Successfully Negotiating and Administering Industry Projects

John HanoldSenior Associate

DirectorOffice of Sponsored

Programs

Barbara SuchanecDirector of Clinical

Research ContractingOffice of Research AffairsCollege of Medicine

Reconciling Competing Interests

Company’s Interests PSU’s Interests Faculty’s Interests Public Interest

Negotiations – Challenges & Opportunities

Some issues are “deal-breakers.” Other issues depend on individual circumstances.

College personnel, departmental personnel, investigators, and central contracting personnel need to understand each other’s goals in order to facilitate solutions.

Communication and unified approach facilitate win-win solutions.

How to “Pump Up” our Negotiating Standpoint

United Front Clear layout of

Goals Know who we are

dealing with Understand the

Challenges

How do I work most effectively with Sponsored Programs/Research Affairs? Alert your

Negotiator ASAP. Communication is

key. Continue to

provide new information you receive.

Key Challenges

Confidentiality Payment Publication Intellectual Property

Universities like to publish and share information.

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Companies are often nervous about working with universities.

Companies consider many of their research interests confidential.

Confidentiality Protection of Sponsor’s Interest Written identification of Confidential

Information Institution attempts to limit the number of

years confidentiality is maintained (3 is fine, 5 is OK, 7 if forced).

Institution shall protect the confidential information with the same level of care it uses to protect its own Confidential information.

Results cannot be considered Confidential Information.

Faculty members must take this responsibility seriously.

Student theses should not rely on a company’s proprietary information.

Foreign nationals should not receive proprietary information if that information might be subject to export control.

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Confidentiality Clause Cautions

Payment clauses: Do we need to treat industry funds the same as federal flow-through funds?

Federal flow-through funds require detailed budgets identifying costs that are reasonable, allocable, and allowable under A-21. Most federal projects are invoiced on a cost-reimbursable basis and are subject to audit under A-133.

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Industry funds are not subject to the above requirements. We often hurt ourselves by submitting detailed budgets to companies even when the projects don’t involve federal funds.

It isn’t always necessary to provide any budget detail to an industry sponsor. Why do they have to know what our F&A rate

is? Why do they have to know how much we are

spending on lab supplies or graduate student tuition?

As long as they are getting their deliverable, what difference does it make to them?

Of course, we still need to make sure that expenditures are consistent with PSU policy.

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Payment

Payments may be tied to tasks, deliverables, or technical reports (as opposed to expenditures).

Income must be tracked very carefully, because companies do not always pay their bills, especially if they are not happy with the research results.

Foreign currency conversion can be problematic.

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Other Payment Issues

Publication Publication clauses balance a

company’s interests in confidentiality with PSU’s interests in publication.

PSU has to promise the company not to divulge any confidential information they reveal to us in the course of the project.

But the company has to understand that PSU will publish its research results.

Publication University’s mission – free and open

dissemination of information and results of research

Does the language restrict the goal of the Universities to provide the results of its research to the public?

Does the language hinder the research and educational process of the students?

Publication Sponsors may review manuscripts prior to

publication, but may not require terms that allow for “approval” by the Sponsor.

30 days for the removal of confidential information. Additional 60 days for the filing of patent applications.

Clinical Trial Specific Issues Compliance with the International

Committee of Medical Journal Editors (ICMJE)

Multicenter Publication first. Ensure ability to publish within 12 – 18 months after study closes at all sites.

Do we need to treat all IP the same, regardless of whether it is federally-funded or industry-funded?

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Intellectual Property: a new approach

Federal flow-through funds are subject to different Intellectual Property (IP) requirements than industry funds.

Federal flow-through funds are subject to Bayh-Dole, which states:

“The subcontractor will retain all rights provided for the contractor in this clause, and the contractor will not, as part of the consideration for awarding the subcontract, obtain rights in the subcontractor's subject inventions” (Title 37, Section 401.14(g)(1)).

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Industry funds are not subject to any federal rules, so all IP terms are negotiable.

How often do we make money off of industry-funded IP?

Are some industry sectors more likely to result in lucrative IP than others?

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Intellectual Property

We need to develop a more flexible and agile approach to determining when we can compromise on IP rights.

We need to develop a more sophisticated dialogue with the faculty members earlier on in the process, often before the proposal is even submitted.

Faculty members and departmental research administrators will need to become more aware of the alternative approaches to IP.

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Intellectual Property

Does the IP have no potential commercial value? If so, let’s assign ownership of the IP to the

company and be done with it.

Risk: The researcher doesn’t want to compromise his or her ability to attract future research funding in that area.

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Intellectual Property – Option 1

Is the IP of limited commercial value? If so, let’s pre-negotiate a license at a

reasonable fee (e.g., 10% of the contract price or a minimum of $10,000).

Risk: If the IP turns out to be more lucrative than expected, the researcher will regret having given it away at such a “bargain price.”

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Intellectual Property – Option 2

Does the IP have significant potential value? If so, we need to inform the company that we

will not pre-negotiate royalties. Instead, we will grant them an option to negotiate a license after the IP has been invented.

Risk: Sponsors typically hate this option, because they don’t know how much it will cost them to practice the IP.

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Intellectual Property – Option 3

Does the value of the IP depend entirely on whether an (unlikely) outcome is achieved (e.g., curing cancer)? If so, we can write a “bonanza” clause, granting

the sponsor rights in the IP, but reserving the right to secure a large payoff if the results are wildly successful.

Risk: It can be complicated to negotiate the specifics of such a clause, especially since the outcome is so uncertain.

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Intellectual Property – Option 4

Achieving Compromise with Industry

All of the above issues are important, but not all of them are equally important.

We also need to be aware at all times of how negotiation delays might negatively impact faculty members and students.

By working together, we can balance the competing interests.