IP Issues in Licensing: The Challenges

Casey K. Chan

National University of Singapore IP Academy of Singapore

Licensing, RCA, MOU’s

Commercial Perspective University’s PerspectiveIndividual’s Perspective

Practical Aspect of Licensing

Company Product Champion University Product Champion Individual Product Champion

Lonnie Johnson - 49 patentsLonnie Johnson - 49 patents

“I pumped it up and fired it across the conference room,” he recalled. “Wow,” was the reaction from the suited executives. “From that point it was a done deal.”

MSNBC Jan 26 ,1999

Selling your ideas Who to disclose to ?

VP, Director, Product Manager, Sales Rep

How does the company view you ? Opinion leader, volume user, inventor,

expert, unknown What kind of disclosures ?

Napkin, Drawing, Prototype, Pre-production Prototype, Patent Filed

Disclosure agreement (a) is in the possession or control of

DISCLOSEE prior to the time of disclosure hereunder; or

(b) is at the time of disclosure or thereafter becomes public knowledge through no fault or omission of DISCLOSEE; or

(c) is lawfully obtained by DISCLOSEE from a third party under no obligation of confidentiality to DISCLOSER; or

(d) is developed by DISCLOSEE independently of the CONFIDENTIAL INFORMATION.

Disclosure Agreement

Time limit of 2 months for a decision

No limitation on disclosures to others

Time to keep in confidence - 3 years

Arbitration in a neutral state

Definition of Scope of Licensing

What is being license Patents - claims Know how

Field of Use Geographical Right to sublicense Exclusive versus Non Exclusive

The most famous Non Exclusive License to IBM

Agreement

Assignment / Licensing / Consultation Financial Terms Warranty and Representation Indemnification against product liability

and infringement lawsuits Minimum performance clause Right of first refusal on new invention

Licensing TermsFinancial Terms

Upfront Fees Milestone Payments Royalty - Based on gross or net sales Equity

Royalty

Medical Device Napkin 1-2%, Drawing 2-4%, Prototype 4-

6%, Patent 6-8% Pharmaceutical

Pre-Clinical - 2% Phase I - 5% Phase II - 15% Phase III - 40%

Licensing TermsPerformance

Minimum performance Due diligence obligation Quality of Product

Licensing TermsWarranty and Indemnification

Warranty from Licensor No warranty of fitness of use No warranty of non-infringement May warrant best knowledge of not

infringing subject to limitation Indemnification from Licensee

Insurance for third party liability

As a general policy University Do not assign IP

Lost of control to defend e.g. reputation

If company insolvent, IP is lost. No control on the field of use. Future improvement by other

University scientist may not receive the benefit of Section 103(c)

Future improvements

Commercial research is project driven University research is investigator

driven Avoid carving out of research areas Such “reach through” clause is

unacceptable

Pointers On Negotiation

Quid pro quoSomething for something

Build up personal relationship

Make licensee feel welcome Having meals with licensee Body language and manner of speech Listen carefully to the optimistic

speech Margin How soon to market Market

Be Prepared Know your stand Know your background

- Technology- Market size- Region

Be Prepared

Product Field of use Royalty rate

Be Prepared

To close the deal at the table To walk away

MOUs

Expression of intent Other terms to be negotiated Binding and non-binding

RCA, Sponsored Research, Grant

Partial payment Full payment Grant

Poor posture

We are hungry for your money We need to get the agreement done

quick Company collaborator make offer,

you being the nice guy agree to the term

IP not important “Never mind, let them have the IP”

Many posture is possible

Weak posture Elite posture Good deal posture

Elite Posture

We are the 3rd ranking university in Asia

We are not a commercial company We have expertise not available in

the industry We are selective in choosing

collaborators

Good deal posture

We are a growing department We are industry friendly We have expertise you need We provide research capability at

reasonable rate

Agreement Finger Print

05

1015

2025

3035

4045

50

Start Negotiated

IP OwnershipImprovementWarrantyIndemnification

Publication Right

Unrestricted right Review delay of up to 30 days No more then 60 days to allow for

patent filing

IP ownership

University owns all IP Allows for sponsor non-exclusive in-

house use for research May give first right of refusal for

exclusive royalty bearing license

Joint owner to be avoided Very difficult to manage Contribution of background

information does not confer automatic joint ownership

Financial contribution not sufficient ground to demand joint ownership

Thank you