February 2005 GUIDELINES FOR STAFF ON STARTING A SPIN-OUT COMPANY

February 2005 GUIDELINES FOR STAFF ON STARTING A SPIN-OUT COMPANY

GUIDELINES FOR STAFF ON STARTING A SPIN-OUT COMPANY CONTENTS PAGE 1 INTRODUCTION 1 2 HOW TO GET STARTED 2 3 IPR DUE DILIGENCE 3 3.1 What is IPR Due Diligence? 3 3.2 Why carry out IPR Due Diligence? 3 4 INITIAL DECISION TO PROCEED 4 5 UNIVERSITY PERMISSION 5 6 WHAT IS A BUSINESS PLAN? 6 6.1 Writing the Business Plan 6 6.2 Contents of a Business Plan 6 7 EQUITY SPLIT 9 7.1 Negotiation of the Equity Split 9 7.2 Model of the Equity Split 9 8 CONSTITUTION OF A SPIN-OUT COMPANY 11 9 TAXATION 12 10 FINAL APPROVAL 13 11 INSURANCE 13

APPENDICES Page 1. Intellectual Property 14 2. Recommended Reading 15 3. Useful Websites 16 4. Innovation/Invention Form 17 5. Glossary 18

1 INTRODUCTION The University is one of the largest higher education institutions in the UK and as such has a large impact on its local communities. The University's expressed aim in its strategic plan is to continue to strengthen its association with industry and commerce through the commercialisation of the results of research, creative and scholarly works. This will help to forge industrial links and commercial collaborations and fulfil the requirements of many Research Councils, the DTI, Business Link, European Commission and the HEFCE to realise the potential of intellectual property generated in the course of carrying out funded work. As well as developing strong links with industry and commerce, it is also possible to commercialise successfully outputs from funded work and teaching activities such as: Consultancy Short Courses Conferences Licensing IP (the University (licensor) retains ownership of the IP but outside bodies (licensees) can use it under terms agreed by all parties) Assignment (ownership of the IP is completely transferred to an outside body) Creating a new business-'spin-out' company or limited liability partnership Manchester Metropolitan University, through the provisions of the Patents Act 1977 and the Copyright Designs and Patents Act 1988, owns the IP in patentable inventions, computer software, know-how, designs and copyrightable material arising from the activities of its employees. In order to achieve its stated goals, the University wishes to support and, where possible, develop IP to its full commercial potential. The net revenue generated through any of the activities listed above, will continue to be shared between the member(s) of staff involved, its department(s)/faculty(s) and the University. The following sections explain in more detail the stages involved in starting a spin-out company. However, the University is not regulated or approved to give financial advice to individuals on these matters. Therefore, if a member of staff involved in starting a spin-out company has any concerns about how legal and financial issues might impact them, they should obtain independent professional advice. Although care has been taken to make these guidelines accurate and reliable, they are a summary of complex provisions and additional information may be required from time to time. To ensure that you have the most up to date information you should refer to the most recent copy of the guidelines on the on Starting a Spin-Out Company 1

web and refer any specific queries to the Financial Director and/or the University Secretary. 2 HOW TO GET STARTED The University Secretary should be contacted at the earliest possible stage. This will ensure that, where appropriate, the invention, the inventor, and the University can be protected legally and it will also mean that the inventor can be advised so that any aspect of their contract of employment with the University is not inadvertently contravened. The initial stage is to carry out IPR Due Diligence (see Section 3) and decide on a possible route of commercial exploitation. Should setting up a spin-out company be the preferred route, it is important to acquire a clear knowledge and understanding of the following: Is the idea feasible? What is the idea/technology involved? What will be the business? What investment and resources are required? Starting a spin-out company is an exciting opportunity but it is time consuming and there will be times when it is also a stressful activity. To ensure that the whole process goes smoothly, questions and issues as they arise will need to be addressed. The University's finance and legal team will provide assistance wherever possible. This will ensure that appropriate procedures are followed, which should safeguard the interests of the University and of the individual(s) involved. It is important to note that market success comes from satisfied customers, not from amazing products. Customers buy a product because they want a need satisfied or a problem solved. Thinking through the checklist (Table 1) will provide the basis for a business plan, an absolute requirement when future funding is required. See Section 6 for more information on writing a business plan. Table 1. Questions to be answered when exploring an idea What exactly is innovative about the idea? How unique is the idea and how can its uniqueness be protected? Can a competitor simply copy the idea? What need does the idea meet? Why is the idea better than comparable alternatives? Is it legal? Can the idea make money? What are the costs involved, and what price can be asked? Who is the customer? on Starting a Spin-Out Company 2

