Tech Transfer News: Significant Use of University Resources

Introduction

Only recently have questions regarding undergraduate Intellectual property (“IP”) begun weighing on the minds of university technology transfer offices (“TTO(s)”). Historically, undergraduate IP was a rare concern mostly because the experience and knowledge to create patentable and/or valuable IP resided in university faculty and graduate students. While this is still primarily the case today, undergraduates have many more resources from which to draw. Cost-savings technologies and commercially sponsored classes and competitions have allowed for greater access to cutting-edge experiments and equipment. A variety of electronic resources such as university databases, JSTOR, Wikipedia, and even YouTube have nearly replaced the dusty walks through library stacks and side-scrolling adventures through microfiche. The inventive landscape is primed for innovation by young, eager minds hoping to follow in the footsteps of Bill Gates, Steve Jobs or Mark Zuckerberg, and very few organizations are better situated to foster, encourage and benefit from such innovation than universities. Given today’s inventive landscape and limited funding sources, universities should understand when they could assert an ownership interest in undergraduate IP and how they can structure their policies accordingly.¹

University Ownership of Patents & Copyrights

Although the legal history of patents and copyrights varies by country,² patents and copyrights are generally thought of as follows: (1) the exclusivity provided, however limited in time, is a “necessary evil” as it incentivizes a writer/inventor/creator to provide the public a writing/ invention/ creation the public might not otherwise receive; (2) patents are granted for ideas and provide a right of exclusion; and (3) copyrights are granted for expression of ideas and provide a right of protection. More specifically, a patent allows an inventor to exclude others, for a specified time period,³ from making, using, offering for sale, or selling his/her process, machine, manufacture, or composition of matter, or any new and useful improvement thereof (“Invention”), provided that he/she has disclosed to the public a novel, nonobvious Invention of eligible subject matter.⁴ Even if two persons independently develop an Invention, the first person awarded the patent can lawfully exclude the other from practicing it. Copyrights, on the other hand, grant the rights holder the ability to exploit his/her work, which includes producing and selling copies of the work, creating derivative works, performing or displaying the work publicly, and licensing the work to others. To obtain a copyright, a creator need only create an original work of authorship fixed in a tangible medium of expression, or, in other words, create an original piece that is “”sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration.” Some everyday examples include literary works saved to a hard drive, sound bites recorded to vinyl and even live football games transmitted to TVs around the world. Unlike patents which exclude others from practicing an idea, copyrights protect an individual’s original expression of an idea. Accordingly, two people may create and protect works of similar expression, so long as both are truly original works, i.e., one did not have access to the other’s work.

In the United States, while patent and copyright laws are nearly as old as the country itself,⁵ patent filings have only spiked in the last thirty years or so. This may be due to a number of factors including greater access to informational resources, technological advances and global collaborations, but one significant factor is the Bayh-Dole Act of 1980 (the “Act”). Prior to the Act, any federally funded IP was licensed exclusively by the funding, federal agency. Due to the uncertainty of which agency was considered the funding agency, the lack of commercial/industrial experience within the agencies, and the maze of regulations surrounding them, the likelihood of federally-funded IP being commercialized and becoming publicly available was low. The Act solved these issues by allowing federally funded entities (predominantly universities) to take ownership of the IP, subject to a federal march in right, provided that the entity comply with certain provisions. Given the volume of federally funded research at U.S. universities, many established TTOs to manage the university’s IP and to ensure Act compliance. While management practices may vary, TTO mission statements remain fairly consistent: (1) promote and encourage scholarly pursuits and innovation at the university for benefit of the public at large; and (2) generate revenue for the university.

