What is Licensing?
A licence is a written legal contract in which an owner of intellectual property (the ‘licensor’), permits another organisation (a ‘licensee’) to use the IP on an agreed basis including the rights and responsibilities related to the development and use of the intellectual property. Licensing agreements are common between universities and external organisations as a way to develop and make use of intellectual property created at the University. Researchers may also work with the licensee/industry partner via formal consulting, contract research arrangements or collaborative grants (e.g. Innovate UK, UKRI or charity funded projects).
The IP & Commercialisation team will support you through a series of steps to evaluate your opportunity, determine a licensing strategy, define a de-risking program, broker contact with potential licensees and negotiate terms with external parties when appropriate. This journey is illustrated below:
What opportunities can be licensed?
IP that can be licensed include inventions protected by patents, trade secrets, copyright protected software (either source code or compiled), devices, as well as data, research tools and other forms of confidential know-how.
Copyrighted material including animations, games, or diagrams can also be licensed. Securing a licensee will depend on demonstrating the benefits of the intellectual property in question versus existing solutions, or how it addresses an unmet need. This typically requires an internal de-risking programme informed by discussions with potential licensees.
Licensee considerations include assessment of risk/reward, time to launch, user adoption challenges, competition and resources required to develop the opportunity.
What does a licensing agreement look like?
Like any legal document, a licensing agreement will outline all the terms and considerations around the relationship between the licensor and the licensee, and the rights granted to the licensee to use the IP in question. These agreements are entered into by the University. They can be complex and have many terms. A basic explanation of key terms is provided below.
Lists the IP being licensed, including any legal patent or trade mark numbers, the copyright or data being licensed, and any documents or files that contain know-how.
Exclusive or non-exclusive
Describes whether the licensee has the sole rights to the opportunity or whether there can be multiple licensees.
Field of Use
Defines the application or market in which the licensee has rights to make and sell a product or service that uses the licensed innovation.
Defines the geographical territory in which the licensee has rights to the licensed innovation.
Grant of Rights
Defines what the licensee can do with the licensed innovation including design, develop, manufacture, sell and sub-license to other third-parties.
Defines the time-bound obligations the licensee has to develop or use the licensed innovation, and any consequences if they don’t.
Defines what the licensee will pay from use of the licensed innovation, for example royalties on sales of products, payments when the licensed innovation reaches significant development milestones, or minimum payments.
Prosecution & Confidentiality
Defines who pays any legal or patent costs, who prosecutes and defends any infringement of the licensed innovation, as well as any terms for keeping know-how, source code, other items secret.
Term, Termination, Governing Law
Defines how long the agreement will last for, what happens if a party breaks the agreement, and what jurisdiction will handle any dispute between the licensor and licensee.
How do you get rewarded from a licensing deal?
The personal rewards from licensing deals will depend on the sector as well as the type of opportunity being licensed. Some of the ways in which you as an inventor may personally benefit in a licensing deal are outlined below.
- Licensing Income: The revenues from licensing of University intellectual property comprise different mixes of payment depending on the deal and sector. These revenues can comprise upfront fees (fees that are paid on signature); milestone payments (an agreed sum paid on a specific event or milestone); minimum annual royalty (fees paid regardless of the amount of sales made) and sales royalties (% of net sales revenue). Payments to academics are calculated from net income. This refers to gross income minus any share to a third party (for example, a grant funder) as well as the University's IP protection costs and legal fees. Exact percentages are here.
- Consultancy: Once the licensing deal has been signed, researchers may be contracted by the licensee to provide technical input or advice under consultancy agreements. These agreements pay consulting fees.
Will a license agreement restrict my research and publishing in relation to my innovation?
License agreements will usually contain “Reserved Rights” clauses retaining the University’s right to use the licensed innovation for research, teaching and other academic purposes. If a licensee has exclusive access to the innovation, then there will often be agreement terms that restrict what the University can and cannot do with the innovation in commercial areas (including commercially funded research). However, agreements terms will typically state that the University will secure permission from the licensee before publishing any licensed know-how or source code.
How are licensees identified?
The best licensees are often an established business who have relevant experience or presence in the markets or sectors where the innovation will be most valuable. For example, they may have existing similar products or services in the market and are looking for a new innovation to give them a competitive edge. Licensees are identified via several marketing channels, for example from contacts at organisations known to the inventor or from marketing activities supported by the IP & Commercialisation team. The IP & Commercialisation team will support the creation of non-confidential marketing materials to send to targeted organisations, posting on electronic brokering platforms such as IN-PART, and for distribution at selected conferences.
Another way to find licensees is to look for corporates who are interested in licensing new innovations from research. Corporate websites are a valuable source of information on industry needs and advertise about new in-licensing opportunities. Most large companies have active technology sourcing and open innovation partnership initiatives. Some examples include AstraZeneca's open innovation platform, Siemens' global collaborations partnerships, Shell's research alliance, Unilever’s innovation programmes, Telefonica’s open innovation programme, and Aviva’s innovation programme .
What happens when a licensee is interested?
Once an interested licensee has been found, the next step is usually to sign a Confidentiality Agreement with them. This means that more specific discussions about the innovation and how it works can take place, while ensuring that each party’s confidential information remains protected. During this stage, information about the innovation will be shared and discussed with the licensee. Each licensee will have a different criteria, process and approach to reaching a decision about whether they want to move from evaluating the innovation to negotiating a licensing deal. The IP & Commercialisation team will support you to engage with licensees, navigate the evaluation stage and lead the negotiation of an agreement.
What happens after an agreement is signed?
Licensing doesn’t end when an agreement is signed. The license deal may include other legal agreements such as a funded research project, personal consulting agreement and/or material transfer agreement. It is also possible you may collaborate with the licensee following completion of the licence, particularly in the early stages when key development tasks remain to be completed prior to transfer to the organisation’s internal teams. Beyond this activity, the University will monitor the licensee’s progress against the agreed the development plan and contact the licensee for annual progress updates or royalty statements.
Looking for inspiration about licensing? Check out the University of Glasgow innovations that are currently available for licensing.