Frequently asked questions
If you can't find the answer here, please contact us and we'll get back to you. Find your question in consultancy, intellectual property and licensing management and investment.
What is CUTS?
CUTS stands for Cambridge University Technical Services Limited. CUTS is a wholly owned subsidiary of Cambridge Enterprise Limited and deals solely with consultancy contracts. It has no employees, and is administered by the staff of Cambridge Enterprise. University employees can work as consultants through CUTS. This has a number of benefits, including that by using CUTS the academic consultant may benefit from the University’s professional indemnity and liability insurance policies. Prior to the incorporation of Cambridge Enterprise in 2006, CUTS was a trading company wholly owned by the University of Cambridge, acting as a vehicle for the University’s commercial activities related to IP.
Who can carry out consultancy through Consultancy Services?
The service is intended for employees of the University, but some contracts involve the subcontract of specialised services beyond the capability of the University employees. In such cases Consultancy Services will ensure that the subcontractor has appropriate insurance cover.
Why is there a management fee for using Consultancy Services?
Consultancy is a voluntary undertaking and therefore the University does not contribute directly to the support of Consultancy Services. The service provided by Cambridge Enterprise is funded entirely from the 12.5% management fee it adds to the cost of consultant and facility fees; this is equivalent to 1/9th of the fee charged to the client.
What is a standard consultancy fee to charge clients?
Consultancy rates vary depending on a number of factors, such as the level of experience of the consultant, the nature of the work being delivered, the extent to which the work is specialist and the type of organisation that the client is.
For example, fees are likely to be higher in a situation where a professor is providing his or her advice in an area where they are regarded as a world expert, than for work that involves data analysis that could be completed by a number of different people.
As a guideline, we would recommend a daily fee of about £1,250 for professors and £600 to £800 for postdoctoral researchers and PhD students.
When the work requires the consultant to use departmental facilities, the costs associated with using such facilities must be built in to the overall consultancy fee that is charged to the client.
How does Consultancy Services charge for departmental facilities?
Departmental facilities are charged at a commercial rate (a premium above the Full Economic Costing, or FEC) as agreed with the head of department or their designate. If the facilities require technical support then a University protocol (pFact) will be used to estimate the FEC. The standard contract contains a University standard optional clause, which is used in cases where the client is happy to allow publication.
How does Consultancy Services distribute income?
Consultancy Services deducts its management fee from income received and distributes the remainder according to the academic’s wishes. Any payment to the academic directly will be in response to an invoice. Similarly, payments to departments for the use of facilities by the academic in delivering the services will be in response to an invoice plus VAT. Any donations to the University will be by the Gift Aid process and must be declared before work commences.
What is Gift Aid?
Gift Aid is the name of the process by which Cambridge Enterprise donates income to University departments.
Once the management fee and direct departmental costs have been deducted from the consultancy project income, an academic can either take the remaining consultancy fee as a personal payment or notify us that he or she will not be taking it personally, in which case Cambridge Enterprise will donate it to the University for use in future research. It is imperative for us to be told at the start of a project if an academic does not want to take part of or all of the money personally.
The Gift Aid donation process is carried out twice annually.
What guarantees does Consultancy Services (CUTS) give that a project will deliver a desired outcome?
In short, we cannot make guarantees. This is stated in the liability and indemnity clause within our standard contract: ‘The work comprised in the services is of an experimental and developmental nature. The client acknowledges that it has not relied on any representation or warranty that the services or deliverables will provide any particular result or outcome.’
What IP rights are retained by Consultancy Services (CUTS) under a consultancy contract?
IP only vests with the client once payment is made in full by the client. In general, it is accepted that the consultancy is fee for service work and that any foreground IP created will vest in the client. The Consultancy Services standard contract will ensure that:
- know-how is excluded from the definition of IP, since this cannot be unlearned by the academic
- the right is reserved for the academic to use the skill, know-how and expertise acquired in the performance of the services for the purposes of providing similar services to any other client and to use the deliverables for the purposes of teaching and academic research.
