Speaker 1  0:00  
Good afternoon and welcome to inter institutional agreements of the potential for unforeseen conflicts webinar presented by Autumn. My name is Sandy Spiegel, autumns professional development manager and I will be your staff host for today. This is the fourth of our five webinar series on agreements and decloak disclosures and we look forward to having you joining us this each week. All lines have been muted to ensure high quality audio and today's session is being recorded. If you have a question for the panelists, we encourage you to use the q&a feature on your zoom toolbar. If you have a technical question or a comment, please feel free to use the chat. throughout the session you'll also be able to use the raise hand feature if you have an example you'd like to share or a question you'd like to ask out loud or strongly into encouraging participation throughout today's session. Should you need closed captioning during today's session, the Zoom closed captioning feature is turned on and available on your toolbar. Before we begin, I would like to take a moment to acknowledge and thank autumns online professional development sponsors, Marshall Gerstein, IP and the Michelson Institute for intellectual property. We appreciate your ongoing support. I now have the pleasure of introducing you to today's distinguished speakers. Malcolm Townes is the Associate Director for technology commercialization and entrepreneurship at St. Louis University. In this role, Malcolm facilitates the adoption and dissemination of Siu research discoveries and intellectual property through licensing, commercialization, collaborations and other tech transfer initiatives. Malcolm provides support and assistance to faculty investigators and students evaluates the commercial potential of intellectual properties and markets University tech to industry commercialization partners, Hannah toric Carbone is the director for innovation, patents and licensing in the Office of Technology Transfer and corporate partnerships at the California Institute of Technology. She earned her PhD in Biology at Cal Tech. And after several years as a management consultant with McKinsey and Company in Toronto, joined OTT CP in 2007. She supports Cal Tech's chief innovation and corporate partnership officer in strategic planning and oversight of Ott, CPS operations. Hannah was also a founding member of the model IA project task force, and she is a registered US patent attorney. Please join me in welcoming Hannah and Malcolm, we're so excited to learn from you both today. And Malcolm, I will turn it over to you first for introduction to the topic.

Speaker 2  2:25  
Okay, great. Thank you, Sammy. So I'm just going to try and provide a little bit of a context and Dr. Carbone will be doing the bulk of the content here. So Sam, if you proceed to the next slide, obviously, our standard disclaimers. So what we're what we're going to present are really our own opinions and views are not representative of our institutions. So keep that in mind. And, and they're not legal advice by any means. So keep that in mind. So if you go to the next side's standing, something happened here. So it might be a little bit hard to read, at least it is on my screen. But basically, I just want to reiterate the two primary learning objectives. You know, inter institutional agreements, we tend to think of them as sort of a formality. Don't really sometimes give them the attention that they're due. But they're really important documents. And so, you know, part of the learning objectives we want to highlight today are one really increasing your appreciation for the potential for conflicts, even when the two institutions are working collaboratively. They're very amicable, there's still a potential for conflict, even in those situations. So we want to make sure everyone really appreciates that. And then the second is really increase, you know, your awareness about the importance of trying to incorporate various mechanisms into handling potential conflicts with IRAs. But more than anything, we really want this to be a very interactive session. So we're really inviting all the participants to try and chime in and share some of your own experiences that you may have had with conflicts, whether they're big conflicts or small conflicts with institutions that you're collaborating with and have aI A's with. So please feel free to use the q&a option on your screen to sort of chime in share a little bit. We want to bring you guys into the discussion as well. So Sammy, if you go to the next slide, um, wow, these slides turned out bad. At least start there. That was

Speaker 1  4:55  
probably me, Malcolm, when I merge them. My apologies. We'll get that corrected on the handouts. Okay,

Speaker 2  5:00  
that's fine. But I just want to raise up two points. These are basically two citations that I pulled from some research research studies about research collaborations. And really to make the point that I A's are probably going to be increasing, you're probably going to see more for various reasons. One, Science and Technology Policy is moving more towards multi-discipline larger scale initiatives that require collaborations across institutions. And so the trend is going to just be increasing going forward. And so with that, you would expect to see more inter institutional collaborations on the research side, and with more collaborations, again, more potential for conflict. So this topic, I expect is going to be of increasing importance down the road, you see from the two citations, this is not a nutrient that goes back at least 20 years. And so it's going to continue going forward, is my expectation. So if you go to the next slide, Sammy. Really, the point here I want to make is there to one, like I said, there's always the potential for conflict, no matter how friendly the collaboration, no matter how well intentioned the parties, there's always going to be that potential for conflict greater small. And the second point is, no matter how well crafted or how well written an ester inter institutional agreement is, is impossible to really try and, and plan ahead for every possible contingency. And so again, this brings up this issue of the need for including mechanisms for handling unforeseen conflicts that may arise within an agreement. And Dr. Carbone will touch upon a little bit of these issues in our presentation. But these are the two big points. I know that if you go to the next slide, just this the references that I had for those two citations that are pulled, so if you just want to go and pull those up yourselves. So there's the reference information for you there. But with that, that's the sort of sets the background and the context for our discussion today. And so with that, I'll actually turn it over to Dr. Carbone for the rest of the presentation.

