This glossary of licence terms is provided to explain the meaning of some common words and phrases found in the terms of licence agreements. During your commercialisation journey, you may encounter or be asked to comment on these terms by Industry Partnerships and Commercialisation (IPC) team members or your commercial or legal representatives if you are forming a startup company. This glossary is provided as an information guide and is part of the Enterprise Division’s commitment to provide you with support during the commercialisation process.
Licence agreements are needed not only when IP is licensed to external organisations, but also when Imperial staff launch their own companies using Imperial's IP.
Learn more about the process of licensing IP to Imperial startups
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Diligent and reasonable endeavours
Imperial has a duty, along with other publicly-funded universities, to maximise the societal impact of its research outputs. This clause sets a standard by which the licensees efforts to achieve that impact are judged. It is the expectation that the licensee makes a reasonable effort to develop the licensed intellectual property into a product or service.
This clause protects ICIL and Imperial in the event there is a court action, claims and damages awarded resulting from the licensee’s use of the IP. The licensee makes a promise of financial protection to ICIL and Imperial for any potential legal liabilities and claims issued by a third party as a result of the licensee’s use. This is a standard provision requested by licensors in all licence agreements and is an essential requirement particularly in licences granted by universities and their technology transfer organisations.
The entity to whom a licence is granted.
The entity that grants the licence.
These are one-off payments to the licensor in the event of certain developmental (e.g. regulatory approval) or sales milestones achieved by the licensee. They are designed to share the increased value of the IP resulting from the achievement of such milestone events between the licensee and licensor.
The income generated by the licensee in sub-licensing the intellectual property. The clause details the forms which that income may take.
The sales price of the product or service covered or enabled by the intellectual property under licence minus the cost of shipping and taxes along with a few other permitted deductions. It is the most common way to calculate royalties based on sales.
Patent cost reimbursement
The repayment of the external costs of filing and prosecuting any patents included in the licence up to the point the licence is signed. With an exclusive licence, the licensee then typically takes over patent prosecution.
The method, frequency and currency of payment of royalties on net sales and net receipts.
Reservation of rights
A clause that ensures that Imperial academics and researchers can continue to use the IP under licence for research and teaching purposes; core to its mission as a university, it “reserves the right” for them to do so. Note the wording of this clause does not grant Imperial (or anyone else) any rights to use the IP for commercial purposes. The transfer of IP from Imperial to ICIL for commercialisation requires that ICIL must include this language in all relevant agreements.
Research funders and collaborators often require additional reserved rights to appear in any licence to IP developed from a research project (for example, reserved rights for external academic groups working on the research project).
Royalties on net receipts
The percentage of net receipts payable to the licensor (along with the other financial terms of the licence) payable by the licensee in return for granting the licence.
Royalties on net sales
The percentage of net sales payable to the licensor (along with the other financial terms of the licence) by the licensee in return for granting the licence.
Royalty stacking and combination products
Terms that allow the licensee to reduce royalty payments to the licensor in the event that 3rd party IP is necessary to exploit the licensed IP (Royalty Stacking); and/or the licensee adds its own products to the licensed products in a “bundle” (Combination Products). The licence specifies a maximum amount by which the licensee can reduce royalty payments to the licensor by this mechanism, so that the licensor is not disproportionately disadvantaged.
Specific diligence conditions
Like milestones, but with no financial terms associated with them. Their purpose is to set goals for the licensee (e.g. first commercial sale by year XXXX), usually aligned with a development or business plan. Startups can often experience changes of direction or unforeseen circumstances; in the event a company is struggling to reach these goals then dialogue is required between the licensee and licensor as the purpose of the licence is to promote development of the IP. It is common for licensors to have the right to seek explanations from the licensee, impose penalties, or as a last resort terminate the licence if these conditions are not met and there is no viable route forward for further development of the IP.
This occurs when the licensee decides to grant some or all of the rights acquired under the original license to a third party. For example, a startup could opt to partner with a larger company that has manufacturing or sales capability. The licence between the licensee and this third party is called a sub-licence. This ensures that ICIL and Imperial receive the same rights, benefits and protection under any sub-licence that are received from the main licence.
The agreed provisions under which each party may end the licence.
A one-off fee payable to ICIL to cover the administrative costs of terminating the licence.
Assurances or promises in an agreement, the breach of which may give rise to a claim for damages. Licensors will always try to limit or exclude any warranties in a licence to the maximum extent possible. Due to the nature of university-derived intellectual property, ICIL can only give very limited warranties in licence agreements. Note to facilitate quick negotiations ICIL also limits the warranties it requires from the licensee, i.e. there are very limited mutual warranties in the licence. The licence will also contain standard specific disclaimers and exclusions, e.g. that the technology is at an early stage of development and the licensor is not giving any warranties that the IP will produce any specific results along with other specific conditions relating to the IP. ICIL (along with other university licensors) does this to avoid exposure of the academic inventors, Imperial and ICIL to breach of warranty claims. As noted above in return, ICIL asks for very limited warranties from the licensee.