A. Rocha , R. Lima , M. Amorim , F. Romero universities and earnings distribution amongPortuguese types Payment included on technology licensingagreements ARTICLE

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www.elsevier.pt/tekhne

ARTICLE

Payment types included on technology licensing agreements and earnings distribution among Portuguese universities

A. Rocha

^a^,^b^,∗

, R. Lima

^a^,^c

, M. Amorim

^d

, F. Romero

^a

aDepartmentofProductionandSystems,UniversityofMinho,Braga,Portugal

bManagementSchoolofthePolytechnicInstituteofCávadoandAve,Barcelos,Portugal

cALGORITMIResearchCentre,ProductionandSystemsEngineering,UniversityofMinho,Guimarães,Portugal

dDepartmentofEconomy,ManagementandIndustrialEngineering,UniversityofAveiro,Aveiro,Portugal

Received4June2017;accepted6November2017 Availableonline24November2017

JEL

CLASSIFICATION O310;

O320;

O340 KEYWORDS Technologytransfer;

Technology evaluationand licensing;

Universityand industryrelation;

Paymenttypes;

Earningsdistribution

Abstract Knowledgeandtechnologytransferpracticesbetweenuniversitiesandindustryare aimedtoenhancethevalueofresearchanddevelopmentoutcomes.Theyallowresearchers anduniversitiestoobtainresourcesandrevenuesthroughtheestablishmentoflicensingand cooperativeresearchanddevelopmentagreements.Themainobjectiveandcontributionofthis paperistoprovideevidenceonwhatarethemainpaymenttypesinusebyuniversityTechnology TransferUnits(TTUs)ensuringacomprehensiveoverviewoftheconceptsandpracticesunder assessment.Thisapproachalsogaveustheopportunitytoknowtheearningsdistributionamong thePortuguesepublicuniversities,andtolistdifferentdispositionsinﬂuencingthevalueofa licensingagreement.InterviewstoeightPortugueseuniversityTTUshavebeendoneasaway ofperceivingfromaninsider perspectivetheissuesthatthispaperwantstoemphasizeand anextensiveliteraturereviewhasbeendone,whichincludedthereviewoftheintellectual propertyregulationofmostPortuguesepublicuniversities.

∗Correspondingauthor.

E-mailaddress:arocha@ipca.pt(A.Rocha).

https://doi.org/10.1016/j.tekhne.2017.11.001

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1. Introduction

Researchanddevelopment(R&D)isthepredecessorofnew knowledge,patentsandtechnologythatmightbeconverted into innovations, enhanced products or explicit or tacit knowledge. To leveragethe valueof R&Doutcome evalu- ationpractices andmethods maybeusedtocombine the uniquefeaturesofaninventionortechnologywiththeneeds andinterestsofdifferentorganizations.Foreseeingthisend, universitieshaveadoptedknowledgevalorizationstrategies tofoster the practical application of researchand devel- opmentresults.Inthiscontext,technologyevaluationand licensingactivitiesallowresearchstaffanduniversitiesto achieve revenuesby means of the establishment of tech- nologytransferagreements.Inordertobetterunderstand this processand toimprove the accessto informationon speciﬁcpracticestosupportthecommercializationofinven- tiveactivitiesthispaperaimstoprovideevidenceonwhat arethe main paymenttypes in use byuniversity Technol- ogyTransfer Units (TTUs),and alsotoprovide knowledge regarding the earnings distribution amongthe Portuguese universities,andtolistdifferentdispositionsinﬂuencingthe valueof alicensingagreement.Wenoticed thattheliter- ature review onthese issuesis ratherfragmented, in the sensethattheyusuallyisolatealimitednumberoffactors totreatthemasindependentvariables(Wright,2014).Itis thisgapthatthepresentpaperintendstoaddressbyclearly stating the payment types inuse by the Portuguese TTUs and by stating the earningdistribution amongPortuguese universities.

2. Methodology

The studyinvolved anextensive literaturereview andthe collectionofcomplementary informationby enquiringthe headsof staffof eight universityTTUs ofPortuguese universities,employingasemi-structuredsurvey.Thedatahas beencollectedbetweenOctober2016andFebruary2017.

