Introducing SAIL: A Proposed Tech-Transfer Framework

For the past couple of months MVIP™, CanInnovate and Action Potential have been working on a new type of agreement: a Simplified Agreement for Innovation Licensing (“SAIL”). The goal of SAIL is to facilitate the transfer of University owned IP into the hands of entrepreneurs who seek to commercialize IP, and sell innovative products and solutions. Here is version 1.0:

Download SAIL in .docx

Why we did it:

Though it's a “work in progress”, we wanted to share SAIL with the startup,  tech-transfer (TTO), and funding ecosystem to:

1. unlock IP value and accelerate the technology transfer process and/or the lab to market journey;

2. gain knowledge in the rationale that leads to the “decision to sell” University owned IP, including project milestones and "triggering events" that lead to an IP acquisition or buyout events (e.g., from licensing to acquisition);

3. support economic activity by promoting technology transfer, entrepreneurship and the commercialization of University-owned  IP (see here and  here), and

4. promote discussion around the issues that the SAIL seeks to solve.

Stakeholders Working Together for a “Win, Win, Win”

For SAIL to work, funders, founders and TTOs, have a role to play together in supporting the commercialization of IP. Understanding these dynamics is crucial for creating an agreement that aligns interests and maximizes the potential for successful innovation and IP commercialization. Below is a summary of these stakeholders:

• Tech Transfer Offices (TTOs): Seek to maximize the impact of University research and sometimes the financial return on their research investments. TTOs must balance their need to deliver sound governance of publicly funded research outputs against the long-term success of startups they enable, while in some cases requiring immediate financial returns to operate a balanced budget. They may also administer Innovation Funds to support spin-offs. 

• Startup Founders: Seek a clear path to ownership and revenue. They prefer agreements that minimize early-stage financial burdens, and that are well understood and acceptable to downstream investors. Founders are also sensitive to agreements that could add difficulty to their future fundraising efforts or impose onerous financial obligations during critical growth phases. While founders have an obvious motivation to get new technologies to market, first time founders often lack understanding of the implications of various models of IP licensing and management, and the negotiation process with TTOs and Investors (see our book chapter);

• Investors: Look for clear, equitable stakeholder agreements that provide a clear path to IP ownership and return on investment (ROI), without unnecessary complexity or constraints. They value transparency in equity distribution and are wary of agreements that might erode their investment through diversion of growth capital or preferential treatment for other entities on exit. While investors are rarely directly involved in tech transfer negotiations, their experience correlating different models of tech transfer to commercialization outcomes is a key input to the conversation. 

Key Features of the SAIL

• Flexibility: Designed to be adaptable across various types of IP and industry sectors, ensuring broad applicability.

• Reduces Surprises; Expectation Management: In addition to our blog, SAIL provides guiding principles and discussion points to arrive to a mutual understanding;

• Promotes Dialogue between the Stakeholders: Designed to create dialogue between the stakeholders at various “triggering events”, e.g., negotiation of project milestones, acquisition/buyout events, etc., at different points in time, pre-, during and post-transaction;

• Clear Equity and Compensation Structure: Establishes predefined terms for equity or future compensation linked to the startup's valuation at specified future funding events using a well-established financial instrument for this purpose (the YC SAFE by default, though any well-tested convertible debt agreement can me made compatible), ensuring fairness, transparency, and investor confidence. Though Universities may not use SAFE agreements, it is possible to use other types of agreements provided valuation of the licensee is deferred to a later date;

• Involvement of Inventors: Designed to facilitate involvement of inventors and university employees in spin-out activity by providing a simple framework to proactively manage potential conflicts of interest that may arise and can be resolved;

• Defined IP Rights: Clearly outlines the scope of IP rights being licensed, including provisions for improvements, derivatives, and future inventions related to the initial IP that avoid the need for additional negotiation when new related IP is available;

• Simple Dispute Resolution: Proposes straightforward mechanisms for dispute resolution to avoid lengthy and costly legal battles, focusing on mediation or arbitration.

Before Sailing

If you’re a founder, researcher, investor, or part of a TTO, check out SAIL and see how it can benefit you. Contact us for more information.

The SAIL was a collaboration between David Durand (MVIP, Durand Lawyers), Kyle Briggs of CanInnovate, Rami Alhamad of Action Potential, Tai Nahm of Nahm IP Law, and many others who provided invaluable feedback from all stakeholder ecosystems.