C. INTELLECTUAL PROPERTY

Revision - Section VIII.C
(Rules & Procedures of the Faculty)

1. GUIDING PRINCIPLE

The University’s policies concerning intellectual property are intended to further its central mission - the sustained production, preservation, and dissemination of knowledge - while exercising due care for its fiduciary responsibility for the resources it administers.

2. PATENT POLICY

a. Basic Objectives

Patents are created by the Constitution and the Laws of the United States "to promote the progress of science and useful arts by securing for limited times to...inventors the exclusive right to their...discoveries." The basic objectives of Princeton University's policy include the following:

1. To maintain the University's policy of encouraging research and scholarship without regard to potential gain from royalties or other such income.
2. To make inventions developed in the course of University research available under conditions that will promote their effective development and utilization in the public interest.
3. To provide adequate recognition and incentive to inventors through a share in any proceeds from their inventions since University salaries are not based on the expectation of income from inventions.
4. To advance and encourage research and scholarly endeavors within the University with any funds accruing to the University from patents.
5. To recognize the equity of outside sponsors in the endeavors of the University by granting appropriate limited rights to the sponsors, consistent with the University's basic objectives outlined above.

The University Research Board is responsible for general oversight and administration of the University's patent policy as regards the University, its Faculty, employees, students, and outside sponsors.

The Office of Research and Project Administration (ORPA) is responsible for the implementation of the Patent Policy under general oversight of the Board. The Office of Technology Licensing & Intellectual Property, located within ORPA, is responsible for the University's technology transfer program, providing management of inventions and patenting and licensing services for inventions developed by members of the Princeton University community.

All Faculty members, employees, and students, in consideration of their membership in the academic community and upon the approval of this policy by the Trustees and the Faculty of Princeton University, agree to handle inventions and patents resulting therefrom as follows:

1. ) The University shall own all rights in any discovery or invention resulting from research carried on by any Faculty member, employee, or student

a) in which all or part of the cost thereof is paid from University funds or from funds administered by the University, or

b) which is made as a direct result of University duties, or

c) which has been developed in whole or in part through the utilization of University resources.

2. All such discoveries or inventions must be disclosed to the Office of Technology Transfer as soon as practicable.
3. The Office of Research and Project Administration shall determine that such discovery or invention be either:

a) assigned outright to the discoverer or inventor in the event the discovery or invention does not meet any of the criteria set forth in paragraph 1) above;

b) assigned outright to the discoverer or inventor if determination is made that commercial exploitation is not warranted

c) transferred to one or more patent management organizations with which the University has contracted for commercial development or marketed by the Office of Technology Transfer;

d) forwarded to the outside sponsor if such action is required under the terms of a sponsored project agreement or by law.

4. No Faculty member, employee, or student may assign or license or agree to assign or license an invention developed under the criteria listed in C. I. above without prior written consent of the Office of Technology Transfer.
5. When the University and an outside sponsor enter into an agreement for research or other scholarly endeavor to be conducted with funds or facilities provided by said sponsor, Faculty members, employees or students who utilize such funds or facilities shall comply with the conditions pertaining to inventions and patents contained in said agreement and may be required to agree in writing that they will so comply.
6. If a dispute should arise between an inventor and the University with respect to the provisions of this Section c., questions shall be referred for decision to the University Research Board.

Any income realized by the University from its equity in an invention will be used for the purpose of research or scholarly activity, with the preferential consideration being given to the field of activity in which the invention was made.

1. For an invention in which the University owns all rights in accordance with Section C. above, the inventor will be paid the following percentages of the net income realized by the University: fifty percent (50%) of the first $100,000; forty percent (40%) of the next $400,000; and thirty percent (30%) of the amount in excess of $500,000.

2. For all licenses signed after July 1, 1998, the Department or Program of the inventor shall receive a portion of net income realized by the University as follows: zero percent (0%) of the first $100,000; ten percent (10%) of the next $400,000; and twenty percent (20%) of the amount in excess of $500,000 up to a maximum of one million dollars ($1,000,000).