When can academic consultants use/not use the University logo?
When channelling consultancy projects through Cambridge Enterprise, academics are able to use their affiliation to the University and use the University address and letterhead for correspondence. When working in a private capacity, academics must use their home address and personal letterhead.
It is not possible for academics, whether working through Cambridge Enterprise or in a private capacity, to give permission to the external client to use the University of Cambridge logo. Use of the University of Cambridge logo in any capacity must be granted by the Office for External Affairs and Communications.
If the project has been channelled through Cambridge Enterprise then external clients are able to make a reference such as: ‘This report was commissioned by Company X and compiled by Dr Joe Bloggs of the University of Cambridge acting through Cambridge University Technical Services Limited.’ Otherwise external clients should not make reference to the University.
Can an academic have the right to publish under a consultancy contract?
Publication is possible and negotiable but in truth it only happens in a small number of contracts. Consultancy Services’ standard contract contains a University standard optional clause, which is used in cases where the client is happy to allow publication.
Intellectual property and licensing management
What is intellectual property – IP and IPR?
Intellectual property (IP) encompasses the expression of ideas, information and knowledge. IP includes not only discoveries and inventions, but also music, literature, and other artistic works, as well as words, phrases, symbols and designs. In the University context IP can be considered as the outcome of research projects, collaborations, consultancies and other activities. At the University of Cambridge this is governed by the University Intellectual Property Rights Policy.
Intellectual Property Rights (IPR) are the legal rights protecting the owners of IP. The first owner of IP is normally either the person who invents, authors or designs the IP, or his/her employer (depending on the contractual arrangements governing his/her work). Commercial exploitation of the IP can occur directly by the owner of the IP, or by licensing the IP to be used by other companies. The most common types of IPR are confidential information, copyright, patents, trademarks and design rights.
Who owns University of Cambridge IP?
- On 13 December 2005 members of the University of Cambridge voted on a new Intellectual Property Rights policy. This policy provides that in the first instance the University owns inventions made during the course of research.
- The University’s Intellectual Property Rights (IPR) policy is available for review in Chapter XIII of the University’s Statutes and Ordinances, section ‘Intellectual Property Rights’ – pp.1038–1046.
- For clarification on the responsibilities of Cambridge Enterprise and the Research Office under the IPR policy see the IPR guidance note.
Where can I find more information about IP and patents on the web?
IP and patent information
I have an idea, what do I do?
If you think your idea may have some commercial application, contact us for a chat in the first instance. If you’re not sure who the right team member should be, please complete the disclosure form or email firstname.lastname@example.org and we will contact you.
We’ll chat with you not just about your research but also your aspirations in relation to commercialisation and some of the ‘bigger picture’ questions.
- Is more research needed to build a portfolio of intellectual property or does this idea stand alone as an opportunity?
- Are external parties needed such as other skill sets or background patents?
- Can this idea be used in multiple applications?
- How might it develop and how long will it take?
- Can we get some sort of positive feedback from a commercial partner or is further development needed?
Following this discussion, an appropriate course of action will be agreed with you. This could include a decision to start working together on the commercialisation of your idea, a suggestion of other sources of support within the University or wider community, or simply a plan to continue the research and meet again in the future when the idea has been further developed.
How do I decide who to contact?
If you have already been in contact with someone at Cambridge Enterprise regarding this or any other matter, then please feel free to contact them again. If you haven’t been in contact with someone previously then please contact us by phone or via email@example.com.
What information do I need to provide Cambridge Enterprise?
Please provide us with as much information as possible about your invention or idea. Our invention disclosure forms offer a guide to the kind of information that is useful to us, and it’s helpful if you can fill in as much information as possible. This includes details about the invention or idea, the people and funders involved and any information you may have about potential industry contacts and competing technologies. If you are uncertain what information we need, please get in touch and we will be very happy to talk it through.
What is a patent?
