Contract Accord 5: Background Intellectual Property
Accord Revision Date: September 2019
Page Updated: January 2020
©2020 University-Industry Demonstration Partnership (UIDP). Please refer to the copyright and disclosure statement for UIDP Contract Accords usage and rights.
OVERVIEW AND BACKGROUND
Some research projects require access to or use of existing intellectual property (IP) of one or both parties for the research to be performed. Also, research may lead to discovery of new IP, including potentially patentable foreground intellectual property (FIP) (see UIDP Contract Accord 6: Foreground Intellectual Property), copyrights (see UIDP Contract Accord 8: Copyrights), software (see UIDP Contract Accord 16: Software), and other research results (see UIDP Contract Accord 4: Other Research Results) (collectively referred to as resulting IP). In order to be practiced, resulting IP may require access to background intellectual property (BIP) that is owned or controlled by the University, the Company, or a third party, and that exists prior to, or outside of, a Sponsored Research Agreement (SRA). The purposes of BIP clauses in SRAs are to:
- clarify and manage the expectations of the parties;
- provide terms for definition and disclosure of BIP;
- describe and provide access rights to the parties as needed for conduct of the research; and
- provide access to the BIP, on a negotiated basis, for the Company to exercise its license rights to any resulting IP.
It is important for the parties to understand and track the obligations they are making in SRAs with respect to BIP. The statement of work should describe whether any BIP is needed for performance of the research. The SRA would then describe the rights that the parties have to use the BIP and for what purpose. Often access to BIP of each party is limited to use by the other party solely in performance of the research project as defined in the SRA.
BIP clauses may also provide broader access to BIP in order to allow the practice of resulting IP, or as part of the rights the Company is granted pursuant to the SRA. BIP clauses help to mitigate the risk that the Company or the University may not have access to BIP, which may be needed to practice resulting IP. BIP is an important asset to both parties and should be recognized and handled as such.
In order to recognize the value from its investment in an SRA, the Company requires assurance that it will have freedom to operate and will not be blocked from commercializing any resulting IP from an SRA that it funds. The Company expects that the University is aware of IP that the University owns or controls, that the University will anticipate and communicate to the Company how such IP will be used in performance of an SRA, and how the Company may need to use such IP to be able to successfully commercialize resulting IP. The Company needs to be assured that in return for funding the project, it will not be surprised by any undeclared or ‘hidden’ university-controlled BIP that may block the Company from ultimately using resulting IP.
If potentially blocking University BIP is identified, the Company may want or need to request a formal option to negotiate a license to ensure that such University BIP will be available to the Company at a later date. The Company expects that resulting IP and BIP clauses in SRAs that contain provisions regarding the downstream use of BIP are reviewed by responsible offices in the University with technology licensing expertise and broad access to the University’s invention disclosure files. Companies will expect the University to provide complete access to University BIP, regardless of where it originates in the University. If the University cannot make that commitment, it should communicate the limitations of what assertions and agreements about BIP it can legally and practically make so that the Company can assess the impact and risk of potentially blocking BIP.
Information about potentially blocking BIP is especially important for smaller companies that may not have in-house experience, access to appropriate outside counsel, or funding to bring in the appropriate expertise needed to properly review agreements. Therefore, they rely on the University to act in good faith when drafting and explaining the relevant terms to the small business concern.
If BIP will be necessary to conduct the research or utilize resulting IP, the University should use reasonable efforts to identify and disclose known University BIP, as well as its availability for licensing to the Company at the onset of the SRA negotiations and the development of the statement of work. (See UIDP Contract Accord 1: Statement of Work). If necessary, the University should be willing to facilitate discussions between the Company and third parties that may control licensing of BIP.
Due to the increasing levels of complexity caused by BIP and the effort needed to conduct the needed due diligence, some Universities prefer that an SRA not involve BIP at all. If University BIP is necessary for the University to conduct a project supported by an SRA, a definition of such BIP should be included in the SRA that:
- describes the BIP in terms of the invention disclosure file(s) that the University has on record;
- limits BIP to intellectual property on which the principal investigator is a named inventor or developer;
- results from a manageable and identifiable segment of the University (e.g., a laboratory or small center) or similarly attempts to clarify exactly what BIP is covered by the SRA; and
- provides fair consideration to the University (e.g., royalty) for the Company’s use of the BIP.
