Patent Program of the University of California - ACS Symposium

6 Patent Program of the University of California MARK OWENS, JR.

Downloaded by RUTGERS UNIV on December 31, 2017 | http://pubs.acs.org Publication Date: June 1, 1978 | doi: 10.1021/bk-1978-0081.ch006

University of California Systemwide Administration, 2200 University Ave., Berkeley, CA 94720

The University of California is a very large institution comprising nine campuses, some 80,000 faculty and staff members, and 125,000 students. The annual budget of the University i s a little over $2 b i l l i o n , with a substantial research budget supported by State and Federal grants, and, to a lesser extent, industry and non-profit foundations. While the University faculty has been research-oriented from the early days of the institution, it was not u n t i l the 1940's that a patent program was developed to administer inventions that might result from faculty research. In the early days, patents were a very minor consideration to the University, but a potentially lucrative invention had evolved at the Davis campus which was assigned to the University by the inventor, and this stimulated the formation of the program. Today the program is unique in that there is an entirely separate Board appointed by The Regents of the University of California to establish policy and procedure for the administration and processing of patents. This Board i s composed of one academic representative from each of the nine campuses of the University, one representative of the Academic Senate, and the chairman of the Patent Board, who represents the University administration. Day-to-day activities of the patent operation are carried out by the office of the Patent Administrator and a staff of three c l e r i c a l assistants. This office receives and reviews all disclosures of inventions which are developed within the University of California system by i t s staff and faculty. (Parenthetically, student inventions to the extent that the students are not also employees of the University are excluded from the patent program.) Use of the program by the faculty was optional u n t i l 1963. In that year, mandatory assignment of inventions to the Univers i t y was required, and, at the same time, the distribution of royalty income was increased from the previous downward sliding scale, from 25% to 15%, based on gross royalties, to a 50% distribution based on net royalties. As a result of this change 0-8412-0454-3/78/47-081-065$05.00/0 © 1978 American Chemical Society Marcy; Patent Policy ACS Symposium Series; American Chemical Society: Washington, DC, 1978.


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to an arrangement more f a v o r a b l e t o the i n v e n t o r , the d i s c l o s u r e r a t e i n c r e a s e d from about 20 per year t o the present 200 t o 300 per year. The i n v e n t i o n d i s c l o s u r e s are analyzed to determine what r e s t r i c t i o n s , i f any, have been imposed by sponsoring agencies. Experts i n the f i e l d of the i n v e n t i o n are chosen from among the f a c u l t y and s t a f f t o review the d i s c l o s u r e s , p r i m a r i l y f o r n o v e l t y , f e a s i b i l i t y and commercial p o t e n t i a l . I f the p r e l i m i nary review i s f a v o r a b l e , a patent search i s undertaken. Based on the t o t a l a n a l y s i s , the i n v e n t i o n i s e i t h e r r e p o r t e d to the sponsoring agency, r e l e a s e d to the i n v e n t o r , or patent prosecut i o n procedures are begun. Two c r i t e r i a must be met before patent p r o s e c u t i o n may be undertaken: There must be reasonable hope f o r developing a d e f e n s i b l e patent p o s i t i o n and reasonable hope f o r l i c e n s i n g the i n v e n t i o n i n the foreseeable f u t u r e . T h e r e a f t e r the o f f i c e of the Patent A d m i n i s t r a t o r seeks out l i c e n s i n g p r o s p e c t s , negotiates l i c e n s e s and assumes a l l subsequent r e s p o n s i b i l i t y f o r t h e i r enforcement. D i s t r i b u t i o n o f r o y a l t i e s t o inventors i s a f u r t h e r r e s p o n s i b i l i t y o f t h i s office. Another important f u n c t i o n o f the Patent A d m i n i s t r a t o r i s t o a s s i s t members o f the U n i v e r s i t y s t a f f and f a c u l t y i n the n e g o t i a t i o n o f patent p r o v i s i o n s i n research c o n t r a c t s and grants to ensure t h a t sponsors do not impose unreasonable c o n s t r a i n t s on the U n i v e r s i t y with regard to i n v e n t i o n s . Aside from the State of C a l i f o r n i a , there are three b a s i c sources o f r e s e a r c h sponsorships w i t h i n the U n i v e r s i t y . Of these the F e d e r a l Government i s the most s i g n i f i c a n t . The f a c t t h a t there i s no one c l e a r coherent F e d e r a l patent p o l i c y has been a s e r i o u s problem. There are more than twenty F e d e r a l agencies which sponsor r e s e a r c h and almost an equal number o f p o l i c i e s with v a r y i n g degrees o f r e s t r i c t i o n s and o b l i g a t i o n s . Although the U n i v e r s i t y has been s u c c e s s f u l i n r e n e g o t i a t i n g some very onerous patent r e s t r i c t i o n s such as the background patent p r o v i s i o n f i r s t introduced by United S t a t e s Department o f the I n t e r i o r , f o r the most p a r t , r e s t r i c t i v e patent p r o v i s i o n s imposed by the F e d e r a l Government are not n e g o t i a b l e to any great degree. The two other sources o f r e s e a r c h funding are p r i v a t e i n d u s t r y and n o n - p r o f i t foundations. In t h i s area, the U n i v e r s i t y has e s t a b l i s h e d a "Schedule o f Support and Patent P r i v i l e g e s " . Under t h i s p o l i c y no r o y a l t y - f r e e r i g h t s may be granted to p r i v a t e i n d u s t r y . The U n i v e r s i t y a t the very most can agree to grant an e x c l u s i v e l i c e n s e to the sponsors, s u b j e c t t o the payment of reasonable r o y a l t i e s , i f the sponsor has supp o r t e d a l l d i r e c t and i n d i r e c t c o s t s o f the r e s e a r c h p r o j e c t , i n c l u d i n g a pro r a t a share o f a l l s a l a r i e s . I f the sponsor has o f f e r e d l e s s than t h i s , the l i c e n s i n g terms are l i m i t e d and may be no more than a grant of a non-exclusive, but r o y a l t y - b e a r i n g

