Guidelines, Policies and Forms
Policy Regarding Conflict of Interest in Licensing
Refer also to the Conflict Avoidance Statement.
The policy statement displayed below is also available for viewing/download as a PDF file.
Policy Statement Regarding Application of Harvard University's Conflict of Interest Policies to the Granting of Licenses
Approved by the University Committee on Patents and Copyrights on March 19, 1993 and by the President and Fellows of Harvard College on September 20, 1993. Revisions approved by the University Committee on Patents and Copyrights at its April 22, 1995, February 16, 1996, and March 16, 2001 meetings.
Introduction
The University is increasingly licensing inventions or other technology to for-profit companies. The growth of such licensing activities has given rise to questions about whether and under what circumstances the University should license its technology to a company in which University faculty members or other members of the University community have some type of financial interest.1
Existing University policies addressing conflict of interest take two forms. First, the Governing Boards and certain Faculties have adopted policy statements that address the subject of conflict of interest in general terms.2 Second, the Faculties of Medicine and Public Health have adopted policies and procedures that deal specifically with issues arising in the context of academic research (particularly biomedical research).
The present statement is intended to establish University conflict of interest policies to apply specifically to licensing transactions. This policy statement was initially implemented upon approval of the University Committee on Patents and Copyrights and the President and Fellows of Harvard College. Periodically, the Committee will review the policy and the University's experience with it. Based on that review the Committee will modify the policy and its procedures to the extent the Committee deems appropriate.
Principles
Since the University is increasingly licensing inventions and other technology to for-profit companies and is receiving income from this activity, it must pay careful attention to and resolve potential conflicts of interest that may arise. The University has established policies and procedures for identifying, protecting and licensing innovations resulting from University activities.3 The University Office of Technology Development(OTD) has been charged with responsibility for carrying out these policies under the oversight of the University's Committee on Patents and Copyrights.
The development and application of the policies and procedures described below are based on the following considerations:
Individuals serving the University are expected to accord the University their primary professional loyalty, and to arrange outside obligations, financial interests, and activities so as not to conflict with this overriding commitment. In particular, members of the University should not seek to influence the University's technology transfer decisions in ways that could lead to personal gain4 or give improper advantage to their associates.
When granting licenses, Harvard seeks to identify licensee companies which have the capability and commitment to develop the technology and bring it to market as rapidly as feasible. In most instances the University does not survey all potential licensees but rather targets its marketing efforts to those companies the licensing officer identifies as suitable potential licensees based on a variety of sources and the licensing officer's professional judgement. When one or more such companies express interest and make proposals, Harvard frequently negotiates one or more license agreements (which may be exclusive or non-exclusive depending on the technology) rather than seeking competitive proposals from other potential licensees. This practice has generally been found to be the most effective especially considering limitations on time and resources. However, when there are potential conflicts of interest because the faculty member/inventor has a Close Financial Interest in the potential licensee company, further consideration as indicated in (3) and (4) below or further marketing of the technology may be needed to assess the validity of an initial decision to license the related company.
The University recognizes that emerging companies play an important role in the national and local economies. Since the passage of the Bayh-Dole Act in 1980, more than 3,000 new companies have been started based in large measure upon technology licensed from academic institutions. In order to grow, these emerging companies must focus their efforts and resources on rapid development of the technologies they have licensed and to do so to a greater extent than is necessary for established companies that have much larger technology portfolios. Faculty often play a key role in these emerging or start-up companies and the opportunity to participate in a new venture without having to leave the university community can be attractive to them and advantageous to the University. For these reasons an emerging company may offer the best opportunity for the rapid commercial development of at least some Harvard inventions. Therefore, when an emerging company is deemed to have the potential of obtaining sufficient financial and management resources to be capable of vigorous development of University technology, licensing to that company should be given serious consideration. Furthermore, OTD should provide reasonable assistance to the faculty members involved as they seek to launch the new company by identifying potential sources of financing and providing input on draft business plans.
