One common complaint I hear from biotech entrepreneurs is that negotiating a license agreement with a university can be a nightmare. There are universities—some of them within the very top echelons of academia—that are infamous for having technology transfer people who are described as very difficult to work with.
It’s not that surprising that these two factions of the life sciences ecosystem—the intellectual property generators in academia and intellectual property seekers in companies—clash over their perceived value of this key asset.
Usually, entrepreneurs and investors come to the negotiating table arguing that a discovery they seek to license, while extremely promising, is a huge bet. Patents for laboratory-based discoveries are seldom supported by exhaustive preclinical research, let alone evidence of efficacy in humans. A startup licensing IP has a lot of work to do, and hundreds of thousands of dollars to spend, before it really knows whether the discovery will lead to a drug candidate. Also quite often a patent is but one small piece of the IP arsenal a company needs to gather, so its individual value may actually be quite small, even if it is crucial that the company claim hold of it.
Universities, on the other hand, have to put in a significant amount of money financing patent applications, so they want to recoup that early on when licensing to a company. The cost to get a single US patent can be $30,000 to $60,000, says Cathy Innes, director of the Office of Technology Development at the University of North Carolina at Chapel Hill. “The university owns all the IP, so very quickly it can end up with $200,000 to $300,000 in IP costs and you’re not making money on the company yet,” she says. Aware that only a small percentage of life sciences discoveries ultimately succeed, but that those which do can become real cash cows, universities also want a good deal on royalties in the event a discovery turns into a popular drug or device.
So, as usually happens, these two factions, through their lawyers, end up spending a lot of time negotiating terms, tugging and pulling at this and that clause, with each side trying to squeeze a better deal for themselves while thinking the other side is greedy. A lot of time is wasted exchanging documents that sit with the other party for days or weeks before coming back. People who do these kinds negotiations for a living say that each and every time it feels as if they’re reinventing the tech transfer wheel, even though, for the most part, the same issues come up again and again. That can’t be too much fun.
That’s why it’s so refreshing to see Innes and her team at UNC take up the tech transfer world by storm with their newest invention: a one-size-fits-all express licensing agreement. They call it the holy grail of tech transfer, though critics, I reckon, think of it more as heresy. Either way, it’s gutsy.
The terms are non-negotiable and the licensing agreement is offered to every UNC-based startup—the company can decide to take it as is, or leave it and negotiate the old-fashioned way. The terms are not very sweet for the university: a 1 percent royalty on products requiring FDA approval following clinical studies and a 2 percent royalty on all other products. The university takes … Next Page »
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