19.059: Employee Participation In Authorized Private Companies Commercializing Ohio University Research
April 9, 2001
Issued by John A. Bantle
This policy applies to all employees, faculty, staff and students, who create intellectual property owned by the Ohio University and who desire to hold an equity interest in a firm, corporation, or other association to which Ohio University has assigned, licensed, or transferred, Ohio University's interests in discoveries or inventions made or created by that employee or in patents issued to that employee (hereinafter "Company") commercializing their research in accordance with § 3345.14 ORC. Ohio University's interests are governed by OU Policy & Procedure # 17.001, Intellectual Property Ownership And Disposition, And Employee Involvement In Research Commercialization.
This policy serves as an exception to the Ohio Ethics Law and related statutes [Chapter 102, § 2921.42 ORC,§ 2921.43 ORC ], which might otherwise apply. Matters outside the scope of this policy will be subject to such laws to the extent applicable.
Conflicts of Commitment
With the acceptance of appointment to Ohio University, an individual makes a commitment to Ohio University that is understood to be the primary commitment in the most inclusive sense. Employees are encouraged to develop discoveries and inventions with commercial potential; however, they should do so with due regard to the broader teaching and research mission of Ohio University. The members of the faculty and staff are expected to devote their primary professional loyalty, time and energy to their teaching, research, and administrative responsibilities. Accordingly, they should arrange their outside consulting activities and authorized private business activities so as not to interfere with the primacy of these commitments. Similarly, faculty or staff should not allow their interest in a financial opportunity arising out of their research efforts to interfere with their relationships with other faculty, staff and/or students. Specifically, research assignments for students must be selected solely on the basis of the students' interests academic development, and degree requirements. Ohio University recognizes that its faculty may engage in outside consulting work, and to the extent these activities serve or do not interfere with the university's interests as well as those of the faculty member, Ohio University approves of such involvement under the provisions outlined in the Faculty Handbook, IV-D Participation in Outside Work or, as required, by Ohio University Policy and Procedure #19.058, Conflict of Interest in Research, Educational, and Public Service Activities.
While faculty are permitted by this policy to engage in authorized private business activities relating to their Ohio University positions, they continue to be primarily responsible for the performance of all of their teaching, research and service obligations. Authorized private business activities must not be allowed to interfere with the performance of any of their Ohio University responsibilities and must be undertaken in pursuant to the provisions of the Faculty Handbook and a formal conflict of interest management plan between the faculty, company and Ohio University and approved by the vice president for research and the dean of the college or regional campus.
Staff who hold full-time administrative or staff appointments are expected to devote their full-time professional loyalty, time and energy to their position. Staff members may pursue research projects as authorized by their supervisors and only in those cases when the project will advance the missions of the Ohio University and the employing unit, without regard to the financial interests of individual employee. Staff members may not perform research activities of any kind during Ohio University working hours unless as a part of a sponsored research agreement with the private business. The activity is then considered Ohio University research. These activities, if determined to be significant by the vice president for research, must not interfere with the performance of any of the staff member's Ohio University responsibilities and must be undertaken pursuant to a conflict of interest management plan between the Staff member, company and Ohio University and approved by the vice president for research and employee's planning unit head.
Faculty Reporting of Business
Private business activities that may relate to a faculty member's Ohio University research, whether assigned or not, shall be reported in writing to the vice president for research and dean of the college. Decisions concerning the scope or management of an employee's private business activities and his or her Ohio University research shall be made by the vice president in consultation with the dean of the college or regional campus.
Private business activities that are not subject to this policy because they are unrelated to the employee's Ohio University research may be nevertheless subject to other Ohio University policies on paid external consulting, conflicts of interest and commitment, and/or patents and copyrights. Deans, in consultation with department chairs or school directors, or, as appropriate, planning unit heads in consultation with the supervisor, are responsible for enforcing the Ohio University Policies.
