My institution is currently engaged in negotiations with two for-profit
businesses that have supported research efforts, that have led to several
inventions.  Those inventions are the subject of jointly owned patents (in
the application stage).

The two companies have suggested that all further interactions between the
Health Center and the companies, related to this general area of research and
business development, be subject to approval, with a majority (2/3) vote needed
in order to achieve this approval.  These business decisions/relationships
would definitely include such matters as licensing the rights of the joint
patents, distribution of royalties, establishing relationships with other
companies interested in licensing or marketing the system which is the subject
of the patents.

The Health Center is currently considering this matter with respect to several
possible issues:

 The University's not-for-profit status depends on an arm's length
relationship with the companies with which we do business.  Our involvement in
business decisions would insert us into the daily business management of these
companies, a role which we think could jeopardize our non-profit status.

 The Health Center's ability to avoid paying Unrelated Business Income Tax on
all revenues related to this relationship (royalties, license fees, research
contracts) could be questioned.

 The State's authority to issue bond funds for construction of space housing
research activities at the Health Center could be affected by such a
relationship.

 Since the 2/3 vote would include all activities related to the system, it
is possible all future research contracts in this general area would be subject
to this approval mechanism.

 It is possible that the partners would consider publication of further
research as subject to the 2/3 approval.

I am most interested in learning about whether any of the other universities
represented on this list have tackled such an situation.  If so, I would be
very interested in speaking with you, or communicating via the list.

Questions I have are:

1.  Have any other universities entered into agreements which gave them the
level of control over (involvement in) business activities which this
agreement would give us?

2.  Have any other universities considered this type of relationship, and
decided not to enter into it, and for what reasons?

3.  What other pitfalls or issues have other universities experienced in such
business relationships.

Len

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Leonard P. Paplauskas    Assistant Vice President for Research     |
203-679-3173             University of Connecticut Health Center   |
FAX 679-2670             Farmington, CT   06030-5355               |
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xxxxxx@sun.uchc.edu                                            |
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