managing the intellectual property guide
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8/14/2019 Managing the intellectual property guide
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A Guide to Strategic Decision-Making
in Universities
Intellectual
MANAGING
PropertyIntellectual
MANAGING
Property
A Guide to Strategic Decision-Making
in Universities
The GuideThe Guide
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Contents1 Why is IP management important? 16
1.1 The benefits 19
1.2 The need for strategic management 21
1.3 Strategic checklist 29
2 Financial expectations and budget management 34
2.1 Risk and returns 35
2.2 Handling uncertainty over expected costs and returns 362.3 What are realistic expectations? 37
2.4 Setting Budgets 39
3 Ownership of IP and negotiations with sponsors 44
3.1 Ownership and control 45
3.2 Negotiating with research sponsors 49
4 Incentives 60
4.1 To whom should incentives apply? 61
4.2 How should incentives be applied? 65
4.3 Relationship to other university policies 69
5 IP management functions 70
5.1 The responsibilities of the IP management office 71
5.2 The IP office: location and structure 73
5.3 The relationship between the IP office and other departments and research groups 76
5.4 Should notification of inventions be compulsory? 76
5.5 Some complexities in IP management 77
6 Implementation: working with others 82
6.1 Collaboration between universities to manage IP 83
6.2 Working with other external organisations 89
7 Monitoring and Evaluation 947.1 The monitoring and evaluation framework 95
7.2 Interpreting performance indicators and the impact of uncertainty of time horizons 96
7.3 Using input measures and ratios 97
7.4 Measures of internal process performance in IP management 98
7.5 Selecting suitable performance indicators 99
Annex A: Provenance of the Guide i
Annex B: Glossary iv
Annex C: AUTM performance measures v
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1. Why is IP
management important?
1 Why is IP management important? 16
1.1 The benefits 19
1.1.1 Effective knowledge transfer 191.1.2 Using others’ IP 19
1.1.3 Income 20
1.1.4 Staff recruitment and retention 20
1.1.5 Other benefits 21
1.2 The need for strategic management 21
1.2.1 IP issues are pervasive 21
1.2.2 IP management and other means of knowledge transfer 24
1.2.3 Key policy overlaps 24
1.2.4 Preservation of missions 25
1.2.5 Conflicts of interest 27
1.3 Strategic checklist 29
16In Higher Education
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Intellectual Property, often known as IP, allows
people to own their creativity and innovation in the
same way that they can own physical property.
The owner of IP can control and be rewarded for
its use, and this encourages further innovation and
creativity to the benefit of us all.
In some cases IP gives rise to protection for ideas but
in other areas there will have to be more elaboration of
an idea before protection can arise. It will often not be
possible to protect IP and gain IP rights (or IPRs)
unless they have been applied for and granted, but
some IP protection such as copyright arises
automatically, without any registration, as soon as
there is a record in some form of what has been
created.
The four main types of IP are:
• patents for inventions - new and improved
products and processes that are capable of
industrial application
• trade marks for brand identity - of goods and
services allowing distinctions to be made
between different traders
• designs for product appearance - of the whole
or a part of a product resulting from the
features of, the lines, contours, colours, shape,
texture and/or materials of the product itself
and/or its ornamentation
• copyright for material - literary and artistic
material, music, films, sound recordings and
broadcasts, including software and multimedia
However, IP is much broader than this extending toconfidentiality (or trade secrets), plant varieties,
performers rights and so on.
What is IP?
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IP management is of strategic importance for two
sets of reasons:
• universities can derive significant benefits from
an effectively managed IP portfolio
• effective management requires IP policies and
activities which need to relate to many other
university policies.
1. Why is IPmanagement important?
ACTIVITY
Using others’ research papers, publications, etc ✓ ✓
Research information
Preparing and collating research or experimental results ✓ ✓
Publishing or presenting research, academic or technical papers ✓ ✓ ✓ ✓
Industrial design projects ✓ ✓ ✓ ✓
Contract research ✓ ✓ ✓ ✓
Consultancy projects ✓ ✓ ✓ ✓ ✓
Starting discussions on a collaborative project or contract research ✓ ✓
Receiving important confidential information ✓
Giving out confidential information ✓ ✓
Using computer software ✓ ✓ ✓
Developing computer software ✓ ✓ ✓ ✓
Revising or providing a manual or computer assisted drawings ✓ ✓ ✓
Preparing notes for lectures ✓ ✓
Responding to telephone queries of a technical nature ✓
Reproduced from Theros IP guide (www.Theros.co.uk)
P a t e n t s
C o n f i d e
n t i a l
i n f o r m a
t i o n
C o p y r i g
h t
D e s i g n
r i g h t s
T r a d e M
a r k s
Figure 1.1: IP and University activities
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1.1 The benefits
The size, and nature, of benefits will depend on the
size of the IP portfolio and the missions and strategies
of individual universities. All universities, however,
employ (and train) substantial numbers of staff and
students who generate IP in the course of their day-to-
day activities, and there are a number of potential
benefits which apply across the board.
1.1.1 Effective knowledge transfer
IP management is an essential part of
effective knowledge transfer
Universities are expected to engage in a diverse range
of activities in return for the public funding they receive,
and one of these is the generation and transfer of
knowledge. This is reflected in mission statements,
which typically encompass the development and
transfer of knowledge for social, quality of life andwealth generation purposes. In many cases, open
publication and making research results freely available
will be the most effective form of knowledge transfer.
But most research outputs require substantial
investment before they can be brought to market and
find applications. Competitive advantage derives from
many factors, depending on the nature of the market
and technology, but protection of the underlying
research results can be important.
The issue is not simply one of protection in order to
encourage commercial investment. University
researchers require continuing access to the results of
their research for use in future projects and teaching.
Effective IP management is required to ensure that this
is the case. The university may also wish to draw on
the results for commercial purposes in the future.
Negotiations and agreements therefore need to be
structured so that future needs of the university can be
accommodated.
Protecting research results and their publication are
not, of course, mutually exclusive. It will be necessary
only to delay publication for a short period while
patents are filed.
1.1.2 Using others’ IP
Universities have considerable latitude
to use others’ IP freely, but if their
research is used for commercial purposes they need to be on their
guard against the possibility of
infringement
Researchers are generally able to use IP owned by
others without a licence, provided it is used privately
and for purposes that are not commercial, or it is used
for experimental purposes relating to the subject
matter of the invention. However, if research activity
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crosses over into commercial work and, for example, a
university assigns to a company IP rights arising from
the research programme, there could be an
infringement. Considerations of a similar nature arise in
relation to copyright and the use of published materials
for teaching purposes (particularly e-learning). Part of
the IP management function is to ensure that there is
clarity amongst researchers as to the legal position
and to guard against any such infringements.
1.1.3 Income
There is undoubted potential for
universities to generate surpluses from
the IP management function, although
there is a need for realism over the
scale of returns. Effective IP
management can also attract research
sponsors
Commercialisation of IP can generate income for theuniversity. One way is directly through the sale or
licensing of IP. While there has, historically, been a
tendency to over-estimate the revenue potential of IP
generated within the HE sector, there can be little
doubt that real potential does exist. This potential is
unlikely to be realised if universities adopt a passive
stance towards exploitation. Instead, there is a need to
identify exploitable IP, decide how it can best be
protected, evaluate its commercial potential, identify
routes to commercial development, and secure and
negotiate with appropriate partners. The issues
surrounding financial returns from the
commercialisation of IP are discussed in more detail in
Chapter 2.
The strength of a university’s IP portfolio, and how well
it is managed, may also be a factor in attracting
research sponsorship. Sponsors may be interested in
accessing the IP within the portfolio. In addition, if the
university is seen to a be a competent IP manager,
then this will give confidence to the sponsor that
effective partnerships can be established to take
forward the commercialisation of results.
1.1.4 Staff recruitment and retention
The quality of IP management will
influence the financial benefits that
staff receive for commercially related
work and can therefore strengthen recruitment and retention
An effective IP strategy and policy can also help
universities to recruit and retain high quality staff. In
part, this relates to personal income incentives. There
are important differences between subject areas, but
opportunities to supplement university salaries through
commercialisation activities are an increasingly
important consideration for many academics. The
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perceived effectiveness of IP management may inform
their choices. However, income is not the only
consideration, and many academics will wish to see
their research outputs commercialised, and as a result
given application because they consider this to be an
integral part of their academic responsibilities.
1.1.5 Other benefits
Finally, there are a number of less tangible potential
benefits, which essentially arise because effective IP
management can raise a university’s profile in the
business and wider community. These include:
• the publicity that can arise from successful
knowledge transfer
• a perception that the university is a good place
with which ‘to do business’, thereby facilitating
wider interaction between the university and
the business sector
• a demonstration that the university is
contributing to economic development
activities, at a local, regional or national level.
1.2 The need for strategic
management
For research-intensive universities the scale of the IP
portfolio generated, and the potential returns, are
probably sufficient reasons for considering IP
management strategically. However, there are also
other reasons that apply, in principle, to all universities.
1.2.1 IP issues are pervasive
IP issues arise, to a lesser or greater
extent, in relation to virtually all
university activities, and policies and
activities need to be consistent
The discussion above has touched on some ways in
which IP issues relate to various university activities. In
practice, the overlaps are pervasive. There is a general
need in relation to teaching, research and consultancy
to ensure that IP with potential commercial value isproperly protected, that the university can access this
IP in the future and that the university is not exposed
to litigation because of infringement of others’ IP. As a
result, IP policy should be co-ordinated with policies
toward research, teaching, consulting, students,
employment terms and conditions and conflicts of
interest. Figure 1.2 illustrates some of the operational
issues that arise.
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How other activities impact
upon IP management
Information provided during teaching
(particularly e-learning) may infringe
others’ copyright and other forms of IP
such as trade secrets and may expose
the university to litigation
IP generated needs to be identified,
evaluated and protected
Future access to IP by the university
needs to be considered
Research, if used for commercial
purposes, may infringe others’ IP and
may expose the university to litigation
Publications may infringe others’ IP and
may expose the university to litigation.
This is a particular issue with electronic
publication
How IP management impacts upon
other activities
It is necessary to ensure that teaching
materials do not infringe IP and that
students are educated about IP
management
It is necessary to ensure adequate
records are kept to comply with future
requirements for securing IP, and that
notification of invention takes place
Increase awareness amongst university
staff of commercial restrictions upon
possible research activities. Although it is
not necessary to obtain a licence to work
a patent for research purposes, providedthat the work is not for commercial gain,
problems can occur in practice
Electronic publication raises copyright
issues about which staff will need to be
informed
1. Why is IPmanagement important?
University activity
Teaching
Research
Publication
Figure 1.2: The cross-cutting aspects of IP management
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1. Why is IPmanagement important?
How other activities impact
upon IP management
Consulting activities may infringe others’
IP, particularly in the area of trade secrets
Consulting activities represent a potential
leakage of university IP
If there are disputes over IP between
staff, they need to be managed
Research services will need to liaise with
IP management to consider IP issues
when organising research projects
Disputes over IP between staff and
students and between different students
may need to be drawn to the attention of
IP management, who will need to
become involved
How IP management impacts upon
other activities
There is a need to ensure that there is
adequate indemnity cover against IP
infringement by staff carrying out
consultancy work via the university
Staff should also be aware of limitations
to professional indemnity cover (such as
the ‘small print’ over aerospace-related
work and US-based activities)
Employment contracts need to align with
IP policies
Contracts will need to be vetted for IP
clauses
There is a need to ensure that IP clauses
in student enrolment are legal and do not
breach the ‘duty of care’
University activity
Consulting
Personnel
Research services
Administration
Figure 1.2: The cross-cutting aspects of IP management (continued)
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1.2.2 IP management and other
means of knowledge transfer
All universities need to engage in IP
management. The level of investment
will, in part, be determined by the
costs and returns relative to other
forms of knowledge transfer
Universities transfer knowledge in many ways besides
the licensing and sale of IP. These include consultancy,
contract and collaborative research and Continuing
Professional Development (CPD). As the previous
section outlined, IP management has an important role
in relation to these activities, and complements, rather
than substitutes for, these other means of knowledge
transfer. Complementarity arises principally at the
stage of ensuring that any IP generated during the
course of these activities is identified and, if promising,
protected. IP management also encompasses the
active marketing of IP, potentially the costly extensionand renewal of patent protection and, if successful, the
monitoring of agreements with commercial partners.
An important consideration is, therefore, the extent to
which universities should invest in these aspects of IP
management activities at the expense of marketing,
and delivering, other forms of knowledge transfer. This
will obviously depend on the volume and quality of
research undertaken within the university. A
consideration of the relative costs, risks and returns for
different forms of knowledge transfer can be helpful in
this respect.
1.2.3 Key policy overlaps
Incentives for engaging in IP-related
activities need to be consistent with
general policies towards internal
income allocation between
departments and also towards other
means of knowledge transfer
Universities have no automatic claim to
student generated IP, but are arguably
best placed to manage it. Policies, and
procedures relating to students need
to explicitly address IP issues
There are two areas of university policy that are
particularly closely related to IP management.
The first concerns the general question of distributing
returns from the exploitation of IP within the university.
This also relates to the specific question of rewards to
individual inventors. Incentives are discussed in more
detail in Chapter 4 but there are a number of general
issues to consider:
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Open dissemination of results can sometimes make
commercial sense as well as being entirely consistent
with university missions (see Figure 1.3).
Figure 1.3: Placing IP into the public domain free
of charge – The University of Manchester
The computer science department at the University
of Manchester has recently placed two significant
software systems into the public domain - the
Maverik VR framework, and the Balsa asynchronous
circuit synthesis system. Both are available under
Gnu Public Licences (GPL).
Professor Steve Furber, head of the department,
commented:
“With this sort of IP there is an issue of establishing and
demonstrating the value of the software. If the IP is
protected and offered for sale under licence, will anyone
buy it? If it is available free, does this imply it has no value and isn’t any good? Our judgement for Balsa was that if it
was not free nobody would pay for it or use it because of
the uncertainties of the tool and the technology it supports
(asynchronous design is still a minority interest among VLSI
designers), so there would be no revenue lost by making it
freely available. If available free, there are a number of
research groups that might pick it up, find it actually works,
and use it. Balsa will continue to be developed and, if its
use becomes significant, it is always possible to sell later
versions or extensions while giving away the core tool. This
is quite a common commercial model - to have a free
basic version while charging for a later, higher featured, fully
supported version. You can consider the initial free release
as a form of seed-corn.
In a university, the use of IP by others in the research
community has considerable indirect value. The use of
Balsa or Maverik by other groups enhances the reputation
of our groups and their ability to publish in the best places
and attract research funding.
Putting software into the public domain can greatly
increase its influence on the computing community - Linux
is the most visible proof of this. In some cases, it may serve
the university’s purposes better to maximise the influence
of its research by putting IP into the public domain rather
than by exploiting it for direct commercial gain. Influential
work raises the reputation of the university, with indirect benefits in terms of RAE ratings and the ability to attract
good students (at both undergraduate and postgraduate
levels) and research funding.”
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1.2.5 Conflicts of interest
Little concern has been expressed, so
far, over actual conflicts of interest
arising from IP exploitation.
Nevertheless, a watching brief should
be maintained
The possibility that active management of universities’
IP portfolios might lead to conflicts of interest has, with
some exceptions, not been as prominent a topic for
debate in the UK as in some other countries, notably
the USA. Indeed, as one workshop participant put it:
“I wish the volume of activity was such that we needed
to worry about conflicts of interest.”
However, it is an issue which was raised by several
universities, and the specific concerns, which need to
be addressed at the strategic level, were that:
• commercial pressures might inhibit the free
flow of information within the research
community
• partnership with commercial organisations to
exploit university generated IP could
compromise, or be seen to compromise, the
status of universities as providers of
independent advice.
Some UK universities are now developing or refining
their policies towards conflicts of interest. For example,
the University of Glasgow implemented a new conflict
of interest policy at the end of 2001 (see Figure 1.4).
Figure 1.4: An Example of a University Conflict of
Interest Policy
The University of Glasgow’s new Conflict of Interest
Policy (implemented in December 2001) provides a
clear statement of the importance of managing
conflicts of interest in higher education. The policy
explicitly takes into account the reports of the
Committee on Standards in Public Life (the ‘Nolan
Committee’) – which defined the seven principles of
public life as: Selflessness; Integrity; Objectivity;
Accountability; Openness; Honesty, and Leadership.
The policy starts by recognising that “increasing
demands are placed upon universities to engage with
for-profit organisations in order to discharge their responsibilities towards economic development and in
order to generate funds to support their research and
related activities. In this environment, University
members are placed in situations where potential
conflict of interest may arise between their personal
and professional interests and the interests of the
University at large.”