3. For inventions which the University releases outright to the discoverer or inventor under the provision of Section C. above, the University may also release all claims to any subsequent income received by the discoverer or inventor.

Research supported by outside funds is governed by the Policies for Sponsored Research which are set forth in the Rules and Procedures of the Faculty of Princeton University and also in the Rules and Procedures of the Professional Research Staff and Professional Technical Staff of Princeton University.

When a sponsor of research at Princeton University desires a formal agreement that includes conditions applicable to inventions and patents, the provisions of such agreements will be negotiated giving full consideration to this Patent Policy and to the objectives cited in Section a. hereof.

1. Definitions

   1.1   "Patent Committee" means the Patent Committee of the University Research Board comprising the Chairman of the University Research Board (URB), the Director of Princo, Treasurer, University Counsel, and one member of the Faculty, chosen from the URB.

   1.2   "Equity" means shares of stock or securities, including but not limited to stock options, warrants, or any other rights to purchase stock or securities.

   1.3   "Equity Pool" means the total allotment of Equity negotiated by the University as consideration for a license of the University’s interest in an Invention.

   1.4   "Inventors" means University faculty or other employees who individually or jointly make an Invention subject to the Patent Policy and who meet the criteria for inventorship under United States patent laws and regulations.

   1.5   "Patent Policy" shall mean the University patent policy.

   1.6   "Licensing Costs" means all historic and on-going patent and legal costs relating to the patents licensed.

   1.7   "Net Equity Income" means the proceeds realized by the University from the dividends or sale of Equity received by the University in a licensing agreement, net of Licensing Costs.

   1.8   "Intellectual Property Administrator" ("IPA") means the Director, Office of Technology Licensing.

2. Rules Governing Equity Transactions

   2.1   License in Consideration of Equity. The principal purpose of licensing by the University is to promote the development of technologies to serve the public interest. If after a diligent effort to identify prospective licensees, the IPA determines that the public interest is best served by a license in consideration of Equity, the IPA may negotiate such a license on behalf of the University, following approval of the Patent Committee. The IPA should be satisfied that the licensee can demonstrate management and technical capability, and that it has the financial resources necessary to meet its developmental objectives and its obligation to the University. The IPA may accept Equity in the licensee for the University in lieu of license or other fees, provided that the Equity represents a fair valuation for the technology. The IPA shall include in each license measures of performance that must be met in order to maintain the license granted by the University.

   2.2   Conflicts of Interest in License Agreements Involving Equity. License agreements involving Equity must be structured to protect the University from liability and to avoid conflicts of interest. The Inventor(s) shall disclose to the IPA any existing or proposed consulting agreement between the Inventor(s) and the prospective licensee or any other consulting agreements with other entities that have potential for conflicts of interest. The IPA shall inform the Patent Committee, the Conflict of Interest Committee, and the involved Inventor(s) in writing of the proposed terms of the agreement and of any potential conflicts of interest. The University may impose limitations on the proposed license agreement, associated sponsored research agreement, consulting agreement between the Inventor and the licensee, or other agreements.

   2.3   Board Participation and Fiduciary Roles. The University will not accept a position on the board of directors of t he licensee, but may accept and exercise observer rights on such boards. Exceptions to this policy require the approval of the President. In accordance with the University policy, Inventor(s) may not take positions that affect adversely either the Inventor’s own independence or the integrity of the University. An Inventor may not accept a regular and continuing position with significant responsibility for the management of an outside enterprise. Also, an Inventor may not become a regular and continuing employee of any outside organization, either part-time or full-time, or accept any outside position that would tend to create a conflict of interest or a conflict of commitment with the individual’s primary obligations to the University.

