Technology Transfer

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Technology Transfer

  1. 1. European Business & Innovation Centre Network Technology Transfer András Haszonits Amman, 16 May 2010 1
  2. 2. Agenda • Decisionmaking • Confidentiality Agreement • Memorandum of Understanding • Standstill Agreement • Term Sheet • License Agreement – Royalty stacking – Royalty packing • Material Transfer Agreement • Cooperative Research and Development Agreement 5/26/2010 Andras Haszonits 3 2
  3. 3. Technology Transfer – Identifying technology Interviewing researchers Researchers often do not recognize commercial potential of an invention. Intensive contact with higher innovation potential, to identify innovations ASAP after creation of mind. • Identifying innovative researchers A way by applying patent databases. Past innovators capable of creating patentable inventions are more likely to develop similar in the future • Recommendation method Scientists have valuable knowledge on which of them have commercially promising inventions. Recommendation method makes use of this internal knowledge. • Hierarchy method Department leaders having an overview of research topic under their supervision, thus they mean the first level of interview. 5/26/2010 Andras Haszonits 4 3
  4. 4. Due Diligence „Success in making a license deal depends 90% on diligent preparation (homework), and 10% of the rest.” Frédéric CAILLAUD, Licensing & Business Development Director, L’Oréal Necessary first step before entering to any contact: • Identify own short- and long-term strategic objectives • License-out/license-in, if any fits those above • Gather info on potential licensor/licensee, technology in question, other available or being developed similar technologies, legal and business environment 5/26/2010 Andras Haszonits 5 4
  5. 5. Main areas of preparation • Ownership of technology, – is it proprietary, or free to use? – have all proper procedures been followed to ensure its proprietary rights in the relevant market? – any third party claiming rights? • Performance – Can it deliver (reduce costs, improve performance, other identifiable benefits)? – Need on any further IP rights to fully implement deliverance – Economic and strategic value? – Fitting to and promote business objective? 5/26/2010 Andras Haszonits 6 5
  6. 6. Information Sources • Public information on companies listed on stock exchange • Patent information services/databases • Innovation centers, Tech. license offices, TTOs, • LESI, PROs, research-intensive universities, • Technology exchanges • Professional and business associations, chambers • Databases and publications on the relevant market/product • Tradeshows, technology exhibitions, fairs • Relevant ministries/agencies/fund managers (beneficiaries of fund allocation to similar research area) 5/26/2010 Andras Haszonits 7 6
  7. 7. Information Sources – in reality Of which patent information: 3% Source: National Innovation and IP survey, Hungary, 2005 5/26/2010 Andras Haszonits 8 7
  8. 8. Patent Information • Largest repository of technical information, contains about 60 million patents • Provide more detailed information about technology than any other publications • Most up-to-date source of technical Information in new areas of technology • Classified into technology areas branching down to 70.000 sub-divisions – allow focused search • Each patent contains more than 50 different fields providing technical / strategic business information in a standardized manner • Mostly free of charge 5/26/2010 Andras Haszonits 9 8
  9. 9. Application of Patent Information • Technology: – Locating technology – Possible alternative solutions – Positioning own innovation (advancement/trend-like) – Search possible solutions for a given problem • Identifying business partners: – Screening stake-holders in a given technology area – Identifying their current level of technology activity – Identifying possible license-in / license-out partners • HR: – Screening for lead researchers to hire • Business development – Searching for business opportunities (BO) 5/26/2010 Andras Haszonits 10 9
  10. 10. IP is a valuable source of information ... … because: • Patents are well structured Patent literature documents • Patent describes how to solve Not effective Effective a technical problem • Largest most concentrated source of technical information 60 million • Most of the entries in patent documents Effective but not reviewed databases are not effective, in other words, 94% of the solutions described in patent documents are free for use 80-90% of the innovations described in patents are not 30-50% of R&D is duplicate! published anywhere else! 5/26/2010 Andras Haszonits 11 10
  11. 11. Application of Patent Information: BO Decision-making Tree Is the technology protected? Only 5 m. out of the 60 m. patents are in force! no Use it! yes Is it so in my region? On average for any one invention a patent is filed in 4 countries! no Use it! yes Is the protection stil valid? Expiration, non-payment, invalidation no Use it! yes Is there any other relevant technology in the public domain? yes Use that! no Is it possible to „kill” or limit the patent”? Try negotiate / no yes Kill and use it! Does the licensing of the patent allows full exploitation? no Watch Out! yes License stack License! Patent information Patent information Calculate! separate presentation case study 5/26/2010 Andras Haszonits 12 11
