Early‑stage biotech companies depend heavily on solid legal foundations, particularly in relation to their core technology. Purposeful negotiation and structuring of license and collaboration agreements can strongly influence whether a promising discovery turns into a fundable, scalable business. This post distills practical insights, focusing on how founders can navigate Swiss university licensing practices and design industry collaborations that effectively protect and leverage their IP from day one.
From a University Lab Discovery to a Technology Licensed to a Spin‑off
A common scenario involves two researchers at a Swiss university who co-invent a life-science technology, which the university then patents and owns. The researchers subsequently establish a spin-off to acquire the rights to develop and commercialize this patented technology, forming the core of the spin-off's business. As the researchers plan on becoming founders, their collaboration with the university evolves. This development may affect their respective interests, which may remain aligned on some topics but diverge on others.
A. Guiding Posts for Negotiating University Licenses
When entering into a licensing process with Swiss universities, founders may want to consider the following guiding posts:
- Anticipate the exit strategy: Plan the exit and preceding steps to maintain flexibility for the spin-off's financing, partnerships, and potential acquisition. The licensing agreement must balance the interests of current stakeholders—such as the university, its technology transfer office, and the academic founders—with those of future stakeholders, including investors and industry partners.
- Distinguish between financial and non-financial terms: Although interconnected, separating these two categories can help structure negotiations. Swiss university licensing practices are trending towards greater transparency and standardization. Examples include the University of Basel's startup policy with equity and royalty guidelines (financial terms), the EPFL's commented license agreement (non-financial terms), and the ETHZ's Business Creation Regulations (financial and non-financial terms).
- Define the negotiation framework: Establish clear goals for the time and effort to be allocated to the licensing process. Protracted negotiations may not justify a marginal improvement in the outcome.
B. Financial Terms in University Licenses
Financial components in licensing agreements may include equity or exit fees (phantom stock), reimbursement of past patent costs, royalties, sublicense fees, license maintenance fees, and development milestone payments.
Founders should closely review any published financial guidelines from the licensing university. If special circumstances warrant a deviation from these guidelines, founders must be prepared to justify their position and potentially offer a concession. If the university lacks such guidelines, benchmarks from other Swiss universities can facilitate discussions. In any event, financial terms should be negotiated as a comprehensive package.
C. Non‑Financial Terms in University Licenses
While negotiations on university licenses understandably often focus on financial aspects, the non-financial terms can be decisive for a license's long-term viability. When assessing the university's proposed terms, founders must also consider potential terms not yet included in the licensing term sheet or agreement. In this respect, they should also account for the anticipated interests of future investors or industry partners.
Industry Collaboration
Beyond securing foundational IP through university licensing, biotech startups must also navigate industry collaborations to validate technology, extend the runway, and unlock investment. These partnerships benefit both sides – startups gain proof-of-concept, resources such as staff and know-how, networking, and extra bidders, while an industry partner secures early access to assets, faster/cheaper development, risk reduction, and stronger negotiating leverage.
A. IP – The Core Business Case of a Biotech Startup
As established earlier, IP forms the core of a biotech startup's business model, protecting emerging technologies while drawing capital. Robust IP differentiates a startup from competitors, erects entry barriers, signals innovation and market dominance to investors, and generates revenue through collaborations and partnering deals. Protecting it demands careful negotiation of collaboration and license agreements with potential industry partners.
B. Structuring Collaboration and Licensing Around IP
A collaboration agreement governs joint work between a startup and an industry partner, defining performance of research, timelines, reporting, governance, and, importantly, the allocation of IP ownership. During negotiations, founders should take care to clearly distinguish between background IP (pre‑existing or independently developed rights) and foreground IP (results and inventions produced under the collaboration), including enhancements and improvements, and to avoid co‑ownership, which often complicates exploitation. The goal: Centralize ownership of all relevant IP at the startup while granting partners certain rights for internal evaluation or commercialization through licensing terms.
Whether embedded in the collaboration agreement or in a separate agreement, licensing terms should precisely define the scope (type of IP, field of use, territory, sublicensing), use exclusivity sparingly and narrowly, and either define financial terms (upfronts, milestones, royalties) that are structured to match expected cash flows or provide a clear, balanced, and time-bound negotiation process to determine them.
C. Practical Tips for Founders
Come in prepared: Successful negotiation of collaboration agreements and licensing terms is less about complex legal jargon and more about aligning contract terms with business goals. Before anything, founders must assess their goals and the startup's strategic fit as well as competitive position to gauge leverage, define non-negotiables, and plan for financing or exit scenarios to avoid blocking long-term growth. Founders should clearly articulate how the collaboration will advance their startup's development.
Draft first: Based on your preparation work, create your own list of terms to set anchors on IP scope, milestones, and economics. Highlight mutual benefits, define room for compromise on non-core terms while protecting foreground IP ownership, and get input from other successful startups and advisors to refine. Even if you will not get the opportunity to provide the first draft of the term sheet to your collaboration partner, this internal list of terms will serve as a reliable guideline throughout the negotiations.
Stay organized: Track your progress by documenting all communications and document versions, set realistic deadlines, plan early for negotiation calls or meetings, and review post-negotiation for lessons to refine the ongoing as well as future deals.
Practice makes perfect: Consider role-playing negotiations with your team or mock partners to test your red lines and fallback positions as well as identify walk-away points. Put in some effort early to identify and develop possible alternatives. This will allow you to act calmly and rationally even when you reach the walk-away point.
Authors: Christian Wyss, Vincent S. Reardon, Natacha Tang
