Licensing Income Distribution

Policy Number: 
II.07.01
Reason for Policy: 

To set forth the manner in which revenues received from licensing of the University's intellectual property rights will be distributed.

Entities Affected by this Policy: 

Faculty and staff engaged in matters relating to licensing of IP and management of IP-related licensing revenue.

Enactment & Revision History: 

07/27/2017 Reviewed with no changes recommended; policy number changed to II.07.01 and technical changes made by the University Secretary

01/14/2011 Reviewed with no changes recommended

02/08/2010 Policy number revised from 3.000 to 09.00.06

Issued by the President on 09/18/1998

Policy: 

II. Preamble:

UO Policy II.07.02 states that it is the university’s intent to, "establish principles and procedures for equitably sharing net royalty income with employees, and with sponsoring agencies when required by an agreement." Royalty income shall be defined as cash royalties and fees. The policy further states the following: Employees [inventors and authors] shall be eligible to share in net royalty income from each invention or separate improvement thereof, an amount not to exceed:

(a) 40% of the first $50,000, 35% of the next $50,000, and 30% of all additional net royalty income received by the Board for inventions and technological improvements; and

(b) 50% of net royalty income from educational and professional materials.

Persons entitled to share in this distribution of net royalty income include: faculty, staff, assistants, graduate teaching fellows, graduate research assistants, and student employees.

The employee's share of net royalty income referred to above is the maximum percentage of net royalty income allowed for distribution to inventors and authors. Hence, this amount shall be divided between said inventors or authors, should there be more than one, in an amount agreed upon in writing by all the inventors and authors.

Section 6.250, (3) of the Internal Management Directives (IMDs) defines net royalty income as gross royalty income received by the University minus the following costs: all institutional expenses and reasonable costs incurred in developing the invention or material, expenses incurred in [obtaining], enforcing or defending any patent, copyright litigation, licensing, interference, and marketing costs attributable to the invention or material, as well as any other expenses deemed necessary to recoup. In the normal situation this means repayment of the direct expenses paid by the University to attorneys for the filing and prosecution of the patent applications, or registration of copyright or trademark.

Section 6.250, (6) of the IMDs states that, "net royalty income received by the Board, less the amount distributed, if any shall be dedicated to the institution of the inventor, or author, subject to the limitation of ORS 351.250. The use made of such net income shall be at the discretion of the president, subject to Board-established budget policy."

III. Distribution of Net royalty income Less Distribution to Employees

Under this policy, the employees' share of net royalty income will normally be (a) 40% of the first $50,000, 35% of the next $50,000, and 30% of all additional net royalty income received by the Board for inventions and technological improvements; and (b) 50% of net royalty income from educational and professional materials ("Employee's Share"). In addition, if equity is granted pursuant to the granting of a license, the Employee's Share of the equity will normally be one-third of the total equity granted. It is the expected that the employee will not receive consideration for the technology as it exists at the time of the licensing agreement, in addition to his/her Employee Share. However, it is understood that an employee may participate with an entity which is further developing the technology, and may receive consideration for that participation.

Net royalty income and equity less the Employee's Share constitutes the "University's share" of net income and equity. The University's share of net income shall be distributed as follows:

(a) 50% to the employee's academic unit ("Unit Share"); and

(b) 50% to the University ("Central Share").

The University's Share of equity will normally be held by the University of Oregon Foundation which will be responsible for distributing the income from such equity, if and when available, with the concurrence of the Vice Provost for Research, following the policies above for the distribution of royalty income.

Where there is more than one inventor or author and they are affiliated with different academic units, the Unit Share shall be divided between the academic units in accordance with the percentage each inventor contributed to the invention, technological improvement, or creative work (i.e., educational material, or professional material). Ideally, the Unit Share shall be used to support the continued research/ developmental activity of the inventor(s)/author(s).

Where an inventor or author is affiliated with more than one academic unit, the Unit Share shall go to the academic unit (e.g., department, institute, etc.) which fostered most of the said inventor's or author's work on the project. If such a determination cannot be made, then the Unit Share shall go the inventor's or author's primary unit. Where an inventor or author has left the University prior to its receipt of gross royalty income, subject to distribution hereunder, his/her Unit Share shall remain with the respective academic unit.

While the distribution of the Central Share shall normally be made to the University's patent budget, some or all of these dollars may be reallocated at the discretion of the Vice Provost for Research.

Collaborations frequently occur between employees of the University and other institutions or corporations. In such cases, the University may be required to share its portion of gross royalty income with another party under a joint exploitation agreement. In these cases, the managing partner under such an arrangement may be required to first distribute the partner's income prior to deduction of its valid costs and subsequent distribution of net royalty income.

Distribution of net royalty income shall be made at least once annually. Inventors/authors receiving such monies from licensing revenues shall assume full responsibility therefore (e.g., tax consequences).

Notwithstanding the foregoing, net and gross royalty income can also be held back to cover anticipated reimbursable, but not yet incurred, costs associated with a particular technology.

IV Examples of Distribution of Royalty Income

1. The Office of Technology Transfer (OTT) receives a check for $75,000 for a license fee (gross royalty income) called for under a newly executed license agreement. The license is for patented technology developed by Dr. X from the Department of Chemistry and Dr. Y from the Materials Science Institute (MSI). OTT has expended $10,000 on patent costs thus far and the licensee has agreed to pay future patent costs directly. The revenue shall be distributed as follows:

$75,000 minus $10,000 for patent expenses incurred by OTT leaves $65,000 net royalty income for distribution to faculty/inventors, the departments (Unit Share) and the University (Central Share).

Amount first $50,000 remain. $15,000

______________________________________

Faculty 40% 20,000 35% 5,250

Dr. X (60%) (12,000) (60%) (3,150)

Dr. Y (40%) (8,000) (40%) (2,100)

Unit Share 30% 15,000 32.5% 4,875

Chem (60%) (9,000) (60%) (2,925)

MSI (40%) (6,000) (40%) (1,950)

Central Share 30% 15,000 32.5% 4,875

______________________________________

Total 100% 50,000 100% 15,000

note: amounts in parenthesis are subtotals.

______________________________________

Reminder: net royalty income for inventions is distributed to inventors at the rate of 40% of the first $50,000, 35% of the next $50,000, and 30% of amounts over $100,000. For educational and professional materials, which are typically protected by copyright, 50% of net royalty income is distributed to the authors.

Chapter/Volume: 
  • Volume III: Administration of Student Affairs
  • Chapter 7: Intercollegiate athletics
Responsible Office: 

For questions about this policy, please contact the Office of the Vice President for Research and Innovation at (541) 346-2090, vpri@uoregon.edu 

Original Source: 
UO Policy Statement