Unknown Speaker  7:45  
All right. Well, thank you so much, Malcolm, for the for really setting the stage there. And thank you, Sandy, for the kind introduction. Before that, let me go ahead and share my slides. All right, so is everybody seeing my PowerPoint now? Great. Okay. So yeah, I think so. So, Malcolm, really set the stage here for, for the situation, which is we're certainly seeing more and more research collaborations between institutions rather than just seeing research being focused within certain institutions. And also, lots more where it's not just bilateral, but multilateral research, collaborations, and all of these can cause complexities in managing the IP that arises out of this research. So same disclaimer, certainly, this is my own personal opinions, not Caltex, not Autumn's and certainly not legal advice. I'm actually not a patent attorney. I am a patent agents, but certainly not going to be giving legal advice on this on this presentation, or during this presentation, though. So this is just a little cartoon that I use in a talk that I gave regularly at Cal Tech, to explain the notion of how jointly owned IP can arise out of research collaborations. So, you know, I'll give a little example of sometimes AI researchers at Caltech are collaborating with their colleagues over at UCLA, and even absent any kind of formal agreements between the institutions. jointly owned intellectual property can arise just by the operation of US patent law. So the Cal Tech inventors have an obligation under their employment agreements with Cal Tech to assign their IP rights to Caltech. The UCLA inventors have an obligation under their employment agreement with UCLA to assign their rights to the Regents of the University of California. And so any resulting patents covering the jointly owned invention is naturally jointly owned by the regents and by Caltech. And so what I tell people when I'm giving this talk is that to manage this jointly owned IP, our office will reach out to our counterpart office at UCLA and work out what's called an IA or inter institutional agreement. And in fact, the model IIA that I think some of you may have already heard of, and that we'll be talking about a bit more later in this talk arose out of a realization by a number of Southern California schools. And really, I have to give a shout out here to recruitment, who was then at USC, who initiated the project and brought together USC, Caltech and UCLA to begin the idea of having a template agreement for making model or sorry, making inter institutional agreements easier to enter into, at least in situations between us nonprofit research institutions. And we are inspired by previous template agreements, such as the UB MTA, which basically were introduced to recognize that there are these kinds of sharing between institutions that take place quite frequently. And let's see if we can streamline the process for putting agreements into place to manage those. And so eventually, that model IA grew beyond the three initial schools that were talking about it to a larger working group. And I'll talk a bit more later about how it's been adopted more broadly. So there we go. So what is the purpose of an AIA and deter institutional agreement? So it seems like it should be a pretty straightforward document. But as as was pointed out in the intro, there may be a lot of unforeseen complexities. But the background basically is are the basic functions of the IAEA is that it will, it should define what specific IP as jointly owned is actually covered by that agreement. It generally defines a lead party to say, Okay, this is the party that's going to take the lead, both on the prosecution, typically, both on the prosecution of any patents that are filed covering the jointly owned IP, and on the licensing of this jointly owned IP. And then it sets out the terms under which any of those costs associated with the patenting of the jointly owned IP will be shared between the participating institutions between the joint owners. And then it sets the terms under which any resulting revenues from the licensing of the IP are shared between the joint owners, the participant, the parties to the IA, it may also set an administrative fee that is captured by the lead party to the IA, in recognition of the additional work that is doing administratively in terms of managing the IP and licensing it. And then finally, the other sort of big substantive piece of the IA is that, you know, many, many of us research institutions, we have certain provisions that we require in all of our licensing agreements, and they may not be consistent from research institutions or research institution. And so to the extent that the lead party is responsible for negotiating the ultimate License Agreement, the IIA will stipulate what are the terms that need to be included in that license on behalf of the non lead institution. So this would be things like, for example, the non lead might have particular restrictions on the use of its name by the licensee, that might be not exactly the same as those that the lead would have. And so we would put that in there, or the lead party would put that into it. So we would put that into the AIA, and then the lead party would have to incorporate those terms from the non lead into the license that it does to the gentleman on IP. So, you know, it all seems pretty straightforward. And you know, thanks to thanks to autumn and the events we have, you know, we all, you know, across that transfer offices in the US and around the world, many of us know each other, we've worked with each other before we have very collegial relationships. And so you'd think it would be pretty straightforward and doesn't generate a lot of controversy. However, there are times it can actually go quite wrong. And so I'll talk through a little case example of one that happened. And this is still actually still playing out, though I think it might be on its last legs at this point. So there was a controversy between Washington University in St. Louis, last year for short, and Worf, those comps alumni Research Foundation, which managed manages the IP for the University of Wisconsin at Madison, and it resulted in going all this content of this conflict between them that is does go back to an IA ended up in court in litigation with the current status being that or has been ordered to pay $32 million to wash you in damages as a result of this, this litigation. So let me talk to talk you through the story and then we can see what To lessons we can take away from that and how it might make us want to be a little more thoughtful about how we enter into IRAs and how we negotiate them. So what's the background? What's the history here? So back ages ago at this point 1995, which actually sort of a side note, as we're, our office was even launched but wharf I think, as we all know, has had been in the tech transfer business for a very long time. So a long established office there. And so in the mid 90s, there was a research collaboration between or certain researchers at wharf and wash you. And so that resulted is this giant real patent 5597 815, or the 815 patent for short. And the two institutions entered into an inter institutional agreement regarding this particular patent. And so under this IIA, we've had the lead on licensing. And the IAEA had this interesting statement in it, which is that dwarfs had the authority to assign relative values to patent rights and or property rights, and other patents and or other proprietary rights as are included in any such license. So similarly to most current IRAs, in the model IIA Wharf, as the lead, had the authority to the sole authority to negotiate a license and negotiate the financial terms of the license to this jointly owned IP. But again, as the sentence says, if they then license that IP together with other IP not covered in the IIA, it was up to work to figure out how much the joint IP was worth relative to the rest of the IP in any license agreement. So after the AIA was entered into or did end up licensing the 815 patent, along with a larger portfolio of its patents, to to Abbotts. And in the license with X, I'm not sure if this was in the license to add, but that's certainly something that was revealed at some point was that the 815 patent and by the way, all of this is from publicly available documents, I'm not sort of basing this on any kind of sort of insider communications from any of the parties. So this is all stuff, one you can find by Googling yourself.

