Stirling Ultracold started off as an intellectual property company. Founder and former (retired) CTO Dave Berchowitz says the business had licensed its IP to companies here and abroad and its approach seemed to have put it in a position to realize its original business goals. The problem with licensing, however, is that it's an unaligned business. After the events of September 11, he says there was a lot of disarray.
"Some of the deals we were working on took longer than we expected," he says. "Eventually, we became more misaligned with our partners."
So, in 2007, Berchowitz decided the company should try and manufacture the technology itself.
"That's a capital-intensive business," he says. "It's quite different from selling or licensing intellectual property. And we needed to raise money."
The company, he says, had an advantage because it could demonstrate working technology. So, it needed to choose a particular target to apply that technology. They looked at several things and deep temperature biological cooling seemed to be a good application. They proceeded on that path by raising angel funds initially and then received Ohio Third Frontier funding, escalating from there to a Series A, a Series B and eventually was acquired by BioLife Solutions.
IP was a very important part of the valuation of the company. In the case of Stirling Ultracold, Berchowitz says they had very well-organized IP. Heading into the diligence process with BioLife, he says a first line of defense to ensure the company's IP, which could include trade secrets, is a non-disclosure agreement.
"A lot of people don't pay much attention to that but that's an essential document," he says. "It's very important to make sure you get the wording right in that particular document. Once you have that in place you can disclose. And of course you want to be totally transparent about what protections you have and what you don't have, and what you've chosen to keep a secret. Your acquirer needs to have total confidence that the technology that they're requiring will be protected to the extent that they imagine it's protected. So, it's very important to be absolutely clear about that."
The way Stirling Ultracold approached that process is it provided a document listing all its patents and it divided it up into patents that protect current products, patents that could protect future products and patents that they don't include in its products but would prevent a competitor from finding an alternative solution.
"That covers quite a gambit of the ways you have to look at intellectual property protection," he says. "And then of course trade secrets, those things you simply explain. And usually those will often include calculations, R&D developments and stuff that you wouldn't really expose to the public."
Berchowitz spoke at the Columbus Smart Business Dealmakers Conference about the deal with BioLife and how the company's IP was managed leading up to and through diligence. Hit play to catch the full discussion.