Material Transfer Agreements (“MTAs”) are legally enforceable contracts that govern the rights and obligations of the contracting parties when a providing party transfers research material to a receiving party. Much has been written about the oppressive burden MTAs impose on university technology transfer or research administration offices, 1
Mirowski, Philip, Science Mart: Privatizing American Science, Harvard University Press (2011), pp. 139-193.
and some have questioned whether MTAs are even necessary. 2
Ku, K., Henderson, J., “The MTA – Rip it up and start again?” Nature Biotechnology, Vol. 25, No. 7, July 2007, pp. 721-724.
While most transfers of research material between universities will never lead to conflict, transfers between universities and commercial entities occur with an inherently greater risk of conflict. While many of these transfers will not lead to actual conflict, how do you know which one will be the exception? Well-drafted MTAs can prevent expensive disputes from arising, and if disputes do arise, MTAs can help resolve them faster and at lesser expense. At the time a transfer takes place, the contracting parties’ interests may well be aligned, but interests can change, especially when there is unanticipated money on the table. Think ahead to the time when a friendly licensee may be acquired by a less friendly assignee. Expect the acquiring company’s attorneys to review the acquired company’s MTAs with a fine-tooth comb, aiming to find loopholes that are advantageous to the acquiring company but likely detrimental to your university.
The following checklist is intended to help university tech transfer and research administration offices negotiate effective MTAs.
1. Is an explicit MTA required?
When research materials are known by the providing investigators to be free of any unusual encumbrances or obligations, negotiating and executing an express agreement accomplishes little, if anything, for either party. A more efficient approach, promulgated by Stanford University and adopted by 25 research institutions, is to agree that the terms of the Uniform Biological MTA (”UBMTA”) 3
will control where nonhazardous, nonhuman biological materials are transferred for in vitro research without a specific MTA. 4
The primary drawback with this approach is that the providing investigator must know which materials qualify. Investigators may prefer not to keep track of multiple options and choose to follow a single protocol—submit an MTA request—for every transfer. Other ways to avoid unnecessary MTAs are to establish master MTAs for frequent transfers, and amend existing MTAs when appropriate.
2. Can a standard model agreement be used?
Model agreements such as the UBMTA and its Simple Letter Agreement are generally well-known and reasonably acceptable to both parties, so unless there are specific reasons that a model agreement should not be used, contracting parties should avoid drafting customized agreements. To extend the advantage of model agreements to transfers that do not qualify under the UBMTA, the Association of University Technology Managers MTA Special Interest Group has drafted model agreements for the transfer of chemicals, human tissues, and induced pluripotent stem cells. 5
3. Can you amend an existing MTA or use an existing master agreement?
Amendments usually are easier than new agreements, especially if you are simply extending the duration of the agreement, expanding the scope of research, or including additional materials. If you anticipate numerous transfers, try to negotiate a single master agreement that will be adequate for all or most of the transfers.
4. Are definitions overbroad or infested with traps?
Beware of traps hidden in definitions that are overbroad or written with nested hierarchies of defined terms. Unwinding these “Russian Dolls” can be difficult and error-prone. Look out especially for overbroad definitions of terms such as “materials,” “modifications,” “inventions,” “confidential information,” “commercial purposes,” and “results.” Where appropriate, use common definitions such as those found in the UBMTA. Be especially aware of “notwithstanding the foregoing” or “including, but not limited to” clauses, which can be deceptive if overlooked.
5. Are permitted uses or scope of work consistent with recipient’s intended use?
MTAs commonly prohibit use outside of the recipient investigator’s lab, use in humans, use for food, use with any encumbered research tools, commercial use, and transfer to third parties. Sometimes it is appropriate for a provider to restrict use to a specific field of inquiry or even an explicit research protocol. Recipient investigators should review the permitted uses carefully and be aware of stipulated remedies in case the permitted use is breached (see remedies below).
6. Are confidentiality obligations appropriate under the circumstances?
Confidentiality obligations are not normally appropriate for transfers between academic investigators, but should be expected where commercial entities are providing research materials. University investigators should be wary of taking on confidentiality obligations, especially when stipulated remedies may provide injunctive relief and block publication of research results. Confidential information should be defined clearly enough that the recipient investigator knows exactly what must be treated as confidential. Confidential information should be defined with standard exclusions for a) information in recipient’s possession prior to receipt from provider, b) information that was in the public domain at the time of receipt or becomes part of the public domain through no fault of recipient, c) information that is lawfully received by recipient from a third party having a right to disclose it, d) information that is independently developed by employees of recipient institution who had no knowledge of the disclosed confidential information, and e) information that is required by law to be disclosed. Obligations of confidentiality should be for a limited time period—five years is typical. An obligation to maintain information as a trade secret typically is not feasible for academic researchers. However, if you must accept such an obligation, consider it a very special situation and take appropriate measures to ensure that the investigator understands and is able to comply with this obligation.
