Table of Contents

SECTION A: TECHNOLOGY TRANSFER –THE BASICS ........................................................ 3

1. What is technology transfer? ...................................................................................... 3
2. What is the role of the MRC IC in technology transfer and how can we help MRC
scientists?............................................................................................................................ 3
3. What is the role of MRC scientists/inventors in technology transfer? ...................... 3
4. How can MRC scientists benefit from technology transfer? ...................................... 3
SECTION B: INTELLECTUAL PROPERTY, INVENTIONS AND INVENTORS .................. 4
1. What is intellectual property? ..................................................................................... 4
2. What constitutes an invention? ................................................................................... 4
3. Who is an inventor? .................................................................................................... 4
4. Who owns the invention? ........................................................................................... 5
SECTION C: PROTECTING INTELLECTUAL PROPERTY ..................................................... 6
C.1. PATENTS .................................................................................................................................. 6
1. What is a patent? ......................................................................................................... 6
2. What are the legal requirements for patenting an invention? .................................... 6
3. What constitutes public disclosure? ........................................................................... 6
4. In what categories are patents granted? ..................................................................... 7
5. What is patentable in the field of biotechnology? ...................................................... 7
6. What is not patentable? ............................................................................................... 7
7. Can genes, ESTs or SNPs be patented? ....................................................................... 7
8. Can computer-related (bioinformatics) inventions be patented? ............................... 8
9. Who should be listed as an inventor on a patent? ...................................................... 8
10. How does the patenting process work? ..................................................................... 10
11. Who benefits from a patent? ..................................................................................... 12
12. To publish or to patent? ............................................................................................ 13
13. How does filing for a patent affect publications/presentations/posters? ............... 13
14. When and why should I carry out a patent search? ................................................. 13
15. How do I carry out a patent search? ......................................................................... 14
C.2. COPYRIGHT........................................................................................................................... 14
1. What is copyright? .................................................................................................... 14
2. How do I ensure that my work has a copyright? ..................................................... 15
C.3. TRADE MARKS ..................................................................................................................... 15
1. What is a trade mark? ............................................................................................... 15
2. How do I register a trade mark? ............................................................................... 15
C.4. PLANT BREEDERS’ RIGHTS............................................................................................... 16
1. What are Plant Breeders’ Rights?.............................................................................. 16
C.5. TRADE SECRETS ................................................................................................................... 16
1. What is a trade secret? .............................................................................................. 16
2. What is confidentiality? ............................................................................................ 16
3. How do I protect confidential information? ............................................................. 17
4. What should be in a Confidentiality Agreement/NDA? ......................................... 17
5. What is a Materials Transfer Agreement (MTA)? .................................................... 17
6. Why are MTAs used? ................................................................................................ 17
SECTION D: ASSESSMENT OF IP.............................................................................................. 18
1. How will my invention be assessed? ........................................................................ 18
SECTION E: GUIDELINES FOR LABORATORY NOTEBOOKS ........................................... 19

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 1. Why is it essential to keep good research records? .................................................. 19
2. How do I keep good research records? .................................................................... 19
SECTION F: HOW TO PREPARE A BUSINESS PLAN ........................................................... 21
1. What is the purpose of a business plan? ................................................................... 21
2. How do I write a business plan? ............................................................................... 21
SECTION G: HOW TO PREPARE A MARKETING PLAN .................................................... 23
1. What is the purpose of a marketing plan? ................................................................ 23
2. How do I write a marketing plan? ............................................................................ 23
3. How do I do market research? .................................................................................. 25
SECTION H: FUNDING FOR COMMERCIALIZATION OF RESEARCH........................... 26
1. What funding channels apply to the commercialization process? ........................... 26
2. What public funding is available for commercialization of research? ..................... 27
3. What private funding is available for commercialization of research? .................... 28
4. What funding is available from the MRC for commercialization of research? ........ 28
SECTION I: THE COMMERCIALIZATION PROCESS ........................................................... 29
1. What is involved in commercializing research? ....................................................... 29
2. What are the possible commercialization routes that I can take?............................. 30
I.1. LICENSING .............................................................................................................................. 30
1. What is a license? ...................................................................................................... 30
2. What issues must be addressed in terms of license agreements?............................. 30
3. What types of technology licenses do you get? ........................................................ 31
4. What are royalties and upfront payments in licensing and how are they decided? 32
I.2. SPIN-OUT AND START-UP COMPANIES......................................................................... 32
1. What are spin-out and start-up companies? ............................................................. 32
2. When would one form a spin-out or start-up company rather than licensing out a
technology? ............................................................................................................... 33
3. Is there any support available to my spin-out or start-up company? ...................... 33
I.3. DIRECT SALE OF PRODUCTS AND SERVICES ............................................................... 34
1. What if I can produce a product or offer a service directly from my bench? ........... 34
I.4. USE OF TECHNOLOGY TRANSFER AGENCIES ............................................................. 34
1. What does a technology transfer agency do? ........................................................... 34

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 Guide for Inventors

SECTION A: TECHNOLOGY TRANSFER –THE BASICS

1. What is technology transfer?

Technology transfer is the process of transferring laboratory research outputs from

the bench to the marketplace, usually through partnerships with industry.

2. What is the role of the MRC IC in technology transfer and how can we help MRC
scientists?

The MRC IC has three staff members located at the MRC offices in Parow, Cape
Town, dedicated to developing a culture of innovation within the MRC’s science
base. The group’s primary function is to manage the development and transfer of
sustainable health care technologies to industry for the benefit of the MRC, MRC
members, and society in general.

3. What is the role of MRC scientists/inventors in technology transfer?

The assistance and commitment of the inventor are vital to the technology transfer
process. According to the MRC’s Intellectual Property Policy, all MRC members are
obliged to disclose any inventions to the IC and to cooperate with them as far as
possible in all matters pertaining to technology transfer. The expertise and
knowledge of the inventor are essential to the IC for assessing the potential
applications, market and patentability of the invention and to commercial partners
for product development and manufacture. MRC members are also responsible for
keeping thorough records of their experiments in order to assist in the technology
transfer process and in the legal protection of the invention.

4. How can MRC scientists benefit from technology transfer?

As documented in the MRC’s Intellectual Property Policy, IP creators/enablers will

receive 30% of the net income generated from the successful transfer of their
inventions to the marketplace. A further 30% of the income is awarded to the
Unit/Group or Centre in which the IP creators/enablers work.

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SECTION B: INTELLECTUAL PROPERTY, INVENTIONS AND INVENTORS

1. What is intellectual property?

Intellectual Property (IP) can be defined as any novel or previously undescribed

invention, process, machine, composition of matter, life form, article of manufacture,
software, data, written work, design or image, and know-how and information
associated with the above. Intellectual Property may or may not be protectable under
legislation, and may be tangible (e.g. biological organisms, plant varieties, computer
software, engineering drawings etc.) or intangible (e.g. patents, copyrights, ideas,
tacit knowledge etc.). IP is owned by individuals, organizations, institutions etc., and
can be bought, sold or licensed. It is therefore essential that IP be adequately
protected.

Patents, registered designs, trade marks and copyright are the most common ways of
protecting IP and preventing others from using or otherwise exploiting it without the
owner’s permission. Other types of IP include circuit layout rights, plant breeders’
rights and trade secrets. Although each is a separate area of law, all are designed to
provide some protection against the unauthorized use of products of the human
mind, particularly if such use provides an unfair trade advantage.

IP allows people to own their creativity and innovation in the same way that they can
own physical property. The owner of IP can control, and be rewarded for, its use, and
this encourages further innovation and creativity to the benefit of us all.

