Licensing Overview

OIC has participated in creating over 100 startups over the last five years. To help facilitate startup creation and reduce as much “friction” as possible, we have assembled this list of answered questions to address a typical startup license and the approach and reasoning that the university takes in negotiating the agreement. This is intended to facilitate the initial conversation with a first-time licensee. These are for conversation purposes.

The university grants access to the Intellectual Property (IP) Rights defined in the license agreement on an exclusive or non-exclusive basis.

Exclusive means only your company will have access to those IP rights- no other company will be granted that access. In the case of an exclusive license, the company will be required to assume ongoing payments for maintaining and prosecuting the patent rights, from the effective date of the license.

Non-exclusive means the university may grant access to the same IP rights to multiple companies in addition to yours. In the case of non-exclusive licenses, you may or may not be required to pay some ongoing patent costs-on a case-by-case basis. In no event will a startup company be required to reimburse the university for patent costs incurred prior to the effective date of a license.

For the purpose of this license discussion, a startup is defined as a company that is less than two years old, and that is licensing UC San Diego IP as a key enabling technology for their business.

The university understands that a startup company often requires as broad a field of use as possible (or no field limitation), for investment purposes. The university balances that with the ability of the company to develop the technology in broad fields of use.

We want to ensure that technologies developed at the university are used as broadly as possible. So, in discussions with startup companies we endeavor to give the company the access they need to be successful, while ensuring, over time, that other opportunities are considered to develop the technology in areas that the company is not interested or unable to develop.

When the company takes an exclusive license, they will be granted the right to sublicense these rights to other companies, in exchange for passing back an agreed percentage of sublicensing revenues to the university. A sublicense is important for startups who will need to collaborate with strategic partners, or whose business model includes licensing their technology to other companies. The university also considers this when defining the field of use. Likewise, in the event the license agreement is terminated, existing sublicenses can be assumed by the University as direct licensees if certain conditions are met.

The University recognizes that most start-ups will realize their liquidity via acquisition by a larger/established company (vs. going IPO). Exclusive licenses are assignable in the event of a merger or acquisition of substantially all of the licensee’s assets, with no additional consideration to the University not otherwise contained in the license. An assignee of the license will be expected to assume all of the terms and conditions of the existing agreement, unless modified in writing by both the University and the licensee.

For UC San Diego, the standard startup license, depending on technology, may omit an upfront fee, or may include a nominal fee ($500) one and a 5% equity stake in the company, diluting after a typical first round investment. OIC is fine with a royalty-bearing agreement, if the inventors or the startup prefers. We have a well-publicized equity-only royalty-free startup license for certain technologies to enable a frictionless transaction. For therapeutics licenses (and related technologies) there will be additional fees, including milestone fees and maintenance fees.

Given that these technologies were often developed through public-funded research, we want to ensure that technologies are developed into products and services that benefit the public. We therefore ask the company to provide us with a development plan at the time of the license, with milestones that are measurable. We ask the company to report on that progress on an agreed timeline. The university strives to be reasonable in this process, and understands that not everything goes to initial plans in startup companies. Our approach is a collaborative and flexible conversation in this regard.

The university reserves the right to use the invention, the technology and the IP that is the subject of the license, for education and research. We also reserve the right to publish that research and allow other universities to use the invention and IP for research and educational purposes. This is core to the mission of the university and is there to protect the interests of the researchers who created the invention.

Any company needs to be able to defend the IP rights they have access to, against any potential infringer in the future. There is a section of the license that addresses this. This section sets out how potential infringers may be identified and how the process works. The university and its licensees have prevailed in many of the infringement-related actions that have undertaken together. However, the Regents of the University of California have retained, for themselves, the decision to join any lawsuits- the campus does not have the authority to make that decision.

 Therefore, the campus cannot agree, in a license, to join any lawsuits that may occur in the future. That has to be determined at the time of a lawsuit, on a case-by-case basis. Having said that, the Regents have never refused to join a lawsuit in which UC is materially involved, when requested by a licensee company.

As a not-for-profit institute, the university requires licensees to indemnify it against any damages, lawsuits, etc. that arise from activities under the license. For example, if someone sues your company over the product you developed using the licensed IP, the university should be protected from financial liability for that. We also require the company to hold appropriate insurance to cover that situation. This is another clause where the authority to substantially change this requirement does not reside with OIC. Any significant change to this requires review and approval from the appropriate risk managers.