Unknown Speaker  17:28  
So the the 815 patent was identified as as part of a portfolio of ancillary patents. And collectively, this group was collectively assigned to 30% of the value in the license. So Abbott, under this license, launched zimpler, a kidney dialysis drug that was covered by this license portfolio. And over the years, as came out in the litigation, or received something like $427 million in royalties under this license, as well as some associated enforcement actions that included the 15 patents. And of that 427 million, or paid WashU, one mil only $1 million based on this relative value allocation analysis. And so as you can see that significantly less than 1% of the total amount that were had received under this under this license. And so in was that sorry, I got something covered. And I guess starting in 2001. Worth was sending, started sending WashU regular royalty payments, as well as a royalty calculation letter. So how does all this math work out? How is it that WashU was receiving less than 1% of the total royalties received by wharf under this license. So if we look at what goes into this calculation, so the IIA terms were not unusual. So we're got to retain a 15% admin fee off the top, and then of the remaining 85% 1/3 would be going to wash you and two thirds will be going to would be retained by Worf. And then further, though, how we get from there from 1/3 going to wash you to less than 1% going to wash you is because of this relative value allocation that was done. So Worf had determined that under the license 70% of the value was attributable to these so called compound patents that belongs solely to Worf and 30% was these ancillary patents, and that included the 815 and 30 other patents, the wash us share ended up being one, one fraction one over 31 Time's the 30% times in the 85%, after the admin fee, and then 1/3 of that, so about a quarter of a percent, or about $1 million of the total 427. So in 2013, wash, you apparently decided that they were not, they're kind of getting the short end of the stick here. And so they actually sued Worf for these issues here breach of contract, breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing and equitable accounting. And what they just discovered or had discovered is that it's actually far from being just sort of one incidental patent in this portfolio. The 815 patent was actually one of only five patents that were listed in the FDA Orange Book for the other product zimpler. And also, the 815 patent had been asserted, by some generic sorry, had been asserted against some generic drug manufacturers, and there were some settlements out of that, which it sounds like wash you only found out about when they were subpoenaed under those under that that litigation. So Worf, apparently, at that point said, Well, hang on this, you know, we've been paying these royalties since 2001. We've sent explanations. statute of limitations has long since lapsed, and the district court initially agreed and granted summary judgment to Worf. And said, Yeah, you know, wash you if you had an issue, you could have brought it up ages ago, however, Washington appealed summary judgment was reversed on appeal. And eventually the District Court did award the $32 million in damages to WashU plus interest. And I think that's still potentially being worked out, but could be as much as another $15 million. Worth then did appeal again against citing the statute of limitations. But the appeals court actually uphold upheld the district court decision on the basis that Worf allegedly actively concealed and refused to share necessary information. So a few analyses that I came across that were interesting, and I thought this was particularly interesting is that by the letter of the IIA Worf, actually did nothing wrong, according to this analysis that they did abide by, abide by the letter of the IIA, in that they had set out the sharing of proceeds from the licensing of that particular patent as 1/3 After 15% admin fee. And there is language in the AI that said, it was up to work to determine the relative value of that patent in the context of a larger portfolio of patents licensed by Worf. And so the reason that Wash U prevailed was because of this Wisconsin law about an implied covenant of good faith and fair dealing. So that despite abiding by the letter of BIA, they really hadn't divided by the spirit of fairly sharing and reassessing what the true value of that patent was. And so another analysis had these additional takeaways, which was just really pointing out that it's really important for parties to an agreement like this, to stay on top of it have clear and open communications, identify issues and in a timely manner. And one of the points that they made in this analysis was, I actually really liked that they gave a shout out to our to our model IIA, because they pointed out that while the 1995 IIA, that werfen WashU had entered into did have a clause for record keeping of costs and revenues associated with the licensing activities. What they didn't have is any kind of clause that would provide for the Donley party to examine the lead party's books and or audit them if necessary. So that was an interesting point that was made and sort of nice to see that shout out for the the model IIA. So I think, you know, the, the takeaway here and certainly in our offices experience with IAS is this is actually often one of the bigger challenges in negotiating IaaS is this question of what happens or what will happen when the jointly owned patent? As is so often the case, is licensed together with a larger portfolio of IP that might be solely owned by the lead institution. So I guess I'll pause there. I don't think I've seen any questions come in on that. But just I think that does sort of set the stage for how things can go go in this rather badly and actually end up in court, which nobody wants. Any. All right. So not seeing sort of any any questions on that? Let me Oh, right. So so wanted to say then well, what would the model III though, of course, this this is a that was done between WashU and Worf, predated by good 20 years the development of the model IAA. So the model IAA does talk about this question of what happens with a situation where you do have to work with a patent does end up licensed with non jointly owned patents. But essentially it says that the parties will negotiate in good faith to determine what the procedure what the portion should be. So does anticipate the issue and it does provide a statement that says that, you know, the parties do need to think about this and preferably, so, you know, certainly the advice here would be to preferably do it sooner rather than later.

Speaker 2  26:07  
So, I hand out rope real quick. Yeah. So, understanding right, that right is under the model is a, that whole situation would have been handled a little bit differently, where essentially, the the non lead party would have had to more or less sign off on an allocation that the lead party sort of calculated or determined, is that how it would have worked?

