Intellectual Property & Technology Transfer Agreements A Glimpse into the Wild World of Technology Transfer

Intellectual Property & Technology Transfer

AgreementsA Glimpse into the Wild World of

Technology Transfer

Topics

• Invention Reports

• Confidential Disclosure Agreements (CDAs / NDAs)

• Material Transfer Agreements (MTAs)

• License Agreements

• Option Agreements

• Recap and Practical Matters

Invention Reports

Invention Reports• Report at Time of Invention – Does

Not Require “Reduction to Practice”• Obtain Written Assignments at Time of

Invention Report• Report Internally Prior to Public Disclosure

(Discussions, Collaborations, Publications, Proposals) – One Year Trigger

• Invention Report Helps to Support “First to Invent” Doctrine (U.S.)!

• Make Report as Broad / All-Encompassing as Possible – Don’t be Constrained by Patentability

Anatomy of an Invention Report

• Front Page Needs to be “at a Glance”– Report Date– Inventorship (Legal Name, Affiliation, Home

Address, Contact Info, & Citizenship) – MUST be Correct!

– Sponsorship (Sponsor Name, Contract/Grant #, Funding Period/ Dates, PI)

– Invention Title


• Invention Abstract

• Prior Art (Patents, Publications, Commercially Available Products & Services) – What Else is Out There & How & Why Yours is Better

• Detailed Invention Description – Broaden!

• Figures & Drawings

• Supporting Data / Reduction to Practice


• Public Disclosures – Prior & Planned

• Regulatory Approval Requirements – Does This Invention Require Regulatory Agency Approval, e.g., EPA, USDA, FDA, OSHA?

• Market Assessment – Potential Markets, Competition, Potential Licensees

• Personal Objectives - File Only, Desire Utility Patent, Commercialize Via License / Start-Up – If Start-Up, What Role?


• Signatures with Dates– Inventors– Witness – Needs to be Familiar with or

Understand Underlying Technology– Department Chairperson (Optional)– Office of Recordation


• Inventor Request for Waiver of Rights– For inventions created external to institution, or

without significant institutional resources– Inventor signatures Required

• List of Faculty Knowledgeable About Subject Matter Technical “Due Diligence”

Confidential Disclosure Agreements(CDAs)


• Also called Nondisclosure

Agreements (NDAs)

• One Direction Vs. Mutual (2-Way)

• One Party Vs. 2 Party Agreements

• One Mutual CDA Between 3 Parties is NOT the Same as Three 2-Party CDAs!

• Motivation for Institution is to Prevent Public Disclosure (Loss in Patent Rights)


• Motivation for Industry is to Protect Proprietary Information – Publication Restrictions!

• Require PI to Sign Letter of Understanding & Compliance – Needs to Educate ALL Who Are Involved in Handling Confidential Info

• Track / Monitor Dates – Issue Memo to PI When CDA is Terminated

• Watch out for: (a) Disclosure of Company’s Name, (b) Company’s “Business” (Strategies, Plans, Customers, Employee Names, etc.), (c) use of Company Info in Multi-Partner Proposals and Publications

Anatomy of a CDA

• Recitals – You have Rights, We Have Rights, You want Institution to Perform Research, What Defines “Confidential Information”

• Purpose of Confidential Info Disclosure = Research Only! No Other Purpose

• No Express or Implied License to Use Info

Anatomy of a CDA

• Info Provided to be Returned or Destroyed Upon Written Request

• Recipient to Use “Best Efforts to Preserve” – Remember that Faculty / Students/ Researchers Far More Likely to Slip Up Than Industry Counterpart!e.g. “Recipient shall use its best efforts to preserve the confidentiality… and shall use not less than reasonable care with respect to such Confidential Information…”

Anatomy of a CDA

• CAN Disclose the Following: (a) Available to Public, (b) Becomes Part of the Public Domain Through no Fault of Recipient, (c) Previously Lawfully Disclosed to Recipient, (d) Previously Developed Independently by Recipient – Require (c) and (d) to include “… as Proven with Written Records”

• Jurisdiction – Agreement Governed by Laws of Institution’s State (Usually State Law Requirement – Only Alternative is to Remain “Silent” on Issue)

Anatomy of a CDA

• Term of Agreement and Confidentiality Requirement - Shorter the Better for Institutions

• Assignment of Rights by Company Requires Institution’s Written Consent

• Agreement is Binding on all Employees of Company / Institution

• Typical “No Reps or Warranties”• Approved Signatures – Who’s Approved to Sign at

Your Institution?

