Licensing Principles

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Below are listed a few general principles followed by academic institutions when licensing technology to a third party, a number of general principles provide the framework for academic institutions in their negotiation process:

• Children's Hospital Los Angeles is a non-profit whose mission is to serve the public, as such in a licensing negotiation OTT has a duty to ensure that Children's Hospital Los Angeles's technologies reach the marketplace in a timely manner for the benefit of the public. Achieving a fair return on the hospital investment also is an important objective.
  
  
• Children's Hospital Los Angeles retains ownership of its technology under the Bayh-Dole Act of 1980 which provides academic institutions with the right to maintain ownership of inventions made by their employees using federal funds. Generally academic institutions will maintain ownership of technology rather than assigning rights, and grant licenses (exclusively or non-exclusively) while controlling the protection and maintenance of patents or copyrights. This strategy ensures that Children's Hospital Los Angeles maintains ownership of the technology should the license be terminated.
  
  
• Reimbursement of patent costs - While Children's Hospital Los Angeles is often willing to take the upfront financial risk to obtain patent or copyright protection for its technology, once a third party elects to commercialize the technology under a license, it will be required take over the financial risk from Children's Hospital Los Angeles. An exclusive licensee will be required to reimburse Children's Hospital Los Angeles for all its costs associated with the preparation, filing, prosecution and maintenance of the licensed patents.
  
  
• Obligations to the U.S. government - Federal funding carries a number of obligations that must be met by Children's Hospital Los Angeles. All inventions, patent applications and licenses for federally funded technologies are to be reported to the applicable federal agency. All patent applications and patents must acknowledge any government funding in writing. Children's Hospital Los Angeles must timely grant the federal government a royalty-free non-exclusive license to federally funded technologies. Any licensees of federally funded invention are subject to any and all rights of the U.S. Government.
  
  
• Diligence - Children's Hospital Los Angeles has a duty to see its technologies reach the public. As such, Children's Hospital Los Angeles requires that a licensee provide a commercial development plan and meet specific diligence milestones. These can include clinical trials milestones, development of a first prototype, first commercial sale, etc. Diligence terms can also include financing milestones (typically with startup companies).
  
  
• Fair Return - A license agreement should provide for a fair return to Children's Hospital Los Angeles as the product progresses towards the marketplace. When licensing to a start-up company, Children's Hospital Los Angeles may take equity in lieu of cash payments to allow the start-up to allocate its resources to product development. As the licensee hits certain diligence milestones, milestone payments are typically made to Children's Hospital Los Angeles. Once a licensee is generating revenues on the product via sales or sublicenses, Children's Hospital Los Angeles will expect a portion of these revenues. Royalty rates are generally based on factors such as the relative profit margin for the particular product, investment required to commercialize the product, competing technologies, strength of patent and copyright protection, and type of license rights (non-exclusive vs. exclusive).
  
  
• Product liability, insurance, indemnification, warranties- Children's Hospital Los Angeles will require that a licensee indemnify Children's Hospital Los Angeles, its employees, regents, trustees, etc. against all claims, proceedings, demands and liabilities of any kind whatsoever. Children's Hospital Los Angeles may also require that the licensee obtain certain amounts of product liability insurance prior to commercial sale of a product. Children's Hospital Los Angeles will not make any warranties as to the fitness, merchantability, validity of patent rights, etc. The licensee assumes all risk associated with the licensed technology.