Unknown Speaker  26:35  
I think in an ideal, I think that's great question. I think in an ideal case, that would be the situation indeed, and we'll talk about this a little more later when we talk about the timing, and what's the optimal timing for entering into an IRA when you do have joint IP, but certainly, the way the model IA is phrased, and the intent is to not make it as unilateral, as was apparently the case in the wharf WashU agreement, or basically was up to Worf. It was explicitly stated in the language of that, IIA, that that wharf had the sole responsibility or the sole power to determine the relative value allocation. Whereas as you can see here, the model II language says that all the parties will be involved in figuring out what the right allocation should be. And certainly, you know, I guess we can sort of jumped to this idea now, but I think part of the the timing issue can be one way of potentially addressing this is if you're doing either if you're doing the IIA very close to the time where you're entering into a license, or if you revisit the IIA at the time that you're entering into license. One possible mechanism, and we certainly done this, at Caltech is right into the IA explicitly, if we know that, okay, we are licensing this one jointly on patents in conjunction with these three solely on patent patents and therefore, non lead party we would expect to share with you not a full half, let's say of the licensing proceeds, but a half of a quarter because that gently on patents accounts for one quarter of the license portfolio. And then that gives the opportunity to the nominee to say well, okay, you know, maybe the four, yeah, maybe just dividing it. One quarter, one quarter, one quarter on quarter isn't the right thing. But you can then have that discussion upfront, as opposed to some unpleasant surprises later. Because, of course, you know, many times there, as we saw, even in this, this case example, there's a long lag between when the IIA is entered into when the licensing occurs, and when the revenues actually start coming in. So it's better to get these things sorted out before There's big money on the table, if at all possible.

Unknown Speaker  29:02  
So let me use that as a segue to UNLV I'd be remiss if I didn't do a bit of a plug for the model IA so if people could vote on whether they've heard of the model IA and whether their office has actually used it or not.

Unknown Speaker  29:48  
All right, I think everybody who's going to answer has probably answered.

Unknown Speaker  29:59  
Me Should we close the poll?

Speaker 1  30:00  
Yep, I can close that. That's sharing for everyone right now.

Unknown Speaker  30:04  
Yeah. All right, you're sharing it? Yeah. Yeah, so that looks pretty good. So sorry. Of course, now I just closed it, but we can't see it again. Where did it go? Um, I thought

Unknown Speaker  30:24  
there should, there might be a pulls option on your toolbar.

Unknown Speaker  30:27  
Oh, there. Okay. Perfect. Yeah, so great. So looks like 80% of our audience has actually heard of it. And a little more than half has used it. So that's not bad. That's I'm glad to see that because it was the task force put a large amount of work into into turning this into a thing and publishing it. So that's really good to see. So just as an update, so as I said, the motivation between the behind the model IAA was to create a document that would serve at least as a starting point as a sort of a broadly agreed upon starting point for entering into an agreement to cover jointly owned IP between research institutions. And so in 2015, we published the current version of the model IIA, and we are still getting people. So in the website's model i.org. It's also linked from the autumn surveys and tools web page, which is also where you find the link to the UB MTA. And we continue to receive institutions contacting us through the through the website, and confirming basically adding their names to a list that's on the website of institutions who have expressed officially that they're willing to use the model III template as a starting point for negotiating IPAs. And, you know, one thing that we that the working group really wrestled with it with for a long time is this question of how to even express that support. Right, we talked about what's can we get institutions to endorse it or to Yeah, I forget what other terminology that we we bounced around, but we ultimately ended up on this language, just because it seemed to strike the right balance between being on board but maybe not requiring sort of, say, super rigorous OGC review, you know, general counsel review of the agreement, really, just to agree that it's it is a starting point, it is a more complicated agreement, I think, than something like the you bmta. So the idea of just having sort of a quick and dirty sign off, really wasn't an option. So it really is just a starting point for negotiations. But we think it's a pretty good one. So we do think it's pretty good. That said, I think one caution that needs to be made is that the model IIA does not cover every possible situation that can arise from research collaborations that then give us jointly owned IP. So one choice we made early in the process is that we would explicitly only cover jointly owned patents. So there isn't really language in the model IAA, to cover jointly owned copyrights, such as software, it doesn't address really explicitly should tangible materials arrive at have joint some kind of joint ownership or joint provenance. And similarly know how those are not explicitly covered. There actually was talk of doing a second effort for a software specific IA that really didn't start sort of lost momentum. But if people if there are people out there who are interested in pursuing that, again, that that might be worth worthwhile thing to do. One area that continue to to be tricky, and I think this is the biggest difference that ended up happening between the original 2013 version and then the current 2015 version was this question of what happens when the joint owner when one of the joint owners under an IA who had previously agreed to pay a share of patent costs, decides not to and so this was one of the one area where we really were unable to come to a consensus decision. And so it's the one place where we had a menu of options for users of the model IA another area where we did decide to do an agree to agree later because you know, as as Malcolm pointed out in the introduction, you really can't anticipate every possible eventualities that's going to come out of jointly owned IP is what would happen in the situation where the owners of the IP and or a license See of the IP wanted to litigate or enforce, enforce the patents. And so that also has essentially and agreed to agree later clause, one where the parties would need to get together at the time where a potential infringer is identified, and then decide how to proceed. We felt at the time that that made more sense than just sort of saying, oh, we'll just split it the same way. We're splitting regular license, regular patent costs and regular licensing revenue, there's going to be a lot more considerations involved, if the patent is to be actually enforced than there are just from from routine licensing. And then, of course, the main point of negotiation that A, that the model IA, by definition can't address an advance is, what are the actual financials going to be? So how are you going? So what is that right? percentage split between the two institutions in terms of both costs and resulting revenues? So do you just count the number of inventors on each side and do a pro rata calculation that way? Or is that sort of, doesn't it sometimes that feels like it doesn't really make sense, just because one school happens to have, say, more students on the IP, and then the other one does, maybe it's by how many PI's are on each side, you know, maybe it's just half and half when it's two schools, and you just say, you know, what, what is what seems fair in terms of their respective contributions of the two, or two or more parties to the collaboration. And so you know, this is something that also definitely need some some attention at the time of negotiation. It our experience is that it's good to have the the PI's involved. And so you do want to get their input, they're definitely going to have some say, that said, sometimes it also takes some education of the PI's to make it work out. So I had a situation where it was actually a, a multi way IIA, and the PI's, some of the PI's are saying, well, we want to make sure that all the participating schools are treated evenly. But also all the participating inventors are treated evenly. And each of the PTO, people in each of the schools had to explain to the respective PIs that mathematically, just given the differences in royalty distribution procedures within the schools, it was mathematically impossible to come up with a formula that gave equal parts to each of the schools, and then equal parts to each of the inventors at each of those schools. So these are some of the details where you don't don't realize that are going to be an issue till somebody raises them and you do need to address them, and as they as they arise. Alright, so a few other things to watch out for when you are entering into IPAs. One thing that I've observed is sometimes people want to make an IA be more than it is. And I think for those of you who've been at some of the previous webinars of this series, I think we've seen that as a theme in some of these other greement types as well that sometimes people want to enter into a full blown collaboration agreements, when really, it's just an MPA, and somebody's just sending material over and the other party is using it. But there isn't actually any research collaboration going on. With IA sometimes you see the opposite, where the parties may think that an IA will do the job of a collaboration agreement. And certainly, I would say in most cases, that's that's not the case, the IA actually has a relatively narrow focus. It really is just about how is the IP to be managed once it exists. And, in fact, it's, in my experience, at least, it's pretty rare to have an IA until the IP actually exists. And so generally, I would say the more appropriate way of handling that is, if there is a research collaboration going on, that's formal enough that an agreement is necessary. So for example, if there's funding flowing one way or the other, or materials or things like that, in the context of a truly collaborative piece of research, then that should be specified in a full blown collaboration agreements that as we saw a few weeks ago, sets out Scope of Work sets out responsibilities, timelines, flow of money, if that's happening at all, and so on. on. And then what will often be the case, then is that the collaboration agreements will then have a statement somewhere in it that says, and should any foreground IP arise out of the work done under this collaboration, then the parties will negotiate and inter institutional agreements to manage that IP in terms of patenting and licensing.

