Understanding the Licensing Process
The Office of Technology Transfer facilitates connections between companies and researchers to create new commercial opportunities.
Penn State University has a tremendous wealth of innovative ideas and inventions being developed by their researchers. To bring these to the public and generate income for further research, they need industry partners. The Penn State Office of Technology Transfer (OTT) facilitates this by connecting companies with technologies through a licensing process. This process emphasizes collaboration and fair agreements, considering both the university’s goals and the company’s needs.
Types of Licensing Agreements
Penn State has a number of pathways available for partners to bring Intellectual Property to life. Below are descriptions of some common agreement types.
Non-Disclosure and Confidential Disclosure Agreements (NDAs & CDAs)
Non-disclosure Agreement (NDAs) and Confidential Disclosure Agreements (CDAs) are used to protect the confidentiality of an invention during evaluation by potential licensees. If warranted, Penn State will sign a two-way NDA / CDA to protect the other party’s confidential information during conversations and evaluations. The Office of Sponsored Programs (OSP) manages NDAs related to research contracts and potential research relationships.
Material Transfer Agreements (MTAs) and Data Use Agreements (DUAs)
MTAs and DUAs are used for exchanging protected incoming and outgoing materials and/or data. These agreements describe the terms under which Penn State and outside groups may share materials and/or data, typically for research or evaluation purposes.
Option/Evaluation Agreement
An Option agreement, or Evaluation agreement, is a short-term agreement which gives a potential licensee an opportunity to evaluate the technology prior to entering into a full license agreement. Typically, Option agreements give the first right to enter into negotiations for a license to a given technology. In exchange, the party receiving the Option will have certain obligations to Penn State which may include sharing of evaluation results and modest fees.
License Agreement
License agreements generally represent a long-term partnership between Penn State and a licensee and can be tailored to suit many different circumstances. A License describes the rights and responsibilities related to the use of intellectual property (IP). IP that can be licensed from Penn State includes patents, software, copyrighted works, know-how, data collections, and tangible research materials. Penn State license agreements usually stipulate that the licensee should diligently seek to bring the IP into commercial use for the public good. License agreements include financial terms such as fees, royalties, patent expense reimbursements, milestone payments, and/or equity.
Steps in the Licensing Process
The licensing process typically involves the following steps:
- Technology disclosure: The inventor discloses the invention to the Office of Technology Licensing (OTT).
- Evaluation: The OTT evaluates the invention and determines if it has commercial potential.
- Marketing: The OTT markets the invention to potential licensees.
- Development plan: The licensee submits a development plan to the OTT, outlining how they will bring the invention to market.
- Term sheet: The OTT and the licensee negotiate a term sheet, which outlines the key terms of the license agreement.
- License negotiation: The OTT and the licensee negotiate the final terms of the license agreement.
- License execution: The OTT and the licensee execute the license agreement.
- Monitoring: The OTT monitors the licensee’s compliance with the terms of the license agreement.
License Terms
The specific terms of a license agreement will vary depending on the specific technology, market, and company. However, some common terms include:
- Exclusivity: Whether the licensee has the exclusive right to commercialize the invention.
- Royalties: The fees that the licensee pays to the university in exchange for the right to commercialize the invention.
- Milestone payments: Payments that the licensee makes to the university at certain stages of development or commercialization.
- Upfront fee: A one-time payment that the licensee makes to the university at the beginning of the license agreement.
- Equity: A share of ownership that the licensee grants to the university in exchange for the right to commercialize the invention (typically only for startups).