Home > Topics > Monitoring, Enforcement, and Resolving Disputes > Administration of Technology Licenses > Editor's Summary, Implications and Best Practices

The National Institutes of Health (NIH) is the premier U.S. (and arguably global) medical research agency, making important medical discoveries that improve health and save lives. Importantly, its work extends to neglected diseases and diseases prevalent in developing countries. One part of the NIH is the Office of Technology Transfer (OTT), which is the agent managing the patenting and licensing of inventions made by scientists at both the NIH and at the U.S. Food and Drug Administration (FDA). The OTT is actively exploring ways to improve how technologies are transferred to developing countries. They are particularly interested in identifying biomedical research institutions, foundations, and companies worldwide that have the interest and capacity to receive and develop new biomedical products and services, including in countries in Latin America, Africa, Asia, and in some of the transitional economies in Central and Eastern Europe. The OTT’s experiences in licensing, therefore, are some of the most important in health research.

The chapter by Hans Feindt lucidly details how NIH’s OTT administers its technology licenses. Licensing is an important part of this office’s operation, and an important part of any technology transfer endeavor anywhere. For NIH, technology licenses generated nearly $100 million in revenues in 2005 from 750 licenses, out of a total portfolio of a staggering 1400 active licenses. Although impressive, such revenue flow is not the OTT’s principal mission. Rather, by instituting and running an organized and highly professional office, the NIH furthers its principled mission of timely introduction of new products and technologies into the marketplace. In this way, the fruits of NIH research and development are made commercially available, fostering economic development and serving the greater public good through the introduction of critical advances in healthcare. Furthermore, the NIH OTT fully recognizes that potential licensees will be from both developed and developing countries, such that the range of beneficiaries is truly global in scope.

The NIH OTT essentially utilizes six types of technology licenses:

1. Commercial evaluation licenses (also known as Options), which enable companies to provisionally evaluate whether a new technology suits their needs
2. Patent commercialization licenses, which provide access to rights in patented, or patent-pending, technology. These licenses can be either:
   1. Exclusive, providing a single licensee with the right to practice the patent, or
   2. Non-exclusive, providing patent rights to, potentially, multiple licensees.
3. Non-exclusive patent licenses for internal use, which provide access to a tool or process, useful for research purposes.
4. Biological materials licenses, which provide access to non-patented biological materials.
5. Software licenses, which provide access to non-patented software.

Although these six licenses differ as to types of technology licensed, specific terms of the license and reporting obligations, one aspect remains consistent: every license is written with well-defined financial terms and clearly delineated reporting obligations. It is crucial that both parties to the license, the licensor (NIH) and the licensee (for example a biotechnology company), understand what is expected, and that the license constitute a “meeting of the minds.”

As a licensor, the NIH OTT administers, monitors, and enforces its technology licenses. It accomplishes this by monitoring licensee compliance with royalty payments and reporting obligations throughout the term of the license. Typically this is not a confrontational relationship. Instead, the NIH OTT seeks to build cooperative relationships with its licensees that, in turn, facilitate problem solving discussions, resolve outstanding issues, and identify possible opportunities for advancing commercialization of products and/or services pursuant to the technology license.

In addition to presenting a broad overview of the NIH OTT mission, this chapter delves into the practical operational procedures that the office employs. For example, licensee contact lists (people within the licensee organization) are important when royalty payments or issues of non-compliance need to be addressed. Such a list will greatly facilitate communication, and save significant time. Another essential operational procedure is maintenance of a well-organized filing system, possibly with archival, working, and computer files. A computer filing system can be structured as a searchable database for license administration, with integrated interactive modules organizing data on contacts, inventions, patents and license applications, royalties, receipts and reporting. The NIH OTT also maintains a website and a special page where available technologies for neglected diseases are also prominently featured, including relevant technologies ranging from African Trypanosomiasis (sleeping sickness) to Vicseral Leishmaniasis.