Marcy; Patent Policy ACS Symposium Series; American Chemical Society: Washington, DC, 1978.


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license. As f a r as n o n - p r o f i t foundations are concerned, the u n i v e r s i t y attempts to r e t a i n any patent r i g h t s under the r a t i o n a l e t h a t the U n i v e r s i t y i s b e t t e r able to ensure widespread p u b l i c use of whatever i n v e n t i o n s may r e s u l t from the r e s e a r c h . The seeking o f l i c e n s e e s and the s u c c e s s f u l n e g o t i a t i o n of l i c e n s e s are, of course, the heart o f any patent program. There are many sources o f l i c e n s e e s . One i s e x i s t i n g l i c e n s e e s . Perhaps an e x i s t i n g l i c e n s e e i s doing a good job handling current U n i v e r s i t y i n v e n t i o n s , and we may f e e l t h a t the new i n v e n t i o n would be a v a l u a b l e adjunct to the l i c e n s e e ' s product l i n e . In t h a t s i t u a t i o n we might o f f e r the new i n v e n t i o n to an e x i s t i n g l i c e n s e e . The more common p r a c t i c e , however, i s to make i n d u s t r y wide s o l i c i t a t i o n s to see i f i n t e r e s t e x i s t s f o r the new invent i o n . The names of p r o s p e c t i v e l i c e n s e e s f o r such general m a i l i n g can be found i n the Thomas R e g i s t e r of American Manufacturers and v a r i o u s other trade p u b l i c a t i o n s . The U n i v e r s i t y a l s o i s w e l l known as a source of new technology; r e p r e s e n t a t i v e s of p r i v a t e i n d u s t r y who are seeking new ideas and i n v e n t i o n s c a l l upon us p e r i o d i c a l l y . The i n v e n t o r , h i m s e l f , i s f r e q u e n t l y a good source to tap f o r p r o s p e c t i v e l i c e n s e e s , s i n c e he i s f r e q u e n t l y very knowledgeable about e x i s t i n g manufacturers and products i n h i s p a r t i c u l a r f i e l d . The terms and c o n d i t i o n s of l i c e n s e s are q u i t e s i m i l a r to those used by other e d u c a t i o n a l i n s t i t u t i o n s or i n d u s t r i e s which are i n v o l v e d i n l i c e n s i n g programs. While we p r e f e r to l i c e n s e on a nonexclusive b a s i s , i n many s i t u a t i o n s t h i s i s not p o s s i b l e because i n v e n t i o n s emerging from U n i v e r s i t y research r e q u i r e a good d e a l of time and money to develop f o r the commercial market. For t h i s reason, many o f the l i c e n s e s must be e x c l u s i v e f o r at l e a s t a p e r i o d of years as an i n c e n t i v e f o r a company to i n v e s t i t s time and r i s k c a p i t a l . Licenses i n c l u d e p r o v i s i o n s f o r payment of a l i c e n s e i s s u e fee which i s i n the nature of earnest money, and a c o n d i t i o n f o r g e t t i n g the l i c e n s e . The l i c e n s e , t y p i c a l l y , has due d i l i g e n c e clauses which r e q u i r e that the l i c e n s e e e n e r g e t i c a l l y develop the i n v e n t i o n f o r the market and t h e r e a f t e r meet market demands. I f the due d i l i g e n c e requirements are not met, the U n i v e r s i t y has the r i g h t to terminate the l i c e n s e . Royalty terms are c o n s i s t e n t with those of i n d u s t r y f o r l i k e i n v e n t i o n s . A minimum annual r o y a l t y payment guarantee i s i n s i s t e d upon, e s p e c i a l l y as a p a r t of an e x c l u s i v e