There are several different forms of licensing arrangements that companies can explore for commercializing UC Berkeley research discoveries. The IPIRA Office of Technology Licensing negotiates these contracts on behalf of UC Berkeley, with standardized terms designed to lower transaction costs, and accelerate the commercialization of university research. Companies choose whether to enter into an IP rights letter agreement or option agreement, or pursue a full license agreement immediately, based on their strategy for managing the risks of commercializing new technologies.
Letter Agreement
- purpose: an effective tool to secure access to a patent or copyright while the company is being formed, seeking initial funding and conducting a detailed analysis of the business opportunity.
- format:a simple, one to two page agreements, in a letter format with minimal “legalese”
- time frame: typically 3-12 months
- cost: the company reimburses patent costs incurred by the university for the licensed invention and will pay a one-time, relatively modest fee.
Option Agreement
- purpose: gives a company the right to secure a license at any time during a fixed time period. The agreement is not itself a license, so the optionee is not granted the right to sell products or services. An option agreement is a good mechanism to employ if a company
- is ready to commit to development of the technology, but the precise business model, profit margins and other financial details are not yet predictable
- does not know how the optioned technology will ultimately fit within its product line.
- format: about 10 pages
- time frame: typically 1-3 years, depending on circumstances.
- cost: an annual fee (with the first fee due upon signing the agreement) and reimbursement of certain patent costs incurred by the university for the licensed invention. .
License Agreement
- purpose: grants the company all of the rights necessary to sell commercial products.
- format: about 30 pages
- time frame: typically lasts for the life of the patent (although it can be terminated by the company at any time, upon notice).
- cost: fees vary widely, as each agreement is customized to reflect the specifically anticipated products and market, the development stage of the company and the technology being licensed, and the role of the licensed intellectual property. The university follows industry norms when developing financial and business terms and has “comparables” from thousands of licenses within the UC system and across the U.S. and Canada.