It is recognized that faculty members or other members of the University community often have a Close Financial Interest in these emerging companies and that the resulting potential for conflicts of interest requires oversight and resolution. The appropriate resolution in a particular case depends on the consideration of a variety of factors, including the reason for the proposed transaction, the nature of the invention, the market for the technology being licensed, the nature of the inventor's interest in and involvement with the licensee company, and the relation of the inventor's future University research to the interests of the licensee company. For example, the nature of university technology frequently requires that inventors assist the licensee company in its development efforts, and thus inventors often become consultants to and have a financial relationship with the licensee by receiving consulting fees from or equity in the company. While the University recognizes that careful review of these relationships is essential, it also supports the commercial development of University inventions and the involvement of inventors in that process.
Procedures
The following steps will be taken by the staff of the OTD to minimize the potential for creating an unacceptable conflict of interest in the granting of licenses:
The staff of OTD will use professional judgment and a range of sources to identify companies as potential licensees for a given technology; this process may include suggestions provided by the inventors.
The staff of OTD will disclose on an annual basis any financial interests they have in companies which are or may be potential licensees and may not participate in licensing discussions or negotiations which would benefit those companies.
When a primary candidate for an exclusive license is identified and before any license (including option) agreement is negotiated, OTD will ask the inventors whether they or members of their immediate family or household have or plan to have a personal financial relationship with the potential licensee (or optionee). When options are to be granted to as yet undisclosed inventions-as in industrially sponsored research or material transfer agreements-only holdings of equity (as defined in footnote 5 below) or consulting agreements which tie compensation to the value of the company, its stock, or its profits will be considered to be a Close Financial Interest.5
If no Close Financial Interest exists or is planned between the inventor(s) and the potential licensee, OTD will proceed to negotiate a license.
If the inventor has a Close Financial Interest, and the potential licensee company is an emerging company (i.e., a company not yet formed or a company which does not yet have initial financing), OTD shall be delegated responsibility for determining whether the company has the potential of obtaining sufficient financial and management resources to be capable of vigorous development of the technology to be licensed.
If the determination is positive, then OTD, at its discretion, using its best professional judgement may
enter into a letter agreement with the emerging company. This letter agreement would provide the company a short-term option to enter into exclusive license negotiations for the relevant technology. The letter agreement will provide that, before an exclusive license will be granted, the company must meet specified financing criteria and a CPC review must be completed. Prior to entering into substantive license negotiations, OTD will present to the CPC the rationale for licensing to the emerging company and seek the CPC's input.
or
market the technology to other companies in order to determine if other potential licensees are more likely to successfully develop the technology than the emerging company in which the inventor has a Close Financial Interest. Before concluding negotiations with the related company, OTD will report to the CPC the results of its marketing efforts and the rationale for its choice of the related company.
If the determination is negative, OTD will undertake an active marketing effort to identify more appropriate licensee companies.
If the inventor has a Close Financial Interest, and the potential licensee company is an operating company (i.e., an existing company that has at least initial financing), OTD will market the technology to other companies in order to determine if other potential licensees are more likely to successfully develop the technology than the company in which the inventor has a Close Financial Interest. Before concluding negotiations with the related company, OTD will report to the CPC the results of its marketing efforts and the rationale for its choice of the related company. However, if the subject technology is "dominated" by patents or other intellectual property owned or controlled by that company, OTD may proceed to grant a license to that company without review by the CPC and subsequently report that decision to the CPC.
In each of the above situations where CPC review is required, the CPC may determine that the proposed license to a company in which the inventor has a Close Financial Interest would not be in the best interests of the public or the University and/or may require that additional steps be taken to address conflict of interest issues.
Once it appears that an exclusive license may be granted to a company in which an inventor has a Close Financial Interest, OTD will inform the Faculty committee which deals with conflict of interest issues6 of that possibility and will ask the inventor to initiate discussions with the committee to resolve any conflict of interest concerns the committee might have. Before or soon after a license is signed with a company in which an inventor has a Close Financial Interest:
OTD will provide to the Faculty committee copies of the reports referred to above and a summary of the CPC's discussion and decisions.
