How does licensing technology work

This associated know-how is immensely important and should be part of licensing agreements; effective technology transfer requires not only patent licensing but also, and perhaps more importantly, trade secret licensing.

Anyone engaged in product development, including developing countries in particular, will want to keep in mind that trade secret protection operates without delay and without undue cost. Patents, on the other hand, are territorial and thus expensive to obtain and maintain, and they can be acquired only in certain countries. When considering the forms of IP protection available for plants, what usually comes to mind are PVP and utility patents.

But as the chapter by Tucker and Ross 10 points out, trademarks are an effective form of IP protection for plants and plant products , either used alone or in combination with one or more other forms of IP rights protection. Furthermore, trademarks can be used to effectively protect IP rights for plant varieties internationally. Similarly, the value of trademarks for varieties and products from developing countries can be tremendous.

The relative strength of trademarks is determined by how distinctive the mark is. When consumers see the trademark, they are able to easily distinguish the goods or services of the trademark owner from the related goods or services of competitors. Two international agreements, the Madrid Arrangement and the Madrid Protocol govern international trademark registration. For plant trademarks, understanding and utilizing these provisions will become increasingly important to developing countries.

Many tropical and subtropical regions are rich sources of novel fruit products, and an owner of such a product will want to adopt a strategy that both stimulates global demand for the product and maximizes commercial returns.

Trademarks will be integral for such IP rights protection and global marketing strategies. In particular, three critical aspects should be considered if new branded fruit products are to be successfully launched from developing countries:. A successful global trademark program, built around exciting products, may be more achievable than a PVP-based strategy that relies only on licensing for returns.

Instead of managers and lawyers securing licensing deals, the market itself can fuel value creation in the trademark.

If successful, the returns can be tremendous. Shifting topics once again, a very important and quite difficult aspect especially for public sector entities is the granting of options and rights of first refusal.

As either a stand-alone agreement or as a clause within a broader agreement, options are a unique way of granting rights to intellectual property. The chapter by Anderson and Keevey-Kothari 11 provides a detailed discussion of the various forms of options, with tips and strategies, sample causes, and template agreements. The chapter delves deep into the legal and commercial promises and perils of granting options and concludes with a helpful section on administering options.

Of special interest to university administrators and technology transfer professionals will be the sections on incorporating options as a part of research agreements. Universities in the United Kingdom and the United States have different approaches to handling privately sponsored research.

In the United Kingdom, sponsors are often granted an option to acquire a license to develop and commercialize results, or the sponsor might in some cases own all the results. In contrast, a university in the United States normally retains ownership of any intellectual property resulting from its own research, though the university may grant rights to a sponsor to commercialize results. This emphasis on university control of research in the United States stems, in part, from provisions in the Bayh-Dole Act that prohibit universities from transferring ownership of intellectual property created from government-funded research.

A pipeline agreement generally refers to an option granted to a university spinout company to acquire rights over intellectual property that may, in the future, be generated by university faculty. Although a pipeline agreement may make sense, universities should be careful to stipulate how pipeline intellectual property will be identified. They will likely want to limit the agreement to intellectual property generated by specific faculty members and their labs.

Universities should also recognize that in some cases spinouts may not be the licensee of choice and should therefore craft pipeline agreements with care.

Licensing is about choices, and it can be argued that no choice is more important than the field of use granted in a license. When licensing complex technologies, the licensor usually can partition patent rights based on time duration of license grant , location where rights may be practiced , and field of use. Shotwell 13 explains and clarifies the last of these three considerations. By partitioning a bundle of patent rights and distributing them to one or more licensees, field-of-use licensing maximizes value, optimizes delivery, and facilitates the most effective use of new technologies, whether in agriculture, biotechnology, pharmaceuticals, vaccines, or diagnostics.

With field-of-use licensing, the licensor gains greater control while maximizing the use and value of the technology. However, field-of-use licensing requires more work. The technology licensor should identify, motivate, negotiate with, and manage more than one licensee—and quite possibly many. Nonetheless, this hard work can increase royalty streams to the licensor, since multiple licensees, each with different and specialized access to the technology, can efficiently speed different types of products to market.

When using field-of-use licensing, a licensor should be flexible. For example, even if a licensor envisions only one possible field of use for an invention, it makes sense to specifically limit a licensee to just that field. This is because technology changes so rapidly that a new use for the invention has a very good chance of developing later during the life of the patent. By limiting licensees to a particular field, a licensor retains the ability to work with the best possible licensee s for a new use when it arises.