A patent protects your invention and lets you take legal action against anyone who makes, uses, sells or imports your invention without your permission.
Is my invention patentable?
The legal requirements for an invention to be patentable are:
- novelty – at least some aspects of the invention must be new and not described elsewhere in the public domain
- non-obviousness – the invention could not have been predicted by someone working in the field
- industrial applicability.
When an invention is disclosed to Cambridge Enterprise, we assess its patentability against these criteria. Other elements are taken into account when taking the decision to patent a technology such as analysis of your market, competition and timing.
Do I need to have something patentable to contact Cambridge Enterprise?
No. Please feel free to contact us at any stage about any invention or new idea, whether you think it may be patentable or not, or if you are not sure. We are happy to advise.
How does the patent process work?
After your invention is disclosed to Cambridge Enterprise, we will evaluate its patentability. If your invention is patentable then a priority application is drafted by a patent attorney. Cambridge Enterprise acts on your behalf and liaises with patent attorneys during this process. The timeline as well as the costs of the patent process are summarised here. Once granted, the term of a patent, or the time it is enforceable, is of 20 years from the initial filing.
How do I file a patent?
Cambridge Enterprise works with inventors and patent agents to draft strong patent applications. Once an application is filed, we will manage all stages of the patent prosecution and administration.
We work with an experienced copyright lawyer in the University’s Legal Services Office to provide advice on copyright issues and to promote the effective commercialisation of copyright works (such as computer software).
What is copyright?
Copyright provides the author or creator of an original work with certain rights concerning use of that work and governs use of the work by others. It arises automatically without the need for registration as soon as the work is created and recorded in a material form.
As a general rule, the first owner of copyright in a work is its author, who may, among other ways, license use of that work to another person or organisation for specific purposes and time period, or assign copyright (i.e. transfer ownership of copyright in that work to another person or organisation).
In essence, copyright is a property right and may be bought or sold, inherited or bequeathed, or licensed or assigned in whole or in part.
What are database rights?
UK law recognises two forms of rights in databases – Copyright Designs and Patents Act 1998, Section 3A and Copyright and Rights in Databases Regulations 1997.
A database is defined as a collection of independent works, data or other materials which:
- are arranged in a systematic or methodical way, and
- are individually accessible by electronic or other means.
A literary work consisting of a database is original if, and only if, by reason of the selection or arrangement of the contents of the database the database constitutes the author’s own intellectual creation.
Examples of databases include telephone directories and timetables.
Like copyright, a database right is an automatic right which exists as soon as the database exists in a recorded form. Database rights last for either 15 years from the end of the year in which the making of the database was completed or, if it was published during that period, 15 years from the end of the year in which the database was first made available to the public.
Database rights provide the author or creator of an original work with certain rights concerning use of that work and governs use of the work by others. It arises automatically without the need for registration as soon as the work is created and recorded in a material form.
As a general rule, the first owner of a database right is its author, who may, among other ways, license use of that work to another person or organisation for specific purposes and time period, or assign the database right (i.e. transfer ownership of the database right in that work to another person or organisation).
In essence, database right is a property right and may be bought or sold, inherited or bequeathed, or licensed or assigned in whole or in part. The database right can apply to both paper and electronic databases.
Infringement of the database right takes place where a person, without the consent of the owner of the database right:
- Extracts (the unauthorised permanent or temporary transfer of the contents to another medium by any means or in any form); or
- re-utilises (making the contents available to the public by any means)
all or a substantial part of the protected database.
There are a number of permitted acts which provide defences to claims for infringement. A database right in a database which has been made available to the public is not infringed by:
- data is extracted by a licensed user of the database for teaching or research, and not for any commercial purpose, provided the source of the material is cited
- extraction and reutilisation permitted when it is not possible by reasonable inquiry to ascertain the identity of the maker and it is reasonable to assume that the database right has expired
- the rights in the database have lapsed (after 15 years)
What are design rights?
Design right can be used to stop someone copying your design. It only applies to the shape and configuration of objects.