Finally, Hans Feindt provides lots of practical tips to technology transfer officers in terms of licensee’s reporting obligations. These are well illustrated with real-world licensing situations, such as amendments to license agreements and sanctions for non-compliance. Amendments reflect mutually agreeable changes in the expectations of licensor and licensee that occur with the passage of time and changing circumstances. Amendments might involve term extensions, royalty adjustments or changes in the field of use. Sanctions, on the other hand, are unilateral actions by the licensor triggered by licensee non-compliance. Sanctions include the threat of license termination and even legal action in order to enforce lapsed financial obligations.

The policies, protocols and procedures of the NIH OTT for administering, monitoring and managing technology licenses have broad applicability; scientists, administrators, technology managers, intellectual property professionals, and even attorneys can learn from this stellar example of how an office should operate. As a best practices paradigm, it is equally applicable to developed and developing countries.

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

• Consider whether the U.S. National Institutes of Health (NIH), as a national R&D center for biomedical sciences, is a model for a similar organization in a developing country. Consider further that this not only includes a central role for basic and applied research, but also a critical national role as the exemplar for how a technology transfer office should function and what constitutes best practices in IP management.
• Incentives, such as tax breaks, government-sponsored, low-interest loan programs, and legal systems for incorporating small businesses, can significantly promote investments by the private capital markets in the development of early stage technology. These investors are critical in encouraging publicly funded, and socially useful, research. Many of the NIH inventions found their way to the market with such incentives.
• Incubator facilities created with government funding are vital in getting businesses started. Ideally, they should provide low cost facilities for start-up ventures, for a limited period of time, including laboratories and pilot manufacturing facilities, and legal and business development expertise.

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

• Establish policies, and invest in capacity building, that allow academic scientists to reap some profit from their inventions and engage in some business-related activities to develop their inventions beyond the laboratory stage.
• Establish technology transfer offices that not only will protect the IP developed at the research center, but also promote and make it available for licensing for commercial development.
• Encourage collaborative research and development efforts between academic researchers, government scientists, and industry scientists to address problems affecting the economic and public health needs of the public.
• IP and licensing policies should remain faithful to an institution’s mission. For a public-sector institution, although revenue flow might be viewed as extremely important, the mission of serving the greater public good should always remain the primary driver.

For Scientists

• Scientists of the U.S. National Institutes of Health (NIH) are interested in collaborating with scientists working in their fields throughout the world. Direct contact—scientist to scientist—should be encouraged whenever possible.
• When working with scientists in the U.S. or other developed countries, you should keep in mind that consideration will be given to the potential commercial interest of any new discovery in basic science, new method of doing a manufacturing process, or new construct of biological materials. For this reason, it is important for you to have a good working relationship with your technology transfer office.
• Any invention, whether patented or not, should be carefully documented to fulfill the legal requirements for patent protection and establishing priority of inventorship.

For Technology Transfer Officers

• Inventions come in many forms and differ widely in the amount of effort and investment needed to bring them to market. Likewise, technology licenses can be written in different forms to accommodate these differences and meet the needs of licensor and licensee.
• Some inventions are better viewed as research tools rather than potentially marketable pharmaceuticals or diagnostic products. Policies for licensing research tools should differ somewhat from policies for licensing potential pharmaceuticals or diagnostic products. Note that the Research Tools Policy of the U.S. National Institutes of Health (NIH) is one approach that has proven to be very effective and beneficial.
• Valuation of licensable inventions is a complicated process that requires good faith negotiation and knowledge of the commercial field, the marketplace, and the regulatory environment in which the invention will be used.
• Many inventions and patents are not particularly useful or valuable by themselves. Greater value may be obtained by combining related inventions and patents so that a potential licensee has broader coverage of the intellectual property in a particular field of activity. Inter-institutional agreements are used to combine related inventions available from other universities, government laboratories, and other institutions for licensing.
• Administration of license agreements in a thorough, consistent manner is important for maximizing the financial return from licensed technologies and for tracking the course of commercial development of licensed inventions.
• Allocate resources and provide tools for establishing a system of best practices for license administration, monitoring and enforcement. This could included commercial development and research proposals, reports and patent prosecution management.