The Art of the Tech Transfer Deal

When considering a relationship with industry, anticipate the worst.

Jun 30, 2006
Ronald I. Eisenstein

Relationships change over time, which is why Donald Trump would have advised Paul McCartney to sign a prenuptial agreement before he married. While no one likes to prepare for the breakdown of a relationship, when it comes to the academic scientist and private industry, it is in the best interests of both to adequately prepare for a bumpy future.

If you find yourself being pursued by industry, remember what a company ultimately wants: product. In the beginning of a relationship, a company is interested in finding out all it can about a research area and working with a particular academic group because of its expertise. However, over time, circumstances change and interests deviate. The company needs a commercial product, and at some point they will insist on graduating from supporting academic exploration to product development. You, however, may feel you are not ready, that there is more research to be done in order to develop an even better product.

Also remember that companies are rarely monogamous. It is in their interest to fund multiple research groups, and tensions arise when one scientist finds that a different group's work has been chosen for further development even as their work, no longer in the spotlight, remains under contract to the company. And then there is the problem of the suitor being suited. When companies are acquired, business goals and company contacts often change. Yet your obligation to the company, which still owns rights to the underlying research, remains. This not only potentially slows or ends funding from the initial source, but because of IP issues it also keeps other companies away.

Why, if people know these things may occur, do they often happen anyway? In a word, passion. The technology transfer office may end up supporting deal terms it does not fully endorse because of pressure from the researcher to make a deal happen. If the researcher lacks clout, he or she is frequently anxious to make any deal, even a bad one. Conversely, if a scientist does have a great deal of clout, the company's initial promises are typically quite attractive, and then the researcher uses his or her influence on the university not to lose the deal. These factors place the university in a difficult position during negotiations. There are some basic fixes:

? Place diligence requirements on the company, thus ensuring that the company works on developing the product. (However, this does not solve the problem when the company is working on an existing product but not interested in developing the next-stage product.)

? Stipulate that at certain time-points the company has its license restricted to specific fields.

? Talk to other researchers.

This last point is particularly important and often overlooked. While those at a particular tech transfer office understand these issues, people do not like to talk about deals that have gone bad. However, just as with marriages and society's growing acceptance of prenuptial agreements to protect parties when the marriage fails, researchers especially need to talk more candidly about deals that end badly, and what might have been done to help in their aftermath.

While there are some forums at the Association of University Technology Managers and Licensing Executives Society International that occasionally address this issue, the key is to have it discussed routinely among researchers. For better deals, scientists need to have a more realistic understanding that collaborations are not always forever, and to enter into the terms of a contract accordingly.

Ronald I. Eisenstein is a partner engaged in biotechnology-related IP in the technology and intellectual property group at Nixon Peabody, a law firm in Boston. The views expressed in this column represent only those of the author and not of Nixon Peabody or its clients.