Helping charity-funded IP flow: A support manual for the community Purpose and scope This best practice manual has been produced by AMRC’s Intellectual Property Advisory Group (IPAG) which is comprised of representatives from charities, academic institutions and commercial organisations, with the aim to support effective communication and negotiation around the commercialisation of IP. It clarifies some of the more complex issues in the area and helps resolve common problems that arise across the community of IP generators, funders and licensees. We recognise that the research community and the charity sector are currently grappling with the immediate impacts of the COVID-19 crisis. But we wanted to share this manual to aid any ongoing IP-related discussions during this challenging time. All participants involved in the commercialisation of IP have a shared purpose: Sustainable translation of ground-breaking research into assets that transform patients’ lives and benefit society This manual is designed to help negotiations and transactions run smoothly across these groups which enable the IP to flow, and improve the lives of today’s and tomorrow’s patients. It does so by: increasing the shared understanding between the groups; providing best practice behaviours around what needs to be communicated and when; enabling all parties to obtain quality, timely independent advice on value and process steps. It is NOT designed to define or specify the financial terms of IP-related deals. It is specifically intended to expand and support the sections relating to reporting and consent provided as part of the AMRC’s Guidance on intellectual property (IP) terms and conditions. We welcome feedback on how useful you find the manual and any other areas where you would welcome clarification. In addition to this manual, we have a list of experts who have agreed to make themselves available to advise charities on matters related to IP arising from university research, knowledge exchange or the commercialisation of the results of university research. Please note that some advisors may be willing to give advice on a voluntary basis, but their time will be limited as they are likely to be offering their time in addition to fulfilling a full-time job. In other cases advisors may be able to offer longer term support but may need to charge for their services. If you seek their advice, please ensure that you are clear upfront on the terms on which advice is being provided. Please contact our Research Policy Manager Mehwaesh to request the IP advisors list or if you have any feedback on this manual. Executive Summary The impact of medical research on patients is at the heart of charity funding decisions. Research grants are given to generate knowledge and know-how, not with an expectation of economic return. All IP generated - whether economically valuable or not - should be used to increase societal benefit through research or product development. Any economic value derived from this IP is an important by-product of charity funding. In entering an agreement associated with IP commercialisation, it is vital that each party is aware that their contribution is a link in a larger ‘value chain’. That value chain includes charities, researchers, universities, knowledge transfer organisations, commercial partners, healthcare providers each of whom may be required to take risks in getting products to patients. Each party invests in long term infrastructure development and short-term specific projects. Each has reputation and sustainability at stake. Each link is important, and everyone involved has a shared interest in keeping the flow of delivery to the end beneficiary working. All parties should see themselves as ‘co-investors’ carrying elements of risk and opportunities for positive return. Negotiations across the chain must be pragmatic and recognise the challenges all parties are facing, and the specific resources they are putting into creating or developing the asset in question. Wider investment decisions that each party makes – or the business models they may adopt - can form a part of the conversation but may be incidental to the specific agreement required at each link in the chain. Two key considerations in managing any discussion around IP are mutual understanding and effective communication. Communication must be clear, and timely, and those involved must be respectful of other positions. There is no one-size-fits-all solution, but there are some core principles that run through every negotiation to reach a successful agreement, which are: Be pragmatic Be clear from the start – including the lines you are not prepared to cross Understand other parties’ barriers Agree reporting needs and timings in advance Don’t delay the commercialisation process unnecessarily Two key challenges for charities and academic institutions are the issues of reporting on the status of the IP and of requesting ‘permission to commercialise’ the IP. This manual deals with both. It does NOT offer guidance on the economic outcomes of the negotiation. 1) Reporting requirements: These generally occur in two phases: during grant giving, when charities may ask whether any IP is likely to arise from the research, and then at regular times (agreed in advance) once the IP arises. Any specific reporting needs (e.g. what should be reported and how often) should be agreed in the relevant charity terms and conditions of funding. Academic institutions should not be asked to report on information they would not normally gather as part of their processes to protect and commercialise IP. Only information that is readily available should be asked for. Standardised templates for reporting are useful but they are not yet commonplace. A potential template is attached in the appendices. 2) Permission to commercialise IP: Charities should be notified of any proposals to commercialise the IP from research they have funded. This is particularly important so they can manage the expectations of their donors and trustees when the news becomes public. Permission should also be sought from the charity about whether or not to commercialise the IP. Most charities want or are required to be asked to give that permission before any agreements to commercialise are signed. Permission should not be withheld unreasonably. Charities should be clear on the stage at which they expect or require to be consulted and then give their answer within a recommended time frame of 30 days. Resource 3 helps to define reasons why permission might be withheld. The Value Chain This diagram shows how each member in the chain invests in long term infrastructures and short term projects. It shows how each participant takes and shares risk along the way. It demonstrates that there are more similarities than differences between the participants in the value chain, and supports the proposition that each should be treated as co-investors in any IP that moves along it. It can be used to better understand the issues faced by counterparts in any negotiation, and provides insight into how each party can help the other achieve their shared purpose. Executive Summary Introduction Reporting Requirements Permission to commercialise IP Resources Permission to commercialise IP Why permission to commercialise IP is requested and necessary Charities should seek to ensure that they are notified of any proposals to commercially exploit the IP arising from research they have funded, and that they are offered the opportunity to give their permission to such commercial exploitation. The