Intellectual property rights were never in the news as much as they are now. Intellectual property is the answer in creating technology and innovation making people owners of their ingenuity. The owner of the invention or content for intellectual property has the right to maintain and control and will ultimately be paid or rewarded for its use. However, to protect these intellectual property rights, the intellectual property result must first be applied for and granted. Nevertheless, intellectual property protection is the most effective way to transfer information and technology.
Application for licensing of the intellectual property is essential to safeguard the property rights of the intellectual property generated, to foster economic growth, to provide encouragement and incentives for technological innovation, and to attract investment that will create new opportunities and work for all the citizens.
Technology Transfer: How It Works?
Technology transfer or what is generally referred to as ‘licensing’ typically operates in a way that will give permission to someone who wants to produce additional income and benefits from the use of licensed technology and rights and who is willing to share those income and gains with the proprietor. Here, the owner of some rights or the ‘licensee’ would be the one to permit the exploitation of his- or her intellectual property creation. This permission or ‘license’ in its most widely used terminology, is granted to the licensee is given or conferred to someone, which is usually called the ‘licensee.’ Before the Technology is transferred by licensing, and the parties must enter into a technology transfer or licensing agreement as a normal practice. This license agreement is usually codified in a contract all parties sign and execute.
Intellectual Property Regime
The question of initial rights to an intellectual property right emerges from the onward development of the invention. The party or parties entitled to such ownership of intellectual property may handle their rights, dispose of them by assignment or allow third parties to act within the framework of the agreement scope of the monopoly by granting them a license to do so.
In order to create the management of a effective collaborative research agreement, the goals and priorities of each party must be understood. Industry and universities have different priorities and objectives. It is therefore imperative that all parties specify and indicate their precise objectives and objectives in connection with the proposed partnership or collaboration and provide an outline Or rough draft of the framework that creates them.
The parties will attempt to predict and foresee what each would like to do with the possible outcomes and consequences, and any associated costs and disadvantages of such collaboration or partnership. It is suggested that the parties should undertake to arrive at a compromise or agreement as regards the degree and extent to which some or all of the intellectual property results should remain private and confidential. They should also agree concerning the issue of who would own any intellectual property generated in the course of the research.
Most universities establish their intellectual property policy or regime by stating the philosophy behind their ownership therein, emphasizing the objective and purpose of the institution in recognizing, cultivating, and commercially exploiting their faculty member’s scientific discoveries and creations. This is to make clear that the accomplishment and development of research are for the advantage and benefit of the public in general, the university, the inventor or researcher, and the research sponsor.
So far as the relationship between the university and the faculty member-inventor is concerned, the land ownership system relating to the work performed or the invention lies in their agreement. However, it is essential and indispensable for the faculty member-inventor to disclose or reveal to the university about the design or discovery, regardless of the ownership of the intellectual property rights. This duty on the part of the faculty member-inventor is to have said invention or discovery patented lest there would be an imminent risk of forfeiture of rights to the design above.
Generally, universities do not have a consequential or automatic entitlement to intellectual property created by students. This is different concerning intellectual property generated by the universities’ employees or faculty members, considering that it is frequently and customarily regarded as owned by the universities. In opposition to the previously stated duty of the faculty member inventor to disclose the creation or invention, students are not under this obligation. Students may refuse to divulge such a fact of design from the university, and the university may be excluded from utilizing the creation or invention in the future.
A three-way contract can be had in case the research resulting in the intellectual property involved commercial sponsors. This three-way contract usually designates the ownership of the intellectual property created either to the university or the commercial sponsor. This is because students are generally regarded as normally not well-equipped with resources to successfully exploit the intellectual property as compared to universities and commercial sponsors. Moreover, students do not have more influence and credence in commercial negotiation as the universities and commercial sponsors.
On the other hand, the relationship between the university and a company in the private sector as the written agreement controls a commercial sponsor arrived at between the two. Their written agreement either would state that the ownership of the material or inventions resulting from the research which was commercially sponsored belongs to the university or, in contrast, the agreement could also be that the commercial organization may have the option to license to the inventions above.
