What Happens When Professors Have Valuable Inventions?

Bench to Market (article)

You are a faculty member at a research university and you have made a significant breakthrough. More specifically, you are on the verge of what might be loosely called an “invention.” It could be anything—a chemical formula, a gene, a medical test or therapy, an engineering advance, or even a method of financial analysis. But its defining elements are that it is new and that it has a potentially useful, real-world application.

So what do you do next? The answer is simple, unequivocal, and unavoidable: Read your university’s patent and invention policy. (It might also be called an intellectual property policy or a technology transfer policy.) In all probability, it became part of your terms and conditions of employment when you were hired.

You might not like what you see, at least initially. (The policy of the University of North Carolina at Chapel Hill, which is typical of those at large research universities, can be viewed here.) Your first duty is probably to disclose the invention to the university. You will then be reminded that the university claims ownership of all faculty inventions made within the scope of the faculty member’s work, on university time, with university-administered funding, or in university facilities. Any one of these conditions usually suffices to create university ownership under the policy.

The next step will be for the university to decide whether it wants your invention. If it doesn’t, you can probably have the invention assigned back to you. If the university decides to seek a patent, you will be obligated to cooperate in the process (the university will pay the lawyers) and ultimately to assign any issued patent to the university. The university may also impose some limits on your ability to publish. It won’t prohibit publication, but it may make you delay. This is because in the United States, you have only a year to apply for a patent after publishing the invention, while in many foreign systems publishing before patenting is an absolute bar. So you should disclose before publishing.

Golden EggThe university will then make a critical decision: how to exploit the patent. It might decide to transfer the patent to a private company in exchange for future royalties, to go into a partnership with a private company, or to keep the patent and grant one or more licenses. Transferring the patent—or granting a single exclusive license—is attractive to universities because it also transfers the duty to defend the patent against validity challenges and enforce it against infringers.

None of this sounds very promising to you, but remember that you might find a way to be part of all this. Universities sometimes transfer patents to start-up companies that are established by or include the faculty inventor. (Financing start-ups is a topic that we’ll address in a subsequent post in the Bench to Market Series.) Even if the patent goes to an established company, that company might be eager to engage the inventor as a consultant. Whether you can do such outside consulting, and how much, is yet another issue on which you need to consult your faculty policies—they’re part of your contract.

Regardless of the direction the university chooses, you should get paid a percentage of the university’s net income (after it recovers the costs of patenting). At UNC-CH, for example, the university’s royalty income is divided 40% to the inventor[s], 40% to the inventor[s]’ department[s], and 20% to support the technology office. Where there are co-inventors (a technical term under patent law), your university will probably honor any revenue-sharing agreement you’ve made, or divide the inventors’ share equally as a default. And I know you’re all honorable people, but let me remind you anyway: do right by the graduate students. If they qualify legally as co-inventors, they may have a legal entitlement to an equal share; if not, consider what a fair share would be.

A final point to consider is the rights of the federal government. If the research leading to the invention is federally funded, then, under the Bayh-Dole Act, the government has a right to “march in” and exploit a promising invention if the university doesn’t—a right that is very rarely exercised. Federal funding may also secure for the funding government agency a non-exclusive license to use the invention. But it is important to remember that government funding does not automatically put an invention into the public domain. On the contrary, it is federal policy to encourage public-private cooperation to exploit technology for profit.

So invent, disclose—before publishing—and cooperate. And don’t spend it all in one place.