Date: Aug. 29, 2006
UC Employees, Faculty, and Staff
Monica Rimai, JD
Fred Hamilton, JD
Sandra Degen PhD
This memo will provide guidance concerning the general matter of consulting agreements and their relationship to other legal requirements associated with employment at the University of Cincinnati, along with the rules pertaining to entrepreneurial activities involving intellectual property arising from UC activities.
A consulting agreement is a private contract between a UC employee and an outside entity under which that employee provides information or other services to the entity in exchange for compensation.
The University normally does not become involved in negotiations surrounding an employee's private consulting agreements. When carrying out these agreements, the faculty members or employees will be acting on their own, and if appropriate, may wish to have such agreements reviewed by counsel of their own choosing.
Occasionally, the sponsor of a consulting agreement will insert provisions that purport to bind the University of Cincinnati as well as the faculty member or employee. Only persons who are authorized by University Rule 3361:10-01-06, titled "Execution of Instruments" have authority to execute documents containing promises that bind the University. Consequently, if the sponsor will not remove such provisions, the agreement must be referred to the Office of General Counsel for review.
Even though most consulting agreements are negotiated between the sponsor and the faculty member or employee without the need for official University review or approval, persons performing under consulting agreements should be aware of certain features of their University employment that could be impacted by that performance. These are summarized below.
Collateral Employment Policy
University Rule 3361:30-21-02, entitled "Employment Policy on Collateral Employment for Faculty Members and Librarians," applies to outside consulting services by UC faculty. Pursuant to that policy, collateral employment in a consulting capacity will be approved provided certain procedures are, followed. Included among these is a requirement that information regarding such employment is made known to the dean of the college or division concerned or the appropriate library administrator and the dean or library administrator agrees that the collateral employment:
(A) does not interfere with nor is inconsistent with the performance of the individual's university duties; and
(B) does not raise questions of conflict of interest in connection with other interests or work with which the individual, or the university, is involved.
Collateral employment is currently reported on University forms A-128 (used by part-time faculty, and all administrative staff), and by full-time faculty on forms A-128(a) (request for approval to perform outside activity) and A- 128(b) (annual report of outside activity). For employees other than faculty or librarians, or for additional information on required procedures and reporting, see University Rule 3361:30-21-03.
Conflict of Interest
It is common that real or apparent conflicts of interest may arise in connection with private consulting activities. This may give rise to specific disclosure and management obligations under University Rules and applicable law.
For example, faculty members receiving grant support from certain federal agencies, including the National Institutes of Health or the National Science Foundation, may have additional reporting and conflict management obligations under University Rule No. 3361:10-17-08, titled "Conduct and Ethics: Policy on Conflicts of Interest in the Conduct of Research at the University of Cincinnati." In order to ensure compliance with this policy and relevant provisions of federal law, the University's Office of Sponsored Research Services requires a Disclosure Statement Form (http://srs.uc.edu/file_PDF/conflictform.pdf) from all personnel performing sponsored research at the University. This form must be completed annually, as well as being updated during the course of any year as changes occur.
For faculty and staff involved in human subjects research, additional conflict-of-interest reporting requirements are imposed by the University's Institutional Review Board according to Policy IV.02, "Investigator Conflict of Interest in Human Research," available from the IRB Office. The Institutional Review Board may require that specific information concerning a faculty member's consulting activities be disclosed to research participants as a part of the informed consent process.
Immunity, Indemnification, Representation and Insurance
Because consulting is regarded as collateral to an employee or faculty member's regular employment, persons engaged in consulting are not entitled to claim immunity from tort liability under Ohio Revised Code Section 9.86, to receive free legal representation by the Attorney General under Ohio Revised Code Section 109., or to be indemnified against certain judgments as provided in Ohio Revised Code Section 9.87. Consequently, employees and faculty members who engage in consulting activities, especially activities that require professional licensure, should consider the advisability of securing private professional and/or general liability insurance to protect against legal claims arising from those activities
Many outside firms consult with UC faculty for the express purpose of gaining access to the faculty member's superior knowledge of a technical field which is of commercial interest to the company. In general, the provision of information available in the public domain by a UC faculty member acting as a consultant does not pose a problem with respect to the faculty member's university obligations. However, because these types of interactions frequently involve the development of intellectual property, certain safeguards are necessary.
Ohio Revised Code 3345.14
Under Ohio law, discoveries or inventions made by UC faculty working within the scope of his or her duties on behalf of the University, or which result from work performed at UC, or with UC resources, belong to the University.2 Although a faculty member who is serving as a consultant is normally not considered to be working within the scope of his or her duties on behalf of the University while doing consulting work, the University still retains intellectual property rights in discoveries made on University premises, or using University resources. Therefore, non-public information about a faculty member's work or research performed on University premises, or with UC resources, should not normally be disseminated to an outside entity as a part of a consulting relationship.
2 Ohio Revised Code Section 3345.14(B) provides: "[a]ll rights to and interests in discoveries, inventions, or patents which result from research or investigation conducted in any experiment station, bureau, laboratory, research facility, or other facility of any state college or university, or by employees of any state college or university acting within the scope of their employment or with funding, equipment, or infrastructure provided by or through any state college or university, shall be the sole property of that college or university. No person, firm, association, corporation, or governmental agency which uses the facilities of such college or university in connection with such research or investigation and no faculty member, employee, or student of such college or university participating in or making such discoveries or inventions, shall have any rights to or interests in such discoveries or inventions, including income therefrom, except as may, by determination of the board of trustees of such college or university, be assigned, licensed, transferred, or paid to such persons or entities in accordance with division (C) of this section or in accordance with rules adopted under division (D) of this section."
Example 1 Professor X is retained as a consultant by a company interested in catalysts. The professor shares the results of a recent international symposium on catalysts with the company. There is no intellectual property concern.
