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Value Delivered -- Licensing Case Example: 1+1=4

  • After many years of scientific discovery work, a not-for-profit medical institution received a patent for a genetic sequence implicated in a hereditary, invariably fatal brain disease. As a result of this isolation of the genetic mutation involved in the disease, it became possible for molecular genetics laboratories to offer screening tests that would help prospective parents learn whether they run the risk of having children afflicted with the disease.

  • For many months, the institution receiving this patent engaged in negotiations with a leading commercial laboratory company to establish licensing terms by which the lab would pay royalties in exchange for the right to offer such testing to the public.The royalty being discussed, as reflected in term sheets then being traded back and forth, was so meager that the patent holder considered abandoning the patent as not worthy of commercialization.

  • Then, one of the founding principals of Tech-Spin was engaged by the patent holder to conduct a process by which the commercial value of a license under this patent could be maximized.

  • Soon afterwards, a series of negotiations with multiple counterparties had established the base license price at a multiple of 5.95 times the price previously discussed.

  • Subsequently, more than a dozen laboratories have been licensed under the patent estate, and more than one hundred thousand patients have benefited from the information made available by this breakthrough discovery.

  • Equally important is the economic return to the patent holder. Even after the 37.5% share paid to the licensing agent, the patent holder’s net receipts have equaled almost four times the amount that would have been earned if the patent holder had settled for, and kept all of, the price initially on the table.

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