Inventor Resources: Commercialization

The Cleveland Clinic Innovations Commercialization Process

1. Overview
2. Disclosure and Screening
3. Active Commercialization
4. After Licensing or Spin-Off
5. The Partnership

Cleveland Clinic Innovations brings inventions and unique capabilities developed by Cleveland Clinic staff to the market in order to benefit the sick. Cleveland Clinic Innovations works with staff throughout Cleveland Clinic to bring high-potential inventions to the market as quickly and effectively as possible.

The commercialization process at Cleveland Clinic has two stages:

• Disclosure and Screening
• Active Commercialization

Disclosure and Screening begins when a Cleveland Clinic staff member submits a completed Invention Disclosure Form (IDF) to Cleveland Clinic Innovations. Cleveland Clinic Innovations screens the invention against three main criteria to determine if it warrants further investment of Cleveland Clinic resources. It is the inventor's responsibility to make the initial case for his or her technology with respect to all three screening criteria:

• Commercial viability
• Medical efficacy (as assessed by medical practitioners); and
• Protectability via patent, copyright, or trade secret.

Once an IDF is received, it is logged into the Cleveland Clinic Innovations database management software and assigned a case number. A Cleveland Clinic Innovations staff member subsequently meets with the inventor to gain further insight into the invention. The Cleveland Clinic Innovations staff then meets as a group to review how the invention meets each criterion, and to discuss issues that might be involved in advancing commercialization. Frequently this initial review will uncover the need for more information or an opportunity to engage a company at an early stage. Once there is sufficient information to make a decision, the project is either advanced to the active commercialization stage or declined for further development by the inventor. If advanced to the active commercialization stage, licenses and/or spin-offs possibilities are actively pursued.

If a technology is returned to the inventor, Cleveland Clinic Innovations removes the technology from the active files list. The inventor then has the option of refining the technology and submitting a revised or new IDF, or, with Cleveland Clinic Innovations written approval and coordination, securing a license independently.

Cleveland Clinic Innovations commits resources to ensure that the technologies in the active commercialization stage are successfully and quickly licensed, spun off to newly formed companies, or included in industrial partnerships (e.g., industrially funded research or research consortia). Cleveland Clinic Innovations supports patenting, prototype development, expert consultants, or other expenses necessary to advance these technologies to commercialization. Cleveland Clinic Innovations staff perform market assessments, contract negotiations, partner identification, and other services themselves.

Most projects in the active commercialization stage involve patent protection. Cleveland Clinic Innovations selects and pays for outside counsel to prepare and file a patent application. The outside counsel works directly with the inventor and Cleveland Clinic Innovations.

A high priority is placed on the formation of new companies based on Cleveland Clinic inventions and special capabilities.

Cleveland Clinic policies on inventions, commercialization, and other relations with the private sector are reviewed in "Cleveland Clinic Institutional Policies" and are covered in more detail in "Major Policies for Professional Staff" (the "Yellow Book"). Any inventor or staff member who might be involved in commercialization should review these policies. Key points to keep in mind are:

• Any invention made by a Cleveland Clinic employee that relates in any way to his or her job responsibilities must be assigned to Cleveland Clinic . This requirement includes joint inventions in which the patent may be secured by another institution. Not assigning to Cleveland Clinic is in violation of the staff employment agreement and is considered theft.
• Cleveland Clinic Innovations, on behalf of Cleveland Clinic , strictly adheres to a range of policies that limit conflict of interest. "Cleveland Clinic Institutional Policies" contains Cleveland Clinic policies.

Distribution of net revenue (that is, gross revenue less patent, material, travel or other like expenses) derived from the commercialization of Cleveland Clinic intellectual property disclosed October 1, 2002 or later shall be as follows:

• 40% to the inventor(s)
• 40% to the Inventor’s laboratory
• 20% to the Cleveland Clinic Innovation operating account

The Commercialization Fund shall be used to support activities associated with the commercialization of Cleveland Clinic technology involving the inventor and/or his or her laboratory. Uses include preclinical studies, prototypes, patents, consultants, equipment, etc. The Fund is accessed through Cleveland Clinic Innovations and requires the guidance of the Commercialization Council and the sign-off of the Cleveland Clinic COO.

