3.3 Easy Access/Express Licenses

One of the biggest complaints industry has about dealing with universities is how slow they are and how long it takes to get agreements done. Six months is not uncommon, and while this may be fine in an industry with a long development time like pharmaceuticals or medical devices, it can kill a promising opportunity in fast-moving fields like software, foods and materials.

It’s often easy to come to financial terms and sign a Term Sheet, but it seems to take forever to get contractual language that both sides can accept. The model agreements we looked at in Track II (Mid-level TTP), Topic 11: Agreements are based on standard forms used by major U.S. universities that have successfully used them in many deals and so form a great starting point. The resistance may come from the company side—universities need several unique terms in their licenses and while U.S. companies have become comfortable with them over the years, they certainly pushed back a lot in the 1980s and 1990s.

There have been two major efforts to fix this issue, discussed below.

3.3.1 “Express” Licenses

Express Licenses were a concept developed by the Kauffman Foundation, a foundation established by Ewing Marion Kauffman in Kansas City and funded from the sale of Marion Laboratories to form Marion Merrell Dow in 1996. The foundation initially focused on philanthropies operating in Kansas City but later identified that there was no major U.S. philanthropy devoted to entrepreneurship and decided to focus its resources on that.

The Express License was developed in partnership with a small group of universities that received funding from Kauffman (“Kauffman Campuses”) most notably the University of North Carolina Chapel Hill.

The concept was to develop a non-negotiable license for use with faculty start-up companies only. Now, the problem with this is that lawyers do not like non-negotiability. Their job is to change things so that they can show their client they’re working hard to protect them. So, to make an agreement non-negotiable it has to offer highly favorable terms to the company. Then, when a company’s lawyer objects to some terms in the license, their CEO will override them noting that the agreement is a fabulous deal.

The only part of the Express License that is negotiated is the development plan and timetable, which are obviously technology-specific. Attempting to change anything else negates use of the Express License, including its advantageous terms.

The program distinguishes between diagnostics, drugs and medical devices (“Clinically Approved Products”) and all others, and offers a lower royalty rate for the former, presumably on the basis that drugs take a much bigger investment to receive FDA marketing approval than to bring other products to market. This ignores the fact that drugs have very high profit margins and royalty rates for licenses to diagnostics, drugs and medical devices are generally higher than those for non-drug products.

The terms for an Express License are as follows:

License Fee	None at signing; exit fee of 0.75% of fair market value of company at a liquidation event (IPO or acquisition)
Sublicensing Income Sharing	10% of revenues received from sub-licensees except for running royalties 20% of running royalties received from sub-licensees
Running Royalties	1% of Net Sales of a Clinically-Approved Product 2% of Net Sales of an Other Product
Annual Maintenance Fee	Clinically Approved Product: $15,000 / year, years 3-5 $30,000 / year, year 6 and on Other Product: $5,000 / year, years 3-5 $10,000 / year years 6 and on

Use of the agreement has led to an increase in start-ups formed at UNC Chapel Hill.

3.3.2 “Easy Access IP” Licensing

The next step in this process came from the University of Glasgow in the United Kingdom and was led by Dr. Kevin Cullen. Cullen’s insight was that probably 90% of academic technologies are of relatively low value, so why not give them away in a way that reflects well on the university. So, they offered to give these technologies to local entrepreneurs (including faculty) who wanted to use them to start a company. The start-up had three years to make something happen with the technology or it reverted back to the university. The license requires the startup to promote the university and the jobs created by the start-up.

One of the key challenges was to make the transfer easy. The standard form of Easy Access IP license is just one-and-a-half pages and is non-negotiable. Only the company’s statement of intent is deal-specific. A form of agreement is Appendix 2 of the National Centre for Universities & Business (NCUB) review of Easy Access IP, also identified below.

One of Glasgow’s surprising findings was that the university’s total knowledge transfer income went up. The loss of the slight possibility of licensing income from doing an Easy Access license was more than outweighed by increased sponsored research income and/or consulting income from the company, which inevitably needed the professor’s help. 

This illustrates the importance of the concept of Knowledge Transfer. If the TTO was only evaluated internally based on license income rather than knowledge transfer income, there would be much less incentive to do Easy Access IP deals. This vividly illustrates the management saying: “You are what you measure.”

A modest number of other institutions have embraced the Easy Access concept (to greater or lesser degrees):

• Bristol University
• European Organization for Nuclear Research (CERN)
• École de Technologie Supérieure
• Kings College London
• Macquarie University
• University of Lancaster
• University of New South Wales
• University of Ottawa
• University of Wollongong

While the Easy Access IP concept may have been a success for the institution (depending on how you measure success), the impact on the TTO has been mixed. Several directors of TTOs that embraced the concept moved on in the year or two after the adoption.