As biomedical research at universities rises, an increasing number of deals often seem to end up in litigation or, at a minimum, in disappointed expectations.

Regardless of the fame of the inventor or the prestige of the institution, you should apply the principle of caveat emptor to all technology transfer deals. You must focus on the quality of the merchandise being offered because it will be delivered without warranties and will not be accompanied by any indemnification to shield you from lawsuits by third parties. Hence, you should consider the following issues before licensing a biotechnology invention from a university:

  • Has the university made all the patent filings in relevant markets for the technology? University technology transfer offices lack the budget to do patent filings on the scale generally deemed appropriate by companies. Consequently, they often fail to make international patent filings because of the expense. International filing deadlines may lapse, thereby forever precluding protection in an important market.

  • Have the technology's inventors published their ideas prior to filing of appropriate patent applications? If they have, the publication can undermine the validity of a subsequent patent application. The general rule in the United States is that publication cannot occur more than one year prior to the filing of a patent application. But publication prior to filing is usually fatal to obtaining a patent in foreign countries.

  • Has patent counsel performed a validity analysis to see whether patents that have been applied for by the university are likely to be valid? Obtaining an opinion as to the validity of the patent application in question is sensible. Universities usually lack the budget to invest in such opinions before filing a patent application.

  • Is the technology properly the subject of patent protection, or are there other forms of intellectual property protection that would be better?

    It may be the case that the ability to obtain patent protection is uncertain, as with partial gene sequences or expressed sequence tags. Other forms of intellectual property protection - for example, trade secrecy - may be preferable, although they may be much less conducive to implementation in a university environment.

    For example, many people have come to the conclusion that the structure of a biological receptor, useful only as an assay target, is best protected as a trade secret rather than under the patent laws. That is because the claims of a patent application will ultimately become a matter of public record, typically after 18 months, making it very difficult to police and charge royalties for actual use of the invention.

  • Have all the inventors and institutions involved assigned all of their rights to the technology?

    Inventions in the university setting are often the result of joint collaboration among researchers at different institutions. For the license to be meaningful, the rights of all co-inventors must be conveyed to the company.

    That may mean negotiating with several academic institutions, although it is the practice under those circumstances for the institutions to designate one institution to take the lead in negotiating. The rough justice of the patent law values the contributions of each co-inventor equally, regardless of their actual contribution to the invention.

    The consequence of failing to get assignment to one party - from all the inventors - is joint ownership. That means that co-inventors can do whatever they want, independently with their patent rights, potentially destroying the commercial value of an invention. Therefore, before entering into a license regarding a joint invention, there should be an agreement giving one party, the licensor, sole authority to act on behalf of the other parties.

  • Does the project require access to materials or information not covered by the technology license? Besides the technology license, you may need a separate license to use biological materials such as human tissues or their genetic components. It is particularly important for a company to license everything it needs.

    Among university administrators, there is a particular sensitivity to a phenomenon referred to as "pipelining," where a corporate sponsor seeks to gain continuing access to the stream of inventions emanating from a university laboratory. Universities will typically avoid giving an omnibus license to future enhancements, improvements, or follow-on inventions. An indirect way to gain access to new developments is to sign personal consulting agreements with the relevant inventors, so that inventions derived from their activities outside the university environs are for the benefit of the licensee.

  • With whom should you negotiate? The technology transfer office is the short answer. Under the Bayh-Dole Act, the U.S. government, which funds most biomedical research, has delegated this part of the process to the university. Academic inventors are required under the act to assign their rights to the university in exchange for the opportunity to receive government funding. Of course, the university technology transfer office consults the inventor throughout the process. An inventor's opposition to a particular licensee will greatly reduce the chances for a successful license transaction. However, the university calls the shots on the economic terms of the license, not the inventor.

Finally, before embarking on a negotiation, you must be familiar with the university¹s intellectual property policy as well as its policy concerning faculty participation in industry arrangements and conflict-of-interest policy. Because many universities begin license negotiations with a standard license form, it makes sense to ask for a copy of the form in advance and to study it carefully. It is also helpful to gather data about comparable transactions. That will convey the message to the institution that the deal you are offering is fair and customary.

Reprinted with permission. All rights reserved. Mass High Tech - September 4-10, 2000.

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.