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The University of California encourages its faculty to participate in activities that contribute to their profession and the outside community. The University sees great value in activities outside the University that advance and communicate knowledge through interaction with industry, the community, and the public, and through consulting and professional opportunities.
The University permits faculty members to provide consulting services related to the person's academic expertise to an outside party, consistent with the full performance of a faculty member's primary University obligations and as long as the consulting does not interfere with a faculty member's full-time commitment to the University.
A number of policies apply to outside consulting activities. These include Regents Standing Order 103.1(b), the University Policy on Conflict of Commitment and Outside Professional Activities of Faculty Members (APM-025), and Conflict of Interest Policies (reference).
Faculty members and other researchers engaging in consulting activities may sign personal consulting agreements with outside entities as long as such consulting does not utilize University facilities, does not interfere with teaching and research responsibilities or with time commitments to the University, does not involve students or postdocs whom the faculty members are mentoring or advising, does not purport to take precedence over prior obligations to the University, including obligations associated with intellectual property arising before, during or after the consulting period, and is not prohibited in a plan developed by the Independent Review Committee on Conflict of Interest to manage a specific conflict of interest.
Although outside consulting arrangements are personal, inappropriate consulting agreement language accepted by a faculty member can create conflicts with his or her obligations to the University and negatively impact his or her ability to perform research and secure sponsored research funding at the University. This guidance is not to be taken as legal advice, but as a tool to assist faculty when entering into personal outside consulting agreements. You may wish to seek personal counsel.
Outside consulting by faculty members or other University employees is a professional activity that provides the opportunity to confront "real world" challenges, identify and work with practicing industrial professionals, and contribute their own expertise to help fuel technological and economic development. However, there are several considerations and potential conflicts that must be examined before a faculty member enters into a binding consulting agreement. One issue concerns consulting contract clauses referring to future intellectual property rights.
When joining the University every new employee signs the University of California Patent Agreement/Acknowledgment (Patent Acknowledgment) and agrees to abide by the University of California Patent Policy (Patent Policy) and the University of California Policy on Copyright Ownership (Copyright Policy). The Patent Policy and the Copyright Policy spell out the rights of the University to own, and the obligations of University employees to assign title and interest in, inventions or certain copyrights that may arise during their employment at the University. For work that is both patentable and copyrightable, the Patent Policy and the Patent Acknowledgment shall first apply. The Patent Acknowledgment contractually describes University employees' duty to disclose their inventions to the University and the procedure to appeal for ownership under certain conditions for an exception to University ownership.
Duty to Disclose. The Patent Acknowledgment is a contract between the employee and the University. It specifically states "I further acknowledge my obligation to promptly report and fully disclose the conception and/or reduction to practice of potentially patentable inventions to the Office of Technology Transfer or authorized licensing office." At UCSD, the "authorized licensing office" is the Technology Transfer & Intellectual Property Services (TTIPS) office and is responsible for receiving all the disclosures. The obligation of the employee to make prompt disclosures of inventions to the University is independent and continuing even if an invention is made in connection with outside consulting activities. All UCSD employees, therefore, must promptly disclose ALL their inventions conceived or reduced to practice while they are employed by the University, regardless of whether in their personal opinions the inventions are patentable or should be owned by the University. As discussed below, the University requirement to disclose all inventions does not imply that the University will claim title to all inventions.
Ownership of Inventions. Inventions developed by University employees are usually the property of and owned by the University. One exception to this general rule is an invention conceived and reduced to practice during permissible outside consulting activities and without the use or involvement of any University resources, including facilities, funds, employees and students, or University proprietary information that has not been published and is not available to the public. Outside consulting activities are considered "permissible" if and only if the activities do not interfere with the University employee's primary obligations to the University to perform his/her University duties and to satisfy his/her responsibilities to the University. For faculty members, such primary duties and responsibilities shall include on-going research, teaching, mentoring and supervising students, and services to selected committees. Nonetheless, even if the University employee believes he/she has developed an invention under permissible outside consulting and without the use of any University resources and therefore the University should not have ownership of the invention, the University employee is still contractually obligated to disclose the invention to the TTIPS office. The University employee must then present the supporting facts stating why the University's claim to ownership should be exempted. Upon receipt of the disclosure of the invention and the written representations by the University employee inventor, TTIPS will then make a determination and notify the inventor whether the University is asserting ownership to the invention or approves of the exception. TTIPS will examine and keep the disclosure in confidence and will in no way jeopardize the patentability of the invention and/or the commercial value of the invention to the company the University employee consults for. In any event, the University employee should not assign title and interest in any invention of which he/she is an inventor to any third party before he/she discloses the invention to TTIPS and receives a letter of determination by which the University disclaims ownership to the invention.
