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Guide to the Ownership, Distribution and Commercial Development of M.I.T. Technology

PART 4. COMMERCIAL DEVELOPMENT

4.0 INTRODUCTION
4.1 COMMERCIALIZATION - GENERAL
4.2 PATENTS
4.3 COPYRIGHTS
4.4 TRADE AND SERVICE MARKS
4.5 MASK WORKS
4.6 TANGIBLE RESEARCH PROPERTY
4.7 ROYALTY DISTRIBUTION - GENERAL
4.8 ROYALTIES - SPECIAL CASES
4.9 COMMITTEE ON COPYRIGHTS AND PATENTS
4.10 CONFLICT OF INTEREST - LICENSING OFFICE STAFF

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4.0 INTRODUCTION

It has long been acknowledged that the primary functions of a university are education, research, and public service. It is in the context of public service that M.I.T. supports efforts directed toward bringing the fruits of M.I.T. research to public use and benefit.

In many cases, mere publication of research results will be sufficient to transfer M.I.T. research to the public. In other cases, it is necessary to encourage industry, by protection of the intellectual property and the granting of license rights, to invest its resources to develop products and processes for use by the public.

4.1. COMMERCIALIZATION - GENERAL

The TLO will pursue the licensing of technology by researching the market for the technology, identifying third parties to commercialize it, entering into discussions with potential licensees, negotiating appropriate licenses or other agreements, monitoring progress, and distributing royalties to the inventors/authors in accordance with M.I.T. royalty policy. When it is appropriate to do so, M.I.T. may accept an equity position in lieu of cash royalties.

4.1.1 INVENTOR/AUTHOR ASSISTANCE
With few exceptions, the support and cooperation of the inventor/author is critical to licensing success.
4.1.2 INVENTOR/AUTHOR OWNED TECHNOLOGY
M.I.T. faculty, staff, or students who wish to pursue the development of their independently-owned technology through the TLO may offer such technology for evaluation by submitting a Technology Disclosure Form. The TLO will evaluate the commercial potential and determine whether or not the technology will be accepted for licensing by the TLO, under the usual royalty sharing policies.

Faculty, staff, and students are equally free to choose some other mechanism for commercializing their independently-owned technology, but prior to such commercialization should make sure that the technology is not subject to a sponsored research or other agreement, does not constitute a work-for-hire, nor results from significant use of funds or facilities administered by M.I.T. If any of these conditions might apply, the inventor/author should request from the TLO an appropriate license to the intellectual property or a waiver of M.I.T.'s rights as set forth in this PART 4.

4.1.3 COMMITMENT OF FUTURE INVENTIONS
It is the policy of M.I.T. not to commit future inventions to licensees even where improvements to technology are anticipated. Some very narrowly drawn exceptions may occasionally be appropriate to handle subordinate patents and well-defined derivative works for licensed software.
4.1.4 CONSULTING CONTRACTS
The TLO will not negotiate consulting contracts for individual inventors/authors as part of a license arrangement.

4.2 PATENTS

4.2.1 EVALUATION
Once a Technology Disclosure Form disclosing an invention is submitted to the TLO, the assigned Technology Licensing Officer will begin the process of evaluating the invention for patentability, commercial potential and obligations to sponsors. The first step will typically be a meeting with the inventor. The TLO may also request that one of the inventors participate in a literature search of prior art, using the TLO's account with the M.I.T. Library computerized search service. Contact with industry may also be made as party of the evaluation process.
4.2.2 SPONSORED PROGRAMS
If the invention arose from a sponsored research project, the TLO will file for a patent and negotiate an appropriate license consistent with the terms of the contract.

The OSP Intellectual Property Officer may be contacted for information about the specific patent terms of individual research agreements.

4.2.3 WAIVER OF M.I.T. RIGHTS
When it has the right to do so, M.I.T. may, if requested by the inventor, and at M.I.T.'s discretion, "stand aside" in those situations where M.I.T. believes that it would enhance the transfer of technology to the public, is consistent with M.I.T.'s obligations to third parties, and does not involve a conflict of interest as set forth below. By "standing aside", M.I.T. agrees not to exercise its contractual rights to the technology, clearing the way for the M.I.T. inventor to seek ownership. Inventors may request that M.I.T. "stand aside" by submitting the waiver letter.

