Revenue & commercialization: #8 in the 8 steps of technology commercialization

What happens after an invention is licensed?

The licensee is obligated to develop university inventions into commercial products or services. The path to commercial markets by the licensee will vary depending on the nature of the invention, the market it addresses, and its stage of development. The major milestones in commercial development for a particular invention are usually identified in the patent license agreement. These can include achievement of technical or regulatory milestones, development of pilot facilities or commercial prototypes, and first commercial sale.

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What are the licensee’s ongoing obligations to the university?

The licensee’s obligations are detailed in the patent license agreement. These include payment obligations to the university, regular reporting requirements of development plans and commercialization results, and requirements to use diligent efforts to bring the invention to market.

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Can a licensee change patent prosecution counsel?

Under certain limited circumstances, yes. However, to do so requires that the law firm be on contract with the State of Texas. Email OTC’s patenting team at patents@otc.utexas.edu for further information.

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What if a licensee misses a milestone?

If a licensee misses a milestone or deadline, we want that to be a cue to open a discussion and renegotiate, not an alarm with penalties.

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What will happen to an invention if the licensee is unsuccessful in commercializing the technology? Can the invention be licensed to someone else?

If the licensee is unsuccessful in commercializing an invention, the university is generally able to terminate the license as a result of failure of the licensee to meet contractual performance milestones or its obligations to use diligent efforts to commercialize the invention. This termination allows for subsequent licensing to another licensee.

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What is the inventor’s role after the invention is licensed?

Many licensees request the assistance of the inventor in further developing the technology. This can be in the form of sponsored research back to the inventor’s lab, a consulting relationship with the inventor, or limited-scope knowledge transfer meetings. An inventor who wishes to enter into a consulting relationship with a licensee must comply with UT’s outside employment policies.

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How are license revenues distributed?

As set forth in Board of Regents’ Rules, Series 90000, the university shares 50% of licensing revenues, after recovery of expenses, with university inventors. If two or more university inventors are entitled to share revenue, the 50% share shall be allocated by mutual written agreement of all inventors. Licensing revenues due to a deceased inventor will be paid to the inventor’s estate.

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How is the inventors’ share allocated if there is more than one inventor?

Allocation of income among multiple inventors is determined by mutual agreement of the inventors and documented in an Inventor Distribution Acknowledgement form. The distribution agreement is ideally negotiated before a licensing agreement is finalized.

According to the Board of Regents’ Rules, Series 90000, if the inventors cannot agree in writing on an appropriate sharing arrangement, the allocation shall be made by the university’s president.

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What if the university receives equity (stock) from a company?

If the university receives stock (equity) in connection with a license, it does not distribute the stock to inventors. Instead, it will generally hold the stock until it receives cash on account of those stock holdings. Upon sale by the university of the shares (or other cash disposition), it generally distributes the proceeds, net of expenses, in accordance with the same policy that governs the distribution of cash revenue.

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Where's my royalty check?
  • Does OTC have your current address and a working email address? OTC’s policy is to verify the addresses of inventors who are currently receiving distributions on an annual basis. Contact distributions@otc.utexas.edu if your address has changed. OTC will guide you to the specific forms (PIF, W8-BEN) you will need to complete.
  • Royalty distributions are processed in the order that the royalty checks were received by OTC. If several royalty checks are received in a short period—as often happens after the end of a calendar quarter—processing may take a little longer than normal.

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What happens to inventor royalties if the inventor’s address cannot be verified?

Such royalties are transferred into a holding account while the inventor is being located. Any interest accrued belongs to the inventor—OTC is prohibited by law from earning interest on inventor royalties.

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What are the tax implications of any revenues received from the university?

The university issues a Form 1099 for licensing income distributed to U.S. inventors. If you received royalty income but have not received your 1099 from UT Austin, contact the UT Office of Accounting. Note that foreign nationals may receive a different tax form. For specific tax advice, inventors should consult a tax advisor.

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