Shotwell recommends that the licensor retain control over patent prosecution, while seeking to fairly distribute costs over field-of-use licensees. When considering reimbursement, the field-of-use licensor should manage patent expenses creatively.

For example, the licensor can cover patent expenses up front, later reimbursing them from the royalty stream, or, if costs are to be reimbursed by the licensees, language can be used to include future licensees in that reimbursement. As with patent costs, the simplest approach is for the licensor to carry interference and infringement costs alone, recovering them through royalties or settlements.

This approach retains more control for the licensor and correspondingly less for the licensees. Another approach to address possible infringement and interference actions would be to work out a mechanism to share the costs and management of these activities with one or more licensees.

Possible problems with field-of-use licensing include rights that overlap across licenses. This can arise from different interpretations of the rights granted under licenses or from unexpected future technical developments. It is therefore wise to lay the groundwork for resolving disputes related to these types of potential issues. Licenses that include royalty stacking and royalty packing clauses are becoming more ubiquitous because virtually all products developed now using biotechnology, genetic engineering, and chemistry are technologically complex and incorporate many different inputs.

As if this were not enough, there is also the added consideration of relevant IP rights, held by third parties that may be attached to these many inputs.

For example, a vaccine might be identified and tested using proprietary research tools with IP rights owned by several companies. Later, the vaccine might be produced using patented recombinant techniques and proprietary DNA sequences.

Transformation vectors might be owned by others. Production of the vaccine might employ a proprietary cell line. The vaccine might be packaged with one or more proprietary adjuvants and then be delivered using a patented device. There will also be separate reporting and accounting obligations to each of the licensors. Similar problems arise in agriculture when a genetically engineered crop might be made using proprietary varieties, vectors, gene sequences, and research tools—each with IP rights owned by different entities.

Jones, Whitham, and Handler 14 discuss two scenarios that can arise when multiple royalty rates are attached to one product—royalty stacking and royalty packing:. The last point shows that managing royalty stacking and packing does not necessarily require royalty streams. For example, a lump-sum payment for the use of a research tool may be an optimal way to disseminate and exploit a patented technology.

Some technologies may be best assembled in patent pools that provide either free use of or fixed-price access to the technologies. As all of the above chapters make clear, in our post-TRIPS environment, leaders in developing countries who seek to improve economic development and public health are advised to be well-versed in the details of global IP management.

Unlike the past, today no country can comfortably remain isolated from the global IP system. Yet among many public sector institutions in developing countries, knowledge of IP licensing practices is often insufficient. To address this gap in expertise, the chapter by Satyanarayana 15 lays out several of the important features of in-licensing agreements, common problems faced by developing countries in constructing and implementing these agreements, and ways to avoid these common pitfalls.

In-licensing by public sector institutions is a useful, if complex, method for bringing technologies into the public sector through patent license agreements with the private sector.

Although the interests of the private and public sector entities involved in these agreements will almost necessarily be in tension, it is possible for a well-crafted license to allow all parties to feel as though they have benefited from the agreement. From a public sector perspective, as Satyanarayana argues, the goal is ultimately to provide a product be it a vaccine, drug, or new agricultural crop to people who would not have access to it without government support.

For developing countries, the good news is that legal expertise is often locally available, since many firms are already familiar with basic licensing procedures. The trick is to put this knowledge in the service of public officials to develop a comprehensive and effective plan to license and develop much-needed-technologies.

These strategies include:. The final chapter by Bobrowicz 16 offers a useful checklist for negotiating licensing agreements.

For the seasoned technology transfer professional or contract attorney, the idea of preparing a detailed checklist for every licensing agreement may seem like unnecessary busy-work. There are standard terms covering termination which are often used in licence agreements. The parties may agree that any disputes are to be resolved by mediation or arbitration instead of in the courts.

In the case of transnational licence agreements, the parties should also agree upon a choice of law clause which State's laws govern the agreement and a jurisdiction clause in which State's courts the agreement may be litigated. Certain terms which might be agreed between a licensor and licensee are in fact not permitted in a licence agreement under UK or European competition law, or the competition law of other jurisdictions.

