Top four considerations for technology licensing
It’s essential to seek professional legal advice as early as possible to get help with your licensing strategy. A thought-out strategy is the key to maximising the return on your investment and avoiding pitfalls connected with drafting licensing agreements.
Here are some of the key commercial issues that need to be considered:
1. A clear definition of “Licensed Products”
Royalty payments are normally linked to licensed products, and a clear definition of this term is therefore a fundamental element of a good license agreement.
2. Field-of-use limitations
Life science technologies will often be licensed in a field of use limited to specific medical indications or modes of treatment. If you choose to restrict an exclusive licensee to a single, limited field, you will be able to increase the technology’s potential for success and add new royalty streams by granting further exclusive licenses for different indications to other licensees. This is of particular importance in an industry where the cost of getting a single product to market is significant, even for the largest multinationals, and where it is important to focus on the different strengths of different companies.
3. Royalty calculation
There are a number of issues to consider when drafting royalty provisions including the basis for calculating royalties, performance obligations, royalty of sale by affiliates and sub-licensees and royalties on bundled products. There is also the issue of anti-stacking, which is particularly important in relation to early stage technology, where any incorrectly drafted provisions may lead to an unreasonable reduction of royalties.
4. Milestone payments
Carefully drafted milestone provisions covering the development, product launch and post-launch phases may help to generate an increased royalty stream that effectively reflects the income of the licensee.
If you are looking to out-license your technology, our specialist life sciences lawyers will work closely with you to ensure that we fully understand it and its industrial application, and can help you protect your assets. Our team will address all the issues that may increase your potential liability and provide robust ways of dealing with the material breach or default, including the insolvency, of the other party.
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