Licensing
Licensing
The License Process
Agreement Types
Non-confidential Discussion: Upon your company’s initial contact with the licensing representative, we can provide publicly available materials describing the invention for your preliminary review. If you believe that the technology might pose a solution to your company’s needs, then we move to put your company’s technical experts in contact with our inventors to confirm the many specific details surrounding the implementation of the invention in the corporate environment.
Non-disclosure Agreements (NDAs): Often, we will ask your company to sign a Non-Disclosure Agreement (NDA) to protect any proprietary information, including information that may either reside in an unpublished patent application or may not be contained in the published patent. With an NDA in place, the technical teams can meet and discuss the technology.
Option Agreement: Sometimes even after these technical discussions, uncertainties remain about the technology, and a brief period of further testing or evaluation may be desired. We offer Option Agreements to reserve the exclusive right to obtain a license agreement to the company. The Option Agreement will include developmental milestones to be completed by the company before it may exercise the option to obtain a license. Financial consideration for holding this exclusive Option usually includes the company’s reimbursement of the University’s patent costs incurred during the Option Period, as well as an Option Fee.
Term Sheet & License Negotiation: In many cases, no further testing is necessary, and the negotiation of an exclusive or non-exclusive License Agreement can begin. For those companies who have completed licensing transactions with other major research universities, you will find few surprises in our agreements. For companies who are doing such deals for the first time, we recommend referring to our Licensing Principles and License Agreement Terms. Just as every technology is different, so too is every deal – we usually start with a term sheet covering definitions, diligence, and financial terms, but we are ready to discuss adjusting any of the terms that we are empowered to change. These changes would reflect the unique needs of both parties and the economic and practical realities that define the market opportunity being addressed. See the License Agreement Terms section below for more information on standard License Agreements.
Licensing Principles
Universities Are Non-profit and Serve the Public
MUSC has three core missions: education, research, and patient care. In licensing discussions, their primary goal is to ensure the technology benefits the public by reaching the marketplace promptly, while also securing a fair return on the investment made by the university and taxpayers.
Universities Own Their Technology
The Bayh-Dole Act of 1980 allows universities to own inventions made with federal funding, supported by policies that typically grant them ownership of employee inventions, excluding scholarly works like textbooks. Universities usually retain ownership of technology, offering exclusive or non-exclusive licenses while managing patents or copyrights. This approach ensures flexibility to seek alternative commercialization partners if the initial licensee fails to bring the product or service to market.
Reimbursement of Patent Costs
While universities are often willing to take the upfront financial risk to obtain patent protection for their technology, once a third party elects to commercialize the technology, it will be required to take over the financial risk from the university. Typically, an exclusive licensee reimburses the university for all its costs associated with the preparation, filing, prosecution, and maintenance of the licensed patents.
Obligations to the Government
Universities receiving government funding must fulfill specific obligations, including reporting inventions, patent applications, and licenses related to federally funded technologies. Patent applications must acknowledge government funding, and the federal government retains a royalty- free, non-exclusive license for its purposes. Additionally, license agreements must often require that products be substantially manufactured in the U.S.
Diligence
Diligence milestones in university license agreements ensure innovations are actively developed and commercialized to benefit the public. Some examples of diligence milestones include clinical trial stages, achieving prototypes, first sales, or securing financing or patents.
Fair Return
A license agreement should provide for a fair return to the university if the product is successful in the marketplace. For startups, universities often accept equity to offset upfront payments but expect royalties once revenues are generated. Royalty rates depend on factors like profit margins, commercialization costs, competing technologies, intellectual property strength, and license exclusivity. Additional payments may include license fees, milestone payments, and maintenance fees. Licensing revenues are shared with inventors to encourage innovation and are reinvested into future research and development.
Sublicenses
If the license is exclusive, the university may allow the licensee to enter agreements with other third parties through sublicense agreements. The university will expect certain requirements of the license to pass down to the sublicensee and the university will share in sublicense revenues received by the licensee.
Product Liability, Insurance, Indemnification, Warranties
The licensee will indemnify the university, its employees, regents, trustees, etc. against all claims, proceedings, demands, and liabilities of any kind whatsoever. Universities will also require that the licensee obtain appropriate amounts of product liability insurance prior to commercial sale or use of a product. The university will not make any warranties as to the fitness, merchantability, validity of patent rights, etc.
License Agreement Terms
The Zucker Institute’s licenses generally will include the following sections.
Definitions
Of particular importance will be the definition of the technology/patent rights being licensed, the field of use that the licensee can sell the technology, and the geographic scope of the license rights. Additional definitions can include net sales, sublicensee, etc.
Grant of License
- Exclusive vs. nonexclusive
- Field of use (eg., diagnostics, therapeutic, veterinary, etc.)
- Territory (worldwide vs. U.S., etc.)
- Sublicense rights (eg., can the licensee sublicense the technology)
- Reservation to MUSC that it can use the technology for research, education, and academic purposes
- If relevant, reservation of rights to the government
Consideration
- License fee
- Equity, or liquidation payment at exit, if licensee is a startup
- Royalty on sales by licensee and its sublicensee
- Percentage of non-sales based sublicense income (such as sublicense fees)
- Minimum royalties or annual maintenance fees
- Milestone/diligence payments
- Patent Prosecution and Payment
Reporting
Typically, the Zucker Institute requires semi-annual or annual reporting, such reports include:
royalties due, sublicense agreements and payments, and other revenues.
Diligence Terms
The license will provide for certain diligence milestones to be met by the licensee to ensure that the technology is being diligently developed and commercialized.
Sublicense Provisions
Licenses that provide for exclusive rights typically also allow the licensee to sublicense the
licensed technology to third parties. The Zucker Institute will require that all sublicense agreements contain some of the same language as the original license such as: use of the university name, disclaimer of warranties, maintenance of MUSC rights, product liability, confidentiality, and
termination.
Infringement
Generally, an exclusive licensee has the first right to enforce the licensed patents. The Zucker
Institute can join the suit usually upon reimbursement of its expenses by the licensee. If the licensee elects not to pursue enforcement, the Zucker Institute may elect to enforce on its own.
This section will also provide for distribution of any damages between the licensee and the Zucker
Institute after expenses are paid.
No warranties; limitation of liability
The Zucker Institute will not make any warranties as to the fitness, merchantability, validity of
patent rights, etc. The licensee assumes all risk associated with the licensed technology.
Indemnification
The licensee will indemnify the Zucker Institute, MUSC, their employees, regents, trustees, etc.
against all claims, proceedings, demands, and liabilities of any kind whatsoever. The Zucker
Institute may also require that the licensee obtain certain amounts of product liability insurance
prior to commercial sale or use of a product.
Term and Termination
This section provides for the term of the agreement (typically the life of the licensed patents or for
other technologies a defined period of time) and for both parties to terminate the agreement.
Generally, the licensee can terminate the license by providing the Zucker Institute some period of
advance notice, while the Zucker Institute can terminate for breach (eg., non-payment of royalties
or patent expenses, milestone payments, or not meeting diligence requirements).
Technology Licensing Showcase
Let’s work together to create a better future
At the Zucker Institute, we strive to provide a conducive environment that enables innovation. Through our extensive resources, we support researchers in translating their ideas into impactful solutions.
