Patenting licensing and partnership in biotechnology industry

Very often, parties provide that all intellectual property rights in the technology transferred which may be by way of patents, trademarks, copyrights or trade secrets that vest with the licensor are also being licensed to the licensee. Without this clause, the licensee may have to negotiate with the licensor separate terms for use of these rights. For instance, if a screening assay is licensed together with the software that identifies various sequences of a particular type, one may not be able to copy or modify it, if the licensee had no rights to the software.

The clause must define and include confidentiality obligations of either parties. In India, any interest created in a patent must be registered with the Patent Office, which includes a license.

Hence, the licensor and licensee may have to take steps in this regard. Parties also need to negotiate as to who is to assume responsibility for maintenance of IP rights and for enforcement thereof. If the license granted is exclusive, it is the duty of the licensee to take action against infringements or at least bring it to the notice of the licensor. In any technology transfer, the licensee would be within his rights to ask for at least the following assurances from the licensor:.

Encumbrance free technology The technology being licensed is novel and does not infringe the intellectual property rights of a third party The licensor has the right to enter into this contract and has not granted licenses to other parties. A licensor may in turn limit these assurances to the specific technology licensed and not any appurtenant technology.

Product liability is an issue that must be negotiated depending on the level of participation by the licensee in market launch of the product. Perhaps, it is here that insurance covers assist the licensor. In India, the concept of patent insurances is still at a very nascent stage. Licenses granted may be exclusive i. The license may be limited to a specific territory or worldwide. Exclusivity is usually with respect to a party. Parties do make arrangements such that the licensor retains the home territory and licenses out the rest of the territories thereby enabling the licensor to freely exploit the technology at least within his own home territory.

The only limitation of a worldwide license is that it could limit the freedom of the licensor in improving the technology and this is often the case when rights are assigned. An important issue to be negotiated may be whether a licensee is entitled to sub-license the rights acquired. It is often practical to do so if the technology has far reaching applications. Structuring the end of the transaction is as important as the beginning.

Key questions that this clause must answer:. Which obligations would survive termination? What about products already in market?

Rights of third parties, if third party interests such as sub-licenses have been created Rights and duties of parties at the time of termination Whether non-solicitation covenants are required?

Arbitration and jurisdiction Conclusion. There is no one-fit all master agreement that would fit all types of transactions because with time we realize each transaction is one of its kind. The goal is to achieve a good agreement, which clearly reflects the intention of the parties and chalks out the options they have in mind. Apart from consistency and clarity, overly limiting clauses or those that are lop-sided should be clearly avoided to create a win-win situation for both parties.

It specializes in the entire gamut of intellectual property laws, protection and enforcement. Would India further ramp up medical technology capabilities in ?

BioSpectrum Asia. All rights reserved Disclaimer. Connect with us : Digital Edition. Thursday, 13 January Finally, an interesting feature is the biotech is a licensing business. Start-ups seldom produce and sell drugs but license their intellectual property IP to large pharmaceuticals companies. They also themselves license IP from universities, where the early inventions are made and protected through patent applications.

One of the best-guarded secrets is the terms of such licenses. I have already published articles about the licensing conditions by universities to start-ups. In terms of equity, there is not much difference; you can read again the table below.

Royalties on sale are very much accepted because Genentech part 3 and Amgen part 1 defined the industry rules. Genentech was to receive 6 percent royalties and City of Hope 2 percent royalties on product sales. This impact has been particularly felt in the field of biotechnology, whose rapid growth coincided with implementation of the act and the rise in licensing activity among academic institutions.

With the expansion of technology transfer offices among academic institutions, by , about a dozen or so of the larger institutions were ranked among the top 40 recipients of biotechnology patents in the United States Edwards et al. Much of biotechnology-driven revenue in the past tended to be the product of a few blockbuster successes, with a large proportion of revenue attributed to a relatively small number of deals Brody However, as the pharmaceutical industry looks increasingly to academic—industry alliances and partnering as a means for conducting foundational pipeline research that in the past was done in-house, that picture is gradually changing.

In the past few years, a growing number of larger-scale and longer-term framework partnerships have been established between a number of large pharmaceutical companies and academic institutions.

A significant number of these framework partnerships have involved multiyear collaboration and drug-discovery deals providing several million dollars of research support for the academic partner Schachter At the time they are drafted and negotiated, biotechnology license agreements involving academic institutions only rarely provide a readily commercializable product or technology.

