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

Key Issues in Key Issues in Collaborations with Collaborations with

IndustryIndustry

Larry R. Steranka, Ph.D.Larry R. Steranka, Ph.D.Executive Director,Executive Director,

Office of Technology LicensingOffice of Technology Licensing

Paul F. O’Keefe, CRAPaul F. O’Keefe, CRADirector, Office of Sponsored ProgramsDirector, Office of Sponsored Programs

OverviewOverview

Differences in Mission and CultureDifferences in Mission and Culture Institutional IssuesInstitutional Issues Operational/Investigator IssuesOperational/Investigator Issues Intellectual Property IssuesIntellectual Property Issues

Mission and CultureMission and Culture

UniversityUniversity Production of KnowledgeProduction of Knowledge Open CommunicationOpen Communication Curiosity-drivenCuriosity-driven

IndustryIndustry Creation of ValueCreation of Value Protection of InformationProtection of Information Market-drivenMarket-driven

Institutional IssuesInstitutional Issues

LegalLegal IRS RegulationsIRS Regulations

Rev Proc 97-14Rev Proc 97-14 UBITUBIT 501(c)(3) Status501(c)(3) Status

Bayh-Dole ActBayh-Dole Act Contractual ImplicationsContractual Implications

IRS Issues : Rev Proc 97-14IRS Issues : Rev Proc 97-14

Pertains to "private business use" of tax-Pertains to "private business use" of tax-exempt bond-financed facilities exempt bond-financed facilities

Provides “safe harbor” for basic researchProvides “safe harbor” for basic research Requires commercially reasonable license Requires commercially reasonable license

terms (no special deal for sponsor)terms (no special deal for sponsor) License terms must be negotiated at the License terms must be negotiated at the

time that technology is available for usetime that technology is available for use

IRS Issues : UBITIRS Issues : UBIT

UUnrelated nrelated BBusiness usiness IIncome ncome TTaxax University income usually exempt from University income usually exempt from

Federal taxFederal tax Activity similar to that of for-profit entity Activity similar to that of for-profit entity

may be considered “unrelated business may be considered “unrelated business income, and be subject to taxincome, and be subject to tax

Research is specifically exempt BUT must Research is specifically exempt BUT must be “in public interest”be “in public interest”

NO product development or testingNO product development or testing

IRS Issues : 501(c)(3) StatusIRS Issues : 501(c)(3) Status

Provision of the US tax codeProvision of the US tax code Provides tax exempt status for some non-profit Provides tax exempt status for some non-profit

organizationsorganizations ScientificScientific EducationalEducational

Allows for tax-deductible contributionsAllows for tax-deductible contributions Requirement of many foundations for funding Requirement of many foundations for funding

eligibilityeligibility Can be revoked for excessive “business” Can be revoked for excessive “business”

activityactivity

Bayh-Dole ActBayh-Dole Act Provides basis for University ownership of Provides basis for University ownership of

federally funded inventions federally funded inventions Establishes uniform patent policy for themEstablishes uniform patent policy for them Preserves government rightsPreserves government rights

Non-exclusive, royalty-free right to use for Non-exclusive, royalty-free right to use for governmental purposesgovernmental purposes

Prohibition against assignment to third party Prohibition against assignment to third party without specific government approvalwithout specific government approval

Requires US manufacture in case of exclusive Requires US manufacture in case of exclusive licenselicense

Contractual ImplicationsContractual Implications

WarrantiesWarranties ““Best-Efforts” research vs. “Merchantability”Best-Efforts” research vs. “Merchantability”

Use of University NameUse of University Name Cannot appear to endorse or approve a productCannot appear to endorse or approve a product

Liability/IndemnificationLiability/Indemnification Each side responsible for its own negligenceEach side responsible for its own negligence Universities do research for which their costs Universities do research for which their costs

are reimbursed, hence no profit, hence no are reimbursed, hence no profit, hence no funds to use for indemnification funds to use for indemnification (and, at least (and, at least in theory, no fixed price contracts)in theory, no fixed price contracts)

Operational/Investigator Operational/Investigator IssuesIssues

Statement of Work, Time Line and Statement of Work, Time Line and Reporting ScheduleReporting Schedule Quite detailedQuite detailed Relatively inflexibleRelatively inflexible More frequent reportingMore frequent reporting

Invoicing and PaymentInvoicing and Payment Higher level of scrutinyHigher level of scrutiny Non-standard formatsNon-standard formats

Operational/Investigator Operational/Investigator IssuesIssues

Conflict of InterestConflict of Interest Conflict of CommitmentConflict of Commitment ConsultingConsulting ConfidentialityConfidentiality Publication RestrictionsPublication Restrictions Intellectual PropertyIntellectual Property

