Licensing & Royalties
The IDEA Center uses many sources and strategies to identify potential licensees and market inventions. Sometimes, existing relationships of the inventors, the IDEA Center, and other researchers are useful in marketing an invention. Market research can also assist in identifying prospective licensees. In addition, the IDEA Center also examines other complimentary technologies and agreements to assist marketing efforts. Faculty publications and presentations can be excellent marketing tools as well.
Licensees can be identified and found in many ways. First, the inventors are often aware of the commercial companies who would be interested in the work. Industry-specific marketing efforts, including trade show participation, affiliations, and market research carried out by the IDEA Center, also seek to identify potential licensees. Additionally, issued patents listed by the USPTO can provide names of companies who currently have patents similar in nature. Oftentimes, these can prove to be potential licensees as well.
Studies have shown that 70% of licensees were known to the inventors. Thus, research and consulting relationships are often valuable sources for licensees, and the IDEA Center encourages the participation of inventors. The more involved and interested the inventor is, the more likely it is for successful licensing to be secured. Normally, the inventor is the best source of information on which companies would be interested in licensing the technology. Once interested companies are identified, the inventor is the best person to describe the details of the invention and its technical advantages. The most successful technology transfer results are obtained when the inventor and the Licensing Manager work together as a team to market and promote the use of the technology.
As licensees are pursued, Confidentiality Agreements (CDA) are typically utilized. A CDA is an agreement between the University and an outside entity to facilitate discussions of confidential information. Companies often need to share their business needs and development problems to move towards developing solutions with University personnel, but are wary of divulging sensitive information that could find its way to their competitors. Likewise, for universities, maintaining confidentiality can preserve certain rights to the inventions. A CDA enables all parties to collaborate freely without worrying about the downside of information sharing. Since the University of Notre Dame does not want to expose its researchers, faculty, and staff to individual liability regarding confidential information, the IDEA Center representatives will authorize the signing of CDAs on behalf of the University. The University taking on this responsibility limits any exposure to liability the researchers, faculty, or staff may have with respect to such confidential information.
An invention can be licensed to multiple licensees, either non-exclusively to several companies or exclusively to several companies. Each license will only apply for a unique field of use or geography. To assist in licensing structures, option agreements are often used so that companies can be exposed to a technology and consider whether securing a license makes sense. Options are granted for a limited time for feasibility to be investigated, but an option does not grant commercial rights. An option can be either exclusive, where no other options will be granted for a limited timeframe in order for the licensee to evaluate a piece of intellectual property, or it can be nonexclusive, where other options may also be granted from the University. The outcome of an option is a go/no-go decision by the company as to whether they desire to license the technology.
License agreements can vary in the amount of time it takes to execute a final agreement. Every license is unique in that it brings together University intellectual property to solve a company’s specific problems. Once the intellectual property is identified by the company, terms of a license need to be negotiated to a mutually acceptable solution. Execution can take as little as a few weeks to as long as over a year depending on the complexity and the response times of all parties involved.
After a license has been executed, the IDEA Center tracks the progress of the licensee towards milestones and goals established in the signed agreement. Licenses usually state that technology progress reports must be submitted regularly until a product hits the market. Some companies will fund research and development of the technology at the University in the inventor’s lab, while others may offer a consulting position to the inventor as they develop a product at the licensee’s lab. The IDEA Center usually continues to manage the patents, if there are any, and will sometimes need to handle issues surrounding patent interference, patent infringement, and arbitration or litigation of a technology or license.
Once the product is offered for sale, the IDEA Center requires quarterly reports and royalties from the licensee. Inventor’s shares are paid out annually, or sometimes quarterly if the payments reach a significant level of income. If approved by the University, the department shares are paid out late in the year, usually about six months after the close of the fiscal year.
It is not necessary to identify a licensee for the IDEA Center to continue patenting activity. Indeed, the University often accepts the risk of filing a patent application before a licensee has been identified. After the University’s rights have been licensed to a licensee, the licensee generally assumes patenting expenses. At times, the University must decline further patent prosecution after a reasonable period (often two to three years) of attempting to identify a licensee.
A final step in licensing agreements pertains to inventor contribution percentage assignments. Inventor contribution percentages refer to the formula by which the adjusted royalty is split amongst the inventors. The standard disposition is equal sharing; however, it is ultimately up to the inventors to propose and agree on a formula and communicate that agreement to the IDEA Center. This should be filled out on the disclosure form, but it can be changed at a later date. It is recommended that this be accomplished no later than the filing of the non-provisional patent application for patent-related intellectual property.