5.9 - Licence Agreement (Non-exclusive Commercialisation)

A licence agreement for an IP owner to licence IP Rights (IPR) (including IPR developed as part of a project) on a non-exclusive basis to the other party for commercialisation.

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When should it be used?

Whilst it will generally be the university licensing IPR to a company, the agreement is structured so that either party could be the Licensor. The agreement is also suitable when a party is a Commonwealth Entity.

The template assumes both parties are Australian entities. If you wish to use the template for a licence to a foreign entity, you should seek legal advice as to any changes that may be needed.

When should it not be used?

Should I use the Standard or Accelerated Non-Exclusive Licence?

The university and the industry partner should consider the following factors to decide whether to use the Standard or Accelerated licence template for a non-exclusive licence. Independent advice or further information from the other party may be needed to make an informed judgement.

  • Will the licence be for uses that do not involve commercialisation? If the licence is for internal use only, then the Accelerated Licence Agreement (inc low risk Commercialisation) must be used
  • Are indemnity or warranty provisions needed? If one or both parties require indemnity and/or warranty provisions, then the Standard Licence Agreement should be used, as it incorporates standard warranty and indemnity provisions that can be customised as required
  • Are the Fees payable expected to be more than $100,000? For higher value agreements, the Licence Agreement (Non-exclusive Commercialisation) should be used
  • What has the internal risk assessment returned? Before starting a commercialisation project, each party should carry out their own risk assessment. Factors to consider include:
    • what is the potential legal exposure that the activity may create?
    • could this activity lead to a breach of intellectual property rights, including patent or copyrights?
    • will this activity involve significant physical or environmental risks?
    • is the proposed liability cap higher than $100,000?

If the internal assessment indicates a higher risk, then the Licence Agreement (Non-exclusive Commercialisation) should be used

  • Are additional arbitration or mediation systems needed: While the parties can always agree to refer their dispute to mediation, there is no mandated mediation or arbitration in the Accelerated Licence Agreement (inc low risk Commercialisation). If this is required, the Standard Licence Agreement should be used
  • Will the licensee be paying a royalty?  Either the Accelerated Licence Agreement (inc low risk Commercialisation) or the Standard Licence Agreement can be used with a royalty model.  The method for calculating the royalty must be agreed by the parties.  If the method is complex, the Standard Licence Agreements are preferred, as they provide more guidance on audit rights and a template that can be adapted for calculation of royalty amounts
  • Is sublicensing allowed? In most commercialisation arrangements a licensee may wish to be permitted to sublicense the licensed IP rights to enable Commercial exploitation. For example, the licensee may wish to outsource some aspects of manufacturing, service provision or sales. While this is consistent with options in both the Accelerated Licence Agreement (inc low risk Commercialisation) and the Standard Licence Agreements, it indicates a higher level of complexity and risk. If sublicensing is allowed for these types of activities, then the Standard Licence Agreements are recommended, as they include template provisions regulating sublicensing, such as provisions which must be included in the sublicence agreement, whether the sublicence must be approved, and management of the risks associated with sublicensing
  • Other factors to consider are: Whether the agreement is required to address the ownership and/or licensing of any improvements back to the licensor, and whether there are any product safety requirements that need to be addressed.  In general, these factors increase risk and make the Standard Licence Agreements more appropriate

Key considerations when completing the template

The following table is provided as a guide to help the parties appreciate the key considerations that each party will have when negotiating a licence using the Licence Agreement (Non-exclusive Commercialisation) template.

The template is provided in the Standard track and understanding each party’s needs and concerns up front will help you reach an agreement more quickly. A licence agreement may take three to six months or more to negotiate and sign, often longer, depending on the complexity of the proposed licence. It is, therefore, important the parties start these discussions as early as possible.

For organisations, particularly SMEs, that have not previously been asked to enter this type of agreement, this table will help you understand what the key provisions of a licensing agreement are and what you need to discuss and agree in order to finalise the agreement from the template.

Additional plain English guidance on the meaning of key clauses is provided in a separate annotated version of the template.

This table sets out the key points each party needs to consider when licensing IP on a non-exclusive basis using the Licence Agreement (Non-exclusive Commercialisation). Understanding your own key considerations, as well as those of the other party, will help you to negotiate a fair and reasonable agreement that works for both parties.

