A startup with surgical technology did just that. They partnered with a larger company and gave them exclusive rights to their surgical technology in return for license fees and development funding. As a result, they can now focus on further development and still can license out the technology to other fields outside the license agreement.
This strategy is an often overlooked way to use licensing for intellectual property development. It’s an ideal strategy if you don’t have the money or resources to fully develop your IP into a commercially ready product or technology. You also get the benefit of the licensee’s manufacturing and distribution facilities or sales and marketing efforts without having to spend the time and money to develop them on your own.
An IP development agreement can be part of a longer-term licensing agreement. You license certain rights to your IP in return for royalties on sales or some other form of compensation. As part of the deal, the licensee agrees to complete the development of the IP. For example, your medical device technology is only partially completed. Rather than try to raise money to complete the development, you find a “development partner” who will finish it for you. In return, they get the rights to market and sell the device in one or more markets.
The most important terms in the development agreement are who owns the rights to the future IP developments and what you can do with those rights. The licensee will most likely want rights to the improvements and exclusivity. It gives them the best opportunity to recoup their investment and make a profit with the IP. In return for investing in the development of the IP, the licensee will want a long-term, exclusive agreement. For example, they specialize in the hospital market, but your device technology also has applications to the consumer market. Make sure it’s evident in the agreement that you own future IP developments and can license them into the consumer market.
Here are a couple of other vital points to consider when negotiating these types of development licensing agreements.
- Specify what the licensee will do, the timeline to finish, and what performance standards to meet.
- Detail the IP development, and if testing is required, when will it be done.
- If your know-how or expertise is required, be sure to detail what you will do.
One final note. Beware of joint ownership of rights to current and future IP development. It creates conflicts when licensing the rights for other markets or products.
IP development is just one way to use licensing to get your med tech developed and into the market. But it’s only one of many licensing strategies to open up new opportunities for your medical device technologies in the fast-moving health care market.
Rand Brenner is an IP professional whose passion is helping inventors, startups, and businesses of all sizes use licensing to turn their IP into income-producing products, services, and technologies. His decades of experience run the gamut from medical devices to food technology to consumer products. He’s licensed some of the biggest Hollywood entertainment blockbusters including the Batman Movies (1 and 2), and the number one kid’s action TV show, the Mighty Morphin Power Rangers. Rand speaks about licensing and is a featured speaker at investment conferences, trade shows, colleges, and startup events. His first book, Hidden Wealth: The Money Making Power of Licensing was released in 2019 and is available on Amazon.com. He’s also a published writer with articles appearing in several prestigious trade magazine including The Licensing Journal, Intellectual Property Magazine, and License India. Rand also mentors at the Cal State Fullerton School of Business and Economics and is a judge for their startup business plan competitions.