Academic licensing consists of licensing primarily patents. However, this is a very incomplete picture of ways to license research results. The real issue for the company to be licensed is to transfer the knowledge of the invention inside the company to develop a product. Having the legal rights to use the invention described in the patent or patent application is only one of the necessary elements.
Carefully written licensing agreements will also open the door to transferring information from the research lab to the company via:
- Sponsored Collaborative Research Agreements (SRAs)
- Consulting agreements
- Material Transfer Agreements (MTAs)
- Training sessions
- Access to use laboratory instrumentation, etc.
The information transferred can consist of:
- Proprietary information
- Know-how
- Show-how
- Trade secrets
3.7.1 Proprietary Information, Know-how, Show-how, Trade Secrets
Proprietary information is information which is known by some select people, but not shared with others, such as results of a laboratory experiment.
Know-how or procedural knowledge is a term for practical knowledge on how to accomplish something, as opposed to “know-what” (facts), “know-why” (science), or “know-who” (communication).
Know-how is an ambiguous term that refers to the knowledge in someone’s mind— it may or may not be contained in any documentation. Know-how is a vague term of knowledge that is— unlike a trade secret— difficult to transfer in a license transaction. However, trade secrets can be viable IP assets that can be sold and licensed.
Language for this term in a License Agreement can be:
Know-how shall mean technical data, formulas, standards, technical information, specifications, processes, methods, codebooks, raw materials, as well as all information, knowledge, assistance, trade practices and secrets, and improvements thereto, divulged, disclosed, or in any way communicated to the Licensee under this Agreement, unless such information was, at the time of disclosure, or thereafter becomes part of the general knowledge or literature which is generally available for public use from other lawful sources. The burden of proving that any information disclosed hereunder is not confidential information shall rest on the Licensee.
Show-how is a diluted form of know-how. Show-how is used to demonstrate technique. An enlarged program of show-how is where the Licensor personnel provides a training program to the Licensee’s personnel.
Trade Secret: Three factors are common to all such definitions: A trade secret is information that:
- is not generally known to the public;
- confers economic benefit on its holder because the information is not publicly known; and
- the holder makes reasonable efforts to maintain its secrecy.
In international law, these three factors define a trade secret under article 39 of the Agreement on Trade-Related Aspects of Intellectual Property Rights, commonly referred to as the TRIPS Agreement.
Proprietary information which may have economic value can be called a trade secret, if the above terms apply. However, academic research institutions are not good places to have tight procedures to retain trade secrets. If the information is called a trade secret (rather than proprietary information), there may be stringent national laws that may not favor the institution.
3.7.2 Managing Proprietary Information and Trade Secrets in Commercialization
To manage proprietary information and trade secrets for commercialization, the TTO should determine a list of what relevant proprietary information is important to transfer to the Licensee.
Next, the TTO must identify where the proprietary information is written down. It may be found in publications, internal reports, patent applications submitted or being written up, lab notes, lab meeting presentations, etc.
Proprietary information and trade secrets are usually managed via a non-disclosure agreement (NDA), also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA) or secrecy agreement (SA), which is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain defined purposes, but wish to restrict access to all others.
To manage the transfer of such information, create a written list of the information with a title and date of relevant documents. Commercialization agreements can include reference to such information and the list (or actual documents) can be appended to the agreement. The agreement can also specify how the information will be transferred— via a hands-on training session, via written exchange, etc.
Such information may be used to increase the compensation owed to the Licensor, and if the information is still relevant at the end of the patent life, it can be used to continue the term of the agreement, but at a reduced compensation rate.
New discoveries (unexpected information) and improvements (to existing information) often need to be formally conveyed to the Licensee on a regular basis and should be addressed in the agreement.
It is not uncommon for proprietary information to be created over many years and by numerous people who come and go in the laboratory. The paperwork to keep track of this personnel movement can be complex. Some laboratories have decided that rather than distribute royalty income to the inventors who happen to still be employed in the lab, at the time of the invention disclosure, that a significant portion of the inventor(s)’ royalty share is retained by the lab director to be used for special lab wide purposes of travel, food, etc. to benefit all in the lab.
3.7.3 Trade Secret Creation and Management: Trade Secret vs. Know-how
Trade secrets and know-how share similarities but are quite different. Trade secrets are contained within transferrable documents, typically separate from individuals who may know the trade secrets. Trade secrets are clearly definable IP, when managed correctly.
