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IP Issues in Sponsored Programs

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1 IP Issues in Sponsored Programs
Lauren M. Goralski Assistant Director Office of Industry Contracts University of Louisville 4/13/2017

2 OVERVIEW What is Intellectual Property (IP)?
What IP issues may appear in pre-award activities, and where? How do we spot them? How do we solve them? Why do we (should we) care? 4/13/2017

3 What is IP? Intellectual property includes that which is protectable by statute or legislation, such as patents, registered or unregistered copyrights, registered or unregistered trademarks, service marks, trade secrets, mask works, and plant variety protection certificates. 4/13/2017

4 What is IP? IP also includes physical embodiments of intellectual effort (e.g., models, devices, machines, designs, apparatus, circuits, instrumentation, computer programs and visualizations, records of research and experimental results). 4/13/2017

5 Examples of Patentable Items
Processes Machines (inc. prototype devices) Electronic Circuits Compositions of matter (e.g., unique biological, chemical and physical materials) Software algorithms Improvements to any of the above 4/13/2017

6 Examples of Copyrightable Items
Text (e.g., technical reports, abstracts, journal articles) Video, music, images (multimedia) Software code and documentation Databases and other compilations Mask works (templates for semiconductor chips) 4/13/2017

7 Institutional IP Policies
Generally considered a part of the conditions of employment for every employee of the university and a part of the conditions of enrollment and attendance at the university by students. 4/13/2017

8 Institutional IP Policies
Typically assert ownership of IP that has the potential to be brought into practical use and that results from the activities of university employees in the course of their duties -- and sometimes through the use by any person of university resources such as facilities, equipment, or funds. 4/13/2017

9 University Ownership Exception
Traditional Academic Copyrightable Works - Many university IP policies provide that author owns copyright in traditional academic works (e.g., articles, books) - Note: Many scientific journals routinely require author to assign or exclusively license copyright to the journal as a condition of publishing the article Ownership can be transferred automatically to employer if required under employment contract. Many faculty assume they have right to take software with them to another employer, when in fact, most institutional policies provide that the copyright in software developed under externally sponsored research vests with the institution. If so, then use at another institution requires permission/license. Educate faculty and staff! 4/13/2017

10 University Missions & Goals
Preserve academic freedom, right to use and transfer university IP for continuing research, education, public benefit Assure timely dissemination of results Foster expeditious development and commercialization/public use of IP Retain required IP use rights for Government Realize return for inventors, university, state 4/13/2017

11 IP Issues in Sponsored Activities
Ownership of / rights to use IP Publication rights / delays Confidentiality (inc. data and results) Consultant / Work For Hire provisions Visiting scientists Materials transfer (in / out) Export control

12 IP Issues May Appear In:
Solicitation / RFP / Application Sponsor funding guidelines Technical proposal / statement of work Funding agreement Prime award Subaward / Purchase Order Related Material Transfer Agreement

13 Potential Applicable Regulations
SBIR/STTR Grant Application NIH Grants Policy Statement NIH Revised Public Access Policy NSF Grants Policy Manual Federal law (Bayh-Dole, ITAR, EAR) FARs, supplements (e.g. DFARS) State law 4/13/2017

14 NIH Revised Public Access Policy
Applies to any final peer-reviewed manuscript: ● Accepted for publication on or after 4/7/08 ● That arises, in whole or in part, from: ○ NIH grant or cooperative agreement active on or after 10/01/07 ○ NIH contract signed on or after 4/7/08 ○ Subaward in/out that meets above criteria 4/13/2017

15 NIH Public Access License
Investigator who is an author/co-author must insure that all publishing or copyright licensing/transfer agreements with publisher allow the manuscript to be submitted to NIH to be publicly accessible on PMC. Include language retaining these rights for NIH in grant to publisher. 4/13/2017

