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Document Sample
Licensing University Intellectual Property
MIT and Stanford as Example Institutions
Joerg-Uwe Szipl, Esq.
Griffin & Szipl, P.C.
Anthony P. Venturino, Esq.
Stevens Davis Miller & Mosher, L.L.P.
Pamela R. Crocker
Raymond L. Owens
Eastman Kodak Company1
AIPLA Japan Committee
April 2004
1/30/2010 1
Introduction
• This presentation is directed to the licensing of
university technology with an emphasis on
technology developed through use of government
funds
• Partially- or wholly-government-funded
• To date, most university-licensed inventions result
from U.S. Government funded research.
1/30/2010 2
Introduction
Benefits of out-licensing (technology transfer)
10
• generation of revenue for research
• unlike grants, licensing revenue can fund activities
unrelated to the licensed technology
• formation of new companies, jobs, markets
• commercialization of technology attracts good
professors (U of California paid $26M in royalties to
7
1129 university inventors in fiscal year 2002.
9
• One professor at U of San Diego made $18M )
1/30/2010 3
Introduction
Patents
A patent gives the owner the right to exclude others
from making, using, or selling the invention for a
period expiring 20 years after patent filing.
Does not necessarily give the right to make, use, or
sell.
Example: your patent may be an improvement on
another patent
1/30/2010 4
Introduction
Patents
To be patentable, an invention must be new, useful,
and non-obvious.
1/30/2010 5
Organization
1. Introductory Statistics
2. Laws and Policies
3. Development of the University Patent
System
4. Organizational Practices
1. Employment agreements
2. Identification of IP
3. When to file for patent protection
4. Marketing and Licensing
5. Enforcement of University Patents
1/30/2010 6
Introductory Statistics
MIT, FY ’02
Invention disclosures received 484
Patents filed 245
Patents issued 126
Licenses concluded 112
Total royalties generated $33.5M
Expenditures on patents $9.1M
1/30/2010 7
Introductory Statistics
Stanford University, FY ‘01
Disclosures received (calendar year) 277
Cases generating income 371
Licenses concluded 137
Total royalties generated $41.2M
Technologies generating over $100K 47
Income generated from liquidated equity $2.1M
1/30/2010 8
Introductory Statistics
Reported to the
Association of University Technology Managers (AUTM)
for FY ‘01
13,569 Invention Disclosures
6,812 New U.S. Patent Applications
3,721 U.S. Patents Issued
4,058 new licenses and options
$1.071 billion license income
1/30/2010 9
Laws and Policies
Such licensing activity increased dramatically after
the passage of the Bayh-Dole Act in 1980
1/30/2010 10
Laws and Policies
Bayh-Dole Act (1980)
•Gave universities (and nonprofits, small businesses)
the right to retain title to and license inventions
resulting from federally sponsored research
•Universities encouraged to collaborate with
commercial concerns to promote the utilization of
inventions
1/30/2010 11
Laws and Policies
Bayh-Dole Act (1980) (cont’d)
•Universities must disclose inventions to federal
agencies
•Universities expected to patent those inventions they
retain (confidentiality of research results protected
for time to allow patenting)
•Government retains nonexclusive, nontransferable,
irrevocable right to practice or have others practice
the invention
1/30/2010 12
Laws and Policies
Bayh-Dole Act (1980) (cont’d)
•March-in rights: gov’t can require the university to
grant a license under reasonable terms
•Preference for U.S. industry, but can be waived
•Government retains nonexclusive, nontransferable,
irrevocable right to practice or have others practice
the invention
•Sharing of royalties with the inventor
1/30/2010 13
Laws and Policies
Stevenson-Wydler Technology Innovation Act (1980)
Facilitated the licensing from the federal laboratories
to the private sector
1/30/2010 14
Laws and Policies
Stevenson-Wydler (1980) (cont’d)
Mandates Federal laboratories to:
(1) actively seek cooperative research with State and
local governments, academia, nonprofit
organizations or private industry;
(2) disseminate information;
(3) establish the Center for the Utilization of Federal
Technology;
1/30/2010 15
Laws and Policies
Stevenson-Wydler (1980) (cont’d)
Mandates Federal laboratories to:
(4) establish and define the basic activities of an
Office of Research and Technology Applications
at each Federal laboratory;
(5) set aside sufficient funding to support technology
transfer activities
1/30/2010 16
Laws and Policies
Small Business Innovation Development Act (1982)
Required federal agencies to set aside funding for
relevant small business R&D
1/30/2010 17
Laws and Policies
Federal Technology Transfer Act (1986)
Amended the Stevenson-Wydler Act
(1) Scientists and engineers are now responsible for, and
evaluated for their abilities to get technology transferred
out of the laboratory
(2) Inventors from Government owned and operated
laboratories (GOGO) are required to receive a minimum of
a 15% share of any royalties generated through patenting
or licensing.
