Negotiating a licensing agreement from a university or a national
lab can be tricky. The top commercialization
priority for universities and the government is to make its research and
knowledge available for the benefit of the general public. This is contrary to the commercialization priorities
of other IP holders, which often prioritize financial benefit and competitive
advantage over the benefit to the general public. Therefore, in a license agreement, a
university or the government often requires a “development and commercialization
plan.” The key motivation behind such requirement
is to ensure that the technology will not be shelved by the licensee of the
technology.
The development and commercialization plan varies greatly
from deal to deal. Sometimes, a general
plan to develop and commercialize the technology is enough. The plan may be part of the business plan on
developing the technology based product or service. Sometimes, the plan may call for a detailed
schedule with built-in performance milestone.
For example, a development and commercialization schedule for a
pharmaceutical compound may include the following milestones. The milestones are often pegged with a
timeline. The achievement of each
milestone may trigger a payment to the university or government licensor.
·
Identification of lead compound(s)
·
Completion of preclinical investigation of the
lead compound
·
Filing of Investigational New Drug (IND) Application
with the FDA
·
Completion of Phase I clinical trials
·
Completion of Phase II clinical trials
·
Completion of Phase III clinical trials
·
Filing of New Drug Application (NDA)
·
FDA’s approval of the New Drug Application (NDA)
A development and commercialization plan should incorporate
relatively “firm” milestones. Ambiguous
milestones can cause future disagreement over whether a milestone performance is
satisfactory and therefore triggers a payment to the licensor. Usually, commencement of a next phase milestone
should be deemed as the “satisfactory completion” of a previous milestone and
such definition should be included in the license agreement.
Failure to “hit” the milestones (nonperformance) usually
triggers some kind of “penalty.” The severity
of the penalty can vary from loss of an option, loss of exclusivity, to termination
of the license. Because of the unpredictability
of the technology development, sever penalty such as termination of the license
is usually tied with the right to cure including a grace period to cure the
non-performance.
In general, if you are interested in obtaining a technology
from a university or the government, be aware of the development and commercialization
requirement. Before the negotiation,
think through how you would use the technology, how you would incorporate the technology
into a product or service, and what it would take to bring the lab-based
technology into the commercial product/service your envisioned. You may want to start with a business plan. Then, you may be able to distill your
business plan into a development and commercialization plan for the license
agreement. In addition, be creative with
the rewards or penalties triggered by performance milestones to minimize
severity of a penalty.
Thanks for reading.
Connie
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