Dr. Ravi Dhar on " Licensing Technologies: Principals & Dynamics"

Principals & Dynamics of Technology Licensing Workshop on “Effective Management of IPR in Biotechnology by Universities & research Institutes in Assam” @ Assam Agricultural University Guwahati, Assam October 17, 2014 Ravi Dhar, Ph.D., f-STEM (rdhar_in@yahoo.com) (in.linkedin.com/pub/ravi-dhar/18/71b/895)
Previous Affiliations:
BIRAC-DBT, GoI, India
National Institute of Immunology
Johns Hopkins University, U.S.A.
LSU, U.S.A.
OTT, Boston University, U.S.A.
OTT, NIH, U.S.A.
16/4/2014
1
RD_AAU-Gauwhati_October-2014

16/4/2014
Resource Acknowledgements
NIH PubMed
Scientific Community across world
Memorial Sloan Kettering Cancer Center
DBT
BIRAC Library Service
NII
Various Websites
Nature Biotechnology & other Journals
 Biotech News (DBT)
Healthcare Biotechnology, CRC Press
GHI & OTT, Boston University
OTT, NIH
2

Acknowledgements
•Dr. Purnima Sharma, BCIL
•Dr. Sanchita Chaudhary, BCIL
•Dr. Gerald T. Keusch, BU
•Dr. Ashley Stevens, BU
•Dr. Lius Salicrup, NIH
•AAU
•Nature Biotechnology
•J. Commercial Technology
•Dr. Ravi Dhar: (www.biospectrumindia.com/biospecindia/news/156942/a- bill-promises)
•LESI
•NII/ BU/NIH/MSK
•BIRAC
•Various websites
16/4/2014
3

16/4/2014
4
Part- I

16/4/2014
5
Research
Basic Applied
Translational
Product
Sell (frugal) License

16/4/2014
6
Partners in Technology Development
Research
Universities/
R&D Institutes
Start-up Firms/Companies; R&D Firms
Development
Production
Manufacturing
Sale
&
Market
Larger Companies
Distribution
IDEA

16/4/2014
7
Proof of Concept
Legal Protection
Validation/Brief Trials
In house Experimental Production
MARKET SALES
Components of Technology Development & Management
Clinical Trials/Field Trials
( =Licensing possibility)

16/4/2014
8
R & D Activity
POC/ Product
(Patents)
Development &
Commercialization
Legal way
to Transfer Technology is to
LICENSE
the Product
Academia does not have time, or mandate or competence, or money, to get into Product Development or Commercialization & Marketing Activities

16/4/2014
9
Components
Technology Due Diligence
Basic Principals of Technology Licensing
Looking into all related agreements
Drafting of Agreements

Definition
16/4/2014
10
Licensing is a Contractual Agreement between two entities in which one, called Licensor (who owns a technology), permits the other, called Licensee to use his Technology (Patent/ Copyright/ brand) in exchange for some fee or royalty

16/4/2014
11
Why License Technologies?
 Helps decrease the time for Development of a Technology into a product
 Since cost of Technology development keeps on increasing, academia or small entities can not afford further development of a Technology
 In the current scenario, collaborations and alliances help in speedy Growth of R&D + Product development
 Regulatory environment is becoming more stringent, and thus we need to License technologies to those, who have such an expertise and money (Note: More customers for embryonic technologies)

16/4/2014
12
Successful Licensing
is/must be
Based on Technical Merit
&
Market Potential

16/4/2014
13
Part-II

16/4/2014
14
Background

How do we Generate Intellectual Property & Products? Research Basic Applied Legal Protection/Patent
16/4/2014
Practical leads/ PoC/ Invention/Product
File a Patent/ License the Technology; or Sell Technology
Develop & Manufacture Product
(commercial activity)
Company/
Enterprise
15
Entrepreneurship

Innovation & Enterprise Individuals/ Universities/ Key Players Institutes/ Industries Invention/ Technology Investment Enterprise/Start up Company Royalty Reap the Fruits of Innovation if the product is commercialized
16/4/2014
16
Contribution to Economy
IP Protection/ Patents

16/4/2014
17
Proof of Concept
Legal Protection
Validation/Brief Trials
In house Experimental Production
MARKET SALES
Components of Technology Management
Clinical Trials/Field Trials
( =Licensing possibility)

16/4/2014
18
Level of
Maturity
of Technology
Is Essential for
consideration for further
Development by a
Licensee

