Invention Basics

U-M Tech Transfer works with you to bring breakthrough discoveries to the widest possible audience through commercialization.

Is Your Discovery an Invention?

Invention is defined as a new and useful process, machine, software creation, article of manufacture, or composition of matter, or new or useful improvement upon them.

  • Inventions may lead to commercial products and processes
  • Inventions may occur in any field and encompass many areas
  • Inventions may address a market or technical need

If you’ve invented something “new,” we’re ready to work with you to determine if your invention has commercial potential.

Rewards of Inventorship

Practical application of your research in developing products fosters the widest possible recognition of your research efforts. Collaboration with industrial partners may also result in financial sponsorship of additional research or outside consulting. Collaboration with industrial partners may also financially support your students, provide them invaluable experience, and give them potential future career paths.

Inventors receive a share of the monetary compensation received by U-M in the form of license payments. Your department and college also receive a share of these revenues and therefore, these revenues can also be a source of funding for your laboratory and department. The economy benefits as well. In the last 15 years, licensing of U-M inventions has resulted in the introduction of many new products in numerous markets and in the creation of more than 100 new companies.

Why Protect Your Invention through Patent or Copyright?

For patentable inventions, it is difficult to protect your invention once you publish it via paper, website, or presentation at a conference. We must file for patent protection before publication should we wish to obtain patent protection outside the US. If the market for your invention is global, this is an important consideration as you plan publications and public presentations.

After publication or any other public disclosure, your invention is no longer patentable outside the U.S. while we have one year to file for a U.S. patent.

After Tech Transfer files a patent application, you may exhibit or publish your work without the loss of patent protection for the inventions claimed in the application.

Patents can provide a strong economic incentive for a company to license U-M technology. Patents give U-M and its licensees the right to exclude others from practicing the invention for a period ending twenty years from the patent application’s filing date. This period of exclusivity presents a barrier to entry to other companies, allowing the firm that licenses the invention sufficient time to recoup its investment.

Some technology lends itself to copyright protection, such as software, educational materials, multimedia presentations, etc. In these cases, copyright protection is provided at creation, but we may also elect under certain circumstances to register the copyright with the U.S. Copyright Office.

Other materials such as vectors, plasmids, cell lines and animals (mice, rats, etc) may be maintained as proprietary materials. Often these “research tools” are licensed non-exclusively to multiple companies.

Commercialization Approaches

There are a number of approaches to transferring intellectual property to an outside entity.

After you, the faculty or staff member, have become aware of a new discovery, a U-M Tech Transfer Licensing Specialist will discuss with you the various manners of commercialization and the factors to consider when selecting the most appropriate transfer mechanism.

License to an Existing Entity

The majority of U-M inventions are licensed to existing large and small companies.

If your invention is created under a sponsored research agreement, Tech Transfer will work with the appropriate Office of Research and Sponsored Projects (ORSP) representative to review any obligations to the sponsor.

If your invention uses materials from a third party, your licensing specialist will also review any constraints based on the Material Transfer Agreement (MTA).

License to a Start-up

Sometimes commercialization of the invention is best suited via the creation of a start-up company (a new company created to commercialize a particular technology). Inventors may participate in these start-up companies in a variety of ways, and U-M Tech Transfer is available to discuss all aspects of company formation with you.

U-M Tech Transfer structures licensing agreements with U-M start-ups with an emphasis on helping the company become viable, but also ensuring that the invention is diligently developed and commercialized and that the university receives a fair return should the company be successful.

For assistance with forming a start-up, please visit the Startups section of our website, or click here to connect with one of our Venture Center specialists.

Licensing Principles

When licensing technology to a third party (whether an existing company or a start-up), a number of general principles provide the framework for universities in their negotiation process.

Universities are Non-profit and Serve the Public

Universities have three basic missions: education, research and serving the public. It is important to recognize that the foremost objective for an institution in a licensing negotiation is to ensure that the university’s technology reaches the marketplace in a timely manner for the benefit of the public. Achieving a fair return on the university’s (and taxpayer’s) investment also is an important objective.

Universities Own their Technology

The Bayh-Dole Act of 1980 provides universities with the right to maintain ownership of inventions made by their employees using federal funds. The vast majority of US universities also have policies providing for ownership of all inventions made by their employees except for a historical exclusion of scholarly works of authorship such as textbooks. Generally universities will maintain ownership of technology (vs. assigning rights) and provide license rights (exclusive or non-exclusive) while controlling the protection and maintenance of patents or copyrights. This strategy ensures that the university maintains ownership of the technology should the license be terminated.

Reimbursement of Patent Costs

While universities often are willing to take the upfront financial risk to obtain patent or copyright protection for their technology, once a third party elects to commercialize the technology, it will be required to take over the financial risk from the university. Typically, an exclusive licensee reimburses the university for all its costs associated with the preparation, filing, prosecution and maintenance of the licensed patents.

Obligations to the Government

Government funding carries a number of obligations that must be met by the university. First, the university must report to the government all inventions, patent applications and licenses of federally funded technologies. Patent applications and subsequent issued patents must recognize the government funding in writing. In addition, the university must give the federal government a royalty-free non-exclusive license to federally funded technologies for government purposes. This government license will be referred to in the license agreement.

Diligence

Because the university has as its overriding objective the commercialization of its technology, the license agreement will provide for certain diligence milestones to be met by the licensee to ensure that the technology is being diligently developed and commercialized. For pharmaceuticals, these often are clinical trials milestones; for other products, diligence terms might include first prototype, first sale, etc. Sometimes diligence terms or milestone terms include financing or business formation milestones (typically with startup companies) or issuance of first patent.

Fair Return

A license agreement should provide for a fair return to the university if the product is successful in the marketplace. When the technology is licensed to a start-up company, most universities are willing to participate in the early risk by taking equity to reduce upfront cash payments. However, once the licensee is obtaining revenues on the product, the university will expect a portion of these revenues. Typically revenues back to the university are provided as royalties on sales. The negotiated percentage is generally based on a number of factors including: the relative profit margin for the particular product, investment required to commercialize the product, competing technologies, strength of patent and copyright protection, and type of license rights (non-exclusive vs. exclusive). License agreements may also provide for the university to receive other payments such as license fees, milestone payments, annual maintenance fees, and minimum royalties.

Product Liability, Insurance, Indemnification, Warranties

The licensee will indemnify the university, its employees, regents, trustees, etc against all claims, proceedings, demands and liabilities of any kind whatsoever. Universities will also require that the licensee obtain appropriate amounts of product liability insurance prior to commercial sale or use of a product. The university will not make any warranties as to the fitness, merchantability, validity of patent rights, etc. The licensee assumes all risk associated with the licensed technology.

Sublicenses

If the license is exclusive, the university may allow the licensee to enter agreements with other third parties through sublicense agreements. The university will expect certain requirements of the license to pass down to the sublicensee and the university will share in sublicense revenues received by the licensee.