Private business activities that are not subject to this policy because they are unrelated as a faculty member's Ohio University research, and that do not fall within the definition of approved consulting activities may not be performed during Ohio University working hours in accordance with applicable Ohio University policies. Ohio University facilities, equipment or other resources may not be used in connection with these activities except as expressly authorized under a written contractual agreement between Ohio University and the employee and/or company.
Faculty and staff must obtain written approval from the vice president for research and a conflict of interest management plan must be in place before any business agreements related to the commercialization of their Ohio University research are finalized. A conflict of interest management plan will address the following expectations:
Management of University Obligations:
The roles and responsibilities of the faculty member to the department or unit, e.g., teaching loads, committee assignments, etc., will be described in sufficient detail to ensure a fair assessment of the performance of the employee in meeting their obligations.
Management of Start-Up Companies:
Faculty members may hold temporary management positions in start-up companies commercializing their research. While they may initially find it necessary to play a management role in a newly formed company, it is expected that their management responsibilities will decrease as the company develops. Professional management should be brought in at the earliest opportunity. Agreements between the Ohio University and start-up companies should contain enforceable milestones for the reduction of these management responsibilities. Failure to comply with these agreed-upon milestones may result in the company's inability to engage in sponsored research, utilize student employees, or other penalties in the commercialization agreements and/or activities permitted under this policy.
Management Positions in Existing Companies:
A faculty member who acquires interest in a previously established company that contracts with the Ohio University to commercialize his or her research should not serve as a director, officer or employee of that company.
Student Research Within the Ohio University:
Graduate and undergraduate students may use Ohio University facilities, equipment and other resources to perform research benefitting a company in which a employee has an interest only pursuant to a sponsored research agreement.
Student Employment With the Company:
Except as provided for below, students may be employed by companies in which faculty member hold an interest. Prior to such employment, the student, the employee, the chair of the student's department, the chair of the graduate studies committee and a company representative not the employee must sign an agreement that clearly sets forth the roles, rights, and responsibilities of the respective relationships.
Employment of Students Academically Involved with Faculty Member Owners of the Company:
A student may not be employed by a company in which a faculty member has an interest if (a) the student is enrolled in a course taught by the faculty member, (b) the faculty member is a member of the student's thesis or dissertation committee, or (c) the faculty member is the student's advisor or the director of his or her thesis or dissertation research. Such students may perform research benefitting a faculty member-owned company only pursuant to a sponsored research agreement or formal internship agreement through the Ohio University
Limitation of Equity Ownership:
While significant employee equity ownership approved by Ohio University may be inherent in a newly formed company, it is expected that their ownership interests, as a percentage of the total outstanding shares or financial interests of the company, will decrease as the company develops and attracts additional investment. A faculty members equity interests shall not exceed ultimately 25% of the company's total outstanding shares or financial interests. Any agreements between the Ohio University and start-up companies should contain enforceable milestones for the dilution of these equity interests. Alternatively, a timed exit strategy can substitute for an equity dilution plan. Failure to comply with these agreed-upon milestones may result in the company's inability to engage in sponsored research, employ students, or other penalties in the commercialization agreements and/or activities allowed-for under this policy.
The relationship between the faculty member, company and Ohio University will be disclosed in any applications to a federal or state agency supporting research in the same field of use, broadly defined, as covered by a sponsored research or licensing agreement.
Department chairs or other appropriate Ohio University supervisors are responsible for ensuring that faculty member participating in authorized private business activities continue to perform all of their teaching, research and service obligations as outlined in the conflict of interest management plan. Deans, in consultation with department chairs or school directors, or, as appropriate, planning unit heads in consultation with the supervisor, are responsible for enforcing the Ohio University policies.