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The over-arching statement of policy is: “It is the policy
of the University that its officers, staff, and others
acting on its behalf have the obligation to avoid ethical,
legal, financial, or other conflicts of interest, and to
ensure that their activities and interests do not conflict
with their obligations to the University or its welfare.
This policy incorporates the Seven Principles of Public
Life established by the Nolan Committee; the
University’s officers, staff and others acting on its
behalf should abide by those principles”
The policy contains the following key elements:
All members of staff in a position to make or influence
decisions and all academic members of staff are
required to complete an Annual Return to the
appropriate authority. If they have nothing to declare
then staff must submit a ‘nil return’ for the record.
The University has established a Committee on
Conflicts of Interest to advise on ambiguous and/orcomplex situations, staff are also encouraged to seek
advice from heads of department and deans etc.
Specific activities are defined that should lead to
scrutiny. Guidelines are then provided on how to think
about the conflicts that can arise rather than to attempt
to define rules that cover all possible situations. These
range from the acceptable to definitely not acceptable,
with other items that need to be declared and actively
managed in order to be acceptable.
The full policy is available at:
http://www.gla.ac.uk/R-E/pub/policies/index.html
Figure 1.5 illustrates the approach taken by the
University of Lancaster.
Figure 1.5: Handling conflicts of interest: the
University of Lancaster
“Our approach is to build an explicit
acknowledgement of university ownership of IP into
employment contracts. However that has limitations
in terms of (1) the 1977 Patent Act, sections of which
may overrule university ownership in rare cases,
though we have had no such difficulty, and (2) what
then happens about “grey” areas. Examples of grey
areas could include consultant contracts and what
happens to IP arising from work done by staff
members during the time they are working as
consultants.
In practice, it seems unlikely any policy document
could explicitly cover every conceivable situation in
which a conflict of interest might arise without
becoming completely unwieldy.
The best solution is probably one in which (a) there is
a simple definition of what the university’s potential
commercial interest is; (b) a binding employment
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contract between university and staff in which the
obligations of the respective parties are clearly spelt
out, and (c) an explicit assurance to staff that people
originating Intellectual Property will share in the
benefits. That keeps the documents relatively simple
and puts a good deal of weight on the application of
plain common sense. It seems to cover most cases
quite well.”
Roderick O’Brien, University of Lancaster
1.3 Strategic checklist
Central management’s main responsibility in relation to
IP management is to set the overall long-term strategy
that the university will pursue and to define how it will
be pursued. The principal elements of an IP
management strategy in a university include:
• providing a statement on how IP management
supports the overall mission of the universityand actively communicating the strategy to
university staff
• the co-ordination of the IP management
strategy with other policies and strategies,
including policies towards the ownership of IP
by different types of staff and students and
defining appropriate incentive structures for
staff
• defining the strategy to be adopted towards IP
negotiations with research sponsors who seek
to own this IP
• defining the responsibilities of the IP
management function, including the conduct
of any cross-cutting role it plays in relation to
other university departments and groups
• deciding how the IP management function will
be organised in relation to other relevant
functions, particularly research services, and
whether or not company structures will be
used for IP management
• establishing realistic expectations and targets
(in terms of level and timing) for potential
financial and non-financial returns to the
university’s investment in IP management
• designing a system for monitoring andevaluation that facilitates a virtuous circle in
improved effectiveness of IP exploitation and
providing a process for the review and, if
necessary, the re-design of the IP
management strategy.
These topics are discussed further in the remainder of
the Guide. At this stage, it may be useful to consider
some examples of the overall approaches universities
are taking towards IP management.
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One prominent feature is the integration of IP
management within a university’s policy framework
and organisational structure (see Figure 1.6).
Figure 1.6: Policy framework and organisational
structure at the University of Glasgow
The University of Glasgow has sought to develop a
framework for an integrated policy towards research
grants and contracts, consultancy and commercial
activities that will evolve and change alongside trends
in research and its commercialisation and any
changes in government policy.
Intentions
This policy framework explicitly recognises that
‘enterprise’ is now a third component in the
university’s mission:
“...each of these elements is inter-linked and is
interdependent: the results of leading-edge research are used to enhance the education and learning
experience of students as well as to underpin the
commercial exploitation and economic development
activities. These activities include the commercial
exploitation of both research (contract income,
licenses and spin-out companies) and teaching and
learning….as well as consultancy and other advisory
services.”
Organisation
The department of Research and Enterprise (R&E) -
part of the university’s Central Administration - has
been given responsibility to coordinate research and
enterprise activities and to direct commercial
operations. The Director of R&E reports directly to the
Secretary of Court and works on a day-to-day basis
with the Vice-Principal for Research. R&E’s activities
are overseen by a R&E Steering Group – which is in
turn accountable to both the University’s
Management Group and to the Advisory Board for
Research and Enterprise. The latter reports regularly
to Court and to Senate. This arrangement is intended
to provide the agility necessary for effective
commercial operations whilst ensuring the
accountability that is appropriate for a university.
Tactics
The University’s view is that commercialisation of IP
can achieve economic benefits in different ways.
1. Direct; The university seeks to maximise the
commercial revenue ‘yield’ on its research
expenditure in order to invest in improving its
research capabilities – thus seeking to create a
‘virtuous circle’ based upon closely coupled research
and enterprise activities.
2. Indirect: The university seeks to assist companies
in the region to become more competitive through
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technology transfer. In some cases, the University will
contribute IP to a company or group of companies if
it is believed that they are best placed to develop or
exploit it. In this case, the major beneficiaries are likely
to be the company and the local economy, but the
university believes that a strong company base and
local economy also lead to a more dynamic
environment in which to carry out research.
IP management staff are given high levels of authority
to act in facilitating research commercialisation and
take a direct and very active role in commercialisation
deal making.
IP managers act as advocates of a particular
business case and each case is critiqued by
colleagues at weekly prospect evaluation meetings.
Operations
R&E operates in a highly integrated manner such that
seamless life cycle support for both research and
enterprise is provided. This involves the use of
integrated databases and formal business and
decision-making process ‘road maps’. There is
considerable interest in other universities in emulating
some of R&E’s operational approaches – such as the
automatic generation every two weeks of emailed
progress reports from a database that logs all IP case
activity. This helps to ensure that all interested parties
are kept fully informed of the progress, or lack of
progress, made.
1. Why is IPmanagement important?
Several universities are conducting thorough reviews
of their approaches, with consequent revision of
structures and systems (Figure 1.7).
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Figure 1.7: A recent strategic review of a
university’s management of IP -
the University of Ulster
Within the University of Ulster, a new structure has
been put in place to manage the process, involving
the establishment of two limited companies within the
university infrastructure to stimulate and manage the
university’s technology transfer:
• UUTech Ltd has been set up to implement and
develop the university’s technology and
knowledge transfer policy with the following remit:
☛ to work in partnership with the private sector to
promote actively technology transfer activities
associated with the university
☛ as a central mechanism to exploit the innovative
research activity emanating from the university’s
research centres
☛ to enhance the close relationship the universityhas established with the local community and
to contribute strategically to the diversification of
business/industrial sectors of the local economy
☛ to act as an umbrella company with a remit to
take venture stakes in start-up companies and
to manage university consultancy activities
☛ to manage and negotiate all matters related to
IP in order to maximise the benefit to the
university, its staff, students and the region.
• University of Ulster Science Research Parks
(UUSRP) has been established to develop and
manage the university’s science research parks
established at the Coleraine and Magee
campuses. The parks are not exclusively for
activities which have derived from the
university research base, and also house
appropriate externally started high-tech
companies. The rationale for this is (i) to
provide an environment for clustering of high
technology companies in close proximity to the
research strengths of the university, and (ii) to
provide an academic/industry innovation
community which will help to drive the
knowledge-based economy in Northern
Ireland.
The university is also planning to establish a university
investment fund, financed by a number of investors
contributing to a pool of funding, and set up as a
limited partnership. The fund will provide preferentialaccess to spin-outs in the university, but investment
decisions will be on a commercial basis and
assessed by an experienced management panel.
Two years on from the introduction of the strategy,
technology and knowledge transfer now form part of
the university’s core business activities alongside
teaching & learning and research.
1. Why is IPmanagement important?
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2. Financial expectations
and budget
management
2 Financial expectations and budget management 34
2.1 Risk and returns 35
2.2 Handling uncertainty over expected costs and returns 36
2.3 What are realistic expectations? 37
2.4 Setting Budgets 39
2.4.1 Using the commercial revenue yield on research expenditure as a
ratio in budget setting 39
2.4.2 Considering anticipated capacity constraints 42
34In Higher Education
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2.1 Risk and returns
Linking the IP management budget to
annual revenue targets may lead to
problems, because the costs and
revenues associated with IP
management are subject to major
external influences and can be volatile
University research results are characteristically highly
uncertain as regards potential future applications. A
particular innovation may eventually produce major
revenues, but many inventions or smaller advances will
not produce significant revenues and some may never
reach the market. This high level of investment risk
means that the return to the university will be low
relative to that captured by the organisations which
make the post-research investments. This simply
reflects how investment risk is distributed.
The range of financial returns that can be negotiated
by a university will be constrained by the extent towhich it is willing and able to commit funds to risky
investments in a similar way to the Venture Capital
sector. University seed funds aimed at facilitating
technology transfer can play a role in increasing the
share of the financial rewards. This type of investment
can reduce the perceived investment risk, by moving
the technology through various proof of principle and
proof of concept stages, producing a more favourable
negotiating position for the university. Figure 2.1
illustrates these broad concepts.
Figure 2.1: Relationships between cost, technical
risk and business risk in the commercialisation
process
The investment process associated with research
commercialisation consists of increasingly high
expenditures aimed at determining the technical and
commercial viability of the concept and then bringing
it to market. This sequence of investments reduces
the technical risk that the concept will not work as
intended, but the cumulative expenditures made
increase the risk that these funds will be lost.
Business risk only decreases as the product or
process nears market introduction and the probability
of commercial failure reduces. These basic
relationships are illustrated in the following diagram:
2. Financial expectationsand budgetmanagement
£
Initial concept
Cost (£)
BusinessRisk (£ at risk)
Technical Risk(prob. of Technical Failure)
Market introduction
Distance to market
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All current and potential partners in research and
technology transfer activities should ideally be in
broad agreement on the anticipated investment risks
faced and their implications for the partnership, in
particular on the ways in which risk capital differs
from research funding. Although research funding
generates the option to commercialise the research,
it does not, in itself, allow this commercialisation
option to be taken up. Shares of the financial rewards
should reflect the shares of the investment risks
taken. Failure to recognise this principle at the
agreement negotiation stage can cause severe
problems at later stages.
2.2 Handling uncertainty over
expected costs and returns
The decision-making process for allocating resources
to IP management activities should recognise that the
variance in expected returns on this investment can be
high and will therefore be uncertain. This means thatsetting annual target revenue to cost relationships is
not viable, particularly if performance against such
targets is to be used to assess good or poor
performance in IP management. A moving average of,
for example, three years is likely to give a clearer
picture, although longer moving average time-frames
may be appropriate for smaller IP management offices
because the lower deal flow will be even more
sensitive to year-on-year variations in returns.
Figure 2.2 provides an example of a fund, established
in collaboration with Scottish Enterprise, which
enhances universities’ ability to capture the financial
benefits of their research.
Figure 2.2: Regional Collaboration in the
provision of pre-seed capital: the Scottish
Enterprise Proof of Concept Fund
The case for an in-house fund to help finance
research through the proof of concept stage is that
further investment will increase its attractiveness for a
commercialisation partnership and thereby secure a
greater share for the university. Yet staffing and
operation of such a fund cannot be done on the
cheap; there is a need to win the confidence of
investors and hard decisions have to made in
deciding which projects to support. To cover the
overhead requires a high volume of research activity,
and a collaborative effort by a regional grouping of
universities is one obvious approach.
One innovative approach is the £30 million Proof of
Concept Fund, established in 1999 by Scottish
Enterprise, as a way of addressing this critical early
stage-funding gap. “We see the Fund as part of a
pipeline, leading eventually on to other funding such
as SMART and SPUR awards and business angel
and venture capital funding. The applicants usually
2. Financial expectationsand budget
management
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have some background IP, but they’re not at the
stage where they can market it.”
The fund is available to applicants for a maximum of
two years. The highest amount of funding available is
£200,000, with payments made quarterly. To date,
there have been two rounds of funding, with projects
for the third currently under evaluation. In round one,
there were a total of 83 applications, of which eight
were successful; in round two, there were 120, with
funding finally going to 36 of those. The third round
has attracted 130 proposals.
A management group is put together for each
successful project, led by the appropriate institution
and supported by Scottish Enterprise. “The idea is to
try and ensure that everything is kept on track and
that the commercialisation happens.” The money is
designed to be spent on proving the core
technology. “It’s meant to cover the salary of one or
two people for a couple of years – most of ittherefore goes on people’s time.”
Quotations are from fund manager Eleanor Taylor
Expected net returns must therefore be based upon a
realistic appraisal of achieving these ‘lightning strikes’ –
they are rare, and therefore the expected value of the
overall portfolio of commercialisation revenue will not
be high. This emphasis on the probability of achieving
different levels of financial return is also important when
it comes to considering the mix of technology transfer
activities. This is discussed in the following Section.
2.3 What are realistic
expectations?
There are some indications that UK
universities already actively engaged in
technology transfer are as effective as
their US counterparts when revenue
from commercialisation is considered
in relation to research expenditure
UK universities are often compared to their US
counterparts. The main reason for looking at the USA,
in relation to IP management, is that there is a longer
history of active technology transfer, reasonable data
sets and, consequently, an indication of how things
might be in the future for UK universities.
Examination of the evidence does not support the
view that there is a large untapped potential for
revenue generation for many UK universities. Figure
2.3 reports well-informed views.
2. Financial expectationsand budgetmanagement
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Figure 2.3: Views on the performance of UK
universities
“The AUTM1 data … allow accurate comparisons. MIT
has a research base which, at over $900 million, is
equivalent to several UK HEIs. Therefore there is a
need to take into account the substantially lower
volume of research income available to UK HEIs when
considering the …. expectations of IP exploitation. The
value of $90 million of research to create one spin-out
in the US gives a more realistic expectation of what
could be achieved in the UK, especially taking account
of the cultural and infrastructure benefits that the US
enjoys.”
University of Edinburgh
“We... view with some scepticism the conventional
wisdom that US technology transfer offices are more
effective than those in the UK. Our own analysis
suggests that if revenues generated by BTG on behalf of UK academia are included, then UK
university licence income as a percentage of total
research income is not dissimilar from that in the
USA.
Similarly, we estimate that UK universities are creating
as many start-up companies per £ million of research
income as those in the USA. While the quality of
patent applications filed by UK academia is not ideal,
it is (in our experience) often better than that in US
academia. The more pragmatic approach that is
typically adopted by UK technology transfer offices is
also in many cases preferable to the narrow
commercial focus that is adopted by some US
technology transfer offices.
It is always dangerous to make sweeping
generalisations, but in BTG’s experience there is
certainly good and bad performance on both sides of
the Atlantic.”
British Technology Group plc
Those UK universities that have been increasing IP
management activities do not appear to lag behind
institutions in the US so far as commercial revenue,
and spin-outs, in relation to research expenditure is
concerned. It may be the case, however, that US
universities generate more commercial revenue for
each $ devoted to IP management, owing to a mix of economies of scale and cumulative experience. It is
those UK universities that are now seeking to catch up
that are likely to have the greatest potential to improve
their revenue. However, these tend to be universities
with relatively low research income and thus the scope
to add significantly to sector-wide returns may be low.
2. Financial expectationsand budget
management
1 Association of University Technology Managers
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2.4 Setting Budgets
It is not feasible to set IP management budgets based
on a precisely defined relationship between expected
returns and expected costs, and hence other
approaches must be used. One alternative is to set
the budget on the basis of the university’s research
profile. This requires an understanding of the
propensity of different subject areas to generate IP.
The easiest means of doing this would be if subject-
specific data on IP activity levels and mixes were
widely available. This would allow each university to
make an informed judgement about the nature and
extent of the expected deal flow. Unfortunately, such
data are not currently available. The collection of
standardised data of this type would, therefore, be
useful in providing benchmarks for budget setting.
2.4.1 Using the commercial revenue
yield on research expenditure
as a ratio in budget setting
The ratio of IP management
expenditure to research income is
probably the most useful budget
indicator.
Budgets can be set by considering the
size and mix of the university’s
research activities, using comparisons
with other universities
The ratio of revenue generated from research
commercialisation to research expenditure expresses
the direct commercial yield. It is important to be clear
that this is the direct yield to the university, and does
not include the wider impact of higher education
research on the economy and society. The desirability
of using moving averages to even out volatility and of
taking catch up phases into account should also be
borne in mind when using this ratio. The only readily
available (partial) data on this ratio relates to overall
research income levels and their relationship to licence
and royalty income. They therefore exclude revenue
generated from any equity sales, which should, ideally,
be included.
