Institutional Considerations Related to Partnering with Industry

Generally, the first goal of university licensing agreements is to recover the costs of having secured intellectual property rights. Such expenses can easily amount to thousands of dollars, even if only United States domestic protection has been sought. The end objective for most biomedical research institutions is to make their technologies commercially available to enhance patient care. Achieving these objectives may require partnerships with industry that appear to force more monetary or equity concessions than might seem reasonable or justified. The nature of these agreements will vary depending on the stage of development of the potential product. If the technology requires extensive additional testing and validation to prove efficacy and safety, then gaining a development partner may require the inventor institution to make fewer upfront demands and accept lower royalty rates. For example, if a researcher invents a compound with anticancer activity in vitro and promising in vivo results in mice, the intellectual property agreement for therapeutic use for that compound will likely command a lower royalty rate and lower milestone payments than could be negotiated if the compound had already undergone phase I and phase II clinical trials without adverse affects. If the product has been developed to an advanced stage, a premium may be added to some of the upfront cost considerations. Royalty rates are often decided as a function of exclusive versus nonexclusive rights, volume of product (or service) being sold, market place disruption potential of the intellectual property, and the cost of that product. In negotiating with potential partners for the commercialization of intellectual property, institutions should consider the risk associated with accepting sponsorship and licensing from a startup biotechnology company in generating acceptable terms. For example, if the startup company is not well capitalized, has little experience with FDA submissions, or generally appears to have inadequate infrastructure that would be necessary to advance the compound, the institution should negotiate for higher royalty rates or milestone payments to help compensate for the risk of losing irreplaceable development time if it becomes necessary to recoup its intangible assets from a bankrupt company. In addition, university licensing agreements should consider requiring payment of a maintenance fee, such that the investor company will have an incentive to advance the technology rather than neglect it. Institutions may also consider taking equity positions in a startup company based on the anticipated product, perhaps making concessions in order to promote local economic development. An institution should use competent legal support to avoid costly consequences when discussing contract terms. Such consequences include accepting less-than-ideal terms or inadvertently making a false warranty in a contract that increases its liability exposure. For example, a standard clause found in most licensing agreements stipulates that the University is the ‘sole owner’ in a group of patents. If other inventors, named or unnamed on the patents, are employed by a different institution, the University may inadvertently be making a false representation and possibly nullifying its license agreement. Goals set by universities when establishing and using a technology transfer program may be summarized as follows:

1) facilitate the commercialization of university discoveries
for the public good;
2) reward, retain, and recruit faculty;
3) forge partnerships with industry;
4) promote economic growth; and
5) generate income.

In an attempt to harmonize university objectives and the public interest, several leading universities have signed on to a document titled In the Public Interest: Nine Points to Consider in Licensing University Technology. This document lists principles to consider when licensing technology to third parties. Such principles include preserving the right to practice licensed inventions, encouraging technology development and use, excluding the licensure of future improvements, ensuring broad access to research tools, and supporting neglected patient populations. University technology transfer offices can attempt to adhere to these principals to balance …nancial interests with positive social outcomes. Securing and marketing intellectual property through principled technology transfer has generated substantial revenue for
universities and return-on-investment for industry partners by helping preserve rights for guiding the application of those technologies.

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