1. P AT E N T S
Material transfer agreements: open science vs.
© 2005 Nature Publishing Group http://www.nature.com/naturebiotechnology
proprietary claims
Victor Rodriguez
For academia and industry, MTAs are the means to widely differing ends.
A lthough the development of pharmaceuti-
cal and biotechnological end products has
been traditionally based on patents, biomedical
impose research restrictions that infringe
upon academic freedom or the dissemination
of research results, and may conflict with spe-
look to inventions as a basis for royalties. Since
research materials may have important com-
mercial value, their transfer is treated much the
research in academia comes from the very dif- cific requirements of funding agreements. same as a transfer of patent rights1.
ferent tradition of open science; that is, relatively MTAs are contracts that are protected by law.
unrestricted access to fundamental knowledge If one of their provisions is not followed, the Standardization and variables
developed by previous researchers. Research contract is breached and the wronged party In the United States, to simplify transfers
materials were often freely exchanged without has the right to bring action against the other, between nonprofit research institutions, the
formal arrangements. Beginning in the 1970s, such as suing for damages. The transferred National Institutes of Health (NIH) published in
however, life science research brought academia material under an agreement may also be pro- 1995 the final version of the Uniform Biological
and industry closer together. tected against certain forms of violation by Material Transfer Agreement (UBMTA) and the
Industry defends its commercial and prop- third parties. Thus, a third party who obtains Simple Letter Agreement for the Transfer of
erty interests by acquiring and protecting the material by theft or trickery may be liable Non-Proprietary Biological Material. Although
exclusivity in the market through patents and for damages. there has been no formal agreement on a for-
trade secrets. In contrast, governments and the In industry, MTAs will authorize the mat for use when a for-profit entity is provid-
academics they fund aim to preserve the flow exchange of materials between collaborating ing material to a nonprofit organization, the
of ideas through publication or to safeguard companies for the purpose of developing a Association of University Technology Managers
the creation of a product thanks to the new product, prohibit the materials’ use or trans- (AUTM), the NIH and industry representa-
knowledge. Sometimes these two missions fer to third parties for purposes other than the tives from what was then the Pharmaceutical
conflict, as in the case of material transfer collaboration, and define a mechanism for Manufacturers Association developed a draft
agreements (MTAs). marketing the product. Patent and ownership agreement in 1992.
rights will be precisely defined, but problems At the 2003 AUTM annual meeting, a spe-
MTAs in practice sometimes arise concerning the allocation of cial interest group on MTAs met for the first
Pioneered by industry, MTAs are used in rights to unexpected inventions arising from time and made a survey of significant issues for
connection with the transfer of materials for the research. A typical solution is for each party academia and industry. For academia, the most
safekeeping purposes (for instance, storage to receive a nonexclusive license to any inven- significant issues relating to MTAs were: the
in gene banks), research or commercial use. tion emerging from the joint effort. The com- nonexclusive royalty-free license, with the right
Now increasingly being used by public sec- mercial value of such a license is often small; to sublicense; the broad definition of materi-
tor laboratories and academia, they may take hence, companies may not attempt to obtain als; the publication restriction; the invention
a variety of forms, from letters accompany- patents on such material. ownership of recipients; the indemnification;
ing a shipment of materials to detailed and Nonprofit research units, such as public sec- the tracking and honoring obligations to the
formally negotiated contracts signed by both tor and academic laboratories, want to ensure provider; and the definition of invention. For
parties before a transfer of materials is made that the material remains in the public domain industry, the most important matters were:
in or out of research units. Outbound agree- while making certain that their association unauthorized distribution and publication2.
ments are often associated with having pat- with the material is recognized. Two factors The provisions of MTAs may vary, depending
ent rights to the material in question, whereas are leading nonprofit research institutions to on the intentions of the parties (see Table 1). At
inbound agreements may include terms that adopt different strategies. First, exclusivity— one extreme, MTAs may be designed to avoid
obtained through intellectual property (IP) patent rights on the material or its components.