How does the product reach the customer? What are the competitive advantages of the spin-out company? What are the competitive advantages of forming a spin-out company based on the idea, instead of licensing or assigning the idea? 3 IPR DUE DILIGENCE Intellectual Property Rights Due Diligence 3.1 What is IPR Due Diligence? IPR Due Diligence has the following aims: To establish who is the legal owner of the IP To establish who has rights over the IP To assist with the identification and resolution of any potential obstacles to the exploitation of the IP To gather documentation to support each element of the above. 3.2 Why carry out IPR Due Diligence? It is important that any IP which is to be exploited, either as leverage for further external funding or commercially, has been subjected to a thorough IPR Due Diligence exercise as early as possible for the following reasons: Investors, whether the University and/or external, will require an IPR Due Diligence report, complete with supporting evidence of the position regarding ownership and commercialisation rights, before investing in any IP. If potential obstacles are identified early, the University will attempt to find a resolution to the problem to free the required IP and proceed with commercialisation. In some cases, for example, where a Research Council claims ownership of the IP in the funding agreement, it will waive its rights and allow the University to proceed with commercialising the IP. If the IP is partly or fully owned by a third party or parties, or is subject to many ownership claims, it may not be cost effective to pursue attempts to exploit it. If this is the case it is better to find it out as soon as possible instead of spending time, energy and money on IP that it is not viable to commercialise. If the University is not made aware, at the time when IPR Due Diligence is being carried out, of an agreement, funding award, person(s) involved or other facts that may impact on the IP, then it is likely that the planned commercial exploitation will have to be terminated as it may: on Starting a Spin-Out Company 3

leave the University open to legal action for using IP to which it is not entitled. affect granting of future funding to the University by the organisation in which previous agreements could not be completed as a result of IP difficulties. 3.3 How is IPR Due Diligence carried out? Once contact is made with the University Secretary, a meeting will be arranged as early as possible to proceed with IPR Due Diligence. At the meeting, completion of the Innovation/Invention Form (see Appendix 4) will be discussed. When the inventor(s) (including person(s) not employed by the University, if involved) have completed the form, the form must then be signed by the inventor s Head of Department (HoD) or equivalent. In addition, all of the commercial exploitation options will be discussed and a decision will be made on the preferred route for commercialisation of the IP. The options include creating a spin-out company, a limited liability partnership (see Appendix 5), licensing and assignment (see Guidelines for Staff on Commercialisation of Intellectual Property and Revenue Sharing) will need to be considered. 4 INITIAL DECISION TO PROCEED In many cases, the use of the University s facilities and equipment will be required to develop the idea so that a spin-out company can be formed. Therefore, to ensure that appropriate arrangements can be made before progressing with the formation of a spin-out company, the inventor(s) must do the following: Complete IPR Due Diligence (see Section 3.3). Request in writing permission from the Head of Department (HoD) or equivalent and Dean of Faculty/Director for the use of facilities and equipment within the University that will be required to start a spin-out company. on Starting a Spin-Out Company 4