Material Transfer Agreements(MTAs)

Material Transfer Agreements(MTAs)

• Usually for Exchange of Biological Materials / Animals – BUT Can Apply to Other Materials

• Most Institutions Have Different Agreements for Incoming and Outgoing Materials

• Know Who is Authorized to Sign for Your Institution – Faculty Typically See Review as “Red Tape” and May Sign to Expedite Receipt of Material

• Preserve Publication Rights!• Watch out for “Built-in” IP License / Assignment • Standardize Templates and Publish on Web to Expedite

Process & Prevent Negotiations Challenges

Anatomy of an MTA(For Outgoing Materials)

• Define Material to be Transferred (and Include all Derivatives, Modifications, and Improvements)

• Define Ownership of Material – Institution!• Recipient Agrees NOT to Transfer to Others

Without Institution’s Consent• Recipient Has Right to Use (& File Patents

for) Substances Created Using Materials ONLY IF Substances are NOT Derivatives / Modifications


• Modifications / Derivatives MAY be Distributed to Not-for-Profit or Government Agencies without Provider Approval ONLY for Research Purposes

• Modifications / Derivatives for Commercial Use Require License from Provider

• No Inherent License Rights

• Define Who Owns Resulting IP (“Yours, Mine, Ours”)


• MTA does NOT Alter any Previously Granted Rights to Material

• Provider’s Obligation to Fully Disclose ANY Health or Safety Risks / Precautions Known to be Associated with Materials

• Typical “No Reps or Warranties”

• Recipient Assumes ALL Liability for Use

• Jurisdiction of Law


• Recipient Agrees to Comply with ALL Laws and Regulations (Human / Animal Subjects, Export Control, etc.)

• Agreement Termination Provisions – Time + How to Dispose of Materials

• Fees Required – If Any

• Signatures

License Agreements

License AgreementsThe “Bread & Butter” of Tech Transfer

• Licenses & Assignments are Different

• Provide the Ability to Manufacture & Sell

• Exclusive Vs. Nonexclusive

• Perpetual Vs. Timed

• Worldwide Vs. Licensed

Territory

• Unlimited Use Vs. Field of Use

• Right to Sublicense


• Institution’s Internal Right to Use

Madey Vs. Duke University

• Institution’s Right to Publish

• Compensation Choices: Royalties, Fees, Equity, % of Profits, Good & Services (Barter)

• Patent Prosecution & Maintenance – Who Manages & Who Pays?


• Auditable Financial Records

• What Happens in the Event of Bankruptcy?

• How do you Handle Patent Infringers or an Infringement Case Against Licensee / Institution?

• Commercialization Plan / Milestones

• What are “Clawback Provisions”?


• Guard Against “Shell Game” & Other Tricks– All Products Sold Through Sublicensees– Collateralization of License for Debt– Sale / Merger of Company– Transfer of Rights to Subsidiaries– Definition of “Net Sales”– Definition of “Bundling”– Technology Workarounds

Anatomy of a License Agreement

• Recitals - “Soft Objectives” & SOPs• Definitions – Need to Clearly & Distinctly Define

Agreement Terms:– “Licensed Products and Processes”

– “Invention Rights” – Derivatives/Improvements Included?

– “Know How”

– “Net Sales Revenue” (Gross Sales Revenue Even Better!)

– “Licensed Field of Use”

– “Licensed Territory”

– “Internal Use”

Anatomy of a License Agreement• License Grant

– Exclusive or Nonexclusive– Perpetual or Time-Based– Field of Use– Right to Sublicense– Institution’s Right to Internal Use – Institution’s Right to Publications– Cross-license Rights– Force Any Additional Research Requirement to be

Governed by Separate Agreement(s)– Preserve Government Rights (Bayh-Dole, FAR/DFARS)– Ensure Compliance with all Regs (e.g. Export Control)


• Licensee Acknowledgement of Understanding– Add Clause that States that

Licensee Fully Investigated

Inventions / Invention Rights

- is Satisfied that Everything

is Accurate, Complete & Understood


• Compensation– Fees:

• How Much are Fees, and How

are They to be Paid? (Initial, Maintenance Fees)

– Royalties:• What Royalty %? Based on Gross/Net Sales? When

Payable? If Bundling Involved, Definition is Critical – How Does One Calculate the Right Amount?

• Sublicense Royalty Terms (%, When, How, Who Collects?)

