ERSM100030 - University Spin-outs

What is a spin-out company?

Universities and other Research Institutions (RIs) which own Intellectual Property (IP) often develop that IP further through companies created in association with the researcher from the institution who worked on the project. These companies are commonly referred to as spin-out or spin-off companies. In this guidance the term spin-out will be used to describe them.

Most RIs have in place an IP-sharing policy that acknowledges the researcher’s contribution to the IP by sharing the benefit of it with the researcher through a share of royalties or, where the IP is developed through a spin-out into which IP has been transferred, shares in that company. Where shares are obtained the researchers normally waive their rights to any further part of the university’s share in the spin-out company, because their reward will, hopefully, come from an increase in the value of their shares in the spin-out.

The combination of publicly funded or charitable institutions, IP-sharing agreements and tax charges arising before cash is available, all in a high-risk environment where many spin-outs fail, is unique to this sector. See a typical spin-out example at ERSM10040.