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Donation drop pushes medical funders to seek better IP deals

Healthcare charity IP managers say they are negotiating fairer patent commercialisation and management arrangements with universities to replace falling revenue streams and generate cash for new projects

Healthcare funders have been seeking fairer IP deals with universities to replace declining revenue streams and generate cash for new medical projects, according to in-house sources.

IP managers at Versus Arthritis, the Wellcome Trust and a large medical charity say that most medical funders have revenue-sharing arrangements with universities for any supported project that is commercialised.
But many of these charities are now looking to renegotiate their agreed share and IP management rights over such projects in part because of a decline in public donations.
“The move has been partly driven by a drop in public donations,” says Sarah Odoi, IP development manager at UK-based medical charity Versus Arthritis.
“A significant income stream used to be legacies and – while it sounds horrible to say – people are living longer and charities are having to look for ways to make up for that shortfall.”
She adds that charities that do not have government grants and rely largely on donations have been hit particularly hard by this drop, saying that IP royalties could be a huge income source for charities if they were managed properly.
Other medical charities that are less reliant on donations have been reluctant to seek larger revenue shares for fear of looking greedy. Katherine Anastasi, legal counsel at the UK-based charity the Wellcome Trust, points out that her organisation is lucky enough to have an endowment and does not necessarily need to make up for a drop in legacy donations.
But she adds that the trust is keen to ensure that it has a say in how universities are reinvesting revenues generated by the commercialisation of funded projects appropriately.
“We did not want to be perceived as greedy by taking money back from universities that do need the funding, but equally we wanted to make sure that money met our own charitable objectives,” she says.
“If money is generated by a product we helped fund, and that goes to fund a new archaeology building, that may be in the university’s remit but it is not part of ours.”
Odoi adds that her organisation is similarly looking to be more involved in the IP management of the commercialised projects it funds.
“We want to be part of the whole process so that we can see what is being proposed and whether we feel that the strategies put in place are robust and sufficient.”
The Association of Medical Research Charities published IP guidance for its members, which include Versus Arthritis and the Wellcome Trust, in September 2018.

The document sets out, among other things, that charities should establish procedures for commercialisation notification and monitoring and a 50-50 revenue-sharing arrangement with universities.


Charitable terms

The challenge for many medical charities seeking better IP commercialisation deals is negotiating with universities.
“Communication is the crux of the matter,” says Odoi at Versus Arthritis. “We have seen backlash from top universities over why we are changing the status quo because the old system worked well for them.”
She adds that revenue-sharing between funders and universities was traditionally based on a sliding scale model that typically rested at 65-35 in favour of the higher education institutes, depending on the income generated by the commercialised product.  
But now that the AMRC has proposed a 50-50 split, many charities are looking to adopt that model.
“I don’t know if other charities are moving towards that model but I do get the sense that there is going to be change.
“Our general position is that if [universities] want to accept our funding, they must accept our terms and conditions.”
The large medical charity solicitor points out that such negotiations will be harder for smaller charities that have not had much negotiating experience. Larger charities often work with multiple universities on a diverse range of projects and have the resources and leverage to organise a good arrangement for both parties each time.
“We have always had good relationships with universities and have a lot of experience of putting agreements in place because of the number of deals we do and the size of our organisation.”
He adds that the organisation sees its relationships as symbiotic and that it is careful to ensure its university partners get a fair share and see the fruits of their labour.
Sources say that negotiations should not be an issue when it comes to ensuring that money generated from funded projects is spent in the right way. 
Anastasi at Wellcome says her organisation recently agreed to put a consent waiver into its funding terms and conditions requiring universities to notify the business when they intend to commercialise a product.
Wellcome has also included a provision that sets out that universities may apply to retain the funds generated from commercialisation so long as they make a case for how they would like to spend it and that the investment somehow improves access to medicine.
“All we are saying is that we would much rather our partners came to us with suggestions of what they would like to do with the money – which we hope will be an incentive to reinvest revenues in projects that matter to the charity.”
The charity sector is changing its stance on IP. Smaller charities want a bigger slice of the patent commercialisation pie to replace lost income and feed new projects, while better-off organisations want more of a say on how the pie is distributed.
Universities might be hesitant to change the status quo but might ultimately feel that giving over a few more rights is better than experiencing a drop in funding.

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