Start Up Company Term Sheet

PURPOSE: This document outlines the terms normally contained in Florida State University (FSU) licenses and the conditions under which licenses are granted to companies being created around FSU technology.

START UP COMPANIES: Since 1980, over 2,500 US companies have been formed based on university technology (364 were reported for FY 1998 alone). FSU encourages such activity both as a means for transfering technology and for local economic development. FSU's technology transfer office staff will help a researcher determine the feasibility of establishing such a venture, provide general business advice, assist modestly with a business plan, recommend financing options, facilitate the licensing process and close deals in a timely manner.

FACULTY INVOLVEMENT: In most instances, a faculty member will want to be involved with the new company, but also retain their full position at FSU. FSU Policy accommodates this. Following discussion of the options, FSU requires an employee to disclose the potential relationship, responsibilities to the corporation and explain why it is suitable in the circumstances. Staff will help provide a written Management Plan to oversee any potential Conflicts of Interest or Conflicts of Commitment. A suitable relationship will be approved in a timely manner and reviewed on an annual basis.

INTELLECTUAL PROPERTY (IP): In all cases, the company is interested in acquiring rights to FSU intellectual property. The IP can take many forms-patentable or copyrightable material, know-how, trademarks, etc. A License Agreement is the usual legal instrument, defining the relationship between FSU and the new company and providing the rights to undertake commercialization. By signing a License or Option Agreement that defines the rights to the technology and the intellectual property that it contains, a company has clear access to the technology and the team of researchers who can assist with commercialization.

OPTION AGREEMENTS: Sometimes an exclusive Option Agreement precedes a full License. In this manner, the company does not need to commit to the license and related performance terms until it has a chance to convince itself of the market potential. Upon payment of an option fee, the company is granted a time-limited option to acquire a license under negotiated terms. During the option period, the company has an exclusive opportunity to understand the technology and its market potential as well as work with the University to create a product. At any time during the option period, a formal license can be signed.

LICENSE AGREEMENT TERMS

1. License Agreement-FSU and its researchers will provide rights to use a selected technology for product development, manufacture, use and sale.
2. Degree of Exclusivity-The company can acquire exclusive or non-exclusive rights to the technology to use in defined markets. In the former case, one license is granted in specified markets. In the latter case, FSU may license a number of companies.
3. Field of Use-Rights are restricted to market applications where the company has the resources to launch new products or services based on the technology. Rights to grant sublicenses to others can be provided under mutually agreeable terms.
4. Improvements and New Discoveries-As commercialization proceeds, the FSU researchers may make improvements to the technology. Normally, these are made known to the company which finances the work and are included in a license for no additional compensation.
5. Performance Milestones-Depending upon the level of exclusivity negotiated, FSU will require commitments from the company in the form of performance milestones defined in terms of measurable events within the company's own commercialization plans or cash payments to FSU.
6. Compensation to IP Owners- By policy and precedent, the University expects to share in the proceeds of eventual commercialization, commensurate with its lack of participation in any business risk. Compensation will be a function of the performance milestones, the degree of company commitment and the degree of exclusivity granted. There will be a license sign-up fee, stated cash payments to FSU prior to market sales and a royalty set on the basis of industry standards. Royalty rates are expressed as a percentage of sales of the company or its sublicensees in stated markets.
   
   Frequently, as part of the long term compensation, negotiations provide FSU with a modest minority equity position in the company. FSU will decline the offer of a Board seat and not involve itself in the management of the company.
7. Collaborative activities-Continuing collaborations between the company and FSU researchers are encouraged during the commercialization phase and usually take the form of a research contract to perform work at FSU as part of the corporation's commercial plans. Such a contract includes allowances for both direct and indirect costs.
8. Patent activity-If the technology is covered by FSU patents, these will be licensed to the company, with ongoing maintenance costs and all foreign costs paid by the company. The company may seek additional patent coverage, and FSU will participate in all aspects of the application. If there is evidence of a patent infringement, FSU will collaborate with the company but expects the company to lead and pay for any necessary action.
9. Indemnification and Warranties-FSU expects the company to indemnify the University from any negative repercussion of the company's activities or products in the marketplace and may request that product liability insurance be in place. FSU is unable to provide any warranties with respect to suitability for the markets, freedom from infringement of third party patents, etc.