rights—is necessary to ensure that the mate- At the other, they encourage patenting inven-
Victor Rodriguez is in the Department of Applied rial can be commercialized. Companies will tions deriving from the material and dividing
Economics, Catholic University of Leuven, not use public sector inventions unless they the benefits of such inventions. For academia,
Naamsestraat 69, 3000 Leuven, Belgium. can recoup the costs involved in taking them the basic restriction is the limitation to pub-
e-mail: victor.rodriguez@econ.kuleuven.be to market. Second, nonprofit research units lish research results. The agreement wording
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2. PAT E N T S
Table 1 Characteristics of material transfer agreements used by nonprofit and for-profit parties
Nonprofit party For-profit party
Advantages Availability of research materials at no cost Access to expertise not available within company; collaborative
opportunity
Disadvantages Conflicting obligations to provider and financial sponsor; Loss of control over materials; loss of competitive edge due to
freedom to publish not always guaranteed; usage restric- publications
tions difficult to track
Definitions of material Narrow definition that includes unmodified derivatives, Broad definition that includes unmodified derivatives, variants
© 2005 Nature Publishing Group http://www.nature.com/naturebiotechnology
but excludes variants and confidential information and confidential information
Use of material Indetermination of noncommercial research; distinction Control of asset distribution; limited use to laboratory; return of
between use and transfer of modified material unused material
License rights Broad, free nonexclusives with right to sublicense; Royalty-free, nonexclusives with limited sub-licensable right; in
forced joint ownership a problem joint inventions, mutual permission necessary to license to third
parties
Pre-license patent prosecution The provider should bear all costs of patent prosecution In sole inventions of recipient, the recipient bears costs and gets
in return for option grant; split costs for joint inventions recouped under exclusive license; in joint inventions parties split
not equitable costs
Post-license patent prosecution It is preferable to control prosecution; alternative, right It is preferable to control patent prosecution and make patent
to veto actions that undermine ownership interests; the decisions, freedom to operate in return for bearing risk of devel-
licensor (recipient) has the right to continue prosecution opment; alternative, if ownership interest is impacted, nonprofit
on its own and the licensee (provider) loses right if this can pursue prosecution
no longer pays patent costs
Confidentiality Avoid obligation if possible; identify clearly in writing all Written broadly; need to protect corporate assets; competitive
confidential information; may permeate research making environment requires maintaining confidentiality; balance risk
publication difficult; need exceptions, e.g., for indepen- against benefit; preserve opportunity for patent protection
dent development; should not include research results or
data generated by investigator
Publication Acceptable delays for review, before submission; accept- Limited time delays before submission or to file patents; pre-
able restriction on content, none to confidential informa- serve confidentiality of confidential information
tion and thesis issues
Term and termination The provider has the right to terminate problematic situ- Freedom to terminate and lack of finite research term
ations if the material has been used in thesis research;
the term on research makes it easier to monitor ongoing
obligations
Source: reference 2
may give the provider control of publication material, implying that the provider is not deterring factor, the agreement can include
and may assert that nothing is to be published responsible, even if the material was provided the proposal of a one-time fee to allow for cost
or otherwise disclosed without the provider’s without proper warnings about associated haz- recovery. Such a fee can reasonably include the
approval, to allow the provider to determine ards or needed precautions. cost of materials, the extra labor required to
whether its own confidential information has Equitable ownership of materials is deter- make them, and shipping or other fees3.
been improperly disclosed, and whether there mined in much the same way as ownership of When the material transfer occurs before the
are new IP rights. IP. Difficulties may arise when an academic filing of a patent application related to the trans-
Providers may also assert ownership not only investigator uses two materials from two dif- ferred materials, such a transfer may be deemed
of the physical material, but also of new materi- ferent providers, or has made one of the mate- prior art to the claims and bar patentability of
als or inventions made by recipients through the rials under company sponsorship. In such a the transferred materials. Although most cur-
use of the provided materials. This not only rep- situation, it is quite likely that the terms of the rently used academic MTAs are adequate for
resents a direct loss, but also can cause indirect agreements covering the two materials are in post-filing transfers, confidentiality provisions
damage by limiting the freedom of recipients conflict. If preemptive MTAs cloud owner- may be required to avoid the prior art effect of
to continue a line of inquiry because they no ship rights, investigators may be restricted in some pre-filing transfers. Whether a pre-filing
longer own their research results. An agreement their ability to interact with a future sponsor. transfer of an invention whose full utility is not
may award the provider an automatic license for Investigators may need a commercial developer known bars patentability awaits future clarifica-
the resulting IP for little or no compensation, to convert an invention into a product, but IP tion by the courts.
