(Approved by the Provost and Executive Vice President by authority of Executive Order No. 4)
|a.||Allocation of Costs and Division of Royalties, Equity,
and License Fees
|1)||Allocation of Costs—Direct costs incurred
by the University in the protection and licensing of intellectual property must be
recovered before distribution of income begins. The Vice Provost for Intellectual
Property and Technology Transfer may also retain amounts necessary to recover
reasonably anticipated direct costs.
Direct costs include legal expenses incurred by the University and associated with either:
Direct costs also include the University's out-of-pocket expenses associated with a given transfer which includes but is not limited to travel, market research, and costs associated with the management and liquidation of an equity security (as subsequently defined in this policy statement).
Colleges, departments, and other units will occasionally direct discretionary funds toward the further development of specific technologies. In certain cases these expenditures may be treated as direct costs and may be reimbursed. All such reimbursements shall be subject to approval from the Vice Provost for Intellectual Property and Technology Transfer. They will be made only after recovery of the OIPTT administrative fee and recovery of any direct costs incurred by the OIPTT and the Treasury Office. The expenditures and reimbursements will be governed by a memorandum of understanding among the participants and subject to the following restrictions:
The OIPTT shall retain licensee-paid cost recoveries, and shall deduct an administrative fee of 20% from adjusted gross revenue. From the remainder, the OIPTT and the Treasury Office (in cases of distribution of equity or equity proceeds) shall deduct amounts necessary to cover incurred and reasonably anticipated direct costs.
|2)||Division of Net License
Revenue—Net royalties, equity and equity proceeds, and licensing fees
(collectively, "net License Revenue") derived from the licensing of intellectual property
in which the University holds an interest will be distributed as shown in the table below,
|#1||Deducting the OIPTT administrative fee;
|#2||Deducting and reserving expenses as provided in
Section 5.a.1; and
|#3||Deducting the amount of any grant from the Technology Gap Innovation Fund (TGIF) program, if the license revenue was generated from a technology developed using TGIF funding, and reimbursing such amount to the TGIF program.|
Distributions will be made annually according to a calendar schedule published by the OIPTT.
The share for University Research Funds (including the Graduate School Fund and Royalty Research Fund) is used to promote research across the whole institution. The college/departmental share is allocated to the dean of the college for distribution. It is expected that at least 75% of this share will go to the inventor's or author's department (or other unit) for promotion of research according to departmental (or other unit) and college goals.
For purposes of applying the distribution schedule, income from improvements and updates of inventions (e.g., computer software updates) is considered as an addition to the net income on the initial technology. Special arrangements may be approved by the OIPTT when such updates are done by the employee on an outside consulting basis.
This revenue distribution schedule will be used to distribute revenue received by the University on technologies disclosed on or after July 1, 2003. This revenue distribution schedule will also be used for revenue from licenses that combine disclosures made before and after this date. No adjustments of prior distributions will be made. With regard to license revenue resulting from disclosures prior to July 1, 2003, the determination whether a distribution is appropriate and the amount, if any, to distribute shall be governed by Subsection 5.c.3, item #1 below (in the case of revenue from sale of equity) and by the policy in place at the time of the disclosure (in the case of cash royalties and license fees.) Agreements with development agencies made prior to 1969 and reconfirmed in writing thereafter will continue with the royalty arrangements specified therein.
|3)||Waiver/Match Policy— A University employee may prospectively waive the receipt of a portion or all of
his or her share of annual revenue received by the University under
a license. The following conditions apply:
|#1||The employee, at the time of the waiver, may designate his or her
laboratory or research program, department, or other University unit as the recipient
of the waived amount. The waived funds will be regarded as regular University funds
subject to all of the usual and customary legal and administrative requirements of
|#2||In order to ensure that the use of the funds is consistent with the broad mission
of the University, or to avoid financial imbalances or hardships within or among
University units, the Office of the Provost, in consultation with the dean or deans
of the involved units, must approve a plan for the designation of funds submitted by
the employee, and, thereafter, may review the use of the funds at any time. It is
expected that the waiver plan will be approved only with the concurrence of the dean
of the receiving unit.
|#3||The waiver must be irrevocable and executed prior to the end of the fiscal year in
which the revenue was generated.
|#4||Funds directed to the employee's research laboratory or program may only be used to
support research and educational expenses associated with the employee's research
laboratory or program. Such funds cannot be used for the employee's travel (including
transportation, lodging, meals, and attendant costs), salary for the employee or a
family member, or other similar purpose.
|#5||The funds waived by the employee may be matched by the University subject to the
|b.||Equity in Business Ventures
The University may take an equity position in a company whether or not license fees or royalties are paid to the University as part of a negotiated agreement. A typical circumstance under which the University might receive equity would be as part of an agreement licensing a University-developed innovation to a start-up or developing business venture. Another example might occur when an employee of the University utilizes the expertise and/or innovation he or she has developed in the course of University employment and assists a business venture in the commercialization of an idea. (A business venture includes corporations, partnerships, or other commercial enterprises.)