Unknown Speaker  40:26  
Yeah, and similarly, and I'm not going to get too deep into this not being an attorney. But this question of whether an IA qualifies as a joint research agreements, to get the benefits of basically being able to disqualify certain previous patent filings or publications by one or the other party as prior art. And the again, the timing generally doesn't work right for that, because often the EIA is not entered into until after the patents in question are filed. Another situation we've sometimes encountered that raises questions about IAS is under US patent law, at least. In the absence of an agreement between the two joint owners or two or more joint owners to a patent, each party each joint owner can license its rights without accounting to and without even notifying the other joint owners. What some sometimes unclear under an IA and of course, they would only be able to offer non exclusive rights because each each joint owner can do the same with respect to its rights to that same IP. So the question that sometimes arises is, let's say you've entered into an IA, but now you have the opportunity to license to enter into a non exclusive license. And it can be actually unclear whether the IA still allows you to do that, or now that you've entered into the IA, now you do have this obligation for an accounting to joint owners, because you have the IIA, even though if you didn't have the IA IA, you wouldn't have to account to them. So if you're thinking about jointly owned IP that might have non exclusive licensing opportunities, you might want to put some thought into whether or not an IA actually makes sense in that situation. The next thing I would say to watch out for is this question of hat and the model Ay ay ay ay ay, I think does a pretty good job of addressing this, which is, how much input how much say, does the non lead party have over the terms and timing, and even sort of administration, I guess, of the license. So the model IIA language, I think makes it quite clear that the non lead party has the right to review a near final draft of any license agreement that the that the lead party has negotiated. But I think the two key things are that it has a finite and defined time by which it can register any concerns or objections. And silence basically implies consent. So the lead party should have the comfort that if they send it out, send out a draft license to the non lead for review, that if they don't hear back within a certain number of business days, the non lead can be deemed to have approved it because you don't want as the lead party. You don't want yourself put in limbo. When you're rushing to get a deal done. I'm sure we've all been in that situation where the startup has started licensees telling you, okay, we need to get the license signed, otherwise, our funding is going to fall through come on what's going on. And so you don't want to be essentially held hostage by the the non lead party. So you want to have you want to make sure that your IIA very very clearly says, What's the timeline for getting response back from the non lead. And also, generally speaking, the non leads ability to modify or sort of ask for changes to license should be restricted to those non financial terms that are specified in the in the EIA as being a requirement of the nonleague party. The lead really typically does need to have the discretion to negotiate financial terms at its at its discretion. And I think, with respect to the the approvals again, there's an analogy, an analogy here to what we saw, I think it was in the discussion of MPAs, where there may be a situation where the recipient of the materials is obligated prior to any publication to notify the provider have the materials so that the provider can make sure that no proprietary information is being incorrectly published, things like that. But again, you want to have a finite timeline for, for, for the, for the, in that case, the provider in this case on the on the to get back to you. Alright, and I see, I see we have a question about whether the LEED can license not exclusively? You know, I didn't review this specifically, but I'm pretty sure it doesn't. I think it's something we didn't contemplate when we were looking at when we were writing the model IA, and so on the later that we've run into situations and using it that it's like, oh, hang on. So once we've entered into the CIA, can we still license? Not exclusively? So I don't think it's explicitly addressed in the model IA, but I'd have to check on that to be absolutely sure. The Oh, and so another another issue that comes up on occasions is a fairly unusual use case. But there can be situate. So one of the things that the model IE does address is compliance with funding obligations to the respective for the respective institutions, funders. And the one tricky one that can come up and you want to watch out for is if only the non lead has federal funding. So if the lead so the lead party is, by definition in charge of filing the patent applications, but if only if the federal funding is only to the non lead, than the lead still has to be sure to do things like include the government support clause in any of the patents that are filed. So that's not always an obvious thing to happen. So that's something to watch out for there. Okay. And then, you know, really typically the most the most controversial, potentially controversial stuff. And certainly what we saw in the case example is the the con the financial fine print here. So we already talked about this question of prorating and value allocation. Another thing to watch out for, and I find this comes up, particularly in situations where the IA is done early in the process. And so both parties do end up sharing the patent costs, as opposed to just putting them directly onto the licensee is that you want to make sure that whatever accounting systems you have internally to your office, correctly account for this when the licensee is being invoiced for reimbursement. So certainly in the system, we have something that could happen if we're not careful, is that if we pay, we pay for the lead, and we pay for patent costs, and then we invoice the joint owner for reimbursement, then, by default, our system would show the outstanding patent costs as only being whatever our share of patent costs was. So let's say we got half the patent costs back from our joint owner. Now it looks like we're out only half of the patent costs. So we need to make sure that if we do then turn around and license that patents to a licensee, that we're invoicing for reimbursement not just of our patent costs that remain unreimbursed, the 50%, but also the 50%. That was already reimbursed by our joint owner. So that's just a little little thing to watch out for. Because you certainly don't want the joint owner coming back and saying, Hey, what about our patent costs? Similar similarly, there can be some trickiness to administering the the admin fee. So the admin fee often takes the form of a certain percentage of the licensing royalties, but often up to a certain cap. And so there's a question of tracking whether you've reached that cap, is that cap annual, or is it cumulative across the life of the license? What happens if the same IP is licensed more than once? Does the admin fee the cap reset? Or is it across the life of that whole patent portfolio? So again, things things to watch out for. The next area that we've seen that kind of comes up as a potential issue potentially is that there seems to be a difference in practice across research institution, as with respect to how equity has held in startup companies, so when are licensing a startup often a big part of the consideration for that license is getting a An ownership share of the startup company. And so there's really

