Transcript PRESENTATION NAME - Universidade Nova de Lisboa

Licensing
Dissecting a License Agreement
Telmo Vilela
Telmo Vilela, 2011
FD_UNL
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Agenda
“Technology is worthless if it is not made available” –
Henry Ford

The Tech Transfer Process: How To Take (Good) Ideas to
the Market?

Tech Transfer Tools

Licensing – the best option?

Dissecting a License Agreement

Licensing Tips
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Tech Transfer In Process:
How To Take (Good) Ideas
to the Market?
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From the idea to the market…
IDENTIFY
SHARE
CREATE
MANAGE
EVALUATE
KNOWLEGDE
EXPLOIT
PROTECT
DISSEMINATE
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Tech Transfer Tools…

IP Rights Assignment;

IP Rights Licensing;

Spin-Offs/Start-Ups.
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Assignment VS Licensing…
Assignment
Licensing
The ownership of the patent is fully The owner of the patent grants a third
party the right to exploit the patent, but
assigned (sold) to a third party.
retains ownership.
Typically, the assignor only gets a single The licensor receives royalties and other
payment arising from the sale of the incomes
according
to
the
patent.
profits/sales/production
of
licensed
products.
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Assignment…
Advantages
Disadvantages
financial Loss of connection with the patented
technology, its future developments, as
compensation, by receiving a single and
well as with the assignee (short term
pre-determined payment independent relationship).
from future profits/sales of the products
Immediate
gaining
of
the
protected by the patent.
The assignee takes full responsibility on the Difficulty in doing the accurate market
patent maintenance, surveillance and evaluation of the patent at this stage,
enforcement.
when the technology is yet to be
exploited. Usually, the assignor has a
better knowledge of the market, and
therefore is in a better position to
dictate the value of the patent.
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Licensing…
ADVANTAGES
DISADVANTAGES
Participation in the market success of the Need to keep an eye (booth eyes, in
fact…) on the licensee business,
patent, by benefiting from the results of its
avoiding being misinformed in what
exploitation.
concerns the patent commercial
exploitation results.
Possibility of obtaining higher profits rather Difficulty to determine the licensee
than in a assignment, considering that the profits
profits are determined according to the
sales/production of licensed products by
the licensee (market success).
Close relationship with the licensee, Need to keep watching for the patent
increasing the chances of new RD projects maintenance and enforcement.
and possible sponsorships.
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Licensing: the best option?...
Technology
Applications
Options
New Capital
Required
Personnel
Requirements
Time Needed
to Access
Market
Accessibility to
Worldwide
Markets and
Broadly-Based
Applications
Comparison
Factor
Highest – 10
Lowest – 1
Most – 10
Least – 1
Longest- 10
Shortest – 1
Best – 10
Poorest – 1
Highest – 10
Lowest – 1
1. Include in
Current Business
9
9
10
1
10
2. Spin-off
10
10
10
1
8
3. Joint Venture
3
4
7
6
6
4. License
Technology
1
1
1
10
1
Liability and
Exposure to
Risk
Source: Vertex Intellectual Property Strategies Inc. ©2004
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Why licensing?...

Benefit to the institution
› Reputation
› Money
› ...

Benefit to the researcher
› Reputation
› Money
› ...

Benefit to the applicant/customer
› Availability
› ......
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Dissecting a License Agreement...
AREAS TO COVER:

Definitions

Grant

Financials/Royalties

Reports, payments and records

Diligence

Warranties, Liability and Indemnification

Sublicensing

Patent Maintenance and Infringement
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Dissecting a License Agreement...
Definitions

Clear and concise

For words that will be used throughout the
agreement

Licensee, Licensor, Invention, Exclusive, Field of
Use, Royalty, Licensed Product, Licensed Patent,
Licensed Territory, Net Sales
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Dissecting a License Agreement...
Grant

What the licensor (University) is giving to the
licensee (Company)
› What kind of license it is (exclusive, non-
exclusive)
› What is it for (patent rights, materials)
› In what areas they can practice the
technology (field of use, territory)

What the University is not giving to the Company
› Retain the right to use your technology!
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Dissecting a License Agreement...
Grant example
Subject to the terms and conditions of this Agreement,
University grants Licensee a license under the Licensed
Patent in the Licensed Field of Use to make, use, import,
offer to sell and sell Licensed Product in the Licensed
Territory.
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Dissecting a License Agreement...
Retained Rights Example
University retains the right to practice the Licensed Patent
and use Technology for any purpose, including
sponsored research and collaborations. Licensee agrees
that, notwithstanding any other provision of this
Agreement, it has no right to enforce the Licensed Patent
against University. University has the right to publish any
information included in the Technology or a Licensed
Patent.
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Dissecting a License Agreement...
Financials/Royalties
Types of payments to chose from:
› Upfront Payment
› Annual Minimums
› Milestone Payments/Lump Sum
› Fully Paid (Single Payment)
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Dissecting a License Agreement...
Financials/Royalties

