Inventor Resources: Commercialization

The Cleveland Clinic Innovations Commercialization Process

1. Overview
2. Disclosure
3. Evaluation
4. Marketing
5. Patenting
6. Licensing
7. The Partnership

Overview

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.

commercialization process at Cleveland Clinic is detailed below, but has two stages:

• Disclosure and Triage
• Active Commercialization

Disclosure and Triage begins when a Cleveland Clinic staff member submits a completed Invention Disclosure Form (IDF) to Cleveland Clinic Innovations. Innovations screens the invention against three main criteria - commercial viability, medical efficacy and protectability (via patent or other form of intellectual property ((IP))). The Innovations staff weighs these factors to determine if further investment of Cleveland Clinic resources is warranted. Innovations commercialization professionals work with the inventor to gain further insight into the invention and to better evaluate the technology.

Once the Innovations commercialization staff has reviewed the invention and discussed issues that may be involved in advancing commercialization, the project either proceeds to the active commercialization stage or is earmarked for further development by the inventor.

Cleveland Clinic Innovations commits substantial resources to ensure that the technologies in the active commercialization stage are successfully licensed, spun off to newly formed companies, or included in industrial partnerships (e.g., industrially funded research or research consortia). Innovations supports patenting, prototype development, obtaining expert consultants, and other steps necessary to advance these technologies to commercialization. All market assessments, contract negotiations, partner identification, and other services are performed internally, with the guidance of colleagues, physicians, the Commercialization Council, the Industrial Advisory Board, Entrepreneurs in residence, and consultants, as needed.

Most projects in the active commercialization stage involve patent protection. Cleveland Clinic Innovations selects and pays for outside counsel to prepare and file patent applications. Outside counsel works directly with the inventors and Innovations to maximize the scope of patent protection available.

A high priority is placed on the formation of new companies based on Cleveland Clinic inventions and special capabilities. Opportunities for creating new companies are managed by the Cleveland Clinic Innovations New Ventures group.

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 or used Cleveland Clinic resources 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 or otherwise manage conflicts of interest. Such policies can be found in the "Cleveland Clinic Institutional Policies" handbook.

The complete Cleveland Clinic IP policy, including the policy governing distribution of commercialization income , is available on the Cleveland Clinic Innovations web site at http://www.clevelandclinic.org/innovations/inventor/ip_policies.htm

Cleveland Clinic Innovations Commercialization Process

Disclosure

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, and can be downloaded from the Innovations web site at http://www.clevelandclinic.org/innovations/inventor/default.htm. This form provides Innovations with a detailed description of the invention, its state of development, the names of the inventors, and other information helpful in evaluating the commercial potential and patentability of the invention. Inventors should be prepared to devote several hours to this form as it is essential in the evaluation process. Please call Doug Meislahn (216-444-0906) 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 Innovations database management software. An Innovations commercialization officer will be assigned to the case and will begin the process of evaluating the commercial potential of the technology.

Importance of Confidentiality
For the reasons detailed below, if an invention is to be commercialized, it should remain confidential until it is protected through a patent application. At this stage, the details of the invention can be shared only with Cleveland Clinic staff or with individuals and institutions that have signed non disclosure 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 US patent.

Inventorship
In submitting an IDF, it is essential to identify inventors and their relative contributions to the project. These are two separate issues. Cleveland Clinic Innovations asks inventors to determine relative contributions to the technology to distribute revenue in accordance with contribution. Inventorship, on the other hand, is a legal determination made as part of the patenting process. Under US patent law, 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.

Any individual, either solely or with another individual, who conceived and diligently reduced to practice potentially patentable subject matter that is claimed in a patent application must be listed as a named inventor. A patent that does not name all of the proper inventors or that names individuals who are not proper inventors can be invalidated. The outside patent counsel responsible for drafting the patent application makes a legal determination of inventorship for Cleveland Clinic based on the information provided in the IDF and information gathered during interviews with the researchers and preparation of the patent application.

Evaluation

As the first step toward commercialization, Cleveland Clinic Innovations staff will schedule an initial interview with the inventor to discuss the details of the invention, determine the extent to which the invention is proven or otherwise reduced to practice, and understand the inventor's perspective of the advantages of the invention and current state of the art. The Innovations commercialization officer will screen the technology to determine whether its commercialization potential merits additional investment by the Cleveland Clinic. The screening process is brief and confidential. For each invention, the staff evaluates the invention on a number of criteria, including:

• Market potential: A critical criterion is the probability that an invention will lead to a viable product which can be licensed or can be 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 such protection is unavailable, the technology does not likely provide a viable commercial opportunity.
• Medical Efficacy: In most cases, 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 with the invention. An inventor is often 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 can be developed.

For Cleveland Clinic Innovations to actively market and invest in the invention, it must receive a compelling review in each category. in such case, the technology is moved forward for active marketing, and Innovations aggressively pursues licenses and/or spin-off possibilities. In the alternative, the technology could be held in abeyance, pending additional development.

