Policy Number: 201
Inventions and intellectual creations
Employees, Students and All Others Using University Facilities or Resources
- Date Reviewed:
- January 2012
- Responsible Office:
- Office of Technology Management
- Responsible Executive:
- Director of Technology Management
I. POLICY AND GENERAL STATEMENT
The University of Texas System (“UT System”) Board of Regents (“Board”) and The University of Texas Health Science Center at Houston (“university”) encourage the development of intellectual property to enhance research, scholarship, teaching, and discovery in the best interest of the public, the creators and research sponsors. This policy is also intended to promote the objectives of the Bayh-Dole Act (35 U.S.C. §§ 200 et. seq.) to encourage reporting and commercialization of technologies developed using federal (e.g., NIH, NSF, NASA, DOD) funds.
Intellectual property either developed within the course and scope of university employment of the individual or resulting from activities performed on UT System time, or with support of State funds, or from using facilities or resources owned by the UT System or any of its universities (other than incidental use) is automatically owned by the Board. The course and scope of employment includes outside activities related to the employee’s area of expertise. Final decisions regarding ownership of intellectual property developed in connection with outside employment will be made by the President or his/her designee. Employees who engage in outside activities must adhere to the procedures outlined in HOOP Policy 20 Conflict of Interest and Outside Activities.
All matters relating to the ownership and reporting of intellectual property, the commercialization of intellectual property and the distribution of income from intellectual property are governed by the UT System Board of Regents’ Rules and Regulations (“Regents’ Rules”) 90001, Intellectual Property, Preamble, Scope, Authority.
This intellectual property policy applies to (1) all persons employed by the university, including but not limited to full and part-time faculty and staff and visiting faculty members and researchers and (2) to anyone using the facilities or resources of the university, including but not limited to students, residents, participants in certificate programs or collaboration programs, or postdoctoral and predoctoral fellows. All individuals subject to this policy assign their rights in intellectual property included under this policy (see Section 3 below) in accordance with the provisions of Regents’ Rule 90001, Intellectual Property, Preamble, Scope, Authority.
All university employees, non-employees who use university facilities, visiting faculty members and researchers and those persons who are hired or funded contractually by the university to perform certain activities or services, unless otherwise exempted by the Regents’ Rules, shall disclose and do hereby assign all rights, interest and title to the Board for all intellectual property discovered or invented during the time employed, funded or using the facilities as specified in accordance with Regents’ Rule 90001, Intellectual Property, Preamble, Scope, Authority.
Individuals subject to this Policy who create such intellectual property must promptly execute and deliver all documents and other instruments as are reasonably necessary in the university’s discretion to reflect the Board’s ownership of such intellectual property, including for purposes of satisfying requirements of the United States Patent and Trademark Office or other patent registrars. A creator of intellectual property owned by the Board has no independent right or authority to convey, assign, encumber or license such intellectual property to any entity other than the Board.
The Board will not assert an ownership interest in the copyright of scholarly or educational materials, artworks, musical compositions, and literary works related to the author's professional field regardless of the medium of expression, unless the work is commissioned by the university or the Board as a work made for hire. The Board encourages such creators to manage their copyrights in accordance with the guidelines concerning management and marketing of copyrighted works (http://www.utsystem.edu/ogc/IntellectualProperty/copyrighthome.htm) consistent with applicable university policies. Creators with questions regarding ownership of scholarly works should contact the university’s Office of Technology Management (“OTM”).
As reasonably required for the limited purpose of continuing a university scheduled course offering, the Board and university retain for one year following the loss of an instructor’s services, a fully paid-up, royalty-free, nonexclusive worldwide license to use, copy, distribute, display, perform and create derivative works of materials prepared by the instructor for use in teaching such course (including lectures, lecture notes, syllabi, study guides, bibliographies, visual aids, images, diagrams, multimedia presentations, examinations, web-ready content and educational software).
Research data or results created by an employee are owned by the Board and, except to the extent that rights to such research data are contractually assigned or licensed to another party by the Board, the creator shall have a nonexclusive license to use such data for his/her nonprofit educational, research and scholarly purposes within the scope of his/her employment, subject to adherence to other provisions of this policy and the Regents’ Rules.
“Intellectual property” includes all types of intellectual property, including but not limited to any invention, discovery, creation, know-how, trade secret, technology, scientific or technological development, research data, works of authorship and computer software regardless of whether subject to protection under patent, trademark, copyright or other laws.
“Equity” is defined to include stock, the right to receive stock or an ownership interest in a business.
“Key employee” includes but is not limited to an owner, manager, director, board member or advisory board member.
The OTM coordinates and assists in securing available protection for Board and university owned intellectual property and pursues development and commercialization of such intellectual property. Such efforts are provided by either an OTM staff, through a related foundation or entity, or through other means.