Technology Transfer Process Technology (A Vaccine/Therapeutic Agent/GM Crop/Medical Devices etc) (Drug Discovery> Product Development (Delivery Method+ Kinetics of Absorption, Distribution, Metabolism, Excretion)> Clinical Evaluation (Toxicity + Animal & Human Studies)> Invention Disclosure Assessment/ Screening Patent Protection Licensing & Monitoring Technology Transfer (Active Pharmaceutical ingredient> Drug Product(Dosage & Delivery Systems)> Analytic Methods> Stability) Product Development, Production & Commercialization Revenue & Monitoring
(http://www.nii.res.in/faculty-06/RaviDhar.htm)
16/4/2014
19
University/
Institute/
Organization
Established or
Start-up Company /Entrepreneur or a
Big Company

Technology/Innovation Management Process
1.Idea/Proof of Concept : Technical Assessment
2.File a Patent (Prior Art Search: Novelty/non-Obviousness/Utility) /  (Publish Manuscript)
3.Grant Process at Patent Office : Be patient
4.Find an Industrial Partner : Be Patient or float your Start-up Company
5.MoUs_NDA : TTO or Attorney or Agencies
6.Licence , DA : TTO or Attorney
7.Exchange Know-how_MoUs : You and Industry
8.Demand Signing Amount : You + Industry+ University
9.Furnish Data (Importance of Record Book): You + Industry
10.Freedom to Operate Analysis : TTO/ Patent Attorney
11.Industrial Partner will Validate Data>Upscale>Pilot run
12.Milestone Payments : You + University
13.Industry will Manufacture, Commercialize, Market Product
14.Distribution of Royalty on Sales : You + University + Industry
16/4/2014
20

16/4/2014
21
Value of Technology (Drug/Vaccine/Medical Device/GM Crop)
Proof of Concept
Untested Product/
Animal or Field Trials
Product Level(Low)
High Category Concept/High Value Low Category/Low Value
Tested Product /
Human Clinical Trials Phase I
Product Level (Better)
Value Low
Value Preposition Debatable
Value Debatable??
Higher Value Preposition
Field Tested Product/
Human Clinical Trials Phase III

16/4/2014
22
Part-III

Technology Disclosure Decide Whether to file for IP If yes, do market analysis of concept or of the Product (A) Plan A : Collaborate/ License or Start up company
•Negotiate the license
•(B) Plan B: Fundraising, management searching
•Brokering interactions with potential partners (pharma, service-for-equity, investors)
Goal:
Bring the technology to market
16/4/2014
23

Definition
16/4/2014
24
Licensing is a Contractual Agreement between two entities in which one, called Licensor (who owns a technology), permits the other, called Licensee to use his Technology (Patent/ Copyright/ brand) in exchange for some fee or royalty, depending upon the contents of written agreement, after due negotiations.

16/4/2014
25
Licensing should not be an
outcome of
Knee-jerk reaction

16/4/2014
26
Technology Licensing has a serious relationship with Product/ Patent Quality & Scenario. (So conduct thorough Due Diligence)

16/4/2014
27
Technology Due Diligence Components
1.Assessing the idea (is it valuable, ethical)
2.Pre visit (what information to gather from academia)
3.First interview with inventor
4.Patentability
5.Legal Issues
6.Status of Patent Applications or Issued Patents
7.Clinical or field trial aspects + Effect on humans
8.Can the product be commercially manufactured - (CMC=Chemistry, Manufacturing, Controls, Cost)

16/4/2014
28
Technology Licensing……(a)
Why should we License?
What do we License?
Where do we License?
Whom do we License?
How much should we license?
Competing products!
FTO Scenario
Patent scenario or Landscaping
Patent Coverage
Patent Claim clauses & deficiencies

16/4/2014
29
Technology Licensing……(b)
Negotiating Skills (Exclusive/Non-exclusive)
Fiscal Aspects – Signing amount/ Compensation/ Royalty
Regulatory Scenario
Commercial Law
Insolvency Issues, if any

16/4/2014
30
Technology Licensing……(c)
Drafting License document/ Licensing deals
i) NDA
ii) MTA
iii) Evaluation agreement
iv) Letters of intent
v) Standstill agreements
Preclinical & Clinical Study Agreements
Clinical & Commercial Supply
Distribution
Pharmaco-vigilance (drug/vaccine/plant safety)
Promotion agreement
Role of Inventor/ Consultancy/Collaboration /Mentoring?