To ensure a balance of interests for the business venture as well as for the University, the University will generally require that it receive an equity position in such circumstances. This equity interest is managed and disposed of by the University in accordance with investment guidelines prescribed by the Board of Regents and the policies and procedures stated in this and the following section.
When such equity interest is liquidated by the University, the net proceeds, after recovery of all University costs and after any distributions described in the following section, are administered by the Office of Research to promote research and technology transfer across the entire University. If the proceeds from the disposition of a particular equity interest are unusually large, the Provost shall confer with the University Budget Committee and with the Research Advisory Board on alternative uses for amounts in excess of a base figure (set at $3 million in 2000 dollars).
There may be situations in which both the University and its employees separately own equity interests in a business venture. In such circumstances, the employee's equity interest is considered to be independent of the University's equity interest and is not held, managed, disposed of, or distributed by the University. An example would be a case in which the University receives an equity interest in a business venture as a result of licensing certain innovations developed by one of its employees and in which the same employee also owns an equity interest as a result of being a founder of the business venture receiving the license. In this example, the employee's equity interest is not held or managed by the University but rather by the employee, and the employee's status as a founder having an ownership stake in the business venture renders the employee ineligible to receive a distribution of a portion of the University-owned equity interest or the proceeds from sale of such.
|c.||Disposition and Distribution of Equity
|1)||SummaryThis section describes the University of Washington's
policies and procedures governing the disposition and distribution of equity interests
received by the University as the result of the commercial licensing or other
transfer of University-developed intellectual property rights for commercial use.
With the exception of persons who are founders or have certain relationships with
founders, the same persons eligible to share in patent and copyright royalties are
also eligible to participate in a distribution of equity interests received by the
University, to the extent that the amount realized by the University from the
disposition of those equity interests exceeds the University's costs. These policies
and procedures also provide that when the University makes a decision to publicly
sell an equity interest, a prospective recipient may request to receive the
distribution in either cash or marketable securities or a combination of both.
Pending a distribution, the University shall be considered the sole legal and
beneficial owner of, and shall manage, the securities. Prospective recipients
shall have only the right to receive the net proceeds (if any) realized by the
University from a liquidation. In addition, under certain circumstances, the
University may allow the distribution of an equity interest prior to sale by the
University. All distributions of equity interests must be conducted in accordance
with all applicable securities laws and in accordance with University policies and
|2)||DefinitionsFor purposes of this section,
the following definitions apply.
|#1||Except as provided herein, an inventor or similar person may
be a Recipient if the invention or innovation was disclosed on or after
December 20, 2000. Equity received by the University as a result of
licensing for disclosures prior to December 20, 2000 will not be
distributed to inventors, but will be retained in its entirety by the Office
of the Provost to promote research and technology transfer.
|#2||A Recipient shall be eligible to receive the same percentage of a
Distribution (if any) as the percentage specified for inventors in the
University's distribution policy for license revenue. In the event more
than one Recipient is eligible to receive a particular Distribution, such
share shall be divided in accordance with any applicable written agreement
signed by all of the Recipients, or lacking any such agreement, in accordance
with University policies and procedures.
|#3||The College, School, and Department (or other comparable University
organizational unit) shall receive the same percentage of a Distribution
(if any) as the percentage specified for such units in the University's
distribution policy for licensing revenue. Such share shall be distributed
to the unit or units in which the research or other activities giving rise
to the applicable Intellectual Property Rights were performed in the same
proportion as would be distributed to the employees performing such research
or other activities, subject to any adjustments deemed equitable and
appropriate by the University.
|#4||If all or part of what would otherwise be a faculty member's, researcher's,
or employee's share is not distributed to that person because that person is
a Founder, or for any other reason, that person's share shall be divided
among the remaining non-Founding inventors. If there are no non-Founding
inventors, the inventor share shall be split evenly between the University
Research Funds and the college/school/department.
