University of Colorado
Office of the Vice President for Academic Affairs and Research
Technology Transfer Office – CU Boulder & CU Colorado Springs
4740 Walnut Street STE 100
589 SYS
Boulder, Colorado 80309-0588
303-492-5647
FAX #: (303) 492-2128
Industry Sponsored Research and University
Intellectual Property FAQ
University of Colorado at Boulder
What rights do industry sponsors have under CU sponsored research agreements?
Industry sponsors of university research often request broad rights with regard to any
intellectual property developed pursuant to the sponsored research agreement. While
such requests may occur in agreements between commercial entities, universities have an
obligation to retain intellectual property rights to ensure researchers enjoy the freedom to
pursue his or her area of research. Universities are able to grant sponsors generous rights
to the intellectual property through option and license agreements.
The standard CU industry sponsored research agreement provides the opportunity for the
sponsor to secure rights to the intellectual property resulting from the research (including
patent rights, copyrights and data). The agreement may include:
Option Rights. A 30-day period to elect a six month option to an exclusive, royalty
bearing license to intellectual property. To secure the option, the industry sponsor shall
reimburse the University for costs associated with protecting the intellectual property
rights (patent costs, copyright filing fees, etc.).
OR
License Rights. A 30-day period to elect a nonexclusive, royalty-free license to
intellectual property in a limited field of use in exchange for reimbursement of patent
costs.
Who negotiates sponsored research agreements for the University?
The Office of Contracts and Grants (OCG) is primarily responsible for all industry
sponsored research contracts at the University of Colorado at Boulder. OCG will contact
the University’s Technology Transfer Office (TTO) when a sponsor requests intellectual
property provisions that depart from the standard terms outlined above.
What administrative steps are necessary in the negotiation of intellectual property
terms?
For more complex agreements, both sides must take time to understand the rationale and
communicate changes from standard terms and conditions within their organization and
consult and obtain approval from the legal counsel’s office when necessary. When a
sponsored research agreement relates to intellectual property, understanding the context
for the research and invention is essential. Within the university, we work with the
investigator to understand the research and work closely with the sponsor to understand
their business and specific business goals for the university intellectual property. The
University also conducts its due diligence to ensure that intellectual property is not
encumbered by obligations to other research sponsors. Our investigators collaborate with
investigators at other universities pursuant to inter-institutional Agreements, obtain
proprietary materials pursuant to material transfer agreements, or receive funding from
federal, state or other industry sponsors. In all cases, the relevant agreement will address
intellectual property rights and these rights are evaluated in the context of the proposed
sponsored research agreement. The TTO is committed to maintaining open and
continuous communications during this process.
Why is the election period for the option or license thirty days? Can it be longer?
The University needs to have a commitment from the sponsor for patent cost
reimbursement before proceeding with a patent filing. It is necessary to delay
presentations and publications until a patent has been filed in order to preserve
international patent rights. A fundamental contractual right that must be preserved
concerns the ability of the investigator to publish and any time constraint on this should
be minimal. The standard term is thirty days because it provides an appropriately
minimal constraint on the faculty member’s publications. By providing this option, the
University has the time to preserve both U.S. and international patent rights.
If the
sponsor needs longer than thirty days to elect this option, then we can provide a longer
period pending approval from the faculty member and OCG, as long as the faculty
member is still able to publish within a reasonable period of time.
What if the sponsor only wants to pursue U.S. patent rights?
This gives us more flexibility to lengthen the option election period. However, in today’s
global economy, obtaining international patent rights is often as important as obtaining
U.S. patent rights.
Why is the option period six months? Can it be longer?
Six months (plus the 30 day election period) should provide adequate time for the
sponsor to evaluate research results and make a decision about moving forward with a
commercial strategy for the intellectual property. We must make sure that the investigator
has the freedom to move on to other industry sponsored research projects with definitive
statement of available intellectual property rights. The University’s fundamental concern
is that the sponsor has a true commitment to commercializing the intellectual property.
