The University of Toronto licensed a patent on the production of insulin to Eli Lilly. The agreement allowed Eli Lilly to manufacture and sell insulin. In return, Eli Lilly would give the University of Toronto

Question

The University of Toronto licensed a patent on the production of insulin to Eli Lilly.  The agreement allowed Eli Lilly to manufacture and sell insulin.  In return, Eli Lilly would give the University of Toronto

BlackTom AI · Accepted Answer

The question presents a licensing scenario: The University of Toronto licensed a patent on insulin production to Eli Lilly, allowing manufacturing and sale by Lilly, in return for a stated consideration. We will evaluate each answer option in light of this description.
Option 1: "$1 million dollars". This figure represents a lump-sum payment. Licensing agreements for pharmaceutical patents more commonly involve ongoing royalties based on sales or other performance metrics rather than a one-time fixed sum, especially when the license covers production and ongoing sales of a widely used product. Thus, this option seems unlikely given the typical structure of such deals and the phrasing of the prompt which emphasizes a continuing consideration tied to Lilly’s sales.
Option 2: "$100,000 dollars". Similar to Option 1, this is a fixed, upfront amount. While upfront payments can occur in licenses, the prompt emphasizes a return linked to the licensee’s commercial activity (manufacture and sale of insulin), which points toward a royalty arrangement rather than a small flat fee. Therefore, this option is unlikely to be correct for the described arrangement.
Option 3: "Rights to other unrelated patents". This would imply a transfer of additional intellectual property rights beyond the insulin production patent, which is not indicated in the prompt. The prompt specifies the license to manufacture and sell insulin, not a broad portfolio or cross-licensing of unrelated patents. Consequently, this option does not align with the described terms.
Option 4: "5% of Eli Lilly’s net sales from the insulin". This option reflects a royalty-based arrangement tied to actual sales, which is a common and logical form of consideration in a manufacturing license of a medical product. The percentage (5%) of net sales aligns with licensing practice where the licensor earns a share of sales revenue rather than a fixed upfront payment, and it directly ties compensation to the commercial performance of the insulin product. This makes it the most consistent with the described agreement.
In summary, the first three options describe fixed sums or additional rights that do not correspond to the ongoing, revenue-based compensation typical of a production and sales license. The fourth option fits the licensing model where the licensor (the University) would receive a royalty proportional to Lilly’s net sales from the insulin, reflecting ongoing value created by Lilly’s commercialization.

BME 3 Treating Diabete... Week 4 Industrialization and Purification of Insulin

The University of Toronto licensed a patent on the production of insulin to Eli Lilly. The agreement allowed Eli Lilly to manufacture and sell insulin. In return, Eli Lilly would give the University of Toronto

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