Dr. Ravi Dhar on " Licensing Technologies: Principals & Dynamics"

Principals & Dynamics

of

Technology Licensing

Workshop on “Effective Management of IPR in

Biotechnology by Universities & research Institutes in Assam”

@ Assam Agricultural University

Guwahati, Assam October 17, 2014

Ravi Dhar, Ph.D., f-STEM ([email protected])

(in.linkedin.com/pub/ravi-dhar/18/71b/895)

Previous Affiliations: BIRAC-DBT, GoI, India National Institute of Immunology Johns Hopkins University, U.S.A. LSU, U.S.A. OTT, Boston University, U.S.A. OTT, NIH, U.S.A.

16/4/2014 1 RD_AAU-Gauwhati_October-2014

mailto:[email protected]

16/4/2014 RD_AAU-Gauwhati_October-2014

Resource Acknowledgements NIH PubMed Scientific Community across world Memorial Sloan Kettering Cancer Center DBT BIRAC Library Service NII Various Websites Nature Biotechnology & other Journals Biotech News (DBT) Healthcare Biotechnology, CRC Press GHI & OTT, Boston University OTT, NIH

2

Acknowledgements

• Dr. Purnima Sharma, BCIL • Dr. Sanchita Chaudhary, BCIL • Dr. Gerald T. Keusch, BU • Dr. Ashley Stevens, BU • Dr. Lius Salicrup, NIH • AAU • Nature Biotechnology • J. Commercial Technology • Dr. Ravi Dhar: (www.biospectrumindia.com/biospecindia/news/156942/a-

bill-promises)

• LESI • NII/ BU/NIH/MSK • BIRAC • Various websites


http://www.biospectrumindia.com/biospecindia/news/156942/a-bill-promises





16/4/2014 RD_AAU-Gauwhati_October-2014 4

Part- I


Research

Basic Applied

Translational

Product

Sell (frugal) License


Partners in Technology Development

Research

Universities/ R&D Institutes

Start-up Firms/Companies;

R&D Firms

Development

Production

Manufacturing Sale

& Market

Larger Companies

Distribution

IDEA


Proof of Concept Legal Protection

Validation/Brief Trials In house Experimental Production

MARKET SALES

Components of Technology Development & Management

Clinical Trials/Field Trials

( =Licensing possibility)


R & D Activity

POC/ Product

(Patents)

Development & Commercialization

Legal w

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Components Technology Due Diligence

Basic Principals of Technology Licensing

Looking into all related agreements

Drafting of Agreements

Definition


Licensing is a Contractual Agreement between two entities in which one, called Licensor (who owns a technology), permits the other, called Licensee to use his Technology (Patent/ Copyright/ brand) in exchange for some fee or royalty


Why License Technologies? Helps decrease the time for Development of a Technology into a product Since cost of Technology development keeps on increasing, academia or small entities can not afford further development of a Technology In the current scenario, collaborations and alliances help in speedy Growth of R&D + Product development Regulatory environment is becoming more stringent, and thus we need to License technologies to those, who have such an expertise and money (Note: More customers for embryonic technologies)


Successful Licensing is/must be

Based on Technical Merit &

Market Potential


Part-II


Background

How do we Generate Intellectual Property &

Products?

Research Basic Applied

Legal Protection/Patent

16/4/2014 RD_AAU-Gauwhati_October-2014

Practical leads/ PoC/

Invention/Product

File a Patent/ License the

Technology; or Sell Technology

Develop & Manufacture Product

(commercial activity)

Company/ Enterprise

15

En

tre

pre

ne

urs

hip

Innovation & Enterprise Individuals/ Universities/ Key Players Institutes/ Industries Invention/ Technology Investment Enterprise/Start up Company Royalty Reap the Fruits of Innovation if the product is commercialized


Contribution to Economy

IP Protection/

Patents


Proof of Concept Legal Protection

Validation/Brief Trials In house Experimental Production

MARKET SALES

Components of Technology Management

Clinical Trials/Field Trials

( =Licensing possibility)


Level of Maturity of Technology Is Essential for consideration for further Development by a Licensee