Key points Licence Provision University (Licensor) Industry partner (Licensee)
Term / Period (Schedule 1)
  • The time period of the licence
  • Generally, this covers the life of any registered IPR or a defined number of years for copyright or software licences
  • In some cases, there may be limits on the ability to licence IPR beyond the term of its registration and this is reflected in the template, with the intent that the Term applies to the fullest extent practical/permitted
  • Clarity over how long the licence will last and what happens when it expires
  • Ensure the industry partner has the rights it needs for long enough, and that this matches your business model and the level of investment needed to get to market
Licence Scope and Sublicensing (Schedule 1)
  • The licence scope is for commercialisation. If the licence is only for research purposes, the Accelerated Non-Exclusive Licence template should be used
  • The Agreement provides a limited right for the Licensee to on-license its rights to third parties – as this is usually required in the case of Commercialisation. These provisions could be removed if the Licensee will only be directly manufacturing and selling products, or using the technology to provide services to end users
  • The granted rights should match the needs, capabilities, and commitment from the company
  • Consider what level of sub-licensing rights are required for the industry partner to meet its business plan
  • Ensure the industry partner has the rights it needs and that this matches your business model and the level of investment needed to get to market
Licence Application & Territory (Schedule 1)
  • A clear definition of the specific application fields of use or application that the licence is granted for
  • The geographical territories of the licence e.g., Australia
  • Ensure that the licence is to those application fields of use where the industry partner has expertise and, in those territories where the company plans to commercialise the licensed IPR
  • This is particularly important with IPR that can be applied in many different applications (so called platform technologies)
  • Ensure the industry partner has the rights it needs and that this matches your business model and the level of investment needed to get to market, and the countries you operate in
Licensed IPR & Technology (Schedule 2)
  • A clear definition of what IPR is being licensed and its technology field and intended applications
  • The template provides tables in Schedule 2 to detail registered IPR, know-how and other forms of IPR (e.g., software) within the licence scope as well as details of any Materials being transferred as part of the licence and how they need to be treated
  • This template does not provide for technology transfer services (e.g., instruction and training, maintenance services, show-how, help desk or personnel support etc). If the Licensee requires such services the simplest approach is to use a separate agreement. The parties could also agree such arrangements as optional clauses to be added to this template
  • The default position is that the Licensor bears the cost of prosecutions and maintenance of registered IPR and is able to recoup some portion of those costs from the Licensee (for example, with the costs to be shared equitably among multiple licensees). The costs can be agreed to be recovered from the Licensee as part of the Fee in Schedule 3. This model for management of IPR can also be amended by the parties within Schedule 2
  • Be clear on exactly what is being licensed and what is not
  • Check that you have the right to grant the rights to the IPR and that all relevant information on each type of IPR under the licence is captured in the tables
  • Consider whether a separate technology transfer agreement is appropriate
  • Be clear of your ongoing obligations with respect to IPR maintenance costs and ensure these are covered by licensees where appropriate
  • Be clear on exactly what is being licensed to ensure the industry partner has access to everything it needs to commercialise the IPR
  • Consider whether a separate technology transfer agreement is appropriate
  • Be clear of any obligations with respect to IPR prosecution and maintenance costs
Confidential Information (Schedule 2)
  • Details of any confidential information exchanged under the licence should be recorded in Schedule 2 and the period for which this information needs to be kept confidential
  • Ensure a clear description of any confidential information relating to the Licensed IPR is recorded
  • Ensure you understand your obligations with respect to confidential information shared with you
  • Ensure your confidential information is kept confidential by the industry partner for as longs as needed so as to impact on the value of the licensed IPR. For some information a perpetual term may be appropriate
  • Ensure details of any confidential information arising from your use of Licensed IPR are recorded
  • For example, you would usually expect progress and payment reports that you share with the Licensor to be kept confidential
Improvements (Schedule 1)
  • Any Improvements (that the Licensee creates under the Licence) will be owned by the Licensee by default, but can be amended to the Licensor if identified and agreed in the Details Schedule
  • If the Licensor also wants to use these improvements, this will need to be agreed and included in the Details Schedule
  • There may be occasions where it is appropriate that the Licensor owns any Improvements made by the Licensee- for example where it is appropriate that these are made available to all licensees as part of the licence package