1/30/2010 18
Laws and Policies
Federal Technology Transfer Act (1986) (cont’d)
(3) Directors of government labs, not contract operated, were
given the authority
(1) to enter into cooperative research and development
agreements (CRADAs),
(2) to license inventions that might result from such
arrangements,
(3) exchange laboratory personnel, services and equipment
with research partners and
(4) to waive rights to lab inventions and intellectual
property under CRADAs.
1/30/2010 19
Laws and Policies
Federal Technology Transfer Act (1986) (cont’d)
(4) Allows for Federal employees, both current and former, to
participate in commercial development if there is no
conflict of interest.
(5) Established and created a charter for the Federal
Laboratory Consortium for Technology Transfer.
Responsible for a variety of activities, including training
courses, providing advice and assistance for technology
transfer programs, and functioning as a clearing house for
technical assistance.
1/30/2010 20
Laws and Policies
Executive Order 12591 Facilitating Access to Science
and Technology (1987)
•Assures that Government laboratories can enter into
CRADAs "with other Federal Laboratories, State and
local governments, universities, and the private
sector."
•Federal laboratories will apprise these parties about
their technology transfer opportunities.
1/30/2010 21
Laws and Policies
Executive Order 12591 (1987) (cont’d)
Assures that Government laboratories can enter into
CRADAs "with other Federal Laboratories, State and
local governments, universities, and the private
sector."
Federal laboratories will apprise these parties about
their technology transfer opportunities. It established
the "Technology Share Program" and "Basic Science
and Technology Centers" with university partners.
1/30/2010 22
Development of the University Patent
System
The System Today
All major U.S. research universities have established
intellectual property policies, have set up Technology
Transfer offices, and charged such offices with the
responsibility of procuring, exploiting and protecting
university patents.
Presently, there are thousands of professionals who
manage intellectual property for the universities out of
2
their Technology Transfer offices.
1/30/2010 23
Development of the University Patent
System
The System Today
Universities, both private and public, are now viewed as incubators
of new technology and receive funding from their local state
governments and from federal grants to encourage formation of
new businesses.
More than 50% of the licenses are exclusive licenses to small start-
3
up companies.
More than 3800 start-up companies have been formed in the past
two decades based on research licensed from universities. In fiscal
year 2001, 494 companies were formed as a result of university
12
technology transfer.
1/30/2010 24
Corporate Involvement with
Universities
Universities are also involved in partnership with
federal laboratories and local companies.
States also fund collaboration between private
enterprises and universities to establish separate
research organizations.
1/30/2010 25
Corporate Involvement with
Universities
Examples:
NY State provided funding for the Infotonics Technology
Center, a collaborative initiative among Kodak, Corning and
Xerox, and 14 universities to provide research in photonics
13
and microsystems.
In this collaboration, the participating corporations
receive a non-exclusive license under patents from
Infotonics, but do not receive royalties. A share of the
net royalty income will be paid to the university
participants in connection with their work on joint
R&D projects.
1/30/2010 26
Corporate Involvement with
Universities
Examples:
Eastman Kodak Company is a Founding Member for the
Center For Electronic Imaging Systems at the University of
Rochester.
Under this arrangement, Founding Members made a
payment to the Center and received an irrevocable,
non-transferable, non-exclusive paid up license under
the patents. Patent rights are generally owned by the
University of Rochester.
1/30/2010 27
Microsoft’s Dealings With Universities
Exemplary Programs through which Microsoft Interacts with Universities:
Faculty Summit is an annual event hosted by Microsoft that brings together
faculty partners from various universities to present examples of collaborative
research and discuss, through various forums and seminars, improved
approaches for interaction. Last year’s Faculty Summit included 340
attendees representing 115 universities in 11 countries.
Microsoft tries to partner with the most influential universities in the world.
Currently about 200 universities in 39 countries.
$500M cash and in-kind sponsorship in the last 5 years (lab grants, research
grants, fellowships, etc).
Microsoft hosts dozens of doctoral and post-doc researchers every year.
Each Microsoft Research laboratory has a Technical Advisory Board
comprised primarily of university faculty.
Sponsors, for example, of the Learning Experience Project at Brown
University, Cornell Theory Center, UCSD ActiveCampus Project, Cornell
Inking Technologies, MIT Games in Education.