Unknown Speaker  50:06  
two basic approaches to this. With respect to, certainly with respect to inventor share, so many institutions will just hold collectively all the equity, and then only make distributions to inventors, when the equity is liquidated and then the cash that's received from liquidation is then distributed to the inventors. But other institutions have a policy that they distribute the actual shares to inventors, are they more specifically, more exactly they have the company issue shares directly to inventors. So if you have an IA between two institutions, one of which does it one way, one of which does it the other way, there's a potential for some trickiness and conflict. Because if the lead institution normally holds the equity and then does distributions only when liquidated, and the other institution does it the other way, they will often then similarly expect to receive equity directly at the time of the license, as opposed to only getting their share of the cash received from a liquidity event. And with that, the startup may or may not be super excited about complicating their cap table by adding additional shareholders at the time of the license. So that can be an issue that needs to be that needs to be addressed. Another issue that that can come up, and certainly we've seen it and you know, continue to figure out how best to manage it is till now, really, and I think most of us sort of in our heads, our idea of how this joint IP arises is that you've got collaborators that one school collaborators and other school, they work together. And like you saw in the cartoon at the beginning, right? Caltech inventors and scientists Caltech, UCLA, and ventures assigned to the region's, currently old IP. But another way in which jointly owned IP can arise is when an inventor moves from one institution to another. And there ends up being IP that sort of spans that transition period. And the schools agree oh, what kind of makes sense for this adventure to sign jointly to both institutions? So that's all well and good, but then it actually down the line once you're making royalty distributions can read to lead some complications, because then you have to think about, well, does that invent and so this isn't really so much about the IIA but about post IA administration? So does that inventor now get paid out of each of the institutions shares? Or should that inventor, or should that inventory share be somehow purportedly reduced, on account of the fact that they're getting paid by both institutions, so something else to think about as you manage that, and just as a sidebar, I would point out that on the model IIA website, we do have a little checklist that Eric Ginsburg at Chicago developed regarding things to consider when an inventor moves between institutions. So that's sort of Another useful resource there on the model IA page. And then another tricky sort of post, potentially tricky, post iei administration thing to think about, and it can be worthwhile to think about, you know, at the time you're doing the IA, is, in addition to the complication of a jointly owned patent being collected is being included in a portfolio for licensing together with material and solely on patents is you might also have situations where your IP for part of the mix is IP with other joint owners. So you could have a mix of, you know, institution a plus institution B, and then institution A's sole own stuff, and then institution a plus institution C. And so if you've said, okay, you know, B gets X percent of their jointly on stuff, and C gets y percent of their gently on stuff, then you've got not just the prorating question, but potentially a sequencing question, like who gets their cut first? Or if you've got like a funder, such as HHMI, or some of these other foundation funders that also expect a royalty share, again, what is the correct sequencing of that? And you may find actually that your for example, your your institutions policies, don't provide clear guidance on that and how much of that then comes out of your inventors institutions and ventures share versus how much comes out of your institutional or department chairs. So these are things that you want to be mindful of as you're putting these ideas into place. So as as often said in the intro, these IRAs may seem straightforward, but they As they have, they can have these unforeseen, unforeseen complexities. Now, I've sort of slightly touched upon this, but I think, start to come back to this question of sequencing or not sequencing, but timing. So a lot of these issues, the extent to which they, you know, they matter, and can be addressed will depend on when you're entering to the IA. So I'm curious to see, and we've certainly asked this question before, of autumn members, but what, you know, when, when is the right time or when in practice, when do you typically enter into an IA when you do have the strength around it?