The request should give details on the following: (i) (ii) (iii) (iv) A list of facilities and equipment within the University required for use Frequency of use of (i) above per week, including length of time per use Requirement for use of (i) above during term and non-term time, weekdays, evenings and weekends Period of time (i) above will be required Include a completed and signed Innovation/Invention form with the above request. Request in writing permission from the HoD or equivalent and Dean of Faculty/Director to arrange, if necessary, replacement staff capable of providing the same quality of delivery as the inventor s previously scheduled work. Details of funding source(s) to make such appointment(s) must be clearly identified. Obtain written permission from the HoD or equivalent and Dean of Faculty/Director to proceed. 5 UNIVERSITY PERMISSION Once arrangements have been agreed and written permission to proceed has been obtained from the Head of Department or equivalent and Dean of Faculty/Director (see Section 4), a business plan must be submitted to the Financial Director. (For further information on writing a business plan and what a business plan should contain, see Sections 6.1 and 6.2 respectively.) The Financial Director will arrange for the inventor(s) to present the business plan to the Board of MMU Enterprises Ltd for approval to start a spin-out limited company. MMU Enterprises Ltd is a wholly owned subsidiary of the University, which funds the development of staff ideas into viable spin-out limited companies or LLP. The Board of Directors of MMU Enterprises Ltd comprises of some members of the University s Directorate with representatives of the Board of Governors. The Board of MMU Enterprises Ltd will consider the business plan to determine if the idea will be commercially viable, that it is satisfied due diligence has been undertaken (see Section 3), and whether it will be legally protected should an Outside Body seek legal redress. It will also give consideration to the financial projections and the expertise, experience and commitment of the proposed management team, all of which should be detailed in the business plan. With some spin-outs the business is at too early a stage for financial projections to be meaningful. In such cases, the investment decision made will be mainly based on the experience, expertise on Starting a Spin-Out Company 5

and commitment of the proposed management team as well as the idea. The Board will notify the inventor(s) in writing, of the outcome of their decision. 6 WHAT IS A BUSINESS PLAN? A business plan is an outline of the proposed activities and aspirations of the spin-out company and what is required to facilitate the activities successfully. The business plan should be a complete description of a business idea and include plans for the next 1-5 years. It should explain what the business will do; outline who will buy the product or services and why; include financial projections; identify and assess risks; and indicate how much money (if any) is needed. Therefore, a business plan will have to appeal to investor(s), which will be MMU Enterprises Ltd in the first instance. It is neither an advertising leaflet for a supposed product, nor a technical description, but a document that will form the basis of a commercial decision. 6.1 Writing the Business Plan A good business plan: contains everything investor(s) need to know in order to give approval and where possible finance, if required, (see Section 6.2) has practical business planning, not unrealistic claims has a clear and simple structure is written clearly (jargon or waffle should not be used) is brief and gives a clear understanding of the idea/technology that will form the basis of the spin-out company is user-friendly (keep it simple and ensure that it is understandable to a wide audience). 6.2 Contents of a Business Plan Executive Summary The aim of an executive summary is to get the investor(s) to read the complete business plan. Therefore the summary should provide an overview and inform the investor(s) of all that they need to know about the business plan. In the business plan information on the following is required: The proposed business on Starting a Spin-Out Company 6

Background Describe the history of the idea Have there been previous attempts to exploit the idea? Has any other party been involved in the development of the idea? Description of the idea Describe the idea At what stage is it in its development? Will ultimate exploitation of the idea, require prior legislative approval i.e. FDA, ethical engagement with sentient beings, etc? Benefits of the idea How unique is the idea? What are the advantages of the idea? How is the idea better than comparables? How will the idea benefit the end user/customer? (Where possible quantify the benefit(s)). Intellectual Property (IP) What is the IP? How has the IP been protected and at what stage is the protection or how will the IP be protected? Who owns the IP? Will ownership of the IP be assigned to the company with or without the IP holder holding an equity stake in the company? Has a licence agreement been agreed between the IP holder and any company? Operations Where will the business be located? Describe the premises and the equipment the business has, or will need. Target market(s) What is the size of the target market(s) quantitatively and financially? Is the target market(s) growing, static or declining? What is the expected percentage gain of market share? Who will be the first targeted customer and when will contact be made? on Starting a Spin-Out Company 7

