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A One-Size-Fits-All License Agreement: The Holy Grail of Tech Transfer?

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no equity in the company and no milestone fees, although in the event of a merger, stock or asset sale, or IPO, it takes a 0.75 percent payment on the company’s fair market value.

The idea of an express license agreement “had been discussed for a long time,” says venture capitalist Jean-Francois Formela, a partner at Atlas Venture. “So kudos to UNC for this.” But Innes is the first to admit she’s “getting a lot of flak” from tech transfer colleagues at other institutions. The comments she gets go along the lines of “Are you out of your mind?” and “This will never work,” she says. Her peers, she adds, “would want more” for the university, such as higher fees or royalties. “Some of my colleagues would not take less than 3 percent  in running royalties,” she says.

The express license has been available at UNC since December and so far it has been used to launch six startups. Why, I asked Innes, would you take a bad deal upfront every time? She said, essentially, that the university is taking a bet on volume over margins. “Where we hope to gain is that if we get a lot of companies started, more of them will be successful and have more products on the market, so we’ll be more successful,” she said. “This university has been very consistent in its messaging [that] we’re not just trying to maximize cash. We need to get more things in the pipeline.”

I asked Lita Nelsen, director of the Technology Transfer Office at MIT—and, by many people’s accounts, one of the most respected technology transfer experts in the US—what she thought of UNC’s agreement. Let’s just say she wasn’t head-over-heels for this type of deal. “This is a massive change to what is not the hard part of the problem,” she said. “People seem to think that negotiating the agreement is the hard part of getting startups off the ground. The real issues are ones of investors, leadership and the like.”

A one-size-fits all agreement, Nelsen argues, takes away from the uniqueness of each technology. For example, terms for a license in the pharmaceutical space, where margins on future sales could be rather large, should be different from terms for an energy startup, since margins on sales of a commodity can be significantly smaller, she said. “Every deal is so different that [the express agreement] is going to cheat it at one end or the other,” said Nelsen. “It’s going to underprice sometimes and overprice other times.”

And how about the argument that the government’s investment, in the form of research grants, is being undermined if license terms don’t aim for a good return on inventions? Innes said getting a big return isn’t the government’s chief aim in giving grants. “The government does not say ‘Get the maximum dollar back into the inventor’s pocket,'” she replied. “It says, ‘Get your inventions commercialized.'”

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Sylvia Pagán Westphal is Xconomy's life sciences columnist. You can reach her at swestphal@xconomy.com or you can follow her on Twitter at http://twitter.com/sylviawestphal. Visit http://www.xconomy.com/author/swestphal/ for Sylvia's full bio and disclosures. Follow @

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  • Kudos to UNC for trying a new model and I am sure it will speed up negotiations for some licenses. I suspect this will have most impact in the middle range of technologies where values are hard to come by.

    However, as Lita Nelsen noted, the license is not really the hard part of the deal. Also, though my expertise is in Federal licensing, pricing is not usually the hard part of the license. I have found that a licensee with a compelling financial case will prevail. Furthermore, if the licensee does not have the marketing research to support his financial model (presumably lower) for the license, I contend that licensee is not prepared to succeed in the other harder parts of commercialization.

  • This has indeed been discussed extensively by the Tech Transfer community and most agree with Lita Nelsen’s analysis. Many also feel that when the angels, venture capitalists and other investors are prepared to implement a “One-Size Fits All” term sheet for new investments then they will do a “One-Size Fits All” license agreement.

    My organization, the Mass Tech Transfer Center, is working with the Mass High Tech Council on the development of an annotated model license agreement. This annotated agreement will hopefully help licensees and licensors understand each other’s issues and concerns when drafting the licensing agreement. When this is done it will be posted on the MTTC and Mass Association of Tech Transfer Offices (MATTO) websites.

  • Bob Wilcox

    University spawned ventures serve the community through job creation, entrepreneurial training, attracting professors and students, translation, and good will. They benefit industry clusters, communities and the University’s image. Unlike an investor, these benefits are part of the University mission.

    UNC’s single template contract may be most appropriate for small market ideas. A few additional templates based on market size and product category could address larger opportunities. However, UNC is right to make the cost of licensing predictable, and the process efficient.

    The licensing transaction is not the worst problem in translating federally funded research into commercial innovations, but it is one problem contributing to the poor national rate of conversion.

  • Great article highlighting a fantastic initiative by UNC. Some more thoughts on why this is a smart approach for tech transfer at http://wp.me/ppKqx-1fw

  • We are developing a Boston University Startup License with support from legal and entrepreneur working groups. This is an important part of our new motto: Maximize Collisions, Minimize Friction(SM). Stay tuned….

    BU Office of Technology Development

  • Kymus

    This does make much sense. At MIT it seems that the donations they get from entrepreneurs who have started companies using licensed MIT technology are very significant.