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I am reading an agreement that our Company is signing with a University regarding a research project. The agreement has one clause which states:

Clause-x: Any IP generated in this Project will be jointly owned by UNIVERSITY and COMPANY.

Another clause says:

Clause-y: COMPANY will be offered first the right to avail of the exclusive right to commercially exploit the IP generated. If COMPANY wishes to avail of the said offer then both parties will enter into a separate agreement detailing the terms.

Clause-z: If COMPANY is not willing to avail of the offer then UNIVERSITY will be free to offer non-exclusive rights on the IP to third parties, based on consent from COMPANY, which shall not be unreasonably withheld.

The part that confuses me is this bit. Does this mean:

  1. Company is always allowed to exploit the IP for itself (after all, it is the joint owner in this IP!) but the "separate agreement" mentioned is only if the company desires exclusivity. i.e. The ability to block University from licensing the IP to others by paying a fee. In other words, as co-owner of the IP, the right to exploit the technology for itself always existed with the Company & is not what is being offered (for sale) here via Clause-y. What is being offered by University to Company (for payment) is for the University to forfeit its licensing rights as a co-owner OR
  2. Even for self-exploitation of the IP the company will need to sign a "separate agreement" with the University (and presumably pay it money / royalty)?

What's the right interpretation of this? I tent to think it is #1 but I'd love opinions.

PS. At some points the lawyers will come in & decide but since I saw the agreement I was curious to interpret it.

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I'm sure you've solved this by now, but your "option 1" is the situation.

As joint owner, you have rights to act with your property in a natural way. You could exclusively license the IP, for instance. However, the university is not bound to do the same, which could undermine the value of your exclusive license. (e.g. If you misrepresented this fact in a prospectus, bond, or note, you could be held liable.)

The university will forfeit its interests, at a price, or based on any other negotiation element which you may bring to the table and win.

The part about

based on consent from COMPANY, which shall not be unreasonably withheld

Is a guard against situations where you may have certain forms of precedent to act with the joint property. A common one that happens is when the university has done nothing with their rights, but you / your company have put the IP into practice and have sales at market.

If the university now attempts to license and act independently, without discussing with you prior or doing other diligence, it could be held as not acting in good faith. This would give you increased leverage for restitution.

In that situation, you would be reasonable to withhold consent until negotiations were finalized.

  • I've added some more context, since you're still around an interested – New Alexandria Aug 24 '17 at 12:28

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