Due to the importance of effective licensing to the development and availability of new products arising from NIH and FDA technology, the NIH licensing program is governed by the following principles in marketing, negotiating, executing, and monitoring licenses to NIH and FDA patents:
NIH seeks to ensure development of each technology for the broadest possible applications, optimizing the number of products developed from NIH technology. This is accomplished by:
- Diligent assertion of inventorship (and thus ownership) rights to NIH and FDA technologies in accordance with current patent law; and
- Retaining those ownership rights for transfer to the private sector through licensing instead of assignment. This strategy allows NIH to engage in licensing negotiations which ensure the broadest and most expeditious development of new products. Assignment of rights to the commercialization partner would inhibit the ability of NIH to have a meaningful role in monitoring and ensuring the development of the technology.
NIH seeks to ensure that a licensee obtains the appropriate scope of rights necessary to develop a potential application of the technology. This ensures that as many companies as possible can obtain commercial development rights, resulting in the concurrent development of many potential applications. This is accomplished through:
- Negotiating non-exclusive or co-exclusive licenses whenever possible. This allows more than one company to develop products using a particular technology, products which may ultimately compete with each other in the marketplace. NIH recognizes that companies typically need an exclusive market position to offset the risk, time, and expense of developing biomedical diagnostic or therapeutic products, however, companies do not necessarily need to achieve that position by exclusively licensing a government technology used to develop that product. Instead, they frequently are able to add their own proprietary technologies to the technology licensed from the government to ultimately achieve some level of uniqueness and exclusivity for the final product.
- Negotiating and awarding exclusive licenses for specific indications or fields of use, based on the license applicant's commercial development ability at the time of application. This prevents one company from tying up license rights to applications that could be concurrently developed by another company.
- Negotiating provisions for mandatory sublicensing by exclusive licensees, particularly where a broad exclusive license is granted, as under a Cooperative Research And Development Agreement (CRADA). CRADA exclusive licenses are granted to patents arising under the CRADA based on the scope of the CRADA research. The research, and therefore the patents, can be broad. Because CRADA partners obtain options to exclusive licenses at the onset of the CRADA, it is usually not appropriate to narrow the field of use to such licenses beyond the original scope of the CRADA research. Thus, NIH requires exclusive licensees to grant sublicenses to broaden the development possibilities when necessary for the public health.
- Negotiating requirements for continuing availability of the technology for further research. Although a technology has been licensed for commercial development, NIH seeks to maintain the availability of that technology for further research uses only by non-profit and for-profit entities. This advances science and stimulates further commercial development.
NIH seeks to ensure that commercial partners expeditiously develop the licensed technology. This is accomplished through:
- Granting license rights only to fields of use for which the company has submitted an acceptable commercial development plan to bring the technology to practical application. NIH typically does not grant license rights to venture capitalists, brokers, or other entities that are not in a position to develop the technology directly.
- Negotiating specific commercial development milestones and benchmarks with proposed licensees so that development can be assessed and monitored;
- Negotiating license execution fees, minimum annual royalty payments, milestone payments, and reimbursement of patent expenses in addition to earned royalty payments. Requiring a company to pay royalties "out of pocket" to acquire and keep the technology ensures that a company is committed to developing the technology and has not licensed the technology merely for competitive advantage.
NIH seeks to ensure that technologies commercialized under NIH licenses are brought to practical application, offered and maintained for sale, and made reasonably accessible to the public. NIH enhances public access to the benefits of its technology by fostering the development of competing products for the same or similar applications. For example, NIH currently has several CRADAs and licenses which combine the significant expertise of its scientists with the knowledge and resources of different private partners for the development of two types of therapy (gene therapy and recombinant enzyme replacement therapy) for an inherited disease. The only therapy currently on the market to treat this disease is an expensive enzyme replacement regimen derived from placental tissue.
NIH seeks to obtain a fair financial return on the public's research investment through negotiating royalty-bearing licenses and obtaining payment of patent expenses from licensees.
NIH seeks to negotiate and obtain public benefits from licensees that are appropriate and consistent with expeditious commercial development and accessibility of the technology.
NIH monitors the performance of NIH licensees and ensures that its licensed technology is fully developed, through the modification or termination of a license in the event that a licensee is unable to fully develop the rights granted. Modifying an exclusive license to a non-exclusive one, or narrowing the fields of use, allows NIH to license the technology to other companies for further development and sale. This is accomplished through:
- Negotiating specific grounds for modification or termination of the license. The NIH model exclusive license specifies nine grounds, including failure to meet commercialization benchmarks, failure to keep the licensed technology reasonably accessible to the public, and failure to reasonably meet unmet health care needs.
- Monitoring the commercial development activities of the licensees to determine compliance with the terms of the license agreement.
- Initiating administrative action to modify or terminate license rights where necessary.