Perspectives on Successful University Licensing

October 2, 2002 Published Work
Reprinted with permission from The Connecticut Tech Tribune


Many Connecticut biotechnology and pharmaceutical companies have successfully licensed technology from universities, particularly Yale University. Engaging in licensing transactions with American universities requires knowledge of laws relating to ownership of inventions made by university staff, various National Institute of Health (NIH) guidelines and issues in patent law that affect the scope and value of licensed technology.

Engaging in licensing transactions with European universities requires knowledge of comparable laws in Europe -- laws that differ significantly from the laws in the United States. European universities, particularly some in Sweden and Germany, are rich sources of technology, yet American biotech and pharma companies cannot always apply the same rules when negotiating technology transfer from a European university that they would apply when dealing with American institutions.

For several decades, technology transfer offices at American universities have been responsible for analyzing, protecting and commercializing inventions created by university researchers. According to the Association of University Technology Managers Licensing survey for the fiscal year 2000, such commercialization activities contributed $1.26 billion in license revenue, with just two of the larger universities accounting for $400 million of that revenue. Other universities averaged $4 million per year in licensing fees, yet according to Science Alliance, no European university reached even half that amount.

In the United States, revenue generated from licensing deals is allocated among the institution and inventor, and occasionally the inventor's department, providing incentive to both the inventor and the institution to commercialize the invention. Furthermore, American universities own the rights to inventions made by a university researcher by assignment to the university of such researcher's rights in and to the invention.

Researchers are required to disclose inventions to their tech transfer offices to allow the office to determine whether an invention is potentially patentable; if so, the office will prepare and file a patent application with the U.S. Patent Office. Once an application is filed, the tech transfer office is responsible for marketing and commercializing the invention.

LAGGING EUROPEANS

Many of the inventions arising out of American research institutions are funded by the NIH, which places certain restrictions on licensing, such as the requirement that licenses to unique research tools be nonexclusive to facilitate the timely dissemination of such resources in the scientific community.

Many European countries lag behind the United States in exploiting inventions created by university researchers. One reason is that, in some countries, the individual researcher owns the title to his or her invention and therefore, may commercialize such invention directly, but may lack the expertise to do so.

Germany recently enacted a law, however, that allows German universities to own, and therefore facilitate commercialization of, inventions made by university researchers after February 6, 2002. The old German law contained what is commonly referred to as a "Professor's Privilege," that allowed inventions created by professors, lecturers and scientific assistants to be free of university ownership of such inventions. Under the Professor's Privilege, the university could renounce its right to acquire ownership through a private agreement with the inventor and instead agree upon participation in profits made by the employee, who was responsible for exploiting his or her own invention.

Conversely, under the new law, all inventions created by university employees, whether or not professors, must be disclosed to the university, which then has two months to claim ownership of the invention. After such two-month period, the inventor is allowed to publish on the invention. If the university decides to protect the invention, and subsequently commercializes such invention through a licensing transaction, the inventor is entitled to 30 percent of the gross income received by the university, while inventors at American universities are entitled to varying percentages of earned income, sometimes based on the amount of royalties earned.

For example, inventors at Yale are entitled to 40 percent of royalties between $100,000 and $200,000, or 30 percent of royalties exceeding $200,000. The allocation of licensing revenue provides incentive to German universities and researchers to exploit university-owned inventions.

THE SWEDES

Under Swedish law, inventions created within the scope of work of an employee's duties are owned by the employer. However, similar to the old German law, Swedish law contains a "teacher exception" which grants university teachers and researchers sole title to their inventions because the creation of inventions is considered to be outside the researchers' scope of work. Despite the Swedish government's efforts to encourage researchers to commercialize their inventions, there are several factors working against the ability of Swedish inventors to commercialize their inventions.

First, researchers in Sweden are not usually experts in the field of technology transfer, and second, there is little incentive for the university to assist the researchers in their commercialization efforts because Swedish universities do not share in the revenue generated by such commercialization.

European university technology transfer is slowly progressing toward the American model of actively commercializing inventions for the benefit of the institution, the inventor and the public good. We can look forward to more changes in European laws to enable this transition, and the creation of in-house technology transfer offices staffed with experts in analyzing, marketing and commercializing university technology.

James Farrington chairs and Gretchen Burger is an associate in Wiggin & Dana's Biotechnology and Life Science Practice Group. Both attorneys work out of Wiggin & Dana's Stamford office.