16 Complying with NIH Rule
Institutions – not individuals – are recipients of NIH funding. As mentioned earlier, individuals – not institutions – own copyright in traditional academic works and license/assign that copyright to journals to publish articles. How to implement? 4/13/2017

17 Example: IP Issue in RFP
States directly or by reference to sponsor terms and conditions that submission of proposal or acceptance of award may grant IP rights to sponsor May conflict with university policy, existing/pending obligations to third parties, state law, and/or Federal law & regulations (e.g., Bayh-Dole)

18 Addressing IP Issue in RFP
Always read sponsor’s guidelines / policies in detail, no matter how long and complex Consider any conflict of obligations with other sponsors, PI’s and students’ need to publish Try to negotiate with sponsor, or at least submit written exceptions to problematic terms

19 Addressing IP Issue in RFP
Discuss IP objectives with PI and campus licensing office If corporate sponsor, may have to take it (with file explanation of exception to IP policy) or leave it either way, opportunity to educate faculty and students 4/13/2017

20 Examples: IP Issues in Proposal
Prototype, new processes, or software referred to as “Deliverables” Proposed transfer of IP to sponsor (e.g., “Software / prototype will be developed and provided to company for its free use.”) Use of existing IP of institution, third party(ies) 4/13/2017

21 Examples: IP Issues in Proposal
PI may have “reached agreement” with sponsor during preliminary discussions Sponsor may think it will own or have free rights to use Deliverables May conflict with institutional policy, terms and conditions of award, law 4/13/2017

22 Addressing IP in Proposal
Double-check requirements of RFP/guidelines Outline potential / actual conflict with other policies, guidelines, agreements Determine who wrote proposal – if sponsor, have PI revise appropriately Emphasize “goals” vs. tangible deliverables 4/13/2017

23 Addressing IP in Proposal
Encourage PIs to list only reports and perhaps copies of data as Deliverables, if possible Delete all grants of rights from proposal; address IP rights in agreement instead If Deliverables required, provide with limited rights to extent possible 4/13/2017

24 Copyrighted Works Sponsor wants to own “all copyrighted works developed in the performance of the project” Would need to exclude any IP which is software, as well as “traditional academic copyrightable works” (e.g., journal articles) owned by author(s)

25 Publication For competitive reasons, companies prefer to withhold public disclosure of research results/IP until patent issues, or keep as “trade secret” indefinitely University policies and mission support expectation that faculty and students will “publish” (verbally and in writing) research results freely and in a timely manner.

26 Publication Delays/Prohibitions
Federal agency guidelines support 30 day pre-publication review (e.g., to delete sponsor confidential info), 90 day delay to file patent. Federal contracts increasingly include export control provisions which prohibit any public disclosure/access to results without sponsor’s prior “approval. Harder and harder to escape. (Export Control session this afternoon!)

27 “Publication” Reminder
When referring to “publication”: Use the term “public disclosure”, and/or Remind your researchers that “publication” includes ANY AND ALL public disclosures (including open lab meetings, discussions with colleagues, abstracts, PowerPoint slides)

28 Examples: BIP Issues Proposal indicates use of existing, background IP (software, biologicals, patented process) May be owned by university but created by faculty other than PI May have been created by PI, but already optioned/ licensed and not free for use in certain research May be owned by third party, not free for university to use (e.g., PI brings from former employer) 4/13/2017

29 Addressing Background IP
In both proposal and agreement: Specify list of needed BIP If university-owned, limit to BIP of contract performers Determine ownership and rights to use and/or deliver; obtain right to use and/or deliver (if necessary and if possible)

30 Addressing Background IP
In both proposal and agreement: State that BIP is NOT a deliverable Specify sponsor’s rights (if any) to BIP don’t use third party IP -- e.g., biological materials, software from another organization -- without appropriate written permission (MTA or license) ! 4/13/2017

31 Federally Funded Projects
Grant of rights between primary grant recipient / subawardee, or contractor / subcontractor, should be consistent with applicable Federal regulations, prime award, SBIR/STTR Allocation of Rights Agreement between SBC and RI, etc.

