This document summarizes key intellectual property issues in licensing. It discusses defining terms, inventorship vs ownership, the components of an IP license grant including recipient, purpose, scope, exclusivity and sublicense rights. It also covers IP warranties, government collaborations, and reversion of rights. The document provides examples of IP license grant language for biotech and software licenses.

1. VLP Virtual Law School
IP for Non-Lawyers
March 4, 2009
Ellen Leznik, Founding Partner, Virtual Law Partners LLP
eleznik@virtuallawpartners.com
(650) 321-1393
Dianna DeVore, Partner, Virtual Law Partners LLP
ddevore@virtuallawpartners.com
(415) 963-4362

2. Select IP Issues in Licensing
Ellen Leznik, J.D.
ELeznik@VirtualLawPartners.com
March 4, 2009
VIRTUAL LAW PARTNERS LLP

3. What is Intellectual Property?
 Patents
Exclusive rights granted by Federal Government for a specific period of time.
 Copyrights
Protection provided to a wide range of “original works of authorship” that are fixed in a
tangible form of expression, such as software, literary works, photographs, audio and
video recordings and other forms of intellectual works.
Example of notice: © 2009 Virtual Law Partners LLP
 Trademarks
Words, names, symbols or other devices used to identify and distinguish business, goods
or services.
State and Federal registration.
™ - not yet registered
® - registered
 Trade Secrets
Confidential business information which provides an enterprise a competitive edge.
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4. Importance of Definitions
 Ability to define terms
Often a sign of whether the deal has been sufficiently well understood and
defined.
 “Nesting” definitions vs. circular definitions
Example of a “nesting” or “hierarchical” definition:
“Collaboration Patents” shall mean all foreign and domestic patents (including
extensions, reissues, re-examinations and inventors certificates relating
thereto) that issue from patent applications (including substitutions,
provisionals, divisionals, continuations and continuations-in-part of such
applications) that claim inventions in the Collaboration Know-How and that are
filed by or on behalf of one or both of the parties hereto.
“Collaboration Technology” means the Collaboration Patents and the
Collaboration Know-How.
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5. Importance of Definitions (cont’d)
 “Nesting” definitions vs. circular definitions
(cont’d)
Example of a circular definition:
“Licensed Products” means all products the manufacture, use or sale
of which involves the use of Licensed Technology.
“Licensed Technology” means all patents and know-how owned and
controlled by Company which are necessary or useful in the
manufacture, use or sale of Licensed Products.
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6. IP Rights: Inventorship vs. Ownership
 Inventors/Creators
Employees
Consultants
Contractors
Researchers (academic, non-profit, government)
Collaborators
 Transfer of ownership
Assignment
License
Reserved rights
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7. IP Rights: What is Included?
 A bundle of rights
Use
Territory
Time
Exclusion of others
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8. IP Rights: License Grant
 Recipient
Single entity
Affiliates
Can also be done through a sublicense
Consider what effect it may have on other terms, such as
minimum royalties
Joint Ventures
Consider issues relating to license termination issues, such as
when your JV was not properly established, JV is dissolved, or
one party purchases all JV interests
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9. IP Rights: License Grant (cont’d)
 Purpose
Patent license: use, make, have made, offer
for sale and sell.
Copyright license: copy, make derivative
works and reproduce.
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10. IP Rights: License Grant (cont’d)
 Scope
Territory
Be precise when defining Territory
Example: China
“Territory” shall mean the People’s Republic of China, including
all provinces and regions thereof, but excluding Hong Kong.
Field of use
Need to specify if licensed technology has applications in more
than one field
Potential pitfall – indication splitting (“Amgen/Ortho” problem)
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11. IP Rights: License Grant (cont’d)
 Exclusivity
Exclusive vs. non-exclusive
Exclusive option vs. exclusive license
Exclusive option vs. right of first refusal
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12. IP Rights: License Grant (cont’d)
 Sublicense Rights
“Have made” implies sublicense rights
Restrictions on sublicensing
Impact on other provisions: royalties, termination,
confidentiality, inventions
 Transferability
Potential pitfall: conflict with the Assignment provision
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13. IP Rights: License Grant (cont’d)
 Royalty/Fee
Royalty-bearing
Fee-bearing
Royalty-free
Fully-paid
 Term
Patent license vs. blended license (patent plus know-how)
Term of license grant vs. term of royalty
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14. IP Rights: License Grant (cont’d)
 Sample license grant clauses
Biotech:
“BiotechCo grants to PharmaCo and its Affiliates an
exclusive, royalty-bearing license under Licensed
Technology to research, develop, make, have made,
import, export, market, sell and distribute Licensed
Products in the Territory in the Field.”
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15. IP Rights: License Grant (cont’d)
 Sample license grant clauses (cont’d)
Software:
“Subject to the terms and conditions of this Agreement,
SoftwareCo hereby grants to Customer a fee-bearing, royalty-
free, nonexclusive, nontransferable license to use the Software
through the SoftwareCo Servers. Except as specifically
authorized by this Agreement, no license is granted under this
Agreement to Customer to distribute the Software for use,
whether or not as part of the SoftwareCo Services. SoftwareCo
shall be responsible for obtaining all third party software
licenses required to provide the SoftwareCo Services.”
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16. Collaborations with Government