1/30/2010 28
Corporate View of Problems in Dealing
with Universities
It is becoming increasingly difficult for U.S. companies to
enter into negotiated research programs with Technology
Transfer Offices of universities.
Most companies, when entering into a research project with a
university, are required to give title to patents to the
university, and in exchange, receive a non-transferable, non-
exclusive paid up license to the patents.
In certain instances, the universities are not willing to grant
licenses to the corporate sponsors. In such cases, most
companies do not enter into agreements with the universities.
1/30/2010 29
Corporate View of Problems in Dealing
with Universities
Students and contractors may believe and act as
though they are under no obligation to protect
proprietary information provided by sponsoring
corporations.
Companies should be aware that their proprietary
information may be disseminated to the industry.
1/30/2010 30
Organizational Practices
University View:
Universities have policies and procedures to
effectively develop and transfer technology8
University policies are binding on its employees
under state law14
Decide to
Invention Pursue
Market License
Disclosure Patent
Protection
1/30/2010 31
Organizational Practices
Employment Agreements
1. Educates faculty and prevents inventions from
going out the backdoor
2. Employment Agreement requires faculty to
1. make invention disclosures and assign inventions
2. disclose conflicts of interest (e.g., consulting
agreements)
3. have University retain all data and invention records if
faculty leaves
1/30/2010 32
Organizational Practices
When to Patent an Invention
• Faculty typically discloses the invention to the
University with an Invention Disclosure
• University evaluates the invention’s patentability,
commercial potential, and obligations to sponsors,
and decides whether to file a patent application.
• Stanford: 277 Invention Disclosures (Fiscal Year ’01) -
files on about 50%
• MIT: 484 Invention Disclosures (Fiscal Year ’02) -
files on about 50%
1/30/2010 33
Organizational Practices
When to Start Marketing
• May wish to wait for data and/or publication
especially with embryonic technologies
• Work fast before PCT or foreign filing is due -
universities cannot afford to foreign file
• Some Universities file a provisional application
and market for nine months. If no potential
licenses the technology returns to the Inventor
1/30/2010 34
Organizational Practices
How to Market
• Directly market to select companies. Network and
develop industry contacts through Licensing
Executives Society (LES) or Association of
University Technology Managers (AUTM)
• Mass market by mailing, advertising, listing
technology portfolio on University website
• College of William & Mary www.wm.edu/ip
• Virginia Tech www.vtip.org
• Inventor’s reputation and publications
1/30/2010 35
Organizational Practices
Types of licenses
• Can be exclusive or non-exclusive
• For a particular field of use
• Geographic limitations
• Universities try to avoid assignments due to:
• fear of Licensee bankruptcy
• prevent loss of control
• state law issues
1/30/2010 36
Organizational Practices
Potential License Contract Clauses
• Often licensing fee + running royalties. Can balance lower
up-front fee and higher royalties
• Often require Licensee to pay University’s patent costs4
• Some universities take an equity position in a start-up
company and share the royalties5
• Tech transfer departments directly tied to a University
might defer royalties until product is marketed if Licensee
pays the patent costs and meets milestones
1/30/2010 37
Organizational Practices
Potential License Contract Clauses (cont’d)
• Require the Licensee to use University’s patent
counsel. Universities fear Licensee’s counsel may
obtain only narrow claims.
• Hire Inventor as a consultant through University.
Even with University overhead charges, the
Universities consider this a bargain.
• If Licensee hires the Inventor directly, then the
Inventor must avoid a conflict of interest.
1/30/2010 38
Organizational Practices
Potential License Contract Clauses (cont’d)
• Best efforts by Licensee to bring product to
market
• Milestones, e.g.: technical milestones, minimum
$ invested in development, or sales figures (units
or $), clinical trials stages
• Limit the use of the University name (not to be
seen endorsing a product)
1/30/2010 39
Organizational Practices
Potential License Contract Clauses (cont’d)
• Indemnification and insurance
• No warranty on validity of patent rights or ability
to practice
• Retain University rights for research use
• Make clear Government rights in federally-
funded research
1/30/2010 40
Organizational Practices
Licensing – Revenue Sharing
• Universities share licensing revenues with
inventors as a reward according to University
patent policy.
• Typically, university inventors receive 30% of
revenues earned after expenses. All the inventors
share this.6 Some Universities pay 50%.8
• Bayh-Dole Act mandates some degree of sharing.