There are two kinds of design right – non-registered and registered.
Non-registered design right exists automatically and protects your design for ten years after the design was first sold or 15 years after it was created – whichever is earliest. However, it is important to note that non-registered design rights are difficult to enforce and don’t provide very strong protection.
A design can be registered, which gives much stronger protection and is recognised as an enforceable right. Registered design right protects any aspect of your design (e.g. both shape and decoration), gives you exclusive rights to use it for up to 25 years, and makes taking legal action against infringement and copying more straightforward. Once registered, the registration number can be displayed on the design. Two-dimensional designs such as graphics textiles and wallpaper must be registered in order to be protected.
What are material rights?
Materials may be created during your research (for example antibodies, proteins, DNA constructs, cell lines, microorganisms, plants and animals). These materials are tangible things that may originate in nature and there are legal rights associated with these materials. Like inventions, the legal rights to materials can be transferred by agreement to other parties. These agreements may dictate what can and cannot be done with a material, for example, a material cannot be modified or sold commercially without permission of the creator. Some materials may be protected by patents.
Rights to any materials created during research at the University of Cambridge belong to the University staff member who creates the materials, subject to any third party conditions which the creators may have previously agreed.
What is a trademark?
A trademark provides a way of uniquely identifying a product or organisation (‘the brand’). It can be a name, word, slogan, design, symbol or other unique identifier.
A trademark can be registered to protect the brand. A registered trademark enables the holder of the trademark to:
- take legal action against anyone using the brand without permission
- display the ® symbol next to the brand
- sell and license the brand
To be registered, a trademark must be unique. It can include words, sounds, logos, colours or a combination of these. It cannot be offensive, describe the goods or services it will relate to, be misleading, be a 3-dimensional shape associated with the trademark, or be too common or non-distinctive.
A registered trademark will last 10 years, after which it may be renewed.
In the case of unregistered trademarks, it may be possible to take action against another party using a similar trademark, however this is much more difficult to prove than it is to defend a registered trademark. Unregistered trademarks may display the TM symbol next to the brand.
What is a Confidential Disclosure Agreement (CDA)?
A Confidential Disclosure Agreement (CDA) is a legal agreement covering how information exchanged between two or more parties will be treated. These agreements are particularly important when you want to ensure that your information, knowledge or research results are held in confidence prior to filing a patent application, to allow a potential research or commercialisation partner to consider the merits of the idea, or to limit how the disclosed information can be used.
The Research Office deals with CDAs as they relate to research at the University, and can offer help and advice concerning confidentiality. The Office can put in place an appropriate agreement, where necessary. For further information, see the Research Office’s Confidentiality Disclosure Agreements pages.
What is a Materials Transfer Agreement (MTA)?
A Materials Transfer Agreement (MTA) is a contract that governs the transfer of one or more materials from the owner (or authorised licensee) to a third party, usually for internal research purposes. Materials may include cultures, cell lines, plasmids, nucleotides, proteins, bacteria, transgenic animals, pharmaceuticals and other chemicals. MTAs are also applicable for the transfer of materials in engineering and physical science applications.
Cambridge Enterprise offers advice on MTAs relating to cases in its portfolio and can assist with MTAs for commercialisation purposes, e.g. to cover interactions with companies interested in evaluating materials for research or commercial purposes.
What counts as a public disclosure?
If a technology you are considering patenting is made public it is considered prior art, and this may prevent you from obtaining a patent. A public disclosure is any non-confidential communication of a technology or research project. It can be an academic publication, a PhD thesis, conference abstract, poster or talk, information posted online or a publicly available abstract of a funded grant proposal. Grant applications are not typically made public but grant final reports can be made available to the public and would be considered a public disclosure.
I am not ready to exploit my research at the moment, but would like to know how to do this in the future. Is there someone I can talk to?
Our Technology Transfer team welcomes the opportunity to hear about research which may have commercial relevance in the future. If you’re not sure who the right team member would be, please complete the disclosure form or email firstname.lastname@example.org and we’ll arrange for someone appropriate to contact you.