   2.4   Disclosure of Equity. The University will require the prospective licensee to disclose all Equity offered to the University, its employees, and other institutions or individuals in consideration for the license agreement. In addition, the prospective licensee will be required to disclose in writing to the IPA the specific terms and conditions associated with such Equity, and the anticipated capital structure of the venture. Furthermore, the prospective licensee and the Inventor(s) must disclose to the IPA in writing the equity to be issued to Inventor(s) for their role as founders, consultants, or otherwise.

   2.5   Direct Personal Ownership of Equity. The University generally requires that the Equity provided to Inventor(s) from the Equity Pool must be issued directly to the Inventor(s), in proportions consistent with the Patent Policy, at the time the Equity is issued. The Inventor(s) will be responsible for retaining their own business advisors, legal counsel and tax counsel. Inventor(s) are responsible for all financial, tax and legal consequences related to the Equity they receive. An Inventor who receives Equity from the Equity Pool will not be entitled to any share of the University’s Net Equity Income.

   2.6   Modifications of Rules. These Rules Governing Equity Transactions and Equity Distributions in License Agreements are subject to the review and approval of the President. These Rules will be reviewed on a regular basis by the Patent Committee, which shall report recommendations for amendments to the President as needed.

   2.7   Management of Equity. Any Equity received by the University under a license agreement will be held by the Office of the Treasurer until the earlier of: i) the earliest date on or following the initial public offering (IPO) date in which the trading of the Equity is not restricted by law or underwriting agreement; or ii) the date that the company is acquired and its stock is converted into unrestricted stock in a publicly traded company.

   At such time that the Equity becomes liquid through one of these events, the Equity shall be sold in an orderly fashion and the proceeds of the sale shall be transferred to OTL’s income account for distribution in accordance with the University’s royalty sharing and equity policies.

   In some cases, the Equity will not be sold in the open market, but rather will be transferred to the University investment portfolio for consideration equivalent to the "Prevailing Price", as defined below. Such transfers will take place when and if the Princeton University Investment Company ("PRINCO") determines that the Equity represents an attractive investment opportunity. This determination will be based solely on economic and investment considerations, and PRINCO will likely consult with external specialists in assessing the Equity’s prospects.

   The "Prevailing Price" will be either of two values described below:

   In cases in which the Equity would otherwise be sold in an IPO, the "Prevailing Price" will be the IPO price. In these cases, the decision to transfer the Equity must be made and communicated to the Treasurer’s Office prior to the start of public trading. The transfer will not be allowed if it would conflict with security or other legal regulations, or with underwriter agreements.

   In all other cases, the "Prevailing Price" will be the price at the close of trading on the relevant date described above. In these cases the decision to transfer the Equity must be made and communicated to the Treasurer’s Office before the start of trading on the next business day.

3. COPYRIGHT POLICY

a. Basic Objectives

Copyrights are created by the Constitution and the Laws of the United States "to promote the progress of science and useful arts by securing for limited times to authors ... the exclusive right to their writings." The basic objectives of Princeton University's policy as to copyrights include the following:

1. To maintain the University's policy of encouraging research and scholarship without regard to potential gain from royalties or other such income.

2. To maintain the basic right of any individual within the University community to write and publish.

3. To encourage the dissemination of copyrightable materials developed in the course of University activities.

4. To recognize each individual's right to all income resulting from his writings except as stated herein.

5. To disavow any claim of equity on the part of the University in the writings of any individual simply because of the individual's membership in the University community.

6. To advance and encourage research and scholarly endeavor within the University with any funds accruing to the University from copyrights.

7. To recognize the equity of outside sponsors in the endeavors of the University by granting appropriate limited rights to sponsors, consistent with the University's basic objectives outlined above.

The University Research Board is responsible for general oversight and administration of the University's copyright policy as regards the University, its faculty, employees, students and outside sponsors.