Each year on the anniversary of the agreement, the vice president for research in consultation with the dean or planning unit head will conduct an assessment of the employee performance under conflict of interest management plan. The department chair or planning unit head will provide a written assessment of the employee's performance of their teaching, research and service obligations as outlined in the conflict of interest management plan. A review of the company's performance focused on the achievement of milestones including but not limited to the reduction of management responsibilities for the employee, the dilution of employee equity interests, patents filed, etc., will be a part of the annual assessment. At the discretion of the vice president for research and the dean of the college, a faculty advisory committee may be convened to provide advice and counsel to the vice president and dean to assist in the assessment of the performance of the faculty member to meet his/her obligations under the conflict of management plan.
Failure to meet the goals outlined in the conflict of interest management plan will result in defined actions prescribed by the vice president for research in consultation with the dean or planning unit head that may include but are not limit to revisions in the management plan, changes in the sponsored research or licensing agreements, or other remedies that ensure the employee meets their commitments to Ohio University.
Agreements with Start-up Companies
Companies may not enter into any agreements with the Ohio University relating to the commercialization of an employee's research until final written approval from the vice president for research is obtained. Employee who wish to participate in a vice president for research; however, they should not participate in the ongoing negotiation of options and licensing terms between the company and Ohio University. As soon as possible, third parties, such as company management and/or legal counsel should perform this function. A company wishing to obtain a license from Ohio University may be required to provide Ohio University with a viable business plan including, at a minimum, the following: 1) a capitalization plan addressing the acquisition of additional capital and the equity dilution of the employee's ownership interests 2) a proposed management team and 3) milestones for capitalization, product development, and commercial sale.
Regulatory Review Boards
Ohio University's regulatory review boards including, for example, the Institutional Review Board for Human Subjects Research and the Institutional Animal Care And Use Committee, may be utilized for research benefitting a company in which a employee has an interest only pursuant to the establishment of a contractual agreement to manage the review of the activity and the payment of a fee by the company to Ohio University.
Use of Ohio University Facilities
Ohio University facilities, equipment and other resources may be used for research benefitting a company in which an employee has an interest only pursuant to a sponsored research agreement, facilities use agreement or other appropriate contractual arrangement in accordance with Ohio University policies.
Leave to Pursue Private Business Activities
Employees should not allow their management activities with newly formed companies commercializing Ohio University research to consume a disproportionate amount of their professional attention. Employees engaged in approved private business activities who are unable to perform all of their Ohio University responsibilities are encouraged to consider a reduction of appointment or other approved leave mechanism. Professional Improvement Leaves available under § 3345.28 ORC shall not be used for private business purposes.
Contracts Unrelated to Technology Development
Companies in which employee hold an interest may enter into agreements with the Ohio University unrelated to research or technology development for the purchase, sale or rental of equipment, supplies, or services only to the extent not prohibited by state law.
Investments by Employee Not Involved with Development of the Technology
Employee who are not directly involved with research and development of technology licensed to a employee owned start-up company may hold equity interests in that company only to the extent not prohibited by Chapter 102 ORC and § 2921.42 ORC and § 2921.43 ORC.
Employee participating in start-up companies approved pursuant to these guidelines continue to be bound by the Ohio University Policy on Patents and Copyrights. New inventions and/or discoveries made as a result of a employee's research efforts for the company, including those made under formal consulting agreements, will be owned by the Ohio University. New inventions and/or discoveries developed by the employee for the company must be disclosed in writing according to Ohio University Policy and Procedure #17.001, Intellectual Property Ownership And Disposition, And Employee Involvement In Research Commercialization.
Faculty or staff members may not assume the role of principal investigator in clinical trails funded by technology commercialization companies in which they have an interest if the projects involve the use of human subjects. In other cases, faculty or staff may assume the role of principal investigator if a formal conflict of interest management plan approved by the vice president for research, dean of the college or regional campus, the director of the Office of Compliance, and the Office of Legal Affairs is in place.
Sponsored Research Agreements
Agreements for sponsored research projects funded by technology commercialization companies must include, at a minimum, a requirement for full University publication rights and fully negotiated direct and indirect cost recoveries. The vice president for research must approve exceptions to these conditions.