Negotiating intellectual property rights between industry and university can be very complex and sometimes contentious. This presentation covers the key areas of negotiating strategy that tries to find common ground.

1.  DR. TATIANA LITVIN-VECHNYAK
 PROF. DJ NAG
Acknowledgment to Alan Naidoff, ex-Merck

2. KEY TOPICS FOR TODAY’S
DISCUSSION
 General Philosophy
 Who Owns The Foreground IP*
 Rights to Background IP*
 IRS Issues
 Publication*
 Patent Prosecution*
 Patent Enforcement*
 Research, Development & Commercialization*
 Improvements*
 Other Issues
 Conclusions

3. GENERAL PHILOSOPHY:
INDUSTRY PERSPECTIVE
 Looking to university/research institution for:
 subject matter expertise;
 special skills/equipment/research tools;
 Increase resources
 University provides Research, not Development (well, maybe not?)
 IP among most strategic assets
 Protect product development investment
 Control competition, product differentiation
 For many, without IP, you’re out of business
 Proper Case Selection – Too proprietary, keep in-house.
 Industry has competition

4. Pharma/Biotech
 IP provides licensing
revenue and product
protection
 If we pay for the
research, why don’t we
own it (results
and/or IP)
 Exclusivity maybe the
key
 Only 1 or a few patents
are possibly relevant
IT
 IP provides defensive
protection
 Due to cross-licenses,
may be little value in
owning patents even if we
pay for it.
 Non-exclusive license is
all we need.
 500,000+ patents are
possibly relevant

5. GENERAL PHILOSOPHY:
UNIVERSITY/RESEARCH
INSTITUTION PERSPECTIVE
 IP is important to a Research Institutional (Bayh-Dole) but
is not essential or top priority as compared to industry. We
protect it when commercially viable or requested by an
industry collaborator
 More important to publish, obtain grants and educate
students.
 Protection of intellectual property to encourage
commercialization is an obligation under Bayh-Dole for
federally funded research and is increasingly a goal outside
of federal funding
 Difficult for institution to carry unreimbursed IP costs for
long; thus the goal is to patent when partnership w/ industry
is likely.

6. WHO OWNS THE
FOREGROUND IP?
INDUSTRY PERSPECTIVE
 IP among most strategic assets; goes to the core of industry
vitality and objectives
 Possible licensing revenue; necessary for viable product
 Pharma: If we pay for it, we need access?
 IT: may provide more value to have school own it. Better
able to negotiate overhead fees (≈50-55% of funds).
 Differentiate: new compound /
transferred material/research tool
 Ownership vs. License Right (exclusive/non-exclusive)
vs. Option right

7. WHO OWNS THE
FOREGROUND IP?
UNIVERSITY/RESEARCH
INSTITUTION PERSPECTIVE
 ** Distinguish between Service Agreement, Sponsored Research
Agreement and Collaborative Research Agreement
 Based on whose employees invented or created it
 Rarely is IP developed by industry funds alone – Bayh Dole and
other implications
 Research projects rarely reflect the entire cost, even when “full”
indirect costs are included
 Government funds created the specialized research facility,
equipment and capabilities required for the project
 Background IP
 Government-owned inventions have additional considerations
 Public domain is OK for some types of inventions

8. WHO OWNS THE IP?
UNIV./RES. INSTITUTION
PERSPECTIVE (CONT’D)
 Other arrangements could affect university tax-exempt bond
status
 Revenue Procedure 97-14
 “safe harbor” for certain types of activities
 “The sponsor must pay a competitive price for use.”
 License fee must be determined at the time the resulting technology is
available for use

9. BACKGROUND RIGHTS:
INDUSTRY PERSPECTIVE
 If we’ve paid for the research and can’t benefit from the
discoveries because of your blocking technology, is that fair?
 Professor in position to contaminate new research with
background IP.
 When we license something we expect to be able to use it.

10. BACKGROUND RIGHTS:
UNIVERSITY/RESEARCH
INSTITUTION PERSPECTIVE
 Granting a sponsor an unfettered right to any and all
background technology
 Ties up the technology
 If free, gives sponsor un paid-for benefits
 Can impact researchers who aren’t benefiting from the
sponsored research
 Government-owned technology licensed separate from the
research agreement
 Look to provide research-only licenses to others, as needed

11. IRS ISSUES: INDUSTRY
PERSPECTIVE
 Industry recognizes the need for universities to protect tax-
exempt status
 Rev. Proc. 97-14 is cited as reason for not giving preferential
treatment in licensing
 Industry feels that tax issues may be used as a smokescreen
or shield in negotiations to block certain options
 A non-exclusive license is not ownership

12. IRS ISSUES:
UNIVERSITY/RESEARCH
INSTITUTION
PERSPECTIVE
PERSPECTIVE
 Research Universities have tax-exempt status
 Buildings some times are building with money from tax-
exempt bonds – sets limits
 “Over-use” of University facilities by for-profit corporation
may violate permitted use