Let us Patent: Why ?
Inventions selected for investment have:
–Solid technical merit
–No unmanageable obligations to others
–Strong patent protection available
–Good prospects of a commercial market and business opportunity
16/4/2014
31

Why Should we not Patent?
•Idea is not an invention
–Doesn’t qualify as eligible subject matter
–Publication created bar to patenting
•Idea is not fully developed
–Enablement issues
(=one should be able to repeat the invention)
–Patent issuance unlikely
•Patent position is not commercially useful
–Narrow coverage
–Dominated by other patents
16/4/2014
32

16/4/2014
33
Part-IV

Strategy in Licensing
16/4/2014
34

16/4/2014
35
Licensing Grant
(Different Degrees of Rights can be Granted)
Assignment
License
Freedom from Suit
Non-Exclusive
Exclusive
Exclusive by Field/ Exclusive by Territory
(Complete Transfer)
(Limited Transfer)
(No Transfer- Immunity)
(Degree of Exclusivity)

Types of Licensing
–Exclusive License
–Non-Exclusive License
–Paid-Up License
–Running Royalty License
–Cross License
16/4/2014
36

16/4/2014
37
(1-a) Exclusive Licenses to Big companies (1-b) Exclusive License by Government /NIH to companies (www.ott.nih.gov) (2) Non-exclusive License to various players (3) Exclusive License agreement to minimize barriers to entry faced by start-ups, e.g., Out- licensing of anti-diabetic compound by Connexios, Bangalore (upfront payment of approximately Rs. 30-60 Crores (?)

16/4/2014
38
Goal or Purpose??? Q) What should one do with a Technology? A) Start a Company or Partner with an Existing one which would be based on:- Time Commitment Near Term Financial Return

Goal or Purpose (A or B) find commercialization route most likely to result in products on the market
•Startup: (A) Partner (B)
•Broad IP -Narrow/dominated IP
•Disruptive -Improvement
•University Know-how -Company well-
positioned
•Lots of time/effort -Less effort
•Low initial $ return -Typically some $ upfront
16/4/2014
39

16/4/2014
40
S.No.
Technology Status
&
Support System Scenario
Type of Company/ Product Development Possibility & Value
1.
Technology patents pending,
Business concept /model defined,
Management team in place
Early Stage Company/
Least Value
2.
Technical and commercial proof of concept more clearly established, Collaborative (validating) relationships in place with technology and/or commercial partners
Mid-Stage Company/
Better Value
3.
Initial products in clinic,
Corporate partnerships well established,
Additional technologies under development
Later Stage Company/
High Value

16/4/2014
41
License to Established Company (1)
Non-Exclusive License (2)
License to Start- up (3)
License Tangible Property (4)
(A)Grant
1. Scope
2. Field
3. Territory
4. Sublicense
1. Exclusive
2. Generally Limit
3. Varies
4. Yes
1.Non-Exclusive
2.Limited
3.Varies
4.No
1.Exclusive
2.Varies
3.Worldwide
4.Yes
1.Non-exclusive
2.Limited
3.Worldwide
4.No
(B)Compen
-sation
1. Upfront
2. Milestone
3. Royalty
4. % of Sublicensing
1.Cash
2.Spread out
3.Varies
4.Fixed
1.Cash
2.Varies
3.Varies
4.n/a
1.Equity
2.Back-loaded
3.Varies
4.Tiered
1.Cash
2.n/a
3.Frequently none
4.n/a
(C)Deligence
Mix of early & late stage Milestones
Light; sometimes non- existent
Heavy; include fund raising milestones & early product development
None – typically required

16/4/2014
42
Part-V

16/4/2014
43
Licensing & Negotiation: Importance of Non-binding, but
Confidential Term Sheet

16/4/2014
44
UNIVERSITY OF UTAH RESEARCH FOUNDATION
CONFIDENTIAL SUMMARY OF TERMS FOR PROPOSED PATENT LICENSE AGREEMENT
(STARTUP COMPANY)
THIS TERM SHEET WILL EXPIRE ON ____________, 200_
U-_________ TECHNOLOGY TITLE:
INVENTORS:
The intent of this document is to describe, for negotiation purposes only, certain principal terms of the University of Utah Research Foundation’s Patent License Agreement. The Patent License Agreement will be negotiated and administered through the University of Utah Technology & Venture Commercialization (TVC) on behalf of the University of Utah Research Foundation. This document is not intended to be a binding agreement between the Parties with respect to the subject matter hereof, except for the paragraph immediately below regarding confidentiality.
(Source: https://www.tvc.utah.edu/tco/Documents/Term_Sheet.doc)

16/4/2014
45
Disclaimer: The licensing terms outlined below shall have no binding effect on University
XYZ…. or any third party unless and until such terms are incorporated into a written
agreement between the parties.
This non-binding term sheet is valid for 90 days and will expire on <DATE>.
Example of Non-Binding Term Sheet Components…between
University and <COMPANY>
1.License Grant
2.Patents
3.Copyrights
4.Field of Use
5.Terms of License
6.Upfront Licensing fee
7.Royalty
8.Non-Sale based Sublicense Income
9.Annual minimum Royalties
10.Milestones
11.Patent Expense Reimbursement
12.Standard terms & Conditions of University
13.Status of Funding (any obligation – Government etc.)