  12. 12. Preparation for a License: NDA Non-disclosure Agreement (NDA): (also called as Confidentiality Agreement (CA), Secrecy Agreement (SA)) • When to use? – Before patenting: Disclosure of the invention prior to patent filing will destroy the application (it is vital that any discussion with investors, business partners, etc. be done CONFIDENTIALY) – After patenting: Even if an inventor has filed a patent application, he must be careful to cover any features of the invention which are not in the patent application with an NDA 5/26/2010 Andras Haszonits 13 12
  13. 13. Preparation for a License: NDA Non-disclosure Agreement (NDA): • Elements of a Nondisclosure Agreement Specification of Ownership of rights confidential information (title) Obligations of receiving No obligation of party disclosure; Period of confidentiality Termination Termination of obligation No warranty of confidentiality General Sample NDA 5/26/2010 Andras Haszonits 14 13
  14. 14. Preparation for a License: NDA – Exclusions Information is not considered as confidential if: • it is in the public domain • it has entered the public domain other than through the fault of the receiving party • at the time of disclosure, the receiving party already had it in its possession or has acquired it from a third party • the disclosing party has been able to disclose it to another party without restriction • it is or was independently developed by the receiving party • it is disclosed as required by law or governmental rules or regulations Soft IP 5/26/2010 Andras Haszonits 17 14
  15. 15. Preparation for a License: MUO Memorandum of Understanding (MUO): (also called as Commitment Letter, Letter of Intent) • When to use? – Official start of license negotiation – Showing serious intention to sign license deal with the other party – Motivating, speeding up process to reach license deal – Indicate the period of time within which agreement is to be concluded – Usually non-binding document, though legal obligations may arise • Indicate the binding / non-bindig status! • Binding by default (if not indicated otherwise) in some countries 5/26/2010 Andras Haszonits 18 15
  16. 16. Preparation for a License: Standstill Agreement Standstill Agreement: • When to use? – Potential licensor grants a limited period of time (few months) to potential licensee for which period licensor agrees not to attract any other candidature – Mostly no financial remuneration for exclusivity and opportunity – Licensor may request report on licensee’s evaluation of technology and reasoning decision – Followed by Agreement to Negotiate License Agreement with a Term Sheet if outcome positive – Possibility to enter into preliminary commercial agreement, distributorship agreement Sample MUO-SA 5/26/2010 Andras Haszonits 19 16
  17. 17. Preparation for a License: Term Sheet Term Sheet (also called as Heads of Agreement): • When to use? – If carrying out evaluation of technology licensee wishes to continue attached to the report – Proposed basis of license agreement – Summary of key issues, following the structure of the license – Good basis of focused negotiation and bargaining – Prepare one for internal use (add notes and borderlines), and share one with negotiation partner – Important!: if not intended to be legally binding „contractual proposition” state in writing! 5/26/2010 Andras Haszonits 20 17
  18. 18. License Agreement – Classification of Variants • According to subject matter: – Classical patent license – Know-how license (→ training and consultancy agreement) – Hybrid license agreement – + Trademark license agreement (technical aspects are considered indirectly) – Copyright license 5/26/2010 Andras Haszonits 21 18
  19. 19. License Agreement – Classification of Variants • According to extent of rights: – Geographic – Commercial body (who is granted access?) The company? 1 machine, 1 location site license corporate wide Subsidiaries and affiliates? – time limitations, – restriction of field of use – Exclusive, sole, non-exclusive license • Sub-licensing • improvements 5/26/2010 Andras Haszonits 22 19
  20. 20. Extent of exercise Rights conferred by a license may include: • Technology/patent: • Copyright: –make, –reproduce, –have made, –display, –use, –distribute, –sell, –alter –import, (make derivative work) –store… … • Trademark: use in connection with distribution 5/26/2010 Andras Haszonits 23 20
  21. 21. Why to Licence? – License-out • No own resources (time, money, skill, or will) to commercialize Developed technology does not fit with the business strategies • Licencing generates immediate or quick cash in-flow Licencing income may be more secure than revenue from sales (in case of upfront / lump sum / fixed payments) Licence income may enable quick pay-back of other liabilities • Licencing is a good option to enter into new markets Own product is not suitable for export but the embedded technology can be used by others (i.e. foreign companies) • One way of conflict resolution in case of infringement 5/26/2010 Andras Haszonits 27 21
