Biotech Licensing

AuthorElizabeth Rodriguez - Sean Solberg
Robert MacWright1
Biotechnology licensing is in many respects similar to licensing other health-care tech-
nologies, such as small molecule drugs or medical devices. Thus, general licensing terms
and issues described elsewhere in this book apply equally to biotechnology licensing.
However, because of the complexity of biological molecules and therapies, long regula-
tory approval times, high development costs, and the high risk of clinical failure, issues
in biotechnology licensing are in many ways unique. Careful attention to these issues, as
outlined below, can avoid pitfalls and potential misunderstandings that may otherwise
deprive an academic patent owner of the intended benet of the bargain.
Since most of my career has been spent negotiating licenses on behalf of academic
patent owners, what follows has been written from the licensor’s point of view. The ref-
erences to “patent owner” apply equally to universities, medical schools, hospitals, and
research institutes.
The overarching factors that make biotechnology licensing difcult are time and money.
It takes a long time and a lot of money to get a product to market. That means that once
the license is completed, the licensee and its employees will invest years of effort and a
lot of money, and the patent owner’s technology will increasingly feel like its their own. It
is human nature to value our own recent efforts more than efforts by others a long time
ago. As a result, although the licensed patents and licensed know-how may have gained
in value as the technology has proven its worth, by the time money is made, the patent
owner may seem more like the tax collector than the provider of great opportunity it used
to be. This may be compounded if all of the people the patent owner negotiated with are
1. Robert MacWright is the Director of Commercial Ventures and Intellectual Property of the University of
Massachusetts Amherst. This chapter reects the personal views and thoughts of MacWright and is not to be
construed as representing in any way the views or advice of the University of Massachusetts or any other party.
The content is solely for purposes of discussion and illustration and is not to be considered legal advice.
Chapter 10
Biotech Licensing
gone or the startup the patent owner licensed to no longer exists, it has been successful
with other products, or it has become a public company.
This natural tendency translates into considerable scrutiny on the terms of the license
agreement. The licensee’s lawyers will likely be asked to consider how the licensee might
limit its nancial obligations, and by parsing the language in ways the patent owner may
not have foreseen, they may construe the terms in ways the patent owner never expected.
They may also argue that there should be substantial deductions from the patent owner’s
revenues to account for substantial licensee investments not expressly reected in the origi-
nal license terms. If the patent owner’s contract terms lack specicity or do not directly
address the issues identied below, the patent owner may nd its nancial returns are not
nearly what it expected, and just when the patent owner thought good news was at hand,
it may instead nd itself with a complex and potentially expensive dispute to deal with.
Everybody likes short, simple contracts that are easy to negotiate. This is especially true
when licensing to start-up companies, which may have little or no licensing experience
and can ill-afford expensive lawyers. The more details the patent owner writes into the
terms, the more numerous, complex, and hypothetical the issues may seem. Licensees can
become frustrated with the process and may feel that the patent owner’s proposed terms
imply that they have disreputable intentions. However, simplicity over specicity is not a
good approach to biotech licensing. It is a hard lesson to learn, but whatever details the
patent owner does not expressly include in the contract terms may have to be inferred by
an arbitrator or a jury, which can be expensive, uncertain, and frustrating.
In this chapter, I share sample language to address issues presented here for the patent
owner’s consideration. These are based on my many years of experience and I hope they
are useful. These provisions are not intended as specic legal advice but are provided for
information only. The patent owner should consult with legal counsel in considering how
to address these issues in particular license transactions.
In the sample language below, I have used “patent owner” and “licensee” rather than
“licensor” and “licensee,” since even the most seasoned of us could go blind trying to keep
the latter two straight.
I. Components of Licensed Technologies
Each proposed licensing arrangement is unique. While the patent owner’s template license
agreement may be a veritable smorgasbord, important choices of what elements to include
must be made. Section I discusses the importance of considering what components are
important for the patent owner’s transaction.

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