Recent work by the National Health Service providessome useful guidance in this area. Its handbook for
R&D managers suggests that an average technology
licensing yield for medical and health R&D would be
around 2.5 percent of R&D expenditure – explicitly
ignoring any ‘lightning strikes’ of unlikely yet very large
licence returns.2 This would indicate a steady state
‘break-even’ IP management budget level of 2.5
percent of R&D expenditure.
2. Financial expectationsand budgetmanagement
2 This estimate is based upon evidence from leading UK research universities with medical schools and from an examination of the AUTM data. As an illustration, estimates of the ratio of
sponsored research income to royalty income from seven Scottish Universities lie in the region of just over 3 percent.
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According to the NHS Guide the cost of running a
technology transfer unit employing two full time staff
plus clerical support could amount to £150,000 per
annum including overheads, and an additional
£100,000 in patenting costs (including patent
attorneys’ fees). The implication of using these NHS
estimates is that R&D expenditure of only £10 million
would be required to justify even a small team (i.e.
£250,000 is 2.5 percent of £10 million). This may be
regarded as a low estimate. In situations in which
higher salaries are paid a unit of two full time
professional staff may require a budget of £350,000,
implying in turn a threshold R&D expenditure of £14
million, still a relatively low level.3 These estimates
relate to health and medical research but the life
sciences do constitute a major area of technology
transfer activity in higher education and attract much
attention because of the rapid rate of scientific
advance and the possibility of making major financial
gains.
In reality however, a team of two professionals may be
too small to be effective. In addition, the estimated
yield of 2.5 percent of R&D expenditure may be
misleading for small portfolios since there is less
chance of a few high return projects balancing many
low return, and loss making, projects. Where large-
scale R&D expenditures are involved then a 2.5
percent yield is more plausible and economies of scale
start to become evident.
The University of Oxford’s budget for handling
technology transfer includes an operating cost
contribution from the university of £1 million per annum
(doubled from £500,000 in 2000).4 Isis Innovation Ltd,
the university’s wholly owned technology transfer
company, handled a deal flow of 415 projects last year
(see Figure 2.4). The university’s contribution facilitates
technology transfer arising from externally funded
research grant and contracts worth over £142 million
in 2000/2001. A yield of 2.5 percent would generate
just over £3.5 million per annum, representing a
significant surplus over costs.
It would be particularly useful for budget-setting
decisions if future analyses of the yield on R&D
expenditure examined how the yield varies with thescale of R&D expenditure. This would assist those
universities with lower levels of R&D expenditure to
decide upon how best to collaborate between
themselves and to use third parties to help them
manage their IP.
2. Financial expectationsand budget
management
3 However, a recent survey of Scottish universities’ commercialisation activities indicated an average annual operating budget of over £500,000 per year and an average full time equivalent
staff of slightly less than 12. This apparent discrepancy may be because this covers offices with a wider scope that IP management alone. Source: Scottish Executive, Economics Advice
and Statistics Division (2001) ‘Intellectual Property Commercialisation in the Higher Education Sector’.4 There is also another £4 million in seed funding from a mixture of university, Treasury and Wellcome & Gatsby Trust funding and an Isis College Fund of £10.7 million (£1 million from the
university and £9.7 million from the colleges).
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Figure 2.4: Budgets and Activity Levels at the University of Oxford
Year ended March 1997 1998 1999 2000 2001
University investment
£000 £40 £300 £500 £1,000 £1,000
Staff 3 9 9 17 21
Projects - 168 243 319 415
Patents filed p.a. - 31 51 55 63
Licences/options p.a. 4 8 18 21 32
New companies p.a. 1 2 3 6 8
External research grants and contracts 2000/2001 £m %
UK Charities £48m 33.7%
Research Councils £46.5m 32.6%
Industry £22.4m 15.7%
UK Public Bodies £10.2m 7.1%
European Commission £5.4m 3.8%
Overseas Charities & Public Bodies £10m 7%
Total £142.5m
Source: Oxford University Research Services Office and Isis Innovation Ltd
2. Financial expectationsand budgetmanagement
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The figures discussed in Fig 2.4 only allow for the
direct costs of IP management. Universities may also
decide to contribute to seed funds. The aim is to
increase returns by funding further investment in order
to reduce the investment risk faced by potential
exploiters of the technology. The probability that a
licence will be taken out and will prove to be profitable
and/or that a spin-out company will be formed is
thereby improved. Obviously, the cost to the university
of any such funds needs to be factored into the
estimates.
Even taking into account the issue of the scale of R&D
expenditure and of the IP management office the
figure of 2.5 percent of research expenditure is only a
very rough estimate of breakeven expenditure on IP
management. Higher than average concentrations of
subject areas with high income generating potential
would justify higher expenditure. Conversely, if a
university is prevented from controlling higher than
average shares of the IP it generates, perhapsbecause of sponsor requirements, then lower than
average expenditure might be appropriate. Optimum
ratios of expenditure to research income are also likely
to vary over time for individual universities. US
experience indicates that the ratio follows a curve of
diminishing returns and, following a period of relatively
rapid growth consequent on developing in-house
expertise and staff enthusiasms, will flatten out.
Two other factors which could influence budget levels
are discussed in the following sections.
2.4.2 Considering anticipated
capacity constraints
Allowing for a degree of flexibility in IP
management budgets will help to
reduce the risk that the IP office hits
capacity constraints which affects the
mutual understanding and confidence
through which researchers and IP staff
work together to improve technology
transfer
Some of the most successful IP management
functions have achieved virtuous circles, through
which researchers become more likely to notify and
pursue IP exploitation opportunities, because they
expect the process to be efficient (in terms of the use
of their time) and effective in terms of final outcomes.Capacity constraints will, at least, inhibit such
behaviour. As the IP office workload approaches full
capacity, the time required to process paperwork and
make decisions will tend to increase. Hitting capacity
constraints may also disrupt relationships with external
business partners and potential new investors. An
example is given in Figure 2.5.
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For these reasons, budgets will need to reflect:
• anticipated capacity constraints in handling an
expected increase in the deal flow
• economies of scale in IP management.
Providing for some flexibility in IP management
budgets, particularly in the area of the recruitment of
professional staff, can be important. This type of
flexibility can be designed to prevent capacity
constraints being reached and would be justified on
the basis that it facilitated the operation of the virtuous
circle, via which researchers and IP managers work
together in facilitating technology transfer.
Figure 2.5: Example of a hard lesson well learnt
A university found that its existing IP budget, which
had been frozen at £140,000 for four years, was
starting to constrain technology transfer activity.Invention disclosures stood at 56 per annum, with
significant increases expected. The strategic plan
had set a target of 15 new patent applications per
annum, and the patent portfolio stood at around 100
patents (this figure varied throughout the year).
Although general increases in technology transfer
activity were largely responsible for this budget being
insufficient, there were some specific problems:
a historical legacy of cases that had progressed
further through the system (hence generating costs)
than would have been allowed under current IP
management practices and guidelines. Not all of
these could be abandoned, because some had in
fact attracted commercial interest.
Due to a misunderstanding between patent agents
and their international affiliates, projected costs,
provided by the patent agents, were consistently
under-estimated. The consequence was over-spend
on budget.
The travel budget was insufficient to allow the IP
portfolio to be marketed effectively, which was an
impediment to generating greater licence revenue to
offset the increased IP management costs.
In view of these budget constraints, efforts were
made to reduce the size of the portfolio. In 1998/99
10 patent cases were removed from the portfolio
and in 1999/2000 14 cases were removed. The
patent portfolio was reduced from 100 to 85.
The way in which this IP management budget
problem arose led to the IP management office
requesting that, in future: greater clarity exist in
demonstrating how IP management contributes to
the university’s strategic objectives; the IP
management budget be set on the basis of these
long-term strategic objectives; and that other relevant
budgets, e.g. marketing and travel, be addressed as
part of the same discussion.
2. Financial expectationsand budgetmanagement
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3. Ownership of IP and
negotiations with
sponsors
3 Ownership of IP and negotiations with sponsors 44
3.1 Ownership and control 45
3.2 Negotiating with research sponsors 49
3.2.1 Joint ownership of IP 50
3.2.2 The nature of the research 51
3.2.3 Relative contributions to research costs 53
3.2.4 The demonstrated capacity of the IP management office to maintain
an IP portfolio effectively 55
3.2.5 Risks associated with the use of licence-back arrangements 56
3.2.6 Companies’ overall need to minimise their investment risks 57
3.2.7 Sharing returns from exploitation 58
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3.1 Ownership and control
The key consideration in IP
agreements is the rights that
universities will have to use and exploit
IP. Ownership is not necessary to
guarantee these rights, but may be the
most effective solution for universities
in practice
Almost all universities now claim ownership of IP
generated by their staff. There are a few exceptions,
but these typically reflect situations where, for historical
reasons, there are variations in the terms of
employment and some staff have contracts entitling
them to retain IP they generate. Ownership and
negotiation issues are addressed comprehensively in
Partnerships for Research and Innovation.5
Universities have no automatic claim to IP generated
by students,6
unlike that which arises in relation to IP
created within an employee’s ‘normal duties’. Thisraises important strategic issues relating to IP
management that are unique to universities. These
issues need to be properly managed, in a manner that
is advantageous and fair to the institution and the
student.
This asymmetry of ownership rights can present
problems for IP managers and for academic staff.
However, policies that seek to address this asymmetry
by assigning ownership of student IP to the university
may raise matters of legality and equity, which need to
be carefully handled.
Much university research involves staff and students
(most likely post-graduate students) working within
collaborative or supervisory relationships. The
fragmentation of ownership generated by the differing
(default) ownership rights between such staff and
students potentially militates against collaboration, and
against successful exploitation. In terms of
collaboration, it is possible that IP in the form of data,
code, text, or patentable ideas generated, and owned,
by a student could be withheld from a supervisor, orthat the academic collaborator could be prohibited
from using such IP in future research. Such conflicts
3. Ownership of IP andnegotiations withsponsors
5 Partnerships For Research And Innovation (produced by CBI in association with AURIL, DTI, HEFCE, EPSRC
and Universities UK) ISBN: 0 85201 553 66 S39 of the 1977 Patent Act, which broadly assigns ownership to employers, does not apply to students who have no employment relation with the University; nor will there be an
employment contract that explicitly assigns ownership to the University. Some post-grad students may, however, also be appointed as research staff and this case the University is likely to
own IP generated either by virtue of the employment contract or S39.
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may be more easily mediated or resolved where the
university has equivalent rights over both subsets of IP.
Perhaps more important, the fragmentation of
ownership rights is an impediment to effective
exploitation. Student ownership of IP is particularly
likely to be perceived as a problem when research
projects are sponsored by industry. For this reason it is
common for research and CASE studentships to be
subject to a three-way contract that assigns ownership
to one party (the university or the sponsor).
“It could be argued that universities have a responsibility
to assist students in exploiting the IP that they generate.
Viewed from a duty of care, or commercialisation
perspective, students are generally not as well placed,
or resourced, as the university to effectively exploit IP.
Specifically, individual students rarely have weight equal
to that of the university when it comes to commercial
negotiations. Consequently, assignment of the IP and its
management by the university is likely to be in student’s self interest.”
Brian McCaul, Research and Business Services,
The University of Liverpool
With growing expectations that universities should
assist in economic development and, in particular, with
the growth of the student enterprise agenda, driven by
Science Enterprise Challenge and similar schemes, the
issue of management of student IP is likely to come
increasingly to the fore. An important aspect of this
enterprise agenda is the integration of IP tuition and
awareness seminars within the student curriculum.
Some universities have sought to address these issues
in the registration process. Often this is done by
including a blanket assignment of all IP that will be
generated by students during their time at the
university to the university. If this position, with its
evident benefits of clarity and uniformity, is adopted it
is important that it is done in an open and transparent
manner and that the legality of this contract is
professionally assessed. Alternatively, assignment
might be sought on a case-by-case basis, where
valuable IP arises, or a hybrid model, adopting different
approaches to different faculties might also be
considered.
With either approach, but particularly when seeking
blanket assignment, it is advisable that the process
and rationale are clearly explained. This might beachieved by including prior notice in student
prospectuses with a more detailed explanation in the
relevant student registration pack. In addition, a
distinct acknowledgement of the assignments might
be considered. The additional overheads of
procedures designed to secure broad assignment of
IP will, however, need to be fully considered.
Whichever procedure is adopted treating students akin
to members of staff in terms of the benefits of
supporting patent costs, and in terms of the
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distribution of royalty income or equity can be powerful
incentives for achieving full consent to assignment of
student generated IP.
Another issue relates to IP arising from research
sponsored by an external organisation. This does not
include research funded by the higher education
funding councils and most of the research council
programmes where ownership is generally retained by
the university. It is not one of ownership per se, but the
scope that parties have to use, and manage, the IP.
The key requirements for universities are:
• the ability to use results in future research. In
cases where sponsors are also collaborators,
this may require access to IP which
collaborators have brought to projects
• the ability to benefit from the exploitation of the
IP, both directly and in combination with other
research results
• to ensure that results are put to use, whether
commercially or otherwise. This may be
important, since commercial behaviour can
often involve not exploiting IP or using patents
to block other firms’ technological activity and
to force competitors to work around protected
technological solutions.
In principle, all these requirements can be
accommodated within agreements that assign IP to
the sponsor. Access to results can be accommodated
by (free) licensing arrangements. The university can
take a share of revenue generated by the IP owners,
and doubts over the sponsor’s ability, or willingness, to
commercialise results can be addressed by
introducing penalty clauses for failure to exploit,
including reassignment of IP to the university.
However, in practice it may be simpler, and more
effective, for universities to guarantee these rights
through the ownership of IP. Licence-back deals which
seek to cover a range of possible situations can
become complex. In addition, verifying whether
owners are meeting their obligations to exploit can be
costly and, in some cases, virtually impossible. As a
result, there are good reasons for universities to seek
ownership of IP.
The issues are, however, similar from the sponsor’sperspective, including the relative merits of ownership
versus access via licensing. Narrow commercial
considerations may be relatively more important to
business sponsors than to universities, but charities
are major sponsors of university research and their aim
will be to see research applied, and used in future
research, as well as to generate income.
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IP agreements reflect the outcome of negotiations,
which in turn reflect the inputs of the parties and the
benefits they expect to derive from various outcomes.
Ownership of IP by the university is one outcome that
universities can seek to negotiate in certain
circumstances. In the next section, the factors that
need to be taken into consideration during
negotiations are discussed.
The position of government sponsors with respect to
the ownership of IP is changing. Recent guidelines7
produced by the Patent Office start from the position
that IP generated in publicly funded research should in
general be vested in the organisations that do the
research. The rationale is that the research provider is
better placed to identify some form of economic
exploitation than the government sponsor. One
important caveat, however, is that those owning the IP
must have access to the skills and management
capability needed to handle the task effectively. These
Guidelines are reflected in the Ministry of Defence’sposition on ownership (Figure 3.1).
Figure 3.1: The Ministry of Defence’s new
approach to IP ownership
The Ministry of Defence (MOD), which funds a
significant volume of contract research in universities
and industry, has recently changed its policies to
bring the treatment of the two groups into line. MOD
will henceforth only seek ownership of IP resulting
from the contract research in limited circumstances,
typically the following:
• where the results have a particular military
sensitivity – e.g. in relation to nuclear, chemical or
biological weapons
• where the results will be commercialised in the
aggregate with other IP owned by MOD, which
may be MOD-generated IP or IP generated by
other contractors
• where the work provides direct assistance in the
formulation of government policy or in the
management of MOD’s business
• where the research provider is unwilling or unable
to protect and exploit the results satisfactorily.
In general, MOD will allow the research provider to
own the IP resulting from its work for MOD, subject
to the grant of a free non-exclusive licence to MOD
for MOD’s normal UK Government requirements. The
research provider will be responsible for making
decisions about the protection of IP, for securing
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7 Intellectual Property In Government Research Contracts, Guidelines for Public Sector Purchasers of Research and Research Providers – The Patent Office December 2001. Available from:
http://www.patent.gov.uk/about/notices/index.htm
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such protection for itself, and for the cost of securing
and maintaining this protection. MOD will have rights
to oversee the progress of commercial exploitation by
requiring the research provider to provide an
exploitation plan and to engage in discussions with
MOD on the matter, but MOD will not take a
reversionary right.
The MOD’s new policy suggests that a strictly non-
negotiable attitude to ownership of IP or a narrow
approach to the granting of licence rights to the
research customer could restrict the ability of a
university to attract contract research work.