The most common way universities establish ownership rights in potential IP and generate revenue is requiring paid faculty and graduate students to assign to the university any IP they develop as a condition of employment. While the assignment provisions have generally only pertained to patentable IP,⁶ universities have taken greater interest in copyrightable IP as it relates to software. Where universities engage independent contractors or non-employees to deliver patentable or copyrightable IP, university ownership rights are usually secured under the hired-to-invent or work-for-hire doctrines, respectively. However, under the work-for-hire doctrine the university is recognized as the creator (the default owner) and not the contractor, so no assignment is needed. In any case, the employee/contractor receives some form of consideration from the university, so the university likely owns the IP.⁷ Less clear is who owns IP developed through the use of university resources or facilities by non-employees or unpaid contractors--namely, undergraduate students.

Undergraduate Intellectual Property

Many countries’ laws provide that, in the absence of an assignment provision, inventors own their Inventions (patents) and creators own their works (copyrights) and that they are entitled to all ownership rights and benefits derived therefrom. Assuming that an undergraduate is not contractually bound to assign IP and that his/her contributions are sufficient to be named as an inventor/creator, an undergraduate may own any IP he/she develops.⁸ This can lead to a few practical and frustrating concerns.

One concern comes from IP developed solely by an undergraduate without substantial assistance, counsel, contribution or any other aid (monetary or otherwise) from another. Arguably, universities should herald these developments as they not only reflect upon the quality of a university’s curriculum and faculty but can also lead to financial contributions from happy and successful alumni. However, should a university need to practice or make use of the IP--barring any shop rights, the university would likely have to license the IP from the undergraduate, which can create ill feelings between the undergraduate and his/her advisors/bosses/lab mates. Alternatively, the university could choose to rely on patent law’s research exemption (which was significantly narrowed in the U.S. by a 2002 court decision⁹), or copyright’s fair use exception for research and teaching use, but TTOs should be aware that these are fact-based defenses (meaning costly litigation) and success rates vary.

A more frustrating concern comes from those instances where undergraduate contributions result in shared IP with university faculty. While faculty are obligated to assign their IP rights to the university, undergraduates are not. This creates joint IP ownership between the university and the undergraduate. In the U.S., joint ownership alone has several practical problems. Joint copyright owners are free to copy, distribute, prepare derivative works and exercise their other exclusive rights under copyright law. However, any profits an owner receives from the IP must be shared with the other owners. Joint patent owners do not have to make such an accounting. On the other hand, joint patent owners, cannot bring an infringement claim against a third party unless all of the joint owners have joined the suit. Unlike joint copyright owners who can individually enforce and protect their IP interests, joint patent owners may have to tolerate sustained acts of infringement due to a stubborn or reluctant joint owner. In either case, neither party may grant an exclusive license to the patented or copyrighted IP without the other owners’ consent. This may cause significant problems for universities and faculty looking to spin out companies where exclusive rights to the IP are vital to the startup’s success.

Based on the discussion above, joint ownership between the university and an undergraduate is bound to create some perceptual problems. Neither patent nor copyright law stipulates the amount of effort that warrants inventor/creator attribution. An undergraduate who contributes even the most minimal inventive/creative contribution to a work may still be considered an inventor/creator and, as discussed above, an owner. Accordingly, it is not the case that the IP is jointly owned by the university and the knowledgeable and experienced faculty but rather by the university and an undergraduate student. Therefore, while senior faculty are engaged in license discussions, lawsuits and payments indirectly through the university, the undergraduate/joint-owner must be directly engaged in exclusive license discussions, must share equally in any profits derived from jointly owned copyrights and must agree to bring suit against a third party patent infringer. In order to avoid these joint ownership issues, universities should consider when they could assert ownership to undergraduate IP and develop a policy for making those assertions.

