U Hawaii Technology Transfer Office Develops Standard License

• By Dian Schaffhauser
• 05/05/10

The University of North Carolina isn't the only institution to develop a standardized approach to license technology developed on campus. According to Lee Taylor, technology licensing associate at the University of Hawaii in Honolulu, his institution implemented a form license at the beginning of the academic year, in September 2009.

Called the "Mahele Method" (Mahele referring to a major land division that took place in the 19th century in Hawaii), the patent licensing structure derived from the realization "that there is no need to start building from the ground up every time," Taylor said. "Also, we are an understaffed office, like 95 percent of [technology transfer offices], so it did not seem worthwhile to dedicate resources to this endeavor."

Taylor explained that the university has kept news about its technology transfer approach quiet, "because we did not want to have cherry picking occur."

The terms of the structure include four parts:

1. A license issue fee, which varies depending on the cost of the patent expenses, from $6,500 to 33 percent of patent fees;
2. A license maintenance fee, set at $12,000 for year one, $24,000 for year two, and $36,000 for year three;
3. Royalties, set at 5 percent of net sales (10 percent in the case of software), with the license maintenance fee creditable against royalties; and
4. Equity, only taken from startups and set to be paid to the university after the first round of $2 million or more in funding or the fifth anniversary of the license, whichever comes first.

That last point is unique, Taylor said. "You'll note we only take equity after a company has closed its first round of financing or otherwise survived to make the transaction costs worthwhile."

Additionally, the university offers three "tracks" for potential licensees to follow. The first is a memo of understanding that allows the licensee to work non-exclusively with the technology for a year for free. The second is an exclusive option for a year for $1,000. The third entails a minimum $3,000 upfront payment to be paid prior to the execution of a license agreement.

Under the new structure, the university has executed three licenses in the last six months. According to Taylor each took less than three weeks, and one took only 10 days from term sheet to signature. "Indeed, two licensees balked because they did not anticipate having execution so quick and monies due," he added. Prior to introducing the Mahele structure, licenses typically took three to six months to execute.

To broadcast new technologies and research under development at the university, the technology transfer office has been involved in annual technology showcases and encourages the on-campus entrepreneurship center in U Hawaii's business school to use university technology in its business plan competition. It also features technology on the home page of its Office of Technology Transfer and Economic Development.