2. What constitutes an invention?

An invention is a novel and useful idea relating to processes, machines,

manufactures, and compositions of matter. It is probable that an invention has been
made when something new and useful has been conceived or developed, or when
unusual, unexpected, or non-obvious results have been obtained and can be
exploited. An invention may be the product of a single individual or a group of
individuals who have collaborated on a project.

3. Who is an inventor?

According to US patent law, inventors are those who have made independent,
original, conceptual contributions to an invention. For the purposes of its Intellectual
Property Policy, the MRC refers to individuals that contribute to inventions as either
IP creators or IP enablers. IP Creator(s) are individuals who are deemed to have
made an intellectual contribution to the creation and/or development of IP. They do
not include individuals that have only carried out the tasks or supplied materials,
and are not necessarily those appearing as authors on a scientific publication. IP
Enabler(s) are individuals who have indirectly contributed to the creation and/or
application of Intellectual Property and without whose intellectual contribution
commercial application would not have been possible. Assistants, technicians and
others who have contributed in taking the idea or concept to fruition may be
considered as IP Enablers. IP enablers do not necessarily qualify as inventors for
patenting purposes.

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4. Who owns the invention?

As described in the MRC’s Intellectual Property Policy, the MRC, in most cases, owns
all IP generated by MRC members (see definition of MRC members in the policy
document). The IC will act on behalf of the MRC and the research scientists to
transfer inventions to the marketplace. Any revenue generated from the successful
transfer of the invention will then be divided proportionally between the MRC, the
MRC unit/group/centre where the invention was made, and the research scientist(s).

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SECTION C: PROTECTING INTELLECTUAL PROPERTY

C.1. PATENTS

1. What is a patent?

A patent is an exclusive right granted for a specific period of time to an inventor, or

other entitled person(s), in exchange for a full disclosure of the invention to the
public. A patent is property and may be sold by “assignment” (i.e. transferring all
rights to another party) or licensed for use by others via a license agreement in which
the patentee retains all rights of ownership, but the right to use the invention is
licensed out for a fee.

Patents provide the patent owner with the right to exclude others from exploiting the
invention for the life of the patent. Generally patents are granted for 20 years, starting
from the date on which the first patent application is filed. Patent rights are territorial
which means that a South African patent, for example, does not afford rights outside
of South Africa.

It is important to note that what is granted is not the right to make, use, offer for sale,
sell or import, but the right to exclude others from making, using, offering for sale,
selling or importing the invention. Once issued, the patentee must enforce the patent
without the aid of the Patent Office.

2. What are the legal requirements for patenting an invention?

In order for an invention to be patentable, it must be novel, have utility, and differ
from what skilled users in the art or technology might expect (non-obvious). An idea
cannot be patented if it was known to the public, published, or secretly applied
before the application date. The invention must have an inventive step, must have an
application within industry, agriculture or commerce, and must add value and
benefit society in some way.

3. What constitutes public disclosure?

Any disclosure of an invention to the public prior to the filing of a patent will
essentially result in the invention no longer being patentable. Public disclosure
includes dissemination of information on the invention (a sufficiently detailed
description of the invention that allows it to be duplicated or put into use) through
newspaper articles, newsletters, bulletins, textbooks, journals, theses, reports, letters
to journal editors, oral presentations etc.

Specific types of disclosure to guard against are:

• informal discussions outside of your unit/institute
• postings on the web
• talks at meetings
• chats with non-MRC colleagues
• abstracts
• posters
• unprotected e-mail

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4. In what categories are patents granted?

• Processes/methods - a form of treatment of certain materials to produce a specific

result
• Machines - a mechanical device or combination of mechanical devices to perform
some function and produce a certain result
• Articles of manufacture - any tangible item not already included in the process or
machine description (this is essentially a catchall category)
• Components of matter - covers all products whether the result of a chemical
mixture or mechanical mixture or other compounds
• Improvements of the previous categories - an improvement may be an addition
to, simplification or alteration of any of the above

5. What is patentable in the field of biotechnology?

ƒ Non-living entities - DNA, recombinant DNA genes, promoters, plasmids,

vectors, polypeptides, antibodies that are present in organisms
ƒ Living entities - Genetically modified organisms and plant and animal cultures

Researchers should make sure that they are in possession of the isolated/purified
entity prior to seeking patent protection.

6. What is not patentable?

The following are not patentable:

• Discoveries, i.e. natural phenomena that had to have existed previously in order
to be discovered
• Scientific theories, i.e. theories that define what already exists
• Mathematical methods
• Presentations of information
• Methods of performing a mental act, or of doing business
• Methods for treatment of a human or animal body by means of surgery or
therapy
• Plants and animals which have not been genetically modified
• Biological processes
• The metabolism of organisms

7. Can genes, ESTs or SNPs be patented?

The patentability of various forms of genetic information remains uncertain and may
depend on the usefulness of the information. Patents on genes that code for medically
useful proteins such as erythropoeitin and thrombopoietin have been granted. The
situation is less clear for open reading frames of unknown function or for expressed
sequence tags (ESTs) and single nucleotide polymorphisms (SNPs). If it can be shown
that genes, ESTs or SNPs are associated with a particular disease in a way that
enables diagnosis of that disease or susceptibility to disease, then this may enable
patenting. Similarly, if a gene encodes a protein that possesses a beneficial function or
is a drug target for the treatment of a disease, this may also allow patenting.

7
 Presently, different patent offices around the world are governed by their own
patentability criteria when it comes to genetic information. The European Patent
Office (EPO) and the US Patent Office, for example, differ with regard to their stance
on the patentability of ESTs and SNPs. Currently, the US Patent Office will grant a
patent on an EST sequence, as long as evidence for a credible utility (such as its use as
a probe for a particular disease gene) can be provided.

8. Can computer-related (bioinformatics) inventions be patented?

Computer programs are patentable so long as they generate the ability for the
computer to perform a novel technical function. For example, a program that simply
sorted something into alphabetical order, which can be done manually, is unlikely to
be patentable. Applications of computation are also patentable. For example, a patent
has been granted for a computerised method and system for the analysis of an
electrophoresis gel test.

9. Who should be listed as an inventor on a patent?

According to US patent law, inventors are those who have made independent,
original, conceptual contributions to an invention. More specifically, it defines
inventors as those who have made at least one contribution to the patent claims (i.e.
the legal definitions of an invention) included in the patent application. When two or
more persons contribute jointly to a patentable discovery, all inventors must
participate in the patent application or risk the patent’s invalidation. A university,
corporation, or other business association may not apply in its own name as an
inventor but is registered with the Patent Office as the owner (assignee) of the patent.

Inventorship should be determined upfront to avoid any conflict with regard to

personal recognition, royalty payments, license fees etc. The acknowledgement of IP
creators and IP enablers and their relative contributions to the invention are provided
for on the MRC’s Invention Disclosure Form and Intellectual Property Contributors
Form.

8
 Figure 2: The Patenting Process

Most Likely Other

Route Options
Months
Priority date
0 SA SA
Complete
EU Provisional
Japan
12 months

12 PCT Foreign SA
Application Complete Complete

16 International 4-5 months after

18 months

Search Report PCT filing Examination

International Patent
18 18 months from
Publication Granted
priority date

30
National Phase
30 months from
initial filing
EU Japan
USA
etc.
2-5 years

Examination

Patent 3-10 years from

3-10 Granted initial filing
years

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10. How does the patenting process work?