A. Reporting Intellectual Property
Intellectual property should be reported to the OTM as soon as a creator believes he/she has a new discovery, creation and/or invention, including software, by submitting a completed and signed Technology Report Form (“TRF”).
The TRF is a legal document prepared by a creator that explains what was discovered or created or what scholarly work was created, who sponsored the work and whether such work has been disclosed or is scheduled for publication or public presentation. For patentable inventions, the completed TRF should clearly indicate the new, useful and non-obvious properties of the intellectual property over existing published materials. All creators of the intellectual property should be listed in the TRF even if they are not university employees.
Publicly disclosing the details of one’s intellectual property during a technical presentation in a public forum (seminar or conference) could affect patent protection. This topic is explained in the OTM Handbook. Creators are encouraged to call OTM with any questions prior to any such presentations.
B. Evaluation of Intellectual Property Rights
When OTM receives a reasonably complete and detailed TRF (as determined by the OTM), OTM will evaluate the TRF to determine the Board’s ownership interest in and rights to the intellectual property, appropriate protection (i.e., patent, copyright or research tool), commercial potential, market interest and technical merit. OTM will regularly and promptly communicate with the creators during this decision-making process.
As necessary and appropriate, OTM may consult with members of the Intellectual Property Committee, members of the faculty or other experts to evaluate the TRF for technical merit and to comment on the commercial potential, marketability and competitive advantages of the technology. Following initial evaluation of the TRF, OTM will make a recommendation that may include the following:
- Hold the disclosure for more information or research data from the creators;
- Seek protection (patent or copyright) on behalf of the university and Board;
- Pursue a research sponsor or licensee. Potential licensees may include existing or new start-up companies with an interest in using or commercializing the technology; and/or,
- Release or offer to license some or all of the rights to the creators. In accordance with the Regents’ Rules, OTM will notify creators of the university’s decision within 20 business days of such decision by the President. (See Section E below).
TRFs which OTM considers promising but are either incomplete or have insufficient information for submission of a patent application, or for which there is insufficient current interest, may be held by OTM for future pursuit. OTM will notify the creator, hold the intellectual property and monitor its development with the aim of protecting and/or licensing the invention when it has developed sufficiently. Creators must update OTM on further developments in a timely fashion.
C. Commercializing Intellectual Property
When the university decides to file for intellectual property protection, OTM will coordinate with outside legal counsel, as approved by the Texas Attorney General and with the General Counsel at UT System, to obtain the appropriate protection. The university bears the costs of filing for intellectual property protection. OTM will give due regard to creators’ comments and recommendations when making decisions with respect to the patenting of their discoveries and will keep them apprised of the decisions regarding patent strategy during patent prosecution. The creators must assist throughout this process to ensure that the strongest intellectual property protection is obtained.
In those instances where the Board asserts its ownership interest in intellectual property, OTM will determine what course of action to follow to realize the greatest potential for the Board’s intellectual property.
OTM negotiates and administers all transactions relating to intellectual property owned by the Board for and on behalf of the university. Such arrangements may include, but are not limited to, confidential disclosure agreements, material transfer agreements, joint ownership agreements, inter-institutional agreements, option agreements and license agreements (exclusive or non-exclusive). All such agreements must: (1) include unrestricted publication rights for the university and its creator, (2) fully indemnify the Board, university and its creators and (3) include other normal and customary provisions.
D. Distribution of Income from Intellectual Property Agreements
1. Non-Equity Transactions
Intellectual property agreements may yield a variety of different financial payments, which may include, but are not limited to, up-front license fees, milestone payments and royalties (“Consideration”). All such Consideration is received by OTM, which will maintain accounts documenting intellectual property expenses, income and disbursement. Licensing income will be distributed according to the university’s policy as detailed below.
Before disbursing licensing Consideration, OTM will deduct the expenses that the university has incurred to protect, manage, market and commercialize the intellectual property. Additionally, OTM may withhold a portion of the licensing income to cover future expense obligations. The net consideration received by the university, excluding equity, will be shared between the university and the creators according to the following formula:
- 50 percent -- creators
- 5 percent -- creators’ School(s)
- 5 percent -- creators’ Department(s), Division(s) (or equivalent)
- 5 percent -- creators’ Laboratory(ies)
- 35 percent -- Office of Technology Management
Fifty percent (50%) of the net income will be distributed to the creator or, in the case of multiple creators, according to percent allocations as set forth in a signed creators royalty sharing agreement or the TRF. A pro rata formula will be used for distributions according to the total number of creators if no separate signed allocation is made, unless appropriate distribution is determined otherwise by the President. The laboratory share is distributed only to a creator’s laboratory during the period that the creator remains a university employee. Should a creator leave the university, the creator’s laboratory share will be retained by OTM.
A creator may disclaim his/her interest in income from the intellectual property, in which case university shall receive the creator’s share and shall decide, in its sole discretion, if, how and when to disburse such income.