OTD will notify the Faculty committee if the license is expected to include rights to future technology (other than that which would be represented by continuation-in-part patent applications) such as rights to separately patentable "improvements" and whether such improvements are limited to technology dominated by the originally licensed technology.
OTD will inform/remind each inventor with a Close Financial Interest that he or she is required to provide his/her Faculty committee with the following:
the details of the inventor's relationship to the prospective licensee company;
the relationship of the inventor's ongoing University research to the activities of the licensee company; and
a "Conflict Avoidance" statement similar to the attached. Through this statement, the inventor acknowledges the potential for conflict and commits himself or herself to certain actions to minimize and manage that potential. In the case of a faculty member, the statement will be signed by the individual and countersigned by his/her department chairperson. In the case of staff, students, or post-doctoral fellows, it will also be signed by the faculty supervisor of the inventor's research activities. If the department chairperson or faculty supervisor also has a Close Financial Interest in the company, the chairperson of the appropriate Faculty committee will countersign. [It is recognized that individual Faculty policies regarding conflict of interest and commitment may require other forms of disclosure and/or action in addition to this statement.]
The Faculty committee will review the above information and institute any monitoring, review or reporting mechanisms or other actions that it deems appropriate to address a potential conflict of interest on the part of the faculty member, such as:
reduction or elimination of the inventor's equity ownership;
ongoing (annual) reporting by the inventor on the relation of his/her university research to the licensee company and how the potential for conflict is being managed; and/or
monitoring of the future research of the inventor.
If the University is to receive equity from the licensee company, approval prior to accepting the equity will be obtained from the President's designee (initially the Chairman of the Committee on Patents and Copyrights). This responsibility shall be further delegated to the Directors of OTD who shall report these transactions to the CPC.
View the Conflict Avoidance Statement.
Footnotes
1To be sure, the relationship between the University and private enterprise in the context of academic research has raised a number of other questions in addition to those relating to conflict of interest in licensing. See, e.g., Faculty of Medicine Policy on Conflicts of Interest and Commitment (1995), Faculty of Public Health Policy on Conflicts of Interest and Commitment (1992), and the Guidelines for Research Projects Undertaken in Cooperation with Industry adopted by the Faculties of Medicine (1996), Public Health (1983), and Arts and Sciences (2000). This statement, however, only deals with the issues related to licensing.
2Faculty of Arts and Sciences, Policies Relating to Research and Other Professional Activities Within and Outside the University (as amended in 1995), Policy Statement of Conflicts of Interest (1975) which applies to the Governing Boards and senior administrative officers of the University, and Harvard University Statement on Outside Activities of Holders of Academic Appointments (2000).
3Statement of Policy in Regard to Inventions, Patents and Copyrights (November 3, 1975, as last amended August 10, 1998 and Licensing Program Objectives and Procedures (as revised May 1991).
4References to personal gain include gain for the individual, family and/or household members, business associates, etc.
5A Close Financial Interest includes equity, the option to obtain equity, or the promise of equity in the prospective licensee company, or a long-term, exclusive or otherwise significant consulting arrangement with the prospective licensee company. An equity position will not be considered a Close Financial Interest unless: (a) the equity represents a significant share of the company (a holding of over 5% of the company's stock would be presumed to be significant; holdings of less than 5% will require case-by-case consideration) or (b) the proposed license or the inventor's future research is likely to have a significant impact on the value of the stock; a relatively small number of shares of a large publicly held company will not be considered a Close Financial Interest, but a small number of shares in a start-up or privately held company is likely to be considered a Close Financial Interest.. A Close Financial Interest shall be considered to exist whether the above relationship is with the inventor or with members of his/her immediate family and/or household.
6In the Faculty of Arts and Sciences the Committee on Professional Conduct; in some Faculties the Dean or the Dean's representative may be designated rather than a Committee. Generally reporting to the Faculty Committee is accomplished by reporting to the Committee's administrative staff or to the Chair of the Committee.
The policy statement displayed above is also available for viewing/download as a PDF file. Refer also to the Conflict Avoidance Statement.