Technology Transfer Process Technology

(A Vaccine/Therapeutic Agent/GM Crop/Medical Devices etc)

(Drug Discovery> Product Development (Delivery Method+ Kinetics of Absorption, Distribution, Metabolism, Excretion)> Clinical Evaluation (Toxicity + Animal & Human Studies)>

Invention Disclosure

Assessment/ Screening

Patent Protection

Licensing & Monitoring

Technology Transfer

(Active Pharmaceutical ingredient> Drug Product(Dosage & Delivery Systems)> Analytic Methods> Stability)

Product Development, Production & Commercialization

Revenue & Monitoring

(http://www.nii.res.in/faculty-06/RaviDhar.htm)


University/ Institute/

Organization

Established or Start-up Company /Entrepreneur or a

Big Company

Technology/Innovation Management Process 1. Idea/Proof of Concept : Technical Assessment

2. File a Patent (Prior Art Search: Novelty/non-Obviousness/Utility) / (Publish Manuscript)

3. Grant Process at Patent Office : Be patient

4. Find an Industrial Partner : Be Patient or float your Start-up Company

5. MoUs_NDA : TTO or Attorney or Agencies 6. Licence , DA : TTO or Attorney

7. Exchange Know-how_MoUs : You and Industry

8. Demand Signing Amount : You + Industry+ University

9. Furnish Data (Importance of Record Book): You + Industry

10. Freedom to Operate Analysis : TTO/ Patent Attorney

11. Industrial Partner will Validate Data>Upscale>Pilot run 12. Milestone Payments : You + University

13. Industry will Manufacture, Commercialize, Market Product 14. Distribution of Royalty on Sales : You + University + Industry



Value of Technology (Drug/Vaccine/Medical Device/GM Crop)

Proof of Concept

Untested Product/ Animal or Field Trials

Product Level(Low)

High Category Concept/High Value Low Category/Low Value

Tested Product / Human Clinical Trials Phase I

Product Level (Better)

Value Low

Value Preposition Debatable

Value Debatable??

Higher Value Preposition Field Tested Product/

Human Clinical Trials Phase III


Part-III

Technology Disclosure

Decide Whether to file for IP

If yes, do market analysis of concept or

of the Product

(A) Plan A : Collaborate/ License or Start up company

• Negotiate the license

• (B) Plan B: Fundraising, management searching

• Brokering interactions with potential partners

(pharma, service-for-equity, investors)

Goal:

Bring the technology to market


Definition


Licensing is a Contractual Agreement between two entities in which one, called Licensor (who owns a technology), permits the other, called Licensee to use his Technology (Patent/ Copyright/ brand) in exchange for some fee or royalty, depending upon the contents of written agreement, after due negotiations.


Licensing should not be an outcome of Knee-jerk reaction


Technology Licensing has a

serious relationship with

Product/ Patent Quality &

Scenario.

(So conduct thorough Due Diligence)


Technology Due Diligence Components 1. Assessing the idea (is it valuable, ethical) 2. Pre visit (what information to gather from academia) 3. First interview with inventor 4. Patentability 5. Legal Issues 6. Status of Patent Applications or Issued Patents 7. Clinical or field trial aspects + Effect on humans 8. Can the product be commercially manufactured -

(CMC=Chemistry, Manufacturing, Controls, Cost)


Technology Licensing……(a) Why should we License? What do we License? Where do we License? Whom do we License? How much should we license? Competing products! FTO Scenario Patent scenario or Landscaping Patent Coverage Patent Claim clauses & deficiencies


Technology Licensing……(b) Negotiating Skills (Exclusive/Non-exclusive) Fiscal Aspects – Signing amount/ Compensation/ Royalty Regulatory Scenario Commercial Law Insolvency Issues, if any


Technology Licensing……(c) Drafting License document/ Licensing deals i) NDA ii) MTA iii) Evaluation agreement iv) Letters of intent v) Standstill agreements

Preclinical & Clinical Study Agreements Clinical & Commercial Supply Distribution Pharmaco-vigilance (drug/vaccine/plant safety) Promotion agreement

Role of Inventor/ Consultancy/Collaboration /Mentoring?