We’ll chat with you not just about your research but also your aspirations in relation to commercialisation and more strategic points, such as:
- What are the big questions that need addressing in this field?
- What other developments are needed for this research to be commercialised, either within the University or in the outside world?
- What funding might be needed/is available?
- How important are patents in the relevant industry?
- What is the timeframe for this to be deployed and what are the competitor technologies on that timeframe?
- Who are the most likely companies we might engage with? Is this a start-up opportunity?
How does Cambridge Enterprise decide whether to take my idea into its portfolio?
The decision to commercialise an idea through Cambridge Enterprise is a mutual one. Under the University’s IPR policy the University owns registerable rights (patents, trademarks, design rights) created by academics and any such rights must be disclosed to us (although the inventors may request to ‘opt out’ from our commercialisation service, in which case – and if there are no restrictions from funding conditions – we can assign the University’s rights back to the inventors). Others may also choose to disclose their ideas to us in search of advice or commercialisation support (e.g. students, creators of software, etc).
If the academic or student wishes us to support the commercialisation, then we will undertake due diligence from both a technical and a commercial perspective. This will typically include a review of patent and scientific publication databases for similar work, and an assessment of the likely interest from industry in the benefits provided by the idea. This may involve non-confidential conversations with relevant companies or analysis of market research reports.
Sometimes the outcome of this due diligence leads us to conclude that there is not a large enough opportunity either due to a crowded technical space or a mismatch between benefits and industry concerns. In this case, if the inventors believe there is indeed an opportunity worth pursuing, and subject to other restrictions, we can put in place an assignment of the University’s rights back to the inventors.
If we believe there is an opportunity to be explored, the case manager and associate will review the situation with the academics and agree a proposal, which must then be presented to the relevant team for approval. Once this approval is in place, the team will move forward with the agreed plan, which will be reviewed and progress presented back to the team at appropriate intervals.
How does Cambridge Enterprise decide the best commercialisation route for a technology?
When considering a choice of licensee, we will use our network and the network of the inventor to try to identify a suitable partner. We will also use appropriate marketing to generate leads where possible. It is of fundamental importance to us that any licensee will undertake to commercialise the technology rather than use it purely defensively to stop other companies.
Do I have to work with Cambridge Enterprise?
Inventors may decide that they do not wish their technology to be exploited by Cambridge Enterprise. However the University, as the inventor’s employer, is the owner of his/her IP and has an initial right to apply for a patent. As a result, any potentially patentable technology should be disclosed to Cambridge Enterprise. If you decide not to work with us, clearly mark the opt-out box on the disclosure form. If this is compatible with your funder’s requirement on exploitation of your research, we will prepare an agreement assigning IP rights to you, including provision for a proportion of any future revenues to be shared with the University, including your University department.
What are the implications of 'opting in' and 'opting out'?
Although the University’s IPR policy requires inventors to disclose their registerable ideas to Cambridge Enterprise, they may choose whether to opt in or opt out. In addition to patents, this also covers trademarks and design rights, but the term ‘patents’ is used for simplicity in the below explanation.
Opting in means that we will perform due diligence on both the technical and commercial aspects of the invention and assess whether this invention is likely to be patentable and successfully commercialised. If approved, we will fund a patent application and work with the inventors to identify a licensee (which could be a spin-out company) and agree commercialisation terms. Any revenue received from that commercialisation will be used to pay incurred patent costs before the remainder is distributed between the inventors, Cambridge Enterprise and the department according to the University IPR policy.
If the inventors choose to opt out, then we will perform limited assessment of the funding which supported the invention to identify any third party rights, and put in place an agreement which hands back the University’s rights to the inventors, subject to the University IPR policy, if no other rights preclude this. It should be noted that the decision to opt out should be made at the initial disclosure stage, although in exceptional cases Cambridge Enterprise and the inventors may agree (subject to third party rights) to put in place a handback assignment at a later stage, which would be on terms negotiated between the parties to reflect the investment and work done to date by Cambridge Enterprise.