Marketing plan Give details of the proposed pricing strategy on the idea, product or service, which will depend on the goal i.e. penetrate the market quickly with a low price or get the highest possible return right from the start How will the idea, product or service be promoted and what are the anticipated promotion costs? What are the proposed selling and distribution methods and what will they cost? Risk What risks might threaten the success of the business? (Technical risks, academic competition, commercial competition, management risks, and market demand i.e. fad, fashion etc.) What are the risks to the University? (see Section 3.2) What is the quantitative effect of the individual risks? How will these risks be dealt with, and how will their impact be minimised? How would the business survive a worst case scenario within a 12 month time frame? Required Investment What existing or future University IP will the company need? What existing or future external IP will the company need? What cash valuation is placed on the existing IP? What investment (accommodation, training, cash, etc) will be provided by external investor(s)? What investment (accommodation, university facilities, training, cash etc) is required from the University for 2-3 years? Give details of grants, private investment, overdraft facilities, small firms loan and venture capital, etc, which have been obtained or applied for. Give details of any assets available as security. Business Projection What are the expected sales figures, direct costs, indirect costs ( overheads), and profit margins for a base case scenario, best case scenario and worst case scenario? Future Development of the Spin-Out Company Will the company be sold to someone else? Will the company be bought out? on Starting a Spin-Out Company 8

Background of the team Give the names of individuals involved and state whether full-time or part-time member(s) of staff, student(s) or person(s) not employed by the university Has the team worked together before? What are the experiences and skills of the team? What experience and skills does the team lack? Has the team agreed on a common goal? What is the proposed role/responsibility for the individual members? Are the individual members fully committed to the undertaking? Proposed Equity Split (see Section 7) Proposed agreement upon disposal or charging of shares 7 EQUITY SPLIT 7.1 Negotiation of the Equity Split Division of equity shares between the member(s) of staff involved, nonmembers of staff, external investor(s) (if involved) must be negotiated and agreed before the business plan is submitted to MMU Enterprises Ltd. The actual equity split between all parties will be negotiated with MMU Enterprises Ltd and the Dean of Faculty once it has been agreed to start a spin-out company (see Section 5). Upon disposal of the shares, should they have gone up in value, tax is paid on the increase in value of the shares (known as capital gains tax), although the length of time the shares are held will be taken into consideration (known as taper relief) when the Inland Revenue calculates the income tax to be paid. If the equity shares are split after the spin-out is formed, then it will be deemed by the Inland Revenue that shares have been acquired by reason of your employment, therefore tax must be paid upon receipt of these shares and for each year they are held if the value of the shares increases. The negotiations should also include disposal or charging of shares should a member of the team or the University wish to dispose of or charge any or all of their shares at a later date. This will be included in a Shareholders Agreement 7.2 Model of the Equity Split Allocation of shares is negotiated on a case-by-case basis using the Equity Split Model (see Figure 1) and every effort will be made by MMU Enterprises Ltd to come to an acceptable and fair agreement with all parties. Should the business plan indicate that further investment from an external on Starting a Spin-Out Company 9

body, e.g. venture capitalist, be required at a later stage for the continued development of the spin-out company, MMU Enterprises Ltd will negotiate allocation of shares also based on the Equity Split Model. This model will make it easier for the spin-out company to attract external investment, as the external investor(s) may want to have the majority share of the equity shares (due to the risks they are taking when investing in the spin-out company). As the spin-out company grows it is likely to issue more shares to new shareholders to attract cash investment and people. Each time this happens existing shareholders will find their percentage shareholding being reduced. A shareholder may use previously agreed pre-emption rights to buy more shares or even to obtain more shares without payment, thereby maintaining the agreed percentage shareholding. Alternatively, MMU Enterprises Ltd may agree not to have the majority of the equity shares, in return for a licence fee and/or a royalty. It is important to remember that the equity model does not include money that the University previously spent on developing and/or protecting the idea, along with the required seed money, therefore arrangements for repayment of these monies will also need to be arranged. Figure 1. Model of the Equity Split University Staff Others The University Initial Start Up * Up to 30% of Equity Share (maximum) 70% of Equity Share (minimum) Further injection of capital at a later stage Venture Capitalist negotiates with the University for % of Equity Share University Equity Share is diluted * Should dilution of shares take place, the University will endeavour to protect the interest of the individual(s) by attempting in the early stages to ensure that dilution of their percentage of Equity Share does not go below 15%. on Starting a Spin-Out Company 10