Let us Patent: Why ? Inventions selected for investment have:

– Solid technical merit

– No unmanageable obligations to others

– Strong patent protection available

– Good prospects of a commercial market and business opportunity


Why Should we not Patent?

• Idea is not an invention

– Doesn’t qualify as eligible subject matter

– Publication created bar to patenting

• Idea is not fully developed

– Enablement issues

(=one should be able to repeat the invention)

– Patent issuance unlikely

• Patent position is not commercially useful

– Narrow coverage

– Dominated by other patents



Part-IV

Strategy in Licensing



Licensing Grant (Different Degrees of Rights can be Granted)

Assignment License Freedom from Suit

Non-Exclusive Exclusive Exclusive by Field/ Exclusive by Territory

(Complete Transfer) (Limited Transfer) (No Transfer- Immunity)

(Degree of Exclusivity)

Types of Licensing

– Exclusive License

– Non-Exclusive License

– Paid-Up License

– Running Royalty License

– Cross License



(1-a) Exclusive Licenses to Big companies (1-b) Exclusive License by Government /NIH to companies (www.ott.nih.gov) (2) Non-exclusive License to various players (3) Exclusive License agreement to minimize barriers to entry faced by start-ups, e.g., Out-licensing of anti-diabetic compound by Connexios, Bangalore (upfront payment of approximately Rs. 30-60 Crores (?)


Goal or Purpose??? Q) What should one do with a Technology? A) Start a Company or Partner with an Existing one which would be based on:- Time Commitment Near Term Financial Return

Goal or Purpose (A or B) find commercialization route most likely to result in products on the market

• Startup: (A) Partner (B)

• Broad IP -Narrow/dominated IP

• Disruptive -Improvement

• University Know-how -Company well-

positioned

• Lots of time/effort -Less effort

• Low initial $ return -Typically some $ upfront



S.No. Technology Status &

Support System Scenario

Type of Company/ Product

Development Possibility & Value

1. Technology patents pending, Business concept /model defined, Management team in place

Early Stage Company/ Least Value

2. Technical and commercial proof of concept more clearly established, Collaborative (validating) relationships in place with technology and/or commercial partners

Mid-Stage Company/ Better Value

3. Initial products in clinic, Corporate partnerships well established, Additional technologies under development

Later Stage Company/ High Value


License to Established Company (1)

Non-Exclusive License (2)

License to Start-up (3)

License Tangible Property (4)

(A)Grant 1. Scope 2. Field 3. Territory 4. Sublicense

1. Exclusive 2. Generally Limit 3. Varies 4. Yes

1. Non-Exclusive 2. Limited 3. Varies 4. No

1. Exclusive 2. Varies 3. Worldwide 4. Yes

1. Non-exclusive 2. Limited 3. Worldwide 4. No

(B)Compen -sation 1. Upfront

2. Milestone 3. Royalty 4. % of Sublicensing

1. Cash 2. Spread out 3. Varies 4. Fixed

1. Cash 2. Varies 3. Varies 4. n/a

1. Equity 2. Back-loaded 3. Varies 4. Tiered

1. Cash 2. n/a 3. Frequently none 4. n/a

(C)Deligence Mix of early & late stage Milestones

Light; sometimes non-existent

Heavy; include fund raising milestones & early product development

None – typically required


Part-V


Licensing & Negotiation: Importance of Non-binding,

but Confidential Term Sheet


UNIVERSITY OF UTAH RESEARCH FOUNDATION CONFIDENTIAL SUMMARY OF TERMS FOR PROPOSED PATENT

LICENSE AGREEMENT (STARTUP COMPANY)

THIS TERM SHEET WILL EXPIRE ON ____________, 200_

U-_________ TECHNOLOGY TITLE:

INVENTORS:

The intent of this document is to describe, for negotiation purposes only, certain principal terms of the University of Utah Research Foundation’s Patent License Agreement. The Patent License Agreement will be negotiated and administered through the University of Utah Technology & Venture Commercialization (TVC) on behalf of the University of Utah Research Foundation. This document is not intended to be a binding agreement between the Parties with respect to the subject matter hereof, except for the paragraph immediately below regarding confidentiality.

