From the assignee’s point of view, an outright assignment would be preferable because:It gives the assignee greater freedom in relation to the technology, since in a typical assignment, there are few, if any, controls placed on the assignee by the assignor.In the event of insolvency, the assignee has an asset that can be sold to create value for the shareholders and it should be easier (or cheaper) to raise funds if the company has some form of assets.There is less of an ongoing relationship between an assignor and assignee than a licensor and licensee, which means that the documents are simpler and there is less room for protracted negotiations between assignee and the other parties. Investors usually prefer to invest in a company which owns and has freedom to use all of its assets. If an outright assignment is not possible, this can also be achieved with an exclusive licence.
Licences: A licence gives the parties a greater feeling of control and also an ability to participate in any successful exploitation of the technology through royalty streams, as well as being able to participate in any growth of the spin-out business as a shareholder. A licence also ensures greater flexibility for the party; it may be possible to provide that the licence terminates if certain conditions are fulfilled (for example, if the company fails to exploit the transferred technology). The university then has the option to take back the licence and perhaps proceed with a new company.A compromise worth considering is a licence with an assignment trigger built in. The trigger can be linked to the value of the licensee, the return to the university, or to some other factor. If a value has been placed on the technology, then the trigger would operate when the value has been paid. The advantage of this approach is that the university is protected at a time when the spin-out is most vulnerable and, from the licensee's point of view, should it succeed, it is very likely that it will end up owning the technology outright. In relation to commercialisation directly to industry, where the agreement is exclusive, the licensee can expect to be required to agree to certain performance criteria. These will often be linked to the number of sales or revenue generated from sales or other commercial exploitation of the licensed technology. Failure to meet the criteria will see the licence come to an end or for the licence to become non-exclusive instead.
3) Consideration
The consideration for the transfer of technology can be made up of equity, up-front payments, royalties, or a mixture of all three. This tends to be an area which is most heavily influenced by policies adopted from time to time by the various parties involved.Other factors may affect the value, for example, where one or more of the contributors to the technology was not a university employee, but was a post-graduate student. A post-graduate student will generally fall outside the definition of "employee" under the Copyright, Designs and Patents Act 1988, and so the IPR may not belong to the university.
4) Continuing rights of use
Whatever the nature of the intellectual property transfer, the parties need to agree what continuing rights the university will have to use the intellectual property transferred. It is normally agreed that the university can continue to carry out non-commercial research and teaching using the transferred technology. However, it is worth investigating whether there are existing research projects, such as PhD theses, which need to be completed. If so, specific rights should be carved out of the transfer agreement as necessary to ensure that these projects can be completed.
5) Intellectual property rights Infringements
The key question to be addressed is which party will have primary responsibility for dealing with any intellectual property infringement of the transferred technology. It is important for the spin-out company to ensure that it has the appropriate rights to take action against a third party which is infringing the transferred technology in some way.Where Newco is the only licensee, a university is generally happy to give it such control, although it will want contractually to provide for Newco to consult with it on any action, and only permit Newco to take action where agreement cannot otherwise be reached. The situation becomes more complex where there is more than one licensee: typically where the licence is divided between different territories or fields of use. Where the licence granted is non-exclusive, a further dimension is added, because the rules as to when a non-exclusive licensee can bring action vary depending on the type of IPR in question.
6) Patent prosecution
If a licence has been granted of patents that have not yet proceeded to grant, there is the question of the extent to which the university should be expected to commit to ensuring the patents are granted.
7) Regulatory issues Depending on the type of technology being transferred and the business sector that the spin-out is going to occupy, there may be a need to obtain regulatory approvals or consents, or at least to perform an analysis of what steps must be taken to comply with regulations and any best practice guidance.
This article is for general purposes and guidance only and does not constitute legal or professional advice. Copyright 2010 © Anassutzi & Co Limited. All rights reserved. Information may be shared or reproduced only if accompanied by the author’s name and bio.
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