Most often, license relationships are established around relatively early-stage technology, where the path to an ultimate commercial product is not entirely certain. As such, understanding the expectations of both parties becomes particularly important in framing the scope of the license and the rights the agreement confers to both parties. In simple terms, a license is a contract between two parties, which allows use of rights or materials belonging to one party by the other party, usually in return for some payment or other benefit.

Having legal rights to or ownership of those rights and materials is therefore necessary to grant a license. In this context, it is important to recognize the distinction between technology and intellectual property IP , both of which are basic parts of most biotechnology deals. Technology, in general, refers to tools, methods, and materials—that is, things that are necessary or can be used by a party to conduct research and develop products under the agreement.

IP, on the other hand, refers to a legally protectable right, such as a government-issued patent right or an unregistered trade secret, which allows a party to prevent or block others from using what is covered by that right. Although often crucially important to a deal, not all technology can be or is protected as IP. For example, when unpatentable research methods and other know-how are freely shared between scientists, instead of being kept as trade secrets, they receive no IP protection.

A license agreement can be viewed as serving three primary purposes: 1 defining the scope of rights being transferred between the parties, 2 defining the compensation for those rights, and 3 putting in place a structure for managing the risks that each party takes on in carrying out the agreement.

Many of the same objectives repeatedly arise in deals between universities and companies. As an illustration, one can consider a drug discovery partnership. The overall objective of such a project may range from short-term research to validate potential biological targets to more extensive, long-term partnerships with the end goal of selecting a lead compound for clinical trials and eventual commercialization. Regardless of scope, each member in such a partnership will have its own more specific objectives.

For the university, research and publication will always be primary objectives. Increasingly, however, universities also view such alliances as a means to directly participate in more effective translation of their research, for example, into new drugs. But in doing so and helping ensure that the public will benefit from their research, universities also remain accountable to their wider mission of advancing and disseminating knowledge.

Part of that mission is to present and publish the results of the sponsored research they conduct. Another part is to safeguard the ability of their investigators and those at other publicly funded institutions to use the technology developed in such alliances. The university, however, cannot overlook that fulfilling this mission depends on continued funding.

Therefore, in sharing the long-term goal of successful commercialization, the university will also look to receive some fair share of revenue. An effective licensing agreement takes into account the total added value the university brings to the table. This includes not only the specific expertise of its investigators, but also the benefit the industry partner obtains from the investment in personnel and infrastructure that the university has made in developing its research capabilities.

Most such biotechnology deals are directed, at least initially, to the early stage of these pipelines. Deal structures can vary significantly, depending on the focus and scope of the collaboration. Defining an appropriate scope of a license is often one of the more challenging starting points in negotiating a license agreement for an industry—university partnership, even with a well-defined project in mind.

Often, the process becomes tied up in negotiations over rights to IP and technology that are unnecessary to carry out the collaboration, rather than on the rights each party actually needs to do so. To determine an appropriate structure, the parties first need to identify the stakeholders on both sides who should be involved in the negotiation process.

Those on the university side should understand how the drug discovery process is managed by their industry partner, who the key decision makers are, and what role their counterparts on the company side have at each stage in the process. For example, an exploratory project directed to identifying new oncology drug targets as compared to a drug discovery partnership to collaborate on a drug screen will likely engage different management teams and decision makers.

As the potential scope of a collaboration changes during negotiations, and during the life of the relationship, different stakeholders, often with different concerns and priorities, may need to be brought into the process.

Ordinarily, objectives for obtaining a license fall into three categories: 1 to obtain access to technology necessary to develop and make a product or service enabling technology ; 2 to obtain legal freedom to make and sell the product or service freedom to operate ; and 3 to use as an offensive tool, for example, IP rights that the partner could use to exclude potential competitors from selling the same products or services exclusivity in that market.

One can draw a simple analogy to operating a food stand in a park. Here, enabling technology might equate to know-how and materials needed to make the food and run the equipment.

Freedom to operate might equate to permits allowing one to run the business and serve food in the park. Finally, exclusivity might equate to being able to keep any other stands out of the park, or those in the park from serving food. Table 1 provides a general description of the range of potential relationships. Many biotech deals begin well before the ultimate commercial product has been determined or development work has even begun. In such cases, there is often little certainty in what IP rights will ultimately be most important, and when negotiations begin, many details for the collaboration are unknown.