TheeightTTUsaddressedwerebondtoeightPortuguese universitiesandtheyallhaveansweredthesemi-structured survey,namely:

1. UniversityofMinho---TecMinho 2. UniversityofPorto:UPIN 3. UniversityofAveiro:UATEC 4. UniversityofCoimbra:DITS

5. UniversityofBeiraInterior:Innovationanddevelopment ofﬁce

6. UniversityNovaofLisboa:RIA---ResearchandInnovation Accelerator

7. UniversityofÉvora:Technologytransferofﬁce 8. UniversityofAlgarve:CRIA

This sample was purposefully chosen due to the high regionalandnationalinﬂuenceoftheuniversities,anddue totheexperienceandability oftheTTUstoprovide data thatexpandtheunderstandingoftechnologytransferpro- cesses.Sixoutoftheeightuniversitiesappearregularlyin worldrankingsofthetop1000universities(CWUR,2015).

Thesemi-structuredsurveywasdividedintwoparts,one focused on technology evaluation methods and practices,

andtheotheronefocusedonlicensingagreementpayments.

OnbothpartsweusedaLikertscaletoclassifythefrequency ofuseof eachissue underanalysis.The higherthevalue, thehigherwerethefrequencyofuse,inascalebetween1 and5.

Theapproachwasexploratoryanddescriptive, butalso analyticalinthesensethatitstatestheissuesatstakeonthe establishmentofapaymentstructureontechnologytransfer agreements,andastatisticalanalysishasbeendoneusing theOne-sampleT-testsforthemeansofrelevantvariables.

IBMSPSSStatistics19hasbeenusedtoperformthisanalysis.

As a framework for theOne-sample T-test analysis we haveusedthroughoutthearticletwohypotheses,consider- inga95%conﬁdenceinterval:

H0. The averagefrequencyisequalto3,thepaymentis frequentlyincludedontechnologytransferagreements by theTTUswhoparticipatedinthisstudy.

H1. Theaveragefrequencyisnotequalto3,thepaymentis notfrequentlyincludedontechnologytransferagreements bytheTTUswhoparticipatedinthisstudy.

Thisapproachallowedustoidentifythetypesofpayment usedbytheTTUsinlicensingagreements.

The intellectual property rights regulation of all the public Portuguese universities, with the exception of the University of Azoresand University of Madeira, have also beenreviewedtoidentifytheearningsdistributionarising fromlicensingagreements.

3. Payment types

When deﬁning the payment structure we must consider different dispositions which might inﬂuence the licensing agreementvalue.Someofthosedispositionsare:

- At a technology level: the invention scope, territorial rightsandprotectionlength,thelevelofexclusivitycon- ceded to reproduce, modify, make further R&D or to develop newproductsbasedontheinvention,thetech- nologydevelopmentstage,thelevelofcomplexityandthe skillsrequired touseit,itsrobustnesstooperateindif- ferentenvironments, itsfriendlyuse, easyandintuitive reproductionandpackaging,thenumberoftechnologies that must be integrated withthe invention to obtain a full commercialproduct,thepossibilityof massproduc- tion,thecompatibilitywithexistingsystems,therisksand thecostsinherenttofuturedevelopments,anditssocial andenvironmentalimpact;

- Atamarketlevel:thepresentandemergentcompetitive technologies, the technology strategic importance, the differentiated applications resulting from the invention andtheindustriesenvisaged,theapplicationsmarketsize and growth rate, the emergent and decliningcostumer segments,thestrengthofexistingﬁrmsandbrands,the marketing,distributionandsalescomplexity,theapplica- tionslifecycleandtheirrevenuestreams.

Thesearesomedispositionaffectingthepaymentsvalue, but there are other dispositions, such as the rights over

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the improvements made with or on the technology, the possibilityof sub-licensing,thepayment ofpatent feesin severalcountries,theagreementlength,andtheexclusiv- ityofrightsgranted,theinclusionoftechnicalservices,the provisionofequipmentorotherresourcesfromthepartof theuniversityortheﬁrm,theexistenceofprojectsandcom- petingR&Dteams, thevalue of theroyalties practicedin the industryand the potential gains fromthe technology commercialization.

