Negotiating a licence with the University

As a public institution, the University wants to generate the greatest impact and return from its intellectual property (IP). This means we must consider all translation and commercialisation options. We then choose the option that will deliver the greatest impact.

To make this assessment, the University usually asks a prospective licensee to submit a development plan for further developing the technology. You must also describe your plan for delivering your resulting product or service to market.

This generally includes plans for:

• regulatory approvals
• sales and marketing
• support and training
• clear development and commercialisation milestones

It might also include:

• contracting some technology development work back to the IP creator’s laboratory at the University
• continued research and technical support from the IP creator’s University laboratory

You might also need a confidential disclosure agreement. This allows the University to share unpublished details of the IP or technology. It also enables you, as the prospective licensee, to share your development plan.

Based on the information above, and any discussions, you might then negotiate a term sheet. This will form the basis of a licence agreement. The term sheet is usually drafted by the University.

For more information, please refer to the General Licence Agreement Terms for University Technologies. You will need formal approval by senior University management for the University to execute a licence agreement.

This is possible, but you will need an Evaluation Licence. This allows the prospective licensee to use the University’s IP based on certain conditions. The IP can only be used:

• within a specific field
• for internal, non-commercial research
• for a certain period of time.

It might also include an option agreement to license the IP after the evaluation has been completed.

Have you identified a University IP or technology of interest? Please get in touch with the contact listed in the technology description.

Or, contact the University’s Knowledge & Technology Transfer team. They will provide any further information and help that you need.

Universities need their researchers and students to conduct and publish research. This is the core business of a university.

So, if you licence our IP, the University will ask for the right to use this IP for non-commercial research and teaching. We will also request any associated information and data.

This might mean the right to:

• transfer research materials to other research organisations for collaborative non-commercial research. Research materials could include biological materials, chemical compounds, software, databases and know how.
• publish research related to the IP.

In making this request, the University considers the licensee’s commercial requirements. As such, licensees can typically review material before publication.

Some IP and technologies need extensive and costly development before reaching the market. As a licensee, you might want an exclusive licence to protect your investment.

But if the University grants your company an exclusive licence to commercialise its IP, we can’t offer the same rights to any other company. If your company has exclusive rights, the University only has one option to achieve impact and benefit society.

So, the University often grants licences that are limited in field, scope of use and/or territory.  Licences are usually granted for a defined period of time. We can extend this period if the licensee is achieving the desired impact. We can also extend the field, scope and/or territory in the future if the desired impact is being achieved.

If we grant an exclusive licence, your company must meet conditions to maintain your licence rights. You must:

• commit to execute your commercialisation and business plans
• achieve agreed milestones and revenue targets on an agreed schedule.

If not, the University can reduce or end the licence rights. If there is no progress, we can then explore other commercialisation options.

It is very important that both parties understand the milestones and targets. You should define these terms, so they are clear, unambiguous and measurable.

As an exclusive licensee, you may also sub-license your rights to use the technology to third parties. You must get the University’s permission, and the same terms apply.

The University receives financial compensation for supporting and developing its IP. It also receives a share of any financial success resulting from commercialisation. The University can benefit through the following means:

Licence fee – your company will make a cash payment to the University. This is an agreed amount in exchange for licence rights. You will pay upfront fees, and/or when your company achieves certain milestones. These agreed milestones might include financing, regulatory approvals and product sales.

Royalty – your company will pay the University an agreed percentage of returns from commercialising the IP. This return might come from the sale of products or services. Or it might come from sub-licensing your company's rights to another party. The licence agreement may also specify minimum annual royalty payments.

Equity – University takes ownership of an agreed percentage of your company. This is in exchange for rights to use its IP. This arrangement is particularly relevant for start-up companies. The University becomes an investor in your start-up, rather than a cost to it. The University only achieves a financial return when your company is acquired or listed on the stock market. An equity agreement might also include governance rights for the University. This might mean membership of your start-up’s board of directors, and a say in your company’s strategy.

Exit fee – this is an alternative to equity. The start-up promises the University a small share of the proceeds from the sale (acquisition) or public offering of the start-up. This amount is in exchange for the right to use the University’s IP. Like equity, the University acts as an investor in your start-up. But the exit fee mechanism does not usually give the University governance rights.

The University might also consider other forms of compensation. This might be research contracts from your company back to the University. Or it might mean rights to use your company’s product for other applications.

Many University licence agreements include a combination of some, or all, of the above.

As a licensee, you must submit regular reports to the University. You may submit quarterly, half-yearly or annual reports. They should include information such as:

• royalties due
• sub-license agreements and payments
• other revenues
• key activities undertaken in the preceding period in connection with the licensed IP or technology. This includes progress versus agreed milestones.

The University oversees patent prosecution for University-developed IP.  We consult with the licensee regarding the territories where patent applications will be filed. Under an exclusive licence, the licensee must reimburse the University for these costs of the licensed patents:

• preparation
• filing
• prosecution
• maintenance

Universities use patents so their discoveries can benefit society. This often differs from the commercial aims of a licensee. The University’s patent might be infringed, for example by a licensee’s competitor. If so, the University will seek a resolution that:

• achieves the licensee’s commercial goals
• promotes continued development of the technology.

For this reason, our licence agreements may specify a consultative approach to any proposed infringement or enforcement action. However, patent management for jointly developed IP may reside with the external party, rather than the University.

The University generally accepts the risk for activities over which it has control. But it has limited ability to accept other risk. As a result, the University typically does not guarantee:

• the capability and/or merchantability of any licensed technology
• the validity of patent rights.

The University will not accept any responsibility or liability for any indirect or economic loss suffered by any party in connection with the licence. As the licensee, you assume all risk and liability associated with:

• the licensed technology or IP
• the commercialisation or translation activities you undertake in connection with the technology.

Also, as the licensee, you are usually asked to indemnify the University and its employees against a broad range of claims and liabilities. The University often requires that you have public and product liability insurance. This is a condition of its grant of the licence.