To obtain a “win-win” situation between and among the parties, the parties must consider a mutual benefit, a balance which points towards both parties’ interest. Also, all university intellectual property policies available must be respected, and the obligations arising from it to a commercial organization or sponsor must be met.
Given the initial concerns, universities have worked on several forms of research agreements, mostly having the same goals and similar provisions and clauses. The two representative agreements are sponsored research agreements and collaborative research agreements. Sponsored research agreements are sometimes called industrial research agreements or funded projects. On the other hand, collective agreements are synonymous referred to as cooperative research agreements or collaborative research agreements.
In this kind of research agreement, the parties are free to pen whatever terms or conditions they want for their agreement. However, as previously stated, in case of a collaborative research agreement between a university and a commercial company in a private sector, the management of the intellectual property ownership is best given either to the university or the commercial company as against the student who worked on the research. The rationale behind this is that the university is better equipped with resources and has a better advantage in commercial negotiation than the student. As between the university and the retail company, on the other hand, the issue does not necessarily revolve around the ownership of the intellectual property. On the contrary, the more critical issue is the scope that each party has in the usage and management of intellectual property creation.
Customarily, it is better if it is the university which has the ownership of the intellectual property. It is the easiest and the most straightforward regime of intellectual property. The assurance of the rights to exploit the intellectual property is through ownership by the university. This paves the way for avoiding uncertainty and hesitation over the ability of the commercial company in the private sector to commercialize and negotiate the creation to exploit the intellectual property creation.
If the parties would agree that the utilization and exploitation of the research results in the future are granted to the commercial sponsor, the university must appropriately insert a provision that guarantees the correct and standard totality of exploitation. Penalty clauses can do this in case the retail company in the private sector fails to exploit the material properly. More often than not, these penalty clauses include the complex provision of “license-back” deals or only, the re-assignment of the ownership of the intellectual property material to the university.
In any event, both the university and the commercial sponsor may require access to the intellectual property for purposes of commercialization, and both may also demand to secure admission for future research. Free licensing arrangements may accommodate the entrance to intellectual property creation. In this manner, the university is afforded the right to take its authorized and permissible share of income or proceeds produced by the intellectual property owner. Universities prefer to own intellectual property because the free licensing arrangement is sometimes sumptuous to regulate.
The cost or value provided by the commercial sponsor in the private sector may play an important part or influence in the negotiation over ownership of the intellectual property. In a collaborative research project, all the parties share provisional results, collectively reconsider and review conflicts and other problems as they occur, and generally agree to changes to the research project objectives or methods of research.
Moreover, the parties may also agree to their arrangement of the joint-ownership of the intellectual property. This is the most common form of intellectual property allocation in collaborative research agreements. This is so because joint ownership is professed to be, as a rule, a fair solution for circumstances involving multiple contributors. This is regarded as one prospective solution to the issue of who should own the intellectual property from externally financed research.
The consequence of such shared ownership arrangement is that the established technology has no exclusive intellectual property rights over either side. More specifically, in this form of agreement, each joint proprietor has the right to market the intellectual property produced separately or to pass the intellectual property rights to a third party, without taking into account any other joint partner or party consenting.
In practice, however, joint ownership for the unwary is littered with pitfalls. Contrary to common perception, it is often unfair and, even worse, is usually unworkable.Because of this, joint ownership of intellectual property should best be averted unless the parties have cautiously and vigilantly thought out a set of rules and the issue of exploitation.
One of the familiar pitfalls of this arrangement is the prospective licensees of technology will have a preference in preventing a deal with more than one owner. This is because it usually causes difficulties in the negotiation process and can entangle them in disagreements and disputes between the parties who jointly own the intellectual property.
The default rule in this arrangement is that each joint owner has the right and privilege to exploit and make use of the intellectual property without the resignation of the other joint owners. Further, the joint owner who exploits the intellectual property has no duty to share royalties and revenues with any other joint owner. And to enforce this arrangement, all the parties who are joint owners must be included in the application.
In the case of Willingham v. Loughton, it was ruled that the result of this joint ownership arrangement is often a “race to the bottom” scenario that minimizes, rather than maximizes, the value of the jointly owned patent. It is no wonder that courts have characterized joint patent owners as being “at the mercy of each other.”