16/4/2014
46
Part-VI

16/4/2014
47
License
to
Start-up Companies (I)
vs.
Well established Companies (II)

16/4/2014
48
Innovation Matrix
Disruptive
New pathway or disease
State targeted (created new
Category), e.g., Enbrel –
treatment for psoriasis
New indication or application, e.g., Serostim – injectable Growth hormone
Same indication with new
Patient benefits – second
Generation – e.g., Antibiotics
New target along with an old Pathway (creates a new category) e.g., Simponi -anti-nflammatory target
New Target
Existing Target
Incremental

16/4/2014
49
When to think of a Start-up? (I)
1.When technology base is broad
2.Technology is disruptive
3.Lots of “know-how” is involved (Know-how is a term for practical knowledge on how to accomplish something, as opposed to “know-what” (facts), “know-why” (science), or “know-who” (communication). Know-how is often tacit knowledge, which means that it is difficult to transfer to another person by means of writing it down or verbalising it. The opposite of tacit knowledge is explicit knowledge”)

16/4/2014
50
When to Partner with a Big Company? (II)
1.When one has an improvement on existing technology
2.Company is well positioned to develop a technology
3.Company has better scientific support in terms of skilled manpower & R&D center 4. Some other logic??!!!

Start a Company…
…or Partner with an Existing one?
This is a choice that has to be made for commercially attractive technologies We will discuss:
•Requirements/demands of each development route
•Factors considered when deciding on a route
16/4/2014
51

Academia and Startup companies - Scenario in U.S.A.
•Many large life science companies struggle to develop new commercial products; fill the gap by purchasing/partnering products developed by smaller players
•Passage of Bayh-Dole act in 1980 allowed academic institutions to patent their inventions; a source of innovation for small companies
•Resultant environment supported new companies, rewarded the investors that financed them and encouraged academics to think about how to translate their research
•About 2/3 of life science-based startups originate from academia
16/4/2014
52

Start a Company… …or Partner with an Existing one?
Before we begin to consider what technology lends itself to each route, we must first understand what each route entails.
16/4/2014
53

Starting a Company vs. Partnering: Time Commitment
Starting a company requires lots of extra time and effort from both Inventor(s) and OTD (part of our job).
•Business must be incorporated and issue shares, find a suitable business model and craft a business plan, recruit management and/or board members, raise money.
•Inventor will drive project development in a startup company
•Investors will be betting on options
16/4/2014
54

Starting a Company vs. Partnering: Near-Term Financial Return
Starting a company requires both OTD and inventor to sacrifice short-term license fees (usually OK with OTD)
•All $ invested in a startup is spent on essential costs (IP, development)
•No/low cash reserves
16/4/2014
55

Start a Company… …or Partner with an Existing one?
Now that expectations are set, we can evaluate which development route is more appropriate
16/4/2014
56

(SU-1)A startup is a good choice when… …the technology base is broad
Multiple product opportunities!
-A must for investors
-More shots on goal = better chance of getting a product onto the market
Examples:
-Novel drug vs. Novel drug + methods of finding more (new assays, etc)
-Polymer chemistry with a wide range of applications
16/4/2014
57

(SU-2) A startup is a good choice when… …the technology is “disruptive”
Cutting edge: Sometimes established companies are slower to accept—reduces chances that companies will put adequate resources into the technology and increases development time. (Result = decreased chance of product reaching the market)
Look at Robert Langer’s prophecy of MIT, Boston in next slide
Contrarian: Acceptance also difficult. Often times, this type of technology is a new approach to an old problem that companies have given up on.
16/4/2014
58

16/4/2014
59
Robert Langer of MIT is an ideal example of Cross talk between Science & Business. He feels that next Big thing 20 years from today will be supplied by one of his Start-ups”

“Know-how” is generally unpublished, unpatented technical information that conveys a significant advantage (research technique, manufacturing process)
Know-how is more difficult to transfer to an established company and evolves rapidly
If there is substantial value in the Know-how (cannot be easily engineered), a startup may make more sense
(SU-3)A startup is a good choice when… …lots of “know-how” is involved
16/4/2014
60