32 Federally Funded Projects
Definitions of “Intellectual Property” Use definitions (Technical Data, Computer Software, Subject Inventions) set forth in Prime Award or Federal Regulations (e.g., FARs) Set aside Government use rights to each as set forth in Prime Award

33 Rights in Subcontractor IP
37CFR401.14(g)-Subcontracts FAR (g)(1) – Subcontracts “…The Subcontractor will retain all rights provided for the contractor in this clause and the contractor will not, as part of the consideration for awarding the subcontract, obtain rights in the subcontractor’s subject inventions.”

34 Rights in Subcontractor IP
The same applies when a contractor requires license rights to copyrightable works arising under a subaward.

35 Rights in Subcontractor IP
OMB Circular A-110 and related FDP guidelines are consistent with Bayh-Dole. A subawardee may grant the contractor rights to use subawardee’s IP solely to the extent required for the contractor to meet its obligations to the Federal Government under the prime award.

36 Rights in Subcontractor IP
A grant of greater license rights to the prime contractor, even for educational and research purposes, should not be required of the subawardee / subcontractor.

37 Problematic Federal Terms
Request explicit waiver of especially problematic clauses DFAR Disclosure of Information FAR : Security Requirements

38 Export Control “Fundamental research” = basic and applied research in science and engineering, the results of which ordinarily are published and shared broadly within the scientific community Waived if universities accept undue restrictions or prohibitions on publication, access to and dissemination of research results (e.g., to foreign nationals) without sponsor approval

39 IP Issues in Industry Award
“We paid for it, we should own it.” “We paid for it, and if we can’t own it, we want to use it for free.” “We also want free rights to the Background Intellectual Property.” “We’ll license if terms listed upfront.” “Don’t make the IP available to our competitors.”

40 “We Paid For It, We Should Own It”
Company is funding a single project Research is made possible by years of experience, knowledge, ongoing research programs of PI Leveraging University, State, and Federal Government investments in research and facilities

41 “We Paid For It, We Should Own It”
Sponsor benefits from access: know-how, equipment not available “in-house” Tax consequences, concern for University’s non-profit status Company does not really need to own the IP in order to gain desired commercial superiority

42 “We Paid For It, We Should Own It”
IP policy says all IP developed as a result of sponsored research shall belong to the University (unless otherwise specified in writing) If it turns out invention arose in part from Government funding, University cannot agree to assign ownership to the corporate sponsor

43 “We Paid For It, We Should Own It”
Definition of IP also includes data, processes, know-how. Assigning ownership of all IP without reserved right to use could stop related current and future University research in its tracks, affect publication, faculty progress toward tenure, and student theses.

44 “Free Use, No Strings Attached”
IP policy states that exploitation decisions are to be made after evaluation of the intellectual property and review of applicable contractual commitments. IP policy and Bayh-Dole require sharing of revenue with inventors

45 “Free Use, No Strings Attached”
Sponsor may not even be interested in and/or able to develop the resulting invention Automatic non-exclusive royalty-free license would devalue the invention SRA does not contain appropriate language for a technology license

46 “Free Use, No Strings Attached”
University likely will not file for patent protection if patent expenses cannot be recovered from license revenue (royalties, fees) Endangers inventions which are best brought into use for public benefit under exclusivity

47 “Free Rights to BIP, Too”
Sponsor did not support research and development of the BIP University may have incurred substantial patent expenses for BIP, need to recover University will provide option in fields of interest, to extent not precluded

48 “Joint Ownership Upfront”
University has limited patent budget, so won’t agree upfront to share all patent costs Sponsor may not even be interested in and/or able to develop the resulting IP… but University would not be able to reclaim it

49 “Joint Ownership Upfront”
No possibility of exclusivity unless both owners agree to license their co-ownership to one party, so endangers inventions best served by exclusive licensing

50 “Specify License Terms Now”
Generally, specific commercial rights are to be based on negotiation at the time of exercise of an option by the sponsor and shall depend on the nature of the IP and its application, the relative contributions of the University and the sponsor to the IP, and the conditions deemed most likely to advance the commercial development and acceptance of the IP.