(Source: https://www.tvc.utah.edu/tco/Documents/Term_Sheet.doc)


Disclaimer: The licensing terms outlined below shall have no binding effect on University XYZ…. or any third party unless and until such terms are incorporated into a written

agreement between the parties.

This non-binding term sheet is valid for 90 days and will expire on <DATE>.

Example of Non-Binding Term Sheet Components…between University and <COMPANY>

1. License Grant 2. Patents 3. Copyrights 4. Field of Use 5. Terms of License 6. Upfront Licensing fee 7. Royalty 8. Non-Sale based Sublicense Income 9. Annual minimum Royalties 10. Milestones 11. Patent Expense Reimbursement 12. Standard terms & Conditions of University 13. Status of Funding (any obligation – Government etc.)


Part-VI


License to

Start-up Companies (I) vs.

Well established Companies (II)


Innovation Matrix

Disruptive

New pathway or disease State targeted (created new Category), e.g., Enbrel – treatment for psoriasis

New indication or application, e.g., Serostim – injectable Growth hormone

Same indication with new Patient benefits – second Generation – e.g., Antibiotics

New target along with an old Pathway (creates a new category) e.g., Simponi -anti-nflammatory target

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Incremental


When to think of a Start-up? (I) 1. When technology base is broad

2. Technology is disruptive

3. Lots of “know-how” is involved

(Know-how is a term for practical knowledge on how to accomplish

something, as opposed to “know-what” (facts), “know-why” (science), or “know-who” (communication). Know-how is often tacit knowledge, which means that it is difficult to transfer to another person by means of writing it down or verbalising it. The opposite of tacit knowledge is explicit knowledge”)

http://en.wikipedia.org/wiki/Tacit_knowledge

http://en.wikipedia.org/wiki/Explicit_knowledge


When to Partner with a Big Company? (II) 1. When one has an improvement on existing technology

2. Company is well positioned to develop a technology

3. Company has better scientific support in terms of skilled manpower & R&D center 4. Some other logic??!!!

Start a Company… …or Partner with an Existing one?

This is a choice that has to be made for commercially attractive technologies We will discuss: •Requirements/demands of each development route •Factors considered when deciding on a route


Academia and Startup companies - Scenario in U.S.A.

•Many large life science companies struggle to develop new commercial products; fill the gap by purchasing/partnering products developed by smaller players

•Passage of Bayh-Dole act in 1980 allowed academic institutions to patent their inventions; a source of innovation for small companies

•Resultant environment supported new companies, rewarded the investors that financed them and encouraged academics to think about how to translate their research

•About 2/3 of life science-based startups originate from academia



Before we begin to consider what technology lends itself to each route, we must first understand what each route entails.


Starting a Company vs. Partnering: Time Commitment

Starting a company requires lots of extra time and effort from both Inventor(s) and OTD (part of our job). •Business must be incorporated and issue shares, find a suitable business model and craft a business plan, recruit management and/or board members, raise money.

•Inventor will drive project development in a startup company •Investors will be betting on options


Starting a Company vs. Partnering: Near-Term Financial Return

Starting a company requires both OTD and inventor to sacrifice short-term license fees (usually OK with OTD)

•All $ invested in a startup is spent on essential costs (IP, development) •No/low cash reserves



Now that expectations are set, we can evaluate which development route is more appropriate


(SU-1)A startup is a good choice when… …the technology base is broad

Multiple product opportunities!

-A must for investors

-More shots on goal = better chance of getting a product onto the market

Examples:

-Novel drug vs. Novel drug + methods of finding more (new assays, etc)

-Polymer chemistry with a wide range of applications


(SU-2) A startup is a good choice when… …the technology is “disruptive”

Cutting edge: Sometimes established companies are slower to accept—reduces chances that companies will put adequate resources into the technology and increases development time. (Result = decreased chance of product reaching the market) Look at Robert Langer’s prophecy of MIT, Boston in next slide

Contrarian: Acceptance also difficult. Often times, this type of technology is a new approach to an old problem that companies have given up on.



Robert Langer of MIT is an ideal example of Cross talk between

Science & Business.

