Josepth Janda is the Director of Innovation & Intellectual Property at Portland State University
Universities have a bad reputation amongst industry leaders and venture capital firms when it comes to licensing their intellectual property (IP). However, licensing technology from a university does not have to be a bad experience. In fact, universities have contributed greatly to industry impact and innovation. Technologies invented at universities have resulted in:
- 153 new FDA-approved drugs in the last 30 years
- $836 billion the U.S. gross industrial output from 1996 to
- 3 million jobs since 1980
- 719 products launched in 2013 alone
All of these products were created because of deals made with universities around early stage innovation. This amount of output means a lot of licensing – successful licensing we can assume. There seems to be a disconnect between the reputation universities have when it comes to licensing and their actual output. Rather than focus on that disconnect let’s focus on what all parties participating in such a deal can do to foster smoother transactions. The following is my experience – your mileage may vary.
- Firstly, universities and their licensees should know that most university best practices for exclusive patent licensing came out of the pharma or diagnostic space. If the IP in the deal is not in these spaces and the university does not typically deal in the IP space in question, it may be worth backing up and discussing what comparable deals actually look like before discussing terms or trading documents. This can save a lot of time and frustration.
- Secondly, the majority of university deals are about the relationship. A poor relationship from the get-go colors the whole partnership and many universities get off on the wrong foot by focusing on the document and negotiating low-probable contingencies meant for the worst-case scenario. It is absolutely true that universities need to ensure an up-side win, make sure their technologies are used and not shelved and make wise decisions about what legal protections to include. It is also true that existing companies need to fit deal terms into existing operations and that start-up companies need to think about what the deal looks like to future investors. However, it is unwise for any party to spend tons of time and relationship capital drafting and editing to defend against all the most egregious wrongs ever dreamed up during a bad night’s sleep, publicly perpetrated in similar deals, or litigated in the courts. Why start a relationship with that level of acrimony and distrust?
- Thirdly, the main points of a license should be agreed on in large strokes before any paper is ever produced and other than a few ground rules most of a license document should never be seen again unless things go really sideways. It’s not about the document, don’t get stuck there.
- Lastly, all parties need to come to the table with appropriate focus. Be polite. Be efficient. Be professional. Be organized. Isolate remaining issues to discuss, and don’t keep moving the ball on material terms or preferred language. But most of all, be interest-based. Present your needs and recognize each other’s and don’t dismiss them when they conflict. Find creative solutions that fall within the confines of an investable deal.
Many of these points will come as no surprise to veteran deal-makers in either industry or universities, but with the reputation universities have and the tremendous potential that some of their technologies have - they may be worth revisiting.
For more information see:
 The Role of Public Sector Research in the Discovery of Drugs and Vaccines, The New England Journal of Medicine, February 10, 2011.
 Biotechnology Industry Organization: The Economic Contribution of University/Nonprofit Inventions in the United States: 1996-2010; June 20, 2012.
 Association of University Technology Managers U.S. Licensing Activity Survey Highlights FY2013.