Commercialising intellectual property : spin-offs.
Date: 2024-10-25
Institutions: European Innovation Council and SMEs Executive Agency
Subjects: business start-up, intellectual property, marketing, research body, technology transfer

FACT
SHEET

Commercialising Intellectual 
Property: Spin-offs

www.ec.europa.eu/ip-helpdesk

Summary

I. Introduction 

II. IP commercialisation through spin-off 

III. Setting up a spin-off 

IV. Intellectual property in the lifecycle of joint ventures 

4.1. IP due diligence 

4.2. Confidentiality  

4.3. Employment contracts 

4.4. Assignment agreements 

4.5. Licence agreements 

4.6. Identity and trademarks 

V. Best practices and checklist 

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European IP HelpdeskFact Sheet 
 
 
 
I. Introduction 

This fact sheet deals  with the creation  and  management of spin-offs  as instruments  for the 
commercialisation  of  intellectual  property  (IP)  rights.  Spin-off,  also  known  as  “spin-out”  are 
entities intended as a separate legal entity created by a parent organisation (PO) to exploit 
its  IP  assets.  Once  the  company  is  established,  the  PO  will  transfer  or  license  to  it  the  IP 
concerned,  for  the  spin-off  to  commercialise  it.  This  fact  sheet  identifies  the  key  factors  to 
create  a  well-conceived  spin-off  company  with  a  main  emphasis  on  the  IP-related  aspects 
that can contribute to its success. Creating a spin-off is a common practice in Universities and 
Research Organisations (ROs), for them to exploit and maximise the economic benefits of the 
knowledge created, as often these organisations lack the required capabilities to market their 
intangibles.

Spin-offs  are  one  option  to  commercialise  IP,  i.e.  bringing  IP  to  the  market  in  order  to  be 
implemented. IP commercialisation can take different forms. The most common are summarised 
in the following diagram:

Common forms of  
IP commercialisation

Assignment

Licensing and 
franchising

Joint venture  
and spin-off

The financial success of any IP exploitation will certainly depend on the choice of the most 
appropriate commercialisation form, which should be based on:

•  The organisation’s business objectives
•  The form of intellectual property
•  The economic resources as its disposal

Risks  should  also  be  taken  into  account. Although  the  very  nature  of  risks  will  depend  on 
the type of commercialisation, their identification, assessment and management would give 
organisations more security.

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European IP HelpdeskFact Sheet 
The IP risks specific to commercialisation activities are those related to:

• 
• 
• 
• 

The nature of the product and/or services
Confidentiality
Legal and financial matters
Business reputation

An assessment of the risks can be based on the likelihood of an event (e.g. ownership disputes, 
third party infringement, etc.) and the associated consequences (e.g. irrelevant, moderate or 
important). Depending on the assessment of the outcomes, organisations will be able to make 
appropriate decisions about the risk management actions to be adopted (e.g. subscribing to an 
appropriate insurance, revising relevant clauses within contracts, etc.).

Before diving deeper into the subject, please note that the content provided in this fact sheet is 
not meant to be exhaustive, and professional advice is strongly recommended when it comes 
to choosing the most suitable commercialisation route for your organisation as well as dealing 
with the complex legal issues surrounding contractual arrangements.

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European IP HelpdeskFact SheetII. IP commercialisation through spin-off

A spin-off refers to a separate company established in order to bring a technology developed by 
a parent organisation to the market. Spin-offs can be valuable vehicles to transform technology 
into a marketable product or service, as well as to license out technology. 

The  interests  in  creating  spin-offs  may  be  several  and  with  different  scopes.  Although  the 
underlying reason is to commercially exploit intangible assets so as to create new economic 
value, spin-offs are also considered a fundamental link between the researchers and industries 
as they are a vehicle for technology transfer between these two sectors. Spin-off companies 
are  in  principle  more  market  or  industry-oriented  than  universities  or  research  institutions, 
and by nature interact more with the commercial players which can help towards and finance 
the  bringing  to  market  of  newly  developed  knowledge.  Often,  this  is  achieved  through  the 
acquisition of the spin-off company by larger companies.

