LICENSING AND TECHNOLOGY DEVELOPMENT-
BACK
For Love and Money - Receiving Royalties
for Your Inventions Made at The Johns Hopkins University
While Thomas Edison’s assertion that,
“the value of an idea lies in the using of it” stands
to reason, academic scientists are rarely in a position to develop
their technologies into finished products that are directly
beneficial to the general public. Rather, there is often a gap
between university inventions and marketable products that can
vary in magnitude depending upon the nature and developmental
stage of each technology. To bridge this gap, university, government,
and industry leaders have taken a number of steps to promote
the licensing of university technologies to industry where the
inventions can be further developed. As a result, university
technologies now provide a wealth of opportunity for consumers
to access useful new products and services, and, through the
process of technology transfer, the opportunity of financial
rewards for those parties involved at each step of the technology’s
development.
Revenue generated by the licensing of
inventions made at JHMI benefits the inventors, their laboratories,
their departments, the School, and the University. On April
2, 2001, the Executive Committee of the Johns Hopkins Board
of Trustees revised the revenue distribution schedule for net
royalty and equity (see e.g. http://www.hopkinsmedicine.org/
lbd/IPG/JHU_distribution-policy_april01.htm.) This new schedule
is more generous to the University’s talented inventors
than the previous formula.
Specifically, thirty five percent of net
revenue is divided among the JHU inventors according to their
percent contribution to the invention as agreed upon in writing
by each inventor prior to licensing. Fifteen percent of the
net revenue is distributed to each of the inventor’s laboratory
and the inventor’s department. Faculty members with joint
or multiple appointments must indicate, on the Report of Invention,
only one department under which a particular invention was made.
Thirty percent of the first $300,000 in net revenue, and twenty
five percent of net revenue above $300,000 is distributed to
the faculty’s School. When an invention is the result of
a collaboration among Johns Hopkins faculty members, the laboratory,
department, and School shares are apportioned in accordance
to the relative contribution of each laboratory. The remaining
share of the net revenue (five or ten percent) is retained by
University.
Business trends and the rules of accounting
impact the amount of revenue available for distribution. For
example, LTD can only distribute monies that are actually paid
to JHU, as opposed to monies that are simply due the University.
In the fight to keep their companies liquid through difficult
economic times, financial executives may delay or avoid paying
their bills (Gamble, “Turning A/R into Cash”, Business
Credit, April 2002, pages 24-28). During the current tight economy,
many of Hopkins’ licensees appear to be following such
a strategy. In response to this trend, LTD has become more aggressive
in its collection efforts.
Revenue available for distribution is
also reduced by out-of-pocket expenses. These expenses include,
for example, fees incurred for patent or other legal work. While
JHU’s Intellectual Property Policy does allow a deduction
of a one-time processing fee of up to $25,000, the processing
fee is not routinely used to cover expenses. Importantly, processing
and maintenance fees are not retained by LTD; instead, they
are credited to the School in which the invention was developed.
In fiscal year 2003, LTD distributed over
2.4 million dollars to inventors and their laboratories. Distributions
were made in December and then again in June. In the future,
royalty distributions will be made annually in June to coincide
with the end of the fiscal year. It is important to note that
the distribution to inventors is pre-tax, and inventors are
responsible for all applicable income taxes.
Universities have been, and continue
to be, a haven wherein academicians are free to pursue their
interests in basic research. Increasingly, however, both the
means and the ends of biomedical research pursued at teaching
institutions have clear immediate, as well as far-reaching,
applications. If you feel that your research results or novel
research tools have market potential, you are encouraged to
complete a formal Report of Invention and return it to LTD.
Not only could you see the results of your research borne out
in the marketplace, but you may also receive a little extra
money for simply doing the research that you love.
Report of Invention: Revenue
What is JHU’s policy on
revenue distribution for JHU inventors?
When a member of the faculty, staff, or in certain cases,
a student develops an invention with direct or indirect support
from JHU**, JHU requires that inventor
to assign his or her rights in the invention to the University.
In return for this assignment, JHU shares with the inventor
any net revenue that may be earned if an invention is successfully
licensed. This article will answer some frequently asked questions
regarding those portions of the Report of Invention (ROI) that
relate to distribution of licensing revenue.
The most frequently asked question
from JHU inventors, is “Why does the ROI ask for my Social
Security Number?”
Licensing & Technology Development (LTD) understands inventors’
reluctance to provide such sensitive information, however, the
SSN number is essential to the University’s ability to
send payment to the inventors. Licensing revenue received by
an inventor is taxable as ordinary income. Without an SSN, the
University’s tax office cannot issue a 1099 statement of
income, nor can Accounts Payable process payments (because of
name similarities). LTD’s need for a SSN is only applicable
to inventors that contributed to the inventive process while
under JHU employ. Collaborating inventors from outside institutions
are subject to their own institutions’ policies and need
not disclose their SSN to JHU.
Inventors have also expressed concern
over the ROI’s request for their residential addresses.
LTD asks for the inventors’ residential addresses for many
reasons. For example, this information is required for application
of a U.S. patent. In regard to revenue distribution, an inventor’s
home address is the default address to which LTD will mail his
or her payments. However an inventor may at any time select
an alternative payment address provided that he/she indicates
this to LTD in writing. LTD asks JHU inventors to provide their
residential addresses each time a new ROI is submitted. This
ensures that LTD’s inventor contact information is current.
Correct and updated contact information gives LTD the ability
to get revenue out to inventors efficiently and enables LTD
to communicate critical developments regarding license agreements.
New addition to the ROI – JHU
inventors’ contribution percentages
LTD’s recently revised ROI has added a request for a percentage
breakdown of each inventors’ contribution to the invention
on the Inventors’ Assignment page of the form, “Section
B”. This “% of Contribution” section is used
by LTD to apportion revenue to JHU inventors based on individual
effort or input toward the development of an invention. If all
inventors have not verified by signature a particular percentage
distribution, or if this section of the ROI is not completed,
per JHU policy, the inventor’s share of net revenue will
be split evenly among all assigning inventors. Please note that
if inventors ever wish to make changes to contribution percentages,
they can do so upon delivery to LTD of a mutual written agreement
signed by all inventors.
Further concerns or questions regarding
the ROI can be answered, simply call or write Jason Paradis,
Sr. Technology Licensing Asst. for LTD, at 410-516-6514 or jpparadis@jhmi.edu.
For more information regarding revenue distribution, contact
Doreen Ferrington, Financial Manager for LTD, at dferrin1@jhmi.edu.
** please see
the Intellectual Property Policy Guidelines and/or LTD’s
Intellectual Property Management & Licensing Practices.
