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Campus to Commercialization: Duke’s Objectives in a License

by Robin Rasor, Executive Director, OTC

OTC is the office that helps connect Duke innovations with industry, entrepreneurial management, investors, and other resources to develop the partnerships necessary to create value and benefit to society.

When Duke protects its innovations via patents or copyrights, it demonstrates that Duke has research that is both novel and useful. When industry licenses a Duke technology, it confirms that the innovation is both valuable and relevant. The innovation solves a problem, cures a disease, or reduces costs or inefficiencies.

In addition, licensing helps Duke meet obligations to research sponsors and can generate a revenue stream to further support the university’s research and educational activities.

The decision to license a technology to a prospective licensee is generally a joint decision by the OTC licensing professional and the inventor(s).  The primary goal is to ensure that the licensed invention will be diligently developed, marketed, and commercialized by the partner for the benefit of Duke, the inventor(s), and the public.

To ensure this goal is met, all license agreements, in particular those that are exclusive, will incorporate milestones to verify that the licensee is diligently pursuing commercialization of the invention.

Duke desires a fair commercial return as the invention is de-risked and reaches the marketplace. The timing and form of sharing in the return can be tailored appropriately to the specific invention, risk profile, market, etc.

Licensing partners are expected to pay the associated costs of doing business – patent costs, product liability insurance, enforcement of the intellectual property against others, etc.

Agreement terms are developed on a case-by-case basis as no two technologies are alike. OTC begins the process with a term sheet and then the first draft of the license agreement is based on those negotiated terms.  OTC has a number of template licenses it uses to shorten the time required for document production.  With that in mind, OTC’s licensing staff is committed to working out an arrangement that is advantageous to the company, based on current market norms, and also provides a fair return for the university.

Generally, a license agreement will include the following articles:

  1. Definitions: this section may be the most important and will include the definition of the technology/patent rights being licensed, scope of field of use, and territory for products to be commercialized under the agreement.
  2. Scope of License Grant: such as exclusive vs. nonexclusive, sublicense right, etc.
  3. Financial Consideration: may include license fee, equity, royalties on sales, annual minimum payments, milestone payments, etc.
  4. Patent Prosecution and Payment: for technologies that are protected by patents, typically, Duke 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.
  5. Reporting: Duke requires quarterly or semi-annual reporting including commercialization progress, royalties due, sublicense agreements and payments, and other revenues.
  6. Diligence Terms: certain diligence milestones must be met by the licensee to ensure that the technology is being diligently developed and commercialized, such as in clinical trials for pharmaceuticals, investment milestones for startups, and prototype development for devices.
  7. Sublicense Provisions: most exclusive licenses also permit the licensee to sublicense the licensed technology to third parties. Duke will require that all sublicense agreements contain some of the same language as the original license.
  8. Enforcement: generally, an exclusive licensee has the first right to enforce the licensed patents. Duke may join the suit upon reimbursement of its expenses by the licensee.
  9. No warranties; limitation of liability: Duke will not make any warranties as to the fitness, merchantability, validity of patent rights, etc. The licensee assumes all risks associated with the licensed technology.
  10. Indemnification: the licensee will indemnify Duke, its employees, trustees, etc., against all claims, proceedings, demands, and liabilities of any kind whatsoever.  Duke may also require that the licensee obtain certain amounts of product liability insurance prior to commercial sale or use of a product. (See The Indemnification Clause: What You Need to Know)
  11. Term and Termination: 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.
  12. Miscellaneous Provisions: these can include provisions for state law governing the agreement, requiring products be marketed with patent numbers, prohibiting the use of Duke’s name for publicity or marketing, etc.


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