Examples of milestone payments triggers:
› Therapeutics: initiation of Phase I, II, III
Clinical Trials, NDA filing, FDA approval
› Prototype
› First commercial sale
› Patent Grant
› Proof of Concept
› Number of years of survival of agreement
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Dissecting a License Agreement...
Financials/Royalties

Earned Royalties
› Can be:
 a percentage
 a set amount per item
 scaled gross amount per sales
› Definition of Net Sales
Gross sales minus any deductible expenses
both parties agreement on (e.g. returns,
certain taxes)
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Dissecting a License Agreement...
Financials example
Upon signing this Agreement, Licensee shall pay to Licensor a
noncreditable, nonrefundable up- front fee of
(“Up-front
Fee”).
Licensee shall pay Licensor
annually from the Effective
Date for use or sale of the Products (“Annual Minimum”).
Annual Minimum(s) are payable and deductible against
accrued Royalties. Licensor shall invoice the Licensee for the
minimum royalty payment at the beginning of each
calendar year and Licensee shall make the payment within
30 days after receiving the invoice.
Licensee shall cumulatively pay to Licensor the percentage
amount of the Revenues (“Royalty”) at following rates:
- years 1 and 2, Revenue share =
%
- years 3 and 4, Revenue share =
%
- years 5 and 6, Revenue share =
%
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Dissecting a License Agreement...
Reports, Payments, Records



You must receive updates on the company’s development
progress!
You must receive earned royalty reports and payments!
What sort of records should the company keep? What are
your auditing rights?
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Dissecting a License Agreement...
Royalty reports and payments example
COMPANY shall deliver to University, within sixty (60) days
after the end of each calendar year, reasonably
detailed written accountings of Net Sales of Licensed
Products that are subject to royalty payments due to
University for such calendar year.
Such annual reports shall indicate gross sales on a countryby-country and product-by-product basis, the
deductions from gross sales used in calculating Net Sales
and the resulting calculation of royalties.
When COMPANY delivers such accountings to University,
COMPANY shall also deliver all royalty payments due
under Section XX to University for the calendar year.
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Dissecting a License Agreement...
Records & auditing example
Licensee shall keep and maintain reasonably adequate books of
account relating to the manufacture, use, distribution, sales
and other disposition of the Products.
With thirty (30) days written notice to Licensee, Licensor may at its
own expense audit the applicable records in order to verify
the amounts of the Products and Royalties hereunder.
Any possible audit shall be conducted during business hours and
in such manner as not to interfere with Licensee’s normal
business activities.
If the audit materially differs with statements provided by
Licensee, Licensee shall be responsible for all incurring costs of
such audit, besides any other legal consequences.
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Dissecting a License Agreement...
Diligence


Mandatory: Company will diligently develop the technology
into a product
Recommendable: specific milestones
Termination if Company cannot fulfill its obligations
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Dissecting a License Agreement...
Diligence example
COMPANY is obligated to exploit the licensed rights.
Failure to exploit the Agreement Patent Rights is just cause for
University to terminate this Agreement with thirty (30) days
written notice to COMPANY.
COMPANY agrees to meet the development and product
milestones for the Agreement Patent Rights set forth in Exhibit X.
If COMPANY fails to meet any of these milestones, University may
terminate this Agreement with thirty (30) days written notice to
COMPANY. In each case, if COMPANY (1) rectifies the failure
and provides University with ample proof of this rectification
before the thirty (30) days is over or (2) comes to a new
agreement with University regarding the milestones, then the
termination will not go into effect.
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Dissecting a License Agreement...
Warranties, Liabilities and Indemnification



What is a Warranty?
› “a written guarantee of the integrity of a product...”
What is Indemnification?
› security against hurt, loss, damage or liability for licensed
technology
What is Liability?
› responsibility
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Dissecting a License Agreement...
Liability example
Neither Party shall be liable to the other Party for any
incidental, consequential, special, or punitive damages
of any kind or nature, including, without limitation, the
breach of this Agreement or any termination of this
Agreement, whether such liability is asserted on the basis
of contract, tort (including negligence or strict liability),
or otherwise, even if either Party has warned or been
warned of the possibility of any such loss or damage.
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Dissecting a License Agreement...
No Warranties example
COMPANY understands and acknowledges that University,
by this Agreement, makes no representation as to the
operability or fitness for any use, safety, efficacy,
approvability by regulatory authorities, time and cost of
development, patentability, and/or extent of the
Agreement Patent Rights.
University, by this Agreement, also makes no representation
as to whether there are any patents now held, or which
will be held, by others or by University which may be
dominant or subordinate to Agreement Patent Rights,
nor does University make any representation that the
inventions contained in Agreement Patent Rights do not
infringe any other patents now held or that will be held
by others.
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Dissecting a License Agreement...
Indemnification example

