1 Technology Transfer Seminar Series Patent Licensing : A Pathway to Commercialization Karen Hersey Senior Counsel for Intellectual Property, MIT. Ret. Adjunct Professor of Law, Franklin Pierce Law Center

2 Commercializing University Assets 4 Success in university technology transfer occurs through establishing commercial value for university “assets” 4 University technology products or “assets” find commercial value in what they are worth – what someone will pay for the product because there is incentive to productize (incentive = profit) –If everyone can use it, money value = 0 –If only one/few can use it, money value = + 4 Value + user/consumer demand = $

3 Commercializing University Assets 4 Two ways to “create” or force value –Limit the number of people who know it Probably not reasonable in an educational environment –Limit the number of people who can use it By asserting legally enforceable ownership rights to it and deciding who can use it, under what circumstances and at what price

4 Commercializing University Assets 4 Asserting legal rights of ownership – the choices –As personal property.... Limited methods of commercial exploitation available: bailment, lease, sale –As intellectual property... Lawfully applied “intangible rights” provide greater promise for the success in the commercial marketplace Ownership of intangible rights do not transfer with “use” rights

5 Sorting Out Legal Protection Options for “Technology-related” Candidates 4 Knowledge/ideas – often not protected by federal statutory IP rights are commonly known as “know-how” = trade secrets (state protection) 4 Innovation in research/discoveries = patents 4 Computer software programs = copyrights and sometimes patents 4 Biological materials = tangible property and sometimes patents

6 Why Do Universities Commercialize Through Licensing? 4 Licensing: the preferential transactional choice for university-owned intellectual property rights –Benefits Confers legal monopoly transferable to licensee but licensor sets the conditions Multiple licensing alternatives allow the licensor to “hedge bets” Due diligence requirements with penalties, loss of license if not met Time, geographical, field of use limitations permitting best development of licensed asset by most competent licensees Royalties matched to licensee’s capabilities, expectations Flexibility

7 Why Don’t Universities Just “Sell” 4 The Downside of a patent “Sale” –Advance payment (selling price) may not reflect true market value –No rights to compel use (avoiding the filing cabinet/circular file end-game) –No opportunity for “best/highest use” alternatives –No retained rights to use by seller –No rights of attribution for seller’s inventors 4 Statutory Limitations –Bayh-Dole (no assignment to commercial company) –UBIT likely

8 Negotiating Patent Licenses: A Complicated Matter 4 Most important: Patent licenses are contracts! 4 Terms to sort out through negotiation –What is being licensed Mere disclosure Patent application Issued patent Foreign filed patents –To whom Who is the licensee?

9 Negotiating Patent Licenses: A Complicated Matter 4 Terms to sort out –With what rights Exclusive, non-exclusive All fields of use or only some All geographic areas (world-wide or not) With right to sublicense others or not –For how long Life of the patent or shorter –For what price The royalty structure

10 Negotiating Patent Licenses: A Complicated Matter 4 More Terms to sort out –Under what conditions Due diligence requirements and penalties if not met –Who pays patent costs? –What happens if the patent is infringed by others – who can sue? –What happens if the licensee infringes rights of others while commercializing? Can the university be sued? –What happens if the licensee’s product using the patent causes injury to others (product liability)? Can the university be sued?

11 Negotiating Patent Licenses: A Complicated Matter 4 And, even more terms to sort out –Can the licensee assign its rights to others Should the licensor have the right to approve? –What if the inventors make an improvement to the patent Does the licensee have rights? –What if the licensor has background patents needed by the licensee?