Transcript techtransfercentral.com

Getting to “Yes” in University IP Licensing:
Mock Negotiation Workshop
October 25, 2012
Presented by
Jim Singer
Brienne Terril
Licensing Activity Statistics
 University and research institute licensing has
remained strong despite economic conditions
 According to the Association of University
Technology Managers U.S. Licensing Activity
Survey for FY2010 (which reflects responses
from 183 U.S. institutions):
-
-
4,284 licenses executed
38,528 active licenses and options
$59.1 billion total sponsored research expenditures
$2.4 billion total license income
2
Overview
 Anatomy of a license agreement
-
Key clauses
What does each side want?
 Negotiation of license provisions
-
University and start-up
University and large company
 Questions
3
Anatomy of a License Agreement
 License provisions
-
Non-exclusive vs. exclusive licenses


-
-
-
Reservation of rights to the institution
Sublicensing
Defining the IP
Consideration: royalties, etc.
Improvements
Enforcement / defense
Representations / warranties
Reporting and auditing
Terminating the relationship
4
Non-exclusive vs. Exclusive
 University Concerns
-
-
-
Universities want to ensure that technology
is actually developed and innovation is
advanced
Exclusive licenses cut against universities’
goal of ensuring that research programs
result in broad practical applications
Overly broad exclusive licenses may have
consequences if the technology is found to
have unanticipated utility
5
Non-exclusive vs. Exclusive
 Licensee Concerns
-
-
Freedom to develop technology without
concern of competitor licensees
Licensees, especially early stage
companies, invest substantial money and
resources to bring a product to market, and
usually require time to do so
Sublicensing and transfer
6
Scope of license: negotiation
 University hereby grants to Licensee, and Licensee
hereby accepts, an [exclusive or non-exclusive],
[worldwide or Territory] right to use the Licensed
Technology to make, have made, use, reproduce, and
otherwise create or distribute Licensed Products in the
Field of Use.
 Notwithstanding the above, University reserves all right
to the Licensed Technology outside of the Field of Use,
and University retains the right to use the Licensed
Technology free of charge for University’s academic,
research purposes.
7
Non-exclusive vs. Exclusive
 Considerations for reaching middle ground
-
-
Universities will usually reserve the right to practice
the licensed invention and allow other non-profit
organizations to do so, even with respect to
exclusive licenses
“Field-of-use” license
Limited period of exclusivity
Require licensee to achieve development
milestones to maintain exclusive license
8
Defining the Intellectual Property
 Patents and patent applications
-
Invention disclosure
 Copyrights / software
 Trade secrets / confidential information
 Know-how
9
Improvements
 University Concerns
-
-
-
Don’t want to inextricably link a research
program to a particular licensee and
preclude funding from or collaboration with
other companies
Broad licenses of future improvements may
touch inventions and university employees
outside of the original invention
Not all improvements are relevant or
valuable
10
Improvements
 Licensee Concerns
-
Wants ability to make use of the most up-todate technology
11
Improvements
 Considerations for reaching middle ground
-
Limit the scope of improvements that are licensed
Restrict licensed improvements to those owned by
the university
Limit improvements to those supported by original
patent filing and entitled to priority date
License improvements in exchange for additional
payment
12
Consideration (royalties, etc.)
 University Concerns
-
Want to share in the financial success of
licensed technology
Licensing income is usually put back into
research and teaching
13
Consideration
 Licensee Concerns
-
-
Upfront licensing fees may be impractical for certain
licensees
Early stage technology may require significant
development before commercialization
High royalties payments may discourage investors
Lower licensing fees and royalties translates to a
lower-priced product which increases market
opportunity
14
Royalties: negotiation
 Licensee shall pay University the nonrefundable sum
of
dollars ($
) upon execution of this Agreement.
 Licensee shall pay University a royalty of ___% of Net Sales.
 Licensee shall pay University a royalty of ___% of Sublicense
Fees.
 Milestones:
-
Business plan
Initial funding
FDA approval
Commercial product release
Annual minimum licenses
15
Royalties and Licensing Fees
 Considerations for reaching middle ground
-
-
-
Implement a royalty or fee structure that increases
over time or that is dependent on the development
of the technology
Impose minimum annual royalty payments after a
time period or a achievement of a milestone
Balance royalties/licensing fees and patent
prosecution costs
Equity arrangements, especially for up-front
payments
Renegotiate financial terms every few years
16
Enforcement/Defense
 University Concerns
-
Usually want to avoid the time, resources
and cost involved in litigation
Will often permit licensees to enforce/defend
infringement claims on their own
Don’t want to alienate licensees of other
technology with litigation
17
Enforcement/Defense
 Licensee Concerns
-
Want ability to enforce patent rights against
infringers and participate in the defense of
infringement claims
18
Enforcement/Defense
 Considerations for reaching middle ground
-
-
Parties agree to use reasonable efforts to seek
resolution of infringement allegations without
litigation
Licensee has first right of enforcement in Field of
Use

-
University will be named party if needed
Licensee pays university a royalty on any monetary
recovery
Licensee is permitted to withhold a certain
percentage of payment to apply to litigation costs
and pay withheld amounts to university from
recovery
19
Enforcement/Defense
 BUT – be mindful of whether licensee has
standing
-
-
Licensee’s standing depends on whether it
possesses “all substantial rights” under the license license language is not dispositive
Non-exclusive licensee’s do not have standing, even
if license conveys such a right
But, an exclusive license in and of itself is not
necessarily sufficient to convey standing
20
Enforcement/Defense
 Considerations in evaluating standing
-
-
Exclusivity
Right to sue
Right to transfer
Rights reserved by university
21
Enforcement: negotiation
 Licensee will have the first right and option to enforce any
infringement of the Licensed Technology. If Licensee fails to take
such action within sixty (60) days of first learning of the infringing
activity, university will thereafter have the right and option to do so.
 The Party who commences the action shall pay all costs required
for the action and retain all proceeds resulting from the action.
 The non-enforcing Party shall provide the enforcing Party with
such reasonable assistance as the enforcing Party may require,
including but not limited to agreeing to be named as a party on any
pleadings in the enforcement action.
22
Reps and Warranties
 Licensee wants:
-
Non-infringement
Right to license (title)
Technology will work as advertised
 University wants:
-
Indemnity for third party claims
Diligence in commercialization
23
Reporting and Auditing




Licensee shall provide University with a quarterly written report of all Net
Sales and Revenues and Sublicense Fees in each country within the
Territory. The report must be provided within 30 days of the end of the
quarter.
To the extent that Licensee does not have net sales in any country within
the Territory within any calendar year, License shall provide university with
an annual written report of Licensee’s efforts toward commercialization in
that country.
Licensee shall maintain accurate books and records such that the
amounts due and payable under this Agreement can be easily
ascertained. Licensee shall make such books and records available for
audit by university or its agent, and Licensee shall fully cooperate in any
such audit
In the event that any audit reveals a deficiency in payment of more than
five percent, then in addition to paying the deficiency Licensee shall also
pay the costs of the audit.
24
Term and Termination
 By university:
-
On breach by licensee
Failure to pay royalties
If milestones not met
 By Licensee:
-
At any time upon notice
25
Questions?
Jim Singer
412.391.2486
[email protected]
http://ipspotlight.com
Brienne Terril
412.391.2404
[email protected]
26