Transcript Document

Licensing: An Overview
Varda N. Main
Director, Technology Licensing Office
Rochester Institute of Technology
Presentation to “Introduction to
Intellectual Property” Course
February 4, 2003
Licensing

In the broad sense, is a discipline that makes it
possible to transfer technology from a
proprietor (the licensor) to an interested
purchaser (the licensee) in a well defined and
effective manner
Intellectual Property Rights
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Trade Secret
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Know-how
Show-how
Patents
Trademarks
Copyright
Mask Works
Emerging Trends
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Technology development time decreasing
Technology development costs increasing
Growing importance of alliances
Regulatory environment becoming more stringent
Corporations licensing in more
Opportunity:
More customers for embryonic technologies
Global Issues
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Knowledge moves quickly around the world
Increase in industrial/academic espionage
Trade agreements: GATT, NAFTA
New trading blocks: EC, E. Europe, N. America
Move to patent harmonization
Historical Context
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Availability of R&D funds decreasing
Competition for R&D funds increasing
Universities seeking additional avenues to fund
R&D
Result:
Emergence of Technology transfer function in
university community
Why Interest in IP
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Value in intangible assets
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GAAP and book value
IP protection adds value and increases lifetime
of that value
Communication between lab and marketplace
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Speeds movement of technology to products
How IP Moves to the Marketplace
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Idea >> concept >> reduction to practice >>
prototype >> scale-up >> productization
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Direct application by IP owner
Sale of IP to another entity who then
productizes
License of IP to licensee(s)
Public disclosure of IP
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Technology Transfer
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Collaborative process whereby the products of
R&D flow from a source to the (next) user
Numerous transfer options including:
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Licensing
Alliances
Use of facilities
Consulting
Outright sale
Types of Licensing
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Licensing Out
Licensing In
Rights under a License
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To make
To use
To disclose to others
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by publication
in a marketed product
in a service manual
as a sub-license to a third party
to lease
To sell
Types of Licenses
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Exclusive - there can only be one licensee; the
licensor has no rights to exploit the
technology/product
Sole - exclusive but for the licensor; i.e., the
licensor has rights to exploit the
technology/product
Non-exclusive - there is no limit to the number
of potential licensees
Licensing Strategy
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Position in technology life-cycle
Presence/absence of competition
Technical, financial and marketing strengths of the
parties
Legal, political, and cultural environments
Protection of proprietary information
Grantsback
Remuneration hoped to be realized over the term of
the license
Types of Licenses
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Irrevocable/Revocable for cause
Territory: World-wide/Limited to named
geographic regions
Field of use: Market-specific
Royalty-bearing/Royalty-free
Determining Position in the
Technology Life Cycle
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Technical performance obsolescence
Technical feature obsolescence
Cost obsolescence
Safety obsolescence
Shifts in consumer preferences
What do you really have?
Know the History
 Base patents and continuations
 Technically related patents and copyrights
 Software versions
 Previous agreements
 Outside authors and inventors
 Funding sources
The View on the Other Side of
the Table
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Perception of business risk.
Who’s bringing what to the table?
What are the 3 points of difference for the
technology/opportunity?
What would make a user switch to this
product/process/service?
What is needed to bring this to the commercial
marketplace?
Importance of Timing
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Commercialization and patent prosecution timelines
must coincide - “Window of Opportunity”
Understand the technology & IP life cycles
Understand the impact of competing technologies (i.e.,
first to market)
Durability of competitive advantage
Fit with business or corporate strategy
Packaging of Technology for
Transfer
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Licensing need to be win-win situations
What must the licensor do to ensure that the licensee
will be able to fully use the licensed technology?
How to identify all the know-how, show-how and
technology needed by the licensee?
What other information may be needed in negotiating a
technology transfer?
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tax credits
financing
marketing
A Good Strategy is a WIN:WIN
Strategy
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There is no real strategy unless there are at
least two interested parties
It’s all in “packaging to attract partners”
Must find common ground
Essential to understand needs of all parties
Don’t get caught up in “but my needs are…”
Why License?
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The Licensor’s reasons might include:
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to make money
to help sell products, services, equipment
to obtain technology via grantback
to secure a market
to settle a patent dispute
cross-licensing of other, existing technology
rights to future technology
to buy continued development of the licensor’s technology
Why License?
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The Licensor’s reasons might include:
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to acquire marketing strength, capital and market assets or an
interest in them.
to reduce capital requirements for reaching a market.
to adapt a product to a local market
to reach fields of use outside the licensor’s normal purview
to avoid waste of by-product technology
to profit from residual value in an old technology
to fulfill local laws
to avoid antitrust/anti-competition or trade regulation problems
Why License?
