Frequently Asked Questions


 

 

Would I receive a greater personal financial distribution under the Old (1963/85) or Current (1997) Patent Policy?

That depends! While it is true that an invention disclosed under the Old Policy will normally result in a greater cumulative payment to you as an inventor over the life of the invention, in any year when unreimbursed expenses exceed more than half of income, an inventor will receive a higher payment under the Current Policy.

If I choose the Current Policy can the University change the method by which my royalties are calculated in the future?

Yes. If you choose the Current Policy you will be asked to sign a form which states: "I...understand and acknowledge that the University has the right to change the Policy from time to time, including the percentage of net royalties paid to inventors..."

Why would I want to choose the Current Policy?

Strong and broad support remains across the University community for the Current Policy. This policy was issued only after broad consideration and was widely embraced by the Academic Senate, the Technology Transfer Advisory Committee, Chancellors and Laboratory Directors, as well as by front-line administrators within the University’s technology transfer program. A consensus has emerged that the Current Policy-driven direct research allocation (15% of net royalty income) to provide further incentive for faculty participation in the technology transfer program and to support research is highly desirable. Many faculty continue to support this, in spite of the fact that in many cases this provides a lesser distribution to them personally. They feel that 35% of net royalty income as a personal distribution continues to provide a sufficient reward and incentive. In addition, the simplified formula of the Current Policy enjoys an ease of understanding and administration.

What is the purpose of the Current Policy direct research allocation and how does it work?

Under the Old (1963/85) Policy, any income remaining after payments to inventors and payment of a General Fund Share accrued to individual campus and UC-managed DOE Laboratory "pools" from which technology transfer program expenses were paid. Any residual funds, after program expenses, were available to Chancellors and Laboratory Directors for discretionary use, as long as expenditures were made in accordance with University policy and certain legislative provisions. Under the Current (1997) Policy, a minimum of 15% of net income from each invention is specifically designated for research-related purposes and allocated based on plans developed at each campus and Laboratory. The research allocation remains broadly defined in the new policy so that individual sites have maximum flexibility to determine how these monies should be directed. Sites may decide to allocate funds back to inventors' research programs, departments and/or schools, or to allocate funds on another basis. Distribution of this research allocation, is only now beginning to occur. The new formula applies only to inventions reported on or after October 1, 1997.

Could co-inventors receive different personal inventor shares for the same invention?

Yes, sometimes they would. In the past the University’s position that it could change invention royalty distribution formulas as a matter of policy allowed the University to select an effective date (the date of the policy change) at which time all inventors on a newly disclosed invention would be treated the same under the Current (1997) policy.

Introducing the employment date of the inventor as one determining factor as to which royalty distribution formula would apply changes this. Different inventors on the same invention could have different employment dates and thereby could have different applicable royalty distribution formulas. Please note, though, that unless you and your co-inventors have made a separate disposition of the inventors' allocation, your choice of policy will not affect funds available to co-inventors on any past, present, or future inventions.

When Do I Make My Choice?

If you have already been paid royalties for an invention disclosed after October 1, 1997 and you are eligible to make a choice, you should have received a letter from us requesting you to return an election form by May 20, 2003 if you want to elect the Current (1997) Policy. If you did not receive this letter and you think you should have, please contact us.

If you are an eligible inventors who has not yet been paid royalties, you will be contacted before your first royalty distribution payment is made. At that time, any questions could be addressed about the application of the Old and Current Patent Policy royalty distribution formulas. Unfortunately, because the ultimate financial distribution outcomes usually cannot be determined upfront, it is impossible to predict which formula would ultimately yield the highest personal financial distributions for any given case. It is predictable however, that the Current Policy would provide 15% of any net income as a direct research allocation, as discussed above, while the Old Policy would not.

Can I make a different choice for different inventions?

No. Your choice of policy determines the calculation of your inventor share from all the inventions you have disclosed since October 1, 1997 and for any inventions you disclose in the future.

How has the University Patent Policy changed over time?

