Pathway to Licensing Patents - Step-by-Step Overview of Agreements
Comprehensive guide to licensing patents, featuring key agreements like NDA/CDA, MTA, LOI, and more. Learn about important considerations, terms, and steps essential for successful patent licensing. Navigate through each stage along the pathway to effectively protect and transfer intellectual property rights.
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The Pathway to The Pathway to Licensing Patents Licensing Patents A STEP-BY-STEP OVERVIEW OF AGREEMENTS EMILY W. LOUGHRAN JULY 19, 2023 WIPO FOR OFFICIAL USE ONLY
Continuum of Agreements along the Pathway to Licensing WIPO FOR OFFICIAL USE ONLY
Step 1: NDA (Nondisclosure Agreement)/CDA Step 1: NDA (Nondisclosure Agreement)/CDA (Confidential Disclosure Agreement) (Confidential Disclosure Agreement) Key Considerations: oNeed for NDA/CDA protection? oAre all patents under discussion for licensing issued? oAre there unpublished/unissued and pending patents? oAre there improvements underway that may not yet be protected? o Is NDA One-way or Mutual? oIs there going to be a two-way collaboration and need for access to licensee confidential information? oIs there a risk/liability to licensor associated with exposure to licensee potentially competing confidential information. WIPO FOR OFFICIAL USE ONLY
CDA/NDA Cont CDA/NDA Cont. . o Term of CDA oLength of Agreement typically a year or length of negotiation. oObligation to hold information in confidence survives the term and typically runs 3-5 years from date of disclosure to other party. o Governing Law o Request governing law of your own country or state. Accepting Governing Law of the other party can make any future disputes costly and complex to resolve. o When unable to agree, stay silent. o Same advice for venue of dispute resolutions. WIPO FOR OFFICIAL USE ONLY
Step 2: Material Transfer Agreement (MTA) Step 2: Material Transfer Agreement (MTA) Key Terms of MTA/Evaluation Agreement for Materials Associated with Patents o Scope of Work oProvide precise description of work to be conducted with materials as well as strict limitations on sharing materials with third parties or use in humans. o Ownership of Materials oRetain ownership of materials and restrict all uses outside of Scope. oTerm of Agreement oRequire return or destruction of materials at end of term oInclude confidentiality provisions around disclosure of proprietary details regarding material oIndemnification oRequire indemnification by recipient. WIPO FOR OFFICIAL USE ONLY
Step 3: Letter of Intent (LOI) Step 3: Letter of Intent (LOI) o Advantages of Entering LOI During License Negotiations oLOI simple to execute with minimal legal expense/effort oLicense negotiations may be lengthy oLOI may provide patent owner with reimbursement of ongoing patent expenses during license negotiations oLOI may allow, depending upon stage of patent prosecution, the potential licensee to provide input and reimbursement for election of foreign territories at National Stage. oLOI separates the serious licensees from the casually interested parties. oIf license negotiations are protracted, a formal option may be put in place. WIPO FOR OFFICIAL USE ONLY
Step 3.5: Exclusive Option Agreement Step 3.5: Exclusive Option Agreement If License negotiations take longer than the term of an LOI, an Option Agreement is an appropriate next step. Benefits of an Option Agreement: o Optionee may make progress towards commercialization under the option agreement so that development time is not lost during license negotiation. Patent term is valuable. o Parties able to lock in financial terms of license under the option and focus on non-financial components of the license. WIPO FOR OFFICIAL USE ONLY
LOI vs Option LOI vs Option LOI OPTION Exclusive Right to Negotiate a License, no rights to use patents. Right to use patents for internal evaluation and planning but no commercial sales. Short Term (3-6 months) Longer Term (1-2 years) Upfront fee Upfront fee, renewal fee No License Terms Incorporated High Level License Terms Ongoing patent reimbursement Diligence requirements for any renewal of term No use of patents therefore no insurance required. Commercial Insurance required WIPO FOR OFFICIAL USE ONLY
Step 4: License Agreement Key Terms o Exclusivity (Exclusive or Nonexclusive) o Field of Use o Geographic Territory o Right to Sublicense (percentage of sublicensing income) o Milestone Payments for reaching developmental and commercial milestones o Royalty Rate on Sales of Licensed Product/Minimum Annual Royalties o Diligence Timeline for Commercialization of Licensed Product WIPO FOR OFFICIAL USE ONLY
Thank You Questions? EMILYWLOUGHRAN@GMAIL.COM WIPO FOR OFFICIAL USE ONLY