He feels that next Big thing 20 years from today will be supplied by one of

his Start-ups”

“Know-how” is generally unpublished, unpatented technical information that conveys a significant advantage (research technique, manufacturing process)

Know-how is more difficult to transfer to an established company and evolves rapidly

If there is substantial value in the Know-how (cannot be easily engineered), a startup may make more sense

(SU-3)A startup is a good choice when… …lots of “know-how” is involved


Recent University startup (Endocrinology) with a focus on treatments for the vascular complications of diabetes

• Broad technology base—have a lead therapy, two novel screens for finding more and a broad base of IP

• Disruptive technology—initial focus is a “discarded” pharma target

• Valuable Know-how—trade secret toxicity assays to differentiate Vascular’s approach from competition

(SU-4) A startup is a good choice when… Example: Vascular Pharmaceuticals



Partnering with Medium or Big Companies

• Value of University technology is enhanced by existing technology

• Capitalizes on company Know-how, established manufacturing, distribution, R&D infrastructure.

Result = increased chance of product reaching the market

• Often, University technology will be “dominated” by existing IP. Then, partnering isn’t the better choice, it’s the only choice.

(P-1) Partnering a good choice when… …one has an improvement on existing technology


• Complimentary R&D efforts

• Established expertise in area

• Large amounts of early R&D required in an area that investors shy away from

--development financed via product sales/cash on hand vs. via money raised from investors expecting a fixed return amount/timeline

(P-2) Partnering is a good choice when… …a company is well-positioned to develop the technology


Novel class of drugs discovered by Lineberger research group

• An improvement—more specific versions of existing drugs

• Company was well-positioned—Development partner performed chemistry that enhanced the drugs, had established means for assaying them and Know-how related to approaches that have failed

(P-3) Partnering is a good choice when… Example: immunoproteasome inhibitors


Goal or Purpose (A or B) (SU or P) find commercialization route most likely to result in products on the market

• Startup: (A) Partner (B)

• Broad IP Narrow/dominated IP

• Disruptive Improvement

• UNC Know-how Company well-positioned

• Lots of time/effort Less effort

• Low initial $ return Typically some $ upfront



Part-VII


Licensing University Technologies


Licensing University Technologies ? (UL) 1. What does the Inventor get out of it? 2. What motivation does TTO have in facilitating Tech Transfer? 3. Responsibilities towards Government/

Funding Agency 4. Priorities of University, or R&D Laboratories 5. Time constraints 6. Reality Investment/ Venture Capital

(UL-1)What do I get out of it?

• Universities are required to share at least 15% of income with inventors

• In USA, Funding agency or University policies mandate upto 40% of the income be shared with the inventor (among highest in the country)

-- 40% to inventor’s department, 20% to OTD


(UL-2) Licensing expectations: University or R&D Organization as Licensor

Need to understand motivations of the TTO: •Requirements of Funding Agency or Govt. •University priorities •Time constraints •Realities of investment climate •Return on investment


(UL-3) Licensing expectations: University as Licensor (U.S.A.)

Bayh-Dole act (1980) allowed institutions to patent discoveries made with federal $--but caveats attached to licensing those patents:

1. Preference for US companies; small business over

large 2. No assignment of rights (license instead) 3. Grant non-exclusive rights to US Gov’t 4. US manufacturing requirements (flexible) 5. Distribution of $ to inventors (University 40%) 6. Actively promote commercialization of inventions

(diligence, non-exclusivity)


(UL-4) Licensing expectations: University as Licensor

University priorities

Many schools seek to use technology licensing, in part, as a tool to: •Retain best faculty •Increase research sponsorship •Promote regional economic development •Generate publicity (smaller schools) •Benefit society



Time constraints

• Many TTOs are very busy (OTD has): -200+ cases per Project Manager -4 “interference” proceedings with USPTO -10 to 20 ongoing negotiations at a time • Result: -Most of us can size up a potential license deal quickly -Most of us would rather close on a reasonable deal that is less that what we were after then haggle forever



Reality of Investment Community/Venture Capital

•Most larger TTOs will have reasonable idea of what terms will be acceptable / unacceptable to institutional investors