8 CONSTITUTION OF A SPIN-OUT COMPANY The spin-out company will be a limited liability company incorporated under English law. Therefore the directors in the spin-out company will be treated as employees, paying income tax and Class 1 National Insurance (NI) under the PAYE Scheme. In addition, the company will pay NI in respect of all employees including directors. It will be a separate legal entity that can sue and be sued in its own right. It will consist of: Shareholders-These will include some or all of the following: member(s) of staff, non-members of staff, the University, and outside investors. Shareholders liability will be limited to the amount payable on their shares. The shareholding will increase with the issuing of additional shares, which is usually done to attract cash investment and/or people Board of Directors-The directors of the company (of which there must be at least one) will be appointed by the shareholders. The directors will be responsible for strategic management of the company and will be personally liable for their actions as directors of the company. The Directors elect one of themselves as Chair of the Board. Legislation sets out three primary duties for directors: 1) A fiduciary duty to the company to act honestly, in good faith and in the best interests of the company as a whole. 2) A duty to exercise the level of skill and care in carrying out their duties as could reasonably be expected from someone of their ability and experience. 3) A duty to carry out the statutory obligations imposed by the Companies Acts and other legislation. Formal powers and rules are set out in the Memorandum and Articles of Association. These are laid down when the company is formed, but may be amended by a resolution of the shareholders. Directors may take any decision necessary to run the company provided they do not infringe the Memorandum and Articles of Association or the Companies Act. Becoming a director is not a decision to be taken lightly as directors have unlimited liability for fraud or negligence. It is possible to take out insurance cover to protect against liability for the spin-out company, shareholders and third parties. This is a relatively new idea and potentially expensive, so professional advice should be sought. A director will not be liable if it can be shown that every step was taken that ought to have been in order to minimise the loss to creditors. Listed below are some useful tips to help ensure that a director is always aware of the spin-out company s trading position and financial status: on Starting a Spin-Out Company 11

Become familiar with all the duties and obligations of a director, as well as legislation and position as determined by the courts. Decisions should not be based on informal chats. Regular board meetings should take place with agendas and papers for decisions being prepared and circulated in advance. All discussions and decisions should be recorded and circulated to directors. Because of the legal penalties that may be imposed, if in doubt, or when facing complicated situations, seek professional advice. Changes in the constitution of the board must be notified to the Registrar of Companies, Companies House by completing Form 288a, b, or c, as appropriate. Managing Director - The managing director will be a member of, and will be appointed by, the board of directors. The managing director will generally be given power by the board to run the spin-out company on a 'day-to-day' level. Company secretary It is a legal requirement for all limited companies to have a company secretary. The company secretary is an officer of the company who reports to the directors and is responsible, along with the directors, for the records of the company, including notices and minutes of meetings, company house returns etc. The University s Secretary s Department may act as company secretary. Alternatively, the company's lawyers or accountants can act as the company secretary. 9 TAXATION The payment of tax is a legal obligation. Payment of the rates of the taxes listed below changes frequently as do the optimal ways of managing the tax liabilities. The taxes to be paid by the individual include: Income Tax National Insurance Capital Gains Tax (see Section 7.1) The taxes to be paid by the spin-out company include: Value Added Tax National Insurance Corporation Tax Stamp Duty (if premises are purchased) It is recommended that advice be obtained on taxation matters from a tax adviser. It is also recommended not to sign a letter of engagement with an adviser until you have agreed who will pay the adviser. on Starting a Spin-Out Company 12