7. Does recipient own the results of its research and have an unrestricted right to publish these results?
Companies providing research materials often expect to own the results of research conducted using the materials they supplied. If that is what a company really needs, it should hire the investigator as an employee. The institution conducting the research is entitled to ownership of experimental results. For university researchers, freedom to publish is fundamental to the academic mission and should not be compromised. That said, it is not unreasonable to grant a provider of research materials the right to prepublication review of proposed publications, provided it is limited to a reasonable time period—usually no more than 30 days, with an extra 30 days if the provider wishes to file patent applications. It also is reasonable for a university to agree to redact a provider’s legitimate confidential information, but be careful not to grant the provider censorship power. If the provider and recipient disagree as to whether something in a proposed publication is rightly subject to recipient’s confidentiality obligation, it should be resolved in a fair forum of dispute resolution, not unilaterally decided by the provider.
8. Does the provider stipulate inappropriate co-authorship?
Academics rarely expect co-authorship, but occasionally researchers from certain countries include such a requirement in their draft MTAs. Usually a polite explanation of academic custom and a promise to acknowledge the source of research materials will satisfy the providing investigator. An obligation to grant co-authorship may be appropriate where investigators are truly collaborating.
9. Does the publisher’s agreement conflict with third-party copyrights?
Watch out for copyright conflicts with academic papers submitted for publication. By submitting a paper for publication, authors generally assign their rights in the publication to the publisher. If the publication incorporates copyrighted content, such as diagrams, forms, or questionnaires, be sure to clear the appropriate rights when they are owned by or licensed to third parties.
10. Are the provider’s rights in results and data limited?
It is normally reasonable to share a summary of research results with providers who request it. However, demands for “all data” are generally unreasonable, and the provider’s use of results and data should be restricted. When the recipient’s goal is to conduct research and publish the results, the MTA should obligate the provider to keep results confidential until after they have been published by the recipient. Corporate providers often wish to use results in fundraising or marketing efforts, but there is a danger that results may be presented in a misleading way, so it may be prudent to prohibit such disclosures without prior written approval.
11. Are intellectual property rights consistent with applicable law, policy, and existing obligations?
IP terms are often the toughest to negotiate, especially when a for-profit provider offers samples of key corporate assets. Research funding agreements and provider MTAs usually assert claims to research results, particularly inventions. For federally funded research, the Bayh-Dole Act and implementing regulations apply, and obligations may become quite complicated when multiple funding sources are involved. Such obligations may include outright assignment, the exclusive option to negotiate an exclusive license, and rights of first refusal. Since you should not grant these rights to more than one party, you must avoid accepting obligations that will lead to potentially conflicting claims.
Companies providing materials often have legitimate concerns regarding their freedom to operate that directly conflict with the recipient’s rights under patent law. Short of assignment of rights, the simplest way to ensure that a provider will have freedom to operate is for the recipient to grant the provider a non-exclusive license under patents in inventions that arise from the research. While universities routinely agree to grant non-exclusive, royalty free (“NERF”) licenses for internal research purposes, granting unrestricted NERFs could violate Internal Revenue Service private use regulations, putting universities and bond purchasers at risk of losing the exempt status of tax exempt bonds. 6
Internal policies regarding this issue are highly institution-specific, so you should clearly determine in advance exactly what is allowed and what needs to be monitored at your institution. Where providers require freedom to operate but a simple NERF is problematic, sometimes carefully tailored, non-blocking language can bridge the gap between the conflicting interests of the parties.
12. Are human tissues or protected health information being transferred?
If human tissues or clinical data are involved, a number of ethical and legal compliance restrictions likely will apply. Be sure that proper institutional review board approvals have been obtained and properly documented and that applicable Health Insurance Portability and Accountability Act (“HIPAA”) regulations are strictly followed. Informed consent can be a particularly thorny issue, especially where genetic analysis or induced pluripotent stem cells are part of the research plan. Be especially wary of tissue sample donations from patients with psychiatric disorders because compliance with adequate informed consent requirements may require extra diligence in these situations. Since relevant policies, laws, and regulations change frequently, seek review by your institution’s experts.
