Who owns the IP rights when a startup emerges from a University?

Did you know Google was a spin off from a university research innovation? The founders of Google had invented the Google algorithm as part of their dissertation work during their PhD at Stanford University. Lately, there has been a steady rise in the number of startups that grow out of university-sourced innovations; hence several universities have started incorporating policies for such joint collaborations between startups and universities.

image credit: Shutter StockThere are several situations from which joint research collaborations may arise from a university.

• The technology is developed and nurtured in the university and the technology is spin-off as a startup.
• The university may have played an incubator role in the beginning stages of a startup and have played an advisor in the development of a technology.
• There may be a case where a continuous association with the startup and the academic institute is maintained as part of the joint research collaboration.

Ownership of IP varies with the above situations. However, before discussing ownership and rights of intellectual property, let’s understand its relevance in decision making.

Background IP is generated before the joint research collaboration

Foreground IP is generated during the research collaboration

Postground IP is generated in a certain time span after the collaboration

Sideground IP is generated during the collaboration phase but in non-project related activities

All the above IPs include patents, know-how, and trade secrets.

How should these IP rights be governed between the university and start-up? It is regulated by various clauses in an agreement for joint research, advisory, spin-off, etc. Some of the clauses may include the following:

1. Who owns the IP; especially the Foreground IP, Postground IP and Sideground IP? Ownership for the Background IP is generally understood.
2. If a start-up does not own an IP, does it have a license for the technology? Is the license exclusive or non-exclusive? What is the duration of license? Is there a provision for further sub-licensing of any of its IP Rights? If the right to sub-license is absent, it may drastically affect the manufacturing process when it is not in-house. Also, there may be adverse effects, if the startup is to be acquired in the later stages.
3. Who will manage and maintain the patents? In most cases, an owner is responsible for maintaining the patent. However, in some scenarios the responsibility may be shifted to a licensee. A startup has to check whether it should keep the maintenance rights or not besides strategising the required checks and balances for maintaining the IP rights. Abandonment of its IP may adversely affect its market position.
4. Who is responsible for indemnification in case of third party IP infringement suites? When the owner of the IP has not checked the probability of third party IP infringement, it may result in an infringement suit and a licensee may ask for indemnification in such cases. The responsibilities of each party, namely, the owner of the IP, the joint owner, and/or the licensee, need to be agreed upon in the relevant contracts/agreements.
5. If you are a licensee, are you allowed to institute an infringement proceeding? Keeping such rights with you may help you in cases when a competitor is infringing upon products for which you have an exclusive license.
6. Do the above rights have a variation based on a specific country or a product line?
7. Whether non-disclosure agreements for trade secret are in place or not?
8. Whether non-compete clauses are in place?
9. Are the considerations well specified in case of grant of ownership or license?
10. Is the license only for “use” or for “commercial exploitation” too?

It is suggested that the expectations should be set correct between both the parties, according to the effort and investments made by each of them, so as to create a win-win situation for both. Surely, the academia provides specific expertise and infrastructure which can optimize costs and improve innovation to help the startup in providing cost-effective and competitive products.

About the authors:

This post is co-authored by Gaurav Singhal and Ananya Dhuddu. Gaurav is the Director and Principal IP Attorney at Patracode Services Pvt Ltd. A B.Tech in Computer Science, LLB from IIT-Kharagpur and Masters in Business Laws from National Laws School of India University, Gaurav has been working in the IPR field since many years. Ananya Dhuddu is an IP Analyst at Patracode Services Pvt. Ltd. She is a Life Sciences graduate from Pennsylvania State University, USA. She holds a PG Diploma in Medical Law and Ethics from National Law School of India University, Bangalore and a PG Diploma in IPR and Patent Management from GIIP, Bangalore.