University spin-out businesses are typically private limited companies set up to commercialise research and innovations developed within academic institutions. They are typically founded by university researchers, faculty members or students with institutional support. Some universities even have spin-out hubs; such spin-outs are vital for transforming academic discoveries into practical applications, driving economic growth and fostering innovation.
If you are considering involvement or investing in a university spin-out, understanding the legal aspects of intellectual property (IP) and commercial law is crucial. Here are some key things to know.
Legal considerations
IP ownership and licensing
It is fundamental to clearly define IP ownership and licensing agreements between the university and the spin-out. This ensures that all parties understand their rights and responsibilities. It is common practice to agree heads of terms before entering into a transfer of ownership or licence agreement to ensure all parties are on the same page. However, it is key to ensure this is drafted by a suitable legal professional to ensure that terms which are not intended to be binding, become binding inadvertently.
Ownership: establish who owns the IP created during the collaboration. This can vary depending on the employment status of the creator or the academic institution’s policies. Founders may have dual roles that can complicate IP ownership. It is fundamental that this is identified at the earliest opportunity.
Licensing: discuss how the IP is to be used by each party – does the academic body require use of the materials for further study or educational resources? Is the spin-out going to benefit from exclusive commercial use or solely for a specific field? The scope needs to be clearly defined, together with the commercialisation rights and any profit-sharing arrangements – this should be considered in tandem with any investment or shareholders agreement to ensure they align.
Regulatory compliance
Make sure that the spin-out is able to comply with any applicable regulatory requirements and standards. Is the product to be used in health-tech or green-tech? It is key to conduct due diligence to determine what is expected and required of the company.
Set up and governance
It is fundamental from a governance perspective that the spin-out company is set up correctly. At Stephens Scown, we have expert corporate lawyers that are on hand with the required experience to ensure the company is correctly set-up, together with the necessary governance agreements. Our expert teams collaborate seamlessly to ensure that our client’s are best protected. From articles of association to shareholders agreements – it is fundamental to make sure the right set-up is in place for a seamless and efficient transition to commercialisation.
Commercialisation
Scaling: scaling the business from a small start up to a larger enterprise requires careful planning and execution – and the necessary commercial protections. Make sure that you have your own terms of business and onward client and supplier agreements to not only protect your business, but to ensure compliance with any terms with the academic body and/or the governing documents.
Strategy: devise a robust IP strategy to protect innovations and gain a competitive advantage in the relevant marketplace. We can help you build a bespoke strategy which strives to aid the longevity of your business.
At Stephens Scown we have extensive experience in assisting both spin-out companies and academic institutions throughout the spin-out journey. We benefit from a variety of legal advisors with the necessary skill, knowledge and expertise to achieve the best outcomes for our clients. If you are embarking on or considering involvement in a spin-out company, please get in touch on 0345 450 5558 or enquiries@stephens-scown.co.uk