3.2 Negotiating with research
sponsors
It is necessary for research partners to recognize the
divergence of views that can occur between
universities and sponsors. The key issues that need to
be considered when identifying potential partners arehighlighted in Fig 3.2.
Figure 3.2: Identifying potential partners
Universities must recognise that:
• industry often needs help in finding relevant
services or solutions to their problems
• in many cases companies may be unaware of
their problems
• industry would prefer to see universities seeking to
understand their needs and then discussing and
offering research and other outcomes directed at
meeting these needs
• if the university makes the first approach, it should
ensure that it packages its assets in the form of
possible solutions to problems, which that
particular company needs to solve, or in terms of
deliverables, which are relevant to that company’s
business.
Correspondingly, industry should understand that:
• universities do not have identical mission
statements and they differentiate themselves by
cultivating different strengths and through
pursuing different priorities
• the focus of some university departments may be
international, while the focus of others may benational or regional
• research has a cost and universities are not
funded to provide research services for industry
from the public purse
• a university’s most significant contribution may be
in the medium to longer term.
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The sub-sections below discuss key aspects to
consider in IP negotiations. However, there is a more
general point. Most universities will seek to negotiate
ownership, and other aspects of the IP agreements,
on a case-by-case basis, but the outcomes may
come to be interpreted by sponsors as university
policy. This implies that the reasons why certain
positions have been taken need to be articulated, but
also that the university needs to monitor how it is
perceived by sponsors. Issues to consider when
negotiating over the ownership of IP are discussed
below.
3.2.1 Joint ownership of IP
There can be problems associated with
the joint-ownership of IP, and normally
it is best avoided as a solution unless
carefully thought out protocols and
exploitation rights are defined
One potential solution to the question of who should
own the IP arising from externally funded research is
for joint ownership to be agreed. However this solution
is rarely advocated because8:
• potential licencees of a technology will prefer to
avoid dealing with more than one owner, as this
complicates the negotiation process and can
embroil them in disputes between joint owners
• joint ownership involving organisations from
the commercial and charitable sectors (which
includes universities) can give asymmetric
advantages to commercial organisations. Any
partner seeking to issue a licence must obtain
formal permission from the other partners.
However, the commercial partners could, in
principle, exploit the technology themselves,
whereas the charitable organisations cannot
trade on the same commercial basis.
Contractual provisions that limit the asymmetry
of advantages can be determined but at the
expense of greater complexity
• each country has different laws governing
what each joint owner of IP can do. In some
countries, either owner can act without the
other knowing, whereas in other countries,
they can only act together. Joint owners could,
in principle, end up destroying the commercial
value of the IP because of ill thought outactions. As a result, joint ownership is
particularly problematic when international
exploitation is anticipated.
Joint ownership should not, however, be dismissed
out of hand. Provided that carefully thought out
protocols and exploitation rights can be defined for
dealing with any asymmetry of advantages, this
approach may be feasible. The NHS is currently
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8 Parts of the guidance that follows on joint ownership are based upon that provided in the handbook on IP management produced by the NHS Trusts.
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examining possible approaches to joint ownership
arrangements as a means of dealing with the HE/NHS
interface.
3.2.2 The nature of the research
Sponsors’ attitudes will depend, to
some extent, on whether their aim is to
integrate results into their core
technologies
The extent to which the advance in knowledge aimed
at is ‘stand-alone’ or depends, for its usefulness, on
strong synergies with other research projects (which
may be being carried out in different universities and/or
disciplines) will also shape the attitudes of sponsors. If,
for example, the sponsoring company is seeking
incremental advances that it will integrate with other
knowledge and IP in order to deliver a useful
technological package, the expected value of each
individual project to the sponsor may be comparativelylow. Figure 3.3 provides and illustration taken from a
CASE studentship9.
Figure 3.3: IP ownership and CASE studentships
– a view from a Research and Technology
Organisation (RTO)
“Industry sometimes sponsors post-graduate
students via CASE studentships and other such
arrangements. Although additional funding comes
from other, usually public, bodies such as the
Engineering and Physical Sciences Research
Council (EPSRC), it is left to the university and the
industrial company to agree the terms and
conditions of the sponsorship, including IP matters.
In the past, it was usually agreed that all IP arising
would be assigned to the company. Recently,
universities have been insisting that they retain IP. It
is interesting to consider the effect of such changes
from both parties’ viewpoints.
Industrially sponsored studentships are useful to the
university for a number of reasons. The research
work involved will be more relevant to industry needs, contact with the company’s staff will improve
the university’s understanding of industrial trends
and practices, additional money will be available for
both the department and the student and, finally, the
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9 Cooperative Awards in Science and Engineering, PhD studentships jointly funded by industry and the research councils.
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student has an improved chance of employment in
industry upon completion. Ownership of the IP
arising will allow the university to continue working in
the field, and may assist in teaching the subject.
The usefulness to industry comes from more
focused research, access to expert academic staff
and an opportunity to see how the student performs
before considering employment offers. To get the
most benefit from the arrangement, industry will
choose research topics close to their needs.
However, within the normal duration of a
postgraduate studentship, incremental advances in
the current research activities of the company are
probably the best that can be achieved. If the
university insists on ownership of arising IP, this
gives the company great difficulty. For research to
be valuable to the company, they must be able to
use it for their needs. If ownership is fragmented,
the IP is reduced in value, and control of future
activities is weakened.
In such situations, industry will evaluate the
advantages and disadvantages of any deal and may
simply conclude that it is not worth the risk to
support studentships in topics close to the core
activities and interests of the company. It will choose
peripheral topics and both parties will lose out. The
university will be kept at arm’s length from the real
interests of the company and the company will not
obtain the best possible research inputs for its future
developments. The student will have least to lose,
but will be slightly less valuable to the company than
if they had been able to work on more interesting
topics.
A possible route out of this impasse is for the
studentship agreement to recognise the needs of
each party; to allow for assignment of the IP when it
is necessary for the core activities of the company,
and to guarantee the appropriate licences to the
university so that the freedom to carry out future
research and teaching is protected.”
Anonymous
Figure 3.4 illustrates how one company’s position
varies according to the nature of the research
sponsored, and also the direct costs of IP
management.
Figure 3.4: A transaction cost based approach to
negotiations over IP ownership – Microsoft
Research Ltd
Doctoral Research
Microsoft Research Ltd funds doctoral students to
carry out work that is intended to enter the public
domain at the earliest opportunity. The company
does not seek to own any IP generated by this
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research because (a) valuable IP from a PhD project
is unusual, and (b) the time and effort (i.e. transaction
costs) involved in project-by-project negotiations with
different universities in several countries would make
such funding un-economic.
Microsoft Research Ltd is happy to fund doctoral
research, provided that it is able to draw upon the
research results without making an additional
payment to exploit the IP.
Other Research
As regards other research, the company draws a
distinction between specific work that it wants done–
in which case it does seek to own the IP - and more
general work, in which no commercial advantage is
anticipated. In the latter case, the same approach is
taken as in funding for doctoral research.
Weighing up transaction costs relative to
expected benefitsBy offering a deal for smaller amounts of funding that
is attractive, while being non-negotiable, the
company seeks to minimise its transaction costs in
funding research. This allows it to fund a wider
portfolio of relatively small projects than would be the
case if the transaction costs were higher. For larger
projects, the expected benefits are sufficiently great
that the higher transaction costs associated with
negotiations over IP are worth bearing.
Approach when a University seeks to secure
rights over IP
A university is free to seek to obtain patents for IP
arising from the research funded by the company –
but only at their own trouble and expense. If a patent
is taken out, the company insists on having a non-
exclusive, world-wide, and royalty free assignable
and sub-licensable licence.
Note: this approach to negotiating over the ownership of
IP is specific to Microsoft Research Ltd based in
Cambridge (UK) – it does not necessarily apply to other
parts of Microsoft Research.
3.2.3 Relative contributions to
research costs
Negotiation over ownership of IP will, in
part, be influenced by the price that
sponsors pay and the extent to whichthis may meet or exceed the full
research costs. Also the intellectual
assets brought to the project and also
other benefits derived by the sponsor,
such as access to international
research networks may have an
important bearing on ownership.
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The value of benefits in kind provided
by both parties will need to be
considered in this context
Because there are risks involved for those contributing
to research, development and market introduction
costs, the relative contributions and expected
contributions to these costs are critical considerations.
With respect to research, the main issue relates to
contributions to the full costs of research – both direct
and indirect. A basic principle is widely accepted,
namely that the research sponsor’s capacity to
negotiate over the ownership of IP is proportional to
their share in the full cost of the research (including
overheads). The more payments by the sponsor
exceed full costs the less likely that universities will be
able to retain ownership.
Care should be taken in applying this principle. First, it
is necessary to ensure that the full direct and indirect
costs of research have been calculated accurately bythe university.10 Second, university research groups
have intellectual assets arising from previous investment
and by virtue of membership of networks of wider
research relationships, often involving many different
sources of funding. Indeed, the role of researchers
within international research networks, a role greatly
facilitated by the Internet, is precisely why some high-
technology companies seek to fund academic
research. It provides them with access to a wide body
of expertise which can be particularly valuable when
responding to unforeseen events and in alerting them
to breakthrough discoveries and to competitors’
research strategies
There is consequently a far wider, and often more
valuable, intellectual asset base than is captured solely
by the background and foreground IP involved in
negotiations. It is unlikely that any cost recovery formula
will fully account for the value of this underlying
intellectual asset base. Consequently, the payment of a
‘full’ research costs is not in itself sufficient justification
for a sponsor owning all the IP (Figure 3.5).
Figure 3.5: An industry view on the influence that
the type of research has on the ownership of IP
“In negotiating the ownership of IP arising from sponsored research it is essential to distinguish
between ‘contract’ and ‘new knowledge generating’
research. Contract research is, in this context, the
situation in which an industrial party contracts an
academic to produce a set of results requiring no or
little new intellectual input, even though special
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10 UK universities have recently done much work on introducing rigorous systems of costing for the Transparency Review (www.jcpsg.ac.gov.uk/transpor).
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expertise may indeed be needed, e.g. doing a survey
or running some samples (provided by the sponsor)
through a technical screen. In this case the results
(data) should, in effect, be purchased (and owned) by
the contractor (sponsor) by paying on a ‘costs plus’
basis, i.e. fully overheaded costs of doing the work
plus a margin on top, negotiable depending on how
uniquely placed (or not) the academic is to provide
the work. For some academic institutions, conducting
contract research may be outside their remit or
constitution.
In contrast, ‘new knowledge generating’ research is
where the academic will be using their special
expertise and intellect to do true exploratory research
(whether basic or applied) to uncover new useful
knowledge and provide solutions to problems (make
inventions) etc. In this situation merely covering the
costs of the research doesn’t buy the Intellectual
Property assets created by it.”
Dr Jan Chojeck, Managing Director, Plant Bioscience
Limited
The value of benefits in kind brought to the research
both by the university or universities and the sponsoring
company or companies will also need to be considered
in the negotiation. In addition, it may be necessary to
take into account the ownership and exploitation rights
in any wider IP portfolio that the particular IP generated
depends upon for effective exploitation. As a result,
complex trade-offs may have to be made in the
negotiation.
3.2.4 The demonstrated capacity of
the IP management office to
maintain an IP portfolio
effectively
Universities will be in a stronger
position if they can demonstrate the
capacity of the IP management office to
maintain an IP portfolio effectively
The primary reason cited in the business sector for
seeking ownership of IP arising from industrially funded
research is the risk that the university will not have the
capability to manage the IP effectively and, as a result,
will damage the company’s competitiveness. Oneexample of a failure to manage IP effectively is missing
the strict deadline for a patent renewal due to
administrative inefficiency.
The strength of this argument is inversely proportional to
the demonstrated credibility of a university’s IP
management office in managing IP effectively. As
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cumulative experience increases from the successful
handling of a growing deal flow, external confidence in
the capacity of the university also increases. The
investment risk associated with not owning IP therefore
declines.
In conducting negotiations over the ownership of IP, it
will therefore be helpful if universities can demonstrate
that they do have a good track record in maintaining an
IP portfolio, by highlighting the absence of problems and
inefficiencies. The monitoring and evaluation framework
can play an important key role in these negotiations and
it should therefore be designed with this use in mind.
If a university has traditionally assigned ownership of IP
to research sponsors (where this is insisted upon), it will
be more difficult to demonstrate the required track
record in maintaining an IP portfolio. This will tend to
reinforce the assignment of IP to business and
charitable sponsors, unless new arrangements to work
with third parties and/or collaborate with moreexperienced IP management offices are put in place.
Such arrangements can provide tactical advantages in
IP negotiations, by removing a major stumbling-block to
the university maintaining ownership.
3.2.5 Risks associated with the use of
licence-back arrangements
Special attention should be paid to risks
that future university research carried
out under licence-back arrangements
could be constrained
The potential loss to a university
through assigning ownership of IP, given
the potential for ‘bundling’ IP arising
from several different research projects,
should also be considered
When a sponsor seeks to own the IP arising from the
research, the university should seek a licence-back
arrangement in order to guarantee unconstrained future
research. This can be a practicable approach as long as
any contractual problems that may emerge have been
anticipated and addressed (an area requiring specialist
legal advice). One key consideration in such
negotiations is the implications for the university’s abilityto bundle together IP arising from several different
research projects funded from different sources. It is
easiest to produce an IP bundle if the IP is owned by
the university and the costs to be incurred will tend to
be lower. Complications can emerge when seeking to
create a comparable assembly of IP based on licences
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from different types of research funder. This is one main
reason why leading US universities seek to maintain
ownership of IP.
3.2.6 Companies’ overall need to
minimise their investment risks
Companies need to minimise their own
investment risks. This can be
accommodated even if the university
owns the IP
One argument put forward in favour of companies
owning IP is that they will usually have to commit
substantial risk capital in the commercialisation process.
Anticipated exit points in the investment process allow
external investors to calculate levels of commercial risk.
Possible investment exit points are very valuable in
reducing the investor’s perceptions of the investment
risks involved (thus increasing the probability of investment).
Particularly in a start-up or spin-out company,
possession of tradable IP enhances these exit points
and can lower the risk and size of the losses faced. The
lower the tradability of the IP portfolio, the less attractive
the investment, and tradability is highest when IP is
owned. However, the company can be granted a right
to sub-licence. Transaction costs may be higher than if
IP is owned by the company, and the time required to
complete a sub-licence may be longer than that
required to assign/sell the IP. But, the company is still in
possession of tradable IP, albeit of a lower value than if it
owned IP. (Figure 3.6)
Figure 3.6: An industry view on investment risk
minimisation and the ownership of IP
“It is understandable that start-ups (and their
investors) like to own title (although in some cases
exclusive licences should be sufficient). However, this
point only relates to IP that exists at foundation of the
company. As regards IP generated by sponsored
research, start-ups are in the same situation as other
companies. Exploitation rights are more important
than ownership. As a licensor (e.g. university)
providing technology to a start-up, you are taking a
risk as well as others investing their personal time or
their money under management. The risk is that the
technology gets locked into a company that fails early
on, maybe for reasons unrelated to the technology.Licensing in the initial stages, with the possibility to
assign later, at least gives some protection.”
Dr Jan Chojeck, Managing Director, Plant Bioscience
Limited
It is sensible to be sensitive to this issue when
conducting negotiations over the ownership of IP.
However, even if the university retains ownership of the
IP, ways can be found to provide appropriate sub-
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licensing contingencies that will help to make the
company’s licences more liquid and consequently help
to reduce their investment risk.
3.2.7 Sharing returns from
exploitation
Agreement will normally need to be reached over the
share of revenue due to one partner from the
exploitation activities of another. Revenue shares should
reflect the inputs of the parties to research (both
intellectual and financial) and existing IP which they bring
to the research (background). However, significant
costs, and risks can be incurred during exploitation, and
revenue shares need also to reflect how these are
shared between partners. Figure 3.7 illustrates the
position, and experience, of one university in this
respect.
Figure 3.7: Negotiating with research sponsors
over revenue shares – experience at the
University of Nottingham
Negotiating with research sponsors over shares of
potential revenues can be difficult unless there is a
shared understanding of the costs and risks
associated with seeking to generate these returns –
and who is taking these investment risks.
“We actively negotiate what the funders’ share of
revenue should be, taking into account (a) who takes
the commercial risk on patent costs and (b) who
takes the lead on commercialisation. Some charities
who have asked for a 50 percent share of income
have accepted our arguments that this is inequitable
where we bear sole financial risk on patent costs and
undertake the commercialisation effort, and have
reduced their share to 30-35 percent. Where others
have refused to do so, we have made it clear that
our reduced share of revenue will be a factor to beconsidered in our decision whether or not to
commercialise, and that consequently we may
choose not to commercialise a project that we would
otherwise have taken forward.”
