University Spinout IP Agreement: The Complete Guide for Founders
Your research could become a billion-pound company. But first, you need to navigate the IP agreement with your university. Here's how to get it right.
In This Guide
University spinouts are responsible for some of the world's most valuable companies: Google (Stanford), Arm (Cambridge), Oxford Nanopore (Oxford). But for every success story, countless promising ventures fail—not because of the technology, but because of poorly negotiated IP agreements.
The IP agreement between your spinout and the university is the single most important document you'll sign. Get it right, and you have a foundation for growth. Get it wrong, and you'll be fighting your own university for years—or watching your company collapse under impossible licensing terms.
1. What Is a University Spinout IP Agreement?
A university spinout IP agreement defines how intellectual property developed during your time at the university will be shared between you (and your new company) and the institution.
The Core Elements
Assignment vs. Licence: The Critical Difference
Assignment means the university transfers ownership of the IP to your company. You own it outright. This is generally better for spinouts because it gives you complete control and makes due diligence simpler for investors.
Licence means the university retains ownership but grants you permission to use the IP. This is more common but creates complications: the university can impose conditions, the license can expire or be terminated, and investors may be concerned about your lack of ownership.
"We've seen spinouts fail because the founders accepted a licence without understanding that they didn't actually own their core technology. When it came time to raise Series A, investors walked away."
— University Tech Transfer Director
2. Who Owns the IP? Understanding Your Starting Position
Before you can negotiate, you need to understand who actually owns what. This depends on your relationship with the university and how the IP was created.
The Default Position in the UK
Under UK law, if you're an employee, your employer generally owns IP you create in the course of your employment. Most universities have policies that extend this to research conducted using university resources.
Who Owns What?
| Your Status | IP Created | Likely Owner |
|---|---|---|
| Academic staff | Using university resources | University |
| PhD student (funded) | During research | Usually university |
| PhD student (self-funded) | Using own resources | Possibly you (check policy) |
| Post-doc on grant | Grant-funded research | University (check grant terms) |
| Visiting researcher | During visit | Depends on agreement |
Important: Check Your Employment Contract
Your employment contract or student agreement may have specific IP clauses. Read them carefully—they override general assumptions. Look for:
- IP assignment clauses
- Invention disclosure requirements
- Revenue sharing arrangements
- Restrictions on outside activities
What If You Developed IP Before Joining?
IP you created before joining the university remains yours—but you need to prove when you created it. This is where timestamped documentation becomes essential. If you can show your core algorithms or designs existed before your university employment began, you have a much stronger negotiating position.
3. Typical IP Agreement Terms (And What's Negotiable)
Every university has different policies, but here's what you can typically expect—and where there's room to negotiate.
Typical UK University Spinout Terms
| Term | Typical Range | Negotiable? |
|---|---|---|
| Equity stake | 5-25% (average ~10%) | Yes |
| Royalties | 0-5% of revenue | Yes |
| Exclusivity | Usually exclusive for specific field | Yes |
| Anti-dilution | Sometimes requested by university | Push back hard |
| Milestone payments | £10k-50k at funding/revenue milestones | Yes |
| Patent costs | Often split or spinout pays | Yes |
| Reversion clause | IP returns if company fails | Somewhat |
Red Flags to Watch For
- Anti-dilution rights — Universities should dilute like any other shareholder
- Royalties AND equity — Paying both is usually too much; negotiate one or the other
- Broad field of use restrictions — Could limit your ability to pivot
- Right to audit/approve decisions — Can slow down your business
- First right of refusal on future IP — Avoid if possible
Industry benchmark: The most founder-friendly universities now offer equity-only deals (no royalties) of 5-10%, with clean terms that investors recognise. If your TTO is asking for significantly more, you have grounds to push back.
4. How to Negotiate Better IP Terms
University tech transfer offices (TTOs) negotiate these deals every day. You probably don't. Here's how to level the playing field.
Before You Negotiate
Document everything
Timestamp all your research notes, code, designs, and documentation before entering negotiations. This creates evidence of what existed when—essential if disputes arise later.
Know your university's track record
Research previous spinouts from your university. What terms did they get? Which ones succeeded? The TTO knows this information—you should too.
Get external advice
Find a lawyer experienced in university spinouts (not just general IP law). Many accelerators and angel networks can recommend specialists. The cost is worth it—bad terms can haunt you for years.
Negotiation Strategies That Work
- Focus on total cost, not individual terms.Universities often care more about the overall deal than specific elements. Offer to trade—higher equity for no royalties, for example.
- Use investor expectations as leverage."Our target investors won't fund with anti-dilution clauses" is a powerful argument because the TTO wants the spinout to succeed.
- Propose milestone-based terms.Lower initial equity that increases only if the company hits certain valuations aligns incentives and reduces your early-stage burden.