The Office of Research and Project Administration (ORPA) is responsible for the implementation of the Copyright Policy under general oversight of the Board. The Office of Technology Licensing and Intellectual Property, located within ORPA, is responsible for the University's Copyright and Trademark Licensing Programs, providing management of copyrights and trademarks and licensing services for the University community.

All faculty members, employees, and students, in consideration of their membership in the academic community and upon the approval of this policy by the Trustees and the Faculty of Princeton University, agree to handle material subject to copyright as follows:

1. The University shall, except as provided by specific contract between the author and the University, have the right to obtain and own copyright and to retain any income from copyrightable material which is developed by individuals whose specifically assigned duties include the preparation of that material.
2. The University supports the normal teaching and research efforts of its faculty in a variety of ways. The University considers these allocations appropriate to further the individual scholarly activities of the members of the University community and makes no claim to the copyrights from products of these activities. However, under some conditions, this support may include substantial resources specifically designated for the development of intellectual property from which a faculty or staff member may derive personal income from the outside. In such cases, the University considers it has some equity and part of the income received should be used to reimburse the University for use of its resources.
3. When the University and an outside sponsor enter into an agreement for research or other scholarly endeavor to be conducted with funds or facilities provided by said sponsor, faculty members, employees or students who utilize such funds or facilities shall comply with the conditions pertaining to copyrights contained in said agreement and may be required to agree in writing that they will so comply. Where the University is the recipient of sponsored research funding it will generally retain ownership of copyrights, especially of technical data and patentable computer programs but not generally of literary, artistic, scholarly, or educational works (even if embodied in computer software or programs). Income realized by the University from such copyrights shall be distributed in accordance with the formulas in 2.d above unless the written agreement requires otherwise.
4. The University shall not, except as provided by specific contract between the author and the University, claim any equity in or right to the copyrights in material other than that covered by paragraphs 1, 2, and 3 above.
5. If a dispute should arise between an author and the University with respect to the provision of this Section C, questions shall be referred for decision to the University Research Board.
6. Ownership of the copyright in computer software shall be in accordance with the provisions laid out above. However, because the analysis underlying the University's decision as to whether it will assert rights to any software may be more complex than the analysis with respect to other works, software is subject to special disclosure requirements. Specifically, if the faculty member or other creator believes the software has commercial potential or wishes to license or otherwise commercialize the software developed, whether or not the creator believes the University would assert rights to it, he or she must disclose the software to the University for a determination of ownership of the respective intellectual property.

The types of material that may be subject to copyright include the following:

1. Literary Works, such as books, journal articles, texts, glossaries, bibliographies, periodicals, manuscripts, study guides, laboratory materials, syllabi, and tests.
2. Musical works, including any accompanying words.
3. Dramatic works, including any accompanying music.
4. Pantomimes and choregraphic works.
5. Motion pictures and other audio-visual works.
6. Sound recordings.
7. Architectural works.
8. Computer software.

Any income realized by the University from its equity in copyrightable material will be used for the purpose of research or scholarly activity, with preferential consideration being given to the field of activity in which the copyrightable material is generated.

1. For a copyright in which the University owns rights in accordance with Section C, above, the creator will be paid the following percentages of the Net Income realized by the University: fifty percent (50%) of the first $100,000; forty percent (40%) of the next $400,000; and thirty percent (30%) of the amount in excess of $500,000.
2. For all licenses signed after July 1, 1998, the Department or Program of the creator shall receive a portion of Net Income realized by the University as follows: zero percent (0%) of the first $100,000; ten percent (10%) of the next $400,000; and twenty percent (20%) of the amount in excess of $500,000 up to a maximum of one million dollars ($1,000,000).

© 2003 - 2006  Office of Technology Licensing
PO Box 36, 4 New South Building
Princeton University, Princeton, NJ 08544 
FAX: 609/258-1159

John F. Ritter, Director : 609/258-1570
William H. Gowen, Technology Licensing Associate : 609/258-6762
Laurie Tzodikov, Licensing Associate : 609/258-7256