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4 Incentives 60
4.1 To whom should incentives apply? 61
4.2 How should incentives be applied? 65
4.3 Relationship to other university policies 69
60In Higher Education
4. Incentives
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Knowledge transfer is, increasingly, a mainstream
activity for academic staff, but most universities
consider it necessary to provide incentives for
academic staff in order to encourage their involvement
in IP exploitation. This is for several reasons:
• many staff consider teaching, research and
administration to be their core duties.
Commercialisation in general, and the exploitation
of IP in particular, make additional demands on
them. This is obviously the case with spin-out
companies, but also applies to other means of
exploiting IP. Inventors need to have at least some
involvement in securing patent protection, and
interaction with licencees will often be required
• there are various incentives for staff to engage in
other kinds of knowledge transfer activities and in
the case of consultancies, these often include
individual financial benefits. Unless a decision has
been taken to favour other forms of knowledgetransfer over IP exploitation, incentives need to be
balanced across different activities
• to ensure an equitable distribution from any returns
arising from the commercialisation of IP
The rest of this section discusses key aspects of
incentives policy: to whom should incentives apply?
how should they be applied? how should incentives
relate to other university policies?
4.1 To whom should incentives
apply?
Incentives can have an important role
in encouraging staff to engage in
exploiting IP
In principle all those directly involved
in generating IP should benefit, and
dealing with students at least as
generously as staff can encourage
them to use university IP management
resources. There are also arguments
for rewarding non-academic staff,
when their inputs are above and
beyond their normal responsibilities
Allocating a share of returns to the
department/unit compensates other
staff for the indirect contributions they
make to generating IP
Incentives clearly need to apply to those primarily
responsible for generating IP, that is the inventors, but
this raises two further issues. First, how are the
inventors defined and identified? Disputes over
inventorship or authorship can arise in universities and
it is important to clarify the position as soon as
possible. Disclosure record forms and databases are
helpful in this respect. It is also critical that no mistake
is made in terms of inventorship when filing for a US
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patent. Patent agents may assist in the resolution of
disputes and, as a last resort, the university may need
to provide contingency funds in case claims are made
in the future.
The second issue relates to student involvement. As
was discussed in section 3.1 universities cannot
automatically claim ownership of student generated IP.
However, because of the IP management resources
available to universities, there are arguments for
universities encouraging students to exploit their IP
through the university. This suggests that students
should be treated at least as generously as academic
staff in so far as incentives are concerned in order to
encourage them to use the IP office
The purpose of inventor incentives is to promote
directly the generation and exploitation of IP, but there
are important issues relating to other staff in the
department or unit. Other academic staff may make
indirect contributions to IP generation. They may, for
example, have assumed higher teaching ormanagement loads thereby freeing up the time of
those directly involved in the invention and, more
generally, they are part of the academic community
from which the invention has arisen. These factors,
and also considerations of equity, suggest that other
academic staff should benefit from the exploitation of
IP generated by colleagues. It needs to be clear,
however, that if a reward is made to participants (who
are non-inventors) then this does not accord joint
inventor status; otherwise further disputes could arise.
As discussed below, some universities achieve this by
allocating a share of exploitation revenue to the
department in question.
The issues are less clear-cut in relation to non-
academic staff within a department. Technicians can
make a very real contribution to IP, both in terms of
prototype development but also in the know-how and
ideas they can bring to commercially relevant research.
However, their input may not be part of their normal
duties and, as such, there is less of an argument for
ownership of IP. Incentives to encourage them to allow
the university to manage the IP they generate may be
important. When technicians are also inventors, there
is an argument for reward structures similar to those
that exist for academic staff. The incentive structure
needs to recognise and distinguish between these two
kinds of contribution.
The third group of staff involved in the exploitation of IPare the IP managers, and there is an important
decision as to whether incentives should be applied to
them, and if so what kinds. The principal argument for
incentives is quite different from that which applies to
academic and other staff. The skills and experience
required for effective management are in high demand
in the private sector and universities can face
difficulties with recruitment and retention. Incentives
can improve the attractiveness of the financial package
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that universities are able to offer in return for successful
performance. It should, however, be noted that while
IP management skills are undoubtedly in short supply,
universities do have considerable latitude in the
salaries they can pay senior managers.
There may also be drawbacks in providing incentives
to management staff based on individual deals:
• high financial returns to IP management typically
arise from a few very successful cases within a
large portfolio. If a university is not generating
sufficient volume, it is unrealistic to expect high
returns and therefore difficult to devise operational
incentive schemes
• there will always be an element of luck about
which cases are assigned to a particular officer,
and actual returns (on an individual manager basis)
could reflect case assignments rather than
performance
• incentive structures may create a bias towards staff
favouring deals that provide early, but lower,
financial returns
• IP managers may devote excessive effort to a few
cases which they judge to have the best financial
potential, and to making deals, rather than
encouraging staff to generate IP. Prioritisation is
important, but the IP office also needs to provide a
service function to academic staff.
Some, but not all, of these potential drawbacks can be
avoided, if the incentive scheme relates to the IP
portfolio as a whole rather than individual cases.
Nevertheless such an approach could cause tension
with other university staff.
Some universities are considering whether incentives
might be appropriate for IP managers although, to
date as far as we are aware, none have introduced
such systems so far. As such, it is not possible to
draw on actual experience for the purposes of the
Guide. However, institutions seeking to move to such
a system will need to consider:
• their willingness and ability to pay competitive
salaries for IP managers
• whether the deal flow is likely to be such that any
scheme would provide real and attainable
incentives
• how the activities of IP managers can be
monitored in order to ensure that the incentive
structure is helping contribute to meeting strategic
aims, rather than distorting management of the
portfolio.
Finally, universities need to consider whether there are
other mechanisms that may be deployed to offer the
generality of university staff greater opportunity to
share in the gains arising from the inventiveness of the
university research community as a whole, at least for
4. Incentives
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universities where there is a substantial IP-based
portfolio of investments. A current case in point is the
situation at Imperial College (Figure 4.1), where
thought is being given to the design of a preferential
vehicle through which College employees can buy
shares, at an early stage, in the portfolio of spin-out
companies coming out of Imperial.
Figure 4.1: Incentives and Imperial College
There is an emerging consensus across the range of
universities as to how rewards should be
apportioned between inventors, their departments
and the university. By contrast the question of how
to allow other university staff members to share in
the profits created through spin-out companies has
proved a very complex issue. Imperial College (IC)
has been keen to find a way of widening access to
the potential benefits from successful
commercialisation across its staff members, but in a
way that avoids potential conflicts of interest.
IC asked Company Guides, a company that
supports commercialisation by universities, to look at
possible approaches to widening access to the
gains from spin-outs. Company Guides proposed a
collective investment scheme restricted to IC staff,
students and alumni. This fund would make early
stage investments in a range of IC spin-outs,
participating alongside venture capital investors,
thereby becoming involved at a much earlier stage
than would usually be possible for small individual
investors.
This initial idea was developed further by Company
Guides, which researched attitudes in some 44 HEIs
during the summer of 2001 to assess what interest
individuals might have in putting money into such an
investment vehicle. Potential interest was indicated
by some 62% of academic staff, 47% of support
staff and 60% of alumni. The scale of interest they
evinced was, respectively, £2,300, £2,000 and
£9,200. Two thirds took the view that the possibility
of some form of tax break, along the lines of those
available to other investors in start-up companies,
would be important in determining whether to
participate.
The obvious vehicle, a Venture Capital Trust (VCT),
could not be adopted unmodified as it has to be
quoted and therefore open to the public.Furthermore, most venture capital backed university
spin-outs are structured in ways that cut across a
number of current VCT rules. Company Guides has
put a proposal for a revised VCT scheme to the
Government. There may, however, be other options
for achieving the goal.
4. Incentives
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4.2 How should incentives be
applied?
Incentive structures need not be
restricted to financial benefits. Support
for academic staff engaged in IP
commercialisation, and consideration
of IP-related activities as a criterion for
promotion, can also be important
Formula-based schemes for sharing
revenue between the university and
inventors are well established and
effective
Equity stakes may not be the best way
of compensating departments for the
temporary loss of staff to spin-outs,
and more direct and immediate
financial compensation should also be
considered
This section is primarily concerned with financial
incentives, but it should be emphasised that other
incentives are possible and, indeed, used with effect
by some universities. The majority of academics did
not choose their careers solely on the basis of financial
rewards, and thus financial incentives are unlikely to be
the complete answer. There are two main
supplements to financial incentives:
• explicit consideration of IP generation and
exploitation as criterion for promotion
• providing time to engage in IP-related activities.
This assumes particular importance in relation to
spin-outs, where staff may be granted leave of
absence, but there may also be scope to relieve
staff of other duties in order to enable them to
concentrate on exploitation through patenting and
licensing.
Financial incentives need, as a minimum, to meet a
number of requirements. They should:
• encompass the various groups mentioned in the
previous section
• be transparent and widely understood
• be fair and treat all inventors in a similar fashion
• reflect the returns generated
• be large and immediate enough to influence
behaviour.
Most universities have adopted a formula-based
approach to the allocation of returns from licensing
and sale of IP and some examples are given in Figure
4.2. Most embody a number of common themes:
4. Incentives
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Formula-based approaches are, in general, an effectiveway of providing incentives. Each university needs to
decide what constitutes a fair return to the individual
and the institution, but it is probably true that variations
in the share allocated to individuals will have
comparatively little effect on perceived incentives and
behaviour. Significant differences between universities,
however, may be problematic if researchers from
different institutions are collaborating on a project that
generates substantial commercial returns.
One difficulty with these incentive schemes is that, giventhe time lags between invention and commercialisation,
rewards to inventors can accrue some time after the
academic input and this may lessen the effectiveness of
incentives. Universities could make projections of likely
returns and make payments in advance, but, given the
high levels of uncertainty involved, this would be a high
risk strategy and there is, in practice, little universities
can do to synchronise returns and inputs. However, it is
interesting to note that the Medical Research Council’s
4. Incentives
Imperial College
Net Revenue Inventor(s) Department Centre
First £50,000 75% 12.5% 12.5%
Next £200,000 50% 25% 25%
Over £250,000 25% 37.5% 37.5%
University of Cambridge
Net revenue Inventor(s) Department University
First £20,000 90% 5% 5%
Next £40,000 79% 15% 15%
Next £40,000 50% 25% 25%
Above £100,000 33.3% 33.3% 33.3%
Oxford (if Isis Innovation Ltd is used)
Total net revenue Inventor(s) General Fund Department Isis
Up to £72,000 63% 7% 0% 30%
£72,000 to £720,000 31.5% 21% 17.5% 30%
Over £720,000 15.75% 28% 26.25% 30%
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incentive formula is based on gross rather than net
returns11. The rationale is that since patenting costs are
all incurred up-front any rewards based on net returns
will inevitably take longer to realise. Universities may
wish to consider such a scheme. The share going to
individuals could be reduced, to reflect calculations
based on gross rather than net returns. But the
university would be assuming a higher level of risk,
which it might find unattractive.
Spin-out companies typically require higher levels of
commitment from inventors, at least in the early stages.
In addition, there are higher levels of uncertainty over
returns, but also the prospect of higher returns than
might accrue to licensing, since the spin-out will take
research outputs closer to market, thereby reducing the
risk attached to its exploitation. For these reasons,
giving inventors a share of the equity in a spin-out can
be a more appropriate way of providing incentives than
a simple share of returns. Inventors have a direct, and
continuing, interest in the company’s success, andfinancial risk to the university is minimised.
Greater care to avoid conflicts of interest may be
necessary, however, when researchers hold equity in
spin-outs. Should the company encounter commercial
difficulties staff may be under more pressure to divert
from academic to company duties, especially if they are
also directors with legal responsibilities for the
company’s commercial health. Arrangements for the
use of university facilities by the company, and contracts
with staff and research students, also need to be
monitored carefully.
Universities may also grant inventors leave of absence
during the early stages of company development, and
this provides a further incentive to engage in spin-out
related activities. However, it also raises further issues.
The department in which the inventors are based will
bear the main costs of temporary staff losses. This
suggests that the department should also benefit from
any returns, otherwise there is little incentive for heads
to encourage staff to generate spin-off companies and
provide the initial time and resources required. One
possibility is to allocate a share of the equity to the
department, in an analogous fashion to departmental
shares of licensing income. However, this may not meet
departmental needs adequately, since the timescales to
realising cash returns can be very long, and high levelsof uncertainty will be attached to expected returns. A
more effective incentive, for departments, is likely to be
additional resources, which they can use to replace staff
time. This would mean, however, that the university is
absorbing more risk than if the department took an
equity stake.
4. Incentives
11 As applied to researchers in Medical Research Council institutes. University grant holders are, of course, subject to university rules.
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The discussion above has, with the exception of
patenting costs, been in terms of sharing returns to IP
exploitation. Costs are also incurred, both for IP
management staff and patenting activities etc, but also
because university resources may be used to develop
ideas to the stage where commercialisation becomes
feasible. This raises an important issue as to whether
costs incurred should be reflected in incentive schemes.
The potential advantage of such an approach is that
incentives would be more closely aligned with net
returns to the university in order to offset the investment
risks it is taking. However, there would also be a
number of difficulties:
• individual incentives would be reduced, especially if
rewards were only paid after all university costs had
been met. If the priority is to transfer knowledge to
users, rather than to maximise financial returns, then
this becomes a serious consideration
• attributing costs to specific deals could discourageacademic staff from making full use of IP
management resources
• collecting cost data could itself add to exploitation
costs.
For these reasons, it is doubtful whether incentive
schemes explicitly reflected costs would be appropriate
or effective and, the consultation process did not reveal
evidence of any university having adopted such a
scheme. Nevertheless, it is important that all staff are
aware of the efforts the university is devoting to IP
management, and the associated costs, if only to
promote realistic views on the financial costs and
returns from IP exploitation.
4.3 Relationship to other university
policies
This section concludes with two brief comments which
reiterate points already made in the Guide. First,
universities transfer knowledge in many different ways,
including contract research, consultancy and
professional development. The incentives available to
promote the commercialisation of IP need be consistent
with the university’s strategy in relation to these other
knowledge transfer mechanisms.
The second point is more general. All disciplines have
the potential to generate financial returns through the
exploitation of IP, but the opportunities are far greater insome disciplines than in others. If opportunities are to
be fully exploited, then rewards need to reflect abilities to
generate revenue, but if universities are more than a
collection of separate disciplines then those
departments with lower potential also need to benefit
from the revenue generating potential of others. As
such, the balance between the university’s share of
returns and those of the inventor and department needs
to be considered in the context of more general policies
of distributing income within the institution.
4. Incentives
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Figure 5.1 shows how these processes are linked together at the Robert Gordon University.
5. IP managementfunctions
S c r e e n i n g S t a g e 1
S c r e e n i n g
S t a g e 2
S c r e e n i n g S t a g e 3
I m p l e m e n t a t i o n
Enquiry
Received
Identify Target Market etc.
Assess byManager
IdentifyBusiness Model
Assess byManager
Assess byManager
Assess byPanel
Assess byBoard
Recommended forFast Track
Recommended FurtherDevelopment
Approve Fundingto agreed limit
Develop BusinessPlan & Partners
ImpementBusiness Plan
Support andMonitor Success
ApportionRewards
reject
reject
reject
select
AppealsProcess
submit to panel review
select
review in3 months
if withinagreedfunding
limits
© Robert Gordon University
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5.2 The IP office: location and
structure
A range of models exists for
structuring IP offices and there are
examples of all types working well. The
key requirements are to ensure that IP
staff develop a constructive rapport
with researchers and that IP
management functions are closely
integrated with other university
management activities. This may be
facilitated by locating the office within
normal management structures, but
there are successful examples of IP
management being undertaken by
companies owned by universities
An important task of IP management is to increase
awareness and enthusiasm for generating exploitable
IP amongst researchers. This requires close andfrequent interactions. Physical proximity to the
academic staff is important, but the task may well be
easier if the IP office is perceived as an integral part of
the university, whatever its precise legal status.
Given the diversity and volume of relevant activity in
many universities, it is not feasible to resource the
function at a level which would enable the commercial
potential of all research to be assessed in detail.
Effective management depends to a large extent on
researchers coming forward with exploitable ideas,
and they are more likely to do so if the IP management
function is perceived as an integral part of the
university.
Effective IP management begins with the signing of
research contracts, if not sooner (see Figure 5.2), and
the IP management function needs to have influence
at this stage. It therefore needs to work closely with
whatever parts of the university are responsible for
marketing commercial and research services and
vetting and signing external contracts.
