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Yours? Mine? Ours? Research Collaborations and Drafting Effective Intellectual

Property Sharing Agreements

NACUA Sponsored Research and Technology Transfer Workshop

BethLynn Maxwell

The University of Texas SystemOffice of General Counsel

Austin, Texas

Washington, D.C ~ Nov 15-17, 2006

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Effective Intellectual Property Sharing Agreements

Inter-Institutional Agreements

and

Material Transfer Agreements

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Inter-Institutional Agreement

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What is an Inter-Institutional Agreement?

a.k.a. “IIA”, “Royalty Sharing Agreement”

More than intra-agency or inter-agency agreement

Contract between 2 or more parties (e.g., institutions)

Outlines patenting & commercialization processes

Each party has an ownership interest in common technology (joint ownership)

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Pros for Negotiating IIAs

Saves time, money and resources

Only one co-owner negotiates on behalf of all co-owners

Only lead party signs license agreement

Co-owners negotiate pesky deal terms before commercialization begins

Aligns/ organizes the co-owners

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Cons for Negotiating IIAs

Should save time, resources and money

Time lost because co-owners get bogged down negotiating their deal terms

If co-owners can’t (won’t) agree, then relationship starts off on wrong foot

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What’s in an IIA?Parties = co-owners How is common ownership created?Names ‘Lead Party’How does non-lead give authority to Lead Party?

Non-lead licenses right to Lead Party Non-lead gives Lead Party right to negotiate on its behalf

How are proceeds split?How is split determined?How are solely owned and jointly owned technologies handled?What about equity?

Who pays patenting costs and expenses?Who deals with assignments, warranties and representations?Mechanism for enforcing against potential infringers in IIA

Who handles and pays for litigation?Termination RightsProtecting co-owners confidential information

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Factors to Consider When Choosing Lead Party

Number of contacts in area of invention

Who can market the technology better?What do you do to market technology?

Percent contribution by institution

Experience of staff in technology transfer office

Are you licensing similar technology?

One of the co-owners just doesn’t want to take lead

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Who Handles the Following? Lead or Non-Lead?

Patent Prosecution

Out-licensing

Accounting

Infringement

Defense

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Sticking Points When Negotiating

How is revenue shared?Management feePayment of patent costsSignatures on license agreementApproval rights for Non-Lead Party?Include certain license requirements in IIAWhen can IIA be terminated?

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Sticking Point: How is Revenue Shared?

Split follows amount each co-owner contributed to invention

Revenue split in proportion to % each co-owner contributed to invention

Inventor’s help co-owners to decide

How is equity handled?

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Sticking Point: Management Fee

Do co-owners agree to fee?

If yes, how much?How do you agree on amount?

Capped or uncapped?

If capped, at what amount?

Sliding scale for cap?

Does fee apply to equity?

Are other costs recoverable – besides patent expenses

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Sticking Point: Payment of Patent Costs

How are they split?Costs are shared in = proportion as revenue sharing

Past patent costs could be deducted from license revenue prior to distributionFuture patent costs

Initially paid by Lead Party and lead invoices Non-Lead

Should costs be capped? What if one party opts out of paying its share of U.S. or foreign patent prosecution

Paying party has sole authority over licensing and patent prosecutionPaying party – no obligation to share revenues with non-paying party

How are costs allocated when marketing sole Lead and joint lead and non-lead IP?

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How are Costs Allocated When Marketing Sole Lead and Joint Lead

and Non-Lead IP?

Marketing both sole Lead IP and joint lead and non-lead IP

Can’t be 50:50

Count number of patents?

Allocate percentage based on number of patents

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Sticking Point: Signatures on License Agreement

Who signs License Agreement (not IIA)?Only Lead Party signs

Saves time, resources and money

All co-owners signAll co-owners could sign but cannot allow co-owners to re-negotiate license terms

Negotiations could come to halt

Lead Party cannot enter into fully paid-up license without prior written consent of Non-Lead party

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Sticking Point: Approval Rights in License Agreement

Does Non-Lead Party get approval rights?

Rarely

Only gets “review and comment” rights

Majority of IIAs

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Sticking Point: License Requirements in IIA

Customary financial termsField of useTerritory Exclusive or non-exclusive licenseIf exclusive license granted:

Licensee will be obligated to pursue commercially reasonable and diligent efforts to commercialize inventionLicensee will pay all past and future patent expenses

Publication rights and continued use of invention reserved for co-ownersStandard indemnity obligationsStandard disclaimers against all warrantiesLanguage that licensee gets no implied licenses re: use of other IP belonging to co-owners Marketing diligence milestones

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Sticking point:When can IIA be terminated?

Include in IIA

Specific diligence requirements on Lead Party

Non-Lead Party can terminate IIA

If the Lead Party does not license technology within certain number of months or years

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Material Transfer Agreement

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What is a Material Transfer Agreement?