In the case of Federal agency sponsorship, any "stand aside" by M.I.T. must be made by releasing the invention to the Federal government, following which the inventor may directly petition the agency for a release of rights to himself or herself. Federal research agreements are generally subject to a uniform patent law which provides that universities take title to resulting inventions subject to certain obligations concerning the exploitation in the public interest, Federal approval of any assignment of ownership, preferences for licensing, the retention by the Federal government of certain license rights, and march-in rights. Decisions by the Federal sponsors to permit individual inventors to acquire ownership are generally made on a case-by-case basis with the Federal Government retaining for itself those rights previously discussed.

In the case of industrial sponsorship, M.I.T. usually must seek approval of the sponsor prior to releasing its ownership rights in favor of the inventor.

4.2.4 LICENSING OF M.I.T. RIGHTS TO INVENTORS
M.I.T. faculty, staff, or student inventors may also request a license to commercially develop their M.I.T.-owned inventions where such licensing would enhance the transfer of the technology, is consistent with M.I.T. obligations to third parties, and does not involve a conflict of interest.
4.2.5 CONFLICT OF INTEREST OR COMMITMENT
Any of the following factors may signify a conflict of interest which will be taken into account prior to waiving or licensing M.I.T.'s rights to inventors under this Section 4.2 or to authors under Section 4.3:

  1. an adverse impact on M.I.T.'s educational responsibility to its students;
  2. an undue influence on the employment commitment of the inventor/author to M.I.T in terms of time or direction of effort;
  3. a detrimental effect on M.I.T.'s obligation to serve the needs of the general public;
  4. potential conflict of interest as defined in M.I.T.'s Policies and Procedures.

If the inventor/author holds or will shortly acquire an equity or founder's stock and/or option position in a small, tightly-controlled company to which the invention is licensed, M.I.T. may accept equity in lieu of royalty only with the prior approval of the Vice President for Research. The inventor/author will be required to sign a Conflict Avoidance Statement if a license is granted to the company in which the inventor/author has an equity position. If M.I.T. does acquire equity in lieu or partial lieu of royalties for intellectual property, it will expect the company to grant the inventor/author holding or acquiring the equity position a total equity and/or option share reflective of the inventor/author's contribution both to the intellectual property and to the company operations, and such inventors/authors will not receive a share of the equity paid for the license. M.I.T. will take this factor into account in its license negotiations with the company. For all other inventors/authors, M.I.T. will require that the company distribute to those inventors/authors the percentages of equity that would have otherwise been distributed to them under the M.I.T. Policy if the payment had been made in cash.

4.2.6 RESEARCH FUNDING/EQUITY
M.I.T. will not accept research funding from a licensee in which M.I.T., through the TLO, or an M.I.T. inventor has an equity interest (including stocks, options, warrants or other financial instruments convertible into equity) unless:

  1. the research is not likely to result in inventions dominated by the claims of the licensed patent or in software that is a derivative work of the licensed software; and
  2. the research will not be conducted in the inventor's laboratory group; and
  3. the inventor's students will not participate in any project funded by the licensee.

When an inventor/author desires to avoid equity in order to obtain research funding from a small company, M.I.T. will also avoid taking equity through a license agreement generally. In such cases, the TLO will require in its license agreements that the inventor not make any arrangements to obtain equity at a later date and avoid negotiating for equity until at least two years following the termination of the research agreement.

4.3 COPYRIGHTS

4.3.1 COMMERCIALIZATION BY THE TLO
Copyrightable works owned by M.I.T. are normally licensed through the TLO except where other arrangements are made in accordance with this policy. Copyrightable material not owned by M.I.T. also may be licensed through the TLO when submitted under a Technology Disclosure Form to the TLO by its author and accepted for licensing by the TLO.

COMPUTER SOFTWARE:
Computer software in which M.I.T. acquires rights may be either patented or copyrighted and made available by M.I.T. for commercial purposes through the TLO under various forms of patent or copyright licenses. Authors and their departments/laboratories will share in royalties earned from licensing as further set forth in this policy. In those instances where the authors desire to distribute commercially licensed software for research purposes or as TRP, such licensing must be coordinated with the TLO.

VIDEO WORKS:
This policy does not define commercialization and ownership rights to video works produced through use of M.I.T. facilities or those which may be specifically commissioned by a department or laboratory within M.I.T. Video works developed pursuant to an agreement will be subject to the terms of that agreement. The disposition of rights with respect to other M.I.T.-owned video works will be made on a case-by-case basis until such time as a policy has been defined.

4.3.2 WAIVER OF RIGHTS TO M.I.T. AUTHORS
When it has the right to do so, M.I.T. may, if requested by the author(s) and at M.I.T.'s discretion, "stand aside" in those situations where M.I.T. believes that it would enhance the transfer of technology to the public, is consistent with M.I.T.'s obligations to third parties, and does not involve a conflict of interest as set forth below. By "standing aside", M.I.T. agrees not to exercise its contractual rights to the technology, clearing the way for the M.I.T. author(s) to seek ownership. Authors may request that M.I.T. "stand aside" by submitting the waiver letter.