Ownership of Copyright. The University generally does not assert claim to copyright ownership on permissible consulting work that is performed outside of the University and without the use of University resources, including facilities, funds, employees and students, or copyright of original work that is owned by the University. Copyrights developed by University employees under such circumstances therefore can be assigned to a third party at the employee's discretion.
Consulting Agreements. Many outside industry consulting contracts purport to take precedence over a University employee's primary and continuing obligations to the University. These arrangements are not considered permissible consulting activities by the University and the employee should take care to avoid such contracts. In particular, University employees should not sign a consulting agreement that precludes the disclosure to the University of any inventions they make. A consulting agreement between the University employee (e.g. a faculty member) and an outside consulting employer is a private and personal agreement and it is important that the employee seeks legal counsel to help review and negotiate the agreement. TTIPS has over the years briefed several attorneys in the greater San Diego area about the intellectual property policies of the University and how they are applied to University employees. These attorneys may be able to provide competent services to University employees who contemplate entering into consulting agreements with outside companies. TTIPS will provide such referrals upon request by University employees. Should you have any questions, please feel free to contact TTIPS at 858-534-5815.
Although permissible consulting activities are performed on a faculty member's own time and are personal arrangements between the faculty member and the company, the terms of any formal contractual agreements should be carefully reviewed by the faculty member before signing in order to assure that the terms do not jeopardize present and future University research programs. Legal review is also recommended; see previous paragraph for resources.
Problems can occur because companies employing consultants typically require assignment of title to inventions made during the course of the consulting relationship. Since the actual consulting frequently occurs concurrently with the researcher's University projects, it is essential to ensure that the assignment of title is restricted to inventions made "under the scope of the consulting agreement" rather than "during the time of the consulting agreement." If this is clear in the consulting agreement, it will avoid later title disputes for inventions developed at the University during or after the period of the consulting. If this is not clear, a dispute regarding ownership of patents, software, data, etc. could occur between the consulting entity, the University and a commercial sponsor which is presently supporting or may in the future fund research at the University.
A related issue concerns separation of a faculty member's consulting activities from University research being conducted in the faculty member's laboratory. Because faculty member's consulting services are sought based on their academic expertise, and since consulting agreements typically include very broad and general references to the scientific area of consulting, the agreement will often appear to overlap with or be indistinguishable from University research projects. It is therefore incumbent upon the faculty member to separate specific University projects from consulting activities. Since the University will assert ownership to any inventions which directly flow from University research, potential misunderstandings and disputes can easily occur without such a clear and distinct separation.
It is not uncommon for a company to disclose proprietary information to a consultant. In doing so, the company often wants written assurance that this information will be kept confidential. Confidentiality can be tricky for a faculty member involved in open, free exchanges of information in a public university setting, and the company's documentation in this regard should be scrupulously examined.
Disclosure of proprietary information, either intentionally or unintentionally, may be actionable under both criminal and civil law. Therefore, it is essential to limit the amount of confidential information received when consulting and to have the company agree to clearly identify such proprietary information by marking it as "confidential". Consulting agreements should always include a statement about the transmission of proprietary information and a "no-fault/no liability" statement regarding unintentional disclosure.
It is very important to remember that the University's duty to defend and indemnify its faculty members as University employees does not extend to consulting activities. Therefore, by signing the consulting agreement, the consultant assumes any risk of legal liability, including those referenced above, and the faculty member should consider personal insurance for such liability.
Consultants are normally asked to provide advice to the company which may or may not be accepted or may be interpreted by the company in a different manner than what was intended by the consultant. Further, the consultant generally has no control over how the results are used in practice.
Therefore, it is very important that consulting agreements limit the consultant's responsibilities to negligent acts on the part of the consultant only. A consultant agreement should not include language which makes the consultant responsible for general liability or liability for any product based on the consulting.
Some consulting agreements may also attempt to require that the consultant actually assume the financial costs of defending lawsuits against the company which result from the consulting activities. University employees should seek to eliminate such language from any consulting agreement they enter into.
Most consulting agreements will indicate that the laws of a particular state or country will be used in a dispute, usually those of the state where the firm is located or where the consulting is taking place. If it is other than California, the litigation of any dispute will physically take place in that state or country. As this could be very costly and disruptive, it is important to try to include a statement in a consulting agreement that in the event of a dispute, California laws will apply.