51 “Specify License Terms Now”
Invention not made yet – how can value be reasonably determined? If invention can be “anticipated”, may pre-set royalty ranges…otherwise, state that license terms will be appropriate for the technology and industry, the profit potential, and the contribution of the parties

52 “Keep It From Competitors”
Publication of research results is central to our University mission We won’t protect as trade secret If sponsor negotiates an exclusive, royalty-bearing license, their competitors will not be able to practice the invention without a sublicense from the sponsor

53 Non-Compete Clause Some companies view our performance of similar work for a competitor to be a conflict of interest and/or commitment. University should not accept “non-compete” clause at an institutional level, because all researchers will be affected. PI may choose to accept, but limit to very narrow area of research and duration (e.g., during performance of company project).

54 IP Issues in Award Many more issues and recommendations for handling IP ownership / option / license rights, but for purposes of this presentation, advice to sponsored programs office is: Get your technology transfer office involved in the negotiation! 4/13/2017

55 Confidentiality The University will cooperate with (potential) sponsors in facilitating appropriate arrangements to provide for receipt and protection of the other party's privileged information where the transfer of such information is, by mutual consent, deemed important to the conduct of the proposed discussion or work.

56 Confidentiality Confidential Information should not include research results developed by University personnel. (Different standard for data and results from performance of technical testing or services, or clinical trials, under which results may be owned by sponsor.)

57 “Return or Destroy” Disclosing party may require the recipient to return or destroy all of the disclosing party’s Confidential Information upon expiration or termination of the agreement

58 “Return or Destroy” Can be problematic if disclosing party’s biological materials or software code is embodied in recipient’s results. Anticipate when possible, and negotiate appropriate, mutually acceptable provisions (e.g., no “return or destroy” but can only use for internal, non-commercial research purposes).

59 Trade Secrets The legal status of trade secrets as IP depends on the diligent protection of their status as trade secrets, in accordance with a large body of law. If trade secrets are knowingly or carelessly disclosed to the public, their legal status as protectable intellectual property is lost, irreversibly.

60 Trade Secrets The employment terms of industry commonly contain provisions for protection of trade secrets. The University is different. It generally has neither the desire, nor the capability, to compel its personnel to protect trade secrets. Such commitments may conflict with academic publication rights.

61 Trade Secrets Furthermore, the academic environment for instruction and open, collegial discussion which exists in a research university makes it extremely difficult to maintain secrecy to the standards required by law.

62 Consultant / Work for Hire
Provides that sponsor owns all results and IP. Performer is paid for services rendered. No right to publish. Not appropriate for most university activities. Sponsor may wish to employ a commercial research firm instead.

63 Consultant / Work For Hire
Closest is clinical trials or technical testing/services, under which sponsor provides proprietary protocol / materials, owns all results, publication of data by university only with sponsor approval…but university reserves rights to inventions made independent of access to company proprietary protocol, information.

64 Consultant / Work For Hire
When consulting privately with external entities, academic staff members are acting in their individual capacities and must make it understood that they are not acting on behalf of the University. In general, University facilities and resources should not be used for non-University activities.

65 Material Transfer Agreements
MTAs may conflict with project funding agreement in: IP ownership issues First option/license rights to provider Prepublication review requirements Confidentiality obligations Export control provisions

66 Restrictions on Use of Material
Providers often limit use of Material to institution, or even particular lab/researcher, with no right to transfer to others Industry providers often limit University use of Material to “non-commercial” research (e.g., funded by University or Government)

67 MTA: Commercial Rights
Often, the University must agree to grant outright to the provider either a royalty-free or a royalty-bearing nonexclusive license (with the royalty rate to be determined after disclosure of invention).