Federal research agreements presently vary widely with respect to rights in copyrightable technical data and computer software, but in general universities have the right to copyright and to control distribution of most materials. Several major agencies retain a large degree of control over computer software and will relinquish control only under limited circumstances.

In the case of industrial sponsorship where the sponsor acquires license rights, M.I.T. usually must seek approval of the sponsor prior to releasing its ownership rights in favor of the author.

4.3.3 OTHER FORMS OF AUTHOR CONTROL
Where consistent with M.I.T.'s obligations to third parties, M.I.T. faculty, staff or student authors, with agreement of their laboratory director or department head and all of their co-authors, may request a license from the TLO to commercially develop their M.I.T.-owned works, may request to have the works openly distributed through royalty-free licenses, or may request that the works be placed in the public domain.

LICENSING TO AUTHORS:
Authors may request control of the copyrighted material through a grant of commercial license rights.

Consistent with the public interest, M.I.T. may grant the request for author control but M.I.T. will retain title to the work, with the right to use it for internal purposes, the right to the payment of appropriate royalties, and the right to withdraw such licensing rights in three (3) years if the authors have not achieved effective dissemination as agreed. In addition, such arrangements will be subject to M.I.T.'s Conflict of Interest and Commitment policies at stated in Section 4.2.5.

Where such requests relate to major projects that typically involve multiple authors and long development periods, determining the most effective course for dissemination will require discussion and special negotiation with the TLO.

M.I.T. will respond to author requests made under this policy within ninety (90) days. However, in those cases where the work, generally software, is not sufficiently developed to allow proper assessment, M.I.T. may require additional development prior to responding to an author request.

PUBLIC DOMAIN:
Authors may request that otherwise copyrightable material, including computer software, be placed in the public domain if such action will promote widespread use, for example by providing a means to establish a new standard such as a computer operating system.

In responding to a request for public domaining, M.I.T. will weigh the advantages of improved access, the complexity of the work and whether or not it is ready for effective public use, whether its quality can be maintained, and the author's reasons for seeking this mode of dissemination.

4.4 TRADE AND SERVICE MARKS

Trade and Service Marks owned by M.I.T. are to be licensed through the TLO. Any exceptions to this procedure must be approved in advance by the Vice President for Research.

4.5 MASK WORKS

Mask works owned by M.I.T. are to be licensed through the TLO. Any exceptions to this procedure must be approved in advance by the Vice President for Research. Mask works not owned by M.I.T. also may be licensed through the TLO when offered for licensing by the M.I.T.-affilated developer of such mask work and accepted by the TLO.

In general, mask works royalties will be allocated as set forth in Section 4.7.

4.6 TANGIBLE RESEARCH PROPERTY

It is M.I.T. policy that any commercial distribution of M.I.T.-owned TRP be handled only through the TLO. Software should be submitted to the TLO in the same fashion as a patentable invention, for which the first step is preparation and submission of a Technology Disclosure Form.

If TRP developed by M.I.T. as a result of research activities is to be distributed to outside users for commercial purposes, the distribution agreement must contain provisions negotiated by the TLO covering the terms under which the property may be used, limits on M.I.T.'s liability for the TRP or products derived therefrom, and other conventional license agreement terms including those relating to any intangible property rights (such as patents) which also may be associated with the use of the tangible property.

4.7 ROYALTY DISTRIBUTION - GENERAL

Royalty income received during the preceding M.I.T. fiscal year for a technology license shall be distributed once annually as follows:

STEP:

1. Deduct 15% from Gross Royalty Income

This deduction is directed toward covering the expenses of the Technology Licensing Office.

2. Then, deduct out-of-pocket costs and, in some cases, a reserve to arrive at Adjusted Royalty Income.

Out-of-pocket costs are direct assignable expenses to a specific case such as patent filing, prosecution and maintenance fees and specific marketing costs.

When out-of-pocket costs in the next M.I.T. fiscal year are forecast and future income unlikely, a reserve may be deducted. Any excess reserve will be promptly distributed after forecast costs are paid.

