1 Yours? Mine? Ours? Research Collaborations and

slide1. 1 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 System
Office of General Counsel
Austin, Texas

Washington, D.C ~ Nov 15-17, 2006<br>
slide2. 2 Effective Intellectual Property Sharing Agreements Inter-Institutional Agreements
and
Material Transfer Agreements<br>
slide3. 3 Inter-Institutional Agreement<br>
slide4. 4 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)<br>
slide5. 5 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<br>
slide6. 6 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<br>
slide7. 7 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 Rights
Protecting co-owners confidential information<br>
slide8. 8 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<br>
slide9. 9 Who Handles the Following? Lead or Non-Lead? Patent Prosecution
Out-licensing
Accounting
Infringement
Defense<br>
slide10. 10 Sticking Points When Negotiating How is revenue shared?
Management fee
Payment of patent costs
Signatures on license agreement
Approval rights for Non-Lead Party?
Include certain license requirements in IIA
When can IIA be terminated?<br>
slide11. 11 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?<br>
slide12. 12 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<br>
slide13. 13 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 distribution
Future 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 prosecution
Paying 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?<br>
slide14. 14 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<br>
slide15. 15 Sticking Point: Signatures on License Agreement Who signs License Agreement (not IIA)?
Only Lead Party signs
Saves time, resources and money
All co-owners sign
All 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<br>
slide16. 16 Sticking Point: Approval Rights in License Agreement Does Non-Lead Party get approval rights?
Rarely
Only gets “review and comment” rights
Majority of IIAs<br>
slide17. 17 Sticking Point: License Requirements in IIA Customary financial terms
Field of use
Territory
Exclusive or non-exclusive license
If exclusive license granted:
Licensee will be obligated to pursue commercially reasonable and diligent efforts to commercialize invention
Licensee will pay all past and future patent expenses
Publication rights and continued use of invention reserved for co-owners
Standard indemnity obligations
Standard disclaimers against all warranties
Language that licensee gets no implied licenses re: use of other IP belonging to co-owners
Marketing diligence milestones<br>
slide18. 18 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<br>
slide19. 19 Material Transfer Agreement<br>
slide20. 20 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.<br>
slide21. 21 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<br>
slide22. 22 For-profit organizations
Not for-profit organizations
Universities
Research institutions
Hospitals
Government entities
Individuals
Same list could be used for Recipient of materials Sources/Owners of Materials<br>
slide23. 23 Why does University Principal Investigator want/need material?
Needs material to further research
To generate more substantive data
To verify/validate results
Owner may be only source of material
Not commercially available
Material too costly to synthesize
Material is proprietary
Opportunity to collaborate So, What’s the Big Deal?<br>
slide24. 24 Extends/stretches limited amounts of materials and resources
Increases owner visibility
Opens new research avenues for owners
Allows all to learn from others
Owners collaborate with gifted academic faculty
Prestige of co-authoring scientific papers
Identify future researchers
Recruiting opportunities
Fosters collaboration
Synergistic impact – great minds … Why Owners Provide Material ~ Up-side for Sharing<br>
slide25. 25 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<br>
slide26. 26 Incoming MTAs
Office of Sponsored Projects or Contracts Office or Technology Licensing Office ~ most preferred
Department / College
Principal Investigator ~ least preferred
Outgoing MTAs
Office of Sponsored Projects or Contracts Office or Technology Licensing Office
Who signs MTAs?
Someone with signatory authority for research institution
Not the principal investigator Who Negotiates & Signs MTAs?<br>
slide27. 27 Handled the same as any contract
Principal Investigator completes “MTA Questionnaire”
Internal approvals
Attach compliance approval
Internal signatures
Obtain signatures MTA Review Process Incoming/Outgoing<br>
slide28. 28 MTA Questionnaire and Checklist (Incoming) Is material relevant to any IP disclosures

Likelihood of IP – patent or copyright?

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?<br>
slide29. 29 MTA Questionnaire and Checklist Incoming (Cont’d) 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?<br>
slide30. 30 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?<br>
slide31. 31 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<br>
slide32. 32 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.<br>
slide33. 33 Provider = Foreign Entity What 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<br>
slide34. 34 What If No Revisions Allowed? MTAs that won’t allow any revisions
How do you handle them?
Potential to halt research
Even bigger problems
Governing law
Foreign country or domestic
Indemnification provisions
“… to the extent authorized by the Constitution and state laws of Texas …”
Handling non-conforming agreements<br>
slide35. 35 Definition of the Material Materials should be narrowly defined
Example:
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”.
OR
Option #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.<br>
slide36. 36 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.<br>
slide37. 37 Distribution of Material to Others Standard 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.<br>
slide38. 38 IP Ownership & Licenses ~ Provider Wants
To 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<br>
slide39. 39 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<br>
slide40. 40 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.<br>
slide41. 41 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<br>
slide42. 42 Publication Concerns Provider Wants
Right to approve publications before they are published
To delete data or information in publication that it deems should not be included in publication
Recipient Wants
Provider to only have “review and comment” rights
Discretion to publish in sole hands of Recipient<br>
slide43. 43 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.<br>
slide44. 44 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<br>
slide45. 45 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?<br>
slide46. 46 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.<br>
slide47. 47 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.<br>
slide48. 48 Export Control Apply standard review procedures
State 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, embargoes
Deemed Export Issues<br>
slide49. 49 Special Concerns Special Requirements for Handling Select Agents under Patriot Act
Shipping Issues
Hazardous Materials
Packaging
Inspection permit
Environmental Health and Safety Office<br>
slide50. 50 Thank you ~~ Any questions? BethLynn Maxwell
bmaxwell@utsystem.edu
512.499.4518<br>