Chapter I of the UK Competition Act and Article 81 1 of the Treaty of Rome prohibit agreements which have the object or effect of preventing, restricting or distorting competition, and which may affect trade within the UK and trade between Member States of the European Union respectively. Parties to agreements that breach this prohibition may be fined, and the agreement itself will be unenforceable, which is often of even more concern to the parties involved.

Because intellectual property rights give their proprietor a monopoly in a particular field, and also because patents give protection within national boundaries, there is often a tension between the exercise of patent rights and competition law.

The European Commission has issued various Block Exemption Regulations that give certain types of agreement exemption from Article 81 1 , provided the terms of the agreement are such that it in fact promotes, rather than restricts, competition. The current Regulation that gives exemption to patent and know-how licences which fall within its terms is the Technology Transfer Block Exemption Regulation which came into force on 1st May Agreements that fall within the terms of a European Commission Block Exemption Regulation are also exempt from the UK Competition Act Chapter I prohibition, regardless of whether they affect inter-state trade or only trade within the UK.

The Technology Transfer Block Exemption Regulation can therefore be regarded as a "safe harbour" for all patent and know-how licences that fall within its scope.

This "safe harbour" is severely limited, however. It does not cover agreements where the parties' market shares are above certain thresholds, and these thresholds vary according to whether or not the parties are competitors. Correct identification of the relevant market is crucial to the assessment of market shares. In any case where the Technology Transfer Block Exemption Regulation does not or may not apply, it is down to the parties to make their own assessment of whether or not, in all the circumstances, their proposed arrangement might be regarded as anti-competitive.

The Technology Transfer Block Exemption Regulation sets out a list of "hardcore" restrictions of competition, and these give a good indication of the kinds of activities that the Commission regards as anti-competitive and unlawful. In particular, Chapter I and Article 81 outlaw agreements which directly or indirectly fix prices, or limit production or markets or technical development or investment, or share markets or sources of supply, or discriminate between different trading parties, or impose obligations which have no true connection with the subject of the agreement.

The Commission has also published Guidelines on the application of Article 81 to technology transfer agreements. These Guidelines which run to over 40 pages provide further insight into the Commission's thinking in this area, and give examples of situations that can result in breaches of competition law.

Once the parties to an intended licence have reached agreement on the proposed terms, it is vital to check the proposed terms against the Technology Transfer Block Exemption Regulation and the Guidelines in order to ensure that the final agreement does not infringe competition law.

In most countries including the UK , patent licences can be recorded and in some countries it is obligatory to record them. It is generally in the interests of the licensee, rather than the licensor, to record the licence, and the licensee therefore usually bears the cost of doing so. In the UK, the licensee will want to record his licence so that anyone who buys the patent from the licensor buys it subject to the licence, and so that he can continue to work under his licence even if the licensor later agrees to grant someone else an exclusive licence.

In the UK, an exclusive licensee may bring legal proceedings for infringement of the patent in his own name, but in order to obtain damages as from the date of the grant of the licence, he must register the licence within six months of its grant. This information is simplified and must not be taken as a definitive statement of the law or practice. Our IP specialists work at all stage of the IP life cycle and provide strategic advice about patent, trade mark and registered designs, as well as any IP-related disputes and legal and commercial requirements.

Read our blogs to keep up to date with developments in the IP world and what we are up to at Mewburn Ellis. We have an easily-accessible office in central London, as well as a number of regional offices throughout the UK and an office in Munich, Germany.

All rights reserved. Introduction to Technology Licensing. Select Option. For further advice please contact us. What rights can be licensed? Which rights can be licensed? A licensee may therefore be permitted to carry out all, or any one or more, of these activities. Is the licensee to be allowed to grant sub-licences? Some relied solely on internal development, while others drew on external knowledge by entering into strategic alliances and collaborating with outside partners.

Other companies used technology licensing. The effect was particularly salient in technological domains in which firms had significant investments and commitments. Put differently, when existing investments were at stake, licensing was the best way for firms to preserve their competitive position. Our study examined how licensing has been an important knowledge-sourcing tool in the biopharmaceutical space over the last decade.

This industry has experienced rapid technological change grounded in the form of new research tools such as immunoassay, gene sequencing, and high throughput screening, as well as new therapies such as monoclonal antibodies, stem cells, and oligonucleotides. The industry is also highly competitive, as firms continuously move new therapeutic treatments towards regulatory approval.

We found that licensing gives firms the ability to more quickly adjust to this shifting competitive landscape. The firms we sampled engaged in more than 4, licensing transactions over a period of 15 years