions, additional detail, or to request changes to this policy, please contact the Office of the Vice President for Research.

Effective Date: January 7, 2013
Date Approved: September 14, 2012
Date Published: January 7, 2013 (Editorial changes- November 19, 2015)

Most Recent Changes:

  • November 19, 2015 - Editorial changes. Title changes FROM "Vice President for Research and Dean of the Graduate School" TO "Vice President for Research."

Revision History (and effective dates):

  • October 25, 2013 - Editorial changes. Addition of policy steward information, in the event that there are questions or requests for changes to the policy.
  • September 10, 2013 - Editorial change in GUIDELINES section; replaced reference to Policy RA21 - Institutional Financial Conflict of Interest Involving Sponsored Projects, Dedicated Gifts, Research, Scholarship, and Technology Transfer (obsoleted) with Policy AD83- Institutional Financial Conflict of Interest.
  • July 25, 2013 - Editorial change; references to the Intellectual Property Office have been changed to the Office of Technology Management (OTM), as the Industrial Research Office (IRO) and the Intellectual Property Office (IPO) have merged to form the new Office of Technology Management.
  • January 7, 2013- Policy moved from the Research Administration section, formerly named RAG14 - What to Expect When Licensing a Penn StateTechnology into a Start-Up Company. Moved to new Intellectual Property section and renamed Policy IPG03 - What to Expect When Licensing a Penn StateTechnology into a Start-Up Company. (Moved; no changes.)
  • July 13, 2010 - Editorial changes in GUIDELINES section: (1) Cross-reference to RA05 deleted in 2nd bullet, and (2) In 5th bullet, reference added for "the Office of General Counsel," making the appropriate reference to this newly-created office and its role in working with IPO to protect the interest of the University and University inventors.
  • April 16, 2003 - New Policy Guideline.