Recent University startup (Endocrinology) with a focus on treatments for the vascular complications of diabetes
•Broad technology base—have a lead therapy, two novel screens for finding more and a broad base of IP
•Disruptive technology—initial focus is a “discarded” pharma target
•Valuable Know-how—trade secret toxicity assays to differentiate Vascular’s approach from competition
(SU-4) A startup is a good choice when… Example: Vascular Pharmaceuticals
16/4/2014
61

16/4/2014
62
Partnering with Medium or Big Companies

•Value of University technology is enhanced by existing technology
•Capitalizes on company Know-how, established manufacturing, distribution, R&D infrastructure.
Result = increased chance of product reaching the market
•Often, University technology will be “dominated” by existing IP. Then, partnering isn’t the better choice, it’s the only choice.
(P-1) Partnering a good choice when… …one has an improvement on existing technology
16/4/2014
63

•Complimentary R&D efforts
•Established expertise in area
•Large amounts of early R&D required in an area that investors shy away from
--development financed via product sales/cash on hand vs. via money raised from investors expecting a fixed return amount/timeline
(P-2) Partnering is a good choice when… …a company is well-positioned to develop the technology
16/4/2014
64

Novel class of drugs discovered by Lineberger research group
•An improvement—more specific versions of existing drugs
•Company was well-positioned—Development partner performed chemistry that enhanced the drugs, had established means for assaying them and Know-how related to approaches that have failed
(P-3) Partnering is a good choice when… Example: immunoproteasome inhibitors
16/4/2014
65

Goal or Purpose (A or B) (SU or P) find commercialization route most likely to result in products on the market
•Startup: (A) Partner (B)
•Broad IP Narrow/dominated IP
•Disruptive Improvement
•UNC Know-how Company well-positioned
•Lots of time/effort Less effort
•Low initial $ return Typically some $ upfront
16/4/2014
66

16/4/2014
67
Part-VII

16/4/2014
68
Licensing University Technologies

16/4/2014
69
Licensing University Technologies ? (UL)
1.What does the Inventor get out of it?
2.What motivation does TTO have in facilitating Tech Transfer?
3.Responsibilities towards Government/ Funding Agency
4.Priorities of University, or R&D Laboratories
5.Time constraints
6.Reality Investment/ Venture Capital

(UL-1)What do I get out of it?
•Universities are required to share at least 15% of income with inventors
•In USA, Funding agency or University policies mandate upto 40% of the income be shared with the inventor (among highest in the country)
-- 40% to inventor’s department, 20% to OTD
16/4/2014
70

(UL-2) Licensing expectations:
University or R&D Organization as Licensor
Need to understand motivations of the TTO:
•Requirements of Funding Agency or Govt.
•University priorities
•Time constraints
•Realities of investment climate
•Return on investment
16/4/2014
71

(UL-3) Licensing expectations:
University as Licensor (U.S.A.)
Bayh-Dole act (1980) allowed institutions to patent discoveries made with federal $--but caveats attached to licensing those patents:
1.Preference for US companies; small business over large
2.No assignment of rights (license instead)
3.Grant non-exclusive rights to US Gov’t
4.US manufacturing requirements (flexible)
5.Distribution of $ to inventors (University 40%)
6.Actively promote commercialization of inventions (diligence, non-exclusivity)
16/4/2014
72

(UL-4) Licensing expectations: University as Licensor
University priorities
Many schools seek to use technology licensing, in part, as a tool to:
•Retain best faculty
•Increase research sponsorship
•Promote regional economic development
•Generate publicity (smaller schools)
•Benefit society
16/4/2014
73

(UL-5) Licensing expectations: University
as Licensor
Time constraints
• Many TTOs are very busy (OTD has): -200+ cases per Project Manager -4 “interference” proceedings with USPTO -10 to 20 ongoing negotiations at a time
• Result: -Most of us can size up a potential license deal quickly -Most of us would rather close on a reasonable deal that is less that what we were after then haggle forever
16/4/2014
74

(UL-6) Licensing expectations: University as Licensor
Reality of Investment Community/Venture Capital
•Most larger TTOs will have reasonable idea of what terms will be acceptable / unacceptable to institutional investors
•Deals too slanted to the TTO (inexperienced company negotiator) will have to be re- negotiated later (time constraints!) or will prevent investment and company viability
•Deals too slanted away from the TTO leaves us without “skin in the game,” which can worry investors (not always…)
16/4/2014
75