Contract between 2 or more parties

Governs the transfer of one or more materials from the owner or authorized licensee to recipient

Recipient = e.g., a research institution or university

Use is limited to research purposes only

Typically limits use of material and disposition of “new” material created from that use.

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Cell lines

DNA libraries

Monoclonal antibodies

Organisms

Reagents

Growth factors

Drugs

Clones/Cloning tools

Animal models

Computer software

Devices/equipment

Chemicals

Plasmids

Types of Materials That Can Be Transferred

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For-profit organizations

Not for-profit organizationsUniversities

Research institutions

Hospitals

Government entities

Individuals

Same list could be used for Recipient of materials

Sources/Owners of Materials

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Why does University Principal Investigator want/need material?

Needs material to further researchTo generate more substantive dataTo verify/validate results

Owner may be only source of materialNot commercially available

Material too costly to synthesizeMaterial is proprietaryOpportunity to collaborate

So, What’s the Big Deal?

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Extends/stretches limited amounts of materials and resources Increases owner visibilityOpens new research avenues for ownersAllows all to learn from othersOwners collaborate with gifted academic facultyPrestige of co-authoring scientific papersIdentify future researchers

Recruiting opportunitiesFosters collaborationSynergistic impact – great minds …

Why Owners Provide Material ~ Up-side for Sharing

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Major investment expended to create material

Concerned about potential liability

Why bother? Time sink!

Confidentiality concerns

Material is hazardous or may be subject to special regulations

Owner Concerns ~ Down-side for Sharing

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Incoming MTAsOffice of Sponsored Projects or Contracts Office or Technology Licensing Office ~ most preferredDepartment / CollegePrincipal Investigator ~ least preferred

Outgoing MTAsOffice of Sponsored Projects or Contracts Office or Technology Licensing Office

Who signs MTAs? Someone with signatory authority for research institutionNot the principal investigator

Who Negotiates & Signs MTAs?

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Handled the same as any contractPrincipal Investigator completes “MTA Questionnaire”Internal approvals

Attach compliance approvalInternal signatures

Obtain signatures

MTA Review Process Incoming/Outgoing

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MTA Questionnaire and Checklist (Incoming)

1. Is material relevant to any IP disclosures

2. Likelihood of IP – patent or copyright?

3. Will progeny, derivatives, modifications or other substances result from use of materials?      

4. Do you agree to relinquish your rights to this intellectual property?

5. Do you plan to request the University relinquish its claim to the intellectual property?      

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MTA Questionnaire and Checklist Incoming (Cont’d)

6. If you agree to relinquish your rights, do you understand and attest that the licensing income could be significantly diminished or negated under these terms.

7. Do you also understand that these terms could handicap your future ability to accept awards from other sponsors.

8. Source of funds will you use under this MTA?

9. Does research involve federal sponsorship?

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MTA Questionnaire and Checklist Incoming (Cont’d)

8. What role will the requesting materials play in your research? Major or minor?     

9. Will the use of the material conflict with other corporate sponsorships or agreements?

10. Is there an alternate source for the requested materials?

11. Delivery date of materials to university?  

12. Will you return any unused material or destroy the material?

     

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MTA Terms and Potential Issues

Who are the “parties”

What if Provider is a foreign entity?

No revisions allowed!

How are “Materials” defined?

Restrictions on handling/use of materials

Transfer or distribution of materials

Ownership and licenses

Publication guidelines

Confidentiality requirements

Reporting and expiration

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Who are the Parties?

Providing Entity and Recipient Entity Not the principal investigator

Example A: MTA made between ABC, Inc. (“Provider”) and Dr. I. Domagic, a scientist with University (“Recipient”)Example B: MTA made between ABC, Inc. (“Provider”) and University (“Recipient”)Example B is correct – Scientist at “Recipient” should not sign MTA.

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Provider = Foreign EntityWhat the big deal about Foreign Entity Providers?Problems arise when governing law is the foreign entity’s country Bigger problem when foreign entity will not make governing law silent (no revisions allowed)Even bigger problem when Recipient has to indemnify Provider

BIG, BIG problem if Recipient = State Institution

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What If No Revisions Allowed?

MTAs that won’t allow any revisionsHow do you handle them?Potential to halt research

Even bigger problemsGoverning law

Foreign country or domestic

Indemnification provisions “… to the extent authorized by the Constitution and state laws of Texas …”

Handling non-conforming agreements

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Definition of the MaterialMaterials should be narrowly definedExample:

Option #1: “Material” includes “xyz” that is actually provided to Recipient by Provider under this MTA, any progeny of “xyz”, and any unmodified derivatives of “xyz”.

OROption #2: “Material” includes “xyz” that is actually provided to Recipient by Provider under this MTA, any progeny of “xyz”, and Any unmodified derivatives of “xyz”, any modifications of “xyz”, and any information, data, and/or results generated by Recipient and related to “xyz” under this MTA.