If a technology is determined to need additional development, Cleveland Clinic Innovations removes the technology from the active files list. In most cases, the inventor then has the option of refining the technology and submitting a revised IDF for further consideration. In cases where the commercialization staff determines that no market opportunity exists, even with further development, the inventor may be offered the option of independently securing a license and seeking commercialization opportunities of the technology. In these circumstances the Clinic retains ownership and licenses the technology to the staff member.

Marketing

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, developing a prototype, and performing other activities that bring the invention closer to the market.

Cleveland Clinic Commercialization Council
The Cleveland Clinic Commercialization Council consists of Cleveland Clinic medical, research, and business staff. It meets monthly to provide policy and operational guidance to Cleveland Clinic Innovations, and to review applications for funding further development of Cleveland Clinic technologies (Product Development Fund discussed below). Innovations' Executive Director chairs the council.

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, most often through the formation of a new venture. 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

Product Development Fund
The Cleveland Clinic Commercialization Council reviews applications for funding from the Product Development Fund . This fund is used to support prototyping, small animal trials, and other steps which further demonstrate or enhance the value of the technology. Applications are selectively approved by the Commercialization Counsel, based upon a number of market factors. Cleveland Clinic Innovations administers the funds, once approved. Contact Innovations for more information.

Patenting

The Cleveland Clinic engages external patent counsel to prosecute applications for 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 that can add great value to the development of the inventive concept.

To be granted patent protection, the invention must be new ("novel"), useful, and non-obvious in view of the relevant prior art. 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.

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 successful commercialization. Securing a US patent can range from $15,000 to $30,000 and take 4-6 years; foreign protection typically costs several hundred thousand dollars. For these reasons, patenting should only occur when it is essential for securing a market opportunity, such as a license or the creation of a spin-off company.

Licensing

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. Innovations works with inventors and other sources of information, such as marketing databases, industry contacts, the IAB, executives in residence, and other sources to identify target companies. Innovations makes personal contacts with target companies, negotiates terms and conditions, and drafts licensing contracts. Throughout the negotiation process, Innovations works with the Cleveland Clinic Office of General Counsel to finalize the contract.

Creation of Spin-Off Companies
In appropriate cases, 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. Innovations always holds a Board seat in each spin-off company through at least the first round of funding.

After Licensing or Spin-Off
Cleveland Clinic Innovations ensures that licensees fulfill their obligations under their license agreements, including the payment of royalties, development of products, and submission of required reports. Innovations is also responsible for amendments and terminations of license agreements as appropriate. Further, Innovations reports to the Government on behalf of the institution all requisite information for the protection and utilization of Federally- funded inventions.

When a spin-off company is created, Innovations remains involved with the spin-off to ensure the appropriate relationship is maintained with the Clinic and that all obligations to the Clinic are met. As the spin-off progresses to the intermediate stage of development (ie, Innovations has licensed the technology, secured assets, and created equity), 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.

Distribution of Income from Commercialization
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.

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 Cleveland Clinic research endowment
• 20% to the Commercialization Fund

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 CFO.

Revenue from licensed non-patented biological materials will be distributed as follows:

• 20% to the inventor(s)
• 40% to the Cleveland Clinic research endowment
• 40% to the Commercialization Fund

The Cleveland Clinic strongly urges collaborators to discuss and agree on the distribution of the inventors' share of the commercialization income early on, preferably before engaging Cleveland Clinic Innovations. If more than one individual is eligible to receive a share of commercialization income, Cleveland 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, Innovations will look to the department chairman for guidance. If the inventors are from different departments and do not agree, Innovations will work to resolve the issue among the inventors. Failing resolution, Innovations will convene the involved department chairs in a committee, chaired by a Innovations designee, to resolve the issues.

The Partnership

If the Cleveland Clinic's initial review of your technology is positive the Clinic will:

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

In return, you are requested to:

• Assist in identifying commercialization partners
• Assist in the preparation of marketing materials, and participate in meetings with potential partners
• Participate in all patent drafting and review
• Disclosure potential conflicts of interest
• Document all new inventions through a completed IDF
• Provide Commercialization Officer with copies of abstracts, posters, or manuscripts a minimum of 15 days prior to submission for review of potential intellectual property
• Remain active in the development process as needed
• Work with the appropriate Clinic office (ie Office of General Counsel) to ensure that a Confidentiality Agreement of Material Transfer Agreement is executed prior to discussing work with of sending materials to, respectively, a third party
• Meet regularly with the Commercialization Officer to discuss progress on commercially relevant fronts
• Understand that despite initial promise, sometimes there are no companies/investors willing to commit resources to a technology

Commercialization can be an entirely new experience for many inventors. It can be interesting and enjoyable buy sometimes lengthy and complex. It requires a strong commitment by the inventor and the Clinic. We seek to build a partnership between the inventor and the Cleveland Clinic Innovations.