1/30/2010 41
Organizational Practices
Licensing at Stanford (FY ’02)
62 non-exclusive licenses
26 exclusive licenses
22 option agreements
Licensing at MIT (FY ’00)
80 total licenses
20 option agreements
1/30/2010 42
Organizational Practices
University Licensing Rates in recent years
3914 executed in 1999
4362 executed in 2000
4058 executed in 2001
(source: AUTM)
1/30/2010 43
Licensing Scenario
• University files a provisional patent application
and markets it
• Potential licensor signs a confidentiality
agreement with a 90 day no shop clause and pays
an up front fee for the no shop clause
• The potential licensor signs an agreement and
pays a royalty to obtain a year to evaluate the
technology and an option to license the technology
at the end of the year
1/30/2010 44
Enforcement by the University Patent
System
Licensing, Royalty Strategies and Enforcement
Universities are becoming more aggressive in suing
commercial concerns under their patents.
It is not uncommon for universities to assert their
patents against private companies and either negotiate
a license or institute litigation.
1/30/2010 45
Enforcement by the University Patent
System
Licensing, Royalty Strategies and Enforcement
In the period from 1976 to 1985, the universities sued
private companies only about 10 times. In the period
from 1996 to 2000, more than 25 lawsuits have been
instituted by universities against corporations.
Examples:
Eolas Technology Inc., a licensee of the University of
California, sued Microsoft over Internet Explorer.
University of Rochester sued Pfizer Inc. over a widely used
11
pharmaceutical drug.
1/30/2010 46
Enforcement by the University Patent
System
Eolas Technologies, Inc. and the Regents of the University of
California vs. Microsoft:
Eolas Technologies Inc. is the exclusive licensee of a patent
owned by the University of California.
Eolas asserted that its patent covered one specific mechanism
used by Web page authors to embed and automatically invoke
certain interactive programs.
Although Microsoft asserted that the patent was invalid due to
pre-existing inventions, the court refused to let the jury consider
the prior art.
The jury rendered a verdict in favor of Eolas and the University
of California for $521M on Aug. 11, 2003. Microsoft is
preparing an appeal for filing by mid-February.
1/30/2010 47
Enforcement by the University Patent
System
Eolas Technologies, Inc. and the Regents of the
University of California vs. Microsoft:
The United States Patent Office on Oct. 30 ordered a
reexamination of the patent that is the basis of the patent
infringement lawsuit against Microsoft.
The patent office cited the response from the Web community and
industry as an "extraordinary situation" that called for a
reexamination being initiated directly by the patent office's
director.
1/30/2010 48
Conclusion
Due to the Bayh-Dole Act, universities have become very active in
patent procurement, licensing and enforcement.
From the university/professor point of view, often there is a
substantial increase in income and licensing generates money for
research.
Small start-up companies are willing to enter into exclusive license
agreements with universities since they can obtain seed money from
venture capitalists based, in part, upon their exclusive license
agreements.
Large corporations with substantial research departments are finding
it increasingly difficult to engage in collaborative research with
universities.
1/30/2010 49
Footnotes
1
The views expressed herein are solely those of the authors and do not necessarily represent the views of the Eastman
Kodak Company, Griffin & Szipl, PC, or Stevens Davis Miller & Mosher, LLP.
2
See, for example, the Association of University Technology Managers, a non-profit association having more than
3200 members. [www.autm.net/index_ie.html]
3
For some interesting statistics for the University of California Technology Transfer Program, see
www.ucop.edu/ott/ars/ann02/ar02.pdf.
4
Examples of license agreements are set forth on the website for Virginia Tech Intellectual Properties, Inc., at
www.vtip.org/forms-and-links.htm.
5
For example, Universal Display Corporation has collaborated with Princeton University and the University of
Southern California. See www.universaldisplay.com/about.php.
6
www.vtip.org/myths.
7
www.ucop.edu/ott/ars/ann02/ar02.pdf.
8
See, for example, www.rochester.edu/ott/policies.
9
The San Diego Union-Tribune, October 26, 2003.
10
See, for example, MIT’s policy at http://web.mit.edu/tlo/www/guide.4 and the University of Rochester’s policy at
www.rochester.edu/ott/policies.
11
249 F. Supp. 2d 216; 68 U.S.P.Q.2d 1424 (March 5, 2003).
12
www.autm.net/index_ie.html
13
www.infotonics.org
14
Chou v. University of Chicago and Arch Development Corp., 354 F.3d 1347 (Fed. Cir. 2001); University of West
Virginia Board of Trustees v. VanVoorhies, 278 F.3d 1288 (Fed. Cir. 2002).
1/30/2010 50
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