COMPANY agrees to hold harmless, indemnify and
defend University, its officers, employees and agents
from and against any claims, demands, or causes of
action whatsoever, including without limitation those
arising on account of any injury or death of persons or
damage to property caused by, or arising out of, or
resulting from, the exercise or practice of the license
granted hereunder by COMPANY, its sublicensees, or
their officers, employees, agents or representatives.
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Dissecting a License Agreement...
Sublicensing




Exclusive vs. Non-exclusive
Allow sublicensees to further sublicense?
What should the sublicense agreement include
(provisions from this Agreement)?
What is the University getting from the sublicense?
› Earned royalties
› Cash payments
› R&D payments/expenditures
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Dissecting a License Agreement...
Sublicensing example

Sublicenses for the Agreement Patent Rights can only be
granted by COMPANY after prior written consent of
University. COMPANY will send a copy of any sublicense
contract to University.

Any sublicense will specifically include the provisions of §8
(Records and Reporting), §9 (Warranties and Liabilities),
§10 (Indemnifications) and §12 Section 2 (Names and
Marks) and will specifically state that sublicensee does not
have the right to further sublicense the Agreement Patent
Rights.

If COMPANY is unable or unwilling to develop a certain
field of the Agreement Patent Rights for which there is a
willing sublicensee, COMPANY agrees to negotiate with
this third party for a sublicense to the Agreement Patent
Rights.

If this Agreement terminates for any reason, any
sublicensee will become the direct licensee of University.
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Dissecting a License Agreement...
Sublicensing example:
Financials

COMPANY will pay to University .. % (... percent) of all
payments and benefits in money’s worth received from any
sublicensee.
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Dissecting a License Agreement...
Patent Maintenance and Infringement Procedures


Non-exclusive vs. Exclusive
› Non-excl: Univeristy is decision-maker
› Exclusive: Who is responsible for maintaining and
prosecuting? Who proceeds with infringers? Who
receives what on outcome?
Non-exclusive
› Is University required to maintain the patents?
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Dissecting a License Agreement...
Patent Maintenance example
University will maintain the Agreement Patent Rights for the
duration of this Agreement.
OR
Company will be responsible for maintaining the
Agreement Patent Rights in the Licensed Territory
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Dissecting a License Agreement...
Patent Infringement (excl. only)
Each Party agrees to notify the other Party promptly of each
suspected or confirmed infringement of the Patent Rights
such patents of which that Party is or becomes aware.
COMPANY shall have the right to prosecute in its own name
and at its own expense any infringement of the Patent
Rights in the Field.
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Dissecting a License Agreement...
Patent Infringment cont.
If COMPANY is involved in any litigation regarding the
assertion or enforcement of its interest in the Patent Rights
in the Field and/or infringement of the Patent Rights in the
Field, University upon request of COMPANY shall
cooperate fully with COMPANY, and COMPANY shall
reimburse University for all reasonable out-of-pocket
expenses in connection with any such assistance.
Recoveries or reimbursements from actions commenced
pursuant to this Section XX shall first be applied to
reimburse COMPANY for all litigation costs. Any
remaining recoveries or reimbursements shall be treated
as Net Sales hereunder.
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Dissecting a License Agreement...
Patent Infringment cont.
If COMPANY does not institute an action within 30 days after
receiving notice from University or otherwise being informed of
an infringement of the Patent Rights in the Field, then University
may, at its sole discretion and expense, institute an action with
respect thereto, and any recovery obtained shall belong to
University .
Telmo Vilela, 2009
UL Summer School
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Licensing Tip # 1
Consider technology licensing as a strategic option – it
can be a valuable and powerful business tool and can
help access global and or new application
opportunities
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FD_UNL
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Licensing Tip # 2

Effectively manage intellectual assets, so they can
become the cornerstone of a licensing venture – areas to
address include:
• Employment & Consulting Contracts and Agreements
• Identification / Cataloguing / Inventorying of IP
• Patent Strategy
• Invention Policy
• Non-Disclosure Agreements
• Proprietary Information Protection
• Other Organizational Specific Issues
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Licensing Tip # 3

Clarify IP ownership issues up-front in all technology
development activities including those that involve:
›
Employees
›
Contractors
›
Universities
›
Other businesses
›
Customers
›
Etc.
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Licensing Tip # 4

Don’t loose sight that the essence of a licensing
relationship is one that:

Is a business partnership rather than the traditional
supplier / customer relationship

Focuses on WIN -WIN results

Is similar to a Strategic Alliance and exhibits the
following characteristics:
• Two separate independent entities
• Working together to tackle specific objectives
• Sharing the risk and rewards
• Supplying resources on a continuous basis
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Licensing Tip # 5
Identifying, selecting and working with the right licensee is
probably the single most important ingredient to a
successful licensing venture
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Conclusion
„Work for What you Need, Negotiate
for What you Want“
Louis P. Berneman, AUTM
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Thank you for your attention!
Telmo Vilela
Member of the Board
Instituto Nacional da Propriedade Industrial
[email protected]
+351 21 881 81 00
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