  • There are a range of alternative approaches to dealing with Improvements, depending on the context of the transaction. This template should be regarded as a starting point for negotiations on these aspects
  • Where the University is the Licensor, it may be appropriate to ask for a licence to Improvements created by the company for research and teaching purposes
  • Carefully consider whether it is appropriate that the University owns Improvements the Licensee makes in certain circumstances
  • Where the industry partner is the Licensor, it can be important to have access to Improvements made by the Licensee to enable the company to use these themselves
  • If there are multiple licensees and there are advantages in the company being able to access rights to improvements made by other licensees as part of the licence, then it may be more appropriate that the University owns Improvements you and other licensees make
Warranties (Schedule 1)
  • The default position is that the Licensor provides warranties as to non-infringement of IPR that is not required to be registered and based on their knowledge for registered IPR, but that otherwise the Licensee exploits the licensed technology at its own risk
  • The precedent states that the Licensor has not conducted exhaustive patent searches and gives no warranty that the patent does not infringe the rights of a third party. The Licensee must make its own "freedom to operate" searches
  • At times, there may have been specific searches conducted / required and the parties may need to further negotiate the types of warranties that should be included and set out in the Details Schedule
  • Ensure you understand the warranties that are required to be given and that you can give these
  • Agree with the industry partner if specific patent or other searches need to be undertaken and recorded in the agreement
  • Consider whether additional warranties or searches are appropriate to the particular licence situation and agree these with the university prior to entering the licence
Royalties & Licence Fees (Schedule 3)
  • Details of the agreed Fees and/or Royalties should be listed in Schedule 3.  The template provisions allow for a basic Fee to be payable on entry into the Agreement, and/or milestone payments, plus the option of an ongoing royalty calculated based on Net Sales
  • The definition of Net Sales is indicative only and the parties need to seek their own commercial and tax advice for their circumstances to ensure the most appropriate fee and royalty structure for the likely product or service
  • The template also allows for adjustments to the Royalty if appropriate – for example where registered rights are not granted
  • Ensure a fair return for the IPR which balances your investment in the IPR and the value being captured by the company
  • Ensure the fair value being paid for the licence matches the value you gain from access to the IPR, and any additional risks you may be taking to get the technology to market
Performance criteria (Schedule 4)
  • There is provision for minimum performance criteria to be met each year from a nominated commencement date in order for the Licence to remain in force
  • Performance criteria may take the form of minimum royalties or licence fees; however other criteria may be more appropriate in the circumstances of the transaction and should be considered
  • Each licence is different and will require appropriate performance criteria to be agreed between the parties. Where the University is granting multiple non-exclusive licences for the same IPR, it would be usual for the performance criteria to be similar across all licences
  • Ensure appropriate steps are taken by the licensee to develop and commercialise the IPR
  • Any performance criteria need to be appropriate for the scope of licence granted and need to recognise that the licence is non-exclusive
  • Ensure the agreed performance criteria are appropriate for the scope of the licensed rights and that these are realistic given the stage of development of the IPR
Liability cap (Schedule 1)
  • The financial limit agreed for all liabilities under the licence except for those that are specifically uncapped or cannot be limited by law
  • Ensure the agreed liability cap is in line with the value being captured by the licence
  • Be aware that certain important potential liabilities are not subject to the cap
  • Ensure the agreed liability cap is in line with the value being captured by the licence and the risks the Licensee is taking to develop the licensed IPR
  • Be aware that certain important potential liabilities are not subject to the cap
Insurances (Schedule 1)
  • The Licensee is required to hold certain insurances to cover liabilities that may arise under the licence
  • Ensure the agreed insurance levels are appropriate for the size of the company and the nature of its commercialisation under the licence
  • Ensure your insurances meet the required minimum levels agreed with the university
Dispute Resolution (Schedule 1)
  • The agreement includes a number of alternative standard approaches to dispute resolution
  • Select the approach that works best for both parties. Most organisations will have a preferred approach
  • Legal advice should be sought as to the best mechanism when the other party is a foreign entity
  • In the absence of agreement, escalation to court proceedings should be the default
  • Select the approach that works best for both parties. Most organisations will have a preferred approach
  • In the absence of agreement, escalation to court proceedings should be the default