Speaker 1  56:09  
I'll leave it open for another couple seconds. Hannah, will we get a couple more votes in? Oh, good.

Speaker 1  56:24  
Okay, looks like we have the majority. So we'll share those results. Right.

Unknown Speaker  56:30  
Perfect. Thanks, me. Yeah. And so I think this is pretty consistent with what we've seen in the past. Which is that in many cases, what triggers the entry into an IA is once one of the other party wishes to file a patent on the joint new invention in question. And I think this makes sense for a lot of reasons, because that's typically when the costs start being incurred. And so the parties are certainly incentivized to do it at that stage. But another approach, and one that we do find ourselves taking sometimes is to wait until it appears that an option or licenses imminent, which, you know, as we talked about before, does have the advantage of them being more likely to be able to pre address some of these issues about allocation, relative value and things like that. But of course, a lot of that will also depend on just how tight your financials are, and whether you can afford to float the full cost of patenting solely or sorry, jointly owned IP, without your joint owner. Paying paying a share of that, so it does depend. Okay, so I think that's really think that was my last slide. So with that, I'll sort of stop and see if we have any questions from the audience, or if anybody has any stories they would want to share. We'd love to hear what other people's experiences have been if they have any other cautionary tales to share.

Speaker 1  58:24  
Thank you, Hannah. As attendees, don't forget, you can use the chat the q&a or you can raise your hand while we wait for folks to try and type in some of those stories or questions. Piano model I seems to be long Is there a model is a lite version? Yeah. easier way?

Unknown Speaker  58:49  
Yeah, no, I'm so glad you asked. So one of the things that I didn't touch upon is, but actually, I think I do have a slide for it. Yeah. Okay. So in addition to the full blown model IIA, which is quite a few pages long, especially the annotated version, by the way, quick shout out for the annotated version of the model IIA, it actually has a lot, all the footnotes, have a lot of good practice tips, and they address some of these things that we've talked about today. But if you really are in that situation, where you're entering into you want to do what I just talked about in terms of find a way to share patent costs with your joint owner and at least clarify who's got the lead at the USPTO. We also developed a template called the preliminary patent management agreement or PPMA. And so this is actually just a two pager. And so it still identifies who are the parties, what's the IP who can lead prosecution and does take a first pass at cost and revenue sharing. But basically it says you can't actually enter into full license unless you've got a full IIA, but at least for now, out, somebody can take the lead on patenting and invoice the other party for those types of expenses.

Speaker 1  1:00:06  
Great. It looks like we do have an attendee who wanted to ask a question. So Richard, you should be able to unmute now.

Unknown Speaker  1:00:16  
Hey, Sammy, this is actually John Johnson. Right here. How are you? Hi, Hannah, are you?

Unknown Speaker  1:00:23  
Hey, good, good to hear. Good. Yeah. Good to hear.

Unknown Speaker  1:00:28  
Good to see you, too. Um, I was just typing out the question, but I'll ask it. So, you know, we use the model IA, and I think it's really helpful. But one area that we seem to run into a lot of negotiation on is the admin fee. And, you know, I know, there's differences of opinion, this has been discussed on the autumn boards a little bit about whether there should be an admin fee charged at all. So recognizing that that's something that people may disagree on. I think certainly there are probably people who feel like an admin fee makes sense because of the work that elite institution does. And you don't really want to create a disincentive to be the lead, right, or an incentive to be the junior party. And again, recognizing that in certain instances, there are institutions that collaborate a lot with each other. And in that case, there's some sort of, you know, reciprocity or they might be able to feel as though not having an admin fee. Makes sense. But but for those, but for those who feel like it does make sense, it seems like we need sort of an agreed upon market rates to reduce the amount of negotiation. So I'm just wondering, how can we get there? Is there any data on that? It would be nice to have something where, when you enter, you know, when you enter into these negotiations, people just kind of agree, okay, this is this is about what it costs to administer an AI A, and, you know, maybe there's some language in there that says, if there's unusual expenses, they'll revisit that.