so that it can develop commercial products if terms in MTAs may prevent the institution Additionally, when pre-filing transfers are
it chooses. Since the provider of the material is from granting rights to a future developer. No made, agreements lacking confidentiality provi-
usually not funding the research, the recipient sponsor wants to pay for research benefits that sions may negatively affect academic technology
needs to ensure that there are no conflicting it cannot have. In addition, the terms of an transfer. First, if a patent is invalidated because
obligations between its financial sponsors and agreement may make it difficult to collaborate of such transfers, the institution may not be
the provider. with other scientists. entitled to royalties from the claimed invention
An agreement term may require that the Some materials can be very costly to make, from the licensee. Second, those transfers may
recipient indemnify the provider against any and it can be financially unreasonable to sup- be used by prospective licensees to discount the
damage that may occur through use of the ply them to multiple investigators. If this is a value of the patent, even if a patent has not been
490 VOLUME 23 NUMBER 4 APRIL 2005 NATURE BIOTECHNOLOGY

3. PAT E N T S
challenged. Third, after discovering those trans- ity does not depend on vigilance. Without tion in setting the terms of their agreements
fers, a would-be licensee may abandon licensing some monitoring or tracking, MTAs may be and tailoring them to their specific needs.
negotiations and develop the technology with- effectively meaningless. Transferred material can be regarded as trade
out a license, knowing that, if sued for patent secrets. In countries that protect trade secret
infringement, an attack on the patent validity Looking ahead contracts, MTAs offer a form of IP protection
could arise. The proprietary claiming wave has been the that can go beyond that available under pat-
MTAs are enforceable in countries that consequence of high levels of investment in ent law. The increasing complexity involved
respect trade secret law. A caveat can arise R&D and extraordinary scientific and techno- in the supply of proprietary technologies may
from competition law that restricts the use logical breakthroughs. Although IP rights may raise matters of contract law, IP law, biodiver-
© 2005 Nature Publishing Group http://www.nature.com/naturebiotechnology
of private agreements to achieve IP goals far sometimes be necessary to motivate industry sity and biosafety law, technology transfer and
beyond those created by patent and copyright to develop and disseminate university-based competition law.
statutes. But it is not clear whether in order inventions, the trend towards the assertion of
ACKNOWLEDGMENTS
to be enforceable, the agreement has to be IP rights by universities may also impede the
The author would like to thank Jean Gilbert for helpful
signed by both parties before the transfer progress of science. The challenge lies in distin- comments on drafts of this article.
of the material, or whether a simple letter guishing research results that are better devel-
included with the transferred material is suf- oped and disseminated through open access or 1. Barton J.H. & Siebeck W.E. Material transfer agree-
ficient to establish an enforceable agreement. under the protection of IP rights. Despite the ments in genetic resources exchange: the case of the
If the recipient proposes terms that materially fact that MTAs provide a safeguard for invest- international agricultural research centers. Issues in
Genetic Resources No. 1 (International Plant Genetic
differ from those contained in the letter of ments in technology by setting out the condi- Resources Institute, Rome, 1994).
agreement, the response, even if it is worded tions for using the material, open science is 2. Streitz W.D. et al. Material transfer agreements: a win-
win for academia and industry. Annual meeting of the
as acceptance, is considered a new offer, to be limited by MTAs. AUTM (AUTM, Northbrook, 2003).
accepted by the provider. Finally, there is no Unlike patents or copyrights, MTAs do not 3. Council of Governmental Relations. Material Transfer
legal requirement for the provider to verify rest upon codified legal statutes defining spe- in Academia (COGR, Washington, 1997).
4. Whitaker, J.S. The prior art effect of material transfer
whether the recipient is living up to obliga- cific rights and obligations. Instead, reflecting agreements. J. Assoc. Univ. Technol. Managers VI,
tions included in the agreement; enforceabil- freedom of contract, parties have wide discre- 1–10 (1994).
NATURE BIOTECHNOLOGY VOLUME 23 NUMBER 4 APRIL 2005 491