Key Issues in Collaborations with Industry Larry R. Steranka, Ph.D. Executive Director, Office of Technology Licensing Paul F. O’Keefe, CRA Director, Office of Sponsored Programs

Overview Differences in Mission and Culture Institutional Issues Operational/Investigator Issues Intellectual Property Issues

Mission and Culture University Industry Production of Knowledge Open Communication Curiosity-driven Industry Creation of Value Protection of Information Market-driven

Institutional Issues Legal Contractual Implications IRS Regulations Rev Proc 97-14 UBIT 501(c)(3) Status Bayh-Dole Act Contractual Implications

IRS Issues : Rev Proc 97-14 Pertains to "private business use" of tax-exempt bond-financed facilities Provides “safe harbor” for basic research Requires commercially reasonable license terms (no special deal for sponsor) License terms must be negotiated at the time that technology is available for use

IRS Issues : UBIT Unrelated Business Income Tax University income usually exempt from Federal tax Activity similar to that of for-profit entity may be considered “unrelated business income, and be subject to tax Research is specifically exempt BUT must be “in public interest” NO product development or testing

IRS Issues : 501(c)(3) Status Provision of the US tax code Provides tax exempt status for some non-profit organizations Scientific Educational Allows for tax-deductible contributions Requirement of many foundations for funding eligibility Can be revoked for excessive “business” activity

Bayh-Dole Act Provides basis for University ownership of federally funded inventions Establishes uniform patent policy for them Preserves government rights Non-exclusive, royalty-free right to use for governmental purposes Prohibition against assignment to third party without specific government approval Requires US manufacture in case of exclusive license

Contractual Implications Warranties “Best-Efforts” research vs. “Merchantability” Use of University Name Cannot appear to endorse or approve a product Liability/Indemnification Each side responsible for its own negligence Universities do research for which their costs are reimbursed, hence no profit, hence no funds to use for indemnification (and, at least in theory, no fixed price contracts)

Operational/Investigator Issues Statement of Work, Time Line and Reporting Schedule Quite detailed Relatively inflexible More frequent reporting Invoicing and Payment Higher level of scrutiny Non-standard formats

Operational/Investigator Issues Conflict of Interest Conflict of Commitment Consulting Confidentiality Publication Restrictions Intellectual Property

Conflict of Interest Brandeis Policy requires disclosure of business or financial relationships “Potential, apparent or actual” conflicts Conflict is an attribute of a situation, not an individual Conflicts can be allowed, but they must be managed Annual disclosure required for all employees engaged in sponsored research Certification of disclosure required at submission stage for each new proposal

Consulting/Conflict of Commitment Faculty Handbook states that: “external activities of faculty members must be consistent with university policies” “faculty members must obtain the approval of the Dean prior to undertaking any significant activity” and “all faculty will file an annual disclosure form with the university detailing all significant external activities during the year”

Key Issues Confidential Information Publication rights Inventions what is it, who at each party can know it, and what can they do with it Publication rights what review rights does the company have and what are possible outcomes Inventions how are they defined, who owns them, and what are the company’s license rights

Confidential Information: Interests What does CI include? CI of the company disclosed to university investigators University investigators’ results prior to public disclosure University Investigators need to be able to publish the results without disclosing CI of the company and without unreasonable delay. University needs reasonable assurance that its investigators will honor confidentiality obligations Company: Can be injured by disclosure of it’s CI, which may be the basis of competitive advantage, or by publication of the results before patent application(s) are on file. Needs assurance that individuals who learn CI will understand that they did and honor the associated obligation

Confidential Information: Terms Companies tend to want general language Example company draft : CI means any information disclosed in writing, orally, electronically or by inspection of tangible objects which is (i) marked “Confidential”; (ii) is otherwise represented by the disclosing party as confidential [even some time after disclosure]; or (iii) otherwise represents information of the type afforded confidentiality Universities need CI to be explicitly identified U. revision: CI means any information disclosed in writing, electronically or, if disclosed orally, summarized in writing within 30 days, and which is marked “Confidential”

Confidential Information: Terms Company may want all employees of the University who will know its CI to have signed a confidentiality agreement with the University Although standard practice in B-to-B relationships, universities don’t do this sort of thing. U can agree to protect company CI as though it were its own U can agree that CI will be shared on a need-to-know basis only and that recipients will be informed of the obligation

Publication : Interests University: Investigators must be able to publish the results freely with minimum delay Company: Needs time to file patent applications on project-derived inventions that would be disclosed in publications and may want to be able to prevent publication of results unfavorable to the company

Publication : Terms Company may request that publications be contingent upon written approval, without limitation, of the company University can never agree Investigators’ freedom to publish is vital Dissemination of results is a requirement of the tax exempt research mission Resolution: Company gets a defined period of time to review manuscripts and presentation materials for specific purposes

Publication : Terms For what purpose and with what outcome? Disclosure of CI of company, which company can delete. The U and its investigators need to ensure that CI accepted is not required for publication. Disclosure of a patentable invention. Company will want the right to delay all public disclosures beyond the defined review period to allow patent filing. U/investigator generally have to agree to some delay of publications but should resist delay of presentations. Duration of review period and delay of publication NIH guideline: 60 days

Inventions : Ownership Terms Company may want to own project inventions In the definitions: “Sponsor Invention” includes those made by the University investigator in the performance of the Research. Later in the document: “Any and all patents and patent applications covering Sponsor Inventions shall be owned by Sponsor.” University response: U owns inventions of its investigators Statutory if federally supported to any extent Brandeis policy dictates U ownership

Inventions: License Rights Company wants a free, automatic non-exclusive license University response U should try to restrict it to research or internal use only, in which case the license can be automatic Company may push for a free non-exclusive commercial license, which may be acceptable if limited to “freedom to operate”. The exception would be a case in which a non-exclusive commercial license would “poison” the technology (e.g., a drug candidate A license that includes commercial activity should be the subject of a formal license agreement, not “automatic” (the U “agrees to grant” vs. “hereby grants“)

Inventions: License Rights Company will get an exclusive option to negotiate an exclusive license and may want that option to be free and perpetual University response U should insist on a time-limit on the option period as well as the negotiation period if the option is exercised (company notifies us that they want to negotiate) Company will agree to a time-limit on the option, but may ask for a “right of first refusal” in the event it exercises its option but the parties are unable to close a deal. If the U has to grant such first right, it should be time-limited as well. Company should pay patent expenses during the option period as consideration for the exclusive option

Inventions : Reach Company may wants its license rights to extend to inventions that fall outside the bounds of the project “Developments [the subject of the option clause] include,without limitation, discoveries, inventions, developments, know-how, trade secrets, techniques, methodologies, modifications, innovations, improvements, research materials, new uses, data and rights that are conceived, discovered, invented, developed, created, made or reduced to practice by [Co] and/or Institution (whether alone or jointly with others) using the data included in the Report” University response “Developments” should be limited to those made during and in the performance of the Research by the PI or individuals under his or her supervision