Figure 5.2: The importance of early interaction. A
view from Oxford Brookes University
“A university’s management of its IP has to begin:
generally with training and advising academics on IP
implications and opportunities (so that they can
target the most IP-advantageous ways of funding or carrying out research) and specifically at the stage of
constructing a bid for funding a particular project:
after identifying the base IP input (background) the
university is bringing to the research (including the
base position of any third party or non-employed
collaborators), the conditions of funding should be
examined in detail, so that the bid can include a
negotiating position on any disadvantageous or
conflicting IP terms (e.g. the funding conditions may
5. IP managementfunctions
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require disclosure although part of the background is
already owned by, or to be kept confidential to, a
third party). Usually a compromise position can be
found and it is essential that problems are identified
at a pre-bid stage, so that the position of having a
deadline to sign a funding contract which contains
IP terms with which the university is unhappy (and
which may be contrary to the university’s IP policy) is
avoided.”
In practice two main types of approach have evolved:
• IP management functions are undertaken by
research support services, who are also
responsible for securing research sponsorship,
contract approvals, marketing services and so on.
This may represent the closest integration with
other management functions. In many universities
staff assume IP as well as other responsibilities.
However, it is becoming increasingly common for
staff dedicated to IP to be appointed, reflecting thespecialist skills required, and also expanding IP
portfolios
• establishment of a company (wholly owned by the
university) to commercialise IP. This represents the
clearest separation between IP management and
other functions, but also offers a number of
potential benefits:
☛ because it is outside the university
management structure it can sometimes act
more quickly than would otherwise be the
case
☛ it is easier to pay higher salaries than the
normal university scale would permit, and
many IP offices have encountered difficulties
recruiting and retaining staff
☛ it may be easier for the university to monitor
and assess financial performance.
Figure 5.3 illustrates changing structures within a
university over time in response to emerging needs.
Figure 5.3: An evolving approach to organising
IP management - the University of Warwick
“For many years the University of Warwick has had
a Research and Development Services Office(RDSO) that has covered the whole spectrum of the
university’s research activities. Some 15 years ago
all staff carried a broad portfolio of responsibilities,
including the identification of research opportunities,
the discussion of research grant applications and
research contracts, and subsequently the
negotiation of patenting, licensing and dealings with
the exploitation of research results. In particular, the
Director of RDSO at that time had responsibilities for
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IP, but also wide ranging activities across the
spectrum of the RDSO remit. As time progressed it
became clear that RDSO must specialise in its
various areas of operation such as dealing with
Research Councils, European funding, charitable
funding and business and industry.
As a result the Industrial Liaison Office was formed
and the Head of the Industrial Liaison Office, within
RDSO, had responsibilities for negotiating industrial
contracts and the follow-up exploitation of the
research results that came out of those contracts.
The specialised focus produced by this team proved
to be a significant improvement, so much so that it
attracted interest and activity across the campus
which threatened to overwhelm the staff involved in
the activity. As a result the Industrial Liaison Office
found itself pulled in various directions and in the
end gave priority to winning industrial and business
research contracts and had limited time to dedicate
to the exploitation of the research results thatemanated from the projects.
Some three years ago the University took the
decision to form Warwick Ventures which, in
partnership with the University of Warwick Science
Park, has responsibility for the exploitation side of
the university’s Research and Development activities
including patenting, licensing the patents, spin-out
companies and the attraction of seed-corn venture
capital funding to launch the spin-out activities.
Although very much still part of the University of
Warwick, and not a separate stand-alone company,
Warwick Ventures is housed in the Science Park on
the university campus to aid the link between
university and spin-out companies. The
Government’s HEROBC13 and HEIF 14 initiatives,
together with university funding, have enabled
Warwick Ventures to flourish, and we are now
seeing a rapid growth in the number of Business
Development Managers operating in Warwick
Ventures and also a significant increase in patenting
and spin-out activity.
In parallel it has now allowed the Research and
Development Services Office to concentrate on
working with academic staff to win research grants
and research contracts and to manage those
contracts through to successful completion. The
university takes great care that the whole area of research, innovation and enterprise operates in a
co-ordinated manner. The Deputy Vice Chancellor
with responsibility for Research co-ordinates a
Working Group that comprises the Directors of
RDSO, Warwick Ventures, the Science Park and the
Science Enterprise Challenge Fund operation which
is known as the Mercia Institute of Enterprise. All of
this is further supported by University Challenge
5. IP managementfunctions
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Funding operated through the Mercia Fund which
provides necessary seed-corn funding. Both the
Mercia Institute of Enterprise and the Mercia Fund
are collaborations with our colleagues at the
University of Birmingham and with the universities in
the rest of the West Midlands region.”15
5.3 The relationship between the
IP office and other
departments and research
groups
Consideration should be given to
identifying ‘IP’ contacts within each
department/unit
Some universities place (or identify) people with IP
management expertise within relevant academic
departments and schools of study in order to facilitate
information flows regarding IP issues. Whether or not
this is an appropriate strategy will largely depend uponthe nature and extent of the information flow problems
that may exist between the IP management office and
the departments. The advantage of expertise within
the department is that there is opportunity for informal
discussion which can highlight potential areas of IP
that would not otherwise be identified. The
disadvantages relate mainly to the cost of pursuing
this approach relative to the benefits obtained. A
compromise which has been found to work well is to
identify individual staff within departments who are able
and willing to act as the initial ‘IP contact point’ for
other staff. A period of secondment to the IP office can
increase their effectiveness.
5.4 Should notification of
inventions be compulsory?
Consideration should be given as to
whether compulsory notification of
inventions would hinder building an
effective partnership between
researchers and IP management staff.
If it is not judged to damage the
process of building this partnership
then compulsory notification may
reduce the chance that
commercialisation opportunities
are missed
The advantage of making notification of invention
compulsory is that it reduces the risk that the IP
management office will be unaware of IP generated
within the university. The disadvantage is that such an
approach can be counter-productive in an academic
environment.
5. IP managementfunctions
15 Science Enterprise Challenge is a Government funding scheme to support a limited number of Centres and University Challenge is also a Government scheme providing a range of seed-
corn funds to support university commercialisation.
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Many IP managers view the capacity of their office to
build informal partnerships with individual researchers
and research teams as a critical factor in the success
of IP management. They take the view that
compulsory notification is not necessary when such
partnerships exist. When these partnerships do not
exist, the chances of engaging in successful
technology transfer activity with a researcher who is
not particularly interested in doing so are relatively low.
Compulsory notification is unlikely to help a great deal
in this situation.
On the other hand, there are advantages in
compulsory notification and also technology audits in
ensuring that opportunities are not missed. Provided
that these procedures are swift and straightforward,
and consequently do not disrupt normal academic
activity, there is no reason why they should damage
building an effective partnership between researchers
and IP management staff.16 If the performance and
evaluation system needs to collect data on thenumber of invention notifications made each year, then
compulsory notification procedures can assist in
providing this information. Given that disputes over
inventorship are not uncommon in universities, early
and accurate recording via invention disclosure forms
can be useful.
5.5 Some complexities in IP
management
This Guide does not seek to provide advice on dealing
with the complex operational issues with which IP staff
are confronted. This section, however, presents a limited
discussion of selected topics, which have been identified
as important during the preparation of the Guide. The
aim is to give senior university managers some insight in
to the complexities of IP management on a day-to-day
basis. The topics are presented in a series of figures.
5.5.1 Practical considerations if IP
ownership is sought
Figure 5.4: Checklist of practical considerations
if IP ownership is sought
1. Ensuring clear title of IP
Established procedures need to be put in place thatwill allow the following questions to be answered:
• who are the inventors?
• who were they employed by when the invention
was made?
5. IP managementfunctions
16 If the university’s intranet is used for invention disclosures, care should be taken to ensure that this information is secure.
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5. IP managementfunctions
• what funding were they using to support the
research leading to the invention?
• did this funding have IP conditions attached?
• what materials were used in making the
invention?
• did these materials have IP conditions attached?
2. Ensuring that patents are drafted to cover
commercially significant applications
Unless care is taken in instructing patent agents and
in assessing their work, patent applications may not
cover the commercially significant applications of the
invention. This will limit the technology transfer
potential of the invention.
3. Ensuring that there is timely and effective
communication between external investors andresearchers
External investors may require some additional
experiments to be carried out before making an
investment based on a licensing arrangement. It is
essential that effective communication takes place
between the investor and the relevant researchers
and that IP management offices facilitate and do not
hinder this interaction.
4. Ability to maintain and defend IP
In those situations in which the university seeks to
retain ownership of IP the capacity to maintain the
IP portfolio and to defend it against infringement will
be key issues examined by commercial and
charitable partners.
5.5.2 Dealing with problems in
valuing IP by selling options on
licenses
The economic value of the IP generated from university
research is characteristically highly uncertain. The
discovery of a promising new approach or an invention
represents the start of a process of determining its
technical feasibility and of estimating the likely return on
any investments made. Until risk-reducing/proof of
concept investments have been made it is often the
case that the value of the IP cannot be estimated with
sufficient accuracy to allow reasonable negotiations to
commence, let alone a licensing agreement to bereached. This process of determining the economic
value can be costly and firms will require an incentive to
undertake such an investment.
One strategic approach to this IP valuation problem is to
sell firms an exclusive option to obtain an exclusive or
non-exclusive licence after a specified period. Selling an
option delays the negotiation over the terms of the
licence arrangement until a point at which sufficient
information is available to allow its value to be estimated,
whilst providing the incentive for businesses to commit
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5. IP managementfunctions
the funding required to estimate the value. Some
universities, such as Cambridge, are now placing a
priority on selling exclusive options of this type. It is not
unusual for an option agreement to be related to a
collaborative research project aimed at determining the
technical and economic feasibility of the technology.
Although selling options to licences can facilitate the
commercialisation process by deferring IP valuations
until better information becomes available, the strategy
can also simply delay difficult and costly negotiations.
Companies may reasonably seek to have the terms of
an eventual licence specified in the option agreement (in
the form of a Heads of Agreement) and this will tend to
involve trying to estimate the value of the IP – thus
removing the advantage of selling the option in the first
place. Consequently, selling options can play a tactical
role if circumstances permit – but it is not a universal
solution to problems caused by uncertainties in IP
valuation. Figures 5.5 and 5.6 contain real examples of
recent option deals.
Figure 5.5: Recent option deals at the University
of Cambridge
a) A 12-month option was granted to a UK-based
manufacturing company for the use of a patented
invention in carefully defined types of scientific
instruments.
The option was minimally costed (essentially covering
only the University’s receipted patent costs), but the
University retained the right to market and licence the
invention to any other companies for all uses outside
those very specific types of instrument. The benefits of
this approach were:
• a focussed, specialist company was encouraged
to evaluate a new invention at a very early stage,
as their financial risk had been minimised
• the patent was “stabilised” as patent funding was
secured for the duration of the option. This period
allowed the University to embark on a more
concerted and considered marketing campaign to
other businesses and sectors
• the restricted field and term overcame the risk of
the invention becoming “locked-up” by the option
agreement.
b) A race-car manufacturer was granted an option to a
patented invention, but only for the particular category
of race-car that they produced.
The agreement included an initially modest option fee,
and a larger “milestone” payment if the technology was
to be used in a motor race. As well as securing the
patent position, various other mutual benefits flowed
from the option agreement:
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5. IP managementfunctions
• the company employed the services of the
inventor as a consultant (under a contract with the
University) in order to expedite the development of
the invention
• additional support from the company helped to
secure an EPSRC project aimed at further study
and development of the invention
• the company supplied high-value specialised
components, materials and expertise free-of-
charge to assist in the on-going research
• an introduction to a partner-company is envisaged,
with the potential for licensing into the volume
road-car market.
The intention of these arrangements was to facilitate
rapid development with a high-calibre commercial
partner, whilst retaining for the University almost all of
the future commercial rights to the invention.
Figure 5.6: Examples of option deals relating to
patents
a) An evaluation licence was granted to Company X
with an option to take assignment of the university
patent. The agreement included:
• Company X will form a dedicated business unit
around the patent on which university research
staff will sit on a consultancy basis:
• Company X will fund £100,000 of fully-funded
research at the university in the first instance, with
further projects being considered as and when
relevant
• the university’s sunk patent costs will be
reimbursed in the option, and on exercise of the
option an assignment fee of £20,000 will be
payable
• further milestone payments will be attached to the
granting of a patent
• the initial market entry will be within the scope of
the patent
• a royalty of 4 percent on sales of the product up to
£2 million gross, thereafter 3 percent, will be paid
to the university.
b) An option was granted by a university to Company
Y for a licence to an existing patent, for £100,000 for a
three year period, during which a fully-funded $2 million
research contract would be placed with the university
(with non-exclusive access rights to foreground IP, to
be owned by the university). Upon exercise of the
option at any time during the option period a further
payment of £200,000 will be received, and the parties
will negotiate in good faith for a three month period
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thereafter the terms of royalty on sales and/or sub-
licensing.
c) An option deal was agreed with a local company in
which the company pays for the initial filing costs on a
patent application and pays £1,000 a month for an
exclusive option to exploit the patent, during an eight
month option period, during which time it seeks seed
funding to expand its business. If the company
exercises the option a payment of £50,000 will be
made to the university, plus royalty payments of 3
percent will be paid until the patent is granted, and 4
percent thereafter.
5.5.3 Exploiting the advantages of
investment exit routes in IP
management
This Guide has already noted (in Section 3.2.6) that
companies will seek to identify investment exit routes as
a means of reducing their overall level of investment risk. This involves identifying points in the commercialisation
process at which investment losses can be partially
recovered by selling IP or sub-licences and equipment
and materials used in the commercialisation process.
The same principle also applies to the university’s IP
exploitation activities. A strategy of identifying investment
exit routes (if things go wrong), and the effective tactical
decision-making over when to actually use these exit
routes, constitutes an important part of IP management.
Senior management should therefore ensure that the
university’s IP managers are making adequate provision
for investment exit routes in their management of the
commercialisation deal flow. This can significantly
reduce the costs associated with generating the
university’s overall returns from IP management because
the cost of failure is lower than would otherwise be the
case.
5.5.4 Business processes and
databases
One of the most important issues is the IP office’s ability
to monitor how its business processes are performing,
and to identify potential problems before they manifest
themselves. Some offices have found that formalising
procedures around case-handling decision points, with
progress tracked in a central database, can help to
increase the efficiency of business processes.
For example, the University of Glasgow has developedan integrated database on its case load (covering
research proposals etc through to commercialisation)
which automatically generates an e-mail every two
weeks to relevant university staff, informing them of the
actions that have been taken over this period. This
reduces the time spent by IP staff responding to
questions on progress made from researchers and can
help to alert staff to problems and opportunities simply
by providing regular reports on a ‘push’ basis rather
than waiting for information on a ‘pull’ basis.
5. IP managementfunctions
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6. Implementation:
working with others
6 Implementation: working with others 82
6.1 Collaboration between universities to manage IP 83
6.1.1 Sharing of best practice and information 84
6.1.2 Joint management of IP portfolios 85
6.2 Working with other external organisations 89
6.2.1 Public agencies 89
6.2.2 IP management services 90
6.2.3 The evolving partnership between medical research charities
and universities 92
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6.1 Collaboration between
universities to manage IP
Staff mobility and collaboration
between researchers from different
universities mean that there is an
increasing need to consider issues of
joint management
There may also be benefits from a
more proactive approach to joint
management reflecting the potential of
pooling IP to create higher valued
packages and economies of scale in
various IP management activities
High levels of skills and resources are required for the
successful exploitation of IP, implying that there may
be scope for collaboration in IP management, in order
to share expertise and overheads. This section
distinguishes between two forms of collaboration:
• sharing of best practice and information
• active joint management of portfolios.
Figure 6.1: Managing IP in research partnerships
– Experience at the University of Nottingham
Joint interest in IP arises due to formal research
collaboration, informal collaboration, or mobility of
researchers and consequently arises frequently. The
University of Nottingham has developed an
approach to dealing with IP in cases of ‘multi-sector’
research collaboration, which is entirely
pragmatically driven and geared towards the
development of mutually acceptable and beneficial
IP management agreements:
“Formal research collaborations (those deliberately
entered into based on a collective bid) are in many
ways the easiest to manage, as due to the
significant awareness-raising campaign which
Nottingham has in place with respect to IP issues,
researchers are aware that they should seek the
Research Support Office’s help prior to
commencing the research. Either appropriate terms are included in the collaboration agreement, or a
separate IP agreement is drawn up to set out how
project IP will be managed, including:
• who will own what
• who will decide on and pay for patent protection
if appropriate
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• who will take the lead in commercial exploitation
and in which field
• how revenue will be shared
• what access rights are needed to background IP
for execution of the project and for subsequent
exploitation, and on what terms such IP will be
made available.
