Invention Management Procedures

University of North Carolina at Chapel Hill

Office of Technology Development

February 3, 2009

I.  Role of the Office of Technology Development

UNC actively supports the development of new ideas that have commercial opportunities or societal impact.  The primary role of the Office of Technology Development (OTD) is to help UNC researchers identify new innovations and, in consultation with the innovators, determine the best way to encourage development of new products and services based on these ideas. 

The OTD is tasked with managing the intellectual property owned by the University and ensuring that all transactions comply with federal and state laws, University policies and procedures, and obligations arising through external research funding and material use agreements.  OTD also manages invention reporting to the federal funding agencies as required by them for all federal contracts and grants. 

The OTD personnel have extensive experience in all facets of technology deployment including intellectual property protection and management, starting a company, attracting investment,  complex commercial transactions, equity-based financing structures, as well as methods for disseminating research results freely via no-cost license agreements and open source software licenses.  The OTD’s licensing staff members have educational backgrounds in pharmacology, biology, chemistry, business and engineering, and over 50 years of collective experience in technology marketing, business development and management of complex business relationships and licenses. 

II.  Invention Reporting Process

The process begins with an initial disclosure of a new idea or research result to the OTD via a “Report of Innovation” or “ROI”.  Through this process, the OTD can establish what has been created and by whom, what form of intellectual property is involved, what obligations may already be in place for this innovation, and who has ownership interests in the innovation. 

     A.  How to report an invention
to report an invention

University researchers who, either alone or in association with others, make an innovation in which the University has or may have an interest, must complete a Report of Innovation  (ROI) via BLUE, OTD’s web-based information management system: https://cfx.research.unc.edu/blue/index_auth.cfm

Within BLUE researchers may create an ROI, complete signatures, submit the ROI, and view the status of all of their technologies under management at the OTD, including associated patents and agreements. 

     B.  What to report

to report

Researchers should report all new ideas they think might be considered an invention or might have a use outside the University.   They should also report research results such as new software, cell lines, research tools, or unexpected results from externally funded research projects.

Inventions

All inventions should be reported to the OTD.

Essentially an ‘invention’ is an idea that is new and falls within the type of ideas that are covered by patent law.  Very broadly, patents are awarded to new ideas for things that can be made by man, or the processes to make them.  Types of works that are eligible for patents are machines, processes, methods and compounds, and improvements to the same.  An idea must be distinctly different from all earlier ideas (the ‘prior art’) to be eligible for patent protection. 

It is not always easy to know when an idea qualifies as an invention, but it is wise to consider whether or not one has something patentable any time one has created a new entity, discovered something that solves a known problem, has come up with a way to do something that no one else has reported yet.   The time to think about a patent is at the point where one has an idea conceptualized to a point where one can describe what the idea is and what it does.

Tangible Property

Research tools for use by commercial companies should be reported to OTD.

Many research tools developed at UNC are freely shared with other researchers. Some tools may also be useful for commercial applications and OTD frequently licenses these tools to companies for a fee. Examples of tangible property that should be reported to OTD for commercial deployment include unique mouse models, antibodies, assay systems and cell lines.

     C.  When to report

A Report of Innovation form should be submitted as soon as you can completely describe how to practice the inventions, or if tangible property, when the work is completed.  There are very rigorous standards for filing and protecting patentable ideas (inventions), and failure to adhere to these requirements can result in a loss of rights. 

Ideally you should complete a Report of Innovation at least 30 days prior to any public disclosure of a potentially patentable idea.  Timeliness in submitting your ROI is very important, as shown below:

It is important that you not discuss, publish or display your invention with persons outside of the UNC-CH community without first disclosing it to the OTD and allowing the OTD time to complete its initial review and pursue a patent, if appropriate.  You should allow as much time as possible, but at least 30 days, as the OTD is typically working on 100-200 new invention reports and 1000 active inventions at any given time.

The reason for exercising caution is that under patent law, if you disclose your invention to someone who is not obligated to treat the disclosure as confidential, you and UNC risk losing the ability to file patents. Most life science inventions are considerably devalued or are worthless to companies if they cannot be patented.  Some software may not need a patent to facilitate commercialization, but it is best to review first, disseminate second. Even if you are not sure if your invention is, in fact, an invention under patent law, you should not disclose it outside of UNC-CH until disclosing it to the OTD.  The OTD can help you make the determination of whether your technology is patentable or otherwise protectable.

When you want to discuss your invention with colleagues at other universities or companies, the OTD will prepare and execute a Confidentiality Agreement (CDA) with that company or university. A confidentiality agreement, among other things, protects our right to file patents, and it makes it more difficult for unauthorized use of your (although a patent is the best defense against such unauthorized use).

