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Tech & Sourcing @ Morgan Lewis


When an inventor of technology who is also a university employee wants to commercialize university-developed technology, it is customary for the university and the inventor to “spin out” the technology via a license agreement to a newly created company (a licensee company) that sets forth the terms of the license, including any necessary milestones for advancing the technology, restrictions on the use of the technology, and the royalties and other financial terms applicable to the licensing and commercialization of the technology.

A murkier scenario arises when the inventor is providing consulting services to the licensee company but continues to work for the university. In this scenario, the inventor should agree to certain restrictions in connection with any consulting services it provides to such licensee company before the university allows the inventor to provide such consulting services.

The following are key restrictions and considerations in such a scenario:

  • Restriction on the use of university resources other than the technology that has already been licensed to the licensee company
  • Restriction on activities that could interfere with the inventor’s obligations to the university
  • Representation to act independently and not bind the university
  • Agreement not to provide, assign, or license any intellectual property (IP) that (1) constitutes or infringes upon any university IP, or any modifications or derivative works thereof; (2) is or was made, conceived, reverse engineered, or reduced to practice using any university IP or any university resources; or (3) is the subject of a research agreement between the licensee company (or an affiliate) and the university

Also note: If the restrictions in the underlying license between the licensee company and the university are not broad enough, there is potential for the licensee company to access new IP from the consulting relationship with the inventor that would not already be covered by the underlying license (e.g., the licensee company creates a version 2 without the use of the version 1 IP that is subject to the terms of the license). In such an instance, or even as an additional backstop, the agreement between the inventor and the university to allow for the provision of the consulting services should contain restrictions on the use of the licensed IP to create or develop products or services substantially similar to, substitutable for, or competitive with the licensed IP (or any update, derivative, or natural extension thereof).