10.1. Filing a complete or provisional application

The so-called “patent prosecution” process begins with preparing and filing a
provisional or complete patent application with a local or international Patent Office.
A provisional application is usually filed when the invention is still under
development and is likely to be changed or improved over the next year. They differ
for each patent office but most applications contain the following headings:
• Field of the invention
• Background of the invention
• Objectives of the invention
• Summary of the invention
• Detailed description of the invention and/or description of the drawings
• Claims

Individual inventors are allowed to file their own patent applications, however, due
to the specific and often complex rules associated with patents and their contents and
the fact that patents are legal documents, it is advisable to enlist the assistance and
advice of a patent attorney. The patent attorney and the inventor(s) work together to
draught the patent application, which is similar to a detailed scientific paper and
must contain a full description of the invention that allows others to make and use it
as well as a clear definition of the boundaries of the invention.

10.2. The priority date

The date on which the patent application is filed is referred to as the priority date, i.e.
the date from which the invention is deemed to have existed and from which the
invention is protected. The priority date is important for determining priority in cases
where similar inventions are patented. The applicant is given world-wide pending
rights for one year from the priority date.

The 12 months following the priority date can be used for further development of the
idea, to assess the commercial potential of the invention, and to identify how the
invention will be exploited. It is possible to file additional data relating directly to the
patent application as separate applications during this time. If after 12 months it is
clear that the invention cannot be exploited, the patent can be abandoned or
withdrawn.

At the end of the twelve-month period, a complete international patent specification

has to be filed. This will include any further applications filed or data collected
during the priority year. The contents of the application cannot be amended beyond
this date, however, if the idea is developed further, the original patent can be
abandoned and a new one filed. The most common route after the provisional patent
is to file a PCT application.

10.3. The Patent Co-operation Treaty

The international Patent Co-operation Treaty (PCT) allows you to file one
international patent application that offers protection in a number of different
countries (PCT Contracting States) designated by you. Patents must be filed directly

10
with countries that are not included in the PCT. Filing a PCT application buys you 18
months of extra time to evaluate the marketability of the invention before incurring
huge patenting costs involved in the “national phase”.

10.4. International Search Report

Usually 4-5 months after filing a PCT application you will receive an international
search report listing any prior art documents relevant to your claims that have been
identified by the International Searching Authority. This will give you some idea of
the novelty and inventiveness (how non-obvious it is) of your invention. If the prior
art questions the novelty and/or inventiveness of your invention, you can amend the
claims to better distinguish your invention from prior art or withdraw the application
before it is published.

You also have the option of obtaining an international preliminary examination

report, which will give you some information on the patentability of your invention
before going through the expensive patent granting procedure in each of the
countries you selected. PCT applications are examined by individuals with expertise
in the invention's technical field to determine whether the invention is patentable and
whether it is novel, and an Examination Report is issued after 28 months. Certain
claims in the patent application will be found to be patentable, whilst others will be
rejected. The applicant is able to file responses and amendments to counter the
arguments for the rejection of claims.

10.5. Other important patenting timelines

Approximately 18 months after the first filing date the patent is published, together
with the international search report. If you decide to withdraw a patent, it should be
done before it is published in order to maintain secrecy.

If you have filed a previous patent application (provisional or complete), you can
claim the priority date of the previous patent provided that the PCT is filed within 12
months of the priority date. Otherwise the priority date will be the date of filing of
the international application.

10.6. The national phase

A PCT application secures you the right to seek patent protection in a number of
countries, however, the actual granting of a patent remains the responsibility of the
national patent offices, and happens during the “national phase.” After a period of 30
months from filing the provisional patent application, or 18 months after filing a PCT
application, the applicant must move into the “national phase,” i.e. file complete
patents in each of the countries in which protection is required. This can be extremely
costly since national fees must be paid in each country and the patents must be
translated into the language of each country involved and must be examined for
compliance with the local patent law. The inventor should therefore be certain of the
potential financial returns from the invention before entering this phase.

Each national patent office will conduct a full examination of the patent to determine
novelty, utility and inventiveness. The international search and preliminary
international examination during the PCT phase will facilitate the prosecution

11
 process in the national phase, since you would already have made the necessary
adjustments to address the prior art identified and the patentability issues. The
applicant is again able to make amendments to the patent to address any objections
raised in the examination report. The patent will either be approved for grant once all
the objections have been addressed or it will be abandoned. Please note that even if a
patent has been granted, a third party may still challenge its validity. Once a patent is
granted, it will be subject to annual renewal fees in each of the countries in which it is
filed.

Under the European Patent Convention, patent protection can be obtained in 19

countries by filing a single application at the European Patent Office. Six other
Extension states are expected to become members in due course.

10.7. Patent prosecution and protection period

It typically takes 3-10 years from the initial filing for a patent to be granted,
depending on the territory and ease of examination. The invention will be protected
for 20 years from the filing date. The patenting process is represented schematically
in Figure 2 above.

10.8. Patenting costs

Estimated patenting costs for South African inventors

Average Renewal
Application Filing Cost Legal Fees Total Cost
Fees p.a.
SA R5 500 – R10
R60 R5 400 – R9 900 -
Provisional 000
R7 200 – R11 R7 500 – R12
SA Complete R266 R60 - R206
700 000
R3 434 – R9 R30 000 – R40 R35 000 – R48
PCT -
230* 000 000
R22 000 – R32 R24 000 – R36
National USA $340 – $770 R4 000
000 000
National Euro90 – R22 000 – R40 R38 000 – R60
R50 000 (5 countries)
Europe 125† 000 000
National R22 000 – R40 R42 000 – R66
Y16 000 R21 000
Japan 000 000
*R2790 filing fee + R644 per designated country up to 10 countries; †Excluding designation fees
Note that the costs do not include fees for possible official action (reporting and responding), grant and
issue of patents, examination requests, validation costs, translation costs etc.

11. Who benefits from a patent?

The granting of a patent and the successful transfer of that invention benefits
everyone concerned. The MRC and its researchers benefit by fulfilling their obligation
to serve the health needs of the public, thereby enhancing MRC-community relations
and by sharing in any income generated from the invention. Industry benefits
through new products that strengthen it and generate wealth. The public benefits
from improved quality of life provided by new technologies, products and processes
and a strengthened economy.

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12. To publish or to patent?

Publishing an invention allows for its exposure to the scientific community and the
rest of the public at an early stage, but does not prevent others from using the
information for commercial purposes. Patenting an invention, on the other hand, is
extremely expensive and time-consuming, but increases the chances of cutting-edge
research discoveries being pursued and developed for the benefit of the public.
Patent protection provides a limited monopoly, which is often required by a
commercial partner as an incentive to invest in the development of a research
discovery into a marketable product.

It is important for inventors to realize, however, that a patent does not guarantee the
commercial success of an invention. Many patents fail to generate sufficient income
to repay the expense of the patent process. Commercialization is often difficult and it
is therefore the job of the MRC IC to assist inventors in assessing the likelihood of
economic success before a decision is made to proceed with costly patent protection.

13. How does filing for a patent affect publications/presentations/posters?

Publishing is one of the most central outputs in the research process. Patent
protection does not prevent publishing. It only requires that the publication
(including any advance abstract publication) needs to be timed so that it doesn’t
appear in the Journal or on the web until the appropriate steps are in place to secure
the protection of any commercial aspect(s). The journal’s publication policy may also
need to be considered before disclosing results elsewhere (for example at a
conference), as some journals may decline to publish if they are not the first to break
the news. A PhD thesis may also be considered to be a disclosure document and
patent applications should be filed before the thesis is made publicly available in the
relevant institution’s library.