•Deals too slanted to the TTO (inexperienced company negotiator) will have to be re-negotiated later (time constraints!) or will prevent investment and company viability

•Deals too slanted away from the TTO leaves us without “skin in the game,” which can worry investors (not always…)


Managing conflicts of interest

Conflicts of interest refer to outside activities that may:

1. Interfere with an employee’s duty to carry out primary duties

2. Involve inappropriate use of University resources

3. Misuse the name of University

4. Claim University responsibility for conduct/outcome of such activities

*All of the above are not permitted*


If managed properly, University or R&D Organization faculty may, with appropriate oversight:

1. Accept sponsored research $ from a company in which they have equity

2. Serve as an officer in a company in which they have equity and which is based on University or academic institute technology

3. Consult for a company in which they have equity

*Many institutions prohibit these activities (e.g., Stanford)*

Conflicts of interest - Permitted activities



Part-VIII

Elements of Drafting and Patent Licensing


Components

1. Introduction to Drafting

2. Contract Language

3. Principles of Contract Interpretation

4. Contract Drafting Basics

5. Contract Elements in Detail

6. Boilerplate Provisions

7. Patent Licensing

8. Solution to the Patent Licensing Scenario


(1) Introduction to Contract Drafting

• What is the goal of contract drafting?

• How can a contract be precise?

• Who should draft the contract?


(2) Contract Language

What makes contract language “special”?

• Mixture of languages

• Desire to avoid ambiguity

• Habit

• Pressure to conform


Examples of Unusual Language

• Doublets and Triplets

• Deeming

• Here-, there-, and where- words

• Other old-fashioned language


Obligations, Authorisations and Conditions

• Avoid the overuse of “shall” Use “will” to state a future fact

Use “shall” to state an obligation

Use “may” to state an option or a right

Use “must” to state a condition precedent


Cultural Issues

• Articles (a, an, the)

• Tense

• Grammar (particularly prepositions)

• Punctuation

• (Over)Use of Chinese-English dictionaries


Characteristics of Language 1. Short sentences

2. Definite, concrete, everyday language

3. The active voice

4. Tabular presentation of complex information

5. Separate paragraphs and sections, with headings, for separate concepts

6. The absence of highly legal jargon or highly technical business terminology and use of Latin or other foreign languages

7. The absence of double or multiple negative

8. The use of multiple columns of text if the font is small



Example ???

Benefits of Drafting in Plain English

• Increased Efficiency and Understanding

• Fewer Errors

• Positive Image for the Legal Profession

• Compliance with statutory Requirements

• BUT: There is resistance!


(3) Principles of Contract Interpretation

I. The document must be read as a whole

II. The Literal and Golden Rules

III. Ut res magis valeat quam pereat

IV. Contra Proferentem

V. Noscitur a sociis


Principles of Contract Interpretation

VI. Ejusdem generis

VII. Expressio unius est exclusio alterius

VIII. Commercial (purposive) Purpose

IX. UCC §3-114 on Contradictory terms.


(4) Structure of a Contract • Title • Introductory paragraph • Preamble / Recitals / WHEREAS Clauses • Definitions • Operative Clauses • Representations, warranties, covenants,

indemnities, guaranties, releases • Events of default and remedies • Boilerplate • Signature Block • Exhibits and Attachments


Titles

• All CAPITAL letters

• Cantered and Underlined

• Use a generic term


Introductory Paragraph Example:

• This Agreement (hereinafter referred to as the "Agreement")

is made by and between National Institute of Immunology

(NII) or XYZ (hereinafter referred to as "Licensor"), a

corporation with principal offices at New Delhi, India & ABC

Company, Connecticut, U.S.A. (hereinafter referred to as

"Licensee").


Preamble / Recitals

• WHEREAS …

Facts about:

• Relationship and goals of the parties

• Nature of the transaction

• Other related transactional documents

… The parties agree as follows:


Definitions

Inclusive:

“Intellectual Property” means intellectual

property as that term is generally used and

includes all patents, copyrights, and trademarks.

Exclusive:

“Intellectual property” means patents, copyrights,

and trademarks.


