From Academia to the Marketplace: The Ins and Outs of University Spinout Licenses with Dan O’Korn | Hutchison PLLC
In the latest episode of the Founder Shares podcast, I had the pleasure of diving into the dynamic universe of university licenses with Dan O’Korn, a seasoned life sciences attorney specializing in licensing and development transactions within the pharmaceutical and biotech sectors, to uncover the secrets that transform groundbreaking academic research into the backbone of thriving businesses.
“As a life sciences company, you want to get all fields of use,” Dan said, “and the reason being is, you know, any bad data is going to be bad across the board.”
And waiting until the drafting stage to bring in an attorney? That’s a gamble that could cost you big.
“New clients will come to me and say, ‘Well, I have this term sheet we already negotiated,’ right?” Dan said. “‘And now we’re going to put it into a license.’ But you may end up spending more if you have to walk back some of these things.”
Dan’s entrepreneurial wisdom echoed a sentiment often overlooked by startups. Many believe they can defer legal involvement until later stages, but as Dan highlighted, engaging legal counsel at the term sheet stage streamlines the process and safeguards against potential pitfalls.
He also shed light on the unique dynamics of university licenses, which often involve patents and untested technologies.
“That’s one of the great things about our practice is that, you know, particularly as it relates to university licenses, we see these things from the ground floor,” Dan said. “These are untested. These are most of the time patented technologies. So, there’s some sort of proof of concept. We’re on the ground floor.”
The conversation then delved into the core of university licenses – what they are and why they matter.
“A university license is basically a license of technology that is developed within the university, so it’s owned by the university,” Dan said. “And in order to get it out of the academic setting, it needs to go to an entity that can continue to develop it outside the constraints of an academic setting.”
But who needs to be thinking about these types of licenses? It’s often professors within the university who have played a pivotal role in developing the technology. Additionally, licenses are extended to business professionals not directly associated with the university, creating opportunities for collaboration.
But there’s an intricate web of stakeholders involved in university licenses, including professors, universities, and potential business partners. Dan emphasized the evolving role of universities, which, over the past few decades, have transitioned from centers of education and research to profit centers.
“The Tech Transfer officers are expected to make money for the university, so it’s become a little bit of a business,” Dan said.
These offices play a crucial role in evaluating technologies developed within the university, deciding on patent applications, and facilitating the transfer of technology to external entities.
And all of this is just the start. There are license fees, reimbursement of patent expenses, royalty rates, milestone payments, and sub-licensing fees, all of which can prove to be a challenge for startups when asked to pay for milestone payments.
So where does the alignment between the university and the company shift as the startup secures funding and progresses in its development? Find out in the rest of the conversation in the latest episode of Founder Shares, available wherever you like to listen to podcasts.
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