To be a good steward of scarce scientific resources, take care not to transfer scientifically valuable tissue samples that one of your institution’s investigators wishes to use for research. Research samples are not always kept by the investigators who wish to use them. Typically, the oncologist who plans a study refers the patient to the surgeon, who in turn collects the samples and then turns them over to the pathology department. Before you approve transfer of samples from pathology, make sure oncology (or any other department) is not planning to use them for a research project.
13. Are there potential conflict-of-interest issues?
Very often investigators launch start-up companies to commercialize their innovations. When they do, it is common for their academic and commercial labs to transfer research materials back and forth. These agreements may require review by a conflict-of-interest committee within your institution.
14. Are the materials hazardous or subject to transfer restrictions or export controls?
You should rely on your institution’s hazardous materials and biosafety experts when dealing with the proposed transfer of potentially dangerous substances. Some materials, particularly pathogens, may require special licenses or permits from the U.S. Department of Agriculture or the Centers for Disease Control and Prevention. Export control laws, such as the International Traffic in Arms Regulations (“ITAR”) and Export Administration Regulations (“EAR”), regulate the export of controlled materials and information. Be aware that making material or information available to a foreign national within the United States may constitute a “deemed export.” Also, it is generally illegal to conduct any business whatsoever with embargoed countries, entities, or individuals. If your institution does not have an Export Control Officer, you should consult with competent outside counsel for advice.
15. Are there onerous warranty obligations?
MTAs should conspicuously (using uppercase and bold font) disclaim warranty of merchantability (normally implied by law in sales of commercial products) and warranty of fitness for a particular purpose (normally implied by law if a seller knows of a particular purpose for which a buyer purchases an item). Providers should disclaim any warranties that their material will not infringe third party intellectual property rights. Most MTAs also include a warning that the material is experimental and must be used with prudence and appropriate caution.
16. Does the liability and/or indemnification language comport with your institution’s policies and legal obligations?
Providers require recipients to assume liability for recipient’s use, storage, and disposal of materials. They also may require recipients to indemnify, hold harmless, and defend the provider against claims, costs, and other liabilities. The obligation to defend is somewhat more onerous than obligations to indemnify or hold harmless. The duty to defend arises upon the mere allegation of facts, which once proven would trigger the duty to indemnify. “Defend” means paying the substantial costs to prepare and defend against a lawsuit. In contrast, the duty to indemnify arises only after liability has been determined by a court of competent jurisdiction. The distinction between “indemnify” and “hold harmless” is more subtle, and may depend on applicable state law, so check with your institution’s counsel if it becomes an issue.
Many states have laws prohibiting or limiting the indemnification obligations of state institutions or the extent to which parties may disclaim liability, such as through exceptions for gross negligence or willful misconduct. You may avoid unnecessary negotiation by adding “to the extent permitted by applicable law” to these provisions.
17. Are the governing law and venue reasonable?
Most MTAs between U.S. universities remain silent on governing law, but universities from other countries and companies everywhere usually stipulate their own local law for interpreting contracts and local courts for settling disputes. Although no individual MTA is likely to lead to a dispute, if you do enough of them, conflict is likely to arise. If you always negotiate a reasonable compromise for governing law and venue, you can avoid many headaches and much expense in the event the dispute ends up in court.
18. Is a use-of-name restriction appropriate?
MTAs between universities normally do not require use-of-name restrictions, but when companies struggling to succeed in the marketplace provide material, it is most prudent for universities to insist on use-of- name restrictions. You should be able to prevent providers from claiming your institution’s endorsement of their technology, and publications using your institution’s or investigators’ names should at least be reviewed for accuracy.
19. Are the termination provisions adequate?
MTAs should have clear termination provisions. The agreement should have an expiration date, there should be clear instructions as to whether the material should be destroyed or returned after the agreement expires, and obligations surviving expiration of the agreement (such as confidentiality requirements) should have their own expiration dates.
20. Are the signatories adequately authorized?
Signatories should be duly authorized by the respective contracting party they represent. Faculty members typically are not authorized to bind their universities and do not wish to take on personal liability. They should sign as “read and understood” and not as a party to the contract.
The purpose of an MTA is to define clearly each party’s respective rights and obligations. As a legally binding instrument, an MTA permits an aggrieved party to enforce its contractual rights in court, but the true value of a well-drafted MTA is to avoid conflict altogether or at least to minimize its potential impact. Try to balance the legal and financial risks with the scientific and business objectives. When the potential benefits outweigh the risks, you have the basis for an agreement, but when the risks are excessive it is time to find an alternative.