Besides these general scopes, creating spin-out companies can allow universities and research 
organisations to:

•  Externalise certain aspects of the development process that might not fit 

with its scientific objectives;

•  Obtain funding not available for purely research institutions to partially 

cover development cost;

•  Participate in a European research funded programme as an industrial 

partner;

•  Endow research staff with entrepreneurial skills.
•  Generate new income streams
•  Foster collaboration and partnerships with industry

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European IP HelpdeskFact SheetThe  creation  of  a  spin-off  is  a  complex  process  entailing  the  development  of  a  separate 
business  with  the  subsequent  allocation  of  IP  rights,  project  and  risk  management  and,  in 
certain circumstances, fund raising to attract investors for financial contribution. As regards to 
the scheme complexity, it is important to note that very often scientific researchers (spinning off 
from the academia or ROs) lack significant management experience (in IP matters but also in 
general business management aspects), which is likely to undermine the commercial potential 
of  a  new  product  in  case  they  do  not  receive  the  necessary  support.  Therefore,  business-
oriented  support  to  their  functions  –  which  can  come  from  his  or  her  research  institution 
via  its technology  transfer  office  (TTO), or  from external  partners  who  bring  entrepreneurial 
experience – is crucial to increase the chances to obtaining funds as well as to increase the 
shareholders’ and costumers’ reliance.

Accordingly, before setting up a spin-off it is important:

•  To draft a business plan identifying the spin-off goals and the suitable 

actions to take;

•  To set up a spin-off management consistent with the overall PO’s IP strategy;
•  To guarantee that the PO is entitled to use the relevant IP if relevant 

(ownership or license rights);

•  To define an expected financial return;
•  To prepare an exit plan.

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European IP HelpdeskFact SheetIII. Setting up a spin-off

A spin-off company is generally set up in one of two ways1 :

•  As a scientific research and development (R&D) company, subsidiary to the PO: a new 
company  created  through  the  separation  from  a  PO  which  contributes  with  its  financial, 
human and intellectual capital. This R&D spin-off has mainly the scope to further develop 
and  commercialise  the  IP  created  and  assigned  by  the  PO. Together  with  the  relevant 
intangible  asset,  the  PO  also  transfers  to  the  new  legal  entity  the  obligations  and  risks 
associated to the commercialisation of the IP.

•  As  a  commercial  product-oriented  start-up:  a  new  company  established,  usually  by  a 
person  external  to  the  PO,  with  a  view  to  exploiting  the  intangible  licensed  by  the  PO. 
Often, in fact, ROs attract venture capitalists interested in investing in the development of 
the IP created by the organisation. This type of company is also referred to as an innovative 
“start-up”, more likely to obtain a final marketable product.

Spin - offs

scientific R&D
subsidiary company

technology as product 
independent start-up

founded by
the RO

IP usually 
assigned

founded by a
third person

IP usually 
licensed

At the time of creating a spin-off, a strategic decision must be made on how the new company 
will acquire the IP belonging to the PO: as an assignment or through a licence. 

Through the assignment, the IP is transferred and becomes the property of the spin-off and 
hence part of its capital. The transfer is done according to the internal company procedures 
and defined by corporate agreement, in the case of contribution in kind.

In  case  of  licensing  the  PO  retains  full  ownership  of  the  licensed  IP  and  therefore  keeps  a 
certain amount of control over it and the rights to use it in the future.

1 A combination of both is also possible

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European IP HelpdeskFact SheetAccordingly, these two methods differently affect the spin-off activity, as in the first case the 
decrease in the value of the IP assigned has a direct repercussion on the spin-off capital and 
its entire existence can be at risk2. In the second case, if the licensed IP loses value, this can 
only be a reason for renegotiating the licence agreement but it has no repercussion on the 
spin-off’s existence. 

