PM-64 - Intellectual Property - Distribution of Royalties and Other Matters
January 03, 1997
| Memorandum to: |
Chancellors
Cavanaugh, Day, Jenkins, Marsala, Nunez, O'Brien,
Richardson, Trail, and Executive Director Bray |
| |
|
| Subject: |
LSU Intellectual
Property -- Distribution of Royalties and Other Matters |
This Memorandum replaces and supersedes prior PM- 64 dated
September 30, 1991, and the changes are to Paragraph D.
Sponsored Research.
The purpose of PM-64 is to establish guidelines under the newly
revised Chapter VII (Patents & Copyrights) of the Regulations of
the Board of Supervisors. The immediate motivation for both the
revised version of Chapter VII and PM-64 was the 1990 amendment
to the State constitution permitting universities to acquire
stock in exchange for rights in intellectual property. Desirable
changes in other areas have also been made. The distribution of
royalties has been modified, and clarifications have been made
on several questions that have arisen in the course of
administering LSU Intellectual Property.
The definitions of Chapter VII of the Regulations apply to this
PM- 64. The term "inventor" in this Memorandum shall be
construed to include an "author", if appropriate in a given
context. Similarly, the term "invention" shall be construed to
include a "copyright" or "other intellectual property", if
appropriate in a given context.
|
A. |
Distributable Royalties
|
1. |
Basic Rule
Forty percent (40%) of all Distributable
Royalties shall be paid to the respective
inventors within thirty days of receipt, unless
a different schedule is otherwise agreed in
writing by LSU and any inventor. Ten percent
(10%) of all Distributable Royalties shall be
allocated to the Office of the President. The
remaining fifty percent (50%) of all
Distributable Royalties shall be allocated
within the appropriate campus as directed by the
Chancellor of that campus, except that none of
this amount may be allocated directly to any
individual. Exceptions to this basic rule are
found in Sections 7-3(e)(1) and (3) of the new
Chapter VII.
On written request by an LSU inventor, a portion
of that inventor's share of Distributable
Royalties will be paid to any other LSU
personnel who helped reduce the invention to
practice.
|
| |
|
|
2. |
Multiple Entities
The distribution of Distributable Royalties
becomes more complicated when more than one
inventor, department, or campus is involved.
Such a situation can arise in several ways. A
single invention may have several joint
inventors. One joint inventor may be an LSU
employee, while another joint inventor has no
affiliation with LSU. An inventor may have a
joint appointment with two departments or two
campuses. A single license agreement may
simultaneously license two or more inventions.
The distribution of Distributable Royalties in
these situations will be proportional to certain
presumed contributions to total Distributable
Royalties by the different entities involved, as
specified in the Appendix below.
|
|
|
B. |
Litigation Proceeds
Because of the expenses and risk
inherent in litigation and other means of dispute
resolution, that part of the LSU System which funds such
expenses shall be entitled to recover double its legal
and other associated expenses before any other
distribution of Litigation Proceeds. After this recovery
of double expenses, any excess Litigation Proceeds shall
be distributed according to the formula used for
Distributable Royalties.
|
| |
|
|
C. |
Non-elected LSU
Intellectual Property
If LSU elects not to pursue or
maintain any item within the definition of LSU
Intellectual Property, in LSU's discretion LSU (with the
concurrence of any research sponsor, if necessary) may
assign that item to the respective inventor(s). The
President or his designee may exercise this authority.
|
| |
|
|
D. |
Sponsored Research
|
1. |
LSU
Elects to Retain Intellectual Property Rights
Any intellectual property rights that LSU
retains under a sponsored research agreement
will be deemed LSU Intellectual Property. All
LSU personnel who participate in an authorized
sponsored research agreement must comply with
the terms and conditions of the agreement
concerning intellectual property, and shall take
appropriate steps to preserve LSU's intellectual
property rights under the agreement. In
particular, such personnel must comply with the
contractual reporting requirements regarding
disclosure of any invention made under research
sponsored by a federal agency.
