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Start-Up Exclusive License Agreements

NIH Start-up License Agreements minimize the barriers to entry faced by start-up companies that seek to license NIH technologies and provide a structure that encourages and supports the commercial development of early stage NIH technologies. While the NIH has been quite flexible in structuring licenses for the benefit of start-up companies, one of the goals of the NIH Start-up License program is to further reduce the time to negotiate and finalize an exclusive license agreement and to raise the initial financial capital needed to execute an exclusive license. By streamlining the licensing process, a start-up company may dedicate its time to attracting additional investment to develop the NIH technology. See the NIH State-Up License Term Sheet for full details of the offered agreement.
Startup Agreements are pre-negotiated, Government-compliant licenses reflective of typical startup company situations and designed to reduce the time to execute agreement.  To be eligible for a Startup license, you must meet the 5/5/50 rule: Less than 5 years old, with less than $5M in capital raised, and less than 50 employees.
There are two types of exclusive licenses available to start-up companies, the Startup Exclusive Evaluation License Application (EELA) and the Startup Exclusive Commercialization License Application (ECLA).
Features of the Startup Exclusive Evaluation License Agreement ("EELA") include:
  • Payment of a $2,000 execution royalty by the Licensee
  • A 1 year term of the Agreement
  • The option to the Licensee to convert the EELA to an ECLA, described below, at the end of the 1 year term (not automatic)
  • The Field Of Use (FOU) of a EELA and any subsequent ECLA that will be (re)negotiated and commensurate with revised Commercial Development Plan (CDP) submitted within the EELA’s 1 year term
Features of the Startup Exclusive Commercialization License Agreement ("ECLA") Include:
  • No execution royalty payment due by the Licensee upon execution
  • The term of the Agreement continues until the last to expire of licensed patent rights
  • The term of the Agreement includes heavily deferred financial terms
  • The Licensee is involved in patent prosecution
  • The Licensee is responsible for paying 50% of unreimbursed patent expenses that accrue after the execution of the license Agreement, with the rest of the unreimbursed patent expenses due upon a liquidity event
  • Does not require 2nd public notice period as published in the Federal Register if the ECLA is converted from EELA in the same FOU
EELA and ECLA model agreements can be found on the Office of Technology Transfer Website.
Thursday, February 11, 2016