When creating a spin-off, it should be clearly established that, where the PO acts as a research 
laboratory of the new company, the PO must expressly retain rights over the IP to carry on 
further R&D activities on it if it plans to do so. In case of a licence, it means that the terms of 
the agreement must not stipulate that the spin-off will have exclusive rights over the IP (i.e. 
exclusive licences should be avoided). In case the IP is assigned, the spin-off should license 
back the IP to the PO so that it can indeed us it for further activities. 

Maintaining  a  balance  between  the  rights  and  expectations  between  parties  is  vital  when 
creating a spin-off and TTOs should act as intermediaries between the parties of the transaction. 
Indeed, a TTO plays a fundamental role in the construction process of any form of spin-off, 
which might be passive or active. A passive role is when only the necessary resources (e.g. 
materials and personnel) are allocated to assist the process, without a direct involvement of 
the TTO. An active role would occur when the TTO, for instance, actively participates in writing 
the business plan and IP related agreements, secures or finds initial funding, assembles the 
management team, and so forth.

2 The IP asset can be liquidated to the creditors as a part of company assets. On the other hand, IP assignment is more conve-
nient for the PO in terms of tax exemption and transfer of risks.

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European IP HelpdeskFact SheetIV. IP related activities and agreements 

When setting up a spin-off company, depending on the form that has been chosen, there are 
several activities to be carried out and agreements to be prepared. Those related to the IP may 
include:

4.1. IP due diligence
This  activity  should  be  carried  out  independently  from  the  type  of  spin-off.  In  fact,  IP  due 
diligence is crucial to show potential investors that any matter related to the IP, forming the 
object  of  the  spin-off  transaction,  is  properly  dealt  with.  By  conducting  IP  due  diligence, 
investors will able to ascertain the ownership of the IP and any obligations affecting it (e.g. 
research contracts3 , granting conditions) as well as its strength and restrictions (e.g. lifespan 
of the IP right, freedom to operate limitations, potential infringement of third-party IP rights). On 
the other hand, through the IP due diligence you will be able to discover any defects in your 
IP management and fill the gaps revealed, before the business transaction: in a few words, to 
tidy up your intangibles.

4.2. Confidentiality
Early  in  the  negotiations  phase,  ROs  need  to  show  their  innovative  knowledge  to  potential 
investors to convince them of the value of the project. Ideas, know-how, prototypes, description 
of  inventions,  chemical  formulas  and  research  information  may  be  the  object  of  negotiating 
discussions. In order to ensure that all this valuable information is kept safe, it is best practice 
to conclude a Non-Disclosure Agreement (NDA) before engaging in negotiations for spin-off 
agreements with external parties, to ensure that in case negotiations fail they will not be able 
to walk away with the ROs internal confidential knowledge and information.

4.3. Employment contracts
These  contracts  should  be  thought  over  in  advance  and  cover  all  the  issues  related  to  the 
ownership of the IP that will be created by employees/researchers during the spin-off life cycle. 
It can prove complex where ROs employees will also be part of the spin-off personnel – the 
rights and obligations of these types of employees must therefore be taken into consideration 
when establishing the spin-off. This is particularly needed for those spin-offs that will act as 
a scientific R&D subsidiary company of the PO, having the scope to further developed and 
commercialise the IP created at and appositely assigned by the PO.

3 A research contract is a binding agreement between a sponsor, funding the research and a University carrying out a specific 
research for a defined Project. In this relationship, the ownership of the IP created usually rests with the University, but sponsors 
can be granted an option for a royalty-bearing licence on the Project results.

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European IP HelpdeskFact Sheet4.4. Assignment agreements
When the IP belonging to the RO is assigned to the spin-off the RO retain no property and 
have to comply with its contractual obligations set forth in the assignment agreement. In such 
cases, assignment agreements normally follow corporate rules. Where the spin-off starts with 
limited outside investment, or where the RO believes that the IP has great economic potential, 
the acquisition of shares of the newly created company (i.e. shareholding) often represents an 
economic consideration for the transfer of the IP. It is also possible that the ROs might have 
licences granted back for academic use.

