Yours Mine Ours Research Collaborations and Drafting Effective

Yours? Mine? Ours? Research Collaborations and Drafting Effective Intellectual Property Sharing Agreements NACUA Sponsored Research and Technology Transfer Workshop Beth. Lynn Maxwell The University of Texas System Office of General Counsel Austin, Texas Washington, D. C ~ Nov 15 -17, 2006 1

Effective Intellectual Property Sharing Agreements Inter-Institutional Agreements and Material Transfer Agreements 2

Inter-Institutional Agreement 3

What is an Inter-Institutional Agreement? a. k. a. “IIA”, “Royalty Sharing Agreement” More than intra-agency or inter-agency agreement Contract between 2 or more parties (e. g. , institutions) Outlines patenting & commercialization processes Each party has an ownership interest in common technology (joint ownership) 4

Pros for Negotiating IIAs Saves time, money and resources Only one co-owner negotiates on behalf of all co-owners Only lead party signs license agreement Co-owners negotiate pesky deal terms before commercialization begins Aligns/ organizes the co-owners 5

Cons for Negotiating IIAs Should save time, resources and money Time lost because co-owners get bogged down negotiating their deal terms If co-owners can’t (won’t) agree, then relationship starts off on wrong foot 6

What’s in an IIA? Parties = co-owners How is common ownership created? Names ‘Lead Party’ How does non-lead give authority to Lead Party? Non-lead licenses right to Lead Party Non-lead gives Lead Party right to negotiate on its behalf How are proceeds split? How is split determined? How are solely owned and jointly owned technologies handled? What about equity? Who pays patenting costs and expenses? Who deals with assignments, warranties and representations? Mechanism for enforcing against potential infringers in IIA Who handles and pays for litigation? Termination Rights Protecting co-owners confidential information 7

Factors to Consider When Choosing Lead Party Number of contacts in area of invention Who can market the technology better? What do you do to market technology? Percent contribution by institution Experience of staff in technology transfer office Are you licensing similar technology? One of the co-owners just doesn’t want to take lead 8

Who Handles the Following? Lead or Non-Lead? Patent Prosecution Out-licensing Accounting Infringement Defense 9

Sticking Points When Negotiating How is revenue shared? Management fee Payment of patent costs Signatures on license agreement Approval rights for Non-Lead Party? Include certain license requirements in IIA When can IIA be terminated? 10

Sticking Point: How is Revenue Shared? Split follows amount each co-owner contributed to invention Revenue split in proportion to % each coowner contributed to invention Inventor’s help co-owners to decide How is equity handled? 11

Sticking Point: Management Fee Do co-owners agree to fee? If yes, how much? How do you agree on amount? Capped or uncapped? If capped, at what amount? Sliding scale for cap? Does fee apply to equity? Are other costs recoverable – besides patent expenses 12

Sticking Point: Payment of Patent Costs How are they split? Costs are shared in = proportion as revenue sharing Past patent costs could be deducted from license revenue prior to distribution Future patent costs Initially paid by Lead Party and lead invoices Non-Lead Should costs be capped? What if one party opts out of paying its share of U. S. or foreign patent prosecution Paying party has sole authority over licensing and patent prosecution Paying party – no obligation to share revenues with nonpaying party How are costs allocated when marketing sole Lead 13 and joint lead and non-lead IP?

How are Costs Allocated When Marketing Sole Lead and Joint Lead and Non-Lead IP? Marketing both sole Lead IP and joint lead and non-lead IP Can’t be 50: 50 Count number of patents? Allocate percentage based on number of patents 14

Sticking Point: Signatures on License Agreement Who signs License Agreement (not IIA)? Only Lead Party signs Saves time, resources and money All co-owners sign All co-owners could sign but cannot allow co-owners to re-negotiate license terms Negotiations could come to halt Lead Party cannot enter into fully paid-up license without prior written consent of Non. Lead party 15

Sticking Point: Approval Rights in License Agreement Does Non-Lead Party get approval rights? Rarely Only gets “review and comment” rights Majority of IIAs 16

Sticking Point: License Requirements in IIA Customary financial terms Field of use Territory Exclusive or non-exclusive license If exclusive license granted: Licensee will be obligated to pursue commercially reasonable and diligent efforts to commercialize invention Licensee will pay all past and future patent expenses Publication rights and continued use of invention reserved for co-owners Standard indemnity obligations Standard disclaimers against all warranties Language that licensee gets no implied licenses re: use of other IP belonging to co-owners Marketing diligence milestones 17

Sticking point: When can IIA be terminated? Include in IIA Specific diligence requirements on Lead Party Non-Lead Party can terminate IIA If the Lead Party does not license technology within certain number of months or years 18