In the event that no school or department is clearly involved in the original development, the Intellectual Property Advisory Committee will suggest a division consistent with the intention of the division shown above. The final decision will rest with the President.
2. Equity-Based Transactions
In agreements with business entities relating to rights in intellectual property owned by the Board, the university may receive equity interests as partial or total compensation for the rights conveyed (Regents’ Rule 90001, Intellectual Property, Preamble, Scope, Authority). In any such instance, the President may elect, at his/her option, to share an equity interest, dividend income or the proceeds of the sale of an equity interest with the creator(s) in the same manner as royalties are shared pursuant to Regents’ Rule 90001, Intellectual Property, Preamble, Scope, Authority. In such instances, equity may be issued in the name of the creators. The Board, through the university, may also receive equity interests in a business entity as consideration for the university's role as a founder or cofounder of the business entity and shall not be obligated to share such equity interests with the creators (“university equity”). The Board may accept equity in private or publicly held businesses in addition to and/or in lieu of receiving licensing or royalty payments. Such licensing activity shall be conducted in accordance with the Regents’ Rules, the university’s Conflict of Interest Policy and other relevant university policies and guidelines. Where applicable, university representation on a company board of directors will be determined and appointed by the President subject to the Regents’ Rules. A member of OTM will be assigned observation rights to a company’s board of directors if such rights are included in the license agreement.
Employees of the university who conceive, create, discover, invent or develop intellectual property may personally hold an equity interest in a business entity that has an agreement with UT System relating to the research, development, licensing or exploitation of that intellectual property if the employee has an executed conflict of interest management plan with the university and such plan fully complies with the university’s conflict of interest policies and guidelines. The university may, but shall not be obligated to, negotiate an equity interest on behalf of any employee as a part of an agreement between UT System and a business entity relating to the Board’s intellectual property.
3. Handling and Sale of Equity
Stock certificates for the university equity will be issued in the name of the Board and held and managed by the University of Texas Investment Management Office under its standard guidelines. The university may sell university equity after the President or Senior Executive Vice President, Chief Operating and Financial Officer approves the transaction.
4. Distribution of Proceeds from the Sale of University Equity
Proceeds from the sale of university equity will be distributed as follows:
- 25 percent -- Laboratory(ies) of creators*
- 25 percent -- OTM Patent Fund
- 25 percent -- New Ventures Fund (OTM managed fund)
- 25 percent -- Pioneer Fund (OTM managed fund).
*If a creator is no longer operating a laboratory at the university, the proceeds from the sale of equity attributable to that creator shall be evenly divided among the remaining three funds.
In addition to the above requirements for equity-based licensing transactions, the following must be completed and approved by the university when any creator intends to participate as a key employee in the company and/or own equity in the company.
- Participating contributors must agree to and sign a Conflict Management Plan developed and approved by the Conflict of Interest Committee and approved by the Executive Vice Chancellor and Office of General Counsel. Incorporation documents, including By-Laws, Registration Rights Agreement, Shareholders Agreement and Subscription Agreement and, when applicable, a Convertible Demand Agreement or Promissory Note must be approved by outside university corporate counsel and held on file with OTM and the Office of Legal Affairs.
- For new start-up companies, a capitalization chart must be on file with OTM showing the number of stock shares issued and percentage ownership of all participants at the time of execution of a license agreement with the university.
E. Release of Intellectual Property
When the university decides to release or license the invention to a creator, the following guidelines must be followed.
Except where prohibited by law, contractual obligations or other requirements, when the university decides not to assert its ownership interest in intellectual property, and that recommendation is approved by the President and notice is given to the UT System Office of General Counsel, then each creator of such intellectual property will be notified that the university will release or license the intellectual property to him/her. If requested in writing by a creators, release or license documents will be prepared for the creator to sign and execute. If the university decides to abandon a pending patent application, it first shall offer to release the patent application back to the creator, subject to the release provisions below. Where the intellectual property creation and/or development was funded by private or federal sources, such releases or assignments will be in accordance with relevant policies of such funding sources.
Documents releasing or licensing intellectual property rights to the creators must include as a condition of the university to release or license: (1) provisions for the university to recover patent and licensing expenses; (2) provisions for the university to retain certain income rights; and (3) a nonexclusive license to the UT System and any of its universities and academic collaborators to use the released intellectual property for patient care, teaching, scholarly and other academically related purposes and nonprofit research. Such documents may include other limitations or obligations in addition to those set forth above. If a patent application has not been filed for the intellectual property, the university may require that the creators file an application on the invention with the U.S. Patent and Trademark Office within a specified period of time. As stated above, when intellectual property rights are released to the creators, the creators must pay the university a percentage of the income he/she makes from commercializing his/her released intellectual property (“University Income from Released Intellectual Property”). This University Income from Released Intellectual Property shall not be considered royalty and shall not be subject to any distribution to the creators or their laboratories, but shall be subject to the distribution policy specified above for sale of equity.
Office of Technology Management