Example 2 Professor X is retained as a consultant by a company interested in catalysts. The professor provides the company with unpublished data from his studies on the performance of catalyst Y in her UC laboratory. If an invention results from the company's use of that information, the professor's contribution to that invention will belong to UC under Ohio law.
Example 3 Professor X is retained as a consultant by a company interested in catalysts. The company asks the professor to perform a single structural study on a purified catalyst preparation using a sophisticated imaging device at UC. If an invention results from that study, the professor's contribution to that invention will belong to UC under Ohio law.
In general, when consulting work involves, or may involve, research or investigation conducted by UC faculty, whether off or on UC's premises, a sponsored research agreement is preferred. Such an arrangement minimizes the potential for intellectual property conflicts between the sponsor and the University, and may result in additional benefits to the sponsor and to the faculty member. The University's Sponsored Research Services (513) 556-2870 administers such agreements.
Please give thoughtful consideration that a sponsored research relationship can ultimately be more beneficial to all parties for the following reasons:
1) it allows for the utilization of intellectual resources as well as specialized laboratory equipment and facilities resident at the University,
2) it provides the possibility of royalty income to the faculty member,
3) outsourcing of research frees company resources, and
4) such activity brings in sponsored research revenue to the University
In addition to the issue of ownership of intellectual property under Ohio law, problems may arise when UC faculty discuss prior sponsored research projects, or their results, during a consulting relationship. Both the nature of the research sponsored by a private company, and its results, are commonly considered to be confidential business information of the sponsoring company, particularly when prior research results are used to support patent application(s). Most sponsored research agreements contain provisions which require the University and the faculty involved with a sponsored research project to hold such information confidential except in narrowly defined circumstances (e.g. publication rights).
Example 1 Professor X is retained as a consultant by a company A, which is interested in catalysts. During the consulting arrangement, he provides the company with results of a prior study performed with funding from company B. Professor X may have exposed himself and the University to a claim from Company B that he has misused Company B's Confidential Information. The Professor's actions may also constitute a "public disclosure" which will jeopardize a patent application by UC or company B based on the prior study.
Example 2 Professor X is retained as a consultant by a company interested in catalysts. Although the professor does not provide the company with any research findings, she mentions that she has previously studied the performance of catalyst Y under a sponsored research agreement with Company Z. Because Company Z's wishes that its interest in catalyst Y be kept secret from its competitors, the Professor may have exposed herself and the University to a claim by Company Z for the misuse of Company Z 's confidential information.
Export Control Issues
In addition to the foregoing, consulting activity may involve concerns arising from U.S. laws involving export controls. The primary authority for controls over exported materials is found in regulations promulgated under the authority of the International Trade in Arms Regulations, 22 C.F.R.§120-125, and the Export Administration Regulations, 15 C.F.R.§730-774. The penalties for violations of these regulations can be severe. In the University environment; special concern exists over so-called "deemed exports" which may occur when individuals of foreign nationality are provided access to materials and information listed as controlled under these regulations. In many cases, research activity occurring within the University setting may qualify for exemption from the operation of these export control rules through the so-called "fundamental research exemption," but this will rarely be the case for private consulting activities. University Rule 10-30-01 governs activities occurring at the University which may involve export controlled materials or information.
ENTREPRENEURIAL ACTIVITIES INVOLVING UC INTELLECTUAL PROPERTY
The University's Board of Trustees has determined that the best interests of the University of Cincinnati will be served if employees who create new technology are afforded the opportunity to hold personal financial interests in companies that are engaged in commercializing their inventions. Employee participation with outside companies in technology development activities will facilitate the university's goal of making its research available for use in the private marketplace by giving researchers an incentive to develop inventions with commercial applications, The opportunity to participate in commercialization activities is also essential to the university's efforts to attract and retain highly qualified researchers.
Faculty involved in companies which are involved in commercialization of inventions made by them during the course of their UC employment are required to comply with University Rule number 3361:10-17-09, titled "Conduct and Ethics: Employee Financial Interests in Private Companies that are Commercializing University Discoveries, Inventions, or Patents."
The Rule applies to any faculty member, staff member or student employee who is the creator of a discovery or invention that is owned by the University through the operation of rule 3361:10-1901 (Patents and copyrights: policy on inventions and discoveries) and who desires to acquire an equity or other financial interest (including any stock, option, loan or other equity or debt interest or promise of the same, as well as paid consulting or employment) in a firm, corporation, or other association to which the university of Cincinnati has assigned, licensed, transferred or sold its interests in the discovery or invention made or created by that employee or in a patent issued to that employee. The University will not knowingly license or transfer intellectual property to a "Technology Development Company" until there has been compliance with the Rule.
Approval steps include the submission of appropriate collateral employment materials, along with a supplemental report which includes a full disclosure of the applicant's relationship to the company, and a comprehensive conflict management plan containing specific elements as outlined in the Rule. The conflict management plan is subject to approval by the Vice President for Research, who may consult with the appropriate Provost and/or the Office of General Counsel. Compliance with this policy will provide an inventor who acquires a financial interest in a technology development company with an exemption from these and other possibly applicable provisions of the Ohio ethics laws. A failure to comply with this policy could result in a violation of the Ohio ethics laws.
Specific questions about intellectual property matters as they may be involved in consulting agreements or entrepreneurial activities may be directed to the Intellectual Property Office at (513) 558-5653. More general questions arising out of consulting arrangements may be directed to the Office of General Counsel at (513) 556-3483 or 558-3485. Although neither office is authorized to provide legal or business advice to individuals, both may be consulted for information concerning the University's position on the above topics.
To view all University Rules, or to search for specific rules by division or number, visit http://www.uc.edu/trustees/rules.