When thinking about the value of a licensing agreement, it’s easy to focus on the financial terms, such as up-front payments and royalty rates. However, licensing revenue isn’t the only area to negotiate financial terms. And in many cases, non-financial terms can have significant value. Financial terms beyond licensing revenue are pretty straightforward to negotiate. For a university…
Earlier this spring, NASA’s Armstrong Flight Research Center (AFRC) signed a license allowing Vigilant Aerospace Systems to integrate its patent-pending sense-and-avoid system into the startup company’s FlightHorizon™ avionics platform. This deal is noteworthy not only because it may improve flight safety for all kinds of aircraft, including UAVs/drones, but also because it provides a valuable tech transfer case study.
What’s a reasonable royalty rate when licensing a technology? Good question! Those of you with years of experience negotiating licensing or other technology transfer agreements know that there are many approaches for determining the value of a potential deal and therefore what the royalty rate should be. Which method is best? When we provide deal-making support to our clients, Fuentek uses a combination of three deal valuation techniques: market assessments, cost assessments, and income evaluations. Let’s consider each element.
A few months ago, the IP Marketing Blog discussed the OpenUlster program at the University of Ulster in Ireland and its evaluation license. It caught my attention for its efforts to streamline licensing and help mitigate the risks that potential licensees may feel when contemplating a new technology. Here’s how the blogger described it: ‘To take out an evaluation license, which costs just one Pound, the visitor just clicks on the link to download the documents, fill out two forms and return them both to Ulster. “When the license is countersigned by one of our commercialization team, the firm has exclusivity to evaluate that technology,” says [technology commercialization manager Dr. John] MacRae… At the end of the evaluation period… the evaluation license can be converted into a full commercial license.”’
Patents have been getting some pretty bad press lately. Between stories about patent trolls in The Economist and on NPR’s This American Life and the patent wars raging between Apple, Google, Microsoft, HTC, Samsung, etc., tech transfer professionals are probably finding their cocktail party conversations getting a bit more interesting… and not in a good way. As the public hears more, some question why we have patents at all. They think that if patents are causing this much trouble, they must be bad. This misconception is a problem that technology transfer offices (TTOs) can and should proactively work to overcome.
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