There have been many changes to University Patent Policy. Most of these changes have been unrelated to inventor shares, but the formula for allocating income generated by inventions has changed several times over the years. Issues have included: What is a reasonable royalty share for inventors? What constitutes an incentive? How much should be allocated for research that may lead to new inventions? To what extent should patent income be used to support research and education activities in the broader University community, even in fields unlikely to generate inventions? Over time the consensus has shifted and the Policy has been revised, but all allocation formulas necessarily have been a balancing of different objectives. Here’s the background:

 

 

The "Old" Policy - 1963
(re-issued as November 18, 1985 Policy)

In 1963, the University adopted a mandatory assignment policy, which required all University employees or others using University funds or facilitates to assign their inventions to the University. At the same time, the University established that inventors would share in royalties and fees received by the University, and that share was established at 50 percent of net royalties. In November of 1982, The Regents approved Standing Order 100.4 which delegated to the President, "...the Authority to execute documents necessary for the administration of intellectual property." In 1985 the University of California Patent Policy was issued as a Presidential policy, still retaining the 50 percent royalty share for inventors. The definition of net royalties has changed between policies. For this policy, net royalties were defined as "gross royalties and fees less 15% thereof for general administrative costs, and less the costs of patenting, protecting, and preserving patent rights, maintaining patents, the licensing of patent and related property rights, and such other costs, taxes, or reimbursements as may be necessary or required by law." The 50 percent inventor's share was seen as a strong incentive for compliance with the new mandatory disclosure provision.

 

 

 

Scaled Royalty System
(April 16, 1990 Policy)
Rescinded October 1, 1997

Beginning in the mid 1980's, concerns began to be raised both within and outside the University about the royalty formula. These concerns centered around the level of generosity of the 50 percent inventor's share. Outside the University, some of these concerns were raised by sponsors of research who felt that excessive funds were going to individual faculty inventors rather than to continue support for the research in question. This was part of a growing legislative interest in the appropriate use of public funds. Internally, questions were also being raised by some faculty inventors who preferred to see more funds used to support research.

In April 1990, the University revised Section II.C of the Patent Policy, to adopt a scaled inventor's royalty share system. This system was adopted on the recommendation of the Intellectual Property Advisory Council (IPAC) after consultation with campuses, DOE Laboratories, and the Academic Council. The system retained the 50 percent inventor's share for the first $100,000 of cumulative net royalties and fees per invention, 35 percent for the next $400,000, and 20 percent of all additional cumulative net royalties.

The scaled system was adopted as an attempt to address some of the concerns noted above. It was seen to lessen exposure to the criticism that public funds were being used for excessive private gain and it was hoped it would permit the University to direct more funds to the campuses to support research. In fact, the scaled system was a compromise which provided the appearance of a shift in royalty distribution without having a significant monetary effect on the overwhelming majority of inventors. Under that system, the royalty distribution of nearly 95 per cent of inventions was unaffected by the April 1990 policy change.

 

 

The Current Policy
Change to Create a Direct Research Royalty Allocation
(October 1, 1997 Policy)

Not long after the sliding scale policy was adopted concerns began to be expressed in various forums that the formula, which provided inventors with decreased percentages as net income reached higher thresholds, discouraged participation in the technology transfer program. There also was broad support for addition of a direct research allocation as a further incentive for participation in technology transfer activities. In 1995, the Technology Transfer Advisory Committee (TTAC) asked the Office of the President to prepare a new royalty distribution proposal that integrated elements of previous proposals with the various interests and concerns expressed by the University community. There was agreement that the proposal should: 1) establish the inventor's share at a rate that provides sufficient reward and incentive for faculty participation in the technology transfer program; 2) add a direct research allocation to provide further incentive for faculty participation and to support research; and 3) simplify the distribution formula for ease of understanding and administration. The resulting proposal went through several rounds of evaluation and revision by the TTAC, Academic Senate, Chancellors and Laboratory Directors before being distributed for formal review by employees in May 1997. President Atkinson issued a new University of California Patent Policy effective October 1, 1997.

The Current Policy establishes a formula that excludes the 15% administrative assessment and defines net income as total income less unreimbursed direct case expenses. Net income from each invention reported under the new policy will be distributed as follows:

35% to the inventor's personal share, and

15% to research at the inventor's campus or Laboratory.

The remaining 50% of net income will be allocated to the general pool at the inventor's campus or Laboratory.

This Presidential action rescinded the Scaled Royalty System Policy - leaving in place two existing Patent Policies - the Old Policy and the Current (October 1997 Policy).

 

Where can I find further information?

If you cannot find the answer to your concerns on this website, contact us at the Office of Technology Transfer.

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