Episode 15: Intellectual property and start-up companies

Synopsis

Intellectual Property on Summit TV takes a look at how two award winning start-up companies are using intellectual property (IP) to their advantage with Kerryne Krause-Neufeldt from EyeSlices, and Nuno Pires from Altis Biologics.

Transcript

Intellectual Property on Summit TV takes a look at how two award-winning start-up companies are using intellectual property (IP) to their advantage with Kerryne Krause-Neufeldt from EyeSlices, and Nuno Pires from Altis Biologics.

STEPHAN LAMPRECHT: Welcome to the second series of the Intellectual Properties show. Intellectual Property is often only on the agenda of large companies, but what about the wave of new start-ups and entrepreneurs? With me are two award winning South African start-ups Kerryne Krause-Neufeldt from EyeSlices, and Nuno Pires from Altis Biologics. Kerryne, tell us a little bit about EyeSlices?

KERRYNE KRAUSE-NEUFELDT: Eyeslices are disposable eye treatment pads manufactured from a patented cryo-gel polymer technology. It’s a high tech cucumber slice for puffiness, dark circles, tired eyes, redness and wrinkles.

STEPHAN LAMPRECHT: You’ve licensed this technology from the CSIR?

KERRYNE KRAUSE-NEUFELDT: Correct.

STEPHAN LAMPRECHT: What was your experience being a small company dealing with someone like the CSIR and having to draft a licence transaction? How did you go about it?

KERRYNE KRAUSE-NEUFELDT: Quite terrifying actually. I was quite lucky - at that point the CSIR was mandated to licence technology more too local companies. A lot of these technologies go offshore into the big multi-nationals - so I guess I was just in the right place at the right time. It took about two years to negotiate the deal - and later on we still renegotiated, years later we made some changes to the contract - so it was an ongoing process for a few years.

STEPHAN LAMPRECHT: Nuno, what is Altis Biologics?

NUNO PIRES: Altis Biologics is a biotech company. We focus on - it’s very scientific - bone morphogenetic protein (BMPs). In essence if I put it in laymen’s terms we extract the BMPs from natural bone and we put them back into patients that require healing of bone fractures. Typical indications would be people that have suffered a severe fracture that’s not healing on its own - it requires a little bit of assistance and Altis BMP would come in there.

STEPHAN LAMPRECHT: I know that you have drafted many licence agreements within your career in the start-up environment - what would you say has been a learning experience from your point of view?

NUNO PIRES: It depends who we are drafting it for. From a South African perspective we start on the same footing - in essence you are dealing with a partner. We’ve licensed our technology locally to a human tissue bank - they make use of it to take a human donor bone and produce a BMP based product. From an international perspective we start off a little bit on the back foot - firstly you have to prove yourself as a South African, and then you start out. The first course is obviously a term sheet - and from the term sheet that should be the basis of the structure of the deal, and then from there one takes it forward. It could be as Kerryne said easily a year or two years sometimes - it depends whom you are dealing with.

STEPHAN LAMPRECHT: What is different from a small company point of view in negotiating these kinds of things typically compared to a larger company?

NUNO PIRES: Small companies always suffer from credibility issues - that’s the major issue. -Like I was saying to Kerryne just before we walked in here - in the US they would even tell us “we just want to come across and see things before we get into the terms sheet or licence agreement” to “kick the tyres” as they put it. That means “prove yourself - let’s see you have an infrastructure. Who are you? Does an IP exist? Can such a small company even develop IP? Okay, then let’s talk.” So credibility is a major issue we face from the start.

STEPHAN LAMPRECHT: Obviously if you are not careful you could easily reveal a lot of the underlying concept that you want them to get interested in.

NUNO PIRES: On strategy we’ve played a few games - maybe games that corporates wouldn’t - but we needed to. For example one says “we are speaking to this company and this company - and we are in advanced stages” but maybe we’ve just started to speaking to them. You have to create that sort of desire for them to want to talk to you - as if someone is already interested so “we’d better be speaking to these people as well.” You wouldn’t suffer from those types of things if you were Sasol - they would know who Sasol was, and they could go to the internet and have a look.

STEPHAN LAMPRECHT: So both of you started with a specific technology 0 or a technology you wanted to licence - but going global to the external market the question would be, and you mentioned credibility - the issue of a trademark. From an EyeSlices point of view how did you develop that creditability? How did you develop the buying power in terms of the EyeSlices brand?

KERRYNE KRAUSE-NEUFELDT: We put a lot of energy and effort in to creating the brand - and even our packaging - but we also further developed the technology. When we licenced the technology it was only basic research - we took it right through the process of applied research and scale-up. We protected all of that - we started to register patents, and PCT patents, we registered the packaging designs that are unique, and our trademarks because we always knew we were going to play on the global scale and needed to protect that. Because we put some much energy, effort and money behind branding and differentiating ourselves we wanted to protect that.

STEPHAN LAMPRECHT: To ensure that you have lasting power - otherwise in a year or two when you really get busy then you don’t have the necessary things in place. How did you do it? Did you do it all by yourself - who helped you?

KERRYNE KRAUSE-NEUFELDT: I bootstrapped the business thanks to a lot of help from government organisations and instruments available in South Africa that assisted me - particularly the biotech sector. Everybody thinks registering intellectual property is so expansive and almost impossible - you have a lot of time, and there’s little things you can do at different times - so you could start with one thing registering trademarks locally, and then go internationally for example. So with little bits of money and government assistance and some of the funds and loans we’ve had we’ve managed to incrementally over three years register everything even internationally.

STEPHAN LAMPRECHT: I’m glad you mentioned that. I find that a lot of people that I deal with are not pro-active enough - so typically when your provisional registration starts lapsing then they start thinking about money and where am I going to get money from? The point you are making is very good - if you go through the little steps and make sure that you do the right things at the right times there are partners that can fund and assist you. Nuno, from your point of view I know that Altis is also partially or entirely public funded in terms of the Innovation Fund - what has been your learning experience in terms of dealing with government specifically from an intellectual property point of view?

NUNO PIRES: Altis Biologics actually had a patented platform technology for BMPs - and because it’s a process we are always a little bit sceptical whether we wanted to use the patent route as an IP instrument. We were falling back on know-how or trade secrets as an IP instrument rather - because as soon as you divulge that the whole world would know exactly what we’re doing - but unfortunately to get funding in this environment we needed to have patents in place. That’s the first stepping stone before you will be seriously considered - so over time the know-how strategy developed into a patents strategy, and we registered our patents. That was the first basic step with the Innovation Fund. They assessed that - it took about a year. It’s not a quick fix type of thing. Eventually we got funding from them - and part of that funding included obviously the continued protection of that patent, and the execution of that from provisional through to PCT through the regional phases.

STEPHAN LAMPRECHT: Kerryne, briefly from your point of view if you have to give advice to a small start-up company in terms of dealing with intellectual property - what should they do? Where should they start?

KERRYNE KRAUSE-NEUFELDT: Think big. First set the goal - so if you want to be a big Virgin type brand in 20 years start with that in mind now. Then go to - I always believe in going to the specialist. One IP group I discovered don’t do everything well - so we have one set of attorneys like Spoor who do our patents. They specialise in that specific arena. There’s somebody who does the trademarks, and somebody who does the design registrations. So start and just keep going - and somehow you end up with a group of intellectual property in your package that’s great, has credibility, and takes you places.