Commercialisation Related Agreements
Licences and Assignments
A Licence gives a third party (‘the Licensee’) the right to use another Person's (“the Licensor”) IP on particular terms. For example the field of use and territory may be restricted. In a commercial licence the Licensee will also have to pay the University fees for use – this will normally be a percentage of sales. So there will also usually be a term requiring the Licensee to use all reasonable efforts to exploit the licensed IP and maximise sales. Where a particular Licensee has exclusive commercial rights the Agreement will also provide that it must take on the responsibility and cost of patent prosecution and infringement actions (and indemnify the University in respect of these).
A licence will be used where territories and/or fields are being split between various Licensees. The University is the Licensor and remains the owner. This also has the advantage that the terms of the Licence will permit the University to terminate in the event of a breach of the agreement or other termination event (e.g. the liquidation of the Licensee).
Where IP is assigned the University essentially sells all of its IP rights to the Assignee. The terms of such assignment will be similar in some respects to those in a licence e.g. they will require the Assignee to bear patent costs and costs and damages in respect of infringement proceedings and frequently the ‘price’ of the Assignment will not be a one off payment, but rather royalties on sales. However if the Assignee breaches the terms of the agreement the Assignor cannot go back on the arrangement and take back the IP. The Assignor’s only redress is the right to sue for damages in the courts.
Draft Model Licence Agreement (to be added)
Spin out companies
Where the University’s IP is licensed or assigned to a Spin Out Company, there are different considerations, since the ‘price’ of such a licence or assignment is the allotment of shares to the University and Academics (pursuant to the University’s IP Policy). Often the IP will initially be licensed to the Spin Out with assignment at a later date upon the achievement of specific milestones.
The procedure for the establishment of a Spin Out Company consists of 4 stages, each with separate legal documents.
Stage 1
When it seems likely that a Spin Out Company will be created to exploit particular IP the University will set up a new company. In order to do this IP and Legal Services will arrange for a Memorandum of Association and Articles of Association to be submitted to Companies House with other required forms. At this point the University is the sole shareholder and members of the University Executive are Directors. The Company is just a “shell” awaiting the next stage.
Stage 2
Academic founders subscribe for shares in the Spin Out (at nominal value).
Stage 3
University licences IP to the Spin Out in consideration for shares. The terms are set out in a Licence Agreement.
Stage 4
Investors subscribe for shares for cash. Legal Agreements include:-
- Shareholders' Agreement: regulating the rights of all the Shareholders.
- New Articles of Association: regulating how the Company will be operated
- Directors’ Service Contracts: regulating the duties of the Directors.
- Facilities Agreements: regulating the terms of which University equipment may be used.