If your university’s industry-sponsored research efforts are not quite getting the traction you expected, it might be time to adjust your IP-related policies – which many corporations view as barriers to a deal.
Not too long ago, the University of Minnesota was in that position, having experienced five to six years in a row of “pretty much flat growth in industry-sponsored research even though a number of Fortune 500 companies are headquartered in the Minneapolis-St. Paul area,” points out Jay Schrankler, executive director of the Office for Technology Commercialization in St. Paul.
Making IP terms more favorable for industry is tantamount to reducing their risk, which often forms the fulcrum of a company’s decision making on research investments. “Reducing the commercialization risk for companies should make them more open to engaging in sponsored research,” says Lisa Lorenzen, PhD, executive director of the Iowa State University Research Foundation.
Two years ago the University of Iowa and ISU jointly announced that both universities would tackle the IP issue by offering for-profit companies an exclusive licensing option for research sponsorships. The new option is modeled after Minnesota Innovation Partnerships (MN-IP), a program launched by U Minnesota to “attract more companies to do research here by eliminating or lowering that barrier of IP concerns,” says Schrankler.
Minnesota designed its program based on the results of multiple interviews with industry, and reaction has been “very positive,” he states. “Under MN-IP, we signed more than 40 agreements in a year, and a number of big companies have done master research agreements in the program.”
Both Iowa and ISU are already talking to companies that are interested in executing deals. However, reaction “has honestly been mixed,” says Lorenzen. “Some companies seem pretty excited. However, others have done enough research that they know the type of research they do here typically doesn’t have a lot of IP potential,” she explains. “For those companies, I hope this new option can open their eyes to other types of research that they could do here now because there isn’t that risk. But evolving the kinds of research they can do will take time.”
Here’s how the exclusive licensing option works:
- An upfront fee. “Basically the sponsor is paying a small upfront fee that guarantees a back-end fixed set of fees,” explains Zev Sunleaf, executive director of the University of Iowa Research Foundation in Iowa City. That initial fee is the greater of 10% of the total cost of the research or $15,000.
- A fixed royalty rate. On the back end, the royalty rate for licensed IP is 1% of total net sales in any year where sales exceed $20 million. Putting the threshold at $20 million “gives companies a chance to generate sales before they have to start paying a royalty rate,” says Schrankler. “So they get some cost recovery from their development work.” In addition, the fixed 1% rate allows TTOs to “incentivize research, yet share if we have a big winner,” says Lorenzen.
- Ownership determined by invention. “If our principal investigators (PIs) alone invent a technology, we own the IP. If people from both the University of Iowa and the company invent a technology, the IP would be jointly owned,” notes Sunleaf. “So in that respect, there’s no difference from standard licensing.”
- License guarantee. “Should there ever be an invention that comes out of the research, the company gets an automatic exclusive license to it, and the company does the patent prosecution,” says Schrankler.
- Limited availability. The exclusive licensing option “doesn’t work in as many cases as the old tried-and-true licensing option,” says Sunleaf. “This only relates to research that is wholly funded with full F&A [facilities and administrative] rates paid by a single sponsor. For example, it doesn’t relate to federally funded research or research where there is income or sponsorship coming from multiple groups.”
The exclusive licensing research option “is an additional tool to use where it makes sense,” says Sunleaf. A detailed article on industry-friendly terms in sponsored research agreements appears in the premiere issue of Industry-Sponsored Research Management. To subscribe and access the full article, or request the premiere issue free, CLICK HERE.
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