|#5||Any cash or other dividends previously paid by a Company on Equity
Securities and accumulated by the University shall be distributed on the
same basis as the Equity Securities upon which such dividends were
|#6||In connection with any Liquidation in which the University is to receive
Marketable Securities, Recipients will be provided a single opportunity to
irrevocably request to receive (in whole or in part) a Distribution in the
form of Marketable Securities in accordance with the procedures described
|#7||Recipients may be provided, in certain circumstances, a single
opportunity to irrevocably request to receive (in whole or in part) an
Early Distribution of Equity Securities in accordance with the procedures
|#8||The University shall have the sole and exclusive authority to determine
the timing of a Liquidation. Recipients, including prospective Recipients,
shall have no rights to participate in the management of Equity Securities,
and in particular, shall have no right to approve, consent to, or receive
notice of any securities transactions.
|4)||General Rules and Conditions—
|#1||Only such persons who are expressly eligible to receive a
Distribution, as provided in applicable University policies and procedures
and under any applicable law, may be a Recipient. Prior to any Distribution,
the University shall be considered the sole legal and beneficial owner of
and shall have the sole right and authority to manage all Equity
|#2||Distributions shall be made in accordance with all federal, state, and
other applicable securities laws, including the rules and regulations of the
SEC, and all Distributions shall be made on condition of compliance by the
Recipient and the Company with all such laws.
|#3||The University may establish such procedures, conditions,and limitations
that it deems proper and appropriate with respect to Distributions, including
any required tax withholding, restrictions on resale (including holding
periods or other measures ensuring the restriction of transfer of Equity
Securities in appropriate circumstances), and the filing of appropriate SEC
notices and forms.
|#4||The University reserves the right to restrict, suspend, or not engage
in a Distribution if at any time it determines that:
|#5||The University shall have the sole and exclusive authority to manage
Equity Securities including, without limitation, to make all decisions
pertaining to Liquidations, sales of Equity Securities, Distributions, and
Early Distributions, including their timing, manner, and method.
|#6||All Distributions (whether in the form of cash, Marketable Securities, or
Equity Securities) will be net of University Costs, including, but not limited
to, the costs to acquire, manage, transfer, or liquidate such securities.
|#7||The Treasury Office will administer all Liquidations and will ensure
that the proceeds of Liquidations (whether in the form of cash or Marketable
Securities) will not be released to Recipients until received and cleared
by the Treasury Office, including making deductions for University Costs.
|#8||The Treasury Office will administer all Early Distributions and will
ensure that Equity Securities distributed as part of an Early Distribution
will not be released to Recipients until authorized under all applicable
arrangements governing the Early Distribution.
|#9||A Recipient may waive (in whole or in part) the right to receive a
Distribution in accordance with the policies and procedures relating to
waivers of rights to receive royalties.
|#10||The University shall have the sole and final right to make decisions
reserved to it under these policies and procedures and to construe,
interpret, and apply these policies and procedures, including the making
of any factual determinations necessary for their implementation.
|#11||The University reserves the right to change at any time its policies
and procedures regarding Distributions.
|5)||Distribution of Cash and/or Marketable Securities
|a)||Authority—Liquidations may arise out of one or more
of the following circumstances:
|b)||Procedures—Upon the closing of an agreement (or as soon thereafter
as may be practicable) pursuant to which the University will receive an Equity
Security, the OIPTT will notify the Treasury Office of such an agreement and
provide the Treasury Office with the following information:
|c)||Request to Receive Marketable Security—Based on information furnished
by the OIPTT, the Treasury Office will notify each Recipient in writing, at least
ten days prior to a Liquidation affecting a Recipient, of the opportunity (if any)
to request to receive all or part of the Distribution in the form of Marketable
Securities. Distributions will be made entirely in cash, except Distributions of
Marketable Securities may be made by the University if:
|6)||Early Distribution of Equity Securities—
|a)||Authority and Conditions—An Early Distribution shall be
allowed only if the University finds in its sole discretion that an Early Distribution
|b)||Procedures—In the event the University makes a decision to allow an Early
Distribution (whether at the time of the closing of the agreement to acquire an Equity
Security or thereafter), the OIPTT will notify all Recipients in writing of the
opportunity to request to receive all or part of the Distribution as an Early
Distribution. Whenever any Equity Securities to be included within an Early Distribution
are under the control of the Treasury Office, the OIPTT will provide the Treasury
Office the following information:
|c)||Request to Receive Early Distribution—No Early Distribution will be made
to a Recipient unless in connection therewith: