Corporate Partnering & Sub-Licensing
Can corporate partnering be part of a sustainable business model?
If you have generated and/or control intellectual property around invention(s) that constitute a potential technology “platform”, and you believe your development team has the potential over time to create multiple products and applications covered under the IP, it may make sense to seek a funding agreement for your first product with a corporate partner. Technology-based, out-license agreements take many forms.
If, for example, your company is developing medical technology and its engineering skills, and/or specialized manufacturing processes are unique or complementary to an interested industry player, they may prefer entering into a joint development and marketing agreement, where the corporate partner would pay an initial license fee and then fund your company to continue R&D until reaching a defined development milestone.
As has been discussed in other sections of this website (see POC Demo Expectations), what constitutes a “working” prototype is somewhat “in the eyes of the beholder”, or in this case, the financing partner.
Depending upon the experience of the startup management team and the internal capabilities of the partner...
Joint development agreements may provide for a transition of formal product development to the partner’s organization, with the startup engineering team serving as consultants and the company receiving development-related milestone payments.
Agreements of this nature are not unusual for medical technologies, where formal product development and transition toward manufacturing must be conducted and documented in compliance with FDA Quality Systems Regulations, all in preparation for the submission of a marketing authorization application [510(k) or PMA]. For more information on this subject, go to Design Controls.
In such joint development agreements, post-approval marketing would typically be the responsibility of the corporate partner, and the startup company would receive product revenue royalties throughout the life of the agreement.
If such a partnership is of interest, perform an internet search with the phrase “joint development and marketing agreement” and you will find templates for such contractual agreements. Doing so will familiarize you with typical agreement provisions, but before proposing anything of this nature to a prospective industry licensee, it is advisable to consult an attorney experienced in such negotiations.