What return can I expect to receive?
Cambridge Enterprise handles the sharing of licensing revenue with inventors and departments in accordance with the University’s Intellectual Property Rights (IPR) Policy.
Further details can be found in Revenue Sharing.
Which aspects of a commercialisation agreement does the University consider to be the most important?
There are two types of terms in any commercialisation agreement – financial and non-financial. Our mission is to ensure that a licensed technology leads to benefit for society, the UK economy, the inventors and the University. Therefore whilst financial terms are important to reward and recognise the contributions of the inventors and the University, they are not the only aspects we focus on in negotiations.
Often our licences will be exclusive in a particular field. This is particularly appropriate when the licensee will need to make significant investment to bring the technology to a suitable level of development before it can be incorporated in a product. Depending on the technology and the market opportunities, there may be multiple licensees with exclusive rights in different, non-overlapping fields, in order that the potential of the technology can be fully realised. However, in other cases a number of non-exclusive licences may be a better route forward, for example when the technology is likely to be widely used (such as software end-user licences) or some degree of risk-sharing is useful to encourage uptake of a disruptive technology. Some funding terms, e.g. European collaborations, also require arising IP to be licensed non-exclusively.
Possibly the most important term to Cambridge Enterprise is around diligent commercialisation. We require our licensees to exploit the licensed technology to its maximum potential in the licensed field, and particularly emphasise this in exclusive licences to ensure that the licensee focuses on commercialising the technology, rather than it sitting undeveloped and with no opportunity for others to move the technology forward.
Finally, there are a number of different financial terms which are used in various combinations in our licences. Our main concern with regard to financial return is that this should be fair and reasonable to the inventors and the University. Typically any patent costs incurred by Cambridge Enterprise are recouped when the licence is signed, and there is often an upfront fee payable at this point. Due to the very early stage of many technologies being licensed from the University, it is almost impossible to predict the ultimate value of any given technology, so we employ a combination of an upfront fee with royalties on sales, since this allows the return to be commensurate with the success of the commercialisation while recognising the risk involved in developing these immature technologies. Where appropriate, annual fees, milestone payments or minimum royalties may be included, depending on the individual case.
How can I help to find industry contacts who are interested in my technology?
Cambridge Enterprise will help find industry contacts for your technology. You don’t need to have already identified relevant contacts when you speak to us, however, any contacts you do have may help Cambridge Enterprise find a partner for your technology. Relevant industry contacts may be working in your technology field or on competing products. You may identify relevant partners by searching for scientific journal articles, press releases or patents in similar technology areas, or relevant partners may attend scientific conferences.
What should I do if someone from industry contacts me about my technology?
You may be free to talk to any industry contacts about your technology, but first please consider whether any information is confidential. You may not wish to discuss it without a confidentiality agreement in place or before a patent application is filed. It may be that ownership rights or funding terms restrict who you can talk to about your invention, so it is advisable to contact us first so that we can advise. Alternatively, we can take the lead in discussions with industry or be involved with you in these discussions, so please feel free to put the company in contact with us directly. If Cambridge Enterprise leads in these discussions we will involve the inventors to discuss the details of the technology at the relevant stage and will keep you updated on our interactions with the company.
I am a clinician and I have an invention, who can help?
- If you are an NHS employee without any link to the University, contact Health Enterprise East for help with commercialising your idea.
- If you are an NHS employee and also hold a University Honorary contract (for example, if you teach at the University), please contact Cambridge Enterprise. Andrew Walsh and Michale Bouskila manage the commercialisation of healthcare technologies at the interface between Addenbrooke’s Hospital and the University.
What do I need to consider if I have some software I'd like to license?
