A basic question I ask university tech transfer officers is this: in a licensing situation for university IP, who is it who first needs a contract?
I get a lot of interesting answers to this. But here’s the thing. It’s the company that needs the contract first. A university can grant a license without a contract at all. It’s the company that wants the contract, the paper that secures the continued promise of the license.
I’ll go further. In university licensing, the companies that participate *have already chosen to pay*. I call this the waiters packing heat problem.
Imagine you are going to a restaurant. You have already decided to pay when you walk in the door. It may be an expensive place, but you are there for the food, the hospitality, the ambiance, the conversation, the social point.
Now imagine a restaurant in which the waiters pack heat. Guns in their belts. They believe that it is by flashing their guns that patrons choose to pay. How do you think this would go over? Not so well. It would utterly destroy the social mores of a restaurant, even if the waiters were right that every so often, someone tried to avoid paying for something. For one thing, it would send the message that folks were expected to try not to play. Well, that would be a wrong signal, wouldn’t it? To run a restaurant, you take that risk in stride and aim for maintaining the reputation of the place–a place people choose.
Now bring it back to university IP. It’s the company that needs a contract. Without a contract, no binding promise on the license thing. Well, a contract is offer, acceptance, and consideration. If the company wants the paper, it has already decided to pay. What matters is what form the consideration will take, and what the university is doing to deserve it, and how in the transaction the company comes away feeling satisfied at the transaction. In this, the value of the transaction is in the relationship, not in the particular value of any particular dish served out on the table.
When universities get all worked up over their IP marketing, with efforts to value the IP through market studies, they are going the wrong direction. When they send out licensing contracts running to 30 or 40 pages, to capture value, they are in essence waiters packing heat. The chefs are the research investigators and inventors. The owners of the place are the public interests sponsors of research. The waiters ought to assume those that choose to work with the institution want to contribute, and that they will pay for a great experience because they have chosen to do so.
This is not an argument that folks will donate money because the university gives away its results. Boy, how that attitude grinds in government circles. The feds hand out what, $50b a year to universities for research, and folks run around all fluffy saying that they are helping the whole world, subsidizing foreign companies and governments, through the largess of the American taxpayer.
No, I’m making an argument about the difference between a license, which is an offer not to enforce a right to exclude practice, and a contract that makes that offer binding, and a written contract that makes that offer binding beyond one year. To acquire that binding, lasting contract, a company pays–chooses to pay–for the *relationship* that the contract memorializes.
Physics is full of counterfactuals. Point charges. Perfect spheres. Closed thermodynamic systems.
Imagine a university licensing operation that for a given patent portfolio offered a general license at no charge, with no formalities. We can make it practical by dividing things up. Say, it’s a no-formalities no-charge license for making and using in the state of California. If you want a piece of paper over it, then give a call. Turn a license into a contract, you’re willing to pay. That starts a purposeful discussion. Gotta be good and valuable consideration to make it a contract.
If one worked this way, then there would be no bottleneck to local practice in the tech transfer office. Want to practice this stuff? Move your operations to California. Want it otherwise? Oh, that’s different. You want to be convenienced, and want us to work out the paper for it, and why do we need to do that? Oh, because you want to work with us. Let’s see if we can serve up something that reflects the kind of experience we put together for the folks we want as repeat customers in our IP restaurant. What would a deal like that look like?
Would universities make just as much money in their licensing programs if they let companies choose them rather than pushing their rights out into the world, like waiters packing heat?