[co-author: Michael Thompson, Guest Contributor]
Introduction
Universities and certain colleges in the United States (US) spend billions of dollars on research and development (R&D) each year to advance knowledge across the gamut of Arts, Humanities, and Science, Technology, Engineering, and Mathematics (STEM) fields. That R&D is largely undertaken by a number of individuals (e.g., faculty, graduate students, research fellows, post-docs, and visiting scholars) who each generate patentable inventions and other valuable intellectual property (IP) during the course of their engagement in, with, or for a university or college.
The amount of IP that can be generated requires each university and any college with a university-like infrastructure to take steps to ensure interests are protected at all times. This is particularly when that knowledge, information, or know-how produced (i.e. IP) may have commercial value and can potentially impact society in significant ways.
Each step in this process of IP protection comes at a cost. To ensure revenue versus a matrix of multiple risks leading to commercialization are balanced, dollars spent on IP protection must be invested wisely.
Because most university and college charters, mandates, or mantras are not centered around commercialization, many institutions are not well equipped to take all of their university-owned IP to market. This means that institutions will consider all the pros and cons before commercializing their own technology.
Universities and colleges often seek to partner with others to help achieve this goal. Sometimes this go-to-market approach is best initiated by the formation of a startup company. Many times these start-up companies, businesses, or Research Impact (RI) Ventures are composed of one or more university or college-related individuals as founders.
This article provides key points for faculty, graduate students, research fellows, post-docs, and visiting scholars to initially consider if and when founding or joining a startup company or RI Venture based on technology developed at a university or college. Such considerations include: 1. understanding patent ownership in a university or college setting; 2. traits of institutional technology transfer offices (TTOs); and 3. university or college Conflicts of Interest (CoI) issues.
- Understanding Patent Ownership in a University or College Setting
Under US patent law, inventors who solely or jointly contribute to the conception of a claimed invention are the first legal owners of resulting patent rights absent an agreement to the contrary. Patent ownership confers a bundle of rights to the patent-holder including the right to exclude others from making, using, selling, offering to sell, or importing a claimed invention.
This means that patent owners have the ability to leverage their patent rights in a multitude of ways. For example, patent owners can: license all or part of the patent rights to third parties on an exclusive or non-exclusive basis; bring an infringement action against alleged infringers; build US and international patent portfolios surrounding the inventions; build new companies around the patent rights; sell the patent rights; and otherwise leverage the patent rights in an advantageous way.
Accordingly, universities and colleges typically seek to maintain ownership over innovations they sponsor or otherwise support. Universities and colleges have broad policies requiring employees and partners who use institutional resources to assign over their patent and other IP rights as a condition of the employment or engagement. Such IP policies are largely available online or through university network portals. For example, here are the IP policies of Harvard and Stanford.
While these policies are invariably broad in scope requiring all inventions developed by those at a college or university to be owned by the institution, it should be noted that several states have adopted laws providing boundaries on the scope of employee invention assignment agreements. These statutes could be useful in situations where universities and colleges significantly overreach to claim ownership over inventions not related to the employee’s work at the university.
Outside of some exceptions such as substantial overreach, it is still important to understand that the boundaries set by state laws are relatively broad. Meaning that state laws can be left open for various interpretations regarding IP ownership. As a general guideline, assume that the IP developed during the scope of employment or otherwise supported by a university or college will be entitled and owned by the institution.
Another item to be aware of affecting patent ownership is the 1980 Bayh-Dole Act. The Bayh-Dole Act allows universities and colleges to own federally-funded inventions so long as the government is granted a nonexclusive license to the invention, substantial manufacture of the invention occurs in the US, certain government march-in-rights, and other conditions. This is important to take into account in advance of accepting federal funds when seeking to commercialize a technology and avoid or minimize the concomitant attachment of these federal rights.
- Tech Transfer Offices
Most universities and several colleges who have administrative structure similar to a university have technology transfer offices (TTOs). These offices help administer the transfer of technologies from a university or college to other persons or entities primarily with a goal of technology commercialization.
TTOs usually employ a diverse set of professionals including scientists, lawyers, engineers, licensing experts, business managers, and analysts. This diversity of expertise allows TTOs to better assess and determine a financial path forward for each deal that involves technology generated from multiple innovation nodes within each institution.