The things to consider when deciding whether to license software are:
- whether all the contributors and authors of the software are in agreement with licensing it
- if there are third party rights involved (such as whether open source or commercial software were used, whether third party databases or libraries are included, etc) which may impact how the software is licensed
- that whoever funded the underlying research is happy for the software to be licensed (see the University’s and Research Council’s data sharing policies here and here)
- the type of licence you wish to provide the software under (e.g. open source, paid, etc)
- who the end users might be and whether they may require a Graphical User Interface (GUI) or additional support.
Can I commercialise software that includes open source code?
This depends on the terms of the licence governing the open source code you’ve used and may affect what you intend doing with the software you’ve created. It is worthwhile familiarising yourself with the terms of the licence agreement, and if there are restrictions, then consider using alternate code or writing novel code if necessary.
There is no simple answer to this question and each instance needs to be considered on a case-by-case basis. Please speak to Cambridge Enterprise for further advice.
What other resources on technology commercialisation are available in the University?
Many departments and faculties have Enterprise Champions, who are members of the department or faculty with a particular interest in commercialisation. They work closely with Cambridge Enterprise and are an ideal first point of contact for you as they will be focused on aspects particularly relevant to your department, faculty or discipline. Many science and technology departments also have Knowledge Transfer Facilitators, whose role is specifically to help you with various aspects of engaging with industry – again working closely with Cambridge Enterprise.
In addition to these specific people, there are many groups, programmes and networks around the University looking at different aspects of commercialisation and entrepreneurship. You can find links to many of them at the University Enterprise Network which includes links to support for all kinds of enterprises and budding entrepreneurs. These range from free weekly lectures to hands-on residential programmes, and funding competitions for both social and technological start-up ideas. Please see Clubs, programmes and networking for more information and suggestions.
What happened to WILO?
The Wolfson Industrial Liaison Office (WILO) was founded in 1970 with an endowment from the Wolfson Foundation. On 1 March 2000 WILO merged with the then Research Grants and Contracts Office to form the Research Services Division, now the Research Operations Office. This created a single organisation dealing with technology transfer and the University’s external research funding from industry, research councils, the European Union and charitable trusts and foundations. In March 2001 WILO was renamed the Technology Transfer Office in order to reflect the current activities of the office. The Technology Transfer Office has now become part of Cambridge Enterprise.
Where can I find out more about innovation activity in Cambridge?
For further information, visit Cambridge Technopole. The Cambridge Technopole Group is an informal network of business support organisations operating in the Greater Cambridge sub-region. The overall mission of the Group is to improve the range and quality of the business support services available in the sub-region, particularly for companies based on technology.
Why form a spin-out company?
Spinning-out a new company can be an excellent way of commercialising technology developed at the University. Sometimes more technology development needs to be done before a technology can be sold and the funding of this development is outside the remit of traditional University funders such as research councils and charities. Forming a new company can be the best way to raise this funding. It is important to note that forming a spin-out company is hard work for the founders and should not be entered into lightly; however, it can be a rewarding experience for University academics and can be an excellent method of commercialising technology.
How does spin-out formation work in Cambridge?
Spin-out formation in Cambridge is unusual in two ways. Academics can opt out and commercialise the technology themselves and/or the University has its own seed funds that can fund new companies that emanate from the University. Cambridge Enterprise Seed Funds team has three levels of preference as to the types of companies that it funds:
- Companies founded on technology owned by the University. These are inventions from members of the University who have opted into the Cambridge Enterprise ownership of the IP and services that it provides.
- Companies founded on technology owned by current members of the University, that is, inventions from members of the University who have opted out of the Cambridge Enterprise system, or members who have made the invention outside of their normal activities within the University.
- Companies founded by alumni who are leaving the University to develop ideas generated during their time at Cambridge.
How does equity division usually work?
This is done on a case-by-case basis, but the equity will usually be split between Cambridge Enterprise as owners of the technology (in return for licensing the technology to the new company) and the founders of the company. Founders may include inventors of the technology who will play an active role in the company going forward, plus any other management brought in to assist with the development of the company in the early stages. Factors influencing the share of the initial equity include:
- the nature of the licence
- the role of the University in the development of the technology
- the role of the founders in the development of the technology and the company
- the number of founders
- the terms and conditions of third party funders of the research that led to the technology.
