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					  Intellectual Property Issues in
Industry – University Partnerships:
   The University Perspective

           Marc Donohue
         Johns Hopkins University

              April 29, 2008
       Purpose of Talk
Present perspective of U.S.
 Universities with respect to IP rights
 when contracting with Industry.

Present JHU perspectives.
      Contract Issues

Cultural issues
Tax issues
Other legal issues
Warranty and Indemnification
   Negotiation Issues
Publication review
IP ownership and terms
Flowdown of FAR clauses
Export Control
Warranty and Indemnification
  University Mission
Create new knowledge through
Disseminate Knowledge
 Publishing Research Results

Right to Publish
Due Diligence
Patent Ownership
Patent Licensing Terms
  Publication Rights
Universities do allow review of
 To redact any proprietary
  company information
 To give time to file patent
  applications on new IP
Universities do not allow approval
 of publications.
      Due Diligence
Universities expect due diligence
 on the part of Industry partners
 to bring new University-created
 technology to the market and not
 put on hold to protect the
 company’s market share for an
 existing product.
         Before 1980
Government owned rights to IP
 generated during federally-
 sponsored research.
Industry owned IP rights for
 industry-sponsored research.
 Very little of the IP from federal
 grants was commercialized.
  Bayh-Dole Act (1980)
Purpose is to encourage that IP
 from federally-funded projects
 benefit society by being licensed
 to industry.
Allows universities to own the IP
 conceived on federally-sponsored
 grants.         35 USC 200-212, 37 CFR 401
      Bayh-Dole Act

Consequence: Most universities
 feel that they should be allowed
 to retain IP rights to industry-
 sponsored research as well.
     Patents and Inventions
• University owns IP it conceives.
• University will give Company first
  right to negotiate an exclusive or
  non-exclusive license to Invention on
  reasonable terms and conditions,
  including reasonable royalties.
• Company to reimburse University for
  patent costs.
      Patents and Inventions
 IP jointly conceived shall vest jointly.
 Each party shall possess an undivided
 one-half interest in IP, as well as any
 corresponding patent rights and the right
 to make, use or sell such Invention
 without accounting to the other party.
     Patents and Inventions
Title to any Invention conceived or
 discovered solely by the Company
 shall vest in Company, except that title
 shall vest jointly if Invention was first
 conceived using University facilities.
        Legal Issues

Universities do not have the same
 freedom to contract as Industry
 because of their tax exempt
Tax Issues for
501(c)(3) Organizations
Section 501(c)(3) of tax code
 defines rules for the way non-
 profit organizations operate.
Tax-free bonds
Unfair competition
               Tax-Free Bonds
      Use of bond-financed facilities for
       unrelated business activity or for the
       benefit of a for-profit company is
       considered private business use.
      For 501(c)(3) bonds, no more than five
       percent of the net proceeds of the bond
       issue may be used for any private
       business use.
IRS Rev. Proc. 2007-47 section 6.02
               Tax-Free Bonds
     Industry-sponsored basic research is not
       private use if:
       (i) any license or other use of the resulting
       technology by the sponsor is permitted only
       on the same terms as the recipient would
       permit other unrelated, non-sponsoring
       parties; and
       (ii) the price paid for the use of the license or
       other resulting technology is determined
       when it becomes available for use.
IRS Rev. Proc. 2007-47 section 6.02
              Unfair Competition
      One objective of the IRS rules for 501(c)(3)
       organizations is to eliminate unfair competition
       by tax-exempt organizations with for-profit
       businesses. Tax-exempt organizations that
       engage in activities (such as providing analytical
       services) in unfair competition with for-profit
       organizations can loose their tax-exempt status.
      Therefore, Universities can not provide such
       services at prices less than for-profit companies.

Section 511 of the Internal Revenue Code
Universities must charge IDC rates
that are equal to or higher than they
   charge the federal government

   “Each institution's F&A cost rate process
     must be appropriately designed to ensure that
     Federal sponsors do not in any way
     subsidize the F&A costs of other
     sponsors, specifically activities sponsored by
     industry and foreign governments.”
  OMB Circular A-21 G.1.a.(3)
JHU-WSE Perspective
JHU-WSE Perspective
 JHU looking for innovative ways to work
  within federal regulations but still
  address the economic needs of our
  industrial partners.
 JHU is working to develop strategic
  partnerships which provide long term
  relationships with Industry.
   JHU-WSE Perspective
 While every project is different, we
 believe that most agreements can be
 structured under one of four basic
 Research Agreements
 “Fundamental” Research Agreements
 Fee for Service Agreements
 Teaming Agreements
“Fundamental” Research
 It is expected that there will not be
  any IP generated as a result of this
 JHU-WSE often will grant IP rights
  to industry just because we believe it
  is not an issue.
Fee for Service Agreements
  JHU provides data but not interpretation;
   therefore, no JHU IP is expected.
  Company is responsible to interpret the data
   and provide any analysis that might create IP.
  JHU cannot use its tax exempt status to
   underbid for-profit enterprises which may
   provide similar services.
  JHU cannot provide such services for less
   than it provides the same services to the
   federal government.
    Research Agreements
 Project may be based on existing JHU IP or
  company IP and there is potential for new IP.
 IP terms of contract depend on who brings
  what to the project.
 JHU-WSE often will grant NERF license and
  option to negotiate an ERF.
 If project is based on substantial company IP,
  JHU-WSE may grant ERF license.
    Teaming Agreements
 To jointly seek funding for the
  activity and/or to develop new
  technologies, markets and
 May based on company or JHU
  intellectual property.
    Open Innovation Case Study:
    Integument-ATL Partnership

 Integument grants JHU-ATL a NERF license for
  research purposes to all its IP in a particular field.
 Integument and JHU seek joint funding for projects.
 Agree IP from joint projects is jointly owned.
 JHU grants Integument:
   ERF for IP based on Integument IP
   NERF w/ option for ERF for other IP in field
   Split proceeds for licenses to others outside of field.

 Highly-effective “open innovation”
 Over 20M in grants over 3 years.
 20M expected next year.
 Several products in development.
 Several patent applications filed.
  Troublesome FAR Clauses
 Contract Terms and Conditions: Cannot agree to
  inspection, term for default, and warranty (52.212-4)
 Rights in Data: JHU cannot agree to publication
  restrictions or work-for-hire clauses (52.227-17)
 Security: Must allow JHU an opportunity to
  terminate if the section cannot be deleted (52.204-2)
 Stop Work Order: As a non-profit, JHU cannot
  suspend work and still pay employees (52.242-15)
Troublesome DFAR Clauses
  Warranty of Data: Universities perform
   research and cannot provide warranties
  Confidentiality Clause: University right
   to publish and disseminate information
  Disclosure of Information: Requires
   approval before publishing and JHU
   only allows review (252.204-7000)
          Negotiation Times
  0   1    2   3   4   5   6   7   8   9   10     11   12   13    14   15   16

          FAR Clause Issues                     Industry Issues

          60 Day Average                        130 Day Average

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