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Best Practices Memo
University-Industry Sponsored Research
Universities and businesses have considerable incentive to cooperate in the
development of intellectual property (IP). Businesses recognize universities
for their rich talent pool and enthusiastic graduate students, while
universities recognize businesses as a source of real-world problems,
technical know-how, and funding. There are numerous examples of successful
research collaborations in computer science, computer engineering, and
electrical engineering. Mindful that some IP such as gene splicing and human
growth hormone have produced "IP goldmines," many university
administrators (and some students and faculty) are eager to establish strong
safeguards to protect their rights to intellectual property.
While such safeguards are perhaps essential in biomedical, pharmaceutical,
and agricultural research, they are not appropriate in Information Technology
(IT). They can be difficult and time-consuming to negotiate, and because
considerations such as time-to-market are so important in IT, the delay can
frustrate beneficial cooperation. Moreover, patent safeguards are unnecessary
because of the role of IP in IT products and the complications involved in
deploying IT IP. Formulating university-industry cooperative agreements must
be sensitive to these issues. This document describes the best practices for
university-industry agreements in IT, particularly the IP aspects of such
Context and Setting
Research and development in IT-related university departments is funded
largely by two mechanisms: federal grants and university-industry sponsored
research agreements (SRAs). Commercializing intellectual property derived from
federal grants is (when appropriate) required by the Bayh-Dole Act. The law
specifies the conditions of ownership and defines "standard
practice" for grant-receiving institutions. Practices surrounding
university-industry SRAs, however, vary widely, being governed mostly by the
needs of the agreeing parties. These agreements can take a variety of forms,
as explained in the next section.
Research universities typically have two offices, variously named, that are
concerned with funding and intellectual property. The Office of Sponsored
Projects (OSP) is generally responsible for negotiating funding agreements
with granting agencies, foundations, and companies. The Office of Technology
Transfer (OTT) is generally responsible for patenting and licensing technology
created at the university. In rough terms, the OSP is largely involved before
the intellectual property is created, and the OTT is involved afterwards. (As
another generalization, the OSP is typically less familiar with industry's
needs than is the OTT.) For all research covered by the Bayh-Dole Act, the
university is stipulated as the (initial) owner of the intellectual property.
For SRAs, ownership and rights to the intellectual property resulting from
research are the subjects of negotiations prior to funding.
The motivation for establishing best practices guidelines is the potential
for the conflicting interests of universities and industry to impede their
negotiations. An important "best practice" is for the OSP and the
OTT to cooperate in establishing the practices described below.
The possibility of producing a much-needed revenue stream by licensing
their intellectual property has motivated some administrators, regents, and
chancellors to require OSPs to exact strong protection for the university's
rights. Patent protection, which is generally required for biomedical,
pharmaceutical, and agricultural IP, is very slow to obtain and can be
expensive to secure and to defend. Almost all patenting expenditures do not
recover their investment. As a general rule, universities that successfully
generate revenue from IP do so with a tiny number (< 10) of significant
patents. (In 2001, the University of California system generated 77 percent of
all revenue from 25 licenses, and none were IT.) There are no known "gold
mine" IT licenses.
Managing IT IP using the traditional patent/licensing mechanism is
inappropriate for the following reasons.
First, patent protection is rarely the best form of IT IP protection.
Copyright is usually better, since it can be used to control an embodiment of
the ideas, such as a software implementation. Second, time-to-market is often
a significant consideration in making a product a success, so both the
university and industry are best served by rapid action. Third, products like
software often contain many "key" ideas (e.g., algorithms), and it
is difficult to assess how any specific idea contributes to the overall worth
of the product, say for the purpose of assessing royalties. Fourth, unlike
patents, which are published in enough detail that someone can reproduce the
art, effective transfer of IT IP such as software often requires participation
by the creators. Finally, many IT ideas can be implemented by "those
schooled in the art" once they have seen the technology in operation.
Thus, companies have a risk of using IP inadvertently, increasing the value of
mechanisms that lower that risk.
The implications of these considerations are: a) universities can introduce
significant barriers to cooperation by forcing IT into a standard
patent-centric form, and b) agreement principles customized to IT will focus
on rapid action.
Consulting and Internships
The most valuable part of intellectual property is the intellect that
produced it. Accordingly, IT businesses understand that working with faculty
and graduate students is at least as valuable as licensing the IP that they
produce. Because IT requires only modest facilities, and to avoid complex
negotiations with universities about who owns the resulting IP, many firms
have opened labs near universities as a venue for faculty consulting and
student internships. Performed on their premises with their equipment and
staff, the companies own all of the IP. It is an efficient scheme for the
businesses, and it can provide professionally valuable experience for both
faculty and students. But it cuts out the university.
A Model for Sponsored Research
Confronted with the aforementioned facts, several universities have adopted
approaches that reflect the best practice. In these cases, an industrial
partner funds research with the understanding that it will receive a
non-exclusive, non-transferable, worldwide, royalty-free license to any IP
created by the organization. In one model the partner funds (annually) a
specific team with a specific research direction, and the arrangement is seen
as ongoing. In another model (e.g., Stanford's EPIC program) industry partners
join a consortium for a modest annual fee, and then have
"pay-per-view" privileges for any specific IP at a specified rate
for a non-exclusive, royalty-free license. The university retains ownership of
the IP, and the option to negotiate an exclusive license is available.
Standardized terms and conditions regularize the process for rapid and
Although it is assumed that industry wants and needs exclusive licenses, in
general this seems not to be the case. Since companies in IT do their own
development, licenses protect them from being sued for infringing on others'
IP. For that purpose a non-exclusive license suffices.
In this model, industry supports the effort with its funds "up
front," with the assurance that there will be a license "if anything
useful comes out of the research." Not charging royalties has the
advantage that the uses of the IP do not have to be accounted for. Though
there is risk on both sides-: It is possible the university might do better by
negotiating more favorable terms for a specific promising technology, and
industry is gambling that the investigators' discoveries get to them early
enough for rapid deployment-. However, this model has the value of promoting
and accelerating cooperation. There is generally an understanding among the
participants that if the IP turns out to be a "home run," then the
company will return later to the question of what it owes the university for
the IP, typically in the form of generous donations or longer-term research
The assertions in this memo are documented in "Model Language for
Patent and Licensing Agreements for Industrially Sponsored University Research
In Information Technology," (140 KB PDF) by J Strother Moore, University of Texas,
Austin. Also visit: /reports/ip/.
Additional information and sample wording for agreements are provided.
Approved by the Computing Research Association Board of Directors July
J Strother Moore (University of Texas, Austin)
Lawrence Snyder (University of Washington)
Philip A. Bernstein (Microsoft Research)
Copyright © 2007 Computing Research Association. All Rights
Reserved. Questions? E-mail: firstname.lastname@example.org.