10 FINAL APPROVAL The University s Technology Transfer Advisory Committee (which includes: the Board of MMU Enterprises Ltd, University Secretary, member(s) of staff Dean of Faculty/Director and Technology Transfer Manager) will meet with the proposed equity holders to draw up the Heads of Agreement. This sets out the key provisions of all aspects of the spin-out company and provides a summary upon which the University s lawyers can build full documentation as listed below: Shareholders Agreement Process of Issuing Shares IPR Agreement Memorandum and Articles of Association Letter of Appointment Confidentiality Disclosure Agreement These documents must be agreed and signed by all members who will have an equity share in the spin-out company. It is recommended that advice from a solicitor be obtained before the necessary documentation is signed. It is also recommended not to sign a letter of engagement with a solicitor until you have agreed who will pay the solicitor. 11 INSURANCE The spin-out company may need to obtain a number of insurance policies including: Directors and Officers insurance Building and contents insurance Employer s liability insurance Professional indemnity insurance Product liability insurance on Starting a Spin-Out Company 13

Appendix 1 INTELLECTUAL PROPERTY Introduction Intellectual Property is the novel output of any intellectual activity. It has an owner, it can be bought, sold or licensed and should be protected. Therefore IP rights are legally defined rights that enable the owner to exert control over its use and commercial exploitation, normally for commercial gain. There are six categories of IP, which include: copyright, know-how, patents, registered design, design rights and trademarks. Copyright Copyright protects the physical expression of an idea, not the idea itself. It is achieved at the point of expression, without registration and at no cost. Putting, the author s name and the date lets the public know it is a copyright work. Copyright lasts for 70 years from the end of the year in which the author dies, 50 years for sound recordings, broadcasts and cable programmes, 25 years for typographical arrangements. Know-how Know-how or expertise cannot always be formally protected, but it does have a commercial value. Patents A patent is a property granted by a state authority, which gives the owner the right for up to 20 years to stop the sale of their invention without permission. This gives the owner a marketable commodity, hence patent rights can be assigned or licensed. Three criteria must be met to obtain a patent: (i) newness, (ii) industrial application and (iii) nonobviousness. Additionally, an invention must not be disclosed to anyone before an application is filed at the Patent Office. If it is necessary to disclose details of the invention before filing the application, confidentiality undertakings must be obtained first. Registered Design Registered design protects only the look or eye appeal of an article that has sales potential solely based on that appearance. Registered design must be formally applied for at the Designs Registry. Design Rights Design right is a right that prevents copying a unique design of an article. It is similar to copyright protection, in that it arises automatically once the design has been created. It can exist in any aspect of the internal or external shape or configuration of an article. It can also exist in the whole or part of an article, provided the design is not determined by the final product. Trade Marks A trade mark is any sign that is capable of distinguishing the goods or services of one business from other businesses. More often than not, words or a logo are used, but packaging, sounds and even smells can also be used. Successfully managed, a trade mark is a very valuable marketing tool, which must be registered at the Trade Marks Registry in the countries where you are trading. A domain name is an address that will enable a third party to access a particular site on the World Wide Web, which should not be confused with trade marks. Registration of a domain name is different from trade marks as it is on a first come, first served basis. on Starting a Spin-Out Company 14

Appendix 2 RECOMMENDED READING Forsyth, P. Business Planning, Capstone Publishing, 2002 (ISBN: 1841123153) Irwin, D. Make Your Business Grow, International Thomson Business Press, 1998. (ISBN: 1861522045) Johnson, R. The 24 Hour Business Plan, Century; 2000 (ISBN: 0712669698) Stutely, R. The Definitive Business Plan, Financial Times Prentice Hall, 2001. (ISBN: 0273659219) West, A. A Business Plan, Financial Times Prentice Hall, 1998 (ISBN: 027363562X) on Starting a Spin-Out Company 15