Carefully managing the timing of publications is an important aspect of successful

technology transfer. Thus, disclosing the idea to the IC as soon as the invention is
clearly conceptualized, or at least before submitting abstracts or manuscripts
disclosing the invention, allows time to evaluate the invention in terms of
patentability and commercialization. If the results of the assessment indicate that the
invention is in fact patentable, inventors will usually be advised to delay publication
for a defined period.

“First to Invent” (US) vs. “First to File” (EU)

A significant difference between the United States (US) and the European Union (EU)
patent systems, is the existence of a “grace period” for patent applications in the US
as a result of its “first to invent” system. Thus researchers in the US often publish
their inventions first and file for a patent later. This essentially means that the
inventor forgoes his/her foreign patent rights.

14. When and why should I carry out a patent search?

Literature and patent searches should be conducted before any research project is
initiated in order to avoid duplication of research and intellectual property. Patent
searches are particularly important when an invention has been made and needs to
be protected. The analysis of “prior art” will enable the preparation of a patent

13
 specification which can better anticipate objection, and is therefore more likely to
proceed to grant. The other advantage of a patent search is to determine the activities
of competitors.

15. How do I carry out a patent search?

The method used for patent searching depends on the objectives of the search. The
most common reason for carrying out a patent search is to determine novelty. Patent
searching is a long, complicated procedure and the results are largely dependent on
the keywords used. It is best initially to use broad search terms to ensure that all
relevant prior art is identified. Hits must be examined to determine whether they
overlap with your invention and to identify other prior art documents that have been
identified in the search reports.

The MRC IC is able to assist you with patent searching. The IC and the Innovation
Fund Commercialization Office (IFCO) have negotiated a license for access to the
MicroPatent on-line patent searching/mapping software, which can be used to search
a number of patent databases simultaneously. Researchers that are interested in
making use of this facility should contact Dr Sharon Herbert at the MRC IC on Tel:
021 938 0561; Email: sharon.herbert@mrc.ac.za for details. Researchers in the Gauteng
region can either conduct their own searches under the guidance of trained
professionals at the NRF offices in Pretoria or provide the relevant persons with key
words and specifications and request that they conduct the search for you. Please
contact Mr Calvin Fambisayi (Tel: 012 481 4268, Email: calvin@nrf.ac.za) for more
information.

Other useful websites for patent searching include:

www.uspto.gov - US applications and granted patents published after 15 March 2001
http://gb.espacenet.com - European Patent Office database
http://pctgazette.wipo.int - Published PCT applications
www.ipaustralia.gov.au - Published Australian patents and applications

Patent applications filed with the South African Patent Office are not as yet available
in electronic format, except through local patent attorneys.

C.2. COPYRIGHT

1. What is copyright?

Material protected by copyright is termed a “work”. Copyright is the form of

intellectual property protection provided to the creators of “original works of
authorship” and includes literary, dramatic, musical, artistic, and certain other
intellectual works, both published and unpublished, that have been “fixed” in a
tangible medium of expression. The copyright protects the form of expression rather
than the subject matter of the work. It therefore does not extend to the idea or creative
element contained in the work. In contrast, patent protection covers the concepts
underlying an invention as well as their specific application.

The main purpose of copyright is to reward creative efforts and to protect copyright
owners from a loss of revenue as a result of the unauthorized use of their works.

14
 Copyright therefore affords economic rights to “authors” enabling them to control
the use of their creations in various ways, such as preventing others from making
copies, issuing copies to the public, performing the work in public, broadcasting the
work, and using it on-line. It also allows “authors” to object to others distorting or
altering their works. Copyright is essentially property and may thus be sold, assigned
or licensed for use by others.

2. How do I ensure that my work has a copyright?

Copyright arises automatically, without any registration, as soon as an original work

has been reduced to a material form. For most works, with the exception of films and
videos, it is not necessary to register copyrights legally.

Copyright exists automatically for the following types of works:

• Literary works, including computer programs
• Musical works
• Dramatic works
• Choreographic works
• Pictorial, graphic, and sculptural works
• Motion pictures and other audiovisual works
• Sound recordings
• Architectural works

In order to protect the copyright, MRC-owned materials must be accompanied by the

following statement: Copyright © [year] Medical Research Council. All Rights
Reserved. The date should be the year in which the work was first published.

C.3. TRADE MARKS

1. What is a trade mark?

A trade mark is a word, name, symbol, or device that is used in trade with goods to
indicate the source of the goods. A service mark is the same as a trade mark except
that it identifies and distinguishes the source of a service rather than a product.

A trade mark can be thought of as any mark/sign used to distinguish the goods or
services of one person/enterprise from those of another during the course of trade. A
mark/sign can include any letter, word, name, signature, numeral, device, brand,
heading, label, ticket, aspect of packaging, shape, colour, sound or scent, or any
combination of these.

Trade mark rights may be used to prevent others from using what is referred to as a
“confusingly similar” mark/sign. However, these rights do not allow trade mark
owners to prevent others from making the same goods or from selling the same
goods or services under a clearly different mark/sign.

2. How do I register a trade mark?

Trade marks must be registered legally through an application to the Trade Marks
Office. The application will be examined to determine whether it adheres to trade

15
 mark requirements and for possible conflict with prior registrations. The registration
process currently takes 30 months or more from the date of filing and costs between
R266 and R310, depending on the type of trade mark, with an annual renewal fee of
R121. Please contact the IC for assistance with registering trade marks.

C.4. PLANT BREEDERS’ RIGHTS

1. What are Plant Breeders’ Rights?

Plant breeders’ rights may be obtained for any variety of a prescribed kind of plant as
long as it is new, distinct, uniform and stable. The holder of a plant breeders’ right is
granted exclusivity (i.e. the right to prevent others) in the production, sale, import
into and export from South Africa of propagating material or harvested material of
the protected variety. An application for the registration of Plant Breeders’ Rights
must be made to the Department of Agriculture. The application is examined by the
authorities, which normally takes 3-5 years, and includes testing of samples of the
plant.

The variety may not be sold or commercially exploited in South Africa, without
permission from the authorities, until it is registered. Application can be made for
provisional protection in order to prevent others from doing so too during this
period. This provisional protection expires on the grant or final refusal of the plant
breeders’ right application. As with a patent, an application must be filed in South
Africa within 12 months of filing in another country if priority is to be claimed. The
plant breeders’ right extends from the date of grant thereof for a period of 20 years,
except for vines and trees, which are protected for 25 years, provided that the annual
renewal fees are paid.

C.5. TRADE SECRETS

1. What is a trade secret?

Trade secrets refer to intellectual property that is protected through confidentiality

agreements, i.e. through secrecy. Secrecy is an important option particularly for IP
that cannot be protected through other legal means or where it is difficult to detect
infringement, for example manufacturing processes. Protection is weaker than that
afforded by either patents or copyrights because rights cannot be enforced in cases
where competitors copy publicly available works (i.e. reverse engineer).

2. What is confidentiality?

Confidentiality is a legal principle that serves to maintain secrecy between two or

more parties. This becomes important when one wishes to ensure that information,
particularly proprietary information in the case of intellectual property, which has
been passed on to another party is held in confidence and not used improperly.
Confidential information may be protected for a number of purposes. The most
important reasons are to retain control over your information, to prevent others from
using your ideas and to protect the novelty of inventions prior to patenting. After
public disclosure information is no longer considered confidential, unless that
disclosure took place under an obligation of confidence.

16
3. How do I protect confidential information?

Although an oral agreement is enough to provide an obligation of confidence, the

existence of such an agreement is often difficult to prove in a court of law.
Confidentiality Agreements (CAs), sometimes called secrecy agreements or Non-
Disclosure Agreements (NDAs), provide documented evidence of the agreement
between the parties, thus protecting the transfer of confidential information and
controlling the subsequent use of that information.