CLEVELAND CLINIC INNOVATIONS Invention Disclosure Process

Figure 1. Disclosure and Screening are the first stage of the Commercialization Process

Invention Disclosure Form

The commercialization process begins formally when the inventor submits a completed Invention Disclosure Form (IDF) to Cleveland Clinic Innovations. The IDF must be filled out completely. Inventors should be prepared to devote several hours to this form, providing the necessary information on the nature of the invention, prior art, the roles of co-inventors, and prior publications. Please call Shannon Schuetz (216-445-1954) if you have any questions.

Once the inventor has completed and signed the IDF and delivered it to Cleveland Clinic Innovations, the invention is given a case number and logged into the Cleveland Clinic Innovations database management software. A Cleveland Clinic Innovations staff member will be assigned to the case and will begin the process of evaluating the commercial potential of the technology.

Importance of Confidentiality

If an invention is to be commercialized, it must remain confidential until it is protected through a patent application. The details of the invention can be shared at this stage only with Cleveland Clinic staff or with individuals or institutions that have signed nondisclosure agreements.

PLEASE NOTE: Any public presentation, published paper, or poster session given before a patent application has been filed will likely prevent Cleveland Clinic from securing foreign patent rights and can complicate pursuit of a U.S. patent (as explained in "Frequently Asked Question About Patenting at the Cleveland Clinic").

Determining Inventorship

In submitting an IDF, it is essential to identify inventors and their relative contributions to the project. These are two separate issues. Inventorship, as noted below, is a determination made as part of the patenting process. No matter how broad a patent is, any individual who contributes to one element of the patent must be listed as an inventor, with rights equal to those of all other named inventors. Distribution of income, alternatively, seeks to reward relative contributions.

Any individual, either solely or jointly, who both conceives and diligently reduces to practice potentially patentable subject matter that is claimed in a patent application must be listed as a named inventor. A subsequent patent of that invention could be invalidated for not naming all of the true and proper inventors, or for naming an individual or individuals who are not true and proper inventors. The outside patent counsel responsible for drafting the patent application makes the inventorship determination for Cleveland Clinic based on the information provided in the IDF and information gathered during preparation of the patent application.

Inventorship is derived from the claims associated with the patent application. The claim or claims are the heart of the patent application, specifying in precise and stylized legal language what the inventor considers the essential elements of the invention. To be patentable, all of these elements must be deemed to be (a) new, (b) useful, and (c) non-obvious in view of the prior art. "Frequently Asked Questions About Patenting at the Cleveland Clinic," explains some of the issues involved in patenting.

Distribution of Income from Commercialization

The Cleveland Clinic strongly urges collaborators to discuss and agree on the distribution of commercialization income early on, preferably before engaging Cleveland Clinic Innovations. Being listed as a named inventor on a patent application or issued patent does not automatically result in sharing any resulting income from licenses, fees, or the sale of equity. If more than one individual is eligible to receive a share of commercialization income, The Clinic expects that the parties will amicably decide on an appropriate distribution. If there are multiple inventors from the same department and they do not agree on distribution of the inventors' share of commercialization income, Cleveland Clinic Innovations will look to the department chairman for guidance. If the inventors are from different departments and do not agree, Cleveland Clinic innovations will work to resolve the issue among the inventors. Failing resolution, Cleveland Clinic Innovations will convene the involved department chairs in a committee, with the Cleveland Clinic Innovations designee chairing, to resolve the issues.

Screening Analysis by Staff

Cleveland Clinic Innovations staff will schedule an initial interview with the inventor, in order to review the invention, as the first step toward a staff recommendation on whether to proceed with commercialization.

The responsible staff members screen the technology to determine whether its commercialization merits additional investment by the Cleveland Clinic. On that basis, they either accept the technology for marketing through a license and/or a spin-off, or reject the technology. If the technology does not meet the criteria, it is returned to the inventor so the inventor can make changes. In some cases the inventor may be approved to pursue commercialization on his or her own. In these circumstances the Clinic retains ownership and licenses the technology to the staff member.

The screening process is brief and confidential. For each invention, the staff evaluates the below. The invention must be compelling in each category.