Nevertheless, it is said that the joint ownership arrangement of intellectual property is beneficial and advantageous to commercial organizations. The reason behind this is that, as previously stated, any joint partner who seeks to issue a license must acquire the permission and authorization of the other collaborative partners. The commercial company, who is also a partner in the joint partnership, can exploit the technology themselves while the university cannot market on the same commercial basis.
Conflicts in Technology Transfer
Some conflicts in intellectual property ownership arise, which cause arguments and issues that affect and influence said ownership.One of the disputes that may occur in the patent application process is the conflicting principle claims for possession of any intellectual property created by partnerships. The commercial company in the private sector may argue that it should own the intellectual property caused because they have an advantage in terms of the financial and intellectual contributions, and they are more competent to protect and exploit the results. On the other hand, the university may argue that it has the right over the ownership of the intellectual property generated, considering that academic staff has created most of the intellectual property. As their employer, the university is entitled to the initial request.
Universities are mostly interested in taking into consideration the four (4) most crucial issues in a conflict of interest between the academic researchers’ responsibilities and duties to the university and their participation with the industry in technology transfers.
DGeeter enumerated these four primary issues in this manner:
- Conflict of Time and Involvement – this includes the investigator’s over-commitment or association with the organization to the detriment and discrimination of the teaching and university work obligations.
- Misuse of university resources on the company’s behalf – this comprises university facilities, equipment, supplies, and participation of graduate students and other paid researchers.
- Confusion in ownership of the intellectual property – this is a common source of conflict or dispute. Unless there are clear policies and definitions in the university within research agreements of the commercial company’s rights, this conflict will persist.
- There may be a potential or perceived conflict of interest where an inventor holds an equity position in a company, which the university has licensed to market and distribute the invention.
Collaborative Research Agreement
We are not going into matters concerning the first form of research agreement but will delve into issues related to the second one or the collaborative research agreements. In joint research agreements, both parties who usually carry out research either separately or simultaneously do the research. This is done, generally, at the university laboratory, and they typically share methods and results.
Collaboration or partnership may be portrayed as collaborative research where the aims, goals, or objectives of the research agreement are defined and identified by all the partners or parties and where all said partners or parties make active participation and involvement in the research activity. The results and outcomes of this collaborative research and any related and allied intellectual property are generally shared between the partners by a written agreement, taking into consideration various aspirations and targets of each party.
“Best Rule” Principle and the Written Agreement of Parties
The statement of a single rule as an example of “best practice” does not necessarily make the agreement or the regime as regards the ownership of the intellectual property generated applicable to any occasion. Best practices are often developed depending on the circumstances surrounding individual cases.Sponsored research is at all times, governed by a written agreement. The following are vital provisions, found in almost all sponsored research agreements, regardless of the parties:
- Scope of work and changes to the content of work
- Funding terms or budget
- Reporting the results of the work
- Ownership of and rights in the products of the work
- The patent filing, prosecution, and maintenance
- Publication of the results of the work
- Liability, indemnification, and insurance
- Term and termination
In terms of sponsor obligations in a collaborative research agreement, the policy or regime which governs the relationship of the parties may include provisions for the sharing by the commercial sponsor of intellectual property creation. The sharing of these terms is frequently ongoing throughout the term of the collaborative research agreement and operates from sponsor to university and vice versa.
In any event, the intellectual property arrangement between the parties must chew on the conclusion, result, or outcome of the negotiation, which should point towards the contribution and participation of the parties and the remuneration and benefits they look forward to from a variety of products.
Peterson, in his book published in 1993, stated that ineffectively working under the collaborative research agreement, the following essential points must be taken into consideration to preclude problems and inconvenience that could get in the way of the research function:
- Who is the owner of the item?
- Take note of the given conditions on the possessing, use, disclosure, and disposal of the product or service.
- Take note of the provisions about the information, materials, data, or services. Should there be considerable restrictions, discuss it with the administrator at the university to determine how the rule will work and if it is acceptable.