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The Licensee’s reasons might include:
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to obtain rights to technology
to supplement the licensee’s R&D
to obtain continuing access to technical help
to benefit from the good reputation of the licensor by
gaining ability to use its trademark
to obtain quick entry without cost and technology
risks
to obtain access to the licensor’s facilities
Why Foreign License?
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Advantages/practicality of foreign licensing
over direct sales or export might include:
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tariff regulations
taxes
potential nationalization
political instability
capital to start foreign production
foreign patent laws
availability of materials and staff
quick return to licensor
access to/acceptance with foreign markets
Why NOT to license
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To avoid risk of establishing a future competitor
To make potentially bigger profits from direct
sales… at higher risk and capital cost
To retain direct control over product liability
exposure
To retain direct control over product quality
To retain direct control over know-how
dissemination
Licensing
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Licensor’s perspective
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ensure that licensee is only acquiring those rights which are
necessary and which do not restrict licensor from making other
uses of the technology
restrictions to be placed on use of technology
is this an international transaction
 what protection exists for technology in foreign jurisdiction
 what rights does a foreign national have to enforce rights
to the extent that any third party material is incorporated in the
technology, does licensor have all rights required in order to
grant license
Acquiring Technology
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Licensee’s perspective
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what is the intended use of the technology
what form of legal protection exists in the technology being
licensed
is one acquiring all of the rights and information which they will
require in order to do what they want to do with the property
licensed in
in what jurisdictions do the technology rights exist
will licensee have to obtain rights from any other party in order
to carry out intended activity
Agreements - What can go Wrong
Who’s idea is it anyway?
I thought of that before we signed this deal.
But I thought I could do that.
Result: Court Actions
 This is costly
Lac Minerals v. International Corona Resources
Agreements - Why They are Needed
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To clarify a win-win relationship
To clarify intentions
To provide a written statement
To state what each party can and cannot do
To describe tasks, budget, deliverables, responsibilities
To protect against changes in involved personnel
To refer to when there are misunderstandings and
disagreements
Value of The Portfolio
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Value in the eye of the beholder
A portfolio is more than the sum of its parts
Value depends on how the portfolio is
protected and the strategy to sell it.
Portfolio Valuation
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What is the competition? Is your portfolio
unique?
Who is willing to buy?
Different Parties = Different values
How critical is technology/portfolio to the
outside?
What are they willing to pay?
Pricing Technologies
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Market value of technology
Uniqueness of technology
Competitive position
Type of protection for the technology
Stage of technology development
Improvement provisions of license
Exclusivity
Field of use
– geographical
– market sector
Investment Theory For Royalty
Rates
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Value of technology is a function of
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the income that can be earned from its employment
the cost to replace it with equivalent
Payment Terms
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Types of Payment
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up front, paid-up licenses
running royalties
minimum annual royalties
sliding scale based on performance
Basis for royalty payments
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net sales
net profits
percentage of service work
percentage of R&D contracts
Portfolio Valuation
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Value each piece
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Commercial cost to use facility or equipment
(analogs)
Commercial value of patents (price)
Investment in personnel to develop skill and
knowledge (replacement)
Value different combinations
Escrow
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Required by licensee for protection in the event that
licensor should go out of business
Licensor agrees to place confidential and other
proprietary material in escrow and allow for its release
only in the event of catastrophe
Usually a three party agreement, but can be done by
having each party have an agreement with escrow
agent
License Administration
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Establishing the licensing relationship
Maintaining the relationship throughout the term of the
license agreement
Diverse aspects of the relationship
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financial payment/audit rights
technology transfer to/from
reporting
tracking performance/deliverables
joint development/exploitation
Licensing Costs are MINIMAL
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Revenues are predominantly profits
The Licensing Person
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The ideal licensing person has a technical education
and background, legal training, market research and
technical research experience, a knowledge of patents,
the ability to get along with people, salesmanship, and
enjoyment of negotiations, foreign language abilities,
negotiation experience, resistance to jet lag and
physical stamina. Technical ability is more important
than legal ability. Marketing ability is more important
than both.
 LICENSING
MUST BE A
WIN-WIN SITUATION TO
SUCCEED
REMEMBER…
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The technology goes through the entire
innovation/commercialization process (from
concept to end user); people typically don’t go
through the entire process
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Know your strengths and weaknesses
Know when to say no
Know when to exit
Non-Disclosure Agreements
NDAs Go Under Different Names:
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NDAs go under different names:
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Secrecy agreement
Confidentiality agreement
Non-disclosure agreement
When to use NDAs:
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When disclosing confidential information
When receiving confidential information
Principles of NDAs
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Allowed use and disclosure of information
defined
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Use is typically limited to purpose of disclosure
Amount of disclosure is controlled by disclosing
party
Information must be kept confidential by
receiving party
Respective rights of the parties defined
One Should Always Ask:
What are the consequences of being the
recipient of another party’s confidential
information?