• Market potential. A critical criterion is the probability of the invention leading to a viable product able to be licensed or the basis of a spin-off company.
• Protectability. To be viable as either a license or spin-off, a technology typically must be protected through patent, trade secret, or copyright. If not, it is not typically a viable commercialization opportunity. Patent issues are discussed in "Frequently Asked Questions About Patenting at the Cleveland Clinic."
• Medical Efficacy. For an invention to advance to the active commercialization stage, its health care potential must be endorsed by a Cleveland Clinic medical practitioner. This practitioner must not be directly involved in the invention. An inventor is asked to suggest a Cleveland Clinic practitioner (or more than one, if possible) who can knowledgeably provide input on the invention. If there is no available Cleveland Clinic practitioner who meets the above criteria, an alternative review mechanism is developed

Cleveland Clinic Innovations Commercialization Council

The Cleveland Clinic Innovations Commercialization Council consists of Cleveland Clinic medical, research, and business staff. It meets monthly to provide policy and operational guidance to Cleveland Clinic Innovations. Cleveland Clinic Innovations’ Executive Director chairs the council.

• Chris Coburn – Vice-Chair
• Ernest Borden, M.D.
• Peter Cavanagh, Ph.D.
• Guy Chisolm, Ph.D.
• Robert Coulton
• Paul DiCorleto, Ph.D.
• Inderbir Gill, M.D.
• Marc Gillinov, M.D.
• Roy Greenberg, M.D.
• Stanley Hazen, M.D., Ph.D.
• Joe Hollyfield, Ph.D.
• Janet Houghton, Ph.D.
• Jennifer Hunt, M.D.
• Vinod Labhasetwar, Ph.D.
• Roger Macklis, M.D.
• Marc Penn, M.D., Ph.D.
• Derek Raghavan, M.D., Ph.D.
• Richard Ransohoff, M.D.
• Feza Remzi, M.D.
• Ellen Rome, M.D., Ph.D.
• Jonathan Schaffer, M.D.
• Roy Silverstein, M.D.
• William Smith, D. Eng.

Active Commercialization

Moving an invention to the active commercialization stage represents a decision by the Cleveland Clinic that a technology has strong commercial potential. The Clinic accordingly will invest its resources in the activities necessary to successfully license or spin-off the technology. This often includes securing a patent (or other means of protecting the technology), carrying out additional market analysis or market development, developing a prototype, and other activities that bring the invention closer to the market.

Securing a Patent

The Cleveland Clinic engages external patent counsel to prosecute the patent. Cleveland Clinic Innovations selects from a set of patent firms based on their expertise with a given technology and their ability to successfully and efficiently protect it. The Clinic recognizes patent attorneys as essential partners in the commercialization process; essential partners that can add great value to the development of the inventive concept.

As noted earlier, to be granted patent protection, an invention must meet three primary statutory requirements: the invention must be new ("novel"), useful, and non-obvious in view of the relevant prior art. Cleveland Clinic Innovations staff will work with the inventor to ensure that an invention meets all three of the criteria. In some cases (such as software), a copyright may be appropriate in place of or in addition to a patent. In some circumstances, maintaining the invention as a trade secret may be the best commercialization route. "Frequently Asked Questions About Patenting at the Cleveland Clinic" reviews some of the basics and Cleveland Clinic Innovations staff can offer more detailed information.

Patents are only pursued after the potential for the technology has been confirmed and the inventor and Cleveland Clinic Innovations are in agreement on the level of effort that will be required from all parties to achieve a successful commercialization. Securing a U.S. patent (with no foreign protection) can range from $15,000 to $50,000. Patenting should only occur when it is essential for a license or spin-off.

Innovation Validation Fund

The Cleveland Clinic will support, through its Innovation Validation Fund, prototyping, small animal trials, and other steps which further demonstrate or enhance the value of the technology. CLEVELAND CLINIC INNOVATIONS staff should be contacted for further information.

Industrial Advisory Board

The Cleveland Clinic Innovation Industrial Advisory Board (IAB) provides strategic business advice and links to financial and management resources to support the commercialization of Cleveland Clinic technology. The IAB is made up of corporate leaders, entrepreneurs, venture capitalists, and technologists. The IAB offers guidance on high-potential technology licenses, Cleveland Clinic Innovations strategy, and all potential spin-offs.