  22. 22. Why to Licence? – Licensing-in • Exploiting technology that is new to the company developed by others (in-licencing, cross-licencing) • Access to technology otherwise unobtainable • Opportunity to combine company’s own and in-licenced technologies to create new solutions / products • Opportunity to achieve geographical monopoly by exclusive licence agreements • Enables focusing in a narrow field of technology in R&D • Savings in company’s own R&D costs • In-licencing vs. cross-licensing? 5/26/2010 Andras Haszonits 28 22
  23. 23. Why to Licence? – Cross-licensing Cross-licensing agreement: • two parties grant a license to each other for the exploitation of their patents. • mutual sharing of patents between companies without an exchange of a license fee if both patent portfolios are about equal in value. • each company can make, use, and sell products covered by patent of the other that had been cross- licensed. 5/26/2010 Andras Haszonits 29 23
  24. 24. Why to Licence? – Patent Pool Patent pool: • agreement between parties agreeing to cross- licence their patents (relating to a particular technology) • Patent pools are example for members of a competitive industry join to create common resource for collective benefit. 5/26/2010 Andras Haszonits 30 24
  25. 25. License Agreement • Most important headings include: – Definition of subject matter and conditions, – Lifetime of legal relationship, termination – Rights and obligations of licensor – Rights and obligations of licensee – Optionally terms of consulting – Other general clauses • Legislation in some countries defines content and default conditions applying if not specifically agreed otherwise 5/26/2010 Andras Haszonits 31 25
  26. 26. License Agreement • Definition of subject matter and conditions – Plain English, easy to understand, use short sentences, roll out abbreviations – Minimize the use of profession related specific wording – Definition and consequent use of professional jargon – Avoid copy-pasting, referencing other materials 5/26/2010 Andras Haszonits 32 26
  27. 27. License Agreement • Lifetime of legal relationship, termination: – Contractual period might be linked to patent protection (end of 20 years) – License agreement terminates by: • Time period defined in the agreement • Conditions occuring defined in the agreement • Expiration/termination of patent – Forms of termination: • Mutually agreed termination • Forced termination from one party 5/26/2010 Andras Haszonits 33 27
  28. 28. License Agreement • Obligations of licensor: – Exact identification and communication of technology information subject to the agreement – Allowing utilization via (indemnity obligations of licensor): • no third-party rights exist on the subject patent obstructing or limiting the commercialization, during the whole period of agreement • the invention is technically feasible • maintenance of protection, enforcement, and litigation (unless if otherwise agreed) – Obligation of information 5/26/2010 Andras Haszonits 34 28
  29. 29. License Agreement • Rights of licensor: – Have access to licensee’s company books, commercial data serving grounds for remuneration – In case of exclusive license right to transfer to non-exclusive license if agreed commercial obligations are unmet – Check on if licensee has made all necessary steps to prevent confidential information to leak (verification of such procedures via auditing) – Liability in case of accidental or negligent disclosure – In case of trademark license: • Control the proper use of trademark in marketing and advertising • Control quality of product trademark assigned to 5/26/2010 Andras Haszonits 35 29
  30. 30. License Agreement • Obligations of licensee: – Required to comply with the specifications and standards – Pay the license fee agreed, – Keeping prudent bookkeeping, required for retention of documents – In case of exclusive license, to make all efforts to achieve commercial success, – To prevent confidential information from disclosure – Non-Compete, Non-Solicit (if requested only!) – In case of trademark license: • Proper use of the trademark in marketing and advertisement • Maintaining quality of product 5/26/2010 Andras Haszonits 36 30
  31. 31. License Agreement Usual forms of financial remuneration: – Up-front lump-sum payment – Milestone payment linked to certain events, – Royalty, based on commercial activity Problems: – What to consider as grounds for setting the price? – How to control? Non financial rewards: – Cross licensing 5/26/2010 Andras Haszonits 37 31
  32. 32. License Agreement Characteristics of license Specification Frequency (%) Free-license 5,1 Up-font 11,6 Financial parameters Royalty 21,2 Up-font + royalty 62,1 Beginning of contractual relation 48,4 Due date of Milestone 16,4 upfront payment Elongated 23,9 Mixed 11,3 Total sales volume 15,2 Sales embodying technology 73,3 Grounds of royalty payment Net sales 10,7 Costs arisen at licensor 0,4 Market value of technology 58,4 Grounds for setting Standard industry rate 32,1 level of royalty Ability to pay of licensee 8,6 Other 4,9 5/26/2010 Andras Haszonits 38 32