Managing conflicts of interest
Conflicts of interest refer to outside activities that may:
1.Interfere with an employee’s duty to carry out primary duties
2.Involve inappropriate use of University resources
3.Misuse the name of University
4.Claim University responsibility for conduct/outcome of such activities
*All of the above are not permitted*
16/4/2014
76

If managed properly, University or R&D Organization faculty may, with appropriate oversight:
1.Accept sponsored research $ from a company in which they have equity
2.Serve as an officer in a company in which they have equity and which is based on University or academic institute technology
3.Consult for a company in which they have equity
*Many institutions prohibit these activities (e.g., Stanford)*
Conflicts of interest - Permitted activities
16/4/2014
77

16/4/2014
78
Part-VIII

Elements of Drafting and Patent Licensing
16/4/2014
79

Components
1.Introduction to Drafting
2.Contract Language
3.Principles of Contract Interpretation
4.Contract Drafting Basics
5.Contract Elements in Detail
6.Boilerplate Provisions
7.Patent Licensing
8.Solution to the Patent Licensing Scenario
16/4/2014
80

(1) Introduction to Contract Drafting
•What is the goal of contract drafting?
•How can a contract be precise?
•Who should draft the contract?
16/4/2014
81

(2) Contract Language
What makes contract language “special”?
•Mixture of languages
•Desire to avoid ambiguity
•Habit
•Pressure to conform
16/4/2014
82

Examples of Unusual Language
•Doublets and Triplets
•Deeming
•Here-, there-, and where- words
•Other old-fashioned language
16/4/2014
83

Obligations, Authorisations and Conditions
•Avoid the overuse of “shall” Use “will” to state a future fact
 Use “shall” to state an obligation
 Use “may” to state an option or a right
 Use “must” to state a condition precedent
16/4/2014
84

Cultural Issues
•Articles (a, an, the)
•Tense
•Grammar (particularly prepositions)
•Punctuation
•(Over)Use of Chinese-English dictionaries
16/4/2014
85

Characteristics of Language
1.Short sentences
2.Definite, concrete, everyday language
3.The active voice
4.Tabular presentation of complex information
5.Separate paragraphs and sections, with headings, for separate concepts
6.The absence of highly legal jargon or highly technical business terminology and use of Latin or other foreign languages
7.The absence of double or multiple negative
8.The use of multiple columns of text if the font is small
16/4/2014
86

16/4/2014
87
Example ???

Benefits of Drafting in Plain English
•Increased Efficiency and Understanding
•Fewer Errors
•Positive Image for the Legal Profession
•Compliance with statutory Requirements
•BUT: There is resistance!
16/4/2014
88

(3) Principles of Contract Interpretation
I.The document must be read as a whole
II.The Literal and Golden Rules
III.Ut res magis valeat quam pereat
IV.Contra Proferentem
V.Noscitur a sociis
16/4/2014
89

Principles of Contract Interpretation
VI.Ejusdem generis
VII.Expressio unius est exclusio alterius
VIII.Commercial (purposive) Purpose
IX.UCC §3-114 on Contradictory terms.
16/4/2014
90

(4) Structure of a Contract
•Title
•Introductory paragraph
•Preamble / Recitals / WHEREAS Clauses
•Definitions
•Operative Clauses
•Representations, warranties, covenants, indemnities, guaranties, releases
•Events of default and remedies
•Boilerplate
•Signature Block
•Exhibits and Attachments
16/4/2014
91

Titles
•All CAPITAL letters
•Cantered and Underlined
•Use a generic term
16/4/2014
92

Introductory Paragraph
Example:
•This Agreement (hereinafter referred to as the "Agreement") is made by and between National Institute of Immunology (NII) or XYZ (hereinafter referred to as "Licensor"), a corporation with principal offices at New Delhi, India & ABC Company, Connecticut, U.S.A. (hereinafter referred to as "Licensee").
16/4/2014
93

Preamble / Recitals
•WHEREAS …
Facts about:
•Relationship and goals of the parties
•Nature of the transaction
•Other related transactional documents
… The parties agree as follows:
16/4/2014
94

Definitions
Inclusive:
“Intellectual Property” means intellectual
property as that term is generally used and
includes all patents, copyrights, and trademarks.
Exclusive:
“Intellectual property” means patents, copyrights,
and trademarks.
16/4/2014
95

Signature Block
The Parties agree to the terms of this Agreement above.
Licensor
XYZ Inc.
By: ________
Name: Purnima
Title: President
Licensee
ABC Company
A Limited Company
By: __________
Name: Jeff Marshall
Title: Owner
16/4/2014
96
(Only University Authorized Person will sign)

