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 andrecognise 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. 

Resource 1: Suggested reporting format 

A simple format can be a list of invention disclosures and patents that arose from research funded by the charity (in part or in whole), and some measure of the stage of development or commercialisation. Each item should be assigned a unique identifier code to allow the charity to track progress over the lifetime of a project (even if the project title, name or application changes). The best guidance is to keep the reporting light-touch and simple. Charities are free to request more information when required and where such information would serve a useful purpose. 

A suggested approach for reporting on grants under which IP has arisen is included here. Each charity should determine how specific it wishes to be, given that most institutional TTOs are experienced in reporting to multiple charities. 

Each individual invention disclosure/IP item should be listed (e.g. in a spreadsheet) with the accompanying information: 

  • The unique identifier code, preferably cross-matched across the charity, institution and TTO. 
  • A reference to the grant(s) from the charity that originally funded the research leading to the invention. 
  • Name of inventors and their employing institution (if different to the host institution). 
  • A short description of the IP/invention disclosure. 
  • IP protection planned, in progress, existing as of right (e.g. copyright), or filed. 
  • For each item of IP, the IP status, e.g. priority year, Patient Cooperation Treaty (PCT) stage, entering international phase in territories X, Y and Z, etc. 
  • A status update: 
  • For pre-commercialisation technology: the currently proposed route forward for the technology (e.g. develop and validate it further, collaborate, market to industry with a view to licensing the technology out, spin-out, etc). It should be acknowledged that this is dynamic, will change as new information arises, and in some cases may be simply a ‘best guess’. 
  • For post-commercialisation technology: the latest progress/status update from the commercial partner should be summarised. Where legally allowable, a summary of the report from the partner/collaborator/licensee of the technology should be appended. 
  • Commentary from the institution on its level of comfort or discomfort with the current status (e.g. progressing well, just raised money, technical validation issues arising, finding a commercial partner is proving challenging, concerns about diligent progression by the licensee, spin-out has not raised money for several years, etc.). 
  • Updated forecasts of potential future revenue (if known) or financial information if revenue is ready to be shared. 

Resource 2: Supporting information that could accompany a request for permission 

Each charity and each institution will need to agree before funding flows how permission to commercialise IP will be sought and provided. For some charities an email plus some accompanying facts will be enough, whilst others may require a more in-depth package of supporting information, or more discussion time with the institution. The suggested minimal level of information is described below as a starting point to any discussions or information exchange: 

  • What is being requested? Institutions should be explicit as to what type of transaction it is requesting permission for. For example, is the commercialisation of the IP in the form of a licence agreement, an option, an assignment, a spin-out, a collaboration, etc? 
  • Route to market. Supporting information as to why this commercialisation route has been chose and why the chosen partner offers the best route to the market should also be provided. This should be supplemented (where possible) with information on any alternative commercial options or routes to market that were considered. 
  • What stage is it at? Institutions should be clear on the stag of the commercialisation deal, the anticipated timelines to completion, and whether permission is being initially sought 'in principle' at this stage (e.g. because the deal terms have not yet been finalised), or whether permission for a 'ready to go' deal (for which the commercial terms have been finalised) is being sought. 
  • What is planned? A summary of the development plan (if one exists). 
  • What is the potential commercial return? A summary of the proposed deal terms, e.g. a 'close to final' heads of terms sheet. If this is not sufficient for the charity to make an informed decision, the charity should request more detailed information from the institutional TTO. 
  • What might the charity’s share be? An estimate of the percentage of future net receipts that are due to the charity, accepting that this represents a ‘snapshot’ of the current situation which could change with time (e.g. new future IP may arise under a collaboration and be added to the package, which can alter relative shares between funding parties). 
  • It should not be expected that, at the point of requesting permission, institutions supply information on estimated market sizes or estimate the quantum of potential revenue streams back to the charity. This is because it is inappropriate to base decisions to give permission to commercialise on economic factors such as market size, and such information is highly speculative. 

Resource 3: Examples of withholding and not withholding permission to commercialise 

Charities agree that they must not unreasonably withhold permission to commercialise. The purpose of providing such permission is not to add another voice to the commercial negotiation but rather to ensure that the institution is correctly representing the charity’s core requirements. The list below provides a non-exhaustive list of permission scenarios, which may be considered reasonable or unreasonable depending on the circumstances. 

Examples of reasons to withhold permission to commercialise 

The list below provides examples of situations where charities may consider exercising their right to veto via the consent process. This does not mean these situations should be automatically vetoed or delayed. Instead the list is intended to help charities consider the situations where pause and further dialogue is appropriate. The exercise of a veto over a commercial transaction is, in the experience of AMRC members, an extremely rare event. It should only apply when the charity is absolutely certain it cannot allow the transaction to proceed in its current form. The goal should always be to reach a solution that allows the transaction to proceed, but also achieves the charity’s goals and protects the interests of all stakeholders. 