4. What should be in a Confidentiality Agreement/NDA?

An NDA should describe the subject field of the confidential information and in what
form it may be transferred, as well as the purpose of the transfer. The agreement
should also define how the information should be handled, in what circumstances the
receiving party can use the information and for how long the obligations apply. If only
one party is disclosing information the agreement should be unilateral, however if two
parties will be disclosing confidential information the agreement should be bilateral.
The main purpose of a CDA is to govern the transfer of confidential information,
therefore other issues such as intellectual property or transfer of materials for the
performance of work should be covered by additional, separate agreements if
necessary.

5. What is a Materials Transfer Agreement (MTA)?

A materials transfer agreement is a contract that governs the transfer of one or more
materials from the owner (or authorized licensee) to a third party for internal research
purposes only. Materials may include cultures, cell lines, plasmids, nucleotides,
proteins, bacteria, transgenic animals, pharmaceuticals and other chemicals. MTAs can
also be applicable for the transfer of materials in engineering/physical science
applications.

6. Why are MTAs used?

The sharing of reagents and materials is widespread throughout the scientific

community and is vital for the progress of research. However, most commercial
organizations, and an increasing number of academic institutions, will only release
materials if there is an MTA in place between the provider and the recipient. For the
provider, this agreement provides a number of comforts including restricting the use
of the material to non-commercial research, and reducing legal liability for the
recipient's use of the material. In addition, the terms of the MTA can help the provider
to gain access to the results of the research, both for information purposes and for
commercial exploitation.

Many MTAs from commercial organizations will seek to put restrictions on

publication of research results. While it is reasonable for providers to have access to
copies of proposed publications or oral presentations in advance in order to remove
confidential information and possibly prepare patent filings, publications should not
be subject to unreasonable or indefinite time delays or to the outright veto of the
provider. Companies/institutions should also not be allowed to control the content of
publications, beyond the removal of their own confidential information.

17
SECTION D: ASSESSMENT OF IP

1. How will my invention be assessed?

Due to the high costs of commercializing research, it is essential to carry out a

thorough assessment of the invention to determine the scientific merit and
commercial potential before embarking on expensive patenting and
commercialization processes. The IC will assess all new inventions disclosed to them
before making a decision on whether to take the invention further. The assessment
will be done according to the following criteria:

• The current intellectual property ownership status

• The options for protection of the intellectual property
• The commitment and capability of the inventors/team
• The feasibility and stage of development of the invention
• The size and characteristics of the market
• The economic and social benefits
• The commercialization feasibility and potential returns

Information for the assessment will be obtained through the Invention Disclosure
Form, interviews with the inventors, advice from specialists in the relevant
technology areas, and market and IP investigations by the IC staff (due diligence).

18
SECTION E: GUIDELINES FOR LABORATORY NOTEBOOKS

1. Why is it essential to keep good research records?

The protection and filing of patents relies on the maintenance of detailed laboratory
records by all researchers. This is particularly important in the case of patent filings in
the USA, where patents are prioritized according to the “first to invent” rather than
the “first to file” policy. Laboratory notebooks may therefore be used as evidence in
litigation over intellectual property disputes.

2. How do I keep good research records?

The following are guidelines to assist researchers in maintaining accurate records of

their laboratory experiments on a daily basis. Moreover, these guidelines serve to
ensure that laboratory notebooks are written up in a consistent manner and according
to Good Laboratory Practice standards, which most researchers outside of South
Africa currently have to comply with.

Notebooks
• Researchers should use a permanently bound notebook with numbered pages to
record research results, rather than writing notes on individual pages and then
filing them later. Notebooks used within research groups should be issued to each
scientist by the laboratory manager/administrator. These notebooks should be
numbered sequentially, with each notebook issued being given a unique number.
The first page of each book should contain information on the book number, user,
date of issue, purpose, and location. This information should also be logged by an
administrator issuing the notebooks, together with information, where applicable,
on the date of completion, place of storage and copying information.

Corroboration of Notebooks
• Laboratory notebooks should be signed and dated daily by a witness. The witness
should be a colleague who understands the content, but should not be a co-
worker or a collaborator in the research area who could be named as an IP
creator/IP enabler.
• A signature page must be used to identify any persons writing in the notebook,
including witnesses.
• Each page should be clearly dated and signed by the researcher and a witness.
The date of the experiment, the date of the write up and the date of witnessing
must be indicated. Any material added after the date given on a page must be
signed and dated accurately and counter-signed by the witness. The witness
should sign the notebook as soon as possible after the research has been written
up, preferably within a week.
• By signing the notebook, the witness acknowledges that he/she has read and
understood the entry and is satisfied that the entry has been accurately and
correctly written.
• Notebooks should be checked by Principal Investigators every few months to
ensure that all the appropriate signatures are in place.

Entering Data into Notebooks

• Records should be made in legible handwriting using permanent blue or black
ink.

19
• Start a new page for each new experiment and draw a continuous diagonal line
through unused pages or portions of pages remaining at the end of an
experiment. This line should be signed and dated by the researcher.
• Begin the write-up of each experiment with a title, a brief purpose or statement of
the problem, and the materials used. Describe all protocols and designs used in
the experiment and list any problems encountered. Document results in full and
record any unexpected or unusual observations. Show all calculations and
reference any software used in the experiment. Conclusions should also be
entered into the notebook.
• Records have more value if they are meaningful to others. Entries should be
complete, accurate, and legible. Any fact or detail can be crucial to proving
ownership of intellectual property; therefore, all information must be noted,
regardless of its perceived importance.
• Laboratory notebooks can also be used to record new ideas.
• Any photographs, autoradiographs, print-outs etc. relevant to research should be
permanently fixed to a page in the notebook, without overlapping with other
items in the notebook. All attachments should be signed or initialed and dated by
the researcher partly on and partly off the attachment. Before fixing the
attachments, label the back with the lab book and page number in case they
become detached. Larger items that cannot be fixed to the notebook should be
kept as supplementary records and cross-referenced to the notebook.
• If data is held in electronic format, it should be secure and backed-up regularly,
with duplicate copies archived. It should also be clearly cross-referenced in
notebooks.
• Errors should not be erased. Instead, where necessary, cross out errors with a
single line so that the original text is still clear. Initial and date all major changes.
Explanations for changes should be provided where appropriate.
• Experimental work should be written up as soon as possible after the work has
been carried out. It is best to get into the habit of making frequent entries,
preferably daily.
• Think carefully before destroying any samples, run sheets, or records related to
any invention.

Storage of Notebooks
• Notebooks should be accessible during use. Those containing confidential
information should be locked in a fireproof cabinet outside of working hours.
• After completion, notebooks should be copied and archived by an administrator.
• Notebooks must be retained by the institution when researchers leave.

20
SECTION F: HOW TO PREPARE A BUSINESS PLAN

1. What is the purpose of a business plan?

There are various reasons for preparing a business plan, including ordering your
ideas about starting a new business into a logical plan, documenting an action plan
on how to go about starting a new business or improving on or changing the
direction of an existing one, and marketing your business to others, usually potential
funders. The style and content of your business plan will depend on the objective you
are trying to achieve, but most business plans have the same broad headings.

