Why Are There So Many Fees In University License Agreements?

Clients who license intellectual property (“IP”) and technology from a university frequently tell us the university is asking for numerous license fees, and they ask whether this is customary.  The answer is yes, if the U.S. government funded all or part of the research that led to the development of the licensed IP or technology.

The Bayh-Dole Act (35 U.S.C § 200-212) (“Bayh-Dole”) applies to licenses of university-owned IP and technology that were funded solely or in part by the U.S. government.  Congress passed Bayh-Dole in 1980, for the purpose of streamlining endeavors between universities and businesses.  Prior to the enactment of Bayh-Dole, the U.S. owned a lot of IP and technology, and very little of that IP and technology was licensed for commercial use.

Bayh-Dole specifies that, as between universities and the federal government, universities own inventions developed using federal funds.  (Inventors’ interest in the IP and technology they develop must be separately addressed through employee invention assignment agreements.)  In exchange for this ownership, universities have certain obligations under Bayh-Dole including commercializing the IP and technology.  Bayh-Dole specifies the means by which universities must commercialize IP and technology, and this is why there are a variety of fees in university licensing transactions.

The following is a typical fee structure for an exclusive IP or technology license where the U.S. government provided some or all of the funding to a university to develop the IP or technology:

1.      license issuance fee – up front fee for the exclusive license

2.      license maintenance fee – on going license fee

3.      royalty on sales

4.      milestone payments

5.      reimbursement of patent prosecution costs

6.      shares of the company

The rate for each of these fees depends on a number of factors, including whether the company is funded, the nature of the milestones and whether they have been achieved, and the type of product or service the company develops and sells.

If you have any questions about a university license agreement or license fees, please contact Helen Christakos at (650) 696-2545 or at
hchristakos@carr-mcclellan.com.

Published In: Administrative Agency Updates, General Business Updates, Education Updates, Intellectual Property Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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