BOSTON - University tech transfer managers weigh a number of complex issues when negotiating the terms of patent licensing agreements for their technologies, according to a panel discussion held here last week at the annual Biotechnology Industry Organization conference.
During a special panel on negotiation tactics for licensing deals entitled “Get Smart: Successful Strategies for Negotiating with Research Institutions,” representatives from the investment community, a recent startup biotech company, and university tech-transfer offices shared their views on a spectrum of issues they consider when hammering out the terms of a licensing agreement.
Jeffrey Quillen, a partner in Foley Hoag’s life sciences practice, moderated the panel, which the firm hosted in conjunction with the release of preliminary results of a survey it is conducting on tech transfer licensing trends (see related story, this issue).
Quillen and several audience members posed questions about tips and tricks for successfully negotiating patent licensing deals with research institutions to the panelists.
Quillen first asked the tech-transfer office representatives what percentage of licensing agreements were typically with startup companies as opposed to existing companies.
Frances Toneguzzo, director of corporate sponsored research and licensing for Massachusetts General Hospital, said that this issue usually revolves around the question, ‘What is the best route to commercialize the technology?’ In most cases, she said, it is faster to license to an existing company, and in some cases safer.
“With startups, you’re assuming a secondary risk in the startup itself,” Toneguzzo said. “With an existing company, you know the [commercialization] capability is already there.” She added that Mass General has recently spawned five to six startups per year while executing a total of 70 to 80 licensing agreements overall.
Andrea Schievella, technology licensing officer for the Massachusetts Institute of Technology, told audience members that despite the inherent risk of startups, MIT “is very serious about what the faculty wants to do. There might be times when we fear that it might not work to have a professor do a startup, but we still support them.” She also agreed that commercializing a technology via the startup route takes a much longer time.
One point that she said most university faculty-entrepreneurs should understand is “what they could do with a technology in addition to what they want to do with a technology,” as it may be necessary to explore alternative options to provide financial footing for the startup.
Quillen also asked licensees on the panel how to best prepare to negotiate a license agreement with a university.
“Before you approach the university, you really need to try to understand what you want, what the value of the intellectual property is, and what the total bill will be if there is a vast body of related IP out there,” said Gordon Jamieson, president and CEO of recent startup Translational Therapeutics, whose lead cancer drug candidate is based on research conducted at the University of Montreal.
Panelists also addressed the value of getting a venture capitalist involved in negotiations in the early stages of a university startup. According to Toneguzzo, “the earlier you can bring in a VC, the better.”
Amir Nashat, a general partner in the Boston office of Polaris Venture Partners, told audience members that the “great value of VCs lies in the fact that they have personal relationships in the industry.”
“Before you approach the university, you really need to try to understand what you want, what the value of the intellectual property is, and what the total bill will be if there is a vast body of related IP out there.”
In response to a question about the relative importance of various terms of a licensing deal, diligence obligations seemed to weigh on panelists’ minds.
“The monetary terms have to be reasonable,” said MIT’s Schievella. “But diligence is truly important.”
Added Toneguzzo, “Diligence obligations with respect to funding are key. Most people need to realize that regarding diligence requirements, it is federal law and part of the mandate of the university to make sure that the company is doing something with the technology.”
Another key issue discussed by panelists was the right of a licensing company to future inventions based on the IP and the rights to improvements made on the original technology in the university laboratory.
Schievella said that MIT has a “retain-rights” clause for most of its technology licensing agreements to ensure that commercialization progress is moving forward at a rate that is suitable to all involved.
“We’ve seen situations where a faculty inventor has a falling out with a company, or no longer has a role, and then they’re unhappy that the company has the technology when they want to do something else with it.”
Polaris’ Nashat said that a competitive dynamic can evolve when a company does not get the right to improvements “because the company will often make sure that it develops an R&D program to better what is being done” in the lab of the original inventor.
Lastly, one audience member asked the tech-transfer officials whether they tried to stay consistent when negotiating deals with faculty startup founders to avoid any animosity that might occur when faculty members talk amongst one another about the specific terms of their deals.
“This is one reason we don’t like to negotiate with faculty founders, or anyone with no experience negotiating in this area,” Toneguzzo said. “We have to negotiate deals based on each specific piece of IP – it’s the technology that’s important.”