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Re: SBIR and STTR AND Faculty Owned/Controlled Companies Herbert B. Chermside 24 Jul 1997 08:13 EST

You are uncovering a can of worms -- though most of them will grow up to
become snakes!!  Virginia's and this institution's experience may interest you.

In VA we have a state COI law which prohibits an employee from having a
"personal interest" -- over $10K/yr income from or over 3% ownership in, by
employee, spouse, or members of household -- in a contract with employee's
own agency.  HOWEVER, we have an exception process for employees of higher
ed which provides for   1) disclosure,  and  2) approval by Univ. official,
for each otherwise prohibited  contract.  The exception process was provided
for in the law because the legislature was persuaded that without it,
university inventors could not have any involvement in the development to
commercialization of their inventions.  Good idea, yes?  Given the
fundamental nature of most university inventions, the inventor may be far
and away the best to lead the next steps of development, either inside or
outside the institution, if non-institutional $ can be found.

Here, this exception process has been used in a number of cases for exactly
this reason.  In fact, there have been two pushes related to this:  1) the
state's Center for Innovative Technology has moved in the direction of
economic development, so has taken steps to encourage state inventions be
commercialized by in-state companies or facilities,  which predisposes the
involvement of inventors in commercializing companies, and   2) with the
creation of a research park under the leadership of our president, there has
been a concerted effort to create entrepreneurial companies around, amongst
other things, our inventions, with occupancy of the research park and
utilization of the start-up-company-support options it has as a carrot (and
that provides renters for the space!).  SBIR and STTR grants are often
sought by these companies; in fact, CIT gives matching grants as inducements
if the company is a VA entity.

The exception has been used to facilitate a number of other entrepreneurial
arrangements, too.  There is the interesting point that the institution's
Intellectual Properties Foundation (in the past, the University itself, but
most of those agreements have been assigned to IPFndn) often takes an equity
position in the company.

The understood -- but seldom contracted for so it can easily be enforced  --
premise is that the faculty members involved do not end up with conflict of
commitment.  The company is allowed -- in fact usually encouraged -- to have
research agreements with the university.  There are no written policies on
the allowable nature of these relationships.

Some other questions/problems which have occurred, but not been resolved by
written policy (though some have been settled on a case-by-case basis, but
not creating a precedent!), include:
If the faculty mamber makes an invention, in what cases is it university
property and in what cases is it company property?
Under what conditions shall company personnel work in University spaces or
with University special equipment (this opportunity is an incudement to
companies to come to the research park, immediately next door);  what
insurance/indemnication provisions should apply, what about invention
ownership, even what about graduate students and post-docs being involved?
What about implied endorsement by the institution when activities are
conducted in what is, or appears to be, University space?  Even worse, what
sanctions should/will be applkied when a company is using the University
name explicitly, even in apparent defiance of contract language to the contrary?
Should the University try to police the state COI law in regard to all
faculty?  Should chairs and deans, who set salaries, be given access to a
faculty member's personal financial information describing outside sources
of income?

Bill, as usual, you see to the heart of a problem situation.  Maybe some
others on the net will have answers to share!!


At 08:43 AM 7/23/97 -0400, you wrote:
>Colleagues -
>I am begining to wonder if I am the only person that worries about faculty
>owned/controlled companies and their participation in SBIR and STTR programs,
>which include the employing university as the academic partner.
>As I recall the early days of the SBIR program, federal agencies were at the
>very least cautious about the relationships and conflicts that could be
>created and most institutions frowned on and/or prohibited the practice.  As
>our world has evolved, federal sponsors have been encouraging of the notion of
>faculty establishing companies and competing for SBIR/STTR funds.
>My query to the group is, what are your institutional policies/positions on
>this general issue and what has been your experience in instances where
>faculty establish companies and seek SBIR/STTR funding?
>If this is a non-issue and I am just being too fussy, my apologies.  Your
>comments directly to me or through the list will be appreciated and if there is
>response worthy of a summary report, I'll post same.
>Bill Reeves
>William W. Reeves, Director             Phone   304/293-7398
>Office of Sponsored Programs            Fax     304/293-7435
>West Virginia University                E-mail xxxxxx@WVU.EDU
Herbert B. Chermside, CRA
Director, Office of Sponsored Programs Admin.
Virginia Commonwealth University
PO BOX 980568
Richmond, VA  23298-0568
Voice:  (804) 828-6772
Fax:    (804) 828-2521
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