68 MTA: Commercial Rights
Provider may also insist upon a first option to obtain an exclusive royalty-bearing license. Some providers also insist upon a royalty rate cap and/or outright exclusivity in their license rights to inventions resulting from the recipient’s research use of Material.

69 MTA Rights Burden is on the recipient to ensure that such grant of rights to the provider of Material does not conflict with any contractual obligations, existing or future, the recipient may have to a third party. Recipient should make a Materials provider aware, upfront, of any pre-existing rights of third parties, including Federal government.

70 Transfer of University Material
Before transferring University Material, consider: Whether the University has clear right to transfer the Material, or is restricted by existing contractual obligations to a third party. Potential commercial value of the Material.

71 Visiting Scientists Visiting Scientists often come from companies or from other academic institutions, both U.S. and foreign, and spend time working in University facilities, with University faculty and researchers – for periods that range from a few days to several months. Circumstances vary greatly.

72 Visiting Scientists May have IP obligations to employer
May conflict with university IP policy May conflict with IP in sponsored agreement Discuss terms with visitor’s employer Execute a Visiting Scientist Agreement to clarify institutional policies re: use of facilities, access to other sponsored research in lab, resulting IP

73 Legal Form Universities can not / will not accept liability, indemnify and hold harmless, and provide any warranty with regard to results and intellectual property, largely because we are “in the business of” research, not commercialization, and need a separation from what happens when others use a product that embodies our technology.

74 Example: IP Warranties
Concern if Sponsor wants: Warranty of Originality Warranty of Institutional Ownership Warranty of Non-infringement of IP

75 Concern with IP Warranties
The university may not have sufficient resources, nor the direct control over its personnel’s activities, to warrant that results are original, are wholly and solely owned by the university, and do not infringe IP rights of any third party; or know of all prior art or pending/issued patent applications.

76 Originality, Non-Infringement
For background IP owned by the University, the University may have previously entered into option or license agreements that commit certain rights to third parties so cannot warrant that Sponsor’s use would not infringe that third party’s rights.

77 Originality, Non-Infringement
… and in the case of potentially patentable inventions, there is no way that the University could undertake an exhaustive search and analysis of the prior art, nor know what pending patent applications are in the pipeline at the USPTO – even if we wanted to do so.

78 IP Warranty Solution Expressly state no warranty or representation of any kind, including any warranty against infringement of any IP rights. For copyrightable works, can ask project personnel to state that, to the best of their knowledge, the work is original and/or document that the copyright owner has granted necessary right to use, distribute.

79 University vs. Industry
develop and disseminate knowledge for public benefit vs. fiduciary responsibility to shareholders to protect and increase value of investment “open” academic environment vs. employer- imposed confidentiality publish results vs. retain trade secrets

80 The More We Move From… basic research to proprietary research
research to testing/services/clinical trials fundamental to applied problem-solving PI-prepared proposal to sponsor’s protocol University sole control to joint participation

81 …The Less Freedom is Available
Proprietary research, testing services, clinical trials, and use of sponsor’s tangible proprietary materials (e.g., MTA) or personnel all are more likely to lead to “could not have been developed but for” argument from sponsor

82 Take Home Lessons Understand IP basics and where issues arise in pre-award office’s usual activities Be familiar with your institution’s IP policy: what it covers, to whom it applies, under what circumstances, and how ownership of IP and rights therein are determined. 4/13/2017

83 Take Home Lessons Be aware of university’s legal rights and limitations Determine which regulations, laws, terms and conditions apply to the specific case Respect intellectual property rights of others 4/13/2017

84 Take Home Lessons Work with your technology transfer office
Protect institution/creator/Government rights Preserve institutional mission as well as university/faculty/staff/student interests 4/13/2017

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