All thesedispositions must be considered or appraised sothatthenature,thecircumstancesandthetermsofthe agreementarereﬂected inthe payment valuesand in its structure,whichcanbesub-dividedinessentiallyfourteen categories:

1. Singlelumpsumpaymentorpaid-uplicense---asingle paymentforadeterminedperiodoftime;

2. Fixedfeepersoldunitortechnologyutilization;

3. Earned royalties, running royalties or pure royalty licenses ---royaltiesbasedonapercentageofsales or technologyutilizations;

4. Up-frontpaymentorup-frontfee;

5. Minimum (annual)cashpayment ---minimums ormini- mumroyalties;

6. Stagepaymentsormilestonepayments;

7. Optionagreementsandoptionspayments;

8. Royaltyadjustments;

9. Deferredroyaltycalculations;

10. Latepaymentpenalties;

11. Terminationfeesorkillfees;

12. Sub-licensingpayments;

13. Equitypayments;

14. Supportpayments;

15. Patentcostsreimbursementandmaintenance.

An agreementmay includemultiple types ofpayments andtheabovecategoriesarenotexhaustive.Inthesubse- quentsectionsweaddresseachpaymenttypeseparately.

3.1. Singlelumpsumpaymentorpaid-uplicense Licensingagreementincludingasinglelumpsumpayment forafixed-termexploitationrightaretypicalofagreements inwhichthetechnologyoffersarelativelylowindustrialand commercial risk (Johnson, 2007) and they provide advan- tagesforbothparties.TheTTUsadministrativecontroland communicationcostsarereducedoreliminatedandthefirm isnotforcedtoexposesensitiveinformation,anditprovides tothelicensor,inasinglemoment,asignificantamountof financialresources. Todetermine the paymentamount, it isadvisabletomakeadiscounted cash-flowprojection,to estimatetheprofitabilityofasinglepaymentcomparedto a series of deferred smaller annual payments (Pressman, 2009), and to establish the payment amount taking into accounttheinventionreturnoninvestment.

Thetest resultsforthe singlelumpsumpayment using the One-sample T-test for a Test value=3 presents a p=0.007withat=−3.74meaningthatthereisevidenceto rejectthenullhypothesis.Thesinglelumpsumpaymentor paid-uplicenseishardlyeverincludedontechnologytrans- feragreementsbytheTTUswhoparticipatedinthisstudy,

beingitsaveragefrequencyofuseof2.00withastandard deviationof0.76.

3.2. Fixedfeepayment

Aﬁxedpaymentpersoldunitortechnologyutilizationmay beestablished.This value mustbeupdatedeveryyear by referencetoinﬂationrates(Johnson,2001;Poddar&Sinha, 2002).

ThetestresultsfortheﬁxedfeepaymentusingtheOne- sampleT-test foraTestvalue=3presentsap=0.836with at=−0.22meaningthatthereisnoevidencetorejectthe nullhypothesis.The establishmentofaﬁxed feepayment ontechnologytransferagreementsisarelativelyfrequent practicebytheTTUs,beingitsaveragefrequencyofuseof 2.88withastandarddeviationof1.64.

3.3. Earnedroyaltiesorrunningroyalties

Running royalties are basedon a percentageof the price ofthelicensedproduct,oronapercentageoftheproduct sales operationalresults.This typeofpayment sharesthe riskbetweenthelicensorandthelicensee,sincethelicen- sorreceivesalargerorasmallerpaymentdependingonthe sales success(Heiden& Petit,2017;Nabulsi&Belt, 2015;

Planting, Yuskavage, Okubo, Moylan, & Bond, 2017; Pod- dar&Sinha,2002;Stevens,2016).Therunning-royaltiesare animportantlicensorsignalofconﬁdenceintheinvention industrial andcommercialization success (Johnson, 2007).

Therunning-royaltiesareoftenusedwhentheuncertainty in forecasting the sales volume is very high and when the technology and its applications are still at an early- developmentstageanditisbelievedthattheinvolvement ofbothpartiescanpositivelyaffectthecommercialization success. To establish theroyalties percentageto bepaid, discountedcash-ﬂows,royaltystandards,ortherealoptions orMonteCarlosimulationmethodscanbeused.