University Assertions of Ownership in Undergraduate IP

University ownership of undergraduate IP is fairly clear cut in some cases such as IP developed under a work-for-hire arrangement or financed by funds earmarked for such development. In other cases, access to certain commercial resources, as part of a commercially-sponsored capstone class or competition, is sufficient consideration for undergraduates to assign their IP rights to the university.¹⁰ Less clear are those cases where an undergraduate has developed IP outside such arrangements. Perhaps, because of this, some universities do not make any attempts at asserting an ownership right in this IP or only in specific types of IP (Inventions or computer software). The fact that undergraduates pay their universities tuition also suggests that any attempts at enforcing an IP assignment provision via an undergraduate handbook will fail for lack of sufficient consideration.¹¹ Nonetheless, many universities continue to assert ownership in undergraduate IP but attempt to clarify when such assertions will be made.

In reviewing 2013’s top 50 NIH-funded and NSF-funded institutions’ IP ownership policies (the “Survey”),¹² the author found that nearly all of the universities asserted some ownership right in patentable IP but less than half of them based this assertion on a significant use of university resources.¹³ These remaining institutions asserted ownership rights based on mere use of university facilities, funds, or personnel. On the other hand, nearly all of the universities, “in the custom of academic tradition,” stated that ownership of traditional scholarly and academic works (books, journal articles, musical scores, audio recordings, etc.) would remain in their creators. No ownership assertions would be made by most universities to such copyrightable IP unless they were: works-for-hire, commissioned works, computer software (which usually had its own policy), or works utilizing significant university resources. Despite the widespread use of these types of IP policies, there have been no U.S. rulings on what constitutes a “significant use of university resources.”

Significant Use of University Resources

When terms have no legal definition grounded in statute or court ruling, legal practitioners must look to “trade usage” or how the terms are used in the applicable field. While the Survey found that 47 out of the 74 universities had patent and/or copyright policies requiring significant use of university resources before the university would assert an ownership interest, only 23 of the 47 actually described what “significant use” meant. The remaining 24 universities either described what was not considered significant use or remained silent on the issue. Based on some of the recurring approaches taken by the universities in the Survey, the author submits the following proposed definition (the “Proposal”) for “significant use of university resources”:

Significant Use of University Resources means the use of university facilities, equipment, funds, personnel and other resources that exceeds what is customarily and currently provided to similarly situated colleagues of the inventor/creator in the inventor’s/creator’s department or to similarly situated students enrolled in the same course/college/school. The following examples are intended for guidance purposes only and do not exclude other uses that may be considered significant:

• Use of specialized services or facilities such as equipment, production facilities, service laboratories, studios, specialized computing resources or facilities, wherein fees normally required for access or use are waived
• Use of financial or other support, including reduction in levels of teaching, service or other typical university activities (e.g., course load, student advising responsibilities, division/department meetings, office hours, administrative responsibilities) for the creation of the invention/work that exceeds the typical supplemental pay and offloading from regular duties
• Use of university personnel (including secretarial, clerical and administrative staff) and research assistants beyond the level customarily provided to all university faculty and departments
• Use of university proprietary property that serves as a significant basis for the resulting invention/work, regardless of whether the inventor/creator produced such proprietary property

The university shall NOT consider use of facilities, equipment, funds, personnel and other resources to be significant if the university makes them generally available either to the general public or to university community, provided that in the latter case, such use is not in excess of the amount normally provided. For clarity, the university does NOT consider the following to be a significant use of university resources:

• Use of publicly available facilities such as libraries and other resources
• Use of routinely-available office or laboratory space, furnishings, supplies, photocopy equipment, telephones, fax machines, desktop or laptop computers and the commercially-available software utilized on such computer
• Use of specialized services or facilities such as equipment, production facilities, service laboratories, studios, specialized computing resources or facilities, wherein the inventor/creator has paid for or reimbursed the university for access and/or use. Inventors/creators wishing to directly reimburse the university for the use of facilities must make arrangements to do so before the level of facilities usage for a particular invention/work becomes significant
• Use of routine secretarial, administrative or clerical services
• Use of unrestricted or specifically allocated funds such as gift money allocated for student use in a specific course which is made available to all students enrolled therein, funding for endowed chairs, academic salaries, sabbatical funding, and internal research or teaching grants
• Use of student supported services covered by student tuition and fees

Decisions regarding whether the use of resources is “significant” or not shall be determined by the inventor’s/creator’s department head or dean of the inventor’s/creator’s college.

