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Using Stock And Stock Options To Minimize Patent Royalty Payment Risks After Medimmune V. Genentech, Sean M. O'Connor

Articles

This Article proposes a more or less functional equivalent mechanism to a patent royalty stream through the use of stock and stock options in the licensee. The stock would coarsely track the overall fortunes of the licensee, while the options could be more finely tuned to vest and become exercisable upon events and milestones that would have been used for payments in a traditional license fee plus royalty stream licensing deal.

There may be problems of liquidity, of course, during the period where the licensee is still privately held and thus has no ready markets for its stock. But even …