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Use of Material by Recipient

What your MTA could say: The Material will be used solely by Recipient for research purposes only.Can Recipient Principal Investigator share with colleague down the hall?

What if it includes the following language? The Material will be used solely for non-commercial research purposes at Recipient’s facilities. Material will be not be used in animals or in products used for animal food. Material will not be used in research that is subject to consulting, licensing or similar obligations to a third party. If used other than as proposed, Provider will solely own any results, discoveries, or inventions arising out of such use by Recipient.

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Distribution of Material to OthersStandard terms (preferred):

Recipient will not transfer Material to others outside of the Recipient Institution

More restrictive:Recipient will not transfer Material to others outside of Recipient Scientist’s laboratory, or to any person who is not obligated to assign their entire interest to any invention to the Recipient institution.

CAUTION: Recipient scientist may violate distribution restrictions if the terms are unclear, overly burdensome, etc.

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IP Ownership & Licenses ~

Provider WantsTo own everything that comes from Material

Non-exclusive license to make, use and sell

Recipient Wants Ownership determined by US Patent Law

What I invent, I own …

Wants to only grant non-exclusive license for internal, research purposes

+ option to negotiate royalty-bearing exclusive license

Needs to retain license to use invention for internal research purposes only + retain publication rights

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IP Ownership & Licenses ~ What is Appropriate?

(1*) Provider retains all right and title in and to Materials and Information. Nothing contained in this MTA shall prevent Provider from sharing Material with other parties. Inventorship of any discoveries developed using Material shall be determined according to U.S. Patent Law.Definition of “information“ – information given to Recipient from Provider under MTA

OR

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Or …

(2) Provider retains all right, title and interest to Materials and Information. Recipient will disclose Inventions to Provider. Provider may, at its sole discretion, file patent application(s) for Inventions. Provider will have control of strategy and expenses with respect to such filing. Recipient hereby grants to Provider and its affiliates (i) a perpetual, fully paid-up, nonexclusive worldwide license with right to sublicense to all Inventions, and (ii) the exclusive option to obtain an exclusive, worldwide license to all Inventions, with total compensation for such exclusive license not exceeding 1% of net sales of products from Inventions.

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Answer

Answer: Option (1) is appropriate

Provider should own their Material and Information provided to Recipient under MTA

Recipient submits a final report on the results of the work conducted with the Material to Provider

Recipient retains publication rights

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Publication Concerns

Provider WantsRight to approve publications before they are publishedTo delete data or information in publication that it deems should not be included in publication

Recipient WantsProvider to only have “review and comment” rightsDiscretion to publish in sole hands of Recipient

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Publication Rights ~ Which is Appropriate?

• (1*) Recipient is free to publish the results of research performed using Material; provided that Recipient gives Provider review and comment rights• Provider has 30 days to review and submit its

comments to Recipient

• (2) Recipient will not disclose results of research using Material without prior written approval from Provider. Recipient also agrees to delete information from proposed publications if directed by Provider.

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Answer: Option (1)

(1) Recipient is free to publish the results of research performed using Material; provided that Recipient gives Provider review and comment rights• Provider has 30 days to review and

submit its comments to Recipient

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Confidentiality Obligations

Standard terms:Recipient agrees to use reasonable efforts to keep Information transferred with the Material to Recipient confidential

marked “confidential”

with appropriate exceptions

for a reasonable amount of time

More restrictive:Recipient will hold in strict confidence the Material and Information for a period of no less than 10 years

10 years from when?

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Reports & Expiration ~ Which is Appropriate?

(1*) Recipient shall provide a final report containing research results using Material to Provider within 6 months of expiration of the MTA. Provider will maintain results in confidence if requested by Recipient. This MTA expires 3 years from date of signature, or upon completion of the research, whichever occurs first.

OR

(2) Recipient will provide complete updates on research results to Provider every 3 months, and a final report upon completion of the research. Provider will have the right to use the data and results for any purpose without compensation to Recipient.

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Answer

(1) Recipient shall provide a final report containing research results using Material to Provider within 6 months of expiration of the MTA. Provider will maintain results in confidence if requested by Recipient. This MTA expires 3 years from date of signature, or upon completion of the research, whichever occurs first.

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Export Control

Apply standard review proceduresState Department: Inherently military technologies--International Traffic in Arms Regulations (ITAR) Commerce Department: “Dual-Use” technologies (primary civil use) -- Export Administration Regulations (EAR)Treasury Department, Office of Foreign Assets Control (OFAC): Prohibits transactions with subject to boycotts, trade sanctions, embargoesDeemed Export Issues

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Special Concerns

Special Requirements for Handling Select Agents under Patriot ActShipping Issues

Hazardous MaterialsPackagingInspection permitEnvironmental Health and Safety Office

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Thank you ~~ Any questions?

BethLynn Maxwell

bmaxwell@utsystem.edu

512.499.4518