Presentation on theme: "Licensing, Alliances, and Partnerships Stephanie L. Chandler Jackson Walker L.L.P. August 3, 2005."— Presentation transcript:
Licensing, Alliances, and Partnerships Stephanie L. Chandler Jackson Walker L.L.P. August 3, 2005
Stephanie L. Chandler Business Transactions and Intellectual Property Specialty Area: Technology Law University of Nebraska B.S.B.A. in Finance University of Virginia Juris Doctorate Community Involvement: Leadership San Antonio, Chair: Entrepreneurship Alliance Committee - San Antonio Technology Accelerator Initiative, National Association of Women Business Owners: Pro Bono General Counsel; Family Services of San Antonio: Board of Directors
Licensing Patents -- gives the inventor the right to exclude others from making the invention Trade Secrets/Know How - - protection by virtue of secrecy Trademarks/Service Marks -- identifies a unique source of goods or services Copyrights -- protects from copying of original works (music, books, software code) License Third Party$$$$ Idea *The terms of licensing and joint venture relationships can add or subtract value.
Product Story Florida State University Cancer treatment drug Licensed to Bristol-Myers Squibb, which began production in 1992 BMS's leading anti- cancer drug, with 1998 worldwide sales in excess of $1 billion.
Source: Association of University Technology Managers License Income (Average FY 1998 & 1999) $ #1 Columbia University$80,908,972 $ #15 Baylor College of Medicine$10,025,025 $ #26 Texas A&M System$ 4,864,484 $ #29 UT Southwestern Med Ctr.$ 4,392,204 * 1997 statistics. Texas Business Review, June 1998 Licensing of innovations made at academic institutions contributed over $40 billion in economic activity and supported more than 270,000 jobs in Fiscal Year 1999 Source: AUTM Licensing Survey: FY 1999
Smallco’s principals have filed a patent application on an invention, however, they do not have the resources to: Manufacture, Distribute, Import, Market, and Sell the product based on the invention.
Solution: Smallco grants a license to a large company to exploit the invention on Smallco’s behalf. Bigco, as Licensee, can be granted rights to Manufacture, Distribute, Import, Market, and Sell the product disclosed in the patent application.
Litigation: Breach of Contract Development agreements License Agreements Joint Venture Agreements The number one source of litigation is a misunderstanding about what was to be delivered when
Technology Contracts Customer: You said it would be done _______ You said it would do _________ You said it would cost $__________ Developer: You added _____ You changed _______ You didn’t give me ________
Important Terms of License Grant Clause Field of Use Territory Diligence Obligations Payment Terms to Licensor –Upfront fees (lump sum) –Milestones (sums paid over time) –Royalties (periodic payments based on product sales)
Grant Clause Scope of rights granted to the Licensee: Exclusive/non-exclusive Smallco grants Bigco –(exclusive/non-exclusive) –rights under all Patents (including patent applications) and Know How… Relating to the Glucose Meter
Grant Clause, cont. To…. manufacture, market, distribute, import; and sell the Glucose Meter…
Field of Use Use Limitation –Allows multiple licensees to exploit different uses of the technology Not a Geographical Limitation Should Smallco limit the Field of Use? Should Bigco demand unlimited rights (limited only to the scope of the Patents and Know How)?
Territory Geographical Limitation on the rights to exploit Patent Rights and Know How Patents issued on Country by Country Basis
Diligence Obligations Must Bigco commit to some level of diligence in commercializing the technology? –Termination rights –Minimum royalties –Exclusive to non-exclusive
Advance Fees/Upfront Fees Lump sum payment for entering into the license agreement May be used to reimburse Smallco for past R & D costs and fund future R & D expenses Different factors impact determination of upfront fees (R&D costs, market potential, industry convention)
Milestones Future payments to Smallco upon meeting defined goals Incentive used to motivate parties to advance project E.g., First commercial sale of System
Royalties Percentage of Product Sales Based on “Net Sales”, but is only net of returns, mandatory reimbursements and rebates COGS typically is not deducted when determining Net Sales Audit rights (Right to check licensee books and records to ensure proper payment)
Use of Forms The parties hereto agree that any disputes or questions arising hereunder, including the construction or application for this agreement, shall be settled by arbitration, in accordance with the Code of Civil Procedure Said arbitration to be accomplished by a single arbitrator appointed by the presiding judge of the Superior Court of Dallas County Texas.
Use of Forms 13. Venue.This Agreement and all amendments or modifications hereof shall be governed by and interpreted in accordance with the laws of the State of Confusion governing contracts wholly executed and performed therein, and shall be binding upon and inure to the benefit of the parties, their respective heirs, executors, administrators and successors. Jurisdiction for any suit filed to enforce the provisions of this Agreement by either party shall be filed in the federal or state courts of Mostfavorable District of Confusion in Hitsville, Confusion or Miracle County, Confusion.
Use of Forms What is the status of the parties? Whose law will govern? Who wrote the “form”? Why was the “form” created? Is this the final draft resulting from negotiation?
Structure of Alliances Contract Relationship General Partnership (GP)* New Subsidiary of Both Parties – Corporation – Limited Partnership (LP) – Limited Liability Company (LLC) *Fear of unintended fiduciary duties between partners; default entity; No liability protection, partners are jointly and severally liable for all partnership liabilities
Structuring Considerations Management Capital raising Interest transferability Continuity of life; desire for relationship breadth to be narrow Nature of desired relationship; expected contributions of each party Exit strategy (i.e. acquisition)
Joint Ownership Issues Not only your partner, but … Buy-sell agreements What if I don’t want to keep doing this? What if my files for bankruptcy? What if we have a unresolvable disagreement? Issues are always easier to resolve before money is a factor Special Issue: Joint ownership of newly developed intellectual property
Licensing, Alliances, and Partnerships Stephanie L. Chandler Jackson Walker L.L.P. 112 East Pecan Street, Suite 2100 San Antonio, Texas (210)