Appendix 3 USEFUL WEBSITES Business Venturing www.enterprisesite.co.uk/ The Venture Site www.bvca.co.uk British Venture Capital Association www.nationalbusangels.com National Business Angel Network www.bestmatch.co.uk/home/ Business Angels Network Company Registration www.companieshouse.gov.uk Official site for the UK's company registration body www.bnr.plc.uk Business Names Registration Inland Revenue www.inlandrevenue.gov.uk Information on Tax and National Insurance www.hmce.gov.uk Customs & Excise (VAT) Market Research www.datamonitor.com UK based sector research www.hoovers.com Research and news www.forrester.com Sector research www.business.com Information on individual companies www.bmra.org.uk Business Market Research Association Patents and IP www.wipo.or g World Intellectual Property Organisation www.uspto.gov United States Patent and Trademark Office www.european-patent-office-org European Patent Office www.patent.gov.uk UK Patent Office www.cla.co.uk Copyright Licensing Agency www.itma.org.uk Institute of Trademark Agents on Starting a Spin-Out Company 16(i)

Appendix 3 (cont) Professional Organisations www.acca.org.uk Association of Chartered Accountants www.cima.org.uk Chartered Institute of Management www.iba.org.uk Institute of Business Advisors www.northwest.accountants-directory.co.uk Business Link Service www.lfyb.lawsociety.org.uk The Law Society-how to choose a solicitor www.beyondbricks.com Setting up an internet business on Starting a Spin-Out Company 16(ii)

Appendix 4 Innovation/Invention Form The identification of exploitable technology arising from research, creative and scholastic work carried out while employed by the University is an important aspect of Intellectual Property (IP) management. It is important, in order both to determine the facts relating to an innovation/invention, design or copyrightable material (e.g. computer software) and to protect the rights of the University, all members of staff and others who may be involved, that a statement of inventorship is lodged with the University Secretary. The Innovation/Invention Record serves an additional purpose of establishing an independent reference point in support of laboratory notebooks as to when an innovation/invention was made. The information given will be treated as confidential and will be used only for assessing and seeking protection of the disclosed IP and the preferred route to commercialisation. Protecting any innovation/invention can be costly and the University will need to evaluate each innovation/invention carefully before establishing a protection strategy. The initial stage will be to conduct a patent search in cases where the IP may be patentable (see next page) and to do some initial market research. The University will keep the originators of the innovation/invention informed and involved at each stage in the process and will as far as possible take into account all relevant factors when taking any decision relating to this innovation/invention. When completed, please return this form to: Either: The University Secretary Tel: 0161 247 3400 Fax: 0161 247 6868 E-mail: kai.hughes@mmu.ac.uk Or: The Financial Director Tel: 0161 247 1868 Fax: 0161 247 6355 E-mail: l.grant@mmu.ac.uk on Starting a Spin-Out Company 17(i)

Appendix 4 (cont) Please complete pages 17(ii) - 17(vii) Confidential Date received / / Title of Invention Inventor(s) External Funding Please give details of ALL external funding used in connection with this or related work, including grants, contracts, studentships, etc. Trust/Department of Health (name) Research Council (name) Charitable Foundation (name) Industry (name of company) European Commission (programme) Other Funding Body (name) University (name) Title of Project Amount of Funds Provided Commencement and Termination Dates External Collaboration Has any of the work leading to the innovation/invention been carried out elsewhere or in conjunction with another organisation? 1) another academic institution/nhs Trust 2) previous employment 3) industrial collaborator Yes No If yes for any of the above, please give details on Starting a Spin-Out Company 17(ii)