Anatomy of a License Agreement• Compensation

– Equity:• Previously not Part of

License Compensation – Becoming More Prevalent

• Understand Who Holds Equity for Institution• Voting Vs. Nonvoting Stock• Common Vs. Preferred Stock• Membership Units Vs. Shares• Warrants / Options / Put• Board Representation – Observer Only Vs. Voting


• Patent Prosecution– Who Manages Filings, Prosecution & Maintenance?– Who Assumes the Costs?– Define How to Handle Termination of Agreement or

Abandonment of Rights

• Record Keeping and Reporting– Where are Records to be Stored?– Permit Inspection / Audits by Institution (or Designee)– Reporting Requirements for Commercialization Plan– Financial Reports Should be Sent to Institution Quarterly– Specify Penalty for Late Payments

Anatomy of a License Agreement• Statement to Prevent Public Disclosure

– Applies to Unpatented Technologies and CIPs / Divisionals (Derivatives / Improvements / Enhancements)

– Could Lose Patent Rights w/ Public Disclosure!– Use CDAs or Patent Filings Prior to Public Disclosure

• Adherence to Commercialization /Milestone Plan– Initial License Fee ($)– Delivery of Written Commercialization / Business Plan (w/

Identifiable Milestones)– Deadline for First Commercial Sale– Annual License Maintenance Fee– Failure of any Above Results in “Clawback”


• Patent Markings – Ensure all Commercial Products are Marked w/ Patent (or Patent Pending) Numbers

• Termination Provisions – Who Can Terminate, When, and What are Ramifications of Termination?– Nonpayment by Licensee

– Evidence of “Shell Game”

– Bankruptcy / Dissolution of Company

– How to Handle Inventory of Licensed Products AFTER Termination of License Agreement


• Patent Infringement– Decide Who Manages Process

and Who Pays– Decide How to Handle any

Resulting Awards

• Prohibition of Use of Institution’s Name – All Licensees WANT to Publicize Relationship w/ Institution to Provide Credibility, Stability, Reputation Enhancement, Validation


• Typical Warranties and Reps, Succession & Assignability, Indemnification

• Require Licensee to Have General Liability Insurance as Precautionary Measure – Mostly for Start-ups / Small Companies – Usually $1M per Claim, $3M in Aggregate

• Typical Notice Statement, Jurisdiction of Law, Compliance w/ Laws – e.g. Government IP Rights and Export Restrictions


• Signatures

• Attachment / Exhibit A :

Description of Invention(s)

& Patent(s)

• Attachment / Exhibit B :

Format for Commercialization / Business Plan Required

Option Agreements

Option Agreements

• Can be Separate Agreements or Embedded in Research Agreements

• Provides Period of Exclusivity While Technology is Being Evaluated

• Can Provide:– Right of First Refusal– Automatic Licensing Terms (Exclusive /

Nonexclusive) – OR – Ability to Negotiate on “Commercially Reasonable” Terms

Option Agreements

Example 1: Option Embedded in Research Agreement

Company Option. Pursuant to the terms of this Agreement, and provided that Company is not otherwise in default of this Agreement or any Task Statement hereunder, Company shall have the option, for Project Inventions, to an exclusive license as described in this Section X (the “Option”).

Option Agreements

• Example 2: Separate Option (or “Exclusivity”) Agreement

– Company pays $50,000 cash for Right of Exclusivity for a Period of 6 Months (to Evaluate Technology)

– At End of Exclusivity Period, Company has Ability to Exercise Option (Usually 30 – 60 Day Window) for an Exclusive License to Technology at the Following Terms…

Recap and Practical Matters


• Report Inventions BEFORE Public Disclosure• Obtain Written Assignments• Broaden Invention Disclosures to Increase Inherent

Value • Multiple 2-Party CDAs NOT Same as 1 Mutual

CDA Among the Parties• Use CDAs to Preserve Patent Rights• Educate PIs on Ramifications of CDAs and Solicit

Their Help in Educating Others on Project


• Provide Heads-Up When CDA Terminates• Use MTAs, but Watch out for Inherent IP Rights

(Loss) or Publication Restrictions• Consider Export Control Issues for all Material

Exchanges• Typically Different MTAs for Incoming and

Outgoing Materials & For-Profit Vs. Not-For-Profit Use

• No MTA is ALWAYS Better than Bad MTA!


• Understand Difference Between Licenses & Assignments

• Preserve Institution’s Right to “Internal Use” and Publications

• Every “Deal” is Different – Standard License Templates Will NOT Usually Work

• Know the Pros & Cons of Having Licensee Control Patent Prosecution Vs. Institution

• Provide Clawback Capability in Licenses


• Watch out for Shell Game & Other Tricks by Licensees

• Use Option Agreements / Clauses to Prevent Problems Down the Road – Establish Pipeline!

• Use Option Agreements / Clauses to get Paid for Period of Exclusivity – Time = CASH!

• Always Seek Advice from Tech Transfer / Legal Advisors Within Institution When Uncertain

• DON’T be Afraid of IP – It’s NOT as Scary as it Seems!

Documents

Intellectual Property & Technology Transfer Agreements A Glimpse into the Wild World of Technology Transfer