University spin-outs and intellectual property rights The value of university research programmes has long been recognised in the UK as a source of talent and potential. Much of the research cultivated in UK universities addresses society’s biggest challenges. It follows that this research has the capacity to grow into valuable business opportunities. Where research performed in a university setting is commercialised in this way, the resulting business is known as a “university spin-out”. The success of these ventures is, to a great extent, contingent on the use and exploitation of the intellectual property rights (“IPRs”) arising from the research. This article explores the mechanics behind the university spin-out process and some of the key issues of which their founders ought to be aware. The parties A spin-out will always involve two parties: (i) the spin-out founders (usually the post-graduate student, research associate or other academics who have led the research activity); and (ii) the university where the spin-out founders are based. However, there may also be investors. Although spin-out founders regularly fund their own spin-outs, investment may also be secured from the university or from third parties such as private venture capitalists or angel investors. IPRs in spin-outs – the basics At a high level, IPRs in the context of spin-outs are most likely to consist of: (i) registered rights (such as patents, trade marks or registered designs) and (ii) unregistered rights (such as unregistered design rights, or copyright in, for example, academic journals or software). Good management of IPRs is vital from the outset as a failure to do so could result in the inadvertent loss of potentially valuable IPRs. For example, the spin-out founders should take care not to publish or disclose a patentable invention before applying for a patent, as this may, in some cases, mean the inventor loses the right to patent that invention. This can quite often conflict with the academic need to publish results at the earliest opportunity. Whilst not always strictly considered to be IPRs, trade secrets and confidential information are sometimes also addressed under the “IPRs” banner (although it is important to note that this kind of information is only as valuable as the owner’s ability to keep it out of the public domain, usually through contractual obligations in the form of confidentiality agreements / NDAs). Who owns the IPRs prior to the spin-out? When embarking on the spin-out process it is vital to establish who owns the IPRs – whether it is the spin-out founder or the university. This will dictate who is able to protect and exploit the outputs of the research. In the case of universities, ownership of IPRs will be subject to the terms in place between the university and the spin-out founders (in the academic or research associate’s contract of employment or a post-graduate student’s PhD agreement). The degree of ownership will vary between universities. In practice this will often mean that the university owns the IPRs generated during the course of the research project. It is good practice for the spin-out founders to check the scope of these contracts so that they are clear what IPRs belong to them (such as any research they carry out in their private time, or independently or beyond the scope of the research project) rather than to the university. To spin or not to spin? Whether the university and the researchers decide to go down the route of a spin-out will depend on a number of factors, including the management and industry experience of parties involved, the stage of the relevant technology’s development and whether it is ready to go to market. In certain circumstances, it may be more attractive to license the technology to an established industry player than bear the risk of establishing a spin-out. www.burges-salmon.com
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