Conflict of InterestConflict of Interest Brandeis Policy requires disclosure of Brandeis Policy requires disclosure of

business or financial relationshipsbusiness or financial relationships ““Potential, apparent or actual” conflictsPotential, apparent or actual” conflicts Conflict is an attribute of a situation, not an Conflict is an attribute of a situation, not an

individualindividual Conflicts can be allowed, but they must be Conflicts can be allowed, but they must be

managedmanaged Annual disclosure required for all Annual disclosure required for all

employees engaged in sponsored researchemployees engaged in sponsored research Certification of disclosure required at Certification of disclosure required at

submission stage for each new proposalsubmission stage for each new proposal

Consulting/Conflict of Consulting/Conflict of CommitmentCommitment

Faculty Handbook states that:Faculty Handbook states that: ““external activities of faculty members external activities of faculty members

must be consistent with university policies”must be consistent with university policies” ““faculty members must obtain the approval faculty members must obtain the approval

of the Dean prior to undertaking any of the Dean prior to undertaking any significant activity” andsignificant activity” and

““all faculty will file an annual disclosure all faculty will file an annual disclosure form with the university detailing all form with the university detailing all significant external activities during the significant external activities during the year”year”

Key IssuesKey Issues Confidential Information Confidential Information

what is it, who at each party can know it, what is it, who at each party can know it, and what can they do with itand what can they do with it

Publication rights Publication rights what review rights does the company what review rights does the company

have and what are possible outcomeshave and what are possible outcomes Inventions Inventions

how are they defined, who owns them, how are they defined, who owns them, and what are the company’s license and what are the company’s license rightsrights

Confidential Information: Confidential Information: InterestsInterests

What does CI include?What does CI include? CI of the company disclosed to university investigatorsCI of the company disclosed to university investigators University investigators’ results prior to public disclosureUniversity investigators’ results prior to public disclosure

UniversityUniversity Investigators need to be able to publish the results without Investigators need to be able to publish the results without

disclosing CI of the company and without unreasonable disclosing CI of the company and without unreasonable delay.delay.

University needs reasonable assurance that its University needs reasonable assurance that its investigators will honor confidentiality obligations investigators will honor confidentiality obligations

Company: Company: Can be injured by disclosure of it’s CI, which may be the Can be injured by disclosure of it’s CI, which may be the

basis of competitive advantage, or by publication of the basis of competitive advantage, or by publication of the results before patent application(s) are on file.results before patent application(s) are on file.

Needs assurance that individuals who learn CI will Needs assurance that individuals who learn CI will understand that they did and honor the associatedunderstand that they did and honor the associated obligationobligation

Confidential Information: TermsConfidential Information: Terms

Companies tend to want general Companies tend to want general languagelanguage Example company draft : CI means any information Example company draft : CI means any information

disclosed in writing, orally, electronically or by inspection of disclosed in writing, orally, electronically or by inspection of tangible objects which is (i) marked “Confidential”; (ii) is tangible objects which is (i) marked “Confidential”; (ii) is otherwise represented by the disclosing party as confidential otherwise represented by the disclosing party as confidential [even some time after disclosure]; or (iii) otherwise [even some time after disclosure]; or (iii) otherwise represents information of the type afforded confidentialityrepresents information of the type afforded confidentiality

Universities need CI to be explicitly identifiedUniversities need CI to be explicitly identified U. revision: CI means any information disclosed in writing, U. revision: CI means any information disclosed in writing,

electronically or, if disclosed orally, summarized in writing electronically or, if disclosed orally, summarized in writing within 30 days, and which is marked “Confidentialwithin 30 days, and which is marked “Confidential””

Confidential Information: Confidential Information: TermsTerms

Company may want all employees of the Company may want all employees of the University who will know its CI to have signed University who will know its CI to have signed a confidentiality agreement with the Universitya confidentiality agreement with the University

Although standard practice in B-to-B Although standard practice in B-to-B relationships, universities don’t do this sort of relationships, universities don’t do this sort of thing.thing. U can agree to protect company CI as though it were U can agree to protect company CI as though it were

its own its own U can agree that CI will be shared on a need-to-know U can agree that CI will be shared on a need-to-know

basis only and that recipients will be informed of the basis only and that recipients will be informed of the obligationobligation

PublicationPublication : : InterestsInterests

University: Investigators must be able to University: Investigators must be able to publish the results freely with minimum delaypublish the results freely with minimum delay

Company: Needs time to file patent Company: Needs time to file patent applications on project-derived inventions that applications on project-derived inventions that would be disclosed in publications and may would be disclosed in publications and may want to be able to prevent publication of want to be able to prevent publication of results unfavorable to the companyresults unfavorable to the company

Publication : TermsPublication : Terms

Company may request that publications be Company may request that publications be contingent upon written approval, without contingent upon written approval, without limitation, of the companylimitation, of the company

University can never agree University can never agree Investigators’ freedom to publish is vital Investigators’ freedom to publish is vital Dissemination of results is a requirement of the Dissemination of results is a requirement of the

tax exempt research missiontax exempt research mission Resolution: Company gets a defined period Resolution: Company gets a defined period

of time to review manuscripts and of time to review manuscripts and presentation materials for specific purposespresentation materials for specific purposes

Publication : TermsPublication : Terms For what purpose and with what outcome?For what purpose and with what outcome?

