Many startups begin their life as an idea in the head of a graduate student, post-doc or professor (or some combination thereof).  These folks are typically carrying out their day jobs at a university and it is not surprising that many ideas are spawned from work started in the course of a lab research project.

The associations to the university lab often come with an obligation to assign to the university.  Some of this is automatic.  Many universities have employment agreements and even facilities-use agreements that include provisions assigning any inventions created during that time to the university.

What are the ramifications of these arrangements?

In a word or two – university ownership of the IP.  The startup will embark on its new life encumbered with licensing arrangements at best, or at worst lacking any rights in the IP.  If there is a license, the university and start-up will be joined at the hip for some time. This will be the case unless the university releases its hold on the rights and assigns the IP to the company.  In the worst case, the IP may rest solely with the university, and the startup may find itself in protracted negotiations, haggling over future royalties, milestones and other terms.

If the university retains ownership of the IP, which is the most common scenario, the start-up should think very carefully about the terms of the arrangement. What type of license is in the offering and what restrictions and obligations does it carry? Here are a few issues to consider.

Who controls prosecution?

The control of prosecution can determine the fate of the IP.  For example, if a PCT is filed, who selects the countries for national phase entry.  As the PCT matures into national phase, filings costs increase.  Universities often select to file US only and forgo broader worldwide rights.  But as a startup, if your strategy is to eventually partner your drug or medical device with a big player, US rights may not be sufficient.  The lost the opportunity for a global reach can impact your cachet with investors in funding rounds, as well as your chances of engaging a suitable pharma or medtech partner.

What rights does the university retain?

Even if the university provides an exclusive license of some flavor to the startup, it may also retain certain rights. Does the university have the right to continue using the technology for research? If so, consider whether this ongoing research could impact the availability of future IP rights for the company. Take the example where the university publishes the research and creates prior art against future patent applications filed by the startup. Absent an agreement between the startup and the university to work together on the timing of publications, this arrangement can hinder the competitive position of the company.

Who has rights to improvements?

It is likely that the technology developed at the university is just the starting point for the startup.  The company will create improvements and develop additional features.  The startup’s sole ownership of these improvements is the optimal arrangement.   However, clauses buried in licenses can provide the university with access to these improvements and even go as far as to share in the ownership of and/or royalty streams from these future directions.

 Issues to consider in formulating a forward-looking IP strategy:

  • What rights will remain tied to the university?

Absent an outright assignment of rights, if the startup started its “life” as a university research project, it is likely the company will remain tied to the university for its starting technology.  When crafting an IP strategy and explaining the outlines to investors, think about how you will describe the relationship and how you will develop future IP, independent from the university.

  • Can you break free of the ties?

The startup may never outgrow the platform of technology it started at the university and those ties will remain through licenses and other agreements.  However, if there are new directions to take, consider undertaking these developments apart from the university, with company-only personnel and outside of the university facilities.

  • Make the ties that remain work for you

To the extent permitted, keep an active role in the prosecution of the patents.  The university may directly control prosecution counsel (and on the upside, pay costs).  However, you may be able to provide input on the claim scope, additional continuation and divisional filings and which countries are of interest for national filings.

The IP you share (or eventually obtain) is a key starting point and asset in forming your startup.  Nurture it, care for it and stay possessive!


The content of this blog is for informational purposes only and does not offer legal advice. Circumstances are fact-specific and you should consult an attorney for legal advice concerning your individual issues.