At ORNL, our focus is on working with partners to ensure ORNL technologies are broadly and successfully commercialized. To that end, we have significant flexibility in how we license technologies. This page explores some of the key components of ORNL license agreements.
What can be licensed?
In private industry it is not uncommon for license agreements to include trade secrets or know-how in addition to patents and copyrights. However, because ORNL is a Federal facility, we cannot maintain information as a trade secret or as know-how. The only intellectual properties we are permitted to protect and license are patentable inventions and copyrightable information. Therefore we cannot include trade secrets or know-how as part of a license agreement.
Field of Use
Licenses at ORNL are executed on a field-of-use basis. This means the technology is licensed according to your company's intended use or application or your anticipated market. We will work with you to determine a field of use that best matches your company's business plan and commercialization strategy.
Exclusive vs. Nonexclusive
ORNL licenses may be either exclusive or nonexclusive. In either case, the license will be granted for a specific field of use. Even exclusive licenses may be licensed to more than one company, provided each licensee is operating in a separate, distinct field of use. Nonexclusive licenses are typically less expensive to obtain than exclusive licenses.
ORNL can offer sublicensing rights to companies with a business and commercialization plan that requires the ability to sublicense rights to third parties. Licenses that include the right to sublicense to others also include financial terms for sublicensing revenue that is based on the commercialization of the technology by a sublicensee. In addition, the license requires that the sublicenses granted by the licensee include specific provisions that are part of the license agreement.
All ORNL license agreements have similar financial components. These components can include an up-front execution fee; patent reimbursement; annual minimum payments and/or milestone payments; an annual minimum royalty; and running royalties as a percentage of sales revenue. When developing these figures, we will work with you and take into account your commercialization plan to define a license structure that makes the most sense for your business. We have significant flexibility on structuring the financial component of our licenses; it is not uncommon to have fees that are staged in order to be aligned with your company's cash-flow needs, for instance, and we try to work with you to develop commercialization milestones that make sense and are practical for your business.
Annual minimum royalties are required in all of our license agreements. These are annual fees paid to keep the license in place when product sales do not reach a minimum threshold. When sales reach a level at which the running royalty exceeds the minimum royalty, then your company would pay the larger amount. An annual minimum royalty is not assessed in addition to a royalty on sales.
Running Royalty Rates
Running royalty rates are calculated by determining the contribution ORNL's technology makes to your company's profit on sales of products using that technology. Our goal is not to impose confiscatory royalty rates which would impact your company's ability to commercialize our technology; rather, we are committed to emplacing license agreements with fair and equitable financial terms.
Because ORNL has often invested significant funds to obtain patent protection on our technologies, it is important for us to recoup those costs so that we may continue to protect new innovations that are being developed on a continuous basis. For this reason, we require full cost recovery for patents that we license. In the event a technology is licensed nonexclusively, those patent costs may be divided by the number of licensees of the patents.
The commercialization plan is also an important part of our license agreements. It lets us know the time line for your company to turn ORNL's technologies into products available for purchase. We will work with you to define milestones, such as targets for your company's investment in product development, target time periods for first commercial sales, or targets for sales above a certain quantity. We recognize that each market is different and each company has a unique approach to commercialization, so we welcome your input in developing a commercialization plan that makes sense for your company.