(5) Contract Elements in Detail
•Representations and Warranties
•Covenants
•Conditions Precedent
•Remedies
•Language to soften provisions
16/4/2014
97

Representations and Warranties
•Distinction is not normally important
•They tend to be coupled:
“Party represents and warrants that…”
•Creates a snapshot of the facts
•Important for assigning risk and due diligence
•Drafted in present or past tense
16/4/2014
98

Covenants
•Affirmative covenants
•Negative (Restrictive) covenants
•Financial covenants
Example:
“Licensee shall pay Licensor a royalty of five
percent (5%) of Licensee's selling price for each
Licensed Product manufactured, used, or sold by
Licensee in the Territory or imported by Licensee
into the Territory.”
16/4/2014
99

Conditions Precedent
•Requirements that must be satisfied before a party has to perform or before the contract is enforceable
•Simultaneous Closing vs. Delayed Closing
16/4/2014
100

Remedy Provisions
•Triggering Event  Remedy
Four types
–Termination
–Acceleration
–Indemnification
–Liquidated Damages
16/4/2014
101

Remedy: Termination
“In the event Operator defaults in the performance of any covenant or agreement made hereunder, as to payments of amounts due hereunder or otherwise, and such defaults are not remedied to the Supplier’s satisfaction within ten (10) days after notice of such defaults, the Supplier may thereupon terminate this agreement and all rights hereunder of the Operator but such termination shall not affect the obligations of the Operator to take action or abstain from taking action after termination hereof, in accordance with this agreement.”
16/4/2014
102

Remedy: Acceleration
“Whenever, within the sole judgment of Seller, the credit standing of Buyer shall become impaired, Seller shall have the right to demand that the remaining portion of the contract be fully performed within ten (10) days.”
16/4/2014
103

Remedy: Indemnification
•Breaching party indemnifies (pays back) innocent party for all costs, damages and losses suffered as a result of the breach
•Could be limited by baskets or caps.
16/4/2014
104

Remedy: Liquidated Damages
•Specific payment upon occurrence of certain event.
Could be unenforceable (a penalty):
•Is the actual damage from breach difficult to calculate?
•Was a good faith effort made to estimate the damage?
16/4/2014
105

Softening Remedies
•Materiality
“[Breach]…in any material respect.”
•Grace (cure) Periods
16/4/2014
106

Softening Contract Provisions
Good Faith
Reasonable Efforts
Diligent Efforts
Best Efforts
Stronger
16/4/2014
107
(Strong Technology) (Weak Technology)

(6) Boilerplate Provisions
What does “boilerplate” mean?
(A description of uniform language used normally in legal documents that has a definite, unvarying meaning in the same context that denotes that the words have not been individually fashioned to address the legal issue presented); or
(Slang for provisions in a contract, form or legal pleading which are apparently routine and often preprinted) ???? Think if we should always use this??
•Miscellaneous
•Pre-litigation planning
•NOT unimportant!
16/4/2014
108

Arbitration
•Why go to arbitration?
Example Clause:
“Any controversy or claim arising out of or relating to this Agreement, or its breach, is to be settled by arbitration administered by [organization] in accordance with its [subject matter] Rules.”
•Arbitration or Mediation? (Indian or International)
16/4/2014
109

Choice of Law
•ALWAYS include this provision
•Which law should you choose?
Example:
“This Agreement and the rights and obligations of the parties hereunder shall be governed by, and construed and interpreted in accordance with, the laws of the State of XYZ, or Arbitration act of India 1996), without regard to its choice of laws principles.”
16/4/2014
110

Consent to Jurisdiction
•Choice of forum provision
Example:
“Each party shall submit to any court of competent jurisdiction for purposes of the enforcement of any award, order or judgment. Any award, order or judgment pursuant to arbitration is final and may be entered and enforced in any court of competent jurisdiction.”
16/4/2014
111

Waiver to Trial by Jury
•Why waive the right to a jury?
Clause must be:
•Binding on both parties
•Conspicuous – bold or CAPS
16/4/2014
112

Counterparts
•Contract may be executed separately by parties
•Common for international agreements
16/4/2014
113

Headings
•What is the proper function of headings?
Example:
“The descriptive headings of the Articles, Sections and subsections of this Agreement are for convenience only, do not constitute a part of this Agreement, and do not affect this Agreement’s construction or interpretation.”
16/4/2014
114

Severability
•Remove (sever) void provision and interpret the remainder
•Remainder must still represent the bargain
16/4/2014
115

Integration
•The contract is the whole agreement
•No other oral or written promises
•Invokes the Parol Evidence Rule
16/4/2014
116

