We hae a similar situation in process here.  Three students have invented
a machine that may well hae a market in the food processing business.
They came to us with questions about patents.  We do have a patent policy
but it is very general and very old.  A present we are negotiating an
agreement with the students.  Nothing is signed yet, but the outlines
appear to be as follows:
-- our foundation will pay patent costs and maintenance costs for
the first segeral years
-- students will retain ownership of patent
-- students will license patent to foundation for several years and
foundation will hae exclusive rights to sublicense
--royalties will be split after costs are recovered.  the engineering
department will also get a share.
--after several years (maybe 8), the foundation's license will end and
students will take up marketing rights.  Sublicenses already established
by foundation will continue.  Royalties from licenses arranged by
students will also be split, more favorably to students this time.

Many issues remain to be worked out, but it seems likely we will reach
agreement.

Hope this helps.

Stuart Ross
Calif State University Fullerton