Such an approach may be reasonable for simple transactions such as a material transfer agreement commonly used to exchange reagents between academic laboratories. But in more complex biotech deals, such an approach is rarely productive or efficient. In the end, attempting to fit the deal into a ready-made box only reduces the likelihood that the final agreement will in all respects accurately reflect the true understanding of each party.

The ultimate success of complex biotech deals often hinges on the ability of the parties negotiating the deal to reach an effective understanding and agreement on the expectations, obligations, and risks each party will take on. Bypassing this step increases the chance for later misunderstanding and disputes, especially in more complex deals and when drafting a final license agreement comes under time pressure.

Use of term sheets will almost always direct more effective and productive negotiations and is often the best approach to ensure that the parties reach a true consensus. Essentially, term sheets provide a summary of those issues that the parties consider as the most important aspects of the deal. Although its primary purpose is to act as a template for drafting a full, detailed agreement, a term sheet—which, generally, is specified legally nonbinding—can provide a useful reference point to guide and focus the negotiation process from the beginning.

Effective term sheets should be customized to reflect the unique requirements each deal presents. Ideally, the process of deciding what should go into a term sheet provides an opportunity to identify all the key provisions each party views as essential for their participation. If the parties are unable to agree on any deal, it is preferable to find out early in discussions rather than months later after drafting a complex agreement has consumed considerable financial and personnel resources.

The more thought and discussion that go into preparing a term sheet, the lower the likelihood of any eventual misunderstanding. Some important provisions commonly negotiated in most biotech deals, and which would be included in a term sheet, are provided in Table 2. In many technological areas, the owner of an IP right may not be best suited to commercially exploit the IP.

For example, although well suited to encourage and enable primary research, academic institutions generally do not have the infrastructure, expertise, or financing required to shepherd a compound through clinical trials to commercialization. To help accomplish this and best commercialize its technology, the university may use a variety of strategies and licensing arrangements. Licensed rights are commonly limited, for example, by field of use or territory.

This consideration becomes particularly important when commercialization of a certain technology involves relationships with several partners. In the biotechnology sector, because patent rights can be subdivided in many different ways, it is common to grant a license for one particular field e. As a result, the same patents may be licensed to different parties, each on an exclusive basis, but for different nonoverlapping fields of use.

In such cases, care needs to be taken to avoid creating conflicting rights in multiple licensees. Conflicting rights might arise, for example, if multiple licensees have rights to control patent prosecution for the same patents or if they have other rights with respect to the licensed patents such as a right to assignment of any licensed patents the academic licensor intends to abandon.

An exclusive license generally means that only the licensee may exercise the rights given in the agreement, even to the exclusion of the IP owner.

Exclusivity generally includes the ability to enforce the licensed IP rights against others. For example, in a patent license, exclusivity will generally provide the licensee with the ability to sue third parties for patent infringement and also provide the licensee with the ability to sublicense all or part of its patent rights to others.

Exclusive rights play a central role in the development and commercialization of molecular targets and drug candidates, because of the extensive cost and effort required to overcome the many risks involved in drug development.

On the other hand, a nonexclusive license in general only provides the licensee with permission to use the rights covered by a patent without giving the licensee any control over enforcement or licensing of such patent rights.

Such a license therefore allows the IP owner to grant the same rights to several parties. These rights are most common for platform technologies with wide applications in different fields of use. Parties, when negotiating a deal and drafting a good license agreement, should ensure that the scope of the licensed IP rights is clearly defined, including both nonexclusive and exclusive rights.

It is often useful to assume that someone who was not involved in drafting or negotiating the agreement will need to understand, even years later, what is intended to be covered by the agreement. When granting exclusive rights, it is important for the licensor to spell out any limitations and restrictions the licensor may want to impose on the scope of the grant.

Typically, the academic licensor will carve out certain elements from the rights it grants to an industry partner. Such carve-outs are often required to allow the institution to satisfy its obligations to the government and funding agencies under Bayh—Dole and also under the terms of many federal grants. As an example, the National Institutes of Health NIH has issued formal guidelines to ensure that institutions receiving NIH funding adopt reasonable terms and conditions in their agreements to ensure access and dissemination of research tools made in the course of that research Federal Register And, more generally, a number of institutions have endorsed guidelines to help ensure that academic institutions in licensing their technology adhere to their core mission AUTM