TTOs can facilitate this path forward in several ways. For example, they act as a channel between academia and industry. TTOs also form and maintain industry partnerships. Utilizing these channels and partnerships increases the chances of being able to out-license university-owned patent rights and know-how for commercialization.
If successful, the university or college will receive royalties and other payments on a going-forward basis for those who have partnered to obtain these rights and know-how and make these things viable in a market. This is important because many times through TTOs a university and college may temporarily absorb the upfront financial risks surrounding this process to market or to commercialize.
As the owner of the patent rights, the university or college will have discretion on the type of license it may grant to such partners. This includes, for example, whether the license will be exclusive or non-exclusive, limited to a particular field or territory, or is sublicensable. Depending on the situation, TTOs may seek to obtain an ownership interest in the company or the payment of upfront licensing fees or triggering fees upon an event such as funding or acquisition. Some institutions also distribute a percentage of net royalties to inventors of the technology which has been successfully commercialized or taken to market.
In addition, TTO personnel typically support innovative students and faculty in the process of their research and development activities. Some TTOs form incubators to encourage entrepreneurship and commercialization activities among faculty, staff and industry partners. Most TTOs are internal to the university, but there are other types set up as separate companies that operate outside of the university setting. Here are some examples of university incubators: Georgetown and Pennsylvania.
- Institutional Conflicts of Interest Policies
Participation by those working, studying, or conducting research at a university or college who plan or are in startup companies can potentially generate a conflict of interest. These conflict of interest policies should always be considered very carefully. Especially in the context as to what existing projects and initiatives should be pursued through to commercialization.
One of the chief concerns underlying these policies includes potential exposure to assertions that researchers at a university are biased due to financial incentives.Here are some example conflict of interest policies, MIT and Texas, with an excerpt from MIT’s policy as follows:
A conflict of interest (COI) can be any situation in which financial or other personal considerations have the potential to compromise a researcher’s professional judgment and objectivity in the design, conduct or reporting of research. MIT has a responsibility to ensure that its teaching and research environment fosters the generation of new knowledge and positive learning opportunities for students and preserves the integrity of its research enterprise and the public’s trust. MIT policy, therefore, requires that MIT officers, faculty, and staff and others acting on its behalf avoid or mitigate real or perceived financial conflicts of interest and ensure that their activities and interests do not conflict with their obligations to MIT or its welfare. The Vice President for Research is responsible for ensuring implementation of this policy.
While each university conflict of interest policy is different, conflicts may arise if the activities of the startup relate to the faculty, post-doc’s, or student’s research at the university and these individuals have a financial interest in the startup (e.g., a founding ownership interest). If this situation exists, the faculty, post-doc, or student involved would normally need to disclose the potential conflict and the university or college (through a designated committee) will review the potential conflict.
The institution or committee will then determine if there is a conflict and whether it can be managed, or not. Conflicts that exist that cannot be managed may preclude these individuals from participating in a startup should they seek to continue their engagement with the university or college.
Takeaways
Individuals who may be interested in founding a company based on research generated at a university or college should carefully consider institutional IP policies as early as possible. This will provide critical early understanding of the parameters needed to navigate their innovative activities on a going forward basis with the end goals of forming a startup.
More-so such innovative individuals should build relationships with TTO personnel to confirm how the written IP policies are typically applied, which may or may not be to the letter of the policy. Since in the end this is all a human exercise, getting the know TTO personnel will be to your long-term advantage as you seek to help society while also being able to generate commercial revenue for the startup and university.
Navigating conflicts of interest policy when forming a startup can be tricky and, again, first understanding your university and college COI policies is paramount to avoiding issues down the road. Entrepreneurial university and college individuals should confer with advisors as well as institutional COI staff to understand the parameters at play. Conflicts issues are not always clear but the general principles are usually defined well. One should understand these principles and set a strategy to avoid the binary choice of being a founder of a company or leaving the university or college altogether.
In all cases, entrepreneurial university and college individuals should consult with their own advisors concerning planning and impending formation of a startup and going to market in the context of the above and other factors.
