Intellectual Property Management:

Model Agreements

Sample Option to License Agreement

By: Dr. Frederic Erbisch, Director (Retired), Office of Intellectual Property, Michigan State University



This Agreement is made and entered into between the__________________, a research establishment under _______________ laws (hereinafter Grantor) having its principle office at, _______________________________________________________ and  ______________________________________ a company organized under the laws of __________________ (hereinafter Grantee), having its principle office at __________________________________________________________.


1.    Grant of Option.  In consideration of payment of the Option Price by the Grantee to the Grantor, receipt of which the Grantor acknowledges, the Grantor grants the Grantee an exclusive option to obtain a license from the Grantor to the Optioned Rights, in accordance with this Option Agreement.

 2.     Definitions.

 a.    Option Price means that amount which the Grantor and the Grantee agree shall be paid for the Optioned Rights within the Term.   The Option Price shall be ___________________________  (___________________)

b.     Optioned Rights means the intellectual property herein described as:__________________________________________________

c.     Term means that period of time which Grantor and Grantee agree shall allow Grantee to evaluate the Optioned Rights.   The Term shall be ___________ to __________________. 

3.    Exercise of the Option.  The Grantee may exercise its option at any time prior to expiration of the Term by giving written notice signed by the Grantee to the Grantor at its address stated above.  The notice must be personally delivered or postmarked before the expiration of the Term.


4.    Confidentiality.   The parties agree to maintain discussions and proprietary information revealed pursuant to the Option Agreement in confidence, to disclose them only to persons within their respective companies having a need to know, and to furnish assurances to the other party that such persons understand this duty of confidentiality.

5.    Conditions to License.  In the event the Grantee elects to exercise its option, execution of a license agreement, fulfillment of the following conditions to license shall occur within thirty (30) days after the Grantor receives the notice that the Grantee is exercising the option.  The Grantee shall pay to the Grantor the following amount and meet the following requirements at the time it enters into a license agreement with the Grantor:

a.     Pay an initial license fee of ________________________ (   )         and a royalty rate not to exceed ____________ percent (    %) of the net sales of Products (as defined in the License Agreement), and

b.     Provide the Grantor with a preliminary business plan acceptable to the Grantor that describes the steps proposed by the Grantee to commercialize the Optioned Rights.

6.    Terms of License.  Terms and conditions of the license agreement will be negotiated in good faith so as to result in a license acceptable to both parties substantially in the form of Exhibit A.

7.    Failure to Exercise Option or to Close.  If the Grantee fails to exercise its option properly before expiration of the Term or fails to meet the conditions to license and enter into a license within the time allowed, this Option Agreement shall terminate and the Grantor may retain the Option Price and shall have no further obligation to the Grantee.

8.    Assignment.  This Option Agreement shall bind and benefit the parties' successors and assigns.  Neither party may assign rights under this Option Agreement without the prior written consent of the other party.

9.    Entire Agreement; Amendment.  This Option Agreement contains the entire agreement of the parties with respect to the transaction described in this Option Agreement, and no prior or simultaneous oral or other written representations or promises shall be a part of this Agreement or otherwise effective.  This Option Agreement may not be amended or released, in whole or in part, except by a document signed by both parties.

10.   Indemnity.   Grantee shall indemnify, hold harmless, and defend Grantor and its trustees, officers, employees and agents against any and all allegations and actions for death, illness, personal injury, property damage, and improper business practices arising of the Optioned Rights.


11.  Warranty.   Optioned Rights is experimental in nature nd it is provided WITHOUT WARRANTY OR REPRESENTATIONS OF ANY SORT, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE OF NON-INFRINGEMENT.  Grantor makes no representations and provides no warranty that the use of the optioned Rights will not infringe any patent or proprietary rights of third parties.

12.   Interpretation.  The paragraph headings used in this Option Agreement are provided for convenience of reference only and shall not be used to interpret the provisions of this Option Agreement.  In the event any provision of this Option Agreement proves to be illegal or unenforceable, the remaining provisions of this Option Agreement shall be interpreted as if such illegal or unenforceable provision were not a part of this Option Agreement.

13.   Law. This Option Agreement is executed and delivered in the ______________ ______ and shall be constructed in accordance with the laws of the Government of ___________________________________________..


To evidence their agreement to the foregoing terms and conditions, the Grantor and the Grantee have executed this Option Agreement below.


Grantor:  ______________        Grantee :   ______________            


By:_____________________________                            By : _____________________________


Signature: _______________________                            Signature : ________________________


Title:___________________________                              Title : _____________________________


Date:___________________________                             Date: _____________________________