To protect LSU's rights in inventions made under
research sponsored by a federal agency,
additional procedures shall be followed to
ensure that timely disclosures and elections are
submitted to federal funding agencies:
|
a. |
The officer
responsible for technology transfer at
each campus shall promptly review each
initial disclosure document filed by any
LSU personnel with that officer, and in
consultation with the researcher(s),
shall determine the pertinent source(s)
of funding. For each invention made
under research sponsored by a federal
agency, the technology transfer officer
shall submit a written disclosure of the
invention to the appropriate federal
funding agency within two months of the
technology transfer officer's receipt of
the initial disclosure of the invention.
|
| |
|
|
b. |
Each patent attorney
or patent agent responsible for drafting
and filing any new LSU patent
application (whether a patent attorney
on contract with LSU, a patent attorney
for an LSU licensee, or otherwise) shall
be instructed in all cases to ascertain
from the inventor(s) the source of any
pertinent funding, and where appropriate
to include at the beginning of the
specification of the patent application
a statement acknowledging the federal
sponsor. Where such a statement is
appropriate, contemporaneously with
filing the patent application the patent
attorney shall notify the federal
funding agency that LSU elects to retain
title to the invention, and shall
simultaneously send to the agency a copy
of the application as filed. If either
the patent attorney or the campus
technology transfer officer realizes
that more than two years may lapse
between the initial disclosure to the
funding agency and the filing of the
patent application, the two shall confer
to discuss the reasons underlying the
delay; if the campus technology transfer
officer decides under the circumstances
that LSU should elect to take title, the
campus technology transfer officer shall
so notify the funding agency before the
second anniversary of the initial
disclosure to the agency.
|
|
| |
|
|
2. |
LSU
Elects Not to Retain Title to or Not to Pursue
Patent Protection for a Federally-Funded
Invention.
To comply with federal law, the following
procedures should be followed if LSU elects not
to retain title, or elects to abandon patent
protection for a federally-funded invention:
|
a. |
If LSU elects not to
retain title to a federally-funded
invention, the federal agency should be
notified in writing within two years of
the initial disclosure to the agency. If
LSU elects not to retain title to a
federally-funded invention, LSU may not
assign, even to the inventor, any rights
to the invention without the approval of
the federal agency.
|
| |
|
|
b. |
After electing to
take title to a federally-funded
invention and filing a patent
application, LSU should notify the
federal agency of any decision to
discontinue prosecuting the application,
not to pay maintenance fees on an issued
patent, or not to defend in an
re-examination or opposition proceeding.
The patent attorney handling the
application or patent should notify the
federal agency at least thirty days
before the last day on which action may
be taken to prevent abandonment.
|
|
|
3. |
LSU
Elects To Retain Title to Unpatented Biological
Material
If the federal funding agency is the National
Institutes of Health (NIH), and if the
federally-funded invention is a biological
material, under NIH guidelines LSU may elect to
retain title and the right to license the
biological materials, even if they are
unpatented. To retain title to such unpatented
biological materials, LSU must comply with
certain terms and conditions set by NIH,
including the following: (a) the campus
technology transfer officer must make a written
request to NIH for LSU to retain title; (b)
information describing the materials must be
made publicly available, for example by
publication; and (c) LSU's licensing activities
must ensure that the biological materials remain
available to the nonprofit research community.
|
|
| |
|
|
E. |
Restrictions on Publication
Research sponsors and intellectual
property licensees frequently request restrictions on
publications of relevant subject matter. Before LSU can
consent to any such restrictions on publication, both of
the following conditions must be satisfied: (1) the
restrictions must be tailored to be the least
restrictive conditions which will satisfy the legitimate
concerns of the sponsor or licensee; and (2) the consent
must be obtained of all LSU personnel likely to be
affected by the proposed restrictions on publications.
|
| |
|
|
F. |
Retroactivity
The revised Chapter VII of the
Regulations of the Board of Supervisors, and this
revised Permanent Memorandum 64 shall generally have
prospective effect only, but their provisions may
provide guidance in determining the effect of earlier
events. However, in the case of Multiple Entities,
Section A(2) and the Appendix of the revised Permanent
Memorandum 64 shall apply in all cases.