Employment Contracts
Who Owns your Work?
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Work you do at RIT:
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You? The University? Your Employer? Business Partners?
What agreements will you sign when you work for a
company?
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Employee Assignment forms
Non-compete assurances
Confidentiality agreements
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With your company
With others with whom you do business
Employment Contracts
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By specific contract; embedded in offer letter;
through acceptance of policies
IP ownership by employer (24/7)
Keep confidential in perpetuity
Need-to-know
Non-compete
IP exit interview
FEDERAL FUNDING AND ARISING
INTELLECTUAL PROPERTY
INTELLECTUAL PROPERTY
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Background Intellectual Property
Arising Intellectual Property
Sole Inventions
Joint Inventions
Ownership of Intellectual Property
Rights to Intellectual Property
FEDERAL GRANTS and
CONTRACTS
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Grants
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Typically most terms are non-negotiable; one
applies for a specific grant understanding the terms
that will be required
Contracts
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Many terms are negotiable; including IP ownership
and rights
PROTECTING PROPRIETARY INFORMATION
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Marking portions of proposals, reports and
other correspondence
Certain information on grants is routinely
published by each agency
Freedom of Information Act (FOIA) requests
Disclosures can bar patenting
REPORTING REQUIREMENTS
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When doing work under a grant or contract
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Work progress
Disclosure of inventions
When licensing out IP developed under a grant or
contract
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Licensing activity
Licensee reports
Job creation and net economic benefits realized
Royalty payments, if required
UNIVERSITIES and the BAYH-DOLE
ACT
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Stipulates that all IP developed by a university
using federal funding is owned by the
university
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Includes flow through funds
US GOVERNMENT AND USE OF FEDERALLYFUNDED TECHNOLOGIES
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The Government funds technology development
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To meet government needs for a technology solution to a
problem
To assist in economic development by helping bring new
technologies to the marketplace
To provide a return to the US taxpayer from the technology
through:
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Job creation in the US
Substantial manufacturing in the US
Net economic benefit to the US
US GOVERNMENT AND USE OF FEDERALLYFUNDED TECHNOLOGIES
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The government wants to encourage use of
new technologies in the marketplace
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Agreement terms encourage/expect technology
owners to bring technologies to the marketplace
The government wants to encourage further
R&D
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IP protection (e.g. patents and copyright) permit
technology owners to disclose their technologies
without losing value in the marketplace
REQUIRED TERMS
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Government Use Rights
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The government gets a non-exclusive, royalty-free
right to use technologies developed with federal
funds for all government purposes
This includes the ability of the government to grant
licenses to government contractors to use the
technology when doing work for the government
REQUIRED TERMS
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Government March-In Rights
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As the government wants to see technologies
brought to the marketplace it can require the owner
of a technology funded with federal dollars to
license out that technology if the owner is not
actively bringing the technology to the marketplace
REQUIRED TERMS
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US Competitiveness Requirements
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The government wants to see technologies utilized
to the benefit of the US economy over that of foreign
economies.
Typically a technology owner will need to seek out
US owned (preferably) or US based licensees and
show that the licensee will use the technology to
benefit US competitiveness
REQUIRED TERMS
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Substantial Manufacture in the US
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As with US competitiveness, the government wants
to see technologies primarily manufactured in the
US, thus resulting in US job creation and net
economic benefit to the US
REQUIRED TERMS
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Export Control Requirements
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Any use of federally funded technologies or licenses
granting rights to those technologies must comply
with all relevant US export requirements and
licenses
Joint Development Agreements
Joint Development Agreements –
Corporate Perspective
Collaborate to obtain access to expertise
and/or facilities not available within the
company
 Move R&D ahead quickly
>>>>> secure/enhance competitive advantage
>>>>> time to market considerations
>>>>> ownership of arising IP
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Joint Development Agreements –
University Perspective
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Exposure to corporate scientists and facilities
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For faculty and students
Additional avenues to perform research
 Career opportunities for students
>>>>> publications and presentations
>>>>> source of research funding
>>>>> enhance reputation of institute and
individuals
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RESOURCES
Resources
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RIT Department of Grants, Contracts and Intellectual
Property
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US Patent and Trademark Office
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www.uspto.gov
US Copyright Office
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www.research.rit.edu
www.loc.gov/copyright/
Good IP Sites
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www.ipmall.fplc.edu
www.patents.com
www.kuesterlaw.com
“To share an asset, usually it must first be
divided. But knowledge is one of the few assets
that multiplies as it is shared.”
. . . . . Indian proverb