ThetestresultsfortheﬁxedfeepaymentusingtheOne- sampleT-test foraTestvalue=3presentsap=0.351with at=1.00meaningthatthereisevidencetorejectthenull hypothesis.Theearnedroyaltiesarefrequentlyincludedon technologytransferagreementsbytheTTUs,beingitsaver- age frequencyof useof3.50 witha standarddeviation of 1.41.

3.4. Up-frontpaymentorup-frontfee

An up-front payment is a payment required by the licen- sorwhosepurposeistoassurethelicenseecommitmentin theinventionindustrializationandcommercialsuccess.Up- front payments are obtained in exchange for a reduction in the royalties percentage (Stevens, 2016; Thalhammen- Reyero,2008).Onecommonrule,forthistypeofpayments, isthedefinitionofapaymentbasedontheestimativeofthe valuetobeobtainedinayearwheretheprojectisalready wellunderway(Razgaitis,2003).Itisthusnecessarytorecur todiscountedcash-flowprojections,butthevalueoftheup- font payment mayalso reflect theadequate amount that each partydeems to be required to keep the project on tracktowardsitscommercialsuccess.

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ThetestresultsfortheUp-frontpaymentorup-frontfee usingtheOne-sampleT-testforaTestvalue=3presentsa p=0.003withat=−4.58meaningthatthereisevidenceto rejectthenullhypothesis.TheUp-frontpaymentorup-front feeis hardlyever included ontechnology transfer agree- mentsbytheTTUswhoparticipatedinthisstudy,beingits averagefrequencyofuseof2.25withastandarddeviation of0.46.

3.5. Minimumsorminimumcashpaymentor minimumroyaltiesorannualfee

Minimumcashpaymentsareannual paymentsrequiredby the licensor for the licensee to maintain its exploitation rights.Theaimisalsotoassurethatduediligenceisbeing taken by the licensee in the invention commercialization success(Kim&Blacklock,2009;Stevens,2016).Itsvaluecan beestablishedbasedonaconservativeoroptimisticscenario resultingfromthesalesestimativeanditcancorrespondto onequarterortwoquartersoftheprojectedroyaltiesfora certainyear(Razgaitis,2007).

ThetestresultsfortheminimumsusingtheOne-sample T-testforaTestvalue=3presentsap=0.785withat=0.28 meaningthatthereisnoevidencetorejectthenullhypoth- esis.Theminimumsarefrequentlyincludedontechnology transfer agreements by the TTUs, being its average fre- quencyofuseof3.13withastandarddeviationof1.25.

3.6. Stagepaymentsormilestonepayments These are payments required to the licensee each time certain development or commercialization objectives or milestonesaresuccessfullyattained(Leone&Oriani,2007;

Stevens, 2016; UMIP, 2005; Wood, 2004), such as, the conclusionof an R&Dstage,the beginningof sales or the developmentofanewapplicationbasedonthetechnology.

The test results for the milestone payments using the One-sampleT-test fora Testvalue=3presentsap=0.275 withat=−1.18meaningthatthereisnoevidencetoreject the null hypothesis. Although the nullhypothesis has not beenrejectedtheestablishmentofmilestonepaymentsare notfrequentamongalltheTTUs,theaveragefrequencyof useis2.50withastandarddeviationof1.20.

3.7. Optionagreementsandoptionspayments Anoptionistherighttomakefuturedecisionsrelativetothe acquisitionorexploitationofatechnology.Optionscanbe veryusefulforthedevelopmentandvalidationofthetech- nologyanditsmarket,andtheinvestorsareabletomake an informeddecision abouttheacquisition ofrights.Ifan investorwantstoconductadditionalresearchanddevelop- ment,theoptionmayincludeanexclusiveright,andinthis case,aninitialpaymentisdeﬁned.Thispaymentcompen- satesthelicensorfordeferringitssearchforlicenseesduring thetimetheoptiontakesplace.Optionsthatimplyexclusive rightsmayconditionotheropportunities,andinthecasethe optionisnotactivated,itmayaffectfuturedeals.Thus,in theoptionagreement,itsdurationmustbeclearlydeﬁned, aswellastheobligationsofeachpartyandtheconsequences

incasetheoptionisnottaken(Thalhammen-Reyero,2008).