These limitations in the definition of BIP allow the University to manage its obligations to the Company under an SRA without unduly or inadvertently affecting the rights of other faculty inventors and research units to pursue sponsored research projects.
Companies will expect the University to provide complete access to University BIP, not necessarily understanding that BIP could include inventions arising from a laboratory of the University other than the one in which the project covered by the SRA is being conducted. The University can explain this point to the Company and should only make assertions and agreements about BIP that it can legally and practically comply with.
Identification of relevant BIP of either the Company or University should involve the University’s sponsored research office, technology transfer office, the PI, and the Company’s technical and contracting representatives. (For more information on roles and responsibilities within a university, see UIDP Comparing Internal Structures Guide.) Side deals between PIs and Companies are inappropriate since they may create: 1) expectations that are inconsistent with the Company’s or University’s policies and with the legal availability of BIP for use; and 2) potentially serious legal difficulties regarding ultimate responsibility of the University with respect to the rights of the Company, or vice versa.
Regardless of the Company’s rights to use University BIP, Universities generally retain educational and research rights to use their BIP for the University’s research and educational purposes.
Potentially patentable BIP developed using federal funds are subject to the Bayh-Dole Act and requirements of the funding agency. (See UIDP Federal Flow-Down Reference Guide and UIDP Contract Accord 6: Foreground Intellectual Property.) At the least, federal funding of potentially patentable BIP may subject such BIP to a limited license, allowing the government to practice the invention for and on behalf of the government. BIP in the form of research tools resulting from government-funded projects are expected to be made available to the research community for the public good. Any license issued in or pursuant to an SRA will need to contain language to appropriately address dissemination or distribution of such research tools. A provision in the SRA should clearly state that the BIP is subject to the rights reserved by the federal government, if that is the case. It is important for the University to take the responsibility for the various reporting obligations imposed by the federal government relative to inventions covered by the Bayh-Dole Act so that the University retains its rights and interests in such inventions and can, therefore, convey those to a Company as agreed in an SRA. (For more information on copyrights and federal funding, see UIDP Contract Accord 8: Copyrights.)
- Identifying the technical relevance of BIP to proposed research is an important and shared responsibility among the University’s sponsored research office, technology transfer professional(s), legal office, the PI, and the Company’s technical and contracting representatives.
- The scope of rights (and terms) of BIP clauses needs to be addressed needs to be addressed according to both the SRA and any related license agreement, as applicable. The SRA needs to define the rights of access to BIP for the performance of the research as well as the breadth of commercial rights in BIP a Company can expect to obtain in any license agreement entered into pursuant to the SRA.
- The parties should thoroughly consider the extent to which they may require access to the other party’s BIP in order to conduct the research project and practice other resulting IP and should negotiate those rights explicitly up front.
- Disclosure of relevant or necessary BIP developed by the project team should be made before or during negotiation of the SRA and also during the project as needed (University and Company technical representatives should agree on scope and timing of such disclosure and review, e.g., as potentially blocking BIP becomes known or as the project activity changes).
- A University will license University BIP to the Company for limited use in performance of an SRA or enter into discussions with the Company about alternatives, including revision of the statement of work.
- Company’s use of University BIP outside the SRA, even if coupled with a license to resulting IP, will likely be royalty bearing.
- Universities generally retain educational and research rights to use their own BIP for research and education regardless of the Company’s rights to the BIP.
- The University will agree to make reasonable efforts to discover and disclose known University BIP that is related to the project and the scope of which is defined in the SRA. If available, the University will make reasonable efforts to license it to the Company on reasonable terms.
- The University will agree to affirm that it has performed a requisite level of due diligence and, to the best of its knowledge at the time, that it has fully disclosed all blocking University BIP, as defined in the SRA, which is owned or controlled by the University at the time of license execution.
- The parties should be aware of laws or regulations that impact the use of BIP (e.g., previous funding provided by the federal government, a non-profit organization, or other type of funding agency) and classification of BIP as research tool.