Our primary goal is to ensure that the invention we are licensing will be diligently developed, marketed and commercialized by our partner for the benefit of the public. Therefore, all license agreements, in particular those that are exclusive, will incorporate milestones to verify that the licensee is diligently pursuing commercialization of the invention.
The University desires a fair commercial return as the invention is de-risked and reaches the marketplace. The timing and form of our sharing in the return can be tailored appropriately to the specific invention, risk profile, market, etc. Our licensing partners are expected to pay the associated costs of doing business – patent costs, products liability insurance, enforcement of the intellectual property against others, etc.
No two technologies are alike and thus agreement terms are developed on a case-by-case basis. Our licensing staff is committed to working out an arrangement that is both advantageous to your company, based on current market norms, and that provides a fair return for the university.
Below are a typical considerations that are part of the license agreement
This section may be the most important and will include 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 net sales, combination products, software/derivatives, sublicensee, etc.
Terms typically include:
- Exclusive vs. nonexclusive
- Field of use (e.g., diagnostics, therapeutic, veterinary, etc.)
- Territory (worldwide vs. U.S., etc.)
- Sublicense rights (e.g., 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
Depending on the type of invention being licensed, financial consideration may include:
- License fee
- Equity or liquidation payment at exit if licensee is a Duke start-up
- Royalty on sales by licensee and its sublicensee
- Percentage of non-sales based sublicense income (such as sublicense fees)
- Minimum royalties or annual maintenance fees
- Milestone/diligence/change of control payments
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.
The University requires quarterly or semi-annual reporting, such reports include: royalties due, sublicense agreements and payments, and other revenues.
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 related to the clinical trials/regulatory process, 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), addition of certain management to the startup team, issuance of first patent, etc. Usually these milestones are developed based on information from the company’s own business plan or plans for product development.
Most exclusive licenses also permit 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 may join the suit 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 of any financial damages awards between the licensee and the university after all other legal expenses are paid.
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, trustees, etc., against all claims, proceedings, demands and liabilities of any kind whatsoever. The University may also require that the licensee obtain certain amounts of product liability insurance prior to commercial sale or use of a product.
This article 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 only for breach (e.g., non-payment of royalties or patent expenses, milestone payments or not meeting diligence requirements). Upon termination, sublicenses will terminate or sublicensees may obtain a direct license with the university under substantially the same terms.
- Provisions for state law governing the agreement. The University strongly prefers using North Carolina as the governing state law.
- 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 Duke