In some industries, we must also consider how quickly technology moves, and whether
the innovation will miss its market window after a long option period. Another concern
about an option period longer than six months involves the time necessary to pursue
conversion of a provisional patent application to a full utility application. If the optionee
decides not to pursue the technology, then we have to undertake a market and technical
assessment to determine if we will protect the IP in the University’s name, all within the
12 month provisional patent application period. Once we understand the rationale for the
longer option period, we may be flexible on the timeframe as long as the publication and
patent filing issues are resolved. With resolution of these two issues we would be willing
to extend the option for up to eighteen months or through the duration of the sponsored
research contract.
When can the sponsor control the patent filing and prosecution?
The University is open to transferring patent prosecution matters to the sponsor under the
license, but we generally control the filing and prosecution during the option period.
Patent claims must be sufficiently broad, not just merely tailored to fit sponsor’s
anticipated application. Once a sponsor has exercised the option rights, we provide drafts
of patent filings to the sponsor for review and comment prior to filing to ensure the
sponsor’s interests are adequately pursued. We impose a similar requirement on licensees
so the University has the opportunity to review and comment on draft filings to ensure
the University interest is protected.
What happens when a patent on technology created through a sponsored research
project is invented jointly by university employees and employees of a sponsoring
entity?
In the case of collaborative projects, inventorship is determined by U.S. patent law. In
most cases, the inventors will assign their rights to their respective employer. CU
employees are required to do so. If a sponsor co-owns a patent as a result of a joint
invention, the sponsor and University will have equal, undivided rights under US patent
law. Such an equal, undivided right typically does not exist in international jurisdictions.
To secure the entire IP asset, the sponsor can elect an option to negotiate for a royalty
bearing, exclusive license to the University’s rights in the invention.
What does the University spend its royalties on?
Most of the royalties go back to supporting University purposes, primarily faculty
research projects at the University. The University has a policy of distributing all
royalties according to a formula: 25% to the inventor personally, 25% to the inventor’s
lab account for research, 25% to the Chancellor’s office and department to fund
innovative research, faculty startup packages and infrastructure, 25% to the CU
President’s Office to fund TTO operations and TTO’s various Proof of Concept
programs.
How are royalty rates decided for exclusive royalty-bearing licenses?
Commercially reasonable economic terms are negotiated based on industry norms and
comparable royalty rates that take into account the development and marketing costs of
the sponsor. Though far from the normal approach, we are open to negotiating a onetime payment, which we would calculate by discounting the expected royalties back to
their present value.
As would be expected of any organization, we seek a fair return on the IP, particularly in
our fiduciary obligation to our employees. We are happy to consider the unique financial
and competitive situation of each sponsor and entertain well-justified counter-proposals
on royalty rates. CU is among the leaders in technology transfer and this national
recognition is due to reasoned negotiations and ability to craft fair license transactions.
Why can’t the University consider the payment for the research project to include
the value of the resulting intellectual property?
The University is bound by legal and policy constraints that do not allow us to “preprice” an asset of unknown value (that asset being the patent rights on a future, unknown
invention conceived during the project).1 Therefore, unlike private independent
consultants and research organizations, the University does not structure research
contracts to include delivery and assignment of resulting intellectual property at the end
of the research project. Payment for sponsored research does not reflect a fair market
value of this asset and University negotiators have a fiduciary duty to protect and manage
the University’s intellectual property assets.
What about software and data that are not patented?
The University is able to be more flexible on negotiating royalties up front for unpatented
software and data. This also takes time for us to work with the sponsor and the
investigator to understand and define the software and data that are of interest. In some
cases, all parties can agree that the value of the resulting software and data will be
negligible, and should be licensed exclusively to the sponsor for no additional cost at the
conclusion of the project.
Will the University agree to release software and data under an OSI-approved open
source license at the conclusion of the project?
Yes, this is acceptable in almost any circumstance.
1
IRS Revenue Procedure 2007-47.