13. PUBLICATION: INDUSTRY
PERSPECTIVE
 Industry understands university/research institution’s need
to publish
 Industry may seek “reasonable” limitations on publication
right
 Exclusion of confidential information
 Exclusion of information that adversely affects patent rights
 Post-AIA Changes

14. PUBLICATION:
UNIVERSITY/RESEARCH
INSTITUTION
PERSPECTIVE
 University/research institution must publish but can:
 Agree to delay for a short period of time to allow for patent
protection
 Agree not to publish someone else’s (identifiable) confidential
information

15. PATENT PROSECUTION:
INDUSTRY PERSPECTIVE
 Industry usually more aware of competitive environment
and can direct prosecution accordingly; timing of filings,
countries, claim structures
 Depending on exclusivity, industry usually pays for some or
all of patent prosecution.
 Whoever owns or has exclusive license should control and
pay for prosecution.

16. PATENT PROSECUTION:
UNIVERSITY/RESEARCH
INSTITUTION PERSPECTIVE
 We must control prosecution and counsel for our inventions
 It’s our asset!
 However, copies and allows (and encourages) comments from
industry partner (Licensee)
 May also allow industry to choose patent counsel provided
counsel is acceptable and will recognize research institution as
client
 Costs generally to be paid by exclusive licensee for any
commercialization agreements other than reagents

17. PATENT ENFORCEMENT:
INDUSTRY PERSPECTIVE
 Industry in the business of protecting technology and using patent
litigation to protect competitive position
 Industry pays for its own participation; damages may be split with
university/research institution depending on exclusivity, royalties and
university/research institution involvement
 Standing to sue likely to require “substantially all rights” under the
patent.
 Orange Book listing requires exclusive rights

18. PATENT ENFORCEMENT:
UNIVERSITY/RESEARCH
INSTITUTION PERSPECTIVE
 Cautious approach to risk
 Balance with exclusive Licensee partner
 Funding of activity
 Resource management
 Non-exclusively licensed technology – litigation is a rarity
 Not generally worried about being co-plaintiff, so long as
licensee pays but reputation is important
 Wants a path to make life-saving drugs available in
developing countries

19. RESEARCH, DEVELOPMENT
& COMMERCIALIZATION:
INDUSTRY PERSPECTIVE
 Industry will develop and commercialize if economically
favorable to do so; specific diligence obligations are
disfavored, unpredictable and often inconsistent with other
products
 Funded product development program in lieu of milestones
 Unrestricted territory and field of use

20. RESEARCH, DEVELOPMENT &
COMMERCIALIZATION:
UNIVERSITY/RESEARCH
INSTITUTION PERSPECTIVE
 University/research institution has affirmative obligation to
bring technologies forward so that the public can benefit
 “Putting it on the shelf” breaches this obligation
 Must have due diligence obligations that allow them to find
another way if technology is not being moved forward by
company
 Lab must be free to continue research & develop new or even
competing technology
 Need to protect future careers of inventors from
infringement blockade

21. IMPROVEMENTS:
INDUSTRY PERSPECTIVE
 Industry would like to have all future improvements made to
a sponsored research invention be made available
 The improvement that is made by university should be
licensed under the same terms as the original invention
 University should not “double dip” for the same kind of
invention
 University should not work with competitors with the
original invention to create an improvement that may be
competitive to the sponsor

22. IMPROVEMENTS:
UNIVERSITY/RESEARCH
INSTITUTION PERSPECTIVE
 Improvements covered by existing patents and/or funded by
Industry Partner vs.
 Improvements NOT covered by existing patents (but closely
related) or NOT funded by Industry Partner
 Research institution position is that improvements covered
by existing patents AND funded by industry partners follow
terms of contract. Everything else is a separate negotiation.

23. ADDITIONAL TOPICS FOR
DISCUSSION …
 Faculty consulting – pitfalls / benefits; impact on
collaboration & relationship
 Research tools/MTA – how is the distribution of research
materials handled?
 Valuing the “outcome” of sponsored or collaborative research
– timing (before or after?); expectations and importance of
Statement of Work (description)
 Preferences – how do universities/research institutions and
companies choose partners or collaborators?

24.  Collaborative research provides universities
and industry (and society) with substantial benefits
 The parties must be willing to strike a balance between
their often conflicting interests, especially regarding:
 IP ownership and rights retained by the university or
granted to the research sponsor or collaboration
 Handling (& licensing) co-owned inventions arising
from joint research projects
 Right to the free publication of results
 Making inventions available under conditions that
promote their effective development and utilization
 Few issues cannot be resolved if the parties are
motivated to obtain the many benefits of sponsored or
collaborative research