If a company would like to acquire either an unpatented material or a patented or patent-pending material for commercial purposes, either a Commercial Evaluation License, a Biological Materials License, or an Exclusive/Nonexclusive License is required. Please click here for an Overview of the Licensing Process.
A license is a legal agreement, subject to Federal, state, and local regulatory authorities, by which a patent owner promises not to take action to exclude the licensed party from making, using, or selling a potential invention. An exclusive license limits the use of the invention to a single group or entity, while a nonexclusive license allows for use by multiple concerns. A license may be for patented, or patent pending technology, or for unpatented biological materials.
If a company would like to acquire commercial rights to either an unpatented material or a patented or patent-pending material, a license is required. The first step in obtaining a license is to complete the license application form. The application is received by an NIH Institute or Center (IC) and docketed. The IC Technology Transfer Professional reviews the application for completeness and, if the application is incomplete, requests additional information before beginning negotiations. After the application is complete, the license is negotiated between the company's representative and the Technology Transfer Professional.
Licensing royalties are determined based on the type of license awarded and its value in a commercial product development.
Usually, the licensing of inventions is granted on a worldwide basis although this is not required. Most biomedical companies, whether large or small, require worldwide patent protection to secure foreign markets or to use their assets in establishing strategic alliances with foreign companies who provide important foreign marketing expertise. When an NIH or CDC invention is licensed worldwide, a simultaneous transfer of both U.S. and foreign patent rights occurs so that the company can manufacture and market its products in commercially important production or marketing regions. Licenses are also granted on a country or regional basis. This strategy may be more appropriate for technologies where there is less interest from one company in developing a product for world markets.
If a company would like to acquire either an unpatented material, or a patented or patent-pending material for commercial purposes, either a Commercial Evaluation License, a Biological Materials License, or an Exclusive/Nonexclusive License is required.
If the materials being distributed are covered by a patent application filed on behalf of NIH or CDC, the recipient must negotiate a license through the IC technology transfer office in order to be able to use the materials for commercial purposes.
There are four types of licenses available:
- Commercial Evaluation License:
Commercial evaluation licenses grant the nonexclusive right to make and use the technology for the purpose of evaluating its commercial potential. The licenses are for a limited number of months, and do not grant the right to sell the technology. Companies are subsequently then required to obtain one of the licenses below for further use and development of a technology.
- Internal Use:
Internal Use licenses grant the nonexclusive right to make and use, but not sell, the technology for an extended period of time. Typical internal uses include compound screening and use of animal models. These licenses have no "reach through" obligations to new products discovered during their use.
- Exclusive/Nonexclusive License:
Commercial patent licenses can be exclusive or nonexclusive and allow commercialization of the technology, under appropriate circumstances, pursuant to applicable statutes and regulations.
- Intellectual Property Not Covered by a Patent/Patent Application – Biological Materials License:
A biological materials license is required and grants the right to make, use, and/or sell commercially useful biological materials for which patent protection will not be obtained. This type of license typically is nonexclusive and facilitates the commercial development of biological materials without requiring that patent protection be obtained for every material. The company and NIH or CDC scientist(s) should first work with the IC Technology Development Coordinator (TDC) and his/her technology transfer office to determine whether a material can be licensed for either internal use or commercial purposes..
A U.S. patent application must be filed prior to any public disclosure of an invention to preserve international patent rights and must be filed within one year of the official publication date or public use to preserve U.S. patent rights. After appropriate TDC reviews of patentability and commercial marketability, a patent application is filed with the U.S. Patent and Trademark Office (PTO) by a contract attorney. The Technology Transfer Professional is responsible for the supervision of patent prosecution and for ensuring that all information and material are forwarded to the PTO to assure that a patent may be awarded. Once the U.S. patent application is filed, the Technology Transfer Professional will update the preliminary marketability and patentability analysis to determine potential commercial uses. In general, where international filing is possible and one can reasonably anticipate commercial interest, the Technology Transfer Professional recommends at least preliminary filing under the Patent Cooperation Treaty 12 months after the U.S. filing date, to preserve international rights for an additional 18 months at modest cost. Upon NIH determination to exercise international patent rights, the contract attorney arranges for international patent prosecution. In parallel with the filing of a patent application, the Technology Transfer Professional reviews the invention and its commercial potential, develops a licensing approach, and identifies potential companies to commercialize the invention. This is coordinated by the Technology Transfer Professional and is a collaborative process requiring input from the inventors and the TDC. After formally advertising for potential licensees and promoting the technology to companies, the Technology Transfer Professional receives an application for a license. The TDC reviews the application to ensure that the proposed exclusivity is consistent with ongoing research activities. The Technology Transfer Professional then negotiates the terms of the license and administers the license.
The appropriate Technology Transfer Professional negotiates licenses for NIH or CDC inventions. This includes CRADA-subject inventions and licenses for technology developed by NIH or CDC intramural scientists.
While Government regulations reflect a preference for nonexclusive licenses, exclusive licenses are available when appropriate to promote successful commercial development of a licensed invention. To obtain an exclusive license a company must complete a license application and submit the application to the appropriate Technology Transfer Professional. Upon receipt of an exclusive license application, the Technology Transfer Professional evaluates the license application using a number of criteria to determine if an exclusive license is warranted (see 37 CFR §404.7). If the NIH determines an exclusive license is warranted after review of the application a notice of intent to grant the license is published in the Federal Register for a period of time, generally 15 days, unless the application is for an invention developed under a CRADA. During this time the public may object to the grant of the license. After the notice and comment period closes the NIH makes a final decision regarding the grant of the exclusive license.
The criteria the NIH uses when evaluating an exclusive license application are based on the requirements set forth in 37 CFR §404.7. These criteria include whether:
- Exclusive licensing serves the best interests of the public.
- An exclusive or partially exclusive license is a reasonable and necessary incentive to promote the investment of risk capital to bring the invention to practical application.
- Exclusive license terms and conditions are not broader than necessary.
- Exclusive licensing will not lessen competition.
Applicants seeking an exclusive license are required to submit a detailed justification addressing each of these criteria as well as a complete business development plan.
Notice of a proposed exclusive license (other than those resulting from a CRADA) is required by law. Notice will be published in the Federal Register, to provide an opportunity for public comment. The public comments generally must be received within 15 days from the publication date of the Federal Register notice of intent to grant an exclusive license. Any such comments will be evaluated, and a final decision will be made as to whether or not an exclusive license is warranted.
NIH has developed several model license agreements that serve as the basis for license negotiation. The business development plan submitted as part of the license application process serves as the basis for establishing performance benchmarks that are included in the license agreement. The Technology Transfer Professional works closely with licensees to monitor performance and to adjust benchmarks, when appropriate, to ensure successful commercial development of agency inventions. Licensees are required to report at least annually on their utilization of, or efforts to utilize, licensed patent rights. These reports are kept confidential, by law. The license is revocable for specific reasons, such as non-use of the patent or failure to comply with governing regulations or to satisfy public health needs.