Notwithstanding any of the above, the university, in traditional academic custom, will not assert copyright ownership in traditional works of authorship created by its students and faculty such as textbooks, other works of nonfiction and novels, articles, or other creative works, such as poems, musical compositions and visual works of art, whether such works are disseminated in print or electronically.

The Proposal not only accounts for “academic custom” as many other policies have done but also hopes to cover some of the gaps within those policies by explicitly defining “significant use” and its exclusions.

Many institutions define “significant use” as a use that exceeds a typical level of use. The Proposal captures this and also specifies as to whom such use is excessive. Unlike undergraduate handbook provisions which are unenforceable for lack of sufficient consideration, a university’s provision, or making available, of resources to an undergraduate that exceed those typically provided or made available to other undergraduates in the normal course of business (i.e., degree programs), should constitute sufficient consideration for the Proposal to be enforceable. Provided that an undergraduate is given effective notice of the Proposal, his/her use of significant university resources would constitute acceptance of the Proposal’s terms.

Almost all of the policies that included a significant use provision also listed what uses were not considered significant. Similarly, the Proposal also lists recurring uses like office supplies, computers usage, etc. as nonsignificant. Additionally, the clarification regarding publicly available resources found in some policies was included in the Proposal’s exclusion paragraph, because it emphasizes a university’s intent to assert ownership only in those cases where the university has some affiliation beyond its public presence. While few universities provided examples of significant and nonsignificant use, the Proposal includes examples for both. Not only do they provide clarification through illustration and thereby address some basic questions such as “is the use of a library computer significant?”, but they also serve as effective (i.e., understandable) notice of a university’s policies to faculty, staff and students. Most faculty and students (especially those who recently matriculated) are likely not practiced in reading university policies or other documents affecting their legal rights. These examples use plain-English in order to describe what will or will not be considered a significant use of university resources so that faculty and students are sufficiently apprised of their IP rights. Finally, by including a decisionmaker as to whether a use is significant or not, a university is able to be flexible in its application of this provision as well as account for any uses that might fall in between the definition, exclusions and their examples.

University Rights in IP Developed Using Significant University Resources

Assuming that an undergraduate has made significant use of university resources, most universities take the following approaches: (1) in the case of Inventions or patentable IP, the university claims an ownership right and will require assignment of the IP;¹⁴ (2) in the case of computer software, many universities will recognize ownership in the creator but require that the university receive a share of any revenue derived from the copyright and that the university be granted a nonexclusive, royalty-free, perpetual license to use the software; (3) in the case of copyrightable IP that constitute traditional scholarly and literary works, the university asserts no ownership but may require the creator to grant the university a nonexclusive, royalty-free, perpetual license to use the IP for the university’s own internal academic and research purposes, such as making dissertations available to the academic community. Understandably, there are bound to be exceptions based on the type of resources used and the commercial viability of the generated IP. However, at the very least, should IP result from a significant use of university resources, many universities would argue that the university should be allowed to use/practice the IP without cost to the university, its faculty and its students.¹⁵

Conclusion

With so many advances in technology and informational resources, the university landscape is especially primed for innovation. Students entering universities today are able to tap into informational and educational sources quickly, precisely and thoroughly. Never before have students been able to so easily access educational materials outside the university through channels like YouTube, Wikipedia and other online forums. Universities have also begun offering a variety of updated informational resources to their students including university and commercial databases, online classes and tools, and even electronic versions of their library’s hardbound books. Through these informational resources, coupled with state-of-the-art facilities and equipment available at many institutions, universities can expect to see innovation and creation occurring more frequently within the undergraduate populace. Accordingly, universities should plan for these eventualities and should ensure that their students understand that should they choose to use some university facility, fund, or resource to a greater degree than their peers, the university may assert ownership in any resulting IP.

