Model agreements and licensing guidelines

International initiatives

22.45 In a 2002 report, the Organisation for Economic Co-operation and Development (OECD) concluded that concerns about gene patents are often about access to patents through licensing arrangements, rather than about the grant of gene patents per se.^[80] The OECD proposed that one means of addressing these concerns is for governments, in consultation with industry, to develop ‘good practice guidelines or codes of conduct’.^[81] In a report released in 2004, the OECD commented that ‘licensing guidelines or model contracts are self-regulatory solutions to some of the perceived problems associated with the patenting of biotechnology’.^[82]

22.46 The OECD’s Working Party on Biotechnology is currently developing best practice guidelines for the licensing of genetic inventions.^[83] It is anticipated that the guidelines will include voluntary, non-binding recommendations as examples of best practice.^[84] In November 2003, a steering group of experts met to discuss this issue, and a draft of the licensing guidelines is scheduled to be released in mid-2004. Australia has provided experts to assist in the project.^[85]

22.47 Best practice guidelines and model agreements are already an aspect of technology transfer in the United States. As discussed in Chapter 12, the United States National Institutes of Health (NIH) have developed Principles and Guidelines for Recipients of NIH Research Grants and Contracts on Obtaining and Disseminating Biomedical Research Resources (NIH Principles and Guidelines).^[86] While the NIH Principles and Guidelines apply specifically to the recipients of NIH research grants and contracts, the NIH has expressed its hope that they ‘will be adopted by the wider research community’.^[87] The NIH has also developed a ‘Simple Letter Agreement for the Transfer of Materials’ in conjunction with the NIH Principles and Guidelines. In addition, in 2004 the NIH released a set of draft guidelines providing best practices for the licensing of genomic inventions. However, the draft is not yet publicly available and no timetable for finalising the guidelines has been set.^[88]

22.48 Industry organisations (such as LES) and industry publications may also be a source of examples of standard form licence agreements. In addition, a model Materials Transfer Agreement developed by the Association of University Technology Managers (AUTM) is widely used in the United States and other countries.^[89]

Submissions and consultations

22.49 DP 68 proposed that AusBiotech, in consultation with Biotechnology Australia, state and territory governments and other relevant stakeholders, should develop model licence agreements and interpretative guidelines for patent licences involving genetic materials and technologies.^[90]

22.50 A broad range of submissions supported this proposal.^[91] AusBiotech indicated that it could develop ‘a pro forma of various model agreements’ in partnership with industry groups and anticipated it could have a role in the ‘development, facilitation and testing’ aspects of such a project.^[92]

22.51 However, some submissions and consultations questioned the utility of developing model licence agreements.^[93] Submissions noted the wide variety of arrangements pursuant to which gene patents may be licensed and observed that the terms of any licence agreement must be adapted to the particular circumstances and the technology involved. The Queensland Government commented:

Licensing agreements need to be tailored in each case, to ensure that the particular circumstances are accounted for. The danger of model licence agreements is that they are not sufficiently tailored to the particular circumstances of each individual case.^[94]

22.52 Nonetheless, the Queensland Government supported the development of model licence agreements ‘on the basis that these model agreements contain a number of different clauses and consider different scenarios that will assist in tailoring the agreement to meet the requirements of the particular circumstances’.^[95]

22.53 Some submissions commented that organisations that are regularly involved in patent licensing often develop their own standard agreements.^[96] If so, model licence agreements would be of most benefit to smaller enterprises in the biotechnology sector, which do not have the resources to develop their own standard agreements.

22.54 It was also observed that a number of similar projects are being implemented in this area and that these initiatives should be closely coordinated.^[97] DITR suggested that ‘the development of any Australian model should preferably await the culmination of the OECD process [to develop best practice guidelines for licensing genetic inventions] in order to benefit from the international developments in this area’.^[98]

ALRC’s views

22.55 Transaction costs in negotiating licences to gene patents have been identified as an issue for Australian entities. The Nicol–Nielsen Study suggested that licence negotiations often follow a well-trodden path in which certain types of terms generate recurrent controversy. The ALRC agrees in principle with the solutions proposed by the OECD and considers that these problems would be ameliorated by the development of model agreements for the licensing of inventions involving genetic materials and technologies. Model licence agreements could reduce the financial costs and time involved in negotiating licences to gene patents, and would be particularly useful for small and medium sized Australian enterprises, which have limited resources.

22.56 AusBiotech would be an appropriate body to coordinate the development of such model agreements. As the peak industry body in the Australian biotechnology sector, AusBiotech’s membership includes entities whose businesses involve diverse aspects of the research, development and commercialisation of genetic materials and technologies. Further, AusBiotech is actively involved in other initiatives to assist entities in the Australian biotechnology sector. For example, the Australian Stock Exchange and AusBiotech have jointly developed a draft code of best practice for reporting by publicly listed biotechnology companies, which is designed to improve the Australian investment community’s understanding of biotechnology companies.^[99]

22.57 AusBiotech is well placed to seek opinions about the issues that model agreements should address and to balance the interests of patent holders and licensees in developing these agreements. Government involvement in this process (at federal, state and territory levels) would also be desirable to ensure that the public interest in maintaining access to genetic materials and technologies—for example, to genetic research tools—is taken into account in developing model agreements. AusBiotech should, therefore, collaborate with Biotechnology Australia, state and territory governments and other relevant stakeholders in developing the model agreements.

22.58 The ALRC envisages that a number of model agreements could be developed to address the particular issues raised by different types of gene patents and the various purposes for which a licence may be required. Further, each type of model agreement could contain alternative clauses relevant to particular situations to allow the agreements to be adapted to the circumstances of a deal. Entities that choose to use the model agreements would be able to adopt the terms of an appropriate agreement in full, or to modify an agreement by negotiation, in whole or part, in a manner that best suits the needs of the parties. Some terms of the model agreements—for example, financial provisions—are more likely than others to require adaptation to meet the needs of the parties. However, model agreements could offer useful examples of the way in which these terms might be structured, as a starting point in negotiations.

22.59 Agreements developed by bodies such as the NIH and AUTM in the United States,^[100] and the licensing guidelines currently being developed by the Biotechnology Working Group of the OECD, may be useful resources in developing the proposed model agreements. The model agreements should include provisions relating to: definitions of particular types of genetic materials and technologies; the scope of rights granted under a licence (including both exclusive and non-exclusive licences); restrictions on the exercise of licence rights (such as reservations of rights for research use); and payment terms (including desirable royalty structures, fixed fee and milestone payment provisions). The agreements might also include model provisions relating to more controversial licensing issues, such as reach-through rights.

22.60 Interpretative guidelines should be developed in conjunction with the model agreements to assist users in understanding the circumstances in which each of the agreements could be used and the scope and purpose of particular terms.