In order to comply with the consultant's responsibilities to both the company and the University, consulting activities need to be conducted without the use of University resources, including laboratories, equipment or other facilities. Any use of such University facilities could be interpreted to be in direct conflict with the University of California Patent Policy (October 1, 1997) which states that only permissible consulting activities without the use of University facilities are exempt from the requirement to assign inventions and patents that result from the consulting activity to the University.
Since almost all consulting agreements require the assignment of title to inventions to the company, the above restriction must be carefully observed.
Full-time faculty members in the professorial ranks on a nine-month appointment may engage in compensated outside professional activities, including consulting, for up to 39 days during the academic year. Faculty members may consult full-time during the summer months in which there is no other salary compensation from the University (such as work on sponsored projects). If an academic-year faculty member is receiving University summer compensation, then the applicable limit on compensated outside professional activities is the equivalent of one day per week during the period in which compensation is received.
Full-time faculty members in the professorial ranks with fiscal-year appointments may engage in compensated outside professional activities, including consulting, for up to 48 days for the entire year.
Allowable days not used one year may not be carried forward to the next year. University policy makes no provision for allowable consulting days for researchers or lecturers.
The University does not set any cap on compensation from outside personal consulting arrangements, except as agreed under a medical compensation plan.
Under the California Political Reform Act of 1974, a Principal Investigator must disclose whether or not there has been any consulting activity with a company when accepting research funding or gifts at the University from a company. The National Science Foundation (NSF) and the Department of Heath and Human Services (DHHS) require that all key personnel responsible for the design, conduct, or reporting of the project disclose any financial interests (including consulting income in the prior twelve months) in entities that would reasonably appear to be affected by the work performed under the federally sponsored project. Thus, to ensure compliance with both State law and federal regulations, UCSD requires that any existing consulting or prior agreement arrangement related to a proposed University contract, grant or gift be reviewed and approved by the Independent Review Committee (IRC) on Conflict of Interest.
The IRC reviews consulting agreements from those PIs and researchers who have a financial interest with a company that relates to NIH/NSH federal grants, gifts or non-governmental sponsored research project. Outside consulting agreements may have language that requires assignment of patentable discoveries and/or other intellectual property to the company. Such a requirement might stand in direct conflict with an Investigator's obligations to the University and possibly with the University's obligations already made to sponsors or supporters of that Investigator's research. It is recommended that the content of personal consulting agreements include a statement that the company acknowledges that the consultant has pre-existing obligations to disclose and assign to the University intellectual property rights resulting from activities that use University research funds or facilities, or that relate to the faculty member's scope of employment. The IRC requests that faculty members with consulting agreements incorporate a Standard Clause for UC Employees and include the UC Patent Policy as an exhibit in such agreements.
By incorporating this language, it acknowledges that the faculty member has signed a patent agreement with the University for the protection of intellectual property. As consultants, faculty function independently of the University, including their retention of assignment rights for intellectual property created during their consultation. However, this only holds true to the extent that their consulting activities do not overlap with their University-sponsored research. If consulting activities include University research, any patent or other intellectual property rights arising are subject and subordinate to any claim of right, title or interest of the University of California. Inventions created outside of the University of California must also be disclosed to the University.
Faculty members may forward a copy of their consulting agreement to the Conflict of Interest Office, mail code 0992 for review to ensure that it complies with University policy. Should you have any questions, feel free to contact the Conflict of Interest Office at Ext. 46465.
Under the University Policy on Outside Professional Activities of Faculty Members (APM-025), faculty are required to submit annual reports on their outside professional activities which includes consulting.
The charge of the IRC is to review situations where a potential for conflict of interest exists in the design, conduct or reporting of research by virtue of faculty financial and/or legal ties to the sponsor of research. Clinical research and clinical trials pose special situations that require close scrutiny for several reasons. The University is responsible for ensuring that human subjects are fully informed and not placed at additional risk because of financial interests on the part of the investigator. Therefore, PIs are prohibited from engaging in consulting activities with the company sponsoring the clinical trial, the company supplying drugs and/or other materials to be used in the study, or any entity that may benefit from the results of the research. The University has an obligation to ensure that the results are free from any harmful conflicts of interest or any appearance of such conflicts.
Students and postdocs may not undertake training in, be employed by, or consult for companies in which their mentors/advisers have a significant financial interest. The definition of significant financial interest includes the receipt of $10,000 or more per year for consulting. For more information on the subject, click here.