2. How do I write a business plan?

Below is a list of the main headings that are used in business plans. A very good
overview of business planning and the kind of information that should be included
under the relevant headings can be found on the Acorn Technologies website. The
relevant links are as follows:

http://www.acorn.org.za/services/bp_part_1.doc - overview of business planning

http://www.acorn.org.za/services/bp_part_2.doc - template business plan
http://www.acorn.org.za/services/financial_model.xls - template financial model
http://www.acorn.org.za/services/models.doc - analytical models useful in
business planning

This information was made available by Professor Frank Moyes, University of

Colorado Business School, http://www.leeds.colorado.edu/entrep/, and is intended
as a guide only.

Business Plan Outline (from Acorn website)

1.) Table of Contents (1 page)
2.) Executive Summary (1 page)
a.) Concept Description
b.) Opportunity
c.) Solution
d.) Value Proposition
e.) Process
f.) Management
g.) Financial
3.) Company Overview (1 page)
a.) Introduction
b.) Mission Statement
c.) History and Current Status
d.) Objectives
4.) Products and Services (1 page)
a.) Introduction
b.) Description
c.) Market Comparison
d.) Proprietary Rights
e.) Stage of Development
5.) Industry and Market Analysis (~3 pages)
a.) Introduction

21
 b.) Industry Analysis
c.) Marketplace Analysis
d.) Customer Analysis
e.) Competitor Analysis
6.) Marketing Plan (~4 pages)
a.) Introduction
b.) Target Market Strategy
c.) Product/Service Strategy
d.) Pricing Strategy
e.) Distribution Strategy
f.) Advertising and Promotion Strategy
g.) Sales Strategy
h.) Marketing and Sales Forecasts
7.) Operations Plan (~2 pages)
a.) Introduction
b.) Operations Strategy
c.) Scope of Operations
d.) Ongoing Operations
e.) Operations Costs
8.) Development Plan (~2 pages)
a.) Development Strategy
b.) Development Timeline
c.) Development Expenses
9.) Management Plan (~1 page)
a.) Company Organization
b.) Management Team
c.) Administrative Expenses
10.) Financial Plan (~3 pages)
a.) Financial Statements
b.) Financial Comparables
c.) Financial Summary
d.) Financial Assumptions
e.) Funding Requirements
f.) Sources and Uses of Funds
g.) Business Risks
11.) Offering (Funding Request) (1 page)
a.) Investment Requirements
b.) Valuation of Business
c.) Offer
d.) Exit Strategies
12.) Appendices (no more than 15 pages)
a.) Required items (e.g. Financial Statements, CVs etc.)
b.) Optional items (e.g. Surveys, Development timeline, Operations layout etc.)

The IC is able to assist you with writing your business plan. Please contact us on 021
938 0413 or email us at mrcinc@mrc.ac.za for more information.

22
SECTION G: HOW TO PREPARE A MARKETING PLAN

1. What is the purpose of a marketing plan?

The marketing plan is an important component of the business plan. It should

provide you with a clear plan of how you will introduce your product into the
market, including the commercialization route to be taken. Developing a good
marketing plan requires a thorough investigation of the market, in particular to
determine whether there is a need for your product in the market, whether customers
will buy your product, how to let customers know about your product, how best to
get the product to them, and how to compete with existing businesses in your
proposed industry.

2. How do I write a marketing plan?

A marketing plan can be presented as part of your business plan or as a separate

document. If it is presented on its own, it must include a Title Page, Table of
Contents, Executive Summary, and Industry and Market Analysis.

The main headings to be used in an Industry and Market Analysis and Marketing
Plan are as follows (from Acorn website):

1. Industry and Market Analysis (~3 pages)

a.) Introduction
b.) Industry Analysis
c.) Marketplace Analysis
d.) Customer Analysis
e.) Competitor Analysis

2. Marketing Plan (~4 pages)

a.) Introduction
b.) Target Market Strategy
c.) Product/Service Strategy
d.) Pricing Strategy
e.) Distribution Strategy
f.) Advertising and Promotion Strategy
g.) Sales Strategy
h.) Marketing and Sales Forecasts

A good description of the type of information that should be included under each
heading is available on the Acorn Technologies website. The links are as follows:
http://www.acorn.org.za/services/bp_part_1.doc
http://www.acorn.org.za/services/bp_part_2.doc.

This information was made available by Professor Frank Moyes, University of

Colorado Business School, http://www.leeds.colorado.edu/entrep/, and is intended
as a guide only.

The Industry and Market Analysis must describe the broader industry environment
in which your business operates, the characteristics of the specific market(s) for your
product, who your potential customers are, who your competitors are, and how you

23
will compete against them. Some of the questions that must be addressed in the
Industry and Market Analysis include:
• What is the state of the economy and how does this impact on your business?
• What industry is your business in?
• Are there any industry trends that could affect your business or product?
• What are the current political, cultural and social trends and how do they
affect your business?
• What current or pending provincial, national and international legislation
may affect your business?
• Are there any threats or opportunities in the environment that could affect
your business?
• What is the target market, i.e. who are your customers?
• Is there a need for your product in the market?
• How big is the market?
• Is it shrinking or growing?
• What trends are visible in the market?
• Is the industry mature or relatively young?
• Who are your major competitors in the industry and what are their annual
sales, market share, and growth profile?
• What strategies have competitors in the industry been using?
• What are the relative strengths and weaknesses of the competitors in the
industry?
• Is there a threat of new competitors coming into the industry and what are the
major entry barriers?
• What is your competitive advantage, i.e. why will people buy your product or
service, as opposed to that of a competitor?

The Marketing Plan, on the other hand, focuses on how you will introduce your
product to the market, through the 5 P’s, i.e. Product, Price, Promotion, Place and
Personnel, otherwise known as the marketing mix. Some of the questions that must
be addressed in the Marketing Plan include:
• What features or benefits does your product have?
• Who are your customers?
• What are the personality traits of your customers?
• Do they have a high disposable income?
• Are they price sensitive?
• What influences their buying decisions?
• What pricing strategy will ensure that the target market is reached?
• How should you let customers know about your product?
• What is the best way to get your product to the customers?
• Where should your business operate from?
• Where should you sell your product?
• Who should sell your product?
• What are the expected marketing costs?
• What are the expected revenues from selling your product?

The Marketing Plan should also include a SWOT analysis of your business. A SWOT
analysis involves determining the strengths and weaknesses within your company, as
well as the opportunities and threats outside of the company.

24
3. How do I do market research?

There are two main sources of market research data, i.e. primary data and secondary
data. Primary data refers to data gathered from the customers, suppliers and
competitors themselves through direct observation, interviews, email or telephone
surveys etc. Secondary data, on the other hand refers to information that already
exists. The most common sources of secondary data are publications, databases,
company reports, the internet etc. Market research is not difficult to do but takes time
and requires some knowledge of data gathering and analysis. The IC is able to
provide advice on, or assist you with, market research and with the development of
your marketing plan. Please contact us on 021 938 0413 or email us at
mrcinc@mrc.ac.za for more information.

25
SECTION H: FUNDING FOR COMMERCIALIZATION OF RESEARCH

1. What funding channels apply to the commercialization process?

Funding sources for the commercialization of research include specific and generic
and public (government-backed) and private sources. Public funds can be structured
as grants, loans, rebates, tax incentives, co-investments, or venture capital (VC), while
private funding includes seed/incubation funding, angel investments, venture
capital and private equity, and private donations, trusts or foundations. The relevant
funding channels that apply to different stages of the development and
commercialization process are illustrated in the figure.