4.5. Licence agreements
These  agreements  are  needed  when  the  RO  decide  to  license  its  IP  assets  to  the  spin-off 
company. By licensing its knowledge, the RO will remain the owner and have a certain degree 
of control over the IP generated by the spin-off. The main financial terms to be agreed upon in 
licence agreement are whether the licence is generally done in return for a lump sum payment 
or  is  royalty-bearing.  On  occasion,  it  can  be  decided  that  the  RO’s  economic  return  will  be 
represented by their shareholding in the spin-off.

4.6. Identity and trademarks
When  creating  a  spin-off  –  and  especially  if  the  goal  is  to  commercialise  a  product  on  the 
market – it is necessary to determine whether the spin-off is to use branding elements of the 
RO or if it will have to create its own brand and identity on the market. If the spin-off retains any 
of the parent company‘s branding elements, clear agreements must outline the terms of use 
to avoid potential conflicts.

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European IP HelpdeskFact SheetV. Best practices and checklist

Mainly, in order to be prepared and to take on the spin-off creation process in the best way 
possible, technology transfer offices play a central role and should set an institutional IP policy 
and have a set of templates already in place answering, inter alia, the following questions:

•  Who is responsible for spin-off negotiations?

- Are complex IP matters to be addressed to external advisers?

•  How will the RO be compensated for the transfer of its IP to the spin-off?
- Is the assignment or licence to be under a lump sum or royalty payment?
- Is the RO’s financial return only based on its shareholding?

•  Will the RO have rights over improvements on the IP developed by the spin-

off? (relevant in case of licences)

•  Will the RO retain licence rights for teaching and research purposes?

•  How will employees and inventors be compensated?

•  Can the spin-off use the RO trademarks?

•  How will the conflicts related to the IP between the spin-off and RO be 

addressed?

All  the  relevant  IP  issues  should  be  treated  separately  as  a  part  of  the  agreements  listed 
above, but they can of course be included in the overall spin-off agreement as key IP clauses.

Drafting IP agreements and the general spin-off agreement is a TTO’s task. Nevertheless, due 
to the complexity of the matter, TTOs are advised to seek external professional support.

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European IP HelpdeskFact SheetThe  following  non-exhaustive  checklist  will  highlight  some  of  these  key  issues  that  a  TTO 
should consider when dealing with the IP allocation in spin-off creation:

•  Clearly define the IP to be transferred to the spin-off
•  Ensure that the RO has all the necessary rights to transfer the IP to the spin-

off

Obtain all the necessary rights from the RO’s inventors if they hold ownership 
rights over the IP
Make sure that the RO has clearance of assignment for any third party’s IP 
rights

•  Protect the RO’s interests in retaining licence rights for research purposes in 

case of IP assignment

•  Carefully negotiate the transfer terms in the case where it is foreseen that 

the IP is firstly licensed and successively assigned to the spin-off during its 
life span

•  Properly deal with all the IP obligations to be included in licences – 

exploitation, royalty payment, enforcement issues, etc.

•  Clearly define the rights to improvements to, or further developments of, the 

licensed IP

•  Envisage how the ROs will recuperate the licensed IP – improved or further 
developed – from the spin-off company in case of insolvency or dissolution

Useful resources

For further information on the topic please also see:

•  Fact sheet on Commercialising Intellectual Property: Assignment Agreements
•  Fact sheet on Commercialising Intellectual Property: Licensing Agreements
•  Fact sheet on Inventorship, Authorship and Ownership
•  Fact sheet on Non-Disclosure Agreements: a Business Tool
•  Guide to IP and Contracts
•  Case Study: RobCo – young start-up from Technical University of Munich (TUM)

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Luxembourg: Publications Office of the European Union, 2024
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European IP HelpdeskFact Sheet