Each set of collaborators brings different intellectual
and financial strengths and resources to a project,
and the most appropriate ownership, access rights
and exploitation route have to be established on a
case-by-case basis. The issues are always
addressed at the outset since they require those
involved to focus on the commercial exit route for
the technology on day one.
At Nottingham, a heavy emphasis is placed on legal
due diligence with respect to IP, so any legal or beneficial interests will be uncovered at the
disclosure stage. The university’s policy is not to
deal externally in IP unless they have a joint
development/commercialisation agreement in place
in the case of an informal collaboration, or a revenue
sharing agreement where a researcher has moved
to Nottingham from the institution where they
started the research.
In the case of informal collaboration (where
collaboration arises as a consequence of
researchers in different institutions exchanging
information and material out of which IP is jointly
created) the royalty share is determined by the
respective intellectual and resource contributions,
the financial risk in terms of patent or development
costs, and who is making the commercialisation
effort. Informal collaboration may lead on to formal
collaboration.
Where mobility of staff is involved, and therefore
the interest of former employers, the situation is
complicated by the fact that the value of the IP may
be substantially increased during the researcher’s
time at Nottingham, in which case the former
employer’s interest should decrease over time. If this
is likely, then a mutually agreed scale is adopted,
whereby the former employer’s share of revenue will
decrease in accordance with the level of investment
applied to develop the IP at Nottingham.”
6.1.1 Sharing of best practice and
information
The networks developed by organisations such as
AURIL17 and UNICO18 are an excellent vehicle for IP
managers to share information on a wide range of
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17 Association for University Research and Industry Links (www.auril.org.uk)18 The UK University Companies Association
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operational matters and AURIL also seeks to inform
opinion more generally. While universities compete
fiercely with one another for grants and contracts they
do not, in general, consider themselves to be in
competition over the commercialisation of IP. As a
result, the networks are accessible to fellow
professionals and information flows freely. However,
the information exchanged is largely concerned with
operational issues, such as ‘how to’ advice and the
range of returns which might be sensibly sought,
rather than the strategic issues which are the concern
of this Guide.
When universities are reviewing IP management
strategies or, perhaps more importantly, when they are
articulating strategies for the first time, they need data
which enable them to benchmark their activities,
resources and returns against those of comparable
institutions. At present, these data do not exist for the
UK higher education sector. Although a number of
surveys of university-business links have beenundertaken they were not designed to provide
benchmarking data and do not give sufficient detail on
IP exploitation in the narrow sense, or enable activities
and returns to be associated with specific
characteristics of a university.
6.1.2 Joint management of IP
portfolios
Most universities will need to work with other
institutions on IP management at some stage, for two
main reasons. First, staff mobility means that IP
generated by academics, which they may wish to
bring to new research and commercial ventures, may
be owned by a university other than their current
employer. Second, more than one institution will have
an interest in IP generated as a result of collaboration
between staff from different universities. In the majority
of cases these factors do not give rise to significant
problems, but if commercialisation of IP, in which
others have some stake, is envisaged, then it is
essential that clear agreements are reached with them
as soon as possible. In practice this will usually relate
to reaching agreement over the use of ‘background’ IP
in subsequent developments.
This kind of collaboration is a by-product of otheractivities or history, but there is scope for universities to
enter proactively into joint management activities and
this arises for three main reasons. First, a bundle of IP
may have a greater aggregate value than the sum of
its individual parts, because it is seldom the case that
a single invention will generate increased
competitiveness and economic advantage. A well
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known illustration of the benefits of bundling is the
bringing together of several patents, which led to the
first nuclear magnetic resonance machines. A single
university can bring together IP from different
departments but the potential to create high value
packages is greater if the scope of the research is
wider. IP bundling is becoming increasingly important,
both within and outside the HE sector, with several
institutions entering into transnational partnerships.
These, and other, kinds of partnership between
universities obviously add to the complexity of IP
management. They also mean that one institution is, to
some degree, reliant on another having good
management practices in place. In particular, relating
to the performance of due diligence activities properly
and addressing other legal requirements. One
implication is that the management practices of the
partners need to converge to some extent if
successful partnerships are to be established.
The second reason why collaboration may be
beneficial is because of the scope for economies of
scale. These may arise because:
• a single institution may not generate sufficient IP to
employ even a single IP manager fully. However,
while this might be the case in a small institution
newly beginning to exploit IP, it is unlikely to be of
much practical significance. In such cases IP
managers typically have other responsibilities. This
is not to suggest that all IP functions should be
performed in-house and even the largest
universities contract out some IP management
processes
• of more practical significance, the larger the
university’s portfolio, then the more feasible it
becomes to employ specialist (technology and
sectoral) expertise
• portfolios can be jointly, and strategically, marketed.
This may involve bundling, as discussed above,
but more simply it may be cost-effective to market
jointly at specific events such as conferences.
Collaboration in these ways can, and most often does,
take place on an informal basis, in the sense that there
are no formal agreements or joint employment of staff.
IP managers stay in close contact with each other,
sharing tasks and expertise on an ad hoc basis.However, there are also examples of more formal
collaborations arising. The Department of Trade and
Industry’s Biotechnology Exploitation Platform (BEP)
initiative, for example, has led to the establishment of
consortia of universities and other organisations,
including many NHS Trusts. These are, of course,
subject specific and reflect the potential for pooling
specialist expertise (see Figures 6.2 and 6.3).
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Figure 6.2: An example of cooperation and joint
management in exploiting IP
The White Rose Biotechnology Consortium was
formed in 1997 using a £250,000 grant from the
Department of Trade and Industry’s Biotechnology
Directorate’s Biotechnology Exploitation Platform
Challenge. The consortium comprises the University
of York, University of Sheffield and the University of
Leeds. These three universities have a collective
bioscience base of 500 researchers and over £40m
of research funding. The universities also collaborate
in other areas apart from biotechnology exploitation.
The Biotechnology Directorate’s funding has now
ceased and the White Rose Consortium continues to
develop its cooperative approach to IP management.
Twenty-one bioscience companies have been
formed and over 50 patents have been filed.
Each university has its own biotechnologyexploitation manager who works closely with the
researchers within their university whilst also
facilitating inter-university cooperation within the
consortium. The consortium’s IP available for
exploitation is promoted in an integrated form via
one web site.
The existence of the consortium makes it easier to
exploit the different capabilities within each university.
For example, one spin-off company was set up in
York (where there is no medical school) with the
medical school links provided by the University of
Leeds. In another case, a spin-off company from the
University of Sheffield is based in Leeds in order to
exploit the local expertise – but is run from Sheffield.
Consortia of this type provide a means of facilitating
IP management based upon overcoming the
constraints faced by individual universities.
For further details: www.whiterose-bio.com/
A number of successful bids to the Government’s
Higher Education Innovation Fund also involved
consortia of universities, and many of these will
encompass some aspects of IP management. These
reflect the potential of regionally based collaborations.
Figure 6.3: Regional collaboration in harnessing
IP an example from the NHS
It is only relatively recently (1998) that the NHS
initiated a fundamental review of its strategic policies
towards IP. To begin with this focused on IP arising
from R&D, but it is now being extended to all
aspects of patient care. This latter aspect may, in
the event, prove of at least equal, if not greater,
importance; bearing in mind that the three main
NHS objectives in identifying and exploiting IP are,
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in order or priority:
• benefits to the operations of the NHS in providing
enhanced patient care (which will always mitigate
against grant of exclusive licences)
• national economic benefit
• generation of cash.
There are some 300 organisations, in the main NHS
Trusts, that receive R&D funding, but none of them
has a scale of activity that would support its own IP
office (the largest Trust has research income of
around £40 million). Some form of collaboration
was, therefore, seen as essential and thought was
given to the possibility of contracting directly with
university IP offices for the service that the NHS
needs. This approach was not pursued for three
main reasons. First there could be conflicts of
interest as the NHS might wish, in support of itspatient care mission, to invest in IP that offered little
prospect of generating income. Second, a set of
agreements with universities would be unlikely to
provide full coverage across all NHS bodies. Third, a
related point, there is uneven expertise in university
IP offices with respect to the areas of science and
technology that are likely to be important to the
NHS. It is nonetheless recognised that positive
collaboration with universities will be vital to the
initiative’s success and there has been active
dialogue with both Universities UK and AURIL to
develop appropriate frameworks to help this evolve.
The decision was, therefore, taken to build up an IP
support structure, clearly distinct from the primary
health mission, that would deal with groups of NHS
bodies and it was concluded that the logic pointed
towards a set of regional IP ‘hubs’ aligned to the
boundaries of government regional offices and, in
consequence, the RDAs. It was this approach that
formed the basis of bids to PRSE Fund in July
2001. The outcome was largely successful except
that the four separate bids from London were given
a combined award and the bids from the, research
rich, East and South East regions, along with the
Bristol-centred South West region, were not funded
By way of example, the Yorkshire and Humber IP
hub will cover a number of trusts including the larger
ones in Barnsley, Bradford, Hull, Leeds, Sheffieldand York and whilst the hub’s central office will be
sited outside the health community (possible in an
RDA office, for instance) there will probably be a hub
staff member attached to the major centres. It is
envisaged that, three years hence, funding of
£500,000 per year will be required, at a minimum,
for each hub and that this level may, in practice,
prove insufficient (although needs are likely to vary
between regions depending on the potential IP that
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comes to light). The budget allocation is to cover
patent and legal costs as well as staff; though the
former will sometimes be met, in whole or in part, by
the trusts. In view of their public service objectives
there can be no certainty of the hubs ever being
self-funding. Moreover there is no logical reason for
thinking this should be major criteria on which to
judge success.
6.2 Working with other external
organisations
Working with public agencies with local
economic development remits can
enhance the effectiveness of
universities’ IP management
There may also be scope to contract
with private companies for the delivery
of some IP management functions.
However, there is a need to maintain at least a minimum level of IP expertise
in-house
The previous section discussed collaboration with
other universities, but there are also networks and
agencies outside the HE sector which can make
valuable contributions to IP management. Most
obviously, these include IP specialists of various sorts.
Even universities with large IP portfolios and well-
staffed IP management offices do not seek to have all
the required expertise in-house. They will use external
legal specialists and patent agents when required. This
is because there is insufficient volume to keep such
specialists fully employed within the university, but also
because external specialists will be working in many
different contexts and their expertise can be refreshed
more regularly.
6.2.1 Public agencies
With increased policy emphasis on devolution and
regional issues, the number of public agencies with
local economic development responsibilities, and their
capacities, have increased. In Scotland, Wales and
Northern Ireland agencies with economic development
remits have worked with the HE sector for many years.
The key agencies today are: Scottish Enterprise and
the Local Enterprise Companies; the Welsh
Development Agency; the Regional Development Agencies in England; and Invest in Northern Ireland.
Many local authorities also continue to play important
roles in local economic development.
These bodies, to varying degrees, can provide
valuable assistance and collaboration in
commercialising IP:
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• their regional innovation strategies, to which
universities have often contributed, help to define
which sectors and technologies are the regional
priorities and will receive special support
• some of the agencies themselves have expertise in
IP management and can be a source of advice
and contacts
• their general business support functions can be
accessed by the universities, especially in relation
to spin-outs.
6.2.2 IP management services
IP management providers19 offer different services, but
most are prepared to undertake some kind of
technology scouting service within the university in
exchange for a first option on owning or exploiting the
IP. The advantage to the company is early knowledge
of the technology and, possibly, also the opportunity tobuild up longer term relationships with groups of
workers.
The potential benefits to the university are essentially
two fold. First, many of these organisations will provide
their services without up-front cost to the university,
which, therefore, gains access to what may be
substantial IP expertise on a no risk basis. Second,
some organisations are also able to bring investment
funds and company management expertise. They can
therefore assist with further development of the
technology and the establishment of spin-out
companies.
If and when actual deals are made, universities may
receive lower returns from the IP management
company than if they were to offer their IP on the open
market. There is also a need to ensure that procedures
are put in place to prevent direct negotiations between
the IP management company and academic staff.
However, if the arrangement is working well then the
volume of deals should be larger than if the university
was reliant on in-house resources and, as a result,
overall returns to the university may well be higher. The
higher volume of deals is especially important to
universities who see the priority for IP management astransferring knowledge as well as generating revenue.
An example is presented in Figure 6.4.
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19 For more information, contact the British Venture Capital Association (www.bvca.co.uk).
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Figure 6.4: Using third parties – the experience
of Heriot-Watt University
Heriot-Watt has recently entered into an agreement
with an IP management company. Under the
agreement, the IP company has the right, which it
has exercised, to establish an office on-campus. It
has completely open access to all university
researchers, although they obviously cannot be
compelled to enter into discussions with the
company.
The company is only interested in spin-outs from the
university, but the expectation is that in searching for
candidates it will also identify IP suitable for
commercialisation by other routes and bring this to
the attention of the university. It will support spin-
outs with finance and managerial expertise.
The deal with the company is non-exclusive. The
company has a representative on the university’sdisclosure committee and informs the committee
whether it is interested in specific IP. If so, the two
parties will negotiate, if not the university can offer
the IP to any interested party. However, the
agreement does prevent the university from
permitting any other company to establish a
presence on campus.
There are no up-front costs to the university.
Universities should consider the costs and benefits of
such arrangements carefully in the light of their
objectives with respect to IP management. There may
also be opportunities for consortia of universities to
enter into agreements with IP management
companies. However, it is important that some IP
management expertise be retained within the university
for the following reasons:
• even if it were feasible to contract out most of the
IP management functions, a university will require
in-house expertise in order to act as an intelligent
buyer and to monitor performance
• institutions can expose themselves to significant
commercial and legal risks if they do not ensure
that due diligence activities are properly performed
in relation to the use and sale of IP. Given that they
bear the risks, it may be sensible to have in-house
control over these activities
• there is an important awareness-raising
component to IP management and, more
generally, a need to promote activities and develop
a rapport with researchers. This may be more
effectively undertaken by IP managers who are
perceived as being part of the university.
Web-based technology brokering services have also
emerged in recent years, some of which are free to the
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universities. An example, developed by the Patent
Office and AURIL, is given in Figure 6.5.
Figure 6.5: Technology Transfer Brokering
Acindus is a free web-based service
(www.acindus.net) that permits university research
laboratories to promote their area of interest and
showcase their latest findings. This service was
developed by the Patent Office, in association with
AURIL, and acts as a matchmaker, pairing off the
scientific community with the commercial interests
they need. Its aim is to help to form profitable,
home-grown partnerships across the widest
possible range of disciplines.
In the words of Dr Philip Graham, AURIL’s executive
director “ACINDUS will promote entrepreneurism
amongst academics, and help close the gap
between vision and reality”.
6.2.3 The evolving partnership
between medical research
charities and universities
Medical research charities are seeking to play an active
role in facilitating the commercialisation and
implementation of the research that they have funded
in UK universities. This means that they are taking an
active interest in how effectively IP is managed by
universities, and examining the areas in which they can
work in partnership with universities to facilitate
effective IP management.
Some of the larger charities have significant
development funds that they can use to facilitate the
research commercialisation process – particularly
when it involves spin-out companies. They also
possess business support and legal expertise that can
assist in the spin-out process.
However, although there is great potential for building
effective partnerships between universities and
charities over IP management, both sides identify
significant impediments to partnership-building.
From the universities’ perspective, some charities are
adopting a very strong focus on maximising financial
returns from the research that they fund, and tend to
under-estimate the investment uncertainties and risks
that the commercialisation process entails. This meansthat they can seek a higher financial return than their
commitment of risk capital warrants.
In contrast, some charities have raised concerns that
universities insist on ownership of IP but pay
insufficient attention to ensuring that adequate
technology transfer takes place. There are also
tensions over revenue sharing.
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The quotes in Figure 6.6 illustrate the divergent
perspectives. A strategic approach by both sides to
overcoming these difficulties could generate significant
benefits. A mutual understanding of each side’s
perception would be a useful first step in this direction
Figure 6.6: Universities and medical charities
Comment by a university IP manager
“Negotiations with charities, or especially the
companies set up by the charities to deal with the
universities, show that in some cases, the charities
are more commercially driven than the universities.
Tensions can develop between the universities and
these commercialisation companies. The original
perception was that charities were more interested
in the public good, but this has changed. There
needs to be a clearer distinction between ‘charity’
funding versus contract research funding.”
Comment from a charity representative
“Universities’ insistence on ownership and control of
their IP may often inhibit exploitation in those cases
where the universities do not have sufficient
exploitation resources or capacity or IP
management experience… some charities have
developed their own IP management and
exploitation groups to help address this concern
and complement the activities of the universities.”