A charity may wish to carefully consider providing permission to commercialise where: 

  • The proposed commercialisation route would clearly contravene the charity’s objects and public benefit mission (e.g. technology is being bought by a third party to be ‘shelved’). 
  • The proposed commercialisation route would significantly impede access to the technology by the research community or the commercial world (e.g. reagents, biomarkers, etc.), noting that sometimes exclusive access is required to garner sufficient investment and accelerate the technology to market. 
  • Public dissemination of the research would be impeded, noting that patenting is a form of public dissemination and a short delay to allow for IP protection is standard practice. 
  • An existing, obvious andreadily available alternative route to market exists that offers greater rapidity to market and greater patient benefit. This is only likely to occur when rival bidders exist, which is very rare in practice. 
  • The institution has no rights to ensure the diligent progression of the IP in the hands of the commercial partner and/or no rights to get the IP back, should this scenario transpire. This can be a complex topic if the IP’s proposed first application is outside of the funding charity’s core purpose/mission. Charities are advised to seek dialogue with the institution and expert guidance through the AMRC network should this situation arise. 
  • The institution has no rights to monitor progress of the IP in the hands of the commercial partner (i.e. receive annual reports or a final report). The institution should also try to ensure it can share a progress update with the charity. 
  • Taking into account the donor base of the charity and its domicile, the commercialisation route could result in donor reprisals, reputational damage to the charity, or a clear conflict of interest arising. 
  • The IP is being commercialised in prohibited areas (e.g. tobacco, weaponry, pornography). This will generally be prohibited under the institution’s own policies anyway. In any case, prohibited areas or areas related to ‘restricted donations’ should be made clear in the charity’s terms and conditions of funding in advance of the project being undertaken. 

It is worth noting that, for the majority of the scenarios outlined above, the institution will be aligned with the charity. For example, reputational risk, prohibited areas, monitoring, and diligent progression, are all issues that institutions routinely seek and require assurances on, therefore withholding consent remains an extremely unusual event. 

Examples of reasons where permission to commercialise should typically not be withheld 

In situations where the terms and conditions of funding do not provide the charity with the commercial lead, such terms generally oblige the institution to take on the burden of IP protection and commercialisation. In this situation it is assumed that charities generally have agreed to delegate responsibility for negotiating the commercial terms to the institution and its designated TTO. 

The institution covers the IP costs and initial costs of commercialisation in return for recovering a percentage of such costs from the fraction of projects that are successfully commercialised. Consequently, the charity would typically be expected not to withhold permission or exercise its veto rights in the following situations: 

  • The charity does not agree with the proposed commercial terms or perceives that a better deal could be struck elsewhere. 
  • Provided it does not breach its charitable covenants, the charity does not agree with the wording of the final, negotiated legal commercialisation contract. Each institution will have its own preferred agreement format, as does each commercialisation partner. Consequently, every agreement is unique, and the charity has delegated such negotiation to the institution. 

Having delegated responsibility for commercial negotiations to the owner of the IP, it is rare for charities to request involvement in the commercial negotiations and/or transaction details. Such situations tend to arise where charities either wish to have a greater say in the commercial terms being negotiated, or where the TTO and the charity agree that the charity may add value to the negotiations by being more involved (e.g. they bring particular expertise or to add ‘weight’ to a discussion).  This can be complex for the charity, the institution and its TTO to manage, as it adds another party to the discussions and (if not handled correctly) can undermine the TTO’s negotiating authority. Consequently, where either party feels strongly that charities should be involved in late stage commercial matters, they should: 

  • Make clear well in advance (e.g. in the charity terms and conditions) that a charity wishes to be closely involved in such commercial negotiation matters. 
  • Upon a charity receiving notice that a commercial transaction is developing, reiterate clearly to the notifying TTO that the charity wishes to be closely involved and in what capacity it expects to be involved. 
  • Agree a communication and operating protocol (e.g. response/turnaround timelines) between the parties in advance of any commercial negotiation to allow negotiations to progress smoothly. Clearly any such protocol should attempt to minimise response times and acknowledge the TTO’s role as lead negotiator. 
  • Recognise that this may increase the complexity of the negotiation and the administrative burden, which may have to be shared or reflected in a final value sharing agreement.  

Additional areas where charities would typically be expected not to exercise their veto right via the permission process also include: 

  • The charity does not agree with the institution’s internal method of distribution of rewards to its departments and inventors/employees. This is done via its institutional ‘rewards to inventors’ scheme or equivalent, which are fixed policies that vary by institution and cannot be revised on a case-by-case basis. Please note that this consideration is separate from the issue of how the institute and charity funder will share revenue. In general institutions share with funders before any internal sharing policies apply. Also, institutional policies relating to sharing rewards with their departments, employees and inventors do not override or prescribe the form of agreement between the institution and the charity funder. 
  • Where the charity’s contribution is a small percentage of the overall funding that led to the IP, charities should consider carefully whether exercising a veto to prevent commercialisation is appropriate. For example, in a situation where the charity funded only a minor component of the ‘total package’ and all the other funders are content to proceed with the commercialisation of the IP. 
  • Careful consideration should also be given to attempting to force the inclusion of specific provisions around equitable access, such as affordable pricing provisions, access by developing nations, mandatory paediatric clinical trials, etc. Whilst the sentiment behind the inclusion of such provisions is compelling to all parties, the commercial reality is that they are often opposed or ‘watered down’ by industry or investors. Efforts will often be made by the institution to obtain assurances, but charities should be circumspect about the institution’s chances of securing such provisions in any legally enforceable form. They should balance this need against the need to rapidly translate the innovation for patient benefit. If required, expert advice should be sought on this complex area. 

Experience suggests that exercising the right to withhold permission in the above circumstances would be unusual in most cases. Taking advice from peer group charities, or consulting with experienced experts would be advised. The AMRC can provide a list of such peers and experts upon request.