The road to commercialization is a long one, and it doesn’t end when a license is signed. With Emory OTT’s vigilant post-license compliance program, Emory inventors can rest knowing that their intellectual property (IP) is being carefully supervised on its way to making a lasting impact.
What is post-license compliance?
Kim Dunn, Compliance Associate at Emory OTT
Licensing and legal professionals work with outside partners to negotiate license terms and conditions, outlining who gets the right to develop the IP in question. Once a license agreement is executed, it enters the “post-license” stage of commercialization.
Post-license compliance is about ensuring that licensees follow the terms of the license – something called diligence. According to OTT’s post-license compliance associate, Kim Dunn, “[Diligence] is not just a financial check. It’s about safeguarding the interest of the IP while serving the best interest of the inventors, investors, and Emory.”
Why is post-license compliance important?
Until recently, a lot of technology transfer offices (TTOs) didn’t have post-licensing programs. Instead, unusual activity or inactivity on the part of the licensee, such as missed payments, would prompt a “check” on a license agreement. TTOs were reactive to the licensees’ actions as opposed to proactive for the license.
Recognizing the greater need for checks and balances for the IP and the licensees, most offices brought a post-license diligence expert to their team. “We follow up on the license to make sure that the licensee is adhering to the terms of the license agreement,” Dunn explained.
For example, when a license is signed, Dunn receives a notification via the internal license tracking platform. She then meticulously reviews the license for any immediate financial obligations, like up-front (license) fees. If so, she reaches out to OTT’s finance team to request an invoice, which is then sent to the licensee.
This process establishes a rapport between the licensee and the post-license compliance officer. It’s a crucial part, considering that up until this point, the licensee has mostly been dealing with the legal and licensing teams during negotiation — before the license is signed. Following the license agreement execution, they still have obligations to fulfill, and post-licensing compliance makes sure they do.
How does OTT conduct its diligence?
Since many Emory technologies are related to life sciences and biomedicine, our licenses often include terms for clinical work and development. In these cases, licensees are required to track their development progress. What phase of trials are they in? What were the results of each phase? How close are they to creating a market-ready product?
Licensees also have financial obligations when they hit certain milestones within their agreement. These milestones vary depending on the intellectual property, but they can involve benchmarks like dosing the first patient, getting FDA approval, or first sale.
Consistent diligence for a license can last years, especially when clinical trials are involved. “Our role is to make sure that the licensees are doing what they need to do under the terms of the license so that everybody benefits,” said Dunn.
Some of these terms include upfront fees, royalty fees, annual maintenance fees, and milestone payments.
- Upfront fees are the fees paid by the licensee to the licensor as partial compensation for the use of the IP and all associated benefits. These are included in most license agreements.
- Royalty fees are the fees that the licensee pays to the licensor once the IP becomes profitable (usually a percentage of the revenue).
- Annual maintenance fees are paid to OTT as a way to ensure that licensees are actively working to develop the technology.
- Milestone payments come in when the licensee achieves development milestones specified in the agreement.
Dunn emphasizes that post-license compliance is a collaboration between the licensor and licensee.
“There is always some requirement of diligence on their end that they have to meet under the license agreement to ensure that they’re taking it forward to market,” she said.
Using the license database to set up report dates and deadlines, licensee activity is carefully monitored — but post-license won’t be breathing down the necks of the developers. OTT recognizes that timelines won’t be perfect because any number of roadblocks can emerge during development. Using progress reports and regular check-ins, the post-license office works with the licensees to help them stay on track despite any setbacks.
Ultimately, OTT wants everyone — the inventors, the licensees, Emory — to succeed. With the guidance of the post-license compliance office, inventors can hand over the managerial reins so that they keep working to make an impact, knowing that their licensees are being diligently monitored for compliance.
— Jenna Woods