Innovation Partnerships Startup Licensing Practices

Hardware, Device, and Materials Startups

Where U-M has IP that covers core aspects of a product, a royalty arrangement is typically appropriate. To facilitate the licensing process, we offer a term sheet for U.S. based startups licensing a single invention. This term sheet has been adopted by over twenty-five U-M startups in the last five years. We believe it covers most circumstances; however, we are happy to discuss different arrangements. Contact us to discuss our standard term sheet for qualifying hardware, device, and materials startups.

For U.S. based startups created to commercialize a single U-M invention

License Type

Exclusive license with right to sublicense

Upfront Fee

None

Royalty

No royalty due in first 4 years of license or until closing of change of control, whichever is earlier; 2% royalty on Net Sales thereafter
Royalty stacking reductions up to half of royalties otherwise due if licensee is required to pay royalties to third party
Minimum royalties starting in year 4: $5k year 4; $10k year 5; $15k year 6; $20k years 7+

Equity

4% equity at $2M of equity financing

Common stock
Participation rights providing U-M, or its assignee, the right to purchase up to 10% of the securities issued in subsequent rounds

Sublicensing

20% of non-royalty sublicensing revenues received by licensee for sublicenses entered in first 4 years; reduced to 10% thereafter

Patent Expenses

Future patent expenses paid as incurred
Back patent expenses reimbursed 1/3 at first anniversary; 1/3 at second anniversary; 1/3 at third anniversary

Benefits of Innovation Partnership License:

Other Startup Support

Specifics About Equity Provisions (U-M’s Typical Equity Provisions)