Cell and gene therapy companies are increasingly outsourcing research and manufacturing to contract development and manufacturing organizations (CDMOs).  Outsourcing enables these companies to take advantage of CDMOs’ core capabilities in development, process optimization, analytics, and manufacturing.  

 

Defining IP ownership arising under a CDMO agreement (Developed IP) is important in any CDMO agreement.  In practice, some ownership structures may benefit the CDMO even though they appear to be a reasonable compromise on Developed IP ownership.  Consider the following:

 

Jointly owned

Joint ownership of Developed IP is frequently perceived as a “fair” solution because it does not appear to give one party an advantage over another. Owing Developed IP jointly may also be the “easy” option, as it does not necessitate an in-depth negotiation about how Developed IP is allocated.  Unfortunately, joint ownership of Developed IP is often less than ideal because different business objectives for the CDMO and their customers often renders the patent process suboptimal for some or all stakeholders. 

 

I paid for it, I bought it

CDMO customers paying for development or manufacturing often assume that Developed IP is theirs. If the CDMO gives up Developed IP rights to platform improvements, it could end up owing a license to a customer – which can be costly and cumbersome.

 

If it’s mine, it’s mine. If it’s yours, it’s yours

One approach to assigning Developed IP is to define the nature of the invention.  As a general rule, Developed IP that is solely related to the product typically belongs to the customer, whereas Developed IP that is related to the process or technology platform typically belongs to the CDMO. Sometimes, instead of defining ownership solely by what the invention relates to, ownership is defined by what the invention “predominately” relates to. Both structures can be problematic because determining whether an invention solely/primarily relates to a product or process can be a source of disagreement. 

 

Ownership follows inventorship

A structure whereby ownership follows inventorship is likely to benefit the customer in situations where the customer provides the CDMO with device design specifications and the CDMO builds the device as directed. In practice, however, inventions are more likely to be conceived using the CDMO’s resources or employees, and as a result, the CDMO will typically invent the majority of the Developed IP.  If ownership is defined by inventorship, it is reasonable to conclude that the CDMO may retain ownership of more Developed IP. This structure may work better for some customers compared to others who rely more on the CDMO’s development expertise.

 

CDMO licenses the Developed IP 

Some CDMOs elect to have the customer own the Developed IP and take a license to the Developed IP. If the license is fully paid up, royalty free, and sublicensable, this approach can provide a lot of flexibility to the CDMO while still maintaining a good working relationship with the customer. In practice, a license to use the Developed IP provides the CDMO with the same operational flexibility that ownership does. An added benefit to the CDMO is that costs of patent drafting and prosecution is passed on to the customer.  If the customer chooses not to pursue or maintain the Developed IP, it can revert to the CDMO.  

 

The customer licenses the Developed IP 

If IP ownership is important to the CDMO, a CDMO can consider offering a license to Background IP in exchange for Developed IP ownership.  

 

CDMO customers frequently request a license to CDMO Background IP in order to shift production of their product to a different contract manufacturer. This approach allows the CDMO to ensure that it has the unrestricted right to practice the invention, while also giving the customer operational flexibility to move their business elsewhere.  

 

Springing License to Background IP

In some situations, a CDMO can consider a limited license to its Background IP that becomes effective only if certain conditions are met, such as a lack of supply, capacity constraints, or new market entrants.

 

Have IP to Background IP

It goes without saying that a CDMO licensing IP to its customers should have enforceable IP to license — such as patents, trademarks and copyrights. CDMOs frequently rely on “low-cost” forms of IP such as trade secrets and know-how. While licenses to these types of intellectual property can be enforced, it can be more difficult to do so.  

 

Combinations of the above

Alternatively, consider defining Developed IP ownership based on inventorship, but if an invention is not developed solely by a party, having inventions solely related to the CDMO platform be owned by the CDMO, and [all other] inventions related to the customer’s product be owned by the customer.

 

Conclusions

Defining Developed IP ownership is important in CDMO agreements, but IP ownership may not be a “one size fits all” contract term.  

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