- Also, take note if the source of the item requires acknowledgment of it in any publication.
As regards the exploitation of the intellectual property generated, some complications may arise concerning the rights and entitlement to the utilization of the results. The following are examples of questions which may give rise to conflicts between and among the parties to a collaborative research agreement:
- Can the researcher use the results as a basis for further research for either him- or herself or a third party?
- Can the researcher take the results and apply them to another specialized area?
- Can the researcher use parts of, for example, a copyrighted work such as creating new works for third parties?
There may be an instance where a conflict would when an owner of the intellectual property results in attempts to impose restrictions and limitations on licenses beyond the scope of the intellectual property grant. This is a patent misuse. Such misuse in an agreement involving a third party is adequate to render the agreement unenforceable. In effect, it reduces and downgrades the value of the intellectual property value.
To avoid this kind of conflict, the attorney should cautiously review individual and representative license agreements, and if possible, ask and demand the contract person about the party’s licensing practices.
The Exploitation of Intellectual Property Rights and Strategies
The fundamental and the most crucial benefit of patent protection is the promotion or marketability it conveys when it is exploited. The exploitation of the patent means “any use of the licensed technology in the production, active or passive sales in a territory even if not coupled with manufacture in that territory or leasing of the licensed products.”
This may be contemplated in the sales volume or higher revenue productivity. In most cases, the owner of the intellectual property would plan a strategy to effect the appropriate exploitation of intellectual property. One method available to an owner of the intellectual property is to patent defensively. This means that when a promising technology has been disclosed through a patent application, the owner will patent around the new invention.
Parties must warrant that the terms on ownership and exploitation of intellectual property generated are written explicitly, openly, and in a manner to ensure transparency and that the legality of these terms into their collaborative research agreement is professionally assessed. Therefore, the attorney must carefully and vigilantly review the agreement since such an agreement might contain language that limits the owner’s intellectual property rights.
For instance, an exclusive license agreement from a university may include language that allows the university to use an invention, creation, or discovery for research purposes. In such a case, the commercial sponsor may exercise due diligence by contacting the university to determine and establish whether any research is being carried out. As regards any such investigation, attorneys should demand or request information concerning the issue of whether the study will be the basis for university inventions, creations, or discoveries that may be licensed to a different entity.
Attorneys should also carefully review collaboration agreements and distribution agreements. Concerning collaborative research agreements, the commercial sponsor might erroneously and inaccurately assume that it owns intellectual property rights based on its collaboration with another entity or the university. Otherwise, this may be another source of conflict between the parties in the collaborative research agreement.
Commercial companies often set up a portfolio of patents with several numbers of variations of the basic technology in such a way that the threat of a competitor firm entering the market with a variety of inventions . According to Nevens, Summa, and Uttal, competitive success will increasingly depend on the coordinated effort of researchers, manufacturing staff, and managers.
As part of their general or overall intellectual property strategy, large firms usually utilize patent portfolios to augment the overall protection that a single patent concurs by ‘fencing’ or ‘creating a maze’ of patents that will make it more complicated and difficult for competitors to patent a rival invention without necessarily breaching existing rights.
These strategies also include licensing agreements with other firms. However, this strategy of generating revenue through licensing is typically just a secondary objective pursued only when the chance and opportunity happened to rise.
In able to generate income from the intellectual property, it is imperative and essential to identify and recognize intellectual property, come into a conclusion as to how said intellectual property can best be safeguarded or protected, to assess and weigh up its commercial potential, categorize and identify routes to commercial development and to secure and negotiate with certain partners.
It is generally regarded that the principal interest of the parties lies in the exploitation of intellectual property. Commercial exploitation of intellectual property creation means the sale, rental, leasing, or any other method of retail distribution or an offer of these purposes. However, in general, commercial exploitation of the intellectual property creation shall not include exploitation under conditions of confidentiality to the extent that no further or additional distribution or dissemination to third parties occurs. A party does not generate intellectual property in the industry for the primary purpose of furthering the science, although it may be one of the goals. On the other hand, the primary purpose of the parties would be the commercial exploitation.
