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Regents approve revised intellectual property revenue policy


A revised intellectual property (IP) revenue distribution policy will create allocations for the University's central administration and offer faculty members more flexibility to manage personal revenues resulting from their work.

The policy, approved by the Board of Regents May 20, gives central administration a share for reinvestment in fellowships, research, education and technology transfer. It also will give faculty members the option to direct any portion of their proceeds to a University unit in lieu of accepting them as personal income.

Marvin Parnes, associate vice president for research and executive director of research administration, says U-M had an unusual intellectual property revenue policy in the fact that no revenues went to central administration. The new policy will better support the investment administration is making in the invention process, he says.

"We have been focusing on how to improve our technology transfer process and understand how we can better commercialize our research results," Parnes says. "This is part of an ongoing process to ensure we are operating under optimal conditions. It reflects more the University's investment in technology transfer."

The distribution formula is divided into three revenue categories. Net revenue derived from IP will be allocated as follows:

• Up to $200,000: 50 percent to the inventors, 17 percent to the originating department, 18 percent to the originating school or college, and 15 percent to central administration

• Between $200,000 and $2 million: 30 percent to inventors, 20 percent to the originating department, 25 percent to the originating school or college, and 25 percent to central administration

• More than $2 million: 30 percent to the inventors, 35 percent to the originating school or college, and 35 percent to central administration.

The changes are the result of a review by the Senate Assembly's Research Policies Committee (RPC), which advises Vice President for Research Fawwaz Ulaby. RPC's study during the past year surveyed 14 peer institutions and found that, on average, 40 percent of IP revenues were allocated to the schools' central administration.

"The committee viewed the proposed changes in the policy, including the return of some revenues to the University for support of additional research activities and ventures, as necessary and beneficial," says Katarina Borer, professor of kinesiology and RPC chair. "The rationale was to provide some general rules of revenue distribution on the basis of the magnitude of the revenue stream."

RPC recommended that researchers have more say in what form they receive revenue, Borer says.

The original proposal was for the money to be a personal distribution, she says, but committee members were concerned about income tax consequences and difficulties faculty sometimes encounter trying to use the funds for their research.

Parnes says the new policy will protect inventors while ensuring equitable distribution of revenues among central administration, and the schools and departments.

"We want to honor the return to the inventors—faculty members; they are the University's most critical contributors," Parnes says. "We want to ensure that faculty receive a large part of the proceeds."

Ken Nisbet, executive director of the Office of Technology Transfer, says revenues for the first three quarters of fiscal year 2004 increased 25 percent, from $6.1 million to $7.6 million. Disclosures increased 18 percent, from 172 to 203.

How that increase will affect revenues allocated to central administration remains to be seen, Parnes says. It will take some time to see, he adds, because it applies only to deals made after the new policy takes effect.

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