Disclosure of CI of company, which company can Disclosure of CI of company, which company can delete. The U and its investigators need to ensure delete. The U and its investigators need to ensure that CI accepted is not required for publication.that CI accepted is not required for publication.

Disclosure of a patentable invention. Company Disclosure of a patentable invention. Company will want the right to delay all public disclosures will want the right to delay all public disclosures beyond the defined review period to allow patent beyond the defined review period to allow patent filing. U/investigator generally have to agree to filing. U/investigator generally have to agree to some delay of publications but should resist delay some delay of publications but should resist delay of presentations.of presentations.

Duration of review period and delay of Duration of review period and delay of publicationpublication NIH guideline: 60 daysNIH guideline: 60 days

Inventions : Ownership TermsInventions : Ownership Terms

Company may want to own project Company may want to own project inventionsinventions In the definitions: “Sponsor Invention” includes In the definitions: “Sponsor Invention” includes

those made by the University investigator in those made by the University investigator in the performance of the Research.the performance of the Research.

Later in the document: “Any and all patents Later in the document: “Any and all patents and patent applications covering Sponsor and patent applications covering Sponsor Inventions shall be owned by Sponsor.”Inventions shall be owned by Sponsor.”

University response: U owns inventions of University response: U owns inventions of its investigatorsits investigators Statutory if federally supported to any extentStatutory if federally supported to any extent Brandeis policy dictates U ownershipBrandeis policy dictates U ownership

Inventions: License RightsInventions: License Rights

Company wants a free, automatic non-exclusive Company wants a free, automatic non-exclusive licenselicense

University responseUniversity response U should try to restrict it to research or internal use only, U should try to restrict it to research or internal use only,

in which case the license can be automaticin which case the license can be automatic Company may push for a free non-exclusive commercial Company may push for a free non-exclusive commercial

license, which may be acceptable if limited to “freedom license, which may be acceptable if limited to “freedom to operate”. The exception would be a case in which a to operate”. The exception would be a case in which a non-exclusive commercial license would “poison” the non-exclusive commercial license would “poison” the technology (e.g., a drug candidatetechnology (e.g., a drug candidate

A license that includes commercial activity should be the A license that includes commercial activity should be the subject of a formal license agreement, not “automaticsubject of a formal license agreement, not “automatic” ” (the U “agrees to grant” vs. “hereby grants“)(the U “agrees to grant” vs. “hereby grants“)

Inventions: License Inventions: License RightsRights

Company will get an exclusive option to negotiate Company will get an exclusive option to negotiate an exclusive license and may want that option to an exclusive license and may want that option to be free and perpetualbe free and perpetual

University responseUniversity response U should insist on a time-limit on the option period as well U should insist on a time-limit on the option period as well

as the negotiation period if the option is exercised as the negotiation period if the option is exercised (company notifies us that they want to negotiate)(company notifies us that they want to negotiate)

Company will agree to a time-limit on the option, but may 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 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 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 has to grant such first right, it should be time-limited as well.well.

Company should pay patent expenses during the option Company should pay patent expenses during the option period as consideration for the exclusive optionperiod as consideration for the exclusive option

Inventions : ReachInventions : Reach

Company may wants its license rights to extend to Company may wants its license rights to extend to inventions that fall outside the bounds of the projectinventions that fall outside the bounds of the project ““Developments [the subject of the option clause] Developments [the subject of the option clause]

include,without limitation, discoveries, inventions, include,without limitation, discoveries, inventions, developments, know-how, trade secrets, techniques, developments, know-how, trade secrets, techniques, methodologies, modifications, innovations, improvements, methodologies, modifications, innovations, improvements, research materials, new uses, data and rights that are research materials, new uses, data and rights that are conceived, discovered, invented, developed, created, made or conceived, discovered, invented, developed, created, made or reduced to practice by [Co] and/or Institution (whether alone or reduced to practice by [Co] and/or Institution (whether alone or jointly with others) using the data included in the Report”jointly with others) using the data included in the Report”

University response University response ““Developments” should be limited to those made during and in Developments” should be limited to those made during and in

the performance of the Research by the PI or individuals under the performance of the Research by the PI or individuals under his or her supervisionhis or her supervision