 Company’s existing inventions
Template:
“Background Invention” means an Invention conceived and first
actually reduced to practice before the effective date of this
Agreement. Background Inventions shall be included in Appendix B.
Negotiated:
“Background Invention” means an Invention conceived or reduced to
practice before the effective date of this Agreement.
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17. Collaborations with Government
(cont’d)
 New inventions resulting from collaboration
Template:
“CRADA Subject Invention” means any Invention of a VA Employee, of
Collaborator, or of both a VA Employee and Collaborator, conceived or
first actually reduced to practice in the performance of the Statement of
Work [15 U.S.C. 3703(9), (10)].
Negotiated:
“CRADA Subject Invention” means any Invention of a VA Employee, of
Collaborator, or of both a VA Employee and Collaborator, conceived
and reduced to practice in the performance of the Statement of Work
[15 U.S.C. 3703(9), (10)].
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18. Collaborations with Government
(cont’d)
 Government reserved rights - third party license
Pursuant to 15 U.S.C. § 3710a(b)(1)(B), if VA grants an exclusive license to a
CRADA Subject Invention made solely by a VA Employee or jointly with a
Collaborator employee, the Government retains the right to require Collaborator
to grant to a responsible applicant a nonexclusive, partially exclusive, or
exclusive sublicense to use the CRADA Subject Invention in Collaborator’s
licensed field of use on terms that are reasonable under the circumstances, or,
if Collaborator fails to grant a license, to grant a license itself. The exercise of
these rights by the Government will only be in exceptional circumstances and
only if the Government determines (i) the action is necessary to meet health or
safety needs that are not reasonably satisfied by Collaborator, (ii) the action is
necessary to meet requirements for public use specified by Federal regulations,
and such requirements are not reasonably satisfied by Collaborator, or (iii)
Collaborator has failed to comply with an agreement containing provisions
described in 15 U.S.C. § 3710a(c)(4)(B). The determination made by the
Government under this paragraph is subject to administrative appeal and
judicial review under 35 U.S.C. § 203(2). [Negotiated: No license or sublicense
shall be granted to a third party prior to the final outcome of such appeal.]
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19. Collaborations with Government
(cont’d)
 Government reserved rights – non-exclusive royalty-free
license to collaboration inventions.
Consistent with the definition of a DAP and pursuant to 15 U.S.C. §
3710a(b)(1)(A) for CRADA Subject Inventions owned solely by VA or
jointly by VA and Collaborator and licensed pursuant to the option of
Paragraph 6.2 or 6.3, Collaborator grants to the Government a
nonexclusive, nontransferable, irrevocable, paid-up license to practice
the CRADA Subject Invention or have the CRADA Subject Invention
practiced throughout the world by or on behalf of the Government. In
the exercise of this license, the Government shall not publicly disclose
trade secrets or confidential commercial or financial information that is
privileged or confidential within the meaning of 5 U.S.C. § 552(b)(4) or
which would be considered privileged or confidential if it had been
obtained from a non-Federal party, except where authorized by law.
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20. Collaborations with Government
(cont’d)
 Government reserved rights – non-exclusive royalty-free
License to collaboration inventions made solely by the
collaborating company
Template:
Pursuant to 15 U.S.C. § 3710a(b)(2), for CRADA Subject
Inventions made solely by an employee of Collaborator,
Collaborator grants to the Government a nonexclusive,
nontransferable, irrevocable, paid-up license to practice the
CRADA Subject Invention or have the CRADA Subject
Invention practiced throughout the world by or on behalf of the
Government for research or other Government purposes.
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21. Collaborations with Government
(cont’d)
 Government reserved rights – non-exclusive royalty-free
License to collaboration inventions made solely by the
collaborating company (cont’d)
Negotiated:
Pursuant to 15 U.S.C. § 3710a(b)(2), for CRADA Subject
Inventions made solely by an employee of Collaborator,
Collaborator grants to the Government a nonexclusive,
nontransferable, irrevocable, paid-up license to practice the
CRADA Subject Invention throughout the world by the
Government for research purposes only.
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22. Collaborations with Government
(cont’d)
 Know what you have
when working with academic institutions
when using government grants
when licensing out the resulting technology
 Government contracts and M&A
transactions
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23. IP Warranty
 To give or not to give?
Biotech vs. Software
 Sample provisions
Biotech:
“BiotechCo represents and warrants that it owns or holds
licenses to the BiotechCo Patents and BiotechCo Know-How
and has sufficient rights and power to grant the licenses to
PharmaCo which it purports to grant herein.”
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24. IP Warranty (cont’d)
 Sample provisions (cont’d)
Software:
“SoftwareCo represents and warrants to Customer that:
(i) SoftwareCo is the sole and exclusive owner of the
Software; (ii) SoftwareCo has full and sufficient right, title
and authority to grant the rights and/or licenses granted to
Customer under this Agreement; and (iii) the Software
does not infringe any patent (to SoftwareCo’s
knowledge), copyright, trade secret, trademark or other
intellectual property rights of a third party.”
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25. Reversion of rights
 Failure to meet diligence obligations
 Commercialization of the Product is not
scientifically or commercially reasonable
 Bankruptcy
 Material Breach
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