Optionagreementsgenerallylastfor6---12monthsandthey areveryusefulonthecreationofnewenterprises(Leone&

Oriani,2007).Otheroptionsarepossible,suchastheoption toobtainanon-exclusivelicenseafteranexperimentation andtestingperiod.

ThetestresultsfortheoptionpaymentsusingtheOne- sampleT-testforaTestvalue=3presentsap=0.142with at=−1.66meaningthatthereisnoevidencetorejectthe nullhypothesis.Althoughthenullhypothesishasnotbeen rejectedtheestablishmentofoptionpaymentsarenotfre- quentamongalltheTTUs,theaveragefrequencyofuseis 2.25witharelevantstandarddeviationof1.28.

3.8. Royaltyadjustments

Anagreementmayincludethepossibilityofreadjustingthe royalties’value.Ascaleofreductionsintheroyaltiesper- centagemaybeintroducedtoreﬂectsomecircumstances, likethereductionoftheinventionvalueduetonewcompet- ing technologies, production and commercialization costs higherthan expected, due tothe impossibility of obtain- ingtherights in acertainregion or duetothe change of anexclusivelicenseintoanon-exclusiveone(UMIP,2005).

The reductionof royalties mayalso serveasan incentive toincrease theproduction anditssales.The deﬁnitionof alowerroyaltiesvalue, thatincreasesifcertaincommer- cialobjectivesaremet,areusuallycalled,kickerroyalties (WIPO/ITC,2005),thisincrementscaleontheroyaltiesval- uesmayalsobeintroducedtoreﬂectthecircumstancesofa favourableindustrialandcommercialrealityduetogreater productabsorptionorduetolowproductioncosts,orother favourableindustrialandcommercializationevents.

The test results for the royalty adjustments using the One-sampleT-testfor aTest value=3 presentsap=0.111 withat=−1.82meaningthatthereisnoevidencetoreject the nullhypothesis. Although the null hypothesis has not beenrejectedtheestablishmentofroyaltyadjustmentsare notfrequentamongalltheTTUs,theaveragefrequencyof useis2.13witharelevantstandarddeviationof1.36.

3.9. Deferredroyaltiescalculation

Whenthereishigh uncertaintyoverthetechnologydevel- opment results and commercial success and there is a reasonable amount of trust between the parties, it may make sense to define the royalties and other forms of payment after the technology and the market validation has occurred. When payments are set a posteriori, it is importanttodefinedeadlinestoachievecertainresultsor tocommunicatecertainobjectives,sothattheresultscan beanalyzedandthe paymentsdefinedaccording tothose results.Thispaymenttypeismostlyusedamonguniversity spin-offfirmswherearelationoftrusthasbeenbuiltandis present.

The test results for the deferred royalty calculations usingtheOne-sampleT-testforaTestvalue=3presentsa p=0.142withat=−1.66meaningthatthereisnoevidence torejectthenullhypothesis.Althoughthenullhypothesis hasnotbeen rejectedtheestablishment of deferred roy- altycalculationsarenotfrequentamongalltheTTUs,the

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averagefrequency ofuse is2.25witharelevant standard deviationof1.28.

3.10. Latepaymentpenalties

The date for each payment must be well deﬁned in the agreement and penalties must be established in case of default,todiscouragefuturedefaults(Razgaitis,2003).

Thetestresultsforthelatepaymentpenaltiesusingthe One-sampleT-testfor aTest value=3 presentsap=0.068 withat=−2.16meaningthatthereisnoevidencetoreject the nullhypothesis. Although the null hypothesis has not beenrejectedtheestablishmentofdeferredroyaltycalcu- lationsare notfrequent amongall theTTUs,the average frequencyofuseis2.00witharelevantstandarddeviation of1.31.

3.11. Terminationfeesorkillfees

Alicensepresupposesaﬁxedduration.Ifacontractisbro- ken, fees must be paidto the institution,to compensate forlostopportunities.Thistypeofpaymentisusuallyused as a measure of licensees’ credibility (Berneman, Davis, O’Reilley,&Raymond,2014;Razgaitis,2007).