- Highlight your contribution.The IP is only valuable because you can commercialise it. Without you, it sits on a shelf. The university needs you as much as you need the IP.
5. Common Mistakes That Kill Spinouts
Mistake #1: Accepting the first offer
TTOs expect negotiation. Their initial offer is a starting position, not a final one. Founders who accept without pushback often end up with terms that make fundraising nearly impossible.
Mistake #2: Not separating background and foreground IP
IP you develop after spinning out should be yours, not the university's. Make sure the agreement clearly distinguishes between existing IP (background) and future developments (foreground). Vague language here causes major problems later.
Mistake #3: Ignoring the reversion clause
Many agreements specify that IP reverts to the university if the spinout fails or ceases operations. This seems reasonable until you realise it can prevent an acqui-hire or asset sale that might salvage value for founders and investors.
Mistake #4: No documentation of pre-existing work
Without timestamped proof of what you created before or outside your university role, you may find all your work claimed by the university. Proper documentation before negotiations begin is essential.
Mistake #5: Signing personally instead of through a company
Always sign IP agreements through your company, not as an individual. This provides liability protection and makes future transactions cleaner. Set up your company before finalising the IP agreement.
6. Protecting IP You Create After Spinning Out
Once you've spun out, you'll continue developing new IP. Protecting this new work—and keeping it separate from university IP—is critical.
Clear Separation Is Essential
The university license covers specific IP that existed at the time of the agreement. Everything you develop afterward should belong to your company. But proving this requires careful documentation.
How to Protect Post-Spinout IP
Timestamp everything from day one
Create blockchain timestamps for all new developments. This provides irrefutable proof of when each piece of IP was created—essential if the university ever claims it's covered by the original agreement.
Maintain clear development records
Document the evolution of your technology. Show how new IP builds on (but is distinct from) the licensed university IP. Version control systems with timestamps are invaluable here.
Have employees assign IP to the company
Make sure employment contracts clearly assign all work-related IP to your company. This is standard but often overlooked in early-stage startups—and can cause major problems during due diligence.
Pro tip: Before any major funding round or acquisition, do an IP audit. Map every piece of IP, its origin, and the documentation proving ownership. Investors will do this during due diligence— better to find problems early.
7. What Investors Look For in IP Agreements
Investors have seen university IP agreements derail promising companies. They'll scrutinise your agreement carefully. Here's what they're looking for.
Green Flags (What Investors Want to See)
- Clean IP assignment (ownership, not just license)
- Reasonable equity stake (under 15%, ideally under 10%)
- No anti-dilution provisions for the university
- Equity OR royalties, not both
- Clear field of use that allows pivoting
- Well-documented IP chain of custody
Red Flags (What Makes Investors Walk Away)
- University retains ownership (license only)
- Combined equity + royalties exceeding 15%
- Anti-dilution rights that persist through future rounds
- Vague or missing documentation of IP ownership
- Ongoing university approval requirements
- Unclear separation between background and foreground IP
The Due Diligence Checklist
Before investing, VCs will typically verify:
8. Real Spinout Examples
Oxford Nanopore (Oxford)
Spun out in 2005, Oxford Nanopore negotiated IP terms that allowed them to raise over £600M and go public at a £3.4B valuation. Key to their success: clean IP assignment, reasonable equity terms, and clear separation of ongoing research developments.
Outcome: IPO at £3.4B valuation
Arm Holdings (Cambridge)
Originally spun out from Acorn Computers with Cambridge University involvement, Arm's clean IP structure enabled licensing to become a global semiconductor standard. Clear IP ownership was essential to their licensing business model.
Outcome: Acquired for £24B by SoftBank, now valued at $50B+
Cautionary Tale: The IP Dispute
A promising biotech spinout from a Russell Group university raised seed funding but couldn't close Series A. The problem: their university agreement included both 15% equity AND 3% royalties, plus anti-dilution provisions. Investors calculated that the university would own more than the founders after two funding rounds.
Outcome: Failed to raise, eventually shut down
9. Your IP Agreement Checklist
Before signing any IP agreement, make sure you've covered these essentials:
Pre-Negotiation
Agreement Terms
Post-Agreement
Related Resources
Related Guides
Protect Your Spinout IP From Day One
Whether you're preparing for IP negotiations or have already spun out, proper documentation is essential. immut creates permanent, court-ready proof of your IP—giving you the evidence you need to protect your work.
Get your research timestamped on the call — court-ready documentation sent to you after
About immut: immut provides blockchain-based intellectual property protection for businesses, researchers, and university spinouts. Our platform creates permanent, court-ready proof of creation in seconds—essential documentation for IP negotiations and ongoing protection. Learn more at immut.io.