In an article published in the January issue of Technology Transfer Tactics, Lance Lawson provides insight on the recent judgement requiring the University of Wisconsin's patent-licensing arm to pay Washington University in St. Louis (WUSTL) $31.6 million for breaching a royalties contract.

As co-development agreements become more prevalent, universities also may need to pay more attention when another entity is given the power to assign relative value to patents involved in a license, because millions can be lost if those valuations are skewed.

The agreement was related to the sale of a drug used in treating kidney disease and researchers from the two universities that collaborated in the 1990s, applying for the drug patent in 1995. They agreed to have the University of Wisconsin's licensing arm, Wisconsin Alumni Research Foundation (WARF), handle licensing of the patent, known as the '815 patent.

Later on, WARF licensed the patent to Abbott Laboratories, which later spun out AbbVie and used the patent to create a blockbuster kidney drug. However, Washington University had received less than $1 million in royalties from the patent when it pursued litigation, while WARF had received more than $426 million.

"Such disputes could be more common in the future as universities continue seeing the potential in co-development agreements," said Lawson.

He emphasizes that universities should be vigilant in reviewing their license portfolios, even 20 years or more down the road, detailing "Blind assumption that the other party is dealing fairly could cost you millions."

According to Lawson, it is noteworthy that the case involved two large, sophisticated schools. They were experienced with patents and licensing agreements, and they had extensive resources - yet still fell into this dispute because their agreement lacked the required specificity.

Lawson concludes, "It can happen to the finest schools with the best lawyers, so it's worth checking your portfolio for potential problems."