Waivers
•No Oral Waivers
•Effect of failure or delay to enforce rights
•Written waivers are limited to one occasion
16/4/2014
117

Amendments
•In Writing
•Signed
•Identify the original agreement
Example:
“The parties may amend this Agreement only by a written agreement, signed by the parties, that identifies itself as an amendment to this Agreement.”
16/4/2014
118

Assignment and Delegation
•Assignment of rights or delegation of duties to a third party
•Only with prior written consent from other party
•Issue of control – important to know who you are dealing with
16/4/2014
119

Costs and Expenses
•Parties cover their own expenses unless otherwise stated.
•Minor, but it avoids arguments
16/4/2014
120

Further Assurances
•Attempts to deal with unforeseen circumstances
Example:
“The parties agree to do such further acts and things and to execute and deliver such additional agreements and instruments as may be reasonably necessary to give effect to the purposes of this Agreement and the parties’ agreements hereunder.”
16/4/2014
121

(7)Patent Licensing
•What is a license?
•Types of Licenses
–Exclusive License
–Non-Exclusive License
–Paid-Up License
–Running Royalty License
–Cross License
16/4/2014
122

Structure of a License Agreement
•Title
•Introductory Paragraph
•Preamble / Recitals
•Definitions
•Grant
•Royalties
•Representations and Warranties
•Term and Termination
•Boilerplate provisions
•Signature Block
16/4/2014
123

Definitions
•Licensed Patents
•Licensed Products
•Territory
16/4/2014
124

Patent Marking
•Why is marking important?
•Licensor may ask to inspect Licensee’s products
16/4/2014
125

Patent Enforcement
•Who should sue infringers?
•Do we always want to sue infringers?
•How should the court award (compensation) be distributed?
16/4/2014
126

Representations and Warranties
•What should the Licensor promise?
–That the patent is valid?
–That the Licensor can grant a license?
–That there are no rights of third parties?
•What should the Licensee promise?
–Paying Royalties?
–Best efforts in selling product?
16/4/2014
127

Improvements
•Licensor’s Improvement
–Can the Licensee use it?
–Additional Fee?
•Licensee’s Improvement
–Can Licensor use it? If so, to what extent?
–If patentable, who gets the new patent?
16/4/2014
128

Indemnification
•Licensor may want to be indemnified against tort actions in relation to use of the final product
•Licensee indemnification depends of bargaining power
16/4/2014
129

Royalty Rate
•Agreed on in negotiations and put into contract
•If disputed, provision for an arbitrator may be utilized
16/4/2014
130

(8) Solution to the Patent License Scenario
•Exclusive or non-exclusive?
•Paid-up or Running Royalty?
•Territory?
•Improvements?
•What if a dispute arises?
16/4/2014
131

16/4/2014
132
Part-IX

Complex Topics to Draft
•WiAV Solutions LLC v. Motorola, Inc., concluding that an exclusive licensee has standing to sue for infringement despite existence of others with right to grant sub-licenses
•Stanford v. Roche and Preston v. Marathon Oil Co., finding that a contract presently assigning future inventions takes precedence over a contract promising to assign in the future
•Stanford v. Roche, holding that the Bayh-Dole Act does not supersede the requirement to get assignment of invention from employee
•Tessera, Inc. v. International Trade Commission, ruling that exhaustion of a patent occurs on sale by licensee, not on payment of royalties by licensee
•Sunbeam Products, Inc. v. Chicago American Manufacturing LLC, determining the rejection of license in bankruptcy does not terminate the agreement, and a trademark licensee retains license rights despite being excluded from effect of 365(n)
•Rates Tech., Inc. v. Speakeasy, Inc., concluding that a no challenge clause in a settlement agreement is unenforceable if settlement occurred before litigation
•(Source: http://www.bna.com/drafting-patent-license-p17179870735/)
16/4/2014
133

(9)Precedents
•Where can we find precedents?
•Use multiple, relevant precedents
•Get first and final drafts
•Think before copying
•Once the Licensing Document is final, destroy earlier versions? Why! (Legal issues)
16/4/2014
134

16/4/2014
135
Thanks
(Please feel free to contact me on rdhar_in@yahoo.com)

Dr. Ravi Dhar on " Licensing Technologies: Principals & Dynamics"

More Related Content

What's hot

Similar to Dr. Ravi Dhar on " Licensing Technologies: Principals & Dynamics"

More from Dr. Ravi Dhar

Recently uploaded

Dr. Ravi Dhar on " Licensing Technologies: Principals & Dynamics"