Navigating university licensing agreements

Most academic spin‑outs commercialise intellectual property (IP) owned by their university or research institute. To use this IP legally, the company needs a licensing agreement. A licence grants permission to use the invention while ownership remains with the university; an assignment transfers ownership to the company. Each approach has pros and cons.

Licensing allows the university to retain ownership and benefit from future improvements while giving the spin‑out the rights needed to develop and sell products. It is attractive when the university wants to support the venture but reduce risk. However, licensing agreements often include royalties, milestone payments and field‑of‑use restrictions. Negotiating reasonable terms is critical; high royalties or broad reach‑back provisions can deter investors and potential acquirers. When structured well, licensing can align incentives and preserve freedom to operate. Keep in mind that investors usually prefer licences that allow the company to control sub‑licensing and future improvements.

Assignments, on the other hand, transfer ownership of the IP to the company. This provides maximum control and simplifies investor diligence, but universities may be reluctant to give up valuable IP, and public funders might expect a return on taxpayer‑funded research. In some cases, a hybrid approach can work: the university grants an exclusive licence with the option to assign at a later stage when certain milestones are met. Transparency and fairness are essential; a heavy‑handed licence that gives the university significant equity and high royalties can hamper fundraising.

As a scipreneur, involve experienced legal counsel early and ask mentors for examples of balanced agreements. Be prepared to explain to the technology transfer office why certain terms (e.g., high equity, broad reach‑back) could stifle innovation. Also remember that IP is just one part of the value equation; your ability to execute and build a team matters more than any single patent. A fair licence will enable your company to thrive while returning benefits to the institution.