Material Transfer Agreement 19

What is a Material Transfer Agreement? Contract between 2 or more parties Governs the transfer of one or more materials from the owner or authorized licensee to recipient Recipient = e. g. , a research institution or university Use is limited to research purposes only Typically limits use of material and disposition of “new” material created from that use. 20

Types of Materials That Can Be Transferred Cell lines DNA libraries Monoclonal antibodies Organisms Reagents Growth factors Drugs Clones/Cloning tools Animal models Computer software Devices/equipment Chemicals Plasmids 21

Sources/Owners of Materials For-profit organizations Not for-profit organizations Universities Research institutions Hospitals Government entities Individuals Same list could be used for Recipient of materials 22

So, What’s the Big Deal? Why does University Principal Investigator want/need material? Needs material to further research To generate more substantive data To verify/validate results Owner may be only source of material Not commercially available Material too costly to synthesize Material is proprietary Opportunity to collaborate 23

Why Owners Provide Material ~ Up-side for Sharing Extends/stretches limited amounts of materials and resources Increases owner visibility Opens new research avenues for owners Allows all to learn from others Owners collaborate with gifted academic faculty Prestige of co-authoring scientific papers Identify future researchers Recruiting opportunities Fosters collaboration Synergistic impact – great minds … 24

Owner Concerns ~ Down-side for Sharing Major investment expended to create material Concerned about potential liability Why bother? Time sink! Confidentiality concerns Material is hazardous or may be subject to special regulations 25

Who Negotiates & Signs MTAs? Incoming MTAs Office of Sponsored Projects or Contracts Office or Technology Licensing Office ~ most preferred Department / College Principal Investigator ~ least preferred Outgoing MTAs Office of Sponsored Projects or Contracts Office or Technology Licensing Office Who signs MTAs? Someone with signatory authority for research institution Not the principal investigator 26

MTA Review Process Incoming/Outgoing Handled the same as any contract Principal Investigator completes “MTA Questionnaire” Internal approvals Attach compliance approval Internal signatures Obtain signatures 27

MTA Questionnaire and Checklist 1. (Incoming) Is material relevant to any IP disclosures 2. Likelihood of IP – patent or copyright? 3. Will progeny, derivatives, modifications or other substances result from use of materials? 4. Do you agree to relinquish your rights to this intellectual property? 5. Do you plan to request the University relinquish its claim to the intellectual property? 28

MTA Questionnaire and Checklist Incoming (Cont’d) 6. If you agree to relinquish your rights, do you understand attest that the licensing income could be significantly diminished or negated under these terms. 7. Do you also understand that these terms could handicap your future ability to accept awards from other sponsors. 8. Source of funds will you use under this MTA? 9. Does research involve federal sponsorship? 29

MTA Questionnaire and Checklist Incoming (Cont’d) 8. 9. What role will the requesting materials play in your research? Major or minor? Will the use of the material conflict with other corporate sponsorships or agreements? 10. Is there an alternate source for the requested materials? 11. Delivery date of materials to university? 12. Will you return any unused material or destroy the material? 30

MTA Terms and Potential Issues Who are the “parties” What if Provider is a foreign entity? No revisions allowed! How are “Materials” defined? Restrictions on handling/use of materials Transfer or distribution of materials Ownership and licenses Publication guidelines Confidentiality requirements Reporting and expiration 31

Who are the Parties? Providing Entity and Recipient Entity Not the principal investigator Example A: MTA made between ABC, Inc. (“Provider”) and Dr. I. Domagic, a scientist with University (“Recipient”) Example B: MTA made between ABC, Inc. (“Provider”) and University (“Recipient”) Example B is correct – Scientist at “Recipient” should not sign MTA. 32

Provider = Foreign Entity What the big deal about Foreign Entity Providers? Problems arise when governing law is the foreign entity’s country Bigger problem when foreign entity will not make governing law silent (no revisions allowed) Even bigger problem when Recipient has to indemnify Provider BIG, BIG problem if Recipient = State Institution 33

What If No Revisions Allowed? MTAs that won’t allow any revisions How do you handle them? Potential to halt research Even bigger problems Governing law Foreign country or domestic Indemnification provisions “… to the extent authorized by the Constitution and state laws of Texas …” Handling non-conforming agreements 34

Definition of the Materials should be narrowly defined Example: Option #1: “Material” includes “xyz” that is actually provided to Recipient by Provider under this MTA, any progeny of “xyz”, and any unmodified derivatives of “xyz”. OR Option #2: “Material” includes “xyz” that is actually provided to Recipient by Provider under this MTA, any progeny of “xyz”, and Any unmodified derivatives of “xyz”, any modifications of “xyz”, and any information, data, and/or results generated by Recipient and related to “xyz” under this MTA. 35

