Express license for a faculty spin-out company

E&I is joining progressive institutions in adopting standard license agreements for faculty spin-out companies. The terms of the agreement are very favorable for the spin-out company. The agreement, which must be signed without modification, is intended to reduce the barriers to spin-out formation, increase the transparency of institutional policy, and expedite spin-out formation by eliminating the need to negotiate a license with E&I.

In addition to the Express License, E&I will provide faculty the opportunity to take an option on intellectual property based on their technologies, unless E&I is engaged in active external marketing efforts. This option will allow faculty to seek investment to fund their new company. Once a preliminary business plan has been submitted and approved, faculty can obtain a one-year option on the intellectual property by paying a $4,000 fee. The option may be exercised once the spin-out has secured funding sufficient to sustain operations for 18 months up to two years. Once the option is exercised, the company can sign the Express License agreement to complete the licensing process.

The terms of the Express License include:

  • Exclusivity in the defined field of use
  • Reasonable royalty on net sales for products
  • Equity of 10% of the company in lieu of a license fee
  • Repayment of past patent costs at license signing, company pays future patent costs as incurred
    • Upon E&I approval, payment of past and ongoing patent costs may be partially deferred for up to three years under a payment plan designed to be sensitive to the company’s cash flow
  • Meeting progress milestones including:
    • Submission of acceptable business plan, including identifying persons to fill key management positions
    • Securing initial funding, which can include grants
    • Securing outside investment
    • Initiation of product testing
    • First commercial sale
  • Staged minimum royalties and minimum net sales are required to maintain exclusive license

Faculty should be aware that they will need to comply with institutional policies on conflicts of interest. This typically requires the faculty to make full disclosure of their activities within the institution and in the company. The institution will work with the faculty to ensure that a suitable management plan is in place to manage any actual or potential conflicts of interest.

We look forward to partnering with our faculty and the investment/entrepreneurial community to build new businesses in Nevada.