Australia: Drafting effective IP licensing agreements in academic and research environments

The commercialisation of intellectual property (IP) generally involves the exploitation or provision—through sale, assignment, licensing or other dealing—of the IP for financial or other gain and is an integral part of academic and research environments at Australian universities. This article looks at some of the key considerations that may be relevant to IP commercialisation activities in the context of these environments.

Know the IP

Basic and applied research generates new ideas and other innovative IP. While a patent is a form of IP that may result from such research, there are other IP forms that may be created. For example, the output of research in information and communications technology may give rise to one or more copyrighted works and one or more patents. In this instance, the commercialisation structure will need to account for all types of IP that will be created.

Research and development

Research and development processes should be managed appropriately to ensure that the IP generated may be effectively commercialised. Appropriate controls that are clearly defined should be applied to manage the research project and the potential interactions as part of that research, such as internal research, research through third parties or a combination of internal and third parties through a collaborative or industry program. These controls should also cover the use of open source licensed materials because the use of such materials could limit or prevent the effective commercialisation of IP.

A clearly defined IP policy that is communicated to the researchers will assist in managing risks that may arise. The university should evaluate and update the IP policy from time to time to ensure it reflects current standards and requirements and to account for any changes to commercialisation channels and models.

It is important to ensure the invention and IP is kept confidential. A clear process to prevent or limit the publication of research outputs could assist in avoiding disclosure of the novel information. By doing so, the risk that any resulting patent may be invalidated by prior disclosure would be reduced.

If a third party is involved in the research, then a collaboration agreement between the university and that third party should be entered into. The collaboration agreement should clearly cover the responsibilities of each party in the research project, project management and governance structures to ensure the effective management of the research project. It should also cover the types of third party materials that may not be used (e.g. open source licensed materials), the ownership and licensing structures that apply to the IP that is created as part of the research project, confidentiality and restrictions (e.g. publication restrictions), termination rights and the consequences of termination, resourcing, and indemnities and warranties.

Commercialisation approach

A university may commercialise the IP itself and/or in conjunction with a third party. For example, IP may be commercialised through the use of a start-up company, a third party development or manufacturing model, or a joint venture with other persons or established companies in the relevant industry. Regardless of the structure used, the university should ensure it secures and protects its ownership rights over the IP at all times, unless the below assignment model is used.

Under the licensing model, the university retains its ownership of the IP. By contrast, the assignment model requires the university to transfer its ownership rights in and to the IP to another person, usually in return for an upfront fee for such assignment.

Regardless of which model is used, international commercialisation will raise additional issues, such as can the university provide the support required and does it have the right to use any required trade marks in overseas jurisdictions?

Scope of the licence

A licensing model allows universities to grant certain rights to a third party to commercialise the IP. The licence may be a sole, exclusive or non-exclusive licence.

If an exclusive licence is proposed, then the university should consider the scope of the exclusivity such as if it is limited to a particular service or product, a territory, an industry channel, a particular sales channel or customer category.

The licence agreement should also contain express obligations on the licensee to commercialise and exploit the IP (including

Universities should ensure appropriate processes and policies are established to manage its research activities.

product development, marketing and the sale of products and services), have a clear and tested fee and financial structure to ensure regular payments to the university, include a strong governance structure to enable the university to manage the licensee's performance and provisions on new developments and derivative works as well as how these are dealt with and who owns them. The agreement should also include appropriate business reporting and sales reporting obligations, provisions to deal with performance management issues by the licensee, appropriate termination rights (which may include a right to terminate without liability should the university determine that an association with the licensee is no longer in the university's best interests or if it would result in a detrimental impact on the university's reputation), include appropriate indemnities to protect the university from licensee claims and an effective liability regime to ensure that the university is able to make a claim against the licensee.

What next?

Universities should ensure appropriate processes and policies are established to manage its research activities, including policies that cover the use of third party materials, third party collaboration and publication, and disclosures of research.

Importantly, appropriate confidentiality arrangements and agreements should be established with all persons involved in the project. If a licensing model is utilised, then the licence agreement will need to cover the commercialisation activities of the licensee and preserve the university's ownership rights over the IP.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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