University Policy on Invention

 

The policies of the University, and the respective rights of its employees and guests, are complex. These guidelines should be read in conjunction with formal University policies regarding intellectual property and creative works, faculty consulting, conflict of interest, etc.


Title to Inventions

The University retains title to all inventions originated by its employees or at its facilities. This includes (a) all inventions arising from research performed at the University; (b) research created through the use of time, facilities, equipment and/or materials owned or paid for by or through the University and (c) research created by University employees as a result of or in the normal course of such employment.

In claiming title to the inventions of its employees, the University follows a policy practiced by many other universities and private corporations. However, unlike most private corporations, the University shares the economic benefit of such inventions with the inventor(s) and also reinvests portions of the income into further research efforts.

Student Inventions

In general, a student's inventions are the property of the student. There are, however, a number of exceptions to the general rule. The University requires being assigned rights to student-developed inventions occurring at the University when:

  • the project giving rise to the invention was funded in whole or in part by an agency of the federal government or by any other extramural sponsor to which obligations are owed regarding any inventions
  • the project giving rise to the invention required "substantial use" of University facilities and/or equipment
  • the student is an employee of the university, performing services in return for monetary compensation, and the invention arose within the scope of that employment
  • the invention is a co-invention of the student and one or more persons who are bound to assign inventions to the University

Benefit Sharing

Inventors receive a fixed percentage of the net income received by the University for inventions. Net income is defined as "gross royalties and/or other receipts received by the University or its agent less deductible costs (direct, administrative, marketing, and patent expenses)." Inventors receive 50% of the first $0-$500,000 of the net income received by the University, 40% from $500,000-$2,000,000, and 40% of net income over $2,000,000.

If there is more than one inventor, the shares are prorated or can be allocated according to an agreement among all inventors. Inventors' rights to such payments are automatically and fully vested at the time the invention is officially disclosed to the Technology Commercialization Office. As with any fully-vested right, payment continues for as long as the University receives income from the invention, whether the inventor is still with the University or not. In case of death, an inventor's share is paid to the inventor's estate.

Whenever economically feasible, the University also shares up to 25% of the income from $0-$500,000, 30% from $500,000-$2,000,000, and 20% of the income over $2,000,000 from inventions with the department (or centers, institutes, etc.) in which they arose. This sharing is intended to fund further research within the department. However, unlike the inventors' shares, department shares are neither vested nor automatic.

Because economic conditions in any given year may constrain available funds, the decision to distribute income to departments is made by the vice president for research. Upon distribution to the department, the department's share will be disbursed by the department head. Such funds will ordinarily be used for research activities of the inventor(s) as long as the inventor(s) remains with the University.

Obligation to Disclose

It is the obligation of each employee who believes he or she may have created an invention to disclose its nature and background to the University's Technology Commercialization Office.

Obviously, such disclosure must take place before the process of technology transfer can occur and any of the benefits realized. Moreover, disclosure is critically important in all projects, especially where any portion of the funding comes from the federal government. Federal law requires prompt disclosure, and the University, inventors and involved companies could lose significant rights if disclosures are not promptly made.

Rights of Sponsors

Frequently, research resulting in inventions is funded by an organization outside the University. It is important to note that University policy claiming title to inventions applies in all cases, even when there is such a sponsor. Private sponsors generally do not, as a result of their funding, obtain title to any invention developed at the University. However, private sponsors are often entitled to the right to negotiate a commercial license to the technology they have funded.

The nature of sponsors' rights will vary according to circumstances and must in each case be approved in advance by the Sponsored Programs Office and the Technology Commercialization Office. Principal investigators do not have the authority to grant commercial rights to private sponsors, agree to royalty or other terms of a license, or otherwise give sponsors anything more than the experimental results of the research performed.

Sponsors frequently prefer that licensing terms be settled before they support research. The standard agreement administered by the Sponsored Programs Office spells out these rights and may be adjusted by the TCO to accommodate specific needs. Only by signing appropriate agreements can sponsors be assured that they have certain rights to the invention they have funded.

Inventions Arising Through Consulting

The University claims no right in or to any invention developed as a direct result of private consulting services performed in compliance with the University consulting policy. If disputes arise, the burden of proof rests with the inventor. The University will not claim such inventions as long as

  • the work was not within the scope of the employment of the employee
  • University time, materials, or facilities were not used in making the invention
  • the time spent by the inventor is within the limits of the consulting policy

University Obligations to Inventors

Employees' obligations to disclose and assign their inventions to the University are matched by specific University obligations once an invention has been disclosed.

The University has an obligation to review submitted inventions, to incorporate them into its invention management system.

The TCO has ongoing relationships with patent attorneys and a budget for paying these attorneys to examine your results. Frequently, these experts can identify inventions others have missed.

Licenses

The University, as a public educational and research entity, avoids engaging in commerce. Yet, as outlined above, the University claims title to and eventually owns patents on inventions and copyrights. To transfer this intellectual property (#327 University Policy Manual) into the private sector, the University enters into relationships with private companies.

The form of this relationship is called a license. A license is a contract whereby the University retains ownership of the patent or copyright, and the private company obtains the right to use those patents or copyrights to make and sell products or services. As consideration for the licensed intellectual property, the University usually takes:

  • (a) an up-front payment upon issuance of the license (License Issue Fee)
  • (b) ongoing payments linked to actual sales of the products or service (Running Royalties)
  • (c) equity in start-up companies based on University technology

Royalties received by the University are important as they are the source money used to fund inventors, departments and other research expenditures.

Another very important part of a University license to a company is called Due Diligence. As a public institution, the University must require concrete proof that the technology it licenses is actually being successfully brought to the marketplace. Specific, objective milestones are included in the license to ensure that the technology does not lie dormant. If these milestones are not met, the University has the right to reclaim the technology in order to find a more successful partner.

Licensing Alternatives

Often, the best avenue for commercializing a new technology is to license it to an established company with an appropriate market. Such companies have the development, manufacturing and marketing resources necessary for commercial success, and they are able to provide the University with immediate consideration which can be paid to inventors and re-invested in new research.

Certain inventions can become the basis for start-up businesses. The University encourages faculty members interested in commercial activity to consider taking their own technology into the marketplace with appropriate business executive support. Provided an inventor-formed company can demonstrate an ability to meet the Due Diligence requirements, the University will generally license the technology to the inventor's company.

In a license to a start-up company, the financial requirements are often significantly reduced. Instead of the up-front License Issue Fee being paid in cash, the University may accept the company's stock. Royalty rates are often discounted. The University does not itself have the venture-capital, accounting or legal resources needed by a start-up company. However, the TCO has a number of reference resources available for interested faculty, as well as a network of contacts throughout the community where assistance can be obtained. Those with an entrepreneurial interest in bringing their own technology into the marketplace are encouraged to contact the TCO.