Good faith negotiations will take place between the founders and Cambridge Enterprise, and any inventors who are not founders, to come up with an equity split that will give a fair financial return to all stakeholders and will incentivise the founders to drive the new company forward in the best way possible.
Sometimes it’s a good idea for the founders to agree among themselves, prior to discussions with Cambridge Enterprise, their relative contribution to the development of the technology and their planned contributions to the company going forward. This can sometimes facilitate the negotiations with Cambridge Enterprise about the initial equity.
What do you mean by 'nature of the licence'?
The terms and conditions of a licence can be varied. Financial returns to the licensor normally include a combination of signing fees, milestone payments (both time-based and development-based) and royalties on sales of any products in the future. However, with a spin-out company it is not always a good idea to withdraw cash from the business for such payments. In these cases, Cambridge Enterprise may forego some of these payments in return for founding equity (and vice versa).
What happens when money is invested in a company?
Once the founding equity has been decided, the company will need to go out and pitch for investment. The University can invest in spin-out companies through the Seed Funds team at Cambridge Enterprise. If Seed Funds (and other investors) decide to invest, negotiations will take place between the investors and the company to ascertain the value of the company. Once investment is made, the original equity holders of the company (founders plus Cambridge Enterprise) are diluted accordingly by the investors.
Suppose two Cambridge academics decide to form a company based on their work at the University and there is one additional inventor who decides not to be part of the new company. During initial negotiations it is agreed that the equity split will be 50% to Cambridge Enterprise in return for the licence to the technology and 25% to each of the founding academics. During fundraising, Seed Funds decides to invest £500,000 and agrees that the value of the company is also £500,000. The equity split before and after funding would look like this:
Founding academic 1 25% Founding academic 2 25% Cambridge Enterprise 50% Pre-money value £500,000
Post-Money (following £500,000 investment)
Founding academic 1 12.5% Founding academic 2 12.5% Cambridge Enterprise 25% Seed Funds 50% Post-money value £1,000,000
(£500,000 original value plus £500,000 investment)
The above example is an oversimplification of what normally happens. The sums are rarely that simple and financial returns upon realisation don’t always mirror percentage ownership due to factors such as options and preference shares.
It is important to note that, while connected, equity held by virtue of the licence and equity held by virtue of investment are handled differently upon a realisation.
What is a realisation?
The ultimate goal for a spin-out company should be an exit. An exit can be flotation on a stock market or, more normally, an acquisition (via trade sale) by another company. In these instances the holders of the equity sell their equity in the spin-out company in return for cash. The founders will be paid for their equity and naturally keep the proceeds. The realisation due to the seed funds will go back into the fund to invest in the next generation of University spin-outs. The realisation awarded to Cambridge Enterprise will usually be shared out to the inventors of the technology according to the University IPR policy.
Who holds the University founding equity?
Cambridge Enterprise holds equity in relation to any licence. The Chancellor, Masters and Scholars of the University of Cambridge hold equity in relation to any cash investment.
When is the IP licensed to the newly formed company?
The terms of the licence are agreed at the outset. The licence is normally signed just prior to investment being made in the company. This is mainly due to logistical and efficiency reasons.
Is the licence agreement to a newly formed company similar to a licence agreement with an established company?
Many aspects will be similar. However, a licence to a spin-out normally has fewer cash payments in an effort to keep cash within the company.
I would like the University spin-out to operate initially within the University. Is this possible?
The University guidelines on Establishing and Working with Embedded Companies are available for review.
Where do I find information about employment opportunities with Cambridge Enterprise?
Any current job opportunities with Cambridge Enterprise will be advertised on our Work for Us page.
Image: DNA/ Protein function finder from the Wellcome Trust Sanger Institute; photo by Duncan Hull, courtesy Creative Commons, via Flickr.