License the Invention
A License is an agreement for someone to use your invention under agreed terms and conditions. What are actually licensed are the intellectual property rights that attach to your invention. The intellectual property may be a patent to an invention, copyright for software, trademarks and identifiers for your program, or may simply be technical information and data that is best managed by license agreements.
A license should explain the rules by which the invention is to be shared in order to help everyone understand their obligations in a relationship and provide a resolution path should the relationship need to be adjusted. Licenses should be designed to meet the expectations of the institution, the inventor, and user.
There are two basic categories of licenses: Commercial (which are revenue-generating) and Academic (Research) Use or Open Source (which increase visibility and benefit the reputation of both LLU and the researcher).
The commercial licensing process begins with negotiations with interested users, including industry partners and start-up companies. Term sheets are exchanged, which summarize the essential business terms of the licensing agreement, including the following items:
LLU’s licensing objective is to obtain widespread use of its technologies. The scope of the license rights should be commensurate with the licensee’s product development plans and the market. The scope includes issues such as:
- Field of use limitations: this could include technological application, method of production, or production of a specific product
- Territory limitations: limits the use to a specific geographical area (e.g. the United States)
- Exclusive vs. Non-exclusive: Under an exclusive license, LLU agrees not to grant other licenses with the exact same scope of rights to anyone else. This does not preclude LLU from issuing multiple licenses with different scopes. Under a non-exclusive license, LLU is free to grant licenses with the same scope of rights to other users.
Together with the royalties and other monetary terms, the value depends on the scope of the license rights and the market value of the technology licensed.
Royalties are paid by the licensee when products or services that require the use of the technology are sold. Royalties can be expressed as a percentage (%) of sale or a fee per selling unit. Royalty rates vary according to the industry, the significance of the invention and the base upon which the royalty is applied (e.g., unit, component, subsystem.)
To learn how incoming royalties are distributed to the researcher, school and institution, see Royalties and Income.
Exclusive licenses usually provide the licensee with the right to sub-license or authorize others to make, use and sell the LLU technology to facilitate widespread use. Revenues received by the licensee from sub-licenses are shared with LLU.
Minimum royalty payments are established to encourage diligence in sales of products / services requiring the use of the technology.
Recovery of the costs incurred for patent registration to protect the technology is part of the license.
Performance (Diligence) Milestones
University technologies often require a significant period of time and effort in product development before they are ready for the market. During the development phase, licensees are required to provide periodic reports and meet specific milestones in order to retain a license, especially an exclusive license.
After a technology is licensed, Research Affairs - Technology Transfer manages the license to ensure all terms and conditions are adhered to and the technology reaches its fullest potential. If the licensee does not comply, steps may be taken to terminate the license, in which case the invention would be available for licensing to another company.
Certain types of intellectual property (copyrighted software and biological materials) may be best disseminated to the public through ways other than traditional licensing on a revenue generating basis. These other ways include research use licenses for academic purposes (e.g. material transfer agreements) and open source licensing for software (which can be for both research or commercial use). Even though such transfers and dissemination are not revenue generating to the University, they promote visibility and public use of University research, benefit the researcher’s reputation in his/her field, and can potentially aid in the University’s mission for public good.
Academic (Research) licenses permit research institutions or individual researchers to use a program or material free of charge or at a research use rate but do not permit those institutions to transfer the software or materials to third parties or make commercial use out of the technology. Such research use licenses also leave open the possibility of future traditional revenue generating commercial licensing.
Open Source licenses allow free and less restricted distribution of software, including commercial use, and promote testing and further development and adoption of the software in a collaborative environment. Most federally funded research in software development requires open source dissemination. However, open source licenses often do limit future proprietary commercial licensing potential.
What kind of license to use? Everything depends on your goals
Research Affairs - Technology Transfer starts licensing conversations with inventors by asking about the goals of the research project and the special considerations, nature and functions of the technology.
The critical questions are:
- What licensing strategy will have the highest likelihood of bringing your invention into use?
- How can we adapt to information we discover during the licensing process? and
- What level of involvement is the research group committed to in order to bring the work into public use?
LLU does not use a “one-size fits all” approach for licensing. The business model and contract terms will depend on the nature of the technology and desired transaction.