Unknown Speaker  1:02:19  
Right? Yeah. So a few things. I think you you touched on on some of them already. One is this question of reciprocity. And so I think there is this sense that, you know, oh, well, we never used to charge an admin fee, but everybody else is doing it. So we're gonna start doing it now or, but it can also cut the other way. Like you said that if two institutions are doing a lot of stuff together, they might just say, look, it's a wash, it's, it's too much trouble. Let's just agree that we're not going to charge an admin fee either way, as part of a survey effort earlier, and I should give a shout out to I think, see, Ellie's dropped off. Now, Alan Bentley, I saw him in the participant list as well, but I think he did. I think he was sort of the point person behind that surveying. And I feel like 15% was kind of the default or the standard. And I think what that also corresponds to, and I think this is one of the things that makes it tricky is that there are a lot of PTOs that fund themselves in a similar mechanism, right. And so when they have their own, just setting aside IRAs, and jointly on stuff, when they have licensing revenues, they that the Office keeps 15% off the top, and then everything else royalty distributions to inventors and so on comes after that. I think there's that bit of a mindset of Yeah, we have to keep the 15% because that's sort of how we operate. So I think that makes it trickier as well. But I did see that Autumn thread you're talking about. I personally like the idea of just wave again entirely. And then I guess, what would have to happen for those institutions where they keep 15% is I guess, they would only keep 15% of their percent. The other thing we've done honestly, sometimes is just bake it into the split and say, okay, instead of 5050, it's going to be you know, 6040 That might be actually easier from an administrative point of view. On the other hand, it doesn't allow you to have a cap. So that's, you know, I don't think there's a single perfect answer. Result. Jeremy, you're still on muted? Yes.

Unknown Speaker  1:04:32  
Okay. Yeah. So sorry, I had I should have clarified the cap is really where the negotiation tends to come in. And I agree, there's a number of ways to approach that it just seems like we spend too much time sometimes trying to justify why the cap should be what it is, or, you know, negotiating that and it'd be I feel like it'd be nice if as a profession, we could find a way to really like, okay, it's, you know, 15% capped at this and that's what most people do, you know,

Unknown Speaker  1:05:01  
I think that'd be lovely. Yeah, maybe we should like put that on the website. Oh, and by the way, here's what your cap should be period the end. Or just agree that we do away with the the admin fee because it's the other thing. We fuss with it so much. And then how many of these actually turn out to be low turnout to even get to the point where there's any risk of even reaching that cap? Right.

Speaker 1  1:05:24  
Right. Yeah. Thank you. Yeah. Thank you. Thanks, John. I don't see any additional questions that have come through just yet. We can wait and see if anyone throws any final thoughts in but I guess what we do that Malcolm Hannah, any kind of parting words, one takeaway that you want to make sure attendees are going to remember from today's presentation or cautionary? Don't forget this one point?

Speaker 2  1:05:56  
Well, I sort of bring up a question. And I think I've inside conversations, I've posed it to Hannah, and we talked a little bit about it. But the idea of mediation and arbitration provisions in a is that Have you ever seen those in? Would that be a good idea? I know, I really haven't seen that very, very often. Or not in any of the eyes that I've seen. So just want to get your take on that. And

Unknown Speaker  1:06:28  
yeah, no, that's a great question. I don't know that I've seen them in an IA either. And one thing I've discovered, sort of just in work with other institutions, is that even in agreements, where we, for example, at Cal Tech do have alternative dispute resolution provisions like for mediation arbitration, which we do have in our license, there's a huge range of practice where some institutions don't ever provide for that, and they'd rather go straight to the court straight to litigation. And I think there's a sense that when you're doing that in a license, that we as nonprofit research institutions are gonna do better in front of in a court and particular in front of the jury than our counterparty who was a greedy for profit corporation. Right. Whereas if it's a more balanced situation, where it's University versus University, I think there's a sense of, yeah, we'll be able to work it out. And so we don't necessarily need these provisions. And people have pretty mixed feelings about mediation and arbitration. I mean, arbitration by definition can be very arbitrary. Mediation can be very lengthy. So it's an interesting point, but I haven't I haven't seen them there either.

Speaker 2  1:07:45  
Yeah, and I noticed it in one of the comments from one of the attendees, as they indicated that their institution cannot agree to any kind of binding arbitration. So there was another point there. Now

Unknown Speaker  1:07:59  
we know, go ahead. Yeah, good. I just to say we walked away from having arbitration as a provision in our licenses. Not that we couldn't, but we, we didn't want to wait, we thought it would probably be risks being unfaithful. Yeah.

Speaker 2  1:08:13  
Right. I know, we're coming up on time. And the final comment I'll make is that our conversation today has been seen has been focused mostly on institutions within the US. But there's still the opportunity for collaborations across boundaries. So we've had collaborations with institutions in other countries. So now you have this cultural factor that come up, that could be a source of conflict and how a potential potential topic is handled as well. And so we haven't even touched on that. But that's something to keep in mind.

Unknown Speaker  1:08:51  
Now, and I think that'd be a fantastic topic for a future session is something about, you know, the the perils and pitfalls, and promise of international collaborations, right, because, absolutely, you know, the world is globalized. We do a lot of collaborations that that go across international borders, and yet both cultural issues, but also just legal issues, historical expectations and practices. I mean, I think we've all seen this when we're dealing with sponsored research with with companies from different jurisdictions. And I think the same is likely to arise. I mean, even things as simple as, you know, in the US, we expect well, of course, we own the IP, you know, every employee, every faculty member signs their IP to the institution. And there's big chunks of the world where that's not necessarily the case where Professor privilege or variants thereof still still apply. And so even something that seems as fundamental to us as who owns the IP might become an issue that needs to be addressed.

Speaker 1  1:09:58  
Thank you for teeing up part two. But we're gonna have to get offline and talk about a potential future topics, right? There's a wealth of information that we could, you know, share and discuss within the space of IAS So, on behalf of autumn I would just like to thank you both so much for such an informative discussion attendees. Thank you for joining and participating and submitting your questions. We appreciate you engaging with us throughout the presentation today.

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