Where a disclosure on an invention is submitted to the
respective campus' Technology Transfer Office on or
before September 30, 1991, the inventors' share of
Distributable Royalties for that invention shall be
determined in accordance with PM-64. By written request
received by that Technology Transfer Office on or before
November 30, 1991, any such inventor may instead opt to
have the inventors' share of royalties determined under
these new provisions. In either case, the relative
distribution within LSU of LSU's share of Distributable
Royalties shall be governed solely by this revised
Permanent Memorandum 64 (adjusted proportionately in
cases where the inventor's share of Distributable
Royalties continues to be governed by prior PM-64.)
Where a disclosure on an invention is submitted to the
respective campus' Technology Transfer Office on or
after October 1, 1991, that invention shall in all
respects be governed by the revised Chapter VII and this
revised Permanent Memorandum 64.
|
Allen A. Copping, President
cc: System Officers
Appendix
Multiple Entities
Following are the details regarding presumed contributions to
Distributable Royalties in the case of multiple entities under
Section A(2) above:
| 1. |
By contract, negotiation, litigation,
or otherwise, LSU and any other party not affiliated
with LSU shall resolve any apportionment issue between
LSU and that other party. Only LSU's part of this
apportionment may be considered "Distributable
Royalties."
|
| 2. |
| |
|
| a. |
Each invention associated
with particular total revenues (e.g., each
patent or patent application licensed in a
single license agreement), in the absence of any
agreement by LSU providing the contrary, shall
be presumed to have contributed equally to those
total revenues (not just to Distributable
Royalties).
|
| |
|
| b. |
For each invention, each LSU
joint inventor shall be presumed to have
contributed equally to Distributable Royalties
for that invention.
|
| |
|
| c. |
The respective contributions
to Distributable Royalties from different
departments or campuses shall be presumed to be
the sum of the contributions thus determined for
the inventors associated with each department or
campus. If one inventor has appointments with
more than one department or campus, each such
department or campus shall be deemed to
participate equally in the departmental or
campus contribution to Distributable Royalties
associated with that inventor, unless the
invention concerned clearly resulted from work
done by that inventor in association with only
one of the departments or campuses.
|
| |
|
| d. |
No predetermined formula for
allocating Distributable Royalties can do
justice in all cases. By unanimous written
consent of all affected persons or entities, the
above proportions may be modified. If the above
proportions are felt to be inequitable in a
given case, and the affected parties cannot
agree on different proportions, the Chancellor
or the Chancellor's designee (of if more than
one campus is involved, the President or the
President's designee) shall make an allocation
among the parties based on the merits of the
individual case. This allocation by the
Chancellor or President shall be final and
unappealable.
|
|
The following hypothetical example will illustrate these
principles for handling royalties in the case of multiple
entities, in the absence of an agreement providing a different
distribution.
Example
$100,000 in total revenue has been received under a single
license for four inventions: Invention 1, Invention 2, Invention
3, and Invention 4. The license agreement does not allocate
royalties among the four inventions.
Invention 1 was conceived by A and B. Invention 2 was conceived
by B, C, and D. Invention 3 was conceived by A, B, and E.
Invention 4 was conceived by C.
Inventors A and B are in department X on campus Q.
Inventor C has a joint appointment with departments X and Y on
campus Q.
Inventor D is in department Z on campus R.
Inventor E is employed by W Corporation.
Invention 3 was conceived by A, B, and E during joint research
by LSU and W Corporation. Separate negotiations between LSU and
W Corporation have established that W Corporation's share of
licensing revenues from this license agreement will be 10% of
the total revenue. W Corporation has no rights in inventions 1,
2, and 4.