The IAB Investment Committee advises on financing and investment activities related to CCF spin-off companies, including expenditures of the Ohio BioValidation grant. The Cleveland Clinic Innovation Commercialization Council advises on expenditures of the Cleveland Clinic Technology Validation Fund.

Securing a License

The goal of the commercialization process is to secure license partners and/or spin-off companies. Cleveland Clinic Innovations identifies companies that may be in a position to successfully bring Cleveland Clinic inventions to market. Cleveland Clinic Innovations works with inventors and other sources of information, such as the IAB, to identify target companies. Cleveland Clinic Innovations contacts the companies, negotiates terms and conditions, and drafts contracts for licenses. Once an agreement has been reached, Cleveland Clinic Innovations works with the Cleveland Clinic Office of General Counsel to finalize the contract.

Creation of Spin-Off Companies

The Cleveland Clinic uses its significant resources, capabilities, and network to establish a company. In the preferred model, the Clinic takes all legal and financial steps to establish the company. The inventor bears no cost or financial risk during the process. Cleveland Clinic Innovations works with the inventor to secure resources to launch the company, recruit management and establish strategic relationships. Depending on space availability, spin-offs are eligible to become tenants in The Cleveland Clinic Innovation Center – the 15,000 square foot accelerator adjacent to the “A” Building. Cleveland Clinic Innovations always holds a Board seat through at least the first round of funding.

After Licensing or Spin-Off

Cleveland Clinic Innovations ensures that licensees meet their royalty schedules, and that all necessary reports (e.g., product development, sales figures, and other financial reports) are provided. Cleveland Clinic Innovations is also responsible for amendments and terminations of license agreements as appropriate.

Cleveland Clinic Innovations coordinates the receipt and distribution of all commercialization income. Income, set by the terms of the license or spin-off, may include but is not limited to royalties, license/up-front fees, milestone payments, and equity.

Where a spin-off company is created, Cleveland Clinic Innovations remains involved with the spin-off to ensure the appropriate relationship is maintained with and that all obligations to Cleveland Clinic are met. As the spin-off progresses to the intermediate stage of development (i.e., Cleveland Clinic Innovations has licensed the technology, secured assets, and created equity), Cleveland Clinic Innovations will interact at arm's length with the spin-off. Administrative support, incubator space, and other forms of collaboration will be set by the terms of the license.

The Commercialization Partnership

Commercialization can be an entirely new experience for many inventors. It can be interesting and enjoyable but sometimes lengthy and complex. It requires a strong commitment by yourself and the Clinic. We seek a partnership between the inventor and the Cleveland Clinic Innovations case manager. To facilitate the process, the information below attempts to specify what is expected of both parties.

Cleveland Clinic commits to assess your technology for patentability, medical efficacy and marketability. If the initial review is positive the Clinic will:

1. Coordinate patent counsel to maximize the chances for successful patent protection;
2. Retain outside counsel and cover all costs to secure appropriate patent protection;
3. Prepare marketing materials for selected technologies;
4. Assess the financial value of the technology;
5. Identify potential commercial partners and manage interactions with them;
6. Execute transactions to bring the technology to market through licenses, spin-offs or other mechanisms;
7. When approved by the Industrial Advisory Board and Cleveland Clinic management, launch a spin-off company based on the technology;
8. Assist and guide the initial phase of spin-off companies including fund raising and recruiting of management;
9. Distribute royalty payments per Clinic policy and enforce license agreements.

In return, you are requested to:

1. Assist in identifying commercialization partners;
2. Assist in the preparation of marketing materials, presentations, and participate in meetings with potential commercialization partners;
3. Participate in all patent drafting and review;
4. Disclose current or evolving potential conflicts of interest;
5. Document all new inventions through a completed Invention Disclosure Form (IDF);
6. Provide the Case Manager with copies of abstracts, posters, or manuscripts a minimum of 15 days prior to submission for review of potential intellectual property;
7. Remain active in the development process as needed after licensing
8. Work with the appropriate Clinic office (i.e. Office of General Counsel) to ensure that a Confidentiality Agreement or Material Transfer Agreement is executed prior to discussing work with or sending materials to, respectively, a third party;
9. Meet regularly with the Case Manager to discuss progress on commercially relevant fronts;
10. Understand that despite initial promise, sometimes there are no companies/investors willing to commit resources to a technology