Figure 3: Funding for the Commercialization of Research

Fundamental Applied Product Commercialization

Research Research Development & Market Release
Curiosity Needs/Market Market Wealth
Driven Driven Driven Creation
NRF Core Grant

Donor Funding

Private Funding

THRIP

Innovation Fund

Angel Investment

Seed Funding

BRICs

Venture Capital

There are a number of different sources of funding for fundamental and applied
research. Some of them are listed in the figure. Once it has been recognized that the
research has commercial potential, the invention enters into the commercialization
process. This may involve proof of concept, further development of the idea,
preliminary market analysis etc. Funding for this stage is usually in the form of angel
investment or seed funding, though other sources include the NRF’s THRIP and
Innovation Fund schemes and the Biotechnology Regional Innovation Centres
(BRICs). Angel investments are high risk, early-stage investments usually made by
wealthy individuals or groups of individuals. Angel investors are often family
members or close friends and are usually experienced and successful entrepreneurs
looking for new challenges and investment opportunities. They will probably get
heavily involved as mentors to new start-ups in which they invest. Seed funding is

26
 also for new ventures in the initial phases of commercialization. This funding
instrument is not directed towards R&D, and is also high risk capital.

The next funding stage, which forms the natural exit opportunity for angel investors
or self-funded entrepreneurs, should be venture capital or private equity investment.
These investors will normally only invest after proof of concept or prototype
development. They invest either in potentially sustainable and competitive
companies or in the final development, marketing and licensing or sale of inventions
to existing industry players. Venture capital represents later stage funding that is
usually invested by specialized VC firms who manage funds on behalf of investors.
Investments are usually made into medium to low risk ventures for a significant
equity stake in the business. More than one venture capital firm may invest in a
company, even at an early stage in its development. Venture capital firms, apart from
providing funds for development, usually provide assistance with business
development and management and access to their extensive business networks.
Venture capital firms take a risk when investing in new ventures, and therefore
require high returns on their investments. The firms usually exit the investment and
make their money by selling their shares in the companies. Typically this happens
when a company makes a public offering, or when it is acquired by another
company. Private equity is late stage funding typically reserved for existing
businesses with established track records of profitability that wish to expand
operations. This instrument is also utilized in the funding of management buy-outs
and similar deals.

2. What public funding is available for commercialization of research?

There are a number of public funding mechanisms available for the

commercialization of research. These include:
a. Biotechnology Regional Innovation Centres (BRICs) located in the Western Cape
(Cape Biotech Trust; www.capebiotech.co.za), Gauteng (Biopad;
www.biopad.org.za) and Kwazulu Natal (EcoBio; www.ecobio.co.za). Funds
available from the BRICs are directed at the development of biotechnology in
South Africa, and therefore are limited to biotechnology projects that are aimed at
application in industry. Please visit the respective websites for more information
on the procedures and criteria for applying for funding.

b. Biotechnology-focused GODISA-funded incubators, eGoli BIO Life Sciences

Incubator (www.egolibio.co.za) in Gauteng and Acorn Technologies
(www.acorn.org.za) in the Western Cape. The incubators provide business
support to projects at various stages of commercialization. Please visit the
respective websites for more information on the procedures and criteria for
assistance.

c. Innovation Fund, administered by the National Research Foundation (NRF). The

Innovation Fund supports projects in various focus areas that are aimed at
commercialization. Funding is usually for a period of 3 years. The NRF has
recently established a seed fund to bridge the gap between the Innovation Fund
and venture capital funding. The Innovation Fund Commercialization Office
(IFCO) has also recently been established to assist groups at public research
institutions with technology transfer. More details on IFCO and applying for
funding can be found at the following website, www.innovationfund.ac.za.

27
 d. Patent Fund, administered by the NRF. The fund is used to cover 50% of the
patenting costs of public research institutions.

e. Department of Trade and Industry (DTI) incentive schemes, which are not
specifically aimed at the commercialization of research but which may apply to
some aspects of it. Examples include, among others, the Technology and Human
Resources for Industry Programme (THRIP), the Support Programme for
Industrial Innovation (SPII), the Skills Support Programme (SSP), the
Competitiveness Fund (CF) etc. Details of these schemes are available on the DTI
website (www.dti.gov.za).

3. What private funding is available for commercialization of research?

Private funding includes funding from private companies, incubation funding, angel
funding, venture capital and private equity, and private donations, trusts or
foundations. Some examples of local venture capital funders that may invest in
biotechnology projects include:
• Bioventures (www.bioventures.co.za)
• HBD (www.hbdvc.com)
• Catalyst Innovations (www.catalystii.net)
• Chrysalis Biotechnology Holdings Limited (www.chrysalisbiotech.com)
• The IDC (www.idc.co.za)

4. What funding is available from the MRC for commercialization of research?

The IC currently has access to a small IP fund from the MRC, which is used, in
particular, to cover the costs of patenting. These funds are insufficient to cover all
commercialization costs and the IP Committee of the MRC will need to prioritize
projects for funding via this avenue.

28
 SECTION I: THE COMMERCIALIZATION PROCESS

1. What is involved in commercializing research?

The commercialization process is generally long and expensive. It involves a number

of different stages, which will differ according to the product or process under
development. Example commercialization processes are illustrated in the diagram
below for a new medical device and a novel drug. Each stage in the process requires
specific skills and resources.

Figure 4: Examples of Commercialization Value Chains

Commercialization of a Medical Device

Product Prototype Full-scale

Development Development Testing Production Distribution

Research Product Pilot Registration Marketing

Design Production

Commercialization of a New Drug

Clinical Full-Scale
Target Compound Distribution
Formulation Trials Manufacturing
Identification Screening

Research Target Lead Pilot Registration Marketing Ongoing

Validation Validation Production Trials

29
 2. What are the possible commercialization routes that I can take?

There are various options available for commercializing research. The specific
commercialization route to be used will be dictated by the following factors:
a. Financial investment required for each commercialization route
b. Potential return on investment for each commercialization route
c. The nature of the technology/product/process itself
d. The target market and how it can best be reached
Each of these factors must be examined before deciding on how to commercialize an
invention. Some of the available routes are discussed in more detail below.

I.1. LICENSING

1. What is a license?

A license is a legal document that allows an individual or company (the licensee) to

use the intellectual property (proprietary materials or know-how) of another
individual or company (the licensor) in return for remuneration. This remuneration is
usually in the form of royalty payments, but may also involve an upfront lump sum
payment. Unlike an outright sale or assignment, a license allows the licensor to retain
ownership rights of the IP. The major advantage of licensing is that the responsibility
for manufacturing, selling, distribution and even further development of the
technology/ product/ process can be transferred to the licensee, thus reducing the
investment required by the MRC or the inventor in commercialization.

The license agreement has terms defining the length of time the license is valid, the
markets (territory) in which the licensee can use or sell the product, whether or not
sublicenses are permitted, the nature and amount of upfront fees and royalties, and
whether or not the licensor has rights to any improvements developed by the
licensee.

MRC members may want to license in technologies for use in their research, or they
may have a technology that they would like to license out to industry. The IC, together
with the relevant legal experts, will assist MRC members in both of these scenarios.

2. What issues must be addressed in terms of license agreements?

License agreements are very complex and need to be as comprehensive as possible in

order to ensure that the rights of both the licensor and the licensee are covered for all
eventualities. It is highly recommended that the negotiating and drafting of license
agreements are carried out with the assistance of a legal specialist with expertise in
the licensing of technologies.