Signature Block

The Parties agree to the terms of this Agreement above.

Licensor

XYZ Inc.

By: ________

Name: Purnima

Title: President

Licensee

ABC Company

A Limited Company

By: __________

Name: Jeff Marshall

Title: Owner


(Only University Authorized Person will sign)

(5) Contract Elements in Detail • Representations and Warranties

• Covenants

• Conditions Precedent

• Remedies

• Language to soften provisions


Representations and Warranties

• Distinction is not normally important

• They tend to be coupled:

“Party represents and warrants that…”

• Creates a snapshot of the facts

• Important for assigning risk and due diligence

• Drafted in present or past tense


Covenants

• Affirmative covenants • Negative (Restrictive) covenants • Financial covenants

Example: “Licensee shall pay Licensor a royalty of five percent (5%) of Licensee's selling price for each Licensed Product manufactured, used, or sold by Licensee in the Territory or imported by Licensee into the Territory.”


Conditions Precedent

• Requirements that must be satisfied before a party has to perform or before the contract is enforceable

• Simultaneous Closing vs. Delayed Closing


Remedy Provisions

• Triggering Event Remedy

Four types

– Termination

– Acceleration

– Indemnification

– Liquidated Damages


Remedy: Termination

“In the event Operator defaults in the performance of any covenant or agreement made hereunder, as to payments of amounts due hereunder or otherwise, and such defaults are not remedied to the Supplier’s satisfaction within ten (10) days after notice of such defaults, the Supplier may thereupon terminate this agreement and all rights hereunder of the Operator but such termination shall not affect the obligations of the Operator to take action or abstain from taking action after termination hereof, in accordance with this agreement.”


Remedy: Acceleration

“Whenever, within the sole judgment of Seller, the credit standing of Buyer shall become impaired, Seller shall have the right to demand that the remaining portion of the contract be fully performed within ten (10) days.”


Remedy: Indemnification

• Breaching party indemnifies (pays back) innocent party for all costs, damages and losses suffered as a result of the breach

• Could be limited by baskets or caps.


Remedy: Liquidated Damages • Specific payment upon occurrence of certain

event.

Could be unenforceable (a penalty):

• Is the actual damage from breach difficult to calculate?

• Was a good faith effort made to estimate the damage?


Softening Remedies

• Materiality

“[Breach]…in any material respect.”

• Grace (cure) Periods


Softening Contract Provisions

Good Faith

Reasonable Efforts

Diligent Efforts

Best Efforts

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(6) Boilerplate Provisions

What does “boilerplate” mean? (A description of uniform language used normally in legal documents that has a

definite, unvarying meaning in the same context that denotes that the words have not been individually fashioned to address the legal issue presented); or

(Slang for provisions in a contract, form or legal pleading which are apparently routine and often preprinted) ???? Think if we should always use this??

• Miscellaneous

• Pre-litigation planning

• NOT unimportant!


Arbitration

• Why go to arbitration?

Example Clause:

“Any controversy or claim arising out of or relating to this Agreement, or its breach, is to be settled by arbitration administered by [organization] in accordance with its [subject matter] Rules.”

• Arbitration or Mediation? (Indian or International)


Choice of Law • ALWAYS include this provision

• Which law should you choose?

Example:

“This Agreement and the rights and obligations of the parties hereunder shall be governed by, and construed and interpreted in accordance with, the laws of the State of XYZ, or Arbitration act of India 1996), without regard to its choice of laws principles.”


Consent to Jurisdiction • Choice of forum provision

Example:

“Each party shall submit to any court of competent jurisdiction for purposes of the enforcement of any award, order or judgment. Any award, order or judgment pursuant to arbitration is final and may be entered and enforced in any court of competent jurisdiction.”


Waiver to Trial by Jury

• Why waive the right to a jury?

Clause must be:

• Binding on both parties

• Conspicuous – bold or CAPS


Counterparts

• Contract may be executed separately by parties

• Common for international agreements


Headings • What is the proper function of headings?

Example:

“The descriptive headings of the Articles, Sections and subsections of this Agreement are for convenience only, do not constitute a part of this Agreement, and do not affect this Agreement’s construction or interpretation.”