While it is likely that a court may determine that “significant use of resources” means an excessive use beyond the norm, TTOs should proceed with some caution. Indeed, whether an undergraduate’s use of significant university resources, as outlined in the Proposal, is legally sufficient for a university to assert ownership in undergraduate IP, or whether the university and/or an undergraduate must meet some other criteria before any transfer of IP of any kind can occur, has yet to be determined.

The material contained in this newsletter is for informational purposes only and is not intended to be legal advice. It is understood that each case is fact-specific and that the appropriate solution in any case will vary. Transmission of this material is not intended to create and receipt does not establish an attorney-client relationship. While the material is intended to be accurate, errors or omissions may be contained herein, for which any liability is disclaimed. Legal advice of any nature should be sought from your legal counsel.

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Endnotes

1. A discussion of whether or not a university should assert an ownership interest is beyond the scope of this article.
2. For the purposes of this publication, references are omitted but are on hand with the author.
3. In the United States, the period is 20 years after the filing date for applications filed on or after June 8, 1995.
4. Non-eligible subject matter is that which: (a) cannot be categorized as a process, machine, manufacture or composition of matter; (b) has been judicially ruled to be non-eligible, including laws of nature, physical phenomena, and abstract ideas; or (c) is enumerated to be non-eligible by law or regulation.
5. The United States declared independence in 1776. The U.S. Constitution, which contains the patent and copyright provisions, was penned in 1787.
6. The rationale being that it would be contrary to the spirit of academia for a university to assert ownership of the byproducts of traditional scholarly and creative pursuits, such as academic writings, musical scores, visual works, etc. Additionally, there is a stronger argument for the university to assert an ownership right to inventions resulting from federal funding as the university is obligated to ensure compliance under Bayh-Dole.
7. The level of certainty attributable to IP developed by employees or contractors outside the scope of their employment is beyond the scope of this article.
8. Some exceptions might include: commissioned works, paid work study programs and paid internships.
9. Madey v. Duke University, 307 F.3d 1351 (Fed. Cir. 2002).
10. However, such pre-class/competition enrollment contracts may face judicial scrutiny if required for a degree and if there are no reasonably similar alternatives. Requiring an undergraduate trade away his/her IP in order to receive a degree is likely considered unconscionable and thereby unenforceable.
11. The sufficiency of consideration and enforceability of any handbook provision is beyond the scope of this article.
12. Due to some overlap, the total number of institutions reviewed equals 74.
13. Synonymous terms used in various policies, for the purposes of this article, include: “non-incidental”, “extraordinary”, “substantial”, etc.--all of which represent a qualified use.
14. To the extent that an undergraduate makes significant use of university resources funded by the federal government, the university is bound by law to ensure that any resulting IP is handled in compliance with the Act.
15. This right is similar to U.S. patent law’s equitable principle of shop rights introduced in a 1933 Supreme Court Decision. U.S. v. Dubilier Condenser Corp., 289 U.S. 178 (1933). It is important to note that a shop right is not an ownership interest per se. Rather, it is a defense raised to prevent an employee-inventor from suing the employer-shop owner for patent infringement. The principle recognizes that employer-shop owners should be entitled to use an Invention created by their employees if their employees made use of the shop’s facilities, materials, and/or funds. A shop owner’s shop rights, however, are limited to use within the shop and cannot be transferred to others.This does not have a judicial equivalent in copyright, but copyright’s work-for-hire doctrine seems similar in application. However, a few important distinctions are: (1) the shop rights doctrine recognizes the employee as the inventor, whereas the work-for-hire doctrine recognizes the employer as the author and not the employee; and (2) the shop rights doctrine grants a limited right of use to the employer, whereas the work-for-hire doctrine provides the employer all the exclusive rights under copyright law.