University of Wisconsin Policies for Split and Distribution of Licensing Income
ONCE AN INVENTION IS PROPOSED by a UW-Madison researcher, WARF's staff evaluates the discovery for patentability and commercial value. If WARF accepts the invention for patenting and licensing, the foundation provides an attorney to help the researcher with the patent application. The researcher also agrees to assign ownership of the invention to WARF. It is at this point WARF may contact companies considered good matches for the technology. WARF's policies call for 20 percent of the gross licensing revenue from an invention to be returned to the inventor (or inventors). The remainder is shared with the UW-Madison Graduate School, and the inventor's laboratory and department.
WARF shares the royalty revenue generated by a licensed technology with the technology's inventor(s) or author(s); the inventors' laboratories; the inventors' academic departments; and the University. The following is a general description of how royalties are divided among these entities.
Inventors' Share
The inventors receive 20 percent of the gross royalty revenue generated by a licensed invention. Payments are made to the inventors following the receipt of the royalty payment.
WARF's Annual Grant to the University
The net income from WARF's licensing efforts and its endowment is used to fund WARF's annual grant, or gift, to the University. WARF's grant to the University is unrestricted, meaning the University decides how best to spend the grant. The following is a general description of how different portions of the grant are allocated.
Laboratory Share of the Annual Grant
Of the first $100,000 generated by each license agreement, the inventors' laboratories receive a grant equaling 70 percent of the gross royalties. For example, if an agreement generated $50,000 in royalty revenue over its lifetime, the inventors' laboratories would receive 70 percent of $50,000, or $35,000.
Department Share of the Annual Grant
The inventors' academic departments receive a grant equaling 15 percent of the gross royalties generated by the inventors' licensed technology.
Graduate School Share
After the laboratory and department shares have been allocated, the remainder of WARF's annual grant is given to the University's Graduate School. The Graduate School uses this money to support a variety of projects and programs each year, including:
- The Graduate School Research Competition
- The Romnes Early Career Awards and the Kellett Mid-Career Awards
- Named professorships and graduate fellowships
- Campus building projects
5.8 Describe your institution's policy regarding faculty and institution equity participation in spinout companies.
WARF encourages investigators to pursue start-up activity and has spun out over 35 companies, most located at the University's research park on Madison's Westside.
Ownership of Inventions
Unlike corporations and other institutions of higher learning, unless required by funding agreements, either federal or non-federal, the university does not claim ownership of intellectual property generated during research by its faculty, staff or students. Invention ownership therefore, may be affected by two limitations associated with the funding sources that supported the research leading to the invention. Under the federal Bayh-Dole Act — which governs the ownership of intellectual property arising from federally funded research — the university's patent designee is WARF and any invention arising from federally funded research must be disclosed to WARF. If the foundation accepts an invention for licensing, the inventor is then also required to assign the discovery to WARF. To assure compliance with Bayh-Dole, the university conducts an equity review that evaluates the funding profile of the invention. If the invention is funded in whole or in part by federal funds, Bayh-Dole applies. Another funding limitation comes into play when a researcher receives third party research funding, such as sponsored research funding from corporate, consortia or private granting agencies. When agreements with third parties contain provisions specifically assigning intellectual property resulting from the research, those agreement terms dictate the handling of any resulting inventions.
Use of University Facilities for Private Purposes
Related to the above discussion, under state law, university employees may not use university property to obtain anything of substantial financial value for themselves, their immediate families, or an organization (including an association, a business, or any legal entity) to which they belong without written permission. The UW-Madison relies on the disclosure process outlined above to identify and manage potential private use of public facilities. If research using specialized UW-Madison facilities is needed in order to further develop a start-up company's product, a signed sponsored research or facilities access agreement must be established between the company and the university. These agreements can be structured to allow the research to progress, while assuring fair compensation to the university for use of facilities. Specific arrangements, contact personnel and agreement forms related to the use of university facilities by companies with which faculty have consulting or equity relationships vary depending on the school or college.
WARF Equity in UW Spin-Off Companies
For start-up business WARF will take an equity position in lieu of cash for the technology license. Depending on the technology, that could be anywhere from $10,000 to $1 million of equity. There are usually some milestone payments made as well.
WARF has a partner relationship with Venture Investors of Wisconsin and Baird Venture Partners. That is how WARF invests in faculty start-ups in order to help them. When WARF thinks that a company would be a viable investment they want to make sure that they are successful. WARF has criteria for investing directly in start-up companies and it usually involves partners. It doesn't invest cash directly in technology companies other than buying stock.
When a faculty member chooses to start a spin-off company through WARF, they must file an acceptable business plan and a start-up application from the faculty spin-off company for approval by its Board of Trustees before license and equity agreements can be finalized. WARF's licensing staff helps faculty navigate the steps as quickly and efficiently as possible.
UW-Madison encourages faculty and staff to engage in activities and share expertise with companies. In fact, the university is obliged to transfer technology to the private sector so that the public can benefit from the results of UW-Madison research. Within this context, the university acknowledges that conflict of interest is common and, in fact, frequently unavoidable. The university does not consider conflict of interest inherently bad or improper, so long as it is properly managed. Anytime a university employee becomes involved in a private enterprise while maintaining his or her university position, there is potential for conflict of interest. Thus, regulations have been established at both the federal and state levels governing conflict of interest, and procedures have been set up at UW-Madison to ensure that conflict of interest is identified and managed in compliance with those regulations.
A conflict of interest is a situation where a UW-Madison employee has financial interests that could adversely impact or influence his or her professional research or teaching responsibilities. Conflict of interest also exists if a university employee has the opportunity to use his or her public position for personal financial gain.
Strict adherence to conflict of interest regulations is critical to the credibility of the UW-Madison. Real or perceived conflict of interest can jeopardize taxpayer support for academic research, allow critics to challenge the credibility of scientific research by questioning the objectivity of investigators, and can undermine academic freedom by interfering with the image of the university as a producer and certifier of knowledge.
UW-Madison identifies and manages potential or real conflict of interest through an ongoing disclosure process. Each university employee must submit annual outside activity reports. These reports are required and disclosures must be made even if no conflict of interest is associated with the activity. The reports must be updated at any time during the year when the employee's outside activities change significantly. Additionally, if an employee becomes involved in any situation where a material conflict of interest might affect their responsibilities to the university, a report of that activity must be filed. Business Incubation
When faculty or staff members become involved in a start-up company, they must submit an updated outside activity report, also known as a disclosure form. Upon filing of the appropriate disclosure forms, the information goes to the university's Conflict of Interest Committee for review. The committee, which operates within the Graduate School, is composed of faculty peers as well as representatives from various UW-Madison schools or colleges. The committee determines whether a conflict exists and if so, the extent of the conflict and what actions must be taken to manage its potential adverse effects.