3. Distribute one-third of the Adjusted Royalty Income to the inventors/authors. This distribution shall be contingent upon the inventors/authors adherence to the obligations of any applicable sponsored research agreement.1

4. The remaining two-thirds of Adjusted Royalty Income (ARI) becomes part of a Department Pool and, if applicable, a Laboratory or Center Pool (in each instance, the “Pool”) (see Note 1 below for calculating the Pool). The Pool for each Department, Laboratory, or Center aggregates all of the remaining ARI from all technology licenses for that Department, Laboratory or Center for the year, then, to the relevant Pool, (i) adds all patent cost reimbursements for all inventions (licensed or not) attributed to that Department, Laboratory or Center for the year, and (ii) subtracts all un-reimbursed patent costs for all inventions (licensed or not) from that Department, Laboratory or Center for the year.

The resulting Pool, if positive, is then divided:

½ to the MIT General Fund
½ to the respective Department, Laboratory or Center.

If the resulting Pool is negative, the General Fund absorbs the costs.

1 If the Vice President for Research determines that an inventor or author has caused a material breach of a sponsored research agreement, he or she may after investigation, but in his or her sole discretion, deny the inventor or author all or a portion of the royalty income from any inventions arising from such sponsored research agreement.

NOTE 1: The only Laboratories and Centers eligible to receive royalty income are those formally recognized by the Institute through access to the Laboratory Director’s Account. Except as might otherwise be dictated by research contract obligations, the distribution of the remaining two-thirds of ARI to the Pool for each Department, Laboratory and Center shall be based on (i) the organization (Department, Laboratory, or Center) that administered the research contract from which the invention arose, and (ii) the academic Department affiliation of the inventors, if any, and shall be calculated as follows.

(a) If a research contract was not administered by a Laboratory or Center, the remaining two-thirds of the ARI shall be allocated to the Department Pool(s) with which the inventor(s) and research grant(s) are affiliated. Distribution to the Department Pools for such ARI shall be prorata based on the number of inventors affiliated with each Department. Final distribution of each Pool is then completed as set forth above.

(b) If a research contract was administered by a Laboratory or Center, the remaining two-thirds of the ARI shall be split between the Laboratory or Center Pool and the Department(s) Pool(s) with which the inventor(s) are affiliated. The distribution shall be according to the following algorithm per invention:
(i) Each MIT inventor on the invention is allocated 2 points.
(ii) If an MIT inventor has a Department affiliation, then the Department receives 1 point and the Laboratory/Center receives 1 point for that inventor. An MIT graduate student inventor’s Department affiliation is the Department in which the MIT graduate student is a degree candidate.
(iii) If an MIT inventor (such as a Research Associate) does not have a Department affiliation, then the Laboratory/Center receives 2 points for that MIT inventor.
(iv) If the MIT inventor is an undergraduate student, the Laboratory/Center receives 2 points for that MIT inventor.
(v) All of the points for the MIT inventors on each invention are then totaled for each Department, Laboratory or Center.

The ARI is then distributed to the appropriate Pools in proportion to the points allocated. Final distribution of each Pool is then completed as set forth above.


NOTE 2: Certain patenting costs are an element of M.I.T.'s indirect cost rate and are therefore borne by all research sponsors. In order to avoid complexity, this consideration is purposefully omitted from the above calculations.

4.8 ROYALTIES - SPECIAL CASES

In some cases distribution of royalties to individuals will be impractical or inappropriate; for example, where the material was developed as a laboratory project or where the authors/inventors are not easily identifiable. The Director of the TLO, in consultation with the principal investigator (or laboratory director/department head if not under a sponsored agreement) will review the circumstances of development when such situations have been identified. Generally in such cases, royalties will be split equally between the department or Laboratory and the M.I.T. General Fund. In any situation when royalty distribution to individuals is not recommended, distribution of income is subject to the approval of the Vice President for Research.

4.9 COMMITTEE ON COPYRIGHTS AND PATENTS

A standing Presidential Committee will oversee the operations of the TLO. The committee will include representatives from those fields of technology generally served by the TLO. This committee may, from time to time, elect to create a subcommittee of experts in a specific technology whose function is to recommend policy that relates to the exploitation of that technology.

4.10 CONFLICT OF INTEREST - LICENSING OFFICE STAFF

In order to assure no present or potential future conflict of interest, an individual Technology Licensing Office staff member should not personally invest in non-public companies that have licensed MIT intellectual property. If a staff member is a partner in a venture fund, that staff member should not engage in licensing negotiations with any company in which that fund is invested, and those who are voting partners should not recommend MIT companies to that fund. TLO staff members also have a special responsibility to assure that their knowledge of a TLO license to a public company is not disseminated in any way that could affect the company's stock price, and that the knowledge is not used for investment purposes by themselves, their families, friends or business associates. (For additional guidelines on Conflict of Interest, see Section 4.2.5.)

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