arrangement. The l i c e n s e e w i l l have the b e n e f i t o f having the inventor p a r t i c i p a t e i n developing the commercial model of the i n v e n t i o n i n v a r y i n g degrees. Know-how, per se, i s not l i c e n s e d , but i f the l i c e n s e e wishes to have the s e r v i c e s of an inventor beyond a c a s u a l exchange of i n f o r m a t i o n , i t must make separate arrangements w i t h the i n v e n t o r . The inventors are u s u a l l y eager to see t h e i r i n v e n t i o n s made a v a i l a b l e and u t i l i z e d by the p u b l i c , and, t h e r e f o r e , i t i s not at a l l uncommon f o r l i c e n s e e s to work out


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such arrangements with inventors. At present the patent program i s generating about $1 m i l l i o n per year from i t s patent licensing a c t i v i t y . A number of inventions, each returning rather modest amounts, contribute to the t o t a l . This i s f e l t to be a healthier situation than to have one or two very large income-producing inventions which could become involved quite easily i n costly l i t i g a t i o n . Some concern has been expressed over the years by faculty members about the worth of the program and the manner i n which i t has been conducted. These concerns have now essentially d i s appeared. Recently the State Auditor made a complete review of the program and reported favorably on i t s effectiveness. As a consequence, the program i s expected to be continued with l i t t l e or no change i n the immediate future. In this paper I have given only very general information about the patent program of the University of California. I hope this bird's-eye view of the extent of the activities of the program w i l l be helpful to those who wish to become licensees and to those who may be contemplating setting up similar programs at other institutions. Abstract The University of California has had a patent program for over t h i r t y years. Revised i n 1963, the current program provides for mandatory assignment of inventions developed by members of the faculty and staff u t i l i z i n g University f a c i l i t i e s . A full-time patent staff administers the program. Inventions covering a wide variety of fields are reported and processed. The processing involves complying with research sponsor commitments, evaluating, patenting and licensing of patent rights. Royalty income i s shared between the inventors and the University; the University's share i s used for research and educational purposes. Biographic Notes Since 1955, Mark Owens, J r . has progressed from Assistant Counsel to the Regents of the University of California to his present position as Deputy Associate Director for Administration at the Lawrence Berkeley Laboratories. During this long period of time, he was involved in many legal and administrative duties, including complete responsibility for all patent and copyright matters for the University system. Mr. Owens has a baccalaureate in p o l i t i c a l science from the University of California at Los Angeles and a doctor of jurisprudence degree from Hastings College of the Law, University of California. He is admitted to the practice of law i n California and before the United States Supreme Court, and currently i s dean and professor of law at San Francisco Law School. RECEIVED June 20, 1978.


Patent Program of the University of California - ACS Symposium

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