Opthalmic Innovator

Cautious optimism required to identify a commercial partner

It could be the start of a beautiful friendship, as long as everyone is on the level.

By Carl Awh, MD, Michael Korenfeld, MD, Kevin Rollins, JD, Gregg Scheller

Gregg Scheller is an engineer/inventor with 90 patentable inventions. He has been in ophthalmology for 30 years and started four medical-device companies. He holds significant financial interest in Katalyst Surgical. His e-mail is gs@katalystsurgical.com. Carl C. Awh, MD, is a retina specialist with Tennessee Retina PC in Nashville, Tenn. He is a consultant to Bausch + Lomb, Katalyst Surgical, Notal Vision, Synergetics and Volk. His e-mail is carlawh@gmail.com. Michael Korenfeld, MD, is in private practice with Comprehensive Eye Care Ltd., of Washington, Mo. He is a consultant to Bausch + Lomb, Katalyst Surgical, and Volk. His e-mail is michaelkorenfeld@hotmail.com. Kevin P. Rollins, JD, is a patent attorney who has represented clients ranging from independent physician inventors to Fortune 500 Companies.

Selecting a partner to commercialize an invention, for many inventors, is not an easy decision. It can be difficult to determine whether a company is serious about developing your invention. This installment of our series is intended to help guide inventors through this process and will discuss the identification, approach, and negotiation in the selection of a partner.

IDENTIFYING CANDIDATES

It may be helpful to begin your search for a commercialization partner by making a list of all the companies that might be interested in developing your product. Find these companies using FDA databases or trade show attendee lists. Speak with your colleagues and the physicians with whom they work. Physicians with an entrepreneurial spirit may have previously collaborated with other manufacturers and can provide potential leads. Do not limit your initial list to only large companies or companies with whom you’re already familiar. Use the experience and resources of others to expand your options.

After making an initial list of companies, try to narrow that list by considering why each individual candidate may not want to develop your product. For example, if your invention is an improvement to a market-leading product, it may seem like the company selling the product is a good candidate to develop your invention. However, that company may think your invention would compete with its existing line.

Finally, determine whether your invention could fall outside a candidate’s general corporate strategy. Does your product require they reallocate their resources to produce the product? Will there be opportunity costs associated and if so, do you have buy-in and are they willing to absorb those costs? Responses to well thought-out questions will speed up the elimination of mediocre candidates.

APPROACH THE CANDIDATE

After identifying your potential commercialization partner, find someone with the ability to make decisions for that company. For smaller companies, this might be a CEO. At larger companies, many layers of corporate structure may exist between you and the deal. Misidentifying this contact could result in delay or the loss of a potential partner.

Beware of an overly positive reception to your proposal, particularly if you are a customer of the company you are approaching. Even the best inventions have some disadvantages, and if the company representative does not address the less-attractive aspects of your idea, you are probably not talking with a serious candidate.

Make sure any candidates you approach sign a non-disclosure agreement (“NDA”) before you pitch them. The consequences of disclosing your idea without an NDA are significant. If a company is unwilling to sign an NDA, that’s a deal-breaker. An example nondisclosure agreement is available at www.katalystsurgical.com/oin/NDA_example.pdf

NEGOTIATING THE DEAL

Once you have an NDA in place, do not wait for a company to make you an offer. You may have an advantage if you offer the initial terms, but only if you are proposing a reasonable deal. When negotiating the terms of a license with a commercialization partner, keep in mind that a lot of effort and resources are required to develop an invention from an idea to a marketable product. Starting out asking for outrageous terms might cause a company to terminate negotiations. Enter your partnership with the attitude that it will benefit all involved. If perfect harmony exists between yourself and the manufacturer, temporary setbacks or obstacles will be easy to overcome due to a shared vision.

During the negotiation process, be wary of agreeing to terms that allow a company to indefinitely postpone development. For example, an agreement without development deadlines that compensates an inventor solely through royalties on future sales may not incentivize a company to invest in developing a new product. Terms requiring a company to make an up-front payment to the inventor may motivate the company to prioritize development of an invention to recover the costs of the up-front payment.

Some examples of different license grant and royalty clauses are available at www.katalystsurgical.com/oin/Example_terms.pdf

SETTING MILESTONES

Try to get the company to agree to milestones that will allow you to get your invention back if the company is not keeping its side of the agreement. For example, a milestone term could anticipate that if the company has not sold a particular number of products by a certain date, the inventor is allowed to seek other commercialization partners. These clauses are common and if the company is unwilling to agree to these terms it is reasonable to ask for a justification. If the company provides no justification, then it may not be the right commercialization partner.

Do not expect a quick resolution to negotiations, but do not hesitate to move on to another candidate if it seems like the negotiations are not progressing. Set reasonable deadlines for issue resolution and stick to your deadlines. Walking away from a potential deal is never easy, but it could be the best thing you can do to successfully commercialize your invention.

"Beware of an overly positive reception, particularly if you’re already a customer of that company”

Identifying, approaching, and negotiating terms with a potential commercialization partner should be a deliberative process designed to bring your product to market in the most efficient and effective manner. This article is only a starting point and is meant to encourage you to formulate your own planned process and the many considerations necessary for success. OM