Forming the Company
If commercialization via spinoff creation is determined to be the best route by the inventor, the process to create, or “formalize”, the company begins. Success does not rest on the innovation alone. Formalizing and growing a new company is a significant undertaking, requiring considerable time, commitment, risk, costs/investments, business acumen and access to a viable market, among other things. Legal, accounting and insurance services will also be required, as will a robust business plan. In addition, the spinoff will need to be registered as a separate legal entity from the university.
Fortunately, there are many free resources available to help in this process, some of which are listed below. The university also has standard agreements and reporting procedures to help researchers satisfy any obligations to the university, while creating a company to commercialize an innovation. There are even on-campus spaces that can be accessed to house the new company for an interim period. Agreements and permissions for such space must be arranged through the appropriate faculty deans. The university also leases space at Enterprise Square in downtown Edmonton to newly developed spinoffs. To inquire about leasing space at Enterprise Square, contact TTS.
During this stage spinoffs will enter into a structured deal to manage revenue sharing with the university. The deal will be selected from the university’s ‘Standardized Terms for Spinoff Companies’ and will consist of one of the following:
- A royalty
- An equity stake
- A blend of a royalty and an equity stake
Legal Considerations
Spinoffs are encouraged to find their own legal counsel as early as possible. The university does not give legal advice nor recommend specific legal services or providers. Upon request, TTS can provide information on legal service directories for Alberta.
University of Alberta Agreements
When creating a spinoff company, inventors will follow the general process (which varies depending on how IP has been assigned) as outlined below:
- Declare any conflicts of interest (COI) via the annual ‘COI Declaration’. The COI is in place to annually identify and manage potential conflicts of interest of the inventor when working for a university spinoff and the university.
- Execute a ‘Master Relationship Agreement (MRA)’ with the university. The MRA is a multifaceted agreement that aligns the university and the inventor on conflict of interests disclosure, use of university resources, work with university personnel, and future IP. The MRA may also include agreements for affiliation or lease of space as required. The inventor, the university, and the spinoff are to sign an MRA at the time any university IP is first transferred to the spinoff. This document also acknowledges COI but does not manage it.
- Develop a company ‘Term Sheet’. The term sheet identifies the options outlined in the ‘Standardized Terms for Spinoff Companies’, that the inventor has selected for their spinoff. Depending on the terms selected (royalty, equity, or blend of royalty and equity), the inventors will then execute some of the following:
- A ‘License Agreement’ which outlines the terms of a license to the university for a given technology.
- A ‘Royalty Free License Agreement’ which outlines the terms of a non-royalty based license agreement.
- A ‘Unanimous Shareholders Agreement’, and a ‘Simple Royalty Agreement’ which are in place to manage equity ownership shares.