Use of Material by Recipient What your MTA could say: The Material will be used solely by Recipient for research purposes only. Can Recipient Principal Investigator share with colleague down the hall? What if it includes the following language? The Material will be used solely for non-commercial research purposes at Recipient’s facilities. Material will be not be used in animals or in products used for animal food. Material will not be used in research that is subject to consulting, licensing or similar obligations to a third party. If used other than as proposed, Provider will solely own any results, discoveries, or inventions arising out of such use by Recipient. 36

Distribution of Material to Others Standard terms (preferred): Recipient will not transfer Material to others outside of the Recipient Institution More restrictive: Recipient will not transfer Material to others outside of Recipient Scientist’s laboratory, or to any person who is not obligated to assign their entire interest to any invention to the Recipient institution. CAUTION: Recipient scientist may violate distribution restrictions if the terms are unclear, overly burdensome, etc. 37

IP Ownership & Licenses ~ Provider Wants To own everything that comes from Material Non-exclusive license to make, use and sell Recipient Wants Ownership determined by US Patent Law What I invent, I own … Wants to only grant non-exclusive license for internal, research purposes + option to negotiate royalty-bearing exclusive license Needs to retain license to use invention for internal research purposes only + retain publication rights 38

IP Ownership & Licenses ~ What is Appropriate? (1*) Provider retains all right and title in and to Materials and Information. Nothing contained in this MTA shall prevent Provider from sharing Material with other parties. Inventorship of any discoveries developed using Material shall be determined according to U. S. Patent Law. Definition of “information“ – information given to Recipient from Provider under MTA OR 39

Or … (2) Provider retains all right, title and interest to Materials and Information. Recipient will disclose Inventions to Provider may, at its sole discretion, file patent application(s) for Inventions. Provider will have control of strategy and expenses with respect to such filing. Recipient hereby grants to Provider and its affiliates (i) a perpetual, fully paid-up, nonexclusive worldwide license with right to sublicense to all Inventions, and (ii) the exclusive option to obtain an exclusive, worldwide license to all Inventions, with total compensation for such exclusive license not exceeding 1% of net sales of products from Inventions. 40

Answer: Option (1) is appropriate Provider should own their Material and Information provided to Recipient under MTA Recipient submits a final report on the results of the work conducted with the Material to Provider Recipient retains publication rights 41

Publication Concerns Provider Wants Right to approve publications before they are published To delete data or information in publication that it deems should not be included in publication Recipient Wants Provider to only have “review and comment” rights Discretion to publish in sole hands of Recipient 42

Publication Rights ~ Which is Appropriate? • (1*) Recipient is free to publish the results of research performed using Material; provided that Recipient gives Provider review and comment rights • Provider has 30 days to review and submit its comments to Recipient • (2) Recipient will not disclose results of research using Material without prior written approval from Provider. Recipient also agrees to delete information from proposed publications if directed by Provider. 43

Answer: Option (1) Recipient is free to publish the results of research performed using Material; provided that Recipient gives Provider review and comment rights • Provider has 30 days to review and submit its comments to Recipient 44

Confidentiality Obligations Standard terms: Recipient agrees to use reasonable efforts to keep Information transferred with the Material to Recipient confidential marked “confidential” with appropriate exceptions for a reasonable amount of time More restrictive: Recipient will hold in strict confidence the Material and Information for a period of no less than 10 years from when? 45

Reports & Expiration ~ Which is Appropriate? (1*) Recipient shall provide a final report containing research results using Material to Provider within 6 months of expiration of the MTA. Provider will maintain results in confidence if requested by Recipient. This MTA expires 3 years from date of signature, or upon completion of the research, whichever occurs first. OR (2) Recipient will provide complete updates on research results to Provider every 3 months, and a final report upon completion of the research. Provider will have the right to use the data and results for any purpose without compensation to Recipient. 46

Answer (1) Recipient shall provide a final report containing research results using Material to Provider within 6 months of expiration of the MTA. Provider will maintain results in confidence if requested by Recipient. This MTA expires 3 years from date of signature, or upon completion of the research, whichever occurs first. 47

Export Control Apply standard review procedures State Department: Inherently military technologies--International Traffic in Arms Regulations (ITAR) Commerce Department: “Dual-Use” technologies (primary civil use) -- Export Administration Regulations (EAR) Treasury Department, Office of Foreign Assets Control (OFAC): Prohibits transactions with subject to boycotts, trade sanctions, embargoes Deemed Export Issues 48

Special Concerns Special Requirements for Handling Select Agents under Patriot Act Shipping Issues Hazardous Materials Packaging Inspection permit Environmental Health and Safety Office 49

Thank you ~~ Any questions? Beth. Lynn Maxwell bmaxwell@utsystem. edu 512. 499. 4518 50