Reviewing SAIL: Freedom to Operate
How SAIL seeks to ensure long-term freedom to operate with respect to future IP produced by the University
Three weeks ago we released Simple Agreement for Innovation Licensing (SAIL). Over the last few weeks, we have followed up with a detailed but plain-language review of the intent behind it. You can find previous articles in that series discussing how universities are compensated for licensing, how SAIL handles the question of exclusivity and sublicensing rights, and how and when SAIL suggests that ownership of should be transferred a startup rather than maintaining a license.
Today’s article concludes this review with a discussion that is often a contentious topic in tech transfer: how are improvements to the licensed IP managed?
In collecting early feedback on SAIL 1.0, it is clear that this is an area in which SAIL missed the mark by giving too broad a scope to improvement access, feedback that will inform SAIL 2.0. Here I will discuss both why we took the approach that we did, and how we anticipate that the approach will change in future versions in response to early feedback.
You can find a copy of the agreement below for reference. As context for this article, I suggest reading Sections 8, 3.b.ii, and 3.c.vi. of SAIL, as well as the Core Design Principles section of the original article.
Freedom to Operate
A key consideration of both investors and founders in licensing technologies is freedom to operate. While patents are generally questionable until tested in court, it is critically important for the investibility of a startup that there be no obvious blocking IP, and that the likely paths to future IP that could be blocking have been addressed. Given the IP spun out of post-secondary labs is often just one of many stepping stones on the path through the related research and that the originating lab is by far the most likely source of potentially blocking IP in the future, investors and founders want clarity on whether or not the startup will be able to access that IP.
While universities are often happy to include non-binding commitments to negotiate access to future IP, this is not of much value to founder and investors, who, as in the case of IP ownership transfer, seek to avoid toothless clauses that involve renegotiation in the future. On the other hand, universities are rightfully wary of overcommitting, given the need to protect the interests of their researchers.
Access to Improvements
SAIL defines two categories of future IP: Improvements, and Related Inventions. The key difference is that Improvements are defined as any new IP produced by the Licensor that cannot be practiced without access to the IP already licensed under SAIL, while Related Inventions are anything related to the underlying IP but which could in principle be used independently without infringing on the IP already licensed under SAIL. This definition of improvements is lifted directly from AUTM best practices on the subject.
The rationale for the SAIL approach is that if IP cannot be used without infringing on IP already licensed under SAIL, then it is by definition worthless to anyone except the primary Licensee. At the same time, because the University has equity in the startup, the University has an incentive to ensure that Licensee has freedom to operate. Given this, there is no reason to withhold Improvements as defined above, which SAIL gives the Licensee an option to automatically roll into the license.
Comparable agreements in American tech transfer, for example that used by Columbia. In this framework, Improvements are defined as anything that necessarily infringes on at least one valid claim of the underlying IP, and are automatically rolled into the base license for a time-limited period of 1-3 years. In practice, while SAIL does not have an explicit time limit on Improvement access, the fact that SAIL terminates when the SAFE converts, and the access to Improvements clause does not survive that termination, means that SAIL will have a similar time limit. The difference is that SAIL adds in the flexibility of tying this time limit to a milestone event that allows for flexibility with respect to the pace of technological development, given that no two IP portfolios will follow the exact same pace.
Access to Related Inventions
Where it is clear from early feedback that SAIL takes too broad a view of access to future IP is in how it handles access to Related Inventions. Like Improvements, SAIL gives the Licensee the option to roll Related Inventions into the License, but unlike Improvements, they must pay again the Initial Licensing Fee to do it. Given that SAIL suggests an initial licensing fee of $0 in most cases, this ends up being the same as Improvements in most cases.
On top of that, SAIL as written does not limit the commitment to the originating lab, instead binding the University as a whole to the option. While this makes sense for Improvements, since, as noted above, Improvements cannot be practiced without access to already-licensed IP, where Related Inventions are concerned this potentially runs into issues of binding labs unrelated to the primary commercialization effort to give the Licensee an option to their IP. This is (rightly) incompatible with most University IP policies, and will be fixed in the next iteration of SAIL.
We are currently debating how and if Related Inventions should be made accessible to Licensees for SAIL 2.0. We are still gathering feedback on this aspect of the framework, and we invite anyone interested to contact us at the coordinates at the end of this article with input.
Wrapping Up
SAIL’s handling of access to Improvements is broadly similar to those suggested by AUTM and those used in several models of American tech transfer, seeking to ensure investor confidence that the startup will continue to have freedom to operate even as the University continues to conduct research and generate IP related to that which is already licensed under SAIL.
This post concludes the review of SAIL for the time being as we continue to collect feedback for improvements to the framework going forward. If you are interested in getting involved in ongoing development of the SAIL framework, or have feedback to share on any aspect of the proposed framework, reach out directly to the co-authors at the coordinates below:
You can find the other entries in the series reviewing SAIL below.
