Patent-Related Contracts FAQs

What is a non-disclosure agreement and when do I need one?

Like any other contract, a non-disclosure agreement is simply a written understanding between parties as to how they will proceed in their business relationship. In that sense, many agreements could be considered non-disclosure agreements because they include written memorialization of an understanding of confidentiality between the parties. For patent-related purposes, non-disclosure agreements are a common means to prove non-disclosure prior to filing a patent application. The patent office will refuse to issue a patent on any innovation that was publicly-available prior to filing the patent application.

The Cal Poly IP Policy is determinative of these relationships. Contact us at Technology Transfer with any questions. We're here to help.

What is a patent rights assignment?

A patent rights assignment is a contract between the inventor and either a business entity or another individual transferring legal title to the invention. Ordinarily, a patent rights assignment is used to bundle all of the inventors' rights under one legal entity, so that the invention may be licensed more easily. Ownership is not determinative of financial reward. Moreover, it is possible for an inventor to have several legal "hats" - inventor, owner, licensee, shareholder, etc., depending on the circumstance.

The Cal Poly IP Policy is determinative of these relationships. Contact us at Technology Transfer with any questions. We're here to help.

What is the Cal Poly-Collaborator agreement?

In the event that Cal Poly and innovators decide to file a patent application to a particular innovation, a short, written understanding of the financial arrangement between the groups is negotiated and memorialized in writing. In general, Cal Poly and the inventors (as that term is defined by law) split any revenues 50/50, after the patent costs are reimbursed. The inventors may choose to distribute any revenues within their collaborators as they prefer. 

The Cal Poly IP Policy is determinative of these relationships. Contact us at Technology Transfer with any questions. We're here to help.

What is a License Term Sheet?

Any contract term sheet, including a license term sheet, is simply a non-binding memo that is used in business discussions and contract negotiations. Once the term sheet is generally agreed-upon by the stakeholders to the business relationship, the parties then develop a legally-binding contract. Not until the contract is signed by all parties does a formal legal relationship begin. A license term sheet usually contains short-hand "bullet point" descriptions of the most variable contract terms. For patent licensing, the parties generally pay a lot of attention to whether the license is exclusive or non-exclusive, the territory of use, the field of use, the term of use, basic commercialization milestones, who pays for the patent costs (past and future), and what the compensation for the patent rights will be. Most often, patent licenses include an up-front payment and a reasonable royalty as part of the terms of the agreement. Determining what the royalty should be and how to measure it depends on the expected commercialization scheme. Both parties have an incentive to assure that the compensation is fair or the commercialization may fail. With this in mind, patent licensing is less antagonistic and more partnership-oriented. Sometimes, the parties agree to ranges and finalize the terms much later in the relationship. Negotiations also continue after the term sheet is agreed upon and sometimes after the contract is signed. 

Contact us at Technology Transfer with any questions. We're here to help.

What is an Option Agreement?

An option agreement is a contract between parties to provide negotiating advantage, title, or other legally-recognizable right in exchange for some sort of compensation. For patent option agreements, a patent holder can offer a potential licensee an option to license in exchange for a one-time payment, in-kind value (equipment, expertise), or reimbursement of patent costs, for example. The option ordinarily expires in a relatively short time frame and must be affirmatively exercised by the optionee in order for it to manifest. Sometimes, option agreements are called "first right of refusal" agreements.

Contact us at Technology Transfer with any questions. We're here to help.

What is a Licensing Agreement?

A licensing agreement is a contract to utilize rights, services, or items that the licensee does not own. A patent licensing agreement is a contract between the patent owner(s) and a business entity or individual who wishes to make, use, or sell the patented invention without risking being sued for infringement. Depending on the terms of the licensing agreement, the licensee may "step into the shoes" of the patent owner and have nearly all of the same rights to sue others, sublicense, direct patent strategy of the invention. The one right that the licensee never has, under any licensing agreements, is the right to transfer title. Title remains with the patent owner at all times. For federally-funded inventions, Cal Poly must take title to any inventions developed under the federal grants, since the Bayh-Dole Act and the grant contract obligates Cal Poly to take title. If Cal Poly determines that it can not or will not attempt to commercialize a federally-funded invention, Cal Poly must offer the invention back to the federal government. If the federal government relinquishes its rights, only then may Cal Poly offer the rights back to the inventors.

For patent licensing, the parties negotiate whether the license is exclusive or non-exclusive, the territory of use, the field of use, the term of use, basic commercialization milestones, who pays for the patent costs (past and future), and what the compensation for the patent rights will be. Most often, patent licenses include an up-front payment and a reasonable royalty as part of the terms of the agreement. Determining what the royalty should be and how to measure it depends on the expected commercialization scheme. Both parties have an incentive to assure that the compensation is fair or the commercialization may fail. With this in mind, patent licensing is less antagonistic and more partnership-oriented. Sometimes, the parties agree to ranges and finalize the terms much later in the relationship. Negotiations also continue after the term sheet is agreed upon and sometimes after the contract is signed. 

Contact us at Technology Transfer with any questions. We're here to help.