rationale for this is that charities usually need to: be reassured that the strategy the institution is adopting is the most appropriate way to deliver impact for patients; and be kept informed so that they can manage the expectations of their donors and trustees once the deal is in the public domain. Charities opting to implement permission to commercialise IP should ensure they have (or can access) appropriate, qualified advice in a timely manner to give or withhold such permission. When permission to commercialise should be sought and given Permission to exploit should be sought ahead of the point of entering into a commercialisation transaction that would grant rights toa third party (either exclusively or non-exclusively). However, some charities allow for retrospective permission to be sought (i.e. after a deal has been done). A good point to seek permission is often when the terms of a commercial outline deal are being finalised with a third party (e.g. via a ‘heads of terms sheet’). At this stage changes could conceivably still be considered, and it avoids immersion in detailed legal prose later on, when meaningful changes are less likely to be achieved. Where certain charities are content to provide permission at the ‘heads of terms’ stage, they should make clear whether they consider their right to consent to have now been exhausted, i.e. permission given at this stage has negated the need to see the deal again when it is finalised. Charities and TTOs may agree that permission only needs to be revisited if substantive changes were made compared to the approved ‘heads of terms’. The definition of ‘substantive’ in this context is subjective and requires high quality, frequent and responsive communication between the charity and the TTO to avoid misunderstandings. If charities still feel that the ‘heads of terms’ provided lack sufficient detail to make a decision, they may wish to make specific requests of the institutional TTO for copies (where legally allowable) of final transaction related documentation, and agree ‘turnaround’ times for such additional information recognising the tempo of the deal negotiations. Material transfer agreements for materials arising under a research programme would not normally trigger the need for consent, unless such materials form the basis of a commercial collaboration or a commercial exploitation contract with a commercial third party. Note: an institution is not required to seek the charity’s permission in assigning IP to its technology transfer company where that company is under the control of the institution. Permission to License Requirement for permissions may also extend to include rights granted under an open source or ‘creative commons’ licence but only to the extent the institutional TTO is aware that such licence has been, or is going to be, granted. Given that some of these licences do not always go via the TTO, any charity should make clear in its terms and conditions of funding that it wishes to be notified of such licences. The charity should ensure that the Principal Investigator is directly aware, as the TTO may not be able to effectively report on such licences until after they have been deployed and/or to the extent they have been informed about them. Timeliness Prompt responses to the institution are very important to avoid unnecessary risks to a transaction, hence charities should prioritise their deliberations and not exceed a certain time period. AMRC guidelines state that if a charity does not provide a response to the institution’s written request within thirty (30) days of receiving such request, the institution or its technology transfer subsidiary will automatically have the right to proceed with such commercial exploitation. Relevant authorised signatories for charities and institutions should be identified in advance. Smaller charities (whose trustees may only meet infrequently) should put in place procedures to allow such decisions to be made within the 30-day turnaround period, recognising the need to move speedily in the business environment. Where a charity wishes to take legal advice on the proposed terms, it should bear in mind that using a lawyer with experience of University-Industry IP contracts can facilitate greatly any related discussions regarding consent Taking the pressure out of the system The charity should not be pressured to give permission and should maintain compliance with its charitable objects, having taken appropriate advice and assembled its trustees (if necessary), but it should strive to respond well within the entirety of the 30-day period, as well as take into account any unusual circumstances (e.g. a deal arising from nowhere fast). In practice, the best interactions occur where there is informal notification in advance of any commercial route being progressed, and constant communication throughout the process, such that the 30-day time limit becomes a non-issue. What format should be used to request and provide permission to commercialise? Charities and institutions provided with information of sufficient quality and breadth make more informed and expedient decisions. Resource 2 provides a list of suggested information required when requesting permission. Charities should recognise that: commercial negotiations are dynamic, and that the institution may not have all the requisite information available at the time it contacts the charity, as the deal terms are still in flux; sometimes commercial opportunities may arise rapidly and require a quick response (subject to the 30-days period) to ensure completion against a known deadline. Charities may sometimes be caught unawares by the sudden request. This is likely to be unintentional on behalf of the institution and reflects the dynamic nature of the commercial environment. Again, frequent communication between the institution and charity as soon as a deal begins to evolve will ensure a smoother transition to final permission being granted; while institutions should anticipate they may have to ask commercial partners for permission to share deal terms/ identity of the partner with the charity, sometimes this introduces delays. When is it appropriate for a charity to give or withhold permission to commercialise? It is important that charities make clear that permission to commercialise will not be unreasonably withheld. A charity should only refuse an institution’s request where it considers that the proposed commercial exploitation would run counter to its charitable objectives or create a reputational risk. Wherever possible, charities should be clear and explicit about their 'known red lines' upfront, i.e. specific exploitation routes or terms that may cause it to delay or withhold permission. Not every scenario can be predicted in advance and the charity's trustees will need to assess each case on its own merits. For example, Cancer Research UK does not permit exploitation by tobacco companies and makes this clear in its terms and conditions of funding. However, is not always obvious where the extent of 'unreasonably withheld permission' starts or ends. To help with this, Resource 3 gives some examples of what may be considered reasonable and unreasonable grounds to withhold permission. However, it should be recognised that: Resource 3 can never be fully comprehensive; it is ultimately up to the charity and the institution to agree the extent to which permission rights may be deployed on a case-by-case basis. What may be considered reasonable in one set of circumstances may be interpreted differently in another.