Severability

• Remove (sever) void provision and interpret the remainder

• Remainder must still represent the bargain


Integration

• The contract is the whole agreement

• No other oral or written promises

• Invokes the Parol Evidence Rule


Waivers

• No Oral Waivers

• Effect of failure or delay to enforce rights

• Written waivers are limited to one occasion


Amendments • In Writing • Signed • Identify the original agreement

Example: “The parties may amend this Agreement only

by a written agreement, signed by the parties, that identifies itself as an amendment to this Agreement.”


Assignment and Delegation

• Assignment of rights or delegation of duties to a third party

• Only with prior written consent from other party

• Issue of control – important to know who you are dealing with


Costs and Expenses

• Parties cover their own expenses unless otherwise stated.

• Minor, but it avoids arguments


Further Assurances

• Attempts to deal with unforeseen circumstances

Example:

“The parties agree to do such further acts and things and to execute and deliver such additional agreements and instruments as may be reasonably necessary to give effect to the purposes of this Agreement and the parties’ agreements hereunder.”


(7)Patent Licensing

• What is a license?

• Types of Licenses

– Exclusive License

– Non-Exclusive License

– Paid-Up License

– Running Royalty License

– Cross License


Structure of a License Agreement

• Title • Introductory Paragraph • Preamble / Recitals • Definitions • Grant • Royalties • Representations and Warranties • Term and Termination • Boilerplate provisions • Signature Block


Definitions

• Licensed Patents

• Licensed Products

• Territory


Patent Marking

• Why is marking important?

• Licensor may ask to inspect Licensee’s products


Patent Enforcement

• Who should sue infringers?

• Do we always want to sue infringers?

• How should the court award (compensation) be distributed?


Representations and Warranties

• What should the Licensor promise?

– That the patent is valid?

– That the Licensor can grant a license?

– That there are no rights of third parties?

• What should the Licensee promise?

– Paying Royalties?

– Best efforts in selling product?


Improvements

• Licensor’s Improvement

– Can the Licensee use it?

– Additional Fee?

• Licensee’s Improvement

– Can Licensor use it? If so, to what extent?

– If patentable, who gets the new patent?


Indemnification

• Licensor may want to be indemnified against tort actions in relation to use of the final product

• Licensee indemnification depends of bargaining power


Royalty Rate

• Agreed on in negotiations and put into contract

• If disputed, provision for an arbitrator may be utilized


(8) Solution to the Patent License Scenario

• Exclusive or non-exclusive?

• Paid-up or Running Royalty?

• Territory?

• Improvements?

• What if a dispute arises?



Part-IX

Complex Topics to Draft

• WiAV Solutions LLC v. Motorola, Inc., concluding that an exclusive licensee has standing to sue for infringement despite existence of others with right to grant sub-licenses

• Stanford v. Roche and Preston v. Marathon Oil Co., finding that a contract presently assigning future inventions takes precedence over a contract promising to assign in the future

• Stanford v. Roche, holding that the Bayh-Dole Act does not supersede the requirement to get assignment of invention from employee

• Tessera, Inc. v. International Trade Commission, ruling that exhaustion of a patent occurs on sale by licensee, not on payment of royalties by licensee

• Sunbeam Products, Inc. v. Chicago American Manufacturing LLC, determining the rejection of license in bankruptcy does not terminate the agreement, and a trademark licensee retains license rights despite being excluded from effect of 365(n)

• Rates Tech., Inc. v. Speakeasy, Inc., concluding that a no challenge clause in a settlement agreement is unenforceable if settlement occurred before litigation

• (Source: http://www.bna.com/drafting-patent-license-p17179870735/)


(9)Precedents

• Where can we find precedents?

• Use multiple, relevant precedents

• Get first and final drafts

• Think before copying

• Once the Licensing Document is final, destroy earlier versions? Why! (Legal issues)



Thanks

(Please feel free to contact me on [email protected])

Dr. Ravi Dhar on " Licensing Technologies: Principals & Dynamics"

Technology

Transcript of Dr. Ravi Dhar on " Licensing Technologies: Principals & Dynamics"