Licensing Pathways for deep tech

Credit: ThisIsEngineering

Researchers all over the world are developing deep tech that can disrupt business-as-usual and fight climate change. Millions of dollars are invested in developing a single technology in highly specialised labs that are designed to foster innovation. Yet most labs lack the capabilities to turn these breakthroughs into market-ready products, because their mission is more oriented towards discovery, not scaling.

Consequently, universities and private research facilities must find ways to shepherd their innovations through the scale-up phase. There are many paths to scale up a technology; the first route is for the innovator to build their own companies to scale up their solutions. This can be burdensome for researchers because their core skillset is in innovation and technology, and enterprise building requires different skillsets. The chances of success in innovator-led enterprises are low due to many risk factors, including significant time investment, capital requirement, and high risk of failure.

Due to the high risk of innovator-led enterprises, many researchers and labs work with industry partners to scale up their solutions via licensing. There are a dozen pathways for licensing, with each route having its own benefits and challenges. Here is an overview of well-established pathways you can mix-and-match when deciding how to license patented laboratory technology so that it can scale in industry:

1. Exclusive license: a single licensee, across all fields & territories. Works when you need one deep-pocket partner to finish scale-up and move fast.

Benefits: Simplicity; strong partner commitment; bigger upfront/milestone fees & royalties

Challenges/risks: Loss of flexibility; price/term renegotiations if partner stalls or pivots

2. Non-exclusive license: Technology is platform-like and can thrive with multiple implementers

Benefits: Wider diffusion, diversified revenue streams, competitive pricing for end-users

Challenges/risks: More negotiation overhead per deal; harder to enforce quality

3. Field-of-use or sector-segmented license: Different partners for different sectors (e.g., medical vs. industrial)

Benefits: Maximises value by selling the same IP more than once; partners focus on their niche

Challenges/risks: Requires very clear field definitions & diligence on overlap

4. Territorial license: Licensees are spread over different territories (states/countries) to navigate regional regulations more effectively.

Benefits: Leverages local champions; mitigates geopolitical or trade-barrier risk

Challenges/risks: Royalty audits across borders; “grey-market” leakage

5. Option-to-license / evaluation agreement: Prospective licensee wants lab or pilot data before committing

Benefits: Fast way to secure an evaluation partner while preserving future upside

Challenges/risks: If option period drags, tech can be tied up and miss other suitors

6. Milestone or stage-gate license: Technology readiness level is low and scale-up risk is high

Benefits: Aligns payments with R&D/prototyping milestones; spreads risk

Challenges/risks: Complex term sheets; disagreement on what counts as “success”

7. Spin-out equity-plus-royalty license: University/government lab wants upside but also alignment with founders

Benefits: Keeps licensor invested; lowers cash burden on a cash-poor start-up

Challenges/risks: Equity + royalties can become double-dilutive if % are high

8. OEM / manufacturing transfer license: Outsourcing only the manufacturing, while brand development lies with innovators. Value sits in process know-how rather than product brand.

Benefits: Licensor earns royalties on every unit; licensee handles CapEx & QA

Challenges/risks: Must supply detailed tech-transfer packages & training; IP leaks

9. Joint venture with back-license: Both sides must co-develop new IP to reach commercial specs

Benefits: Shared risk & resources; each party back-licenses foreground IP

Challenges/risks: Governance complexity; exit and IP ownership provisions are vital

How to choose the right licensing pathway

While choosing a licensing pathway, it is important to evaluate the different options based on your product’s design, the sectors you are working in, your organisation’s needs, your goals with the product, and market readiness. Here are a few elements to factor into your evaluation:

1. Map risk vs. control: Higher technical or scale-up risk usually drives you toward stage-gated or option paths; lower risk can justify exclusivity (for premium royalties).

2. Segment the pie early: If the technology naturally splits by industry or geography, design that segmentation into the first license — not later amendments.

3. Keep diligence ready: Regardless of the pathway, licensees will ask for proof of freedom to operate, milestone plans, and evidence that know-how (not just the patents) transfers cleanly.

4. Think beyond cash: Equity, manufacturing rebates, tech-service fees, and data-sharing can sweeten deals while reducing up-front payments — especially important for early-stage climate-tech or deeptech spinouts.

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