Home > Topics > Technology and Product Licensing > Commercialization Agreements: Practical Guidelines in Dealing with Options > Editor's Summary, Implications and Best Practices

As either a stand-alone agreement, or as a clause within a broader agreement, options are a unique way to grant rights to intellectual property. To the novice, the legal and commercial complexities of these agreements might seem overwhelming, particularly when differences of expectation or legal culture complicate negotiations. This chapter, however, is intended to provide an introduction to options, with tips and strategies that are of use to both beginners and technology transfer professionals. Using examples from the U.K. and the U.S., the authors give a comprehensive overview of several types of options, with particular attention paid to the needs of universities engaged in IP licensing.

Beginning with a general introduction, the authors discuss, in detail, the practice of granting right of first refusal and pipeline agreements. The chapter then covers best practice in dealing with options, including use of template agreements, negotiation tips and a checklist of option provisions. Finally, the chapter delves deeper into the legal and commercial promises and perils of granting options, before concluding with a helpful section on administering options.

Of special interest to university administrators and technology transfer professionals will be the sections on incorporating options as a part of research agreements. As the authors relate, universities in the U.K and U.S. have different approaches to handling privately sponsored research. In the U.K., sponsors are often granted an option to acquire a license to develop and commercialize results, or the sponsor might in some cases own all the results. In the U.S., in contrast, a university normally retains ownership of any intellectual property resulting from its own research, though it may grants rights to a sponsor to commercialize results. This emphasis on university control of research in the U.S. stems, in part, from provisions in the Bayh-Dole Act that prohibit universities from transferring ownership of intellectual property created with government funding.

Also instructive to university personnel will be the chapter’s discussion of when and when not to grant a pipeline agreement to a university spinout company. A pipeline agreement generally refers to an option granted to a university spinout company to acquire rights over intellectual property that may, in the future, be generated by university faculty. Although a pipeline agreement may make sense, universities should be careful to stipulate how pipeline intellectual property will be identified and they will likely want to limit the agreement to intellectual property generated by specific faculty members and their labs. Universities should also recognize that in some cases spinouts may not be the “licensee of choice,” and so should craft pipeline agreements with care.

Finally, those involved in the day to day work of managing intellectual property will be interested in the practical suggestions for keeping track of options, including tips for writing standard operating procedures (SOP), generating nondisclosure agreements, developing a useful database for data, and if and when necessary, calling in legal professionals for more specialized advice.

Key Implications and Best Practices

Given that IP management is heavily context specific, these Key Implications and Best Practices are intended as starting points to be adapted to specific needs and circumstances.

For Government Policymakers

• Contract law is the vehicle that regulates intellectual property. Policy and law should support and foster contract laws and their legal and equitable enforcement. In this way, a nation’s public sector institutions can make the most of their valuable intellectual property and the innovations that invariably flow therefrom.
• Transparent and enforceable contract law is important in any context.

For Senior Management (university president, R&D manager, etc)

• Establish an institutional policy that covers the different types of options contracts. Such a policy should address critical issues, such as authority to sign, conflicts between options and other contracts (whether real or only apparent) and what types of options are available.

For Scientists

• Interface with the technology transfer office so as to understand options and whether, or not, you might have a role in their implementation or fulfillment.

For Technology Transfer Officers

• Implement procedures to monitor obligations pursuant to options agreements, including setting up and maintaining a database that has organized and catalogued your organization’s options (and other agreements).
• Have a series of options template agreements that are readily available for use as specific needs arise.
• Negotiating options agreements is a specialized and acquired skill. Your office should have professionals with the requisite level of experience, knowledge, skills, abilities and sophistication needed to effectively negotiate options agreements.