Appendix 4 (cont) Brief Description of Innovation/Invention (not more than 50 words) Potential Commercial Use (please include details on the following: how will the innovation/invention benefit the end-user, market analysis, companies that may be interested in the innovation/invention, etc). Please also indicate any intended publication or disclosure including any of the following: details in any thesis submitted in respect of a degree or other qualification at the University or any other academic or qualifying institution; conference papers; seminar contributions; correspondence; emails; poster presentations; any other disclosures e.g. to an industrial or commercial company. If any of these have been accepted for publication, please indicate approximate date publication may occur. Prior Art i.e. previous publications or disclosures (poster presentations; conference papers; oral contributions to conference discussions; etc) relating to the Innovation/Invention, made by you. Please give dates of publications and attach copie s. Publications or other disclosures (poster presentations; conference papers; oral contributions to conference discussions, etc) of which you are aware, relating to the innovation/invention. Please give dates of publications and attach copies. on Starting a Spin-Out Company 17(iii)

Appendix 4 (cont) Was a Confidential Disclosure Agreement in place? (If yes, please attach a copy) Yes/No ORIGINATOR(S) Name Department Address Nationality Appointment Tel no. Fax no. Email address OTHER STAFF OR NON-STAFF INVOLVEMENT Name Department/ Organisation Address Nationality Appointment Tel no. Fax no. Email address on Starting a Spin-Out Company 17(iv)

Appendix 4 (cont) STUDENTS INVOLVED Name Department Address Nationality Appointment Tel no. Fax no. Email address Date, place of innovation/invention and by whom a) Innovation/invention was conceived Date Place Name(s) b) Innovation/invention was reduced to practice (i.e. manufacture of prototype, trial(s), etc) Date Place Name on Starting a Spin-Out Company 17(v)

Appendix 4 (cont) Full Description of Innovation/Invention (Please attach an additi onal sheet(s) if necessary) on Starting a Spin-Out Company 17(vi)

Appendix 4 (cont) Other relevant information (please attach any relevant papers, letters, etc) As an employee of Manchester Metropolitan University, I/we agree to co-operate with the University in seeking patent or other legal protection in the name of the University, and in any commercial exploitation of the invention through licensing or assignment to a new party or through the creation of a spin-out company. To the best of my knowledge the information given above is complete and correct and I/we have not withheld any relevant information. Originator (i) (ii) (iii) Signed Dated Signature of Head of Department/Unit Date Signature of the University Financial Director Date This form should be signed by all those named as originators on Starting a Spin-Out Company 17(vii)

Appendix 5 GLOSSARY Assignment Base Case Best Case Business Plan Direct Costs DTI HEFCE Indirect Costs A legal transfer Business scenario based on the assumption that the majority of events affecting the targeted result will be as predicted Business scenario based on the assumption that the majority of events affecting the targeted result will be positive Report or working paper that clearly and concisely presents all aspects of a new company that are important for investors: information about the product idea, the market, the people who will manage and run the business, growth prospects, financial analysis, etc Costs that vary with output, such as wages, raw material and costs of intermediate goods. (Direct costs are also known as variable costs.) Department of Trade and Industry Higher Education Funding Council for England Costs that do not vary with output, such as rent, insurance, lighting and heating. (Indirect costs are also known as overheads or fixed costs.) Licence Contractual authorisation to make a product or service, usually in exchange for a licence fee and or a royalty (amount of money in exchange for a licence) Limited A separate legal identity from the people who own it (shareholders). Liability The shareholders are not personally liable for the company s debts in the event of collapse. Should the business fail, the losses incurred by the shareholders are limited to the amount they invested (unless a personal guarantee has been given to provide security). Limited Liability Partnership Memorandum and Articles of Association Shareholders Agreement Venture Capitalist Worst Case Since 6 April 2001, it has been possible to trade via a limited liability partnership (LLP). This retains the flexibility and tax advantages of a partnership, but in the case of negligence, only the negligent member is liable for their mistakes: the liability of the other members (partners) is limited. Documents that set out the nature of the company business and its operations Contract between investor and management governing the conditions of the future cooperation and ownership terms Investors that fund the financing of new, fast growing companies Business scenario based on the assumption that the majority of events affecting the targeted result will be unfavourable on Starting a Spin-Out Company 18