Licenses with universities generally will include the following sections:
Of particular importance will be the definition of the technology/patent rights being licensed, field of use that the licensee can sell the technology, and the geographic scope of the license rights. Additional definitions can include the net sales, sublicensee, etc.
Grant of License
- Exclusive vs. nonexclusive
- Field of use (eg., diagnostics, therapeutic, veterinary, etc.)
- Territory (worldwide vs. U.S., etc.)
- Sublicense rights (eg., can the licensee sublicense the technology)
- Reservation to the university that it can use the technology for research and academic purposes
- If relevant, reservation of rights to the government
- License fee
- Equity if licensee is a start-up
- Royalty on sales by licensee and its sublicensee (most common, but sometimes a set royalty amount per product sold)
- Percentage of non-sales based sublicense income (such as sublicense fees)
- Minimum royalties or annual maintenance fees
- Milestone/diligence payments
Patent Prosecution and Payment
Typically the university will control patent prosecution and provide the licensee the opportunity to make comments, decisions about the prosecution strategy, which countries to file in, etc. In an exclusive license, the licensee reimburses the university for all its costs associated with preparing, filing, prosecuting and maintaining the licensed patents.
Typically the university requires quarterly or annual reporting, such reports include: royalties due, sublicense agreements and payments, other revenues, etc.
The license will provide for certain diligence milestones to be met by the licensee to ensure that the technology is being diligently developed and commercialized. For pharmaceuticals, these often are clinical trials milestones, for other products diligence terms might include first prototype, first sale, etc. Sometimes diligence terms or milestone terms include financing milestones (typically with startup companies) or issuance of first patent, etc.
Licenses that provide for exclusive rights typically also allow the licensee to sublicense the licensed technology to third parties. The university will require that all sublicense agreements contain some of the same language as the original license such as: use of the university name, disclaimer of warranties, maintenance of university rights, product liability, confidentiality, and termination.
Generally an exclusive licensee has the first right to enforce the licensed patents. The university can join the suit usually upon reimbursement of its expenses by the licensee. If the licensee elects not to pursue enforcement, the university may elect to enforce on its own. This section will also provide for distribution, if any, of any damages between the licensee and the university after expenses are paid.
No warranties; limitation of liability
The university will not make any warranties as to the fitness, merchantability, validity of patent rights, etc. The licensee assumes all risk associated with the licensed technology.
The licensee will indemnify the university, its employees, regents, trustees, etc. against all claims, proceedings, demands and liabilities of any kind whatsoever. Universities may also require that the licensee obtain certain amounts of product liability insurance prior to commercial sale or use of a product.
Term and Termination
This section provides for the term of the agreement (typically the life of the licensed patents or for other technologies a defined period of time) and for both parties to terminate the agreement. Generally the licensee can terminate the license by providing the university some period of advance notice, while the university can terminate for breach (eg., non-payment of royalties, milestone payments or not meeting diligence requirements). Upon termination, typically sublicenses also terminate although sublicensees usually can obtain a direct license with the university under substantially the same terms.
A listing of contact information for both parties and any requirement for communication (overnight mail, fax, etc.)
- Provisions for Alabama law governing the agreement
- Agreement to mark products sold in the United States with all applicable United States patent numbers. For sales in other countries, an agreement to comply with the patent laws and practice of the country of manufacture or sale.
- Prohibitions on using the university’s name in any publicity or advertising without its written consent
- Agreement that the licensee will comply with all applicable laws and regulations, including for example US law relating to the transfer and export of certain commodities and technical data
- Provision that the license may not be assigned without the written consent of the University
- Force majeure
- No agency relationship