Distribution
| 1. |
W Corporation receives its 10% of
total revenues, or $10,000. Then $90,000 in
Distributable Royalties remain.
|
| |
|
| 2. |
| a. |
The Office of the President
receives 10% of total Distributable Royalties,
or $9,000.
|
| |
|
| b. |
Each of the four inventions
is presumed to have contributed equally, or
$25,000 each, to total revenues. The
Distributable Royalties for Inventions 1, 2, and
4 are thus $25,000 each. Because of the payment
of $10,000 to W Corporation, Distributable
Royalties for Invention 3 are $15,000.
|
| |
|
| c. |
For each invention, each LSU
joint inventor is presumed to have contributed
equally to the Distributable Royalties received
for that Invention. Thus, these "contributions"
are:
| |
|
Invention 1,
½ x $25,000 =
|
$12,500 each
for A and B
|
|
Invention 2,
_ x $25,000 =
|
$8,333 each
for B, C, and D
|
|
Invention 3,
½ x $15,000 =
|
$7,500 each
for A and B
|
|
Invention 4,
all $25,000 for C
|
|
|
The total contributions to
Distributable Royalties allocated to each LSU
inventor are thus:
| |
A
|
Invention 1
|
|
$12,500
|
| |
|
Invention 3
|
|
7,500
|
| |
|
|
|
$20,000
|
| |
|
|
|
|
| |
B
|
Invention 1
|
|
$12,500
|
| |
|
Invention 2
|
|
8,333
|
| |
|
Invention 3
|
|
7,500
|
| |
|
|
|
$28,333
|
| |
|
|
|
|
| |
C
|
Invention 2
|
|
$ 8,333
|
| |
|
Invention 4
|
|
25,000
|
| |
|
|
|
$33,333
|
| |
|
|
|
|
| |
D
|
Invention 2
|
|
$ 8,333
|
The inventors are entitled to
40% of their respective "contributions," i.e.,
A--$8,000; B--$11,333; C--$13,333; and
D--$3,333.
|
| |
|
| d. |
The departments' and
campuses' "contributions" to Distributable
Royalties are the sum of the "contributions" for
their respective personnel, reduced (as in the
case of C) if necessary for any joint
appointments. The department "contributions" are
thus:
| |
X -- A, B, and half of C |
= |
$20,000 + 28,333 + (1/2)($33,333) |
| |
|
|
|
| |
Y -- half of C = (1/2)($33,333) |
= |
$65,000 |
| |
|
|
|
| |
Z -- D = $8,333 |
= |
$16,667 |
Similarly, the campus
"contributions" are:
Q--A, B, and C = $20,000 + $28,333 + $33,333 =
$81,667
R--D = $8,333
The campuses' net share of Distributable
Royalties is 50% of their respective
contributions, i.e., Q--$40,833; and R--$4,167.
The distribution of these amounts within the
campuses shall be as directed by the Chancellors
of campuses Q and R. Any departmental shares of
Distributable Royalties should (in general) be
proportional to their total "contributions". In
other words,
| |
X would
receive |
$65,000 |
= 79.6% of
the departmental share for Q |
| $81,667 |
| |
|
|
|
| |
Y would
receive |
$16,667 |
= 20.4% of
$81,667 the departmental share. |
| $81,667 |
|
| e. |
Thus the total $100,000 received is distributed as follows:
| |
A |
$8,000 |
B |
$11,333 |
| |
|
|
|
|
| |
C |
$13,333 |
D |
$3,333 |
| |
|
|
|
|
| |
Q |
$40,833 |
R |
$4,167 |
| |
|
|
| |
President's Office |
$9,000 |
| |
|
|
| |
W Corporation |
$10,000 |
The share of campuses Q and R
are further distributed within those campuses as
directed by their respective Chancellors.
Note: For many license
agreements the relative distribution percentages
will be constant over time, and will thus only
have to be calculated once, and not separately
for each new payment received. Also note that
the above example was deliberately chosen to be
more complex than is typical to illustrate the
principles involved.
|
|
|