While the commercial exploitation of intellectual property may be a source of remuneration and revenues for the owner, it also constitutes a form of control on marketing exerciser by the owner, or any management societies acting on his behalf and grantees of licenses.
In the book Partnerships for Research and Innovation Between Industry and University, A Guide to Better Practice, a range of policy options for ownership, protection of results, rights of non-owners, and disclosure of results was suggested. As an example, parties may resolve to assign the ownership of intellectual property generated fully to one of them, either to the university or to the commercial company in the private sector. It may also be decided that one of the parties may, at the outset, own the intellectual property creation. However, should there be a failure on the part of the party to exploit the intellectual property within a given period commercially, ownership may transfer to the other party.
One solution to the issue or problem relating to intellectual property ownership is that the party who generates the intellectual property gets to own it while granting user rights to the other partners.
Another strategy in exploiting the intellectual property is for a party who does not own the said intellectual property may be given the right to utilize and exploit the results for its research or teaching. However, this agreement usually gives no such rights to use or exploit the results for the benefit of third parties without the permission and acquiescence of the other partner or partners.
In essence, all those who are wholly and directly involved in generating intellectual property should benefit and be given the advantage of exploiting the said intellectual property. This would include even the non-academic staff in cases where the contribution and participation thereof are greater than or beyond their everyday responsibilities.
Most researches and collaborations and partnerships on research projects indeed seek a license to the intellectual property generated, generally, to obtain and get hold of the actual or potential commercial advantages and benefits that go along with the right to exclude others. Considering the expensive and high-cost research and development, the opportunity to recover or recoup these costs and amount of expenses using commercial exploitation of the intellectual property generated or created is more often than not the primary and elementary justification for embarking on the research in the first place. It is the commercial exploitation of intellectual property, which is the fundamental rationale and encouragement or promotion of undertaking the research.
Intellectual property rights can be effectively exploited commercially in two basic ways: directly and indirectly. Direct commercial exploitation of the intellectual property rights is done in the sense that the inventor or researcher may practice the invention or the intellectual property generated to obtain and acquire an exclusive marketplace benefit or advantage, in case the patented technology results in a better creation or product or produces an old product less expensively. On the other hand, indirect commercial exploitation means that the owner of the intellectual property rights and those who have a share in the advantages and benefits thereof receive revenue and income from the sale or licensing of the intellectual property generated.
The indirect commercial exploitation of intellectual property rights may be exclusive in the sense that one may sell all rights in the intellectual property or grant exclusive rights to others.Another form of incentive to encourage and promote staff to engage in intellectual property exploitation would be the allocation of a share of returns or revenues to the department or unit as a compensation for the contribution, participation and involvement in generating intellectual property, albeit indirectly.
In cases of commercial exploitation of the intellectual property results, from royalties or licensing its use by third parties, the parties must agree in their partnership contract or collaborative research agreement on provisions for the advantage and benefits which would be credited with or accrue to partners or parties who do not own the intellectual property.
In any event, infringement of all forms of intellectual property may be committed by a person concerned using illegal commercial exploitation of the intellectual property generated. That is the case if such person concerned knows or has a well-founded reason to believe that the intellectual property creation disseminated were infringed when they were made. This may be another concern of the parties in dealing with the commercial exploitation of the intellectual property generated by their partnership or collaboration in the research of such creation.
The owner of the intellectual property creation should be able to take advantage of all the methods and ways to exploit the intellectual property results commercially effectively. It should be borne in mind that technology transfer is a careful account of how to start the process of commercialization of technology, and describes in specific detail the difficulties and the amount of time necessary to carry out the process through a successful conclusion.
The parties to the collaboration best negotiate, all in all, the ownership of intellectual property rights. They are the ones who are in the best position to argue, negotiate, dispute, and decide as to which regime or policy they should enter into for the best advantage of all the parties concerned, taking into account the considerable number of varying and different objectives of each of the parties. It should be well thought and carefully reviewed to attain the common goal of all the parties, which is to ensure that commercial exploitation of the invention or intellectual property creation can be turned into a money-making exercise to earn back all the expenses and efforts contributed by each party to the agreement.
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