“The root cause of the tension between HEIs and
charities is much more often about revenue sharing
though we acknowledge there have been some
(very few) about control. There have also been
tensions where the university IP office may not
understand the charity’s perspective (particularly the
patient-based ones) or the charity may feel its own
IP management expertise and focus in the area is
better.”
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7. Monitoring and
Evaluation
7 Monitoring and Evaluation 94
7.1 The monitoring and evaluation framework 95
7.2 Interpreting performance indicators and the impact of uncertainty
of time horizons 96
7.3 Using input measures and ratios 97
7.3.1 Research expenditure 97
7.3.2 Costs of IP management 98
7.4 Measures of internal process performance in IP management 98
7.5 Selecting suitable performance indicators 99
7.5.1 Benchmarking 99
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This chapter considers issues which arise with
performance measurement and evaluation. It is
intended to assist in the design of internal measures
and systems. However, external considerations are
very relevant, for two different sorts of reasons. First,
there may be real benefits in universities benchmarking
their costs and performances against others, and this
obviously requires information to be collected and
made available on a consistent basis. This is
discussed later in this chapter.
Second, this Guide is concerned with the
management of IP in a narrow sense. Universities
transfer knowledge in many different ways, such as
consultancy and training, which are outside the scope
of this Guide. Although IP management needs to
interface with these activities, indicators designed to
assess the effectiveness of IP management will not be
appropriate for measuring the effectiveness of other
knowledge transfer activities. This point needs to be
emphasised. There is a possibility that indicatorsdesigned for internal monitoring purposes will be used,
externally, to assess and compare the performance of
universities. This is especially topical at present, with
consideration being given to future allocations of
knowledge transfer funding. It should be emphasised
that the indicators discussed in this section are only
relevant to IP management, and would not be
appropriate for evaluations of knowledge transfer
activities more generally. Further, individual universities
need to decide which indicators most closely reflect
their own objectives in IP management.
7.1 The monitoring and evaluation
framework
A useful first step is to clarify why
monitoring and evaluation are
necessary. In particular, universities
need to consider the relative
importance of demonstrating
effectiveness in IP management whilst
seeking to identify areas for
improvement
The framework needs to encompass
‘hard’ indicators but also ‘softer’
assessments of whether general
objectives and specific policies are
being attained
Performance indicators can fulfil two main purposes.
First, they can be used to demonstrate to external
organisations that the university is capable of
managing IP effectively. This can be important in
assisting the university to implement key policies. One
of the reasons some sponsors give for seeking to
retain ownership of IP is that they lack confidence in
the ability of universities to manage the IP. Hence, the
ability to demonstrate an effective track record can be
important in negotiations.
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Second, performance indicators are obviously helpful
in assisting university managers to identify problems
and opportunities relating to IP management and to
modify budgets and strategies accordingly. In addition,
the monitoring and evaluation framework can play a
useful role in facilitating the process of learning-by-
doing in IP management. Cumulative experience
should ideally lead IP management to become more
efficient in its internal business processes and more
effective in delivering technology transfer outcomes.
Internal indicators need to be closely aligned with
objectives and management processes.
The monitoring framework needs to reflect two further
considerations:
• as has been mentioned repeatedly in this Guide,
income generation is not the only reason why IP
needs to be managed effectively, and factors as
diverse as protecting the university’s research
capabilities and contributing to economicdevelopment are also important. It is for each
university to decide the relative weight to be given
to these factors, but if there are objectives then
they must be reflected in the monitoring framework
• actual outcomes should be reviewed regularly, to
ensure that general principles are being adhered
to. Universities need, for example, to have clear
principles governing when they are prepared to
assign IP to sponsors and on what terms.
However, case-by-case decisions will establish
precedents, which may become established as the
policy norm in the minds of sponsors and
researchers. Monitoring needs to check that
pragmatic decisions are in line with more general
policies.
7.2 Interpreting performance
indicators and the impact of
uncertainty of time horizons
The long time lags between costs being
incurred and revenues being received
mean that evaluations of financial
performance should be patient and
recognise that costs and revenues are
decoupled, in the sense that changes in
revenues may have little to do with
changes in costs
There is usually little direct control over
the relationship between IP
management costs and revenues.
Because costs and revenues are not
strongly correlated, the measurement
and evaluation of performance should
also be de-coupled. Management
decision-making has little influence on
the cost-revenue relationship, save for
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seeking to minimise costs and maximise
the probability of achieving high returns
The returns to the university’s investment in IP
management in a given year will relate to IP
management activities, and hence costs, in previous
years. Similarly, benefits from current investments will
occur in future years. This long time-lag has important
implications for assessing performance.
Chapter 2 suggested that the fundamentally uncertain
nature of the commercial returns from IP management
is central to strategic management and, in particular,
setting realistic expectations for financial returns. The
argument is not that significant financial returns cannot
be achieved; it is that they cannot be forecast.
Effective IP management is consequently concerned
with seeking to maximise the likelihood that
unexpected high returns might happen, not with
setting targets for financial returns and judging
performance against these targets.
7.3 Using input measures and
ratios
Ratios that relate research expenditure
to outputs such as patents and licence
revenue should be used with caution.
Income generated for the university as
a result of incurring IP management
costs may arise in other areas. If the
university seeks to compare the costs
and returns from IP it should identify
all income sources attributable to
effective IP management
7.3.1 Research expenditure
One commonly used input measure is research
expenditure which is frequently related to different
output measures (patents, licensing, option revenue
and start-ups) as a ratio. Although easy to calculate,
care should be taken in interpreting such ratios,
particularly if they are to be used in making
resource/funding allocation decisions. This is because
its behaviour is strongly influenced by a wide range of
factors, in particular:
• differences between subjects in the propensity to
generate commercial outputs
• differences in the proportion of externally funded
research that comes with restrictions over
exploitation. For instance, contract research
funding may tend to be associated with the
sponsor owning and exploiting the IP, not the
university
• differences in the proportion of full costs recovered
in research contracts and in whether or not
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principal investigators’ salaries and on-costs are
covered by the research grant or payment
• in cases where international comparisons are
made the situation is even more complex because
research costs are affected by country-specific
factors.
7.3.2 Costs of IP management
The costs associated with operating the IP
management office can usually be identified. The
accuracy of these estimates depends upon a number
of factors and different figures have been reported by
universities in different surveys.
It is tempting to compare these costs with the revenue
generated, giving an estimate of net revenue. Care
should, however, be taken when relating costs and
revenues for the following reasons:
• the cost of managing the university’s IP includes
opportunity costs associated with academic time
spent on these activities, and also the opportunity
costs of university facilities used in the
development of IP. Costs may therefore be under-
estimated
• the costs incurred in one year will generate a
variable and uncertain stream of revenue in future
years. When the university is building up its IP
management activity the costs incurred in a
particular year will not relate to the revenues
received in that year
• the revenues received by the university as a result
of its IP management activities will not be captured
solely in income from commercialisation. For
instance, an option or licence deal with a company
may result in a collaborative or contract research
arrangement. This will increase the university’s
research income, a contribution that may not have
taken place without effective IP management.
7.4 Measures of internal process
performance in IP management
Internal performance measurement in IP management
is not a well-developed area of performancemeasurement in the UK. Indeed, the most recent
business interaction survey20 suggested that nearly 38
percent of institutions do not monitor the number of
invention disclosures on an annual basis.
Aspects of internal performance in IP management to
consider measuring include:
7. Monitoring andEvaluation
20 Higher education-business interaction survey. A report by the Centre for Urban and Regional Development Studies, University of Newcastle upon Tyne, December 2001.
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• deal flow in the IP management office(s),
particularly with respect to the distribution of large
and complex versus smaller and simpler cases
• case eliminations: whittling down the set of cases
via procedures such as the Stage-Gate Process21
can be important in controlling IP management
costs by ensuring that relatively unpromising cases
are abandoned before they incur excessive costs.
It can consequently be useful to collect data on the
numbers of cases that pass and fail specified
investment decision-points (e.g. clear ‘proceed’ ‘do
not proceed’ decision stages). Private sector
companies’ return on R&D can be as heavily
influenced by the number of projects that are killed
off as by the revenues that stem from those
projects that reach the market. The same principle
applies to IP management in universities
• case load queue times: the incidence of delays in
starting or completing cases due to log-jams inhandling other existing cases
• contract drafting iterations: the number of iterations
required to complete contracts and the time taken
on these iterations.
7.5 Selecting suitable performance
indicators
There may be benefits in UK
universities collecting data on a
consistent basis for benchmarking
purposes, provided that performance
can be assessed on a subject-by-
subject basis rather than in aggregate
While benchmarking can be a valuable
exercise, each university needs to
decide for itself which, if any,
indicators are a useful measure of
performance against objectives
7.5.1 Benchmarking
Each university should identify those indicators which
are most appropriate to its aims and objectives.
Nevertheless, there are benefits in establishingcommon indicators since this would facilitate
benchmarking and decision making in relation to IP
activities22.
7. Monitoring andEvaluation
21 The Stage Gate Process involves the sequential elimination of less promising investment alternatives in favour of the most promising, thus seeking to maximise the ratio of investment
returns relative to costs.22 Annex C presents a set of indicators introduced by AUTM.
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Annex A:
Provenance of the Guide
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The importance of the effective management of
Intellectual Property in HE was highlighted in
Excellence and Opportunity , the 2000 Government
White Paper on science and innovation policy. This
stated:
“The Government believes that effective IP
management should be a fundamental goal of
universities and research bodies in the public sector
because: identifying and managing IP is essential for
effective knowledge transfer out of the research base
to benefit the wider economy; and IP can itself be a
valuable asset deserving attention.”
“Research organisations need to follow some basic
principles if we are to achieve this goal. First, the
management and exploitation of IP needs to be
recognised as important by the top management in
research organisations – by vice chancellors and
principals of universities and by their top management
teams …. it is not enough to leave this task to theexperts.”
“As universities develop a more active approach to the
exploitation of their knowledge they also need support.
Good guidance is available at the technical level ….
but more needs to be done to get the attention of top
management and spread best practice.”
Reflecting the commitment in the White Paper,
Universities UK and AURIL, with the support of the
Department of Trade and Industry (DTI) and the Patent
Office, commissioned SQW Limited (with technical
assistance from TWI Ltd) to prepare a Guide to the
management of IP in HE23. The Guide focuses on the
strategic aspects of IP management, but some
discussion of policy and operational considerations is
also included to illustrate how these flow from strategic
decisions. It concentrates on IP arising from research
and its exploitation through sale, licensing and the
establishment of spin-out companies. Many of the
issues are, however, generic to other forms of IP and
exploitation routes.
There are two main target audiences for the Guide:
• Vice Chancellors and senior institutional managers.
The Guide aims to cover the key issues in the
development of IP strategy and policy in higher
education and to provide a framework to helpinstitutions to produce an IP strategy appropriate
to their mission and circumstances
• Pro-Vice Chancellors (Research) and senior
managers with responsibility for IP.
Annex A:Provenance of the Guide
23 Universities UK is the representative body for universities in the UK: it works to advance the interests of universities and to spread good practice throughout the higher education sector.
AURIL (The Association for University Research & Industry Links) represents industrial liaison, technology transfer and research administration specialists in the UK and Ireland. SQW is an
independent consultancy whose specialist areas include higher education and science and innovation policy.
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The Guide aims to cover the implementation of
policies and practices within universities to deliver the
effective management of IP. We hope, however, that
audiences both within and outside HE will find the
Guide useful.
This document reflects extensive consultations both
within and outside the HE sector. At the start of the
project, SQW undertook discussions within a small but
heterogeneous and representative group of
universities24. Discussions were also held with other
organisations, including research funding bodies,
economic development agencies, businesses and
financial institutions, all of which had direct interests in
IP generated by universities. The purpose of these
discussions was to identify the key issues relating to IP
management strategy and how they might be
successfully addressed. A consultation document was
then prepared, discussing the main themes identified
and raising a broad range of issues. This was widely
circulated, made available on the internet, andcomments invited. Five workshops were held, each
covering a topic which feedback to the consultation
document had suggested was of major interest25
Many people took part in this process and we are
grateful for the time they gave and their willingness to
share their experiences.
The project was overseen by a Steering Committee,
chaired by Professor John Archer, Principal of Heriot-
Watt University, and comprising staff from the
sponsoring bodies and a range of universities.
We are grateful to members of the project steering
committee for their assistance in this study. Besides its
other responsibilities, the committee reviewed papers
and draft reports during the project and members also
participated in a number of the workshops.
Annex A:Provenance of the Guide
24 In this publication the term ‘universities’ is used to refer to all higher education institutions.25 The five workshops were: (i) Incentives; (ii) Inter-university collaboration; (iii) Relationships with sponsors – the ownership and control of IP; (iv) Setting IP management strategies and
budgets, and (v) Monitoring and evaluation.
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AUTM American Association of University
Technology Managers
BTG British Technology Group plc
CASE
Studentships Cooperative Awards in Science and
Engineering: PhD studentships jointly
funded by industry and the research
councils
CBI Confederation of British Industry
CPD Continuing Professional Development
DTI Department of Trade and Industry
EPSRC Engineering and Physical Sciences
Research Council
HE Higher Education
HEI Higher Education Institution
HEIF Higher Education Innovation Fund
HEROBC Higher Education Reach Out to
Business and the Community Fund
IP Intellectual Property
• Background IP
• Existing IP brought to a researchproject
• Foreground IP
• IP generated during a research
project
Isis Oxford University IP exploitation
company
MIT Massachusetts Institute of
Technology
MOD Ministry of Defence
NHS National Health Service
PSRE Fund Public Sector Research Exploitation
Fund
PVC Pro-Vice Chancellor
R&D Research and Development
RAE Research Assessment Exercise
RDA Regional Development Agency
RTO Research and Technology
Organisation
SMART Small Firms Merit Award for Research
& Technology
Grants to help individuals and small and
medium-sized businesses to make better
use of technology and to develop
technologically innovative products and
processes
SPUR Support for Products Under
Research Scheme:
An R&D support scheme whose aim is to
help medium-sized businesses improvetheir competitiveness by developing new
products and processes to the benefit of
the national economy. (Now part of
Smart)
UNICO The UK University Companies
Association
Annex B: Glossary
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Annex C:
AUTM performance
measures
v In Higher Education
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Some of the benefits from IP management are not
captured in the AUTM system. The most prominent
issue in this regard is when research sponsors are
attracted by the university’s IP portfolio. These benefits
to the university are not captured by licence income
alone.
The performance measures used by AUTM
(n=number)
RESEARCH INPUTS
Federal Government Research Expenditure ($)
Research Expenditure from Industrial Sources ($)
Total Research Expenditures ($)
RESEARCH OUTPUTS RELEVANT TO IP
MANAGEMENT
Invention disclosures received (n)
IP MANAGEMENT RESOURCES UTILISED
Licensing Full-Time-Equivalents in technology
transfer offices (n)
Other Full-Time-Equivalents in technology transferoffices (n)
Total Full-Time-Equivalents (n)
IP MANAGEMENT OUTPUTS
Securing IP
Total US patent applications (n)
New US patent applications (n)
US patents issued (n)
EXPLOITING IP
Licences & options executed: exclusive (n)
Licences & options executed: non-exclusive (n)
Total licences & options executed (n)
Licences & options executed to start-ups (n)
Licences & options executed to small
companies (n)
Licences & options executed to large
companies (n)
Total licences & options executed (n)
Number of start-up companies formed that were
dependent upon the licensing of your institution’s
technology for initiation (n)
Number of these that have their primary place of
business operating in your home state (n)
Number of start-up companies that were
dependent upon the licensing of your institution’s
technology for initiation and were reported in the
Survey this year or in earlier years that became
non-operational in the fiscal year (n)
Number of start-up companies that were
dependent upon the licensing of your institution’s
technology for initiation and were reported in theSurvey this year or in earlier years that were
operational as of the last day of the fiscal year (n)
Number of licensed technologies that became
available for consumer (public) or commercial use
in the fiscal year (n)
FINANCIAL PERFORMANCE IN IP
MANAGEMENT
Licence income received ($)
Licence income paid to other institutions ($)
Annex C: AUTM performance measures
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Amount spent in legal fees ($)
Amount reimbursed by licences ($)
Total number of licences/options yielding licence
income (n)
Licence income received: running royalties ($)
Licence income received: cashed-in equity ($)
Licence income received: all other types ($)26
PORTFOLIO PERFORMANCE
Number of publicly-traded companies in the
portfolio (n)
Number of privately-held companies in the
portfolio (n)
Source: The Association of University Technology
Managers Inc. Report entitled, AUTM Licensing
Survey, Fiscal Year 1998. Note: the indicative
classification of these metrics was carried out by
SQW Limited.
Annex C: AUTM performance measures
26 This refers to licence fees and annual fees paid as part of licence agreements.
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