As mentioned before, know-how is an ambiguous term that refers to the knowledge in someone’s mind – it may or may not be contained in any documentation. A technology is typically covered by more than one type of IP, and trade secrets can be one of those types. The key to creating and managing a trade secret is—no surprise—secrecy. A trade secret is only as good as the secrecy used to maintain it. A trade secret must be kept confidential at every step of the process of creating and using it. Steps must be taken to limit the number of persons that know the trade secret—and they must be contractually bound to keep it secret unless a confidentiality agreement is signed.
In creating the trade secret, it must be defined in writing and any other format necessary to convey the totality of the trade secret. Then, this writing (and/or data, or photos, drawings, etc.) must not be allowed into anyone’s hands unless and until a strictly defined and clearly written non-disclosure agreement is signed.
Trade secrets should have a non-disclosure agreement that is significantly fortified with strict provisions for maintenance of secrecy, and strong repercussions for the loss of secrecy. Typically, a trade secret is not registered with the national government in the same way patents, trademark, or copyrights are. Therefore, there is no cost to file or prosecute. The cost lies in the management activities that must be enacted to create and manage them. This is where the institution is at a disadvantage. Unlike companies, the institution generally has difficulty in implementing a secrecy regime in and around research offices and laboratories. That said, it is possible to do so, and when appropriate, the TTO/TTP should make it clear to the creators (inventors) of the trade secret all the management steps that will be required—on an ongoing and long-term basis—to maintain the trade secret as a valuable IP asset. The critical issue for the TTO regarding know-how is this: if the License Agreement obligates the TTO/institution to deliver know-how that is in the minds of institutional personnel, how can the TTO be sure it will be delivered as promised? That requires control over faculty, staff, and students that the TTO does not have. The TTO can have control over a trade secret since it can be made to be independent of the creator through careful documentation.
More details on this subtopic can be found here.
3.7.4 Integrating Patents and Trade Secrets: Management and Licensing
Many institutions (particularly those in the United States) do not hold their own trade secrets, for philosophical and practical reasons. This is primarily because these PSRI adhere to the academic mantra that “all information is publishable and public.” So, such institutions do not consider trade secrets, relying solely on patents for their primary IP coverage.
For institutions whose IP policy allows trade secrets to be created and held by the institution, a useful IP strategy mechanism is available: the patent/trade secret combination. Such a combination has a variety of benefits. Having different types of IP for the same technology provides IP resiliency in the business/legal/marketplace, and also provides for extension of IP lifetimes. The patent has a finite life whereas the trade secret is potentially – if well managed – perpetual. However, combining a patent and trade secret approach requires careful analysis and implementation. To be valid, a patent application must fully disclose an enabling description of the invention—doing anything less is grounds for invalidation.
However, it is often the case that a fully enabled invention description in a patent application does not require the inclusion of certain information that makes the invention more cost effective or profitable. For example, a fully enabled patent description will describe a manufacturing technique (mixing for example) but not disclose the exact type of mixer, its settings, certain temperatures, storage conditions, etc. When an institution’s IP policy allows the creation and maintenance of a trade secret, the TTP should always consider how best to divide the technology into the portion that is patentable versus that which can be covered by a trade secret (without violating the patentability requirement of full enablement).
Creating a package of patent+trade secret provides a more valuable IP asset to license and enhances the TTO’s negotiating position. In such cases, the TTP should be very aware and careful to distinguish between these two different types of IP in the license and include provisions for their separate management. The TTP should also consider creating a two-tiered mechanism for financial terms comprised of a patent and trade secret and a trade secret alone (after the patent expires).
More details on this subtopic can be found here.
3.7.5 Licensing/Commercializing a Trade Secret
For those institutions whose IP policy allows for trade secrets, the TTP has another IP asset to commercialize. The trade secret can be licensed, and license income realized. However, the TTP must consider if and how the faculty/staff/student creators will establish (by excellent documentation) and maintain (by rigorous secrecy mechanisms) the trade secret. A trade secret license should not be created if the TTP cannot rely on the faculty/staff/student creators to maintain such necessary secrecy. In the trade secret License Agreement itself, the Licensee must be strictly and clearly bound to maintain the secrecy of the trade secret. The license may even need to explicitly define the types and degrees of secrecy implementation required of the Licensee by the owner-Licensor. Furthermore, the Licensor must include a provision for significant damages (i.e., financial penalties) if the Licensee loses the secrecy (and thus the business value) of the trade secret. Of course, the license must also allow that neither Licensee nor Licensor have any recourse to stop any third party that discovers the trade secret legally and without any access to the trade secret.
The most relevant issue for licensing these types of IP is the lack of disclosure of proprietary information or trade secret at a PSRI where the researcher is under the normal pressure to publish with attribution to the researchers. In this instance, an early conversation between the researchers and TTP can usually define a way through this situation.