Royalty Sharing

What is the University policy for distributing cash rewards resulting from inventions and discoveries shared?

The University takes the financial risk in patenting and licensing Harvard-owned intellectual property.  When successful, the cash rewards are shared among the University and the inventors, their labs, departments, and schools. Although we take into consideration the interests of inventors, departments and schools, ultimately OTD's licensing decisions are made on behalf of the University. Thus, notwithstanding the financial interest of inventors, departments and schools share in the outcome of licensing decisions.  OTD is charged with making decisions that, in the exercise of its professional judgment, best serve the public, result in the efficient and effective transfer of the technology, and are consistent with University policy and procedures.

How are royalties shared?

Under Harvard's current policy on royalty sharing (which is presently under review), net royalties are shared with the inventors, the inventors' department and school, as well as with the University.  Half of the department share is made available to the inventing laboratory.  In the case of multiple inventors, OTD will divide the inventors' share equally among all inventors.  When there are multiple patent filings for a single invention, the inventors' allocations are generally weighted by the number of times each inventor appears on the active US applications and patents.  The inventors may, however, agree among themselves on a different allocation method.  When multiple technologies are licensed as a portfolio, the inventions are generally regarded as having equal value although OTD may determine relative values when it is clear that treating the inventions equally would be unfair.  The inventors may, of course, agree among themselves on a different allocation.  An inventor may waive his/her personal share and direct the money to his/her laboratory for support of research, provided IRS requirements are met. Harvard distributes royalty money once a year between March and June unless it is a newly signed license agreement, which is distributed within the next 60 days.  For more information, refer to the Royalty Sharing Policy.

Does OTD enter into equity agreements?

While OTD often seeks cash payments from licensees, equity may be accepted as partial consideration for a license. In the case of start-ups or small companies where cash flow is limited, equity may be the preferred means of compensation from the company's standpoint.  From OTD's viewpoint, taking equity represents greater risk and thus when equity is part of license consideration; OTD focuses on obtaining the best overall compensation package, taking into account the risk factors. 

What happens when inventions are co-owned with other institutions?

Frequently, inventions are co-owned with other institutions and Harvard and the other institution will enter into an Invention Administration Agreement under which expenses and income will be shared and responsibility for patenting and licensing will be assigned. In addition, foundations supporting research sometimes require that licensing income be shared with the foundation.  On rare occasions, OTD may use a third party to license technology if the third party has special expertise and the third party may be allocated a share of the royalty income, if any.  In each of these instances, the remaining Harvard share of royalties will be distributed according to the University's present, standard royalty sharing policy.

Are funds from sponsored research shared with inventors?

License agreements are completely separate and distinct from sponsored research agreements. As such, and as noted in Harvard's royalty sharing policy, sponsored research funding is not considered royalties (even if tied to a license agreement) and is not shared with inventors.