ThetestresultsfortheterminationfeesusingtheOne- sampleT-testforaTestvalue=3presentsap=0.051with at=−2.35meaningthatthereisnoevidencetorejectthe nullhypothesis.Althoughthenullhypothesishasnotbeen rejectedtheestablishmentofterminationfeesarenotfre- quentamongalltheTTUs,theaveragefrequencyofuseis 1.88witharelevantstandarddeviationof1.36.

3.12. Sub-licensingpayments

Sometimes thelicensee has accessto large networksand isinterestedindistributingthetechnologytothirdparties, whichenhancesitssalesandliquidity.Thesecontractsmust preview how the gains will be distributed among licen- sors,licenseesandsub-licensees.Sub-licensingiscommon inexclusive licensingagreements(Berneman etal.,2014;

Franko&Ionescu-Pioggia,2006;Stevens,2016).

Thetestresultsforthesub-licensingpaymentsusingthe One-sampleT-testfor aTest value=3 presentsap=0.316 withat=1.08meaningthatthereisnoevidencetoreject the null hypothesis. The sub-licensing payments are fre- quentlyincludedontechnologytransferagreementsbythe TTUs, being its average frequency of use of 3.50 with a standarddeviationof1.31.

3.13. Equitypayments

The university may opt for an equity participation in a firm,assuring financial supportfor the firmor technology transferwithoutor atreducedcostforthefirm.Themost successfuluniversitiesintermsoftechnologytransferusu- allyhave some form of equity in spin-off firms and have explicitandproactivemeasuresdirectedtowardsitsdevel- opment(Lockett, Wright, & Franklin,2003).The financial returnviaequityparticipationisgenerallyhigherthanthe oneobtainedvialicensing,anduniversitiesseemtobemore

engagedinequityiftheyaremoreexperiencedintechnol- ogytransfer(Bray&Lee,2000;Feldman,Feller,Bercovitz,

&Burton,2002).

Thetestresultsfor theequitypaymentsusingtheOne- sampleT-testforaTestvalue=3presentsap=0.001witha t=−5.61meaningthatthereisevidencetorejectthenull hypothesis. Theequity paymentsarehardlyeverincluded ontechnologytransferagreementsbytheTTUswhopartic- ipatedinthisstudy,beingitsaveragefrequency ofuse of 1.50withastandarddeviationof0.76.

3.14. Supportpayments

Thelicensorsupportintermsoftechnicalassistanceispar- ticularlyimportantforsophisticatedtechnologiesandduring thelicense earlyyearswhere thelicensee goesthrougha learningcurveprocess,andtheycanhaveapositiveimpact in terms of investment risk reduction, and for the licensor they are an important source of revenues and they enhancetherelationshipwiththelicenseeandthepossibil- ityofestablishingnewcommercialandinvestmentrelations (Rocha,2009).

ThetestresultsforthesupportpaymentsusingtheOne- sampleT-test foraTestvalue=3presentsap=0.180with at=−1.49meaningthatthereisnoevidencetorejectthe nullhypothesis.Althoughthenullhypothesis hasnotbeen rejectedtheestablishmentofsupportpaymentsarenotfre- quentamongalltheTTUs,theaveragefrequencyofuseis 2.38witharelevantstandarddeviationof1.19.

3.15. Patentcostsreimbursementand maintenance

Paymentsforthecostsincurredwithpatentapplicationsand maintenancefees.Thispaymentsareusuallyaskedwhenan exclusiverightisgranted,aslongasthiscostsdonotexceed themarketvalueoftheassetbeinglicensed(Rochaetal., 2013;Stevens,2016).

Thetestresultsforthepatentcostsreimbursementand maintenanceusingtheOne-sampleT-testforaTestvalue=3 presents a p=0.785 with a t=0.28 meaning that there is noevidencetorejectthenullhypothesis.Thepatentcosts reimbursementandmaintenancearefrequentlyincludedon technologytransferagreementsbytheTTUs,beingitsaver- age frequencyof useof3.13 witha standarddeviation of 1.25.

3.16. TypesofpaymentusedbytheTTUsin licensingagreements

A licensing agreement creates contractual obligations betweenthelicensorandthelicensee,andseveraltypesof payment,thatreﬂectseveralconsiderationswhosenature maybeeconomical,technological,legalorcommercial,may be included on the contract. The most frequent types of paymentinuse bytheTTUsaretherunningroyalties,but otherpaymentsarealsofrequentlyincludedontechnology transferagreements, suchastheminimumcashpayments or themilestonepayments,butthereisusuallyaconcern in assessingthe ﬁrmspositionandthereis alsoaconcern

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Table1 EarningsdistributionwithinPortuguesepublicuniversities.Thisinformationdoesnotexemptconsultingtheintellec- tualpropertyrightsregulationofeachuniversity.

University Earningsdistribution

UniversityofAveiro (UniversidadedeAveiro)

40%fortheinventors

60%fortheUniversity(negotiable) UniversityofBeiraInterior

(UniversidadedaBeira Interior)

50%fortheinventors 15%fortheinventorFaculty 35%fortheUniversity,fromwhich 20%fortheRectory

15%forthecoordinatingresearchInstitute UniversityofCoimbra

(Universidadede Coimbra)

55%fortheinventors

45%fortheUniversity,amongwhich:

30%fortheFaculty 15%fortheRectory UniversityofMinho

(UniversidadedoMinho)

50%forinventors

50%fortheUniversity,fromwhich

15%fortheresearchcentre,orinjustiﬁedoccasionsfortheorganicunitordepartmentwhere theinventionwasoriginated

35%fortheRectory,valuethatwillalsosupporttheremunerationofentitiesonwhichthe universityhasdelegatedexecutivecompetencies.

NewUniversityofLisbon (UniversidadeNovade Lisboa)

30---55%forinventors,dependingontheprocessproﬁtability

RemainingfortheUniversity(Rectory),tobedistributedamongagreementstobeestablished, onacasebycasebasis,withtheinvolvedorganicunits

UniversityofLisbon (UniversidadedeLisboa)

P<=5000D

100%fortheinventors 5000D<P<=100,000D 75%fortheinventors 25%fortheuniversity P>100,000D

25%fortheresearchers 75%fortheuniversity UniversityofPorto

(UniversidadedoPorto)

60%forinventors

30%fortheinventororganicunitorotherunitoftheUniversityofPorto 10%fortheUniversityofPorto

UniversityofTrás-os-Montes andAltoDouro

50%fortheinventors 50%fortheuniversity TechnicalUniversityof

Lisbon

(UniversidadeTécnicade Lisboa)

80%forinventors 20%spitedinequalparts:

HalffortheinventorR&Dunit

Remainingfortechnologytransferactivities

UniversityofÉvora Theprofitsfromthetechnologytransferagreementwillbedistributedaccordingtoawritten contractbetweentheUniversityandtheinventororcreator,intheabsenseofawritten contracttheprofitsareevenlydistributed.TheprofitsretainedbytheUniversitywillbe distributedaccordinglytoarectorydecision.

UniversityofAlgarve 50%fortheinventor 50%fortheuniversity 25%fortheRectory

25%fortheinventorSchoolorFaculty

onestablishingamutualrelationship, especiallywhenthe firmshavepreviousrelationswiththeuniversityorwhena newfirmisestablishedtoexploitaninvention.Thisconcern isalsoreflectedonthefrequencyofpaymentsestablished afteraperiodofexperimentationandtests(deferred royalty calculation) --- some TTUs express apprehension on establishingthistypeofpaymentsbecauseofpotentialcon- flictsthataposterioripaymentagreementsmaygenerate.

In what concerns to support payments for scientiﬁc and technicalservicestheyarerelativelyfrequentontheTTUs licensingagreements. These services,a mixture of maintenance and technical assistance, increases the licensor revenues,andtheyalsohavetheadvantageofkeepingthe relationshipwiththe licenseeenhancing thepossibilityof transferringothersolutions.Thegrantofsublicensingrights isalsocommon,inwhatconcernstopaymentsfromequity

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participationtheir notcommon. Among thetypes of payments least in use by the TTUs are the single lump sum payments,terminationfees andthe latepaymentspenal- ties.