  33. 33. License Agreement Typical royalty rates on sale price as of different subject-matters Patent Royalty rate Software 5-15% Medical equipments 3-5% Equipments 1-4% Semiconductor (Chip design) 1-2% Materials (process) 0,2-2% Materials (products) 0,1-1% Drugs in clinical testing stage 12-20% Material composition of drugs 8-10% New entity for diagnostics 4-5% New process for known entity 2-4% Biotech. process (exclusive) 1-2% Process (non-exclusive) 0,25-15% Source: LESI 5/26/2010 Andras Haszonits 39 33
  34. 34. License Agreement What does the Royalty apply to? – To all fabricated product made? – Combination products? – Just areas where/until patent exists? – The same royalty where support services not provided? – Tying royalty to valid claims? – Just in case of valid patent? – How long is a patent valid? – If patent is invalidated by a patent office, what is its area of reference? 5/26/2010 Andras Haszonits 40 34
  35. 35. License Agreement Royalty Stacking: – Example: development of a new vaccine implies: • Research-tools, • Recombinant techniques, • DNA sequences, • Transformation vectors, • Cell lines, • Adjuvants, • Delivery devices All of them might be proprietary 5/26/2010 Andras Haszonits 46 35
  36. 36. License Agreement Recommended solutions: • Separate royalties due if sold alone / combined • Royalty ceiling – Licensee motivated to incorporate more technologies if reached ceiling – Licensee argues his/her technology being more important than others, thus his/her pro rata royalty should not be decreased – Solution: • Royalty floor • Licensor may agree to lower pro rata only in case additional technology is needed, not just desired 5/26/2010 Andras Haszonits 48 36
  37. 37. License Agreement - Structure Checklist Title, Table of contents Life of the agreement Indemnity; liability; Identification of parties Termination insurance and signature Use of trademarks Notices Background, Recitals Representations and Assignment Definitions; description warranties (limited); Waiver Grant or terms of use disclaimers Failure to perform (Extent of rights; Intellectual property Confidentiality/secrecy limitations) protection; conduct of Miscellaneous: Fees, royalties, prosecution force majeure, minimum annual Marking; export control maintenance, payments Applicable law; survival on termination, Payment terms choice of jurisdiction; Amendments etc. Diligence requirements arbitration/mediation Closing; signatures, Reporting schedules Infringement; date and place, Records/accounts right to sue date of effectiveness 5/26/2010 Andras Haszonits 50 37
  38. 38. Cooperative Research and Development Agreement CRADA Agreement between a private company and a government agency to work together on a project. • Benefits: – Enable partners to combine their research budgets and optimize resources – Provide means for sharing technical expertise, ideas, and information in a protected environment. – Allow the partners to agree to share intellectual property emerging from the effort or to agree that one partner may retain exclusive license to patentable research. – Promotes commercialization of technology resulted from CRADA • Process: dialog - joint development of work-plan – completion of CRADA • Financing and fees agreed are due even if non-performance 5/26/2010 Andras Haszonits 59 38
  39. 39. Partnership/Aliance Definition • Collaboration to create something which was not achievable „alone’ – „Virtual” structure – Joint venture • Is it dramatically different from a marriage? 5/26/2010 Andras Haszonits 60 39
  40. 40. Partnership Process 5/26/2010 Andras Haszonits 63 40
  41. 41. Cooperative Research and Development Agreement Structure of CRADA: • Definitions: (as of License Agrement) – background, – foreground, – proprietary (confidential) information, • Project team: both side to accomplish aims of the project • Financing: shared cost, cost bearing party • Confidentiality: Reciprocity, field, info exchange and confidentiality duration, written vs. oral, confidential stamp, no release of company names 5/26/2010 Andras Haszonits 73 41
  42. 42. Cooperative Research and Development Agreement Structure of CRADA: • Liability: PRO has to be waived from economic responsibility related to damages (including personal injury) in connection with the activity of the business entity, or the commercial use of products/processes/ services resulting from the research. • IPR splitting, but at least: – „first right of refusal” – „first look option” • Manufacturing • Exclusivity Sample CRADA 5/26/2010 Andras Haszonits 74 42
  43. 43. Thank you very much for your attention András Haszonits haszonitsandras@upcmail.hu The training material is to be used exclusively in conjunction to the SRTD project in Jordan 5/26/2010 Andras Haszonits 83 43

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