The signing of a licence agreement is usually the beginning of a long-term relationship. Most licensees continue to develop an invention to enhance the technology, reduce risk, prove reliability, and satisfy the market requirements for adoption by customers. This can involve additional testing, prototyping for manufacturability, durability and integrity, and further development to improve performance and other characteristics. Documentation for training, installation, and marketing is often created during this phase. Benchmarking tests are often required to demonstrate the product/service advantages and to position the product in the market. The licensee’s performance is monitored by the Commercial Development team for the duration of the licence. Most licence agreements require periodic financial or commercial status reports from the licensees.
Your role can depend on your capacity for involvement and on the level of interest by the licensee in using your services for various assignments.
Licence agreements often include requirements for payments in the form of upfront fees, minimum annual royalties, milestone payments, earned royalties and sometimes equity. Licensing fees (upfront, annual minimum, milestones) range from very modest amounts to hundreds of thousands of pounds. If licensed products are eventually developed and sold (which can take years to occur), earned royalties can generate revenues. These payments are usually based on product sales and can vary considerably. If equity is included in a licence, it may yield a return for the inventors and the University, but only if the equity can be liquidated through a successful public offering or the sale of the company. Most licences do not yield substantial royalties. A study of licences at US universities demonstrated that less than 1% of all licences yield over $1 million. However, the satisfaction of an invention reaching the market is often more significant than the financial considerations alone.
Licences typically include performance milestones that can result in termination of the agreement if they are not met. This allows us to pursue subsequent licensing to another business. However, time delays and other considerations can typically hinder this re-licensing effort.
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