4. Earnings distribution

Each universityhas itsownrules or set of principlesthat define how the gains from licensing agreements are dis- tributedwithintheuniversitystakeholders.Higherfeespaid totheinventorsseemtobepositivelyrelatedtothenumber ofinventions,tothefinancialreturnofthelicensesandin theattraction of ablerresearchers(Lach & Schankerman, 2003), anduniversities tend topay larger percentages to inventorsthattaketheinitiativetocreatetheirownspin-off firm,thesehigherfeesareaimedtocompensatetheinven- torsinitiativeandrisktakingattitude(CEC, 2007;Lockett etal.,2003).InwhatconcernstotheTTUs,theytypically receive10---25% ofthelicenserevenuesandtheuniversity tends to subsidize directly the TTU activities during sev- eralyears,untilitbecomesself-sufficient(CEC,2007).Many yearscanpass beforeself-sufficiencyis attained,andthe TTUmustreachabalancebetweentheresourcesavailable andwhattheycanprotect.Asaruleofthumb,onlyonein teninventiondisclosures’ispatentable,andonlyoneinten patentsislicensable(Dodds&Somersalo,2007).Evaluation practicesarethusessentialintheprocessofdecisionmak- ingregardingpatentsandinthemarketingandlicensingof inventions.

Thedistributionoflicensingagreementsrevenuesamong theinventorswithintheuniversitiesatstudyrangefrom30%

to60%and,theseuniversities,donotspecifytheearnings distributionamongtheirTTUandwhenanewspin-offﬁrm iscreatedbyuniversitypersonnel.Theremainingearnings areusedtosupportthe researchcentre where theinven- tiontook place, toacquire equipment and materials and tomake further research work on the technology having in mindfuture gains. Revenuesare alsoused in transver- salactivities,mainlyinthemanagementandreinforcement of intellectual property rights and in the developmentof strategicR&Dprojects.

Details on the earnings distribution within Portuguese universitiescanbeconsultedinTable1.Thisinformationhas beenobtainedbyreviewingtheintellectualpropertyrights regulationofeachPortugueseuniversity.Thesedocuments havebeenobtainedbyaskingtheTTUsacopyorbyconsul- tingthedocumentontheuniversitiesorTTUswebsite.

5. Conclusion

From the empirical results obtained several conclusions couldbereached.Thefollowingisasummaryofsomeimpor- tant ones, regarding the payment types and the earning distribution.

Paymenttypes:

a) Themorefrequenttypesofpaymentaretherunningroy- alties,butotherpaymenttypesarefrequentlyincluded inthetechnologytransferagreements,suchasthemin- imums, the milestone payments,and the patent costs reimbursementandmaintenance;

b) Payment for scientiﬁc and technical support services increasethelicensorrevenuesandtheyhavetheadvan- tage of keeping the relationship with the licensee enhancingthepossibilityoftransferringothersolutions;

c) Deferredpaymentcalculationsareinuseespeciallywhen the firm has previous relations with the university or when a new spin-off firm is established to exploit an invention.SomeTTUsexpressapprehensiononestablish- ingthistypeofpaymentsbecauseofpotentialconflicts whichcanbegenerated;

d) Withregardtotheinvestmentonnewspin-offﬁrmssocial capital we have noticed a lack of University technology transfer units on this engagement process, which doesnot meanalack of participationbyother univer- sityunitsthatmaybehappening.Weshouldremember that according to our literature review the participation on spin-off ﬁrms usually has a higher investment return than the one usually obtained with a licensing agreement (Bray & Lee, 2000; Feldman et al., 2002).

Earningsdistribution:

e) Revenuesfromlicensingagreementsaremainlyusedto rewardtheresearcher or researchteamwhoproduced theinventionandtosupporttheirunitofafﬁliation;

f) Allocationofrevenuestotheinventorsdiffersfromuni- versitytouniversityandhasarangefrom30%to80%of thetotalrevenues;

g) Universityintellectual propertyrights regulations,usually do not specify the allocation of revenues for the TTUs,nordotheyspecifyadifferentdistributionofrev- enueswhenanewspin-offﬁrmiscreated.Althoughwe should notice that according to our literature review universities tend to pay larger percentages to inven- torswhotaketheinitiativetocreatetheirownspin-off ﬁrmasa meanstocompensatetheirinitiative andrisk taking attitude (Lach & Schankerman, 2003; Lockett etal.,2003).

Acknowledgements

Thiswork waspartiallyfundedbyCOMPETE-POCI-01-0145- FEDER-007043andFCT-UID-CEC-00319-2013.

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