30
 Below are listed some of the key issues that must be addressed when negotiating a
license agreement.
• Obligation for the licensee to share plans for commercial development
• Time limits on the development and release of the product onto the market by the
licensee
• Clear definitions of the intellectual property related to the license agreement
• Clear definitions of the types of products the licensee is permitted to develop
using the intellectual property
• The term of the license agreement (In the case of patents this is often the lifetime
of the patents)
• The payment amounts, structure, and terms
• The exclusivity and geographical scope of the license
• Guarantees or warranties on the technology
• Rights of the licensor to any improvements developed by the licensee

3. What types of technology licenses do you get?

The majority of technology licenses are for patents, copyright (especially in software)
and know-how, and one license may relate to more than one patent and/or other
type of intellectual property. The following types of technology licenses can be
granted by licensors:
Patent commercialization licenses provide licensees with rights to patented technology
or technology covered in patent applications that have been filed in anticipation of
receiving a patent. These licenses can be exclusive or non-exclusive.
Exclusive licenses are those in which one licensee receives exclusive rights to develop
products using the IP. This means that both the licensor and other potential licensees
are prevented from exploiting the IP. This often provides the licensee with a
significant competitive advantage and the potential for a large financial return,
therefore, the royalty obligations and financial terms in such licenses are often quite
substantial.
Non-exclusive licenses give several licensees as well as the licensor the right to develop
products using the IP. Such licenses are often given when the technology has the
potential to significantly benefit the wider public, and when providing multiple
licenses may accelerate its entry into the marketplace. Some non-exclusive licenses
allow the licensee to use the IP internally only, e.g. where the technology is useful as
a tool or process but is not itself a marketable product.
Commercial evaluation licenses (also known as options) grant a potential licensee the
option (for a fee) to negotiate a license within a specific time, while the company
assesses the commercial potential or appropriateness of the technology. This allows
the licensee to explore the value of a new technology for a limited time before making
the financial and resource commitment of a full license. Commercial evaluation
licenses have smaller financial terms and are of a short duration. If the licensee finds
the technology meets their needs, then the parties can negotiate a new agreement for
an exclusive or non-exclusive patent commercialization license.
Biological materials licenses provide licensees with access to non-patented materials or
biological constructs that were prepared at great effort and expense and may only be
available from the laboratories that made them. These licenses can be non-exclusive
and for internal use only, or for commercial sale to promote the wider use of unique
materials or biological constructs.

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 4. What are royalties and upfront payments in licensing and how are they decided?

A license is a transfer of value, and royalties and up-front fees are the agreed price of
that value. Since licenses are not traded in open markets, where the price can be set
through supply and demand, each negotiation is unique and has to reflect the intense
evaluations of each party. A licensor will want, at a minimum, to recover the costs, or
some reasonable portion of the costs, already invested in the product, and to generate
a steady flow of income. Up-front payments should be high enough, if possible, to
meet the licensor’s need for short-term income and to assure that the licensee is
according an appropriate level of seriousness to the product, but should not be so
high as to limit the ability of the licensee to invest in the product and make it a
success. Other factors to consider are the life of the product and the life-time of the
intellectual property rights being granted. The shorter the life of a product (because
other better products are expected to emerge quickly), the less the licensor can ask for
up-front fees and, to a lesser extent, royalty.

Royalty rates differ considerably and depend on the following main factors:
• The stage of development of the product when licensed out
• The type of product
• The industry in which it is applied
• The price at which the product can be sold
• The maturity of the market
• The geographical scope of the license
• The term and exclusivity of the license
Royalties can vary from 0% for technologies or products that are licensed out at the
idea stage to 10% for a product with a captured market and distribution channel.

If the license is based on a patent, the level of royalties may decrease, or the license
may even expire at the end of the patent life. The issue of license term is more
complicated when the license is for know-how. A reasonable approach toward a
know-how license is for the royalty to diminish with time and eventually reach zero
when both parties agree the know-how would be no longer of value. However, if
know-how is essential for the successful manufacture and sale of the product
throughout its lifetime, there is no reason for the royalty to change. Also, a licensor
may make continual changes in the know-how and pass those to the licensee. Again
in this situation, royalties may be collected for a very long time.

I.2. SPIN-OUT AND START-UP COMPANIES

1. What are spin-out and start-up companies?

A “spin-out” company is a company that is created using the resources of the

institution or company from which the technology originated. The institution or
company usually incubates the spin-out company at least until the first round of
venture capital investment. Staff members from the institution or company are often
transferred to the new company either on a permanent or on a secondment basis.
Research institutions may spin-out companies in order to separate their commercial
activities from their core purpose, i.e. teaching and research, while an existing
company may spin-out a new company when the technology in question falls outside
of its core business.

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 A “start-up” company is a company created by people outside an institution or
company. It is usually built on a license to one or more technologies that may
originate from an institution or company, however, its other resources such as
management are drawn from elsewhere.

2. When would one form a spin-out or start-up company rather than licensing out a
technology?

The commercialization of research through the creation of new companies is an

option in cases where the technology is sufficiently broad based (e.g. a platform
technology that enables a range of different products to be produced, possibly for a
range of different markets) or novel or where the capital investment required for
product development and commercialization is justified by the potential returns. The
costs and risks must be weighed against the potential returns when deciding on
whether to form a new company or to license the technology to an existing company
that has the necessary infrastructure such as channels to market, sector knowledge,
facilities, commercial management, and an existing contacts network in place.

The new company route may be the only option where no licensee can be recruited to
commercialize a product (i.e. if the technology does not fit into the product offerings
and markets of existing companies) and where a market does not already exist for the
product. On the other hand, a license may be the only option if funding for product
development and marketing is not available. Forming a new company as a means of
commercializing technology presents a higher risk than the traditional licensing
route; however, it has the potential to contribute to economic development via the
creation of jobs.

The IC and the relevant legal experts will assist with the formation of new companies,
including the sourcing of appropriate management.

3. Is there any support available to my spin-out or start-up company?

There are many challenges facing new companies, particularly those based on
technology(s). A wide variety of skills, expertise and resources is required for them to
develop and market their own products. They usually require a huge investment
over a relatively long period of time before sales and revenues are realized. Spin-outs
from existing companies usually have a strong infrastructure and support base, while
spin-outs from research institutions may be at higher risk, since the institutions are
normally limited in the staff and financial resources and capabilities which they can
devote to the commercialization of technology.

The Department of Science and Technology and the Department of Trade and
Industry have initiated a number of interventions to support the successful
development of new companies in South Africa. The interventions include the
establishment of a number of incubators designed to provide business support and
the necessary resources to aid the successful establishment of new companies. Start-
ups and spin-outs from research institutions and companies are able to make use of
the incubators for support. Spin-outs based on MRC-funded research will be assisted
by the IC in business and strategy development as well as in all processes involved in
releasing products onto the market, including registration, regulations, trials, permits,

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 ethics, licenses, pilot and full-scale production, biosafety issues etc. for as long as
required.

I.3. DIRECT SALE OF PRODUCTS AND SERVICES

1. What if I can produce a product or offer a service directly from my bench?

In some cases, it may be possible to produce a product or offer a service directly from
your laboratory or department, without incurring high capital costs. In these cases,
you may be able to sell the product or service directly. The IC is able to assist you
with marketing your product or service, if required.

I.4. USE OF TECHNOLOGY TRANSFER AGENCIES

1. What does a technology transfer agency do?

There are a number of technology transfer agencies in South Africa and abroad that
assist with the commercialization of IP. When utilizing the services of such agencies it
is standard practice that the IP is assigned to the agency, although the agreement will
usually provide for the sharing of royalties between the IP owner and the agencies.
The advantage of using a technology transfer agency is that the costs involved in the
commercialization of IP are borne by the agency, which usually has a good network
of potential licensees and extensive experience in the field of technology licensing.
Please note that any decisions to use a technology transfer agency to commercialize
IP developed from MRC funds or by MRC members must first be approved by the
MRC’s IP Committee.

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