ITEM 113-110-R1101

 

TO:                   Board of Regents

 

FROM:              LeRoy H. Schramm

                        Chief Legal Counsel

 

RE:                   University System/Employee Collaborative Efforts to Develop Intellectual Property

 

DATE:               November 15-16, 2001


Background

 

The 2001 State Legislature, at the request of the University System, enacted Chapter 379 (now codified as 20-25-109 MCA, reproduced at end of memo) sponsored by Representative Haines of Missoula.  The most important part of the Act clarified that it was not a violation of the state conflict of interest statutes for the University System to enter into joint ventures with its own employees to develop intellectual property that the employee had created in conjunction with his/her University employment.  The Act also clarified that University employees could also attain an equity interest in business entities that the University and the employee might create or be part of in order to commercially develop the intellectual property.  However, because these activities were exempted from the state conflict of interest statutes the Legislature required that such arrangements must receive the approval of the Board of Regents.  This new policy implements this Act.

 

The Policy Summarized

 

Section I.  Merely states the general purposes of the policy.

 

Section II.  Defines “intellectual property” identically to that used in Chapter 379.  This is a very broad definition so collaborative activities could go beyond seeking commercial development of what we normally think of as the fruits of university research, i.e. inventions of a technical nature.

 

Section III.  Specifies that a University System employee can contract with the University or another public body to commercially develop intellectual property created by the employee through a for-profit business entity in which ownership split among the employee, the University System and others.  In addition it allows the employee to be part of the governance of the business entity and also to hold an equity interest in the entity.  The section also covers the possibility that the University may enter into a similar joint venture with a non-employee.  This possibility is covered because, although likely to be rare, the new statute explicitly allowed it.

 

Any such arrangements are made subject to specific approval of the Regents.  Subsection A-D require that the Regents be fully apprised of the nature of the agreement prior to approval and a procedure for protecting trade secrets is laid out.

 

Section IV.  Several Board of Regents’ policies already deal with the manner in which the University may benefit from the commercial development of intellectual property created by University employees.  For example, MSU has, pursuant to Regents Policy 401.2 for decades assigned patentable faculty inventions to Research and Development, Inc. (RDI) commercial development.  Earlier this year the Regents adopted a policy (MUSP 406) under which the University units could make contracts to share the fruits of electronic course development with its faculty.  The purpose of Chapter 379 was not to upset these arrangements.  Rather, the purpose was to create a new mechanism whereby the University might be a more direct and active partner in the development using a variety of business structures that arguably were previously forbidden by statute.  This section allows these previously existing arrangements to continue along side of these new arrangements.

 

Section V.  This section requires annual reports on how any of these newly created arrangements are operating.

_______________________________________________________________

CHAPTER 379

20-25-109. Authorized university system employee or individual activities. (1) A Montana university system employee who, as part of the employee's authorized work for the university system, conceives, creates, discovers, invents, or develops intellectual property may:
     (a) if approved by the board of regents, own or be awarded equity interest or participation in the intellectual property; or
     (b) if approved by the board of regents, serve as a member of the board of directors or other governing board of or as a director, officer, or employee of a business entity that:
     (i) has an agreement with the university system or with any other Montana state agency or political subdivision that relates to the research, development, licensing, or exploitation of that intellectual property; or
     (ii) shares an ownership interest in the intellectual property with the university system.
     (2) An individual, at the request of and on behalf of the university system, may serve as a member of the board of directors or other governing board of a business entity that:
     (a) has an agreement with the university system or with any other Montana state agency or political subdivision that relates to the research, development, licensing, or exploitation of the individual's intellectual property; or
     (b) shares an ownership interest in the intellectual property with the university system.
     (3) For purposes of this section, "intellectual property" means inventions, discoveries, and creations that may be eligible for copyright or patent. The term also includes other economic development activity of a proprietary nature, including but not limited to business practices, ideas, processes, or arrangements that may not be eligible for either patent or copyright but for which the possibility of profitable commercialization exists.
     (4) An employee or individual included under the provisions of subsection (1) or (2) shall report the name of the business entity with which the employee or individual is affiliated to the commissioner of higher education and to the appropriate person within the unit of the university system at which the person is employed or on behalf of which the individual is serving.
     (5) The provisions of 2-2-104, 2-2-105, 2-2-121, and 2-2-201 do not apply to this section.

History:
     En. Sec. 1, Ch. 379, L. 2001.