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
- Student Inventions
- Obligation to Disclose
- Rights of Sponsors
- Inventions Arising Through Consulting
- University Obligations to Inventors
- Licensing Alternatives
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.
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
From gross royalty income, deductions are taken for cumulative expenses (typically patent filing fees) that are directly assignable to the work. An additional deduction, to total 15% of cumulative royalties after expenses, also will be taken to help defray administrative costs of Intellectual Property Services.
After deductions, the University distributes the remaining incomes as follows:
1) income (after deductions) from 0 to $500,000:
- 50% to the inventor*
25% to the generating unit(s)**
25% to the University***
2) income (after deductions) from $500,000 to $2,000,000.
40% to the inventor*
30% to the generating unit(s)**
30% to the University***
3) income (after deductions) over $2,000,000.
40% to the inventor*
20% to the generating unit(s)**
40% to the University***
* Co-inventors split the inventor's share in proportion to their relative contributions, unless otherwise agreed to among themselves. Payments to inventors/authors are paid directly to them, and are not employment consideration.
** When more than one generating unit is involved, the inventor(s) shall designate the distribution to them, based on their support of the work. The generating unit's share is disbursed by the dean(s), director(s), and department head(s).
*** The university share is used to provide university-wide research support, as determined by the President upon advice from the Vice President for Research.
It is the obligation of each employee who believes he or she may have created an invention to disclose its nature and background to Intellectual Property Services
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.
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 Intellectual Property Services. 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 ISPO to accommodate specific needs. Only by signing appropriate agreements can sponsors be assured that they have certain rights to the invention they have funded.
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
- 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.
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:
- an up-front payment upon issuance of the license (License Issue Fee)
- ongoing payments linked to actual sales of the products or service (Running Royalties)
- 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.
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, IP Services 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 IP Services.