III.  Evaluation of ROI by the OTD 

Within 60 days of receipt of an ROI, the OTD Project Managers will complete an initial commercialization assessment that will evaluate the following:

     A.  Stage of development of the invention 

In arriving at a decision to file a patent, it is important to assess what resources will be required to develop the invention for commercial applications. The OTD conducts this analysis through discussion with the inventor(s), potential clients, and industry contacts, and relies on the business expertise within the OTD and UNC. To facilitate the assessment, it is important to identify all results obtained and any work done to prove the concept or test the invention in various applications or environments.

     B.  Strength of available patent protection

This assessment considers whether the reported invention meets the statutory criteria for patent eligibility;  whether there are concerns regarding novelty, obviousness or enablement; and whether other patents have been issued that might limit the scope of a patent we could obtain or otherwise impact a licensee’s freedom to practice our invention. 

     C.  Commercial opportunity

This analysis considers how the invention solves a known problem or offers and improvement to existing products or methods.  It is necessary to consider the size of the potential market and its value, and the likelihood that a commercial entity would be willing to invest in the invention given its stage of development and strength of patent protection, if applicable.   It is important to identify both known and potential applications for the invention for this analysis.

     D.  Encumbrances

This assessment considers obligations to third parties through contractual agreements, including material transfer agreements and research sponsorships.  Also impacting an invention’s readiness are any questions regarding inventorship, ownership, control, or conflicts of interest or commitment. The OTD will review all agreements in place in the inventor’s lab to determine existing encumbrances.

IV.  Management of Inventions by the OTD

Upon completion of the initial assessment, the Project Manager will recommend one of five commercialization categories for the invention, or closure.  Each of the categories provides guidelines and timelines for commercialization:

Launch

Inventions that are fully developed when reported to the OTD, appear to have strong patent protection available, and a licensee or startup opportunity identified are considered ready for immediate patent filing and licensing; as long are there are no unresolved conflicts or ownership issues present.  

For ‘Launch’ inventions, the OTD will file provisional or utility patent applications (see Section V) as required and target commercial license completion within 6 months.

Accelerate

Inventions that are not fully developed but appear to have strong commercial and patent potential are accepted by the OTD and marketed to prospective licensees for commercial development; as long are there are no unresolved conflicts or ownership issues present. 

For ‘Accelerate’ inventions, the OTD will file provisional or utility patent applications as required and target commercial license completion within 12-18 months.  If a licensee cannot be found prior to foreign patent filing deadlines (see Section V), the OTD will consider carrying the costs of continuing with patent prosecution if the commercial opportunity is still viable and such patents are required for commercialization.  These inventions may also be offered to business school(s) and entrepreneurial/venture groups to help advance them and develop marketing/business plans. If a startup venture is contemplated, the OTD will assist founders in securing outside support through venture capital, loans, grants, and business plan competitions.

Develop

Inventions that are not developed but appear to have strong commercial and patent potential are accepted by the OTD and marketed to prospective licensees for commercial development; as long are there are no unresolved conflicts or ownership issues present.  

For ‘Develop’ inventions, OTD will file provisional patent applications as required, but may determine to hold off on filing until further development work can be completed.  OTD will target license completion within 18-24 months. If a licensee cannot be found prior to foreign patent filing deadlines, the OTD will consider carrying the costs of continuing with patent prosecution if the commercial opportunity is still viable and such patents are required for commercialization.  These inventions may also be offered to business school(s) and entrepreneurial/venture groups to help advance them and develop marketing/business plans. If a startup venture is contemplated, the OTD will assist founders in securing outside support through venture capital, loans, grants, and business plan competitions.

Distribute

Inventions that are suitable for direct distribution to end users under a fully paid up or no-fee license, such as research tools, software and digital media may be distributed under an appropriate licensing strategy by the OTD.  Patent protection will typically not be sought for such technologies as the subject matter is ineligible for patent protection or patents are not required for commercialization.   

For ‘Distribute’ inventions, the OTD will discuss options with inventors and develop appropriate end use license or transfer documents, develop marketing materials, and market and license these technologies via the OTD’s website and other channels.

Revisit

Inventions that are reported to the OTD, but are not yet complete or have unresolved conflicts or ownership issues that make it difficult to evaluate the commercial opportunity should be reviewed at a later date.   

For ‘Revisit’ inventions, OTD will work with inventors to establish next steps and reevaluate whether the technology is ready for commercialization at 6 month and 12 month intervals.  After 12 months, if the technology is not ready to move forward, the OTD will close the case in accordance with the procedures set forth in Section VIII, below.

V.  Patents

A U.S. Patent is a Federal grant based on an invention, which gives the holder the right to exclude others from making, using, or selling the invention in the United States.  A patent is active for a twenty-year period which begins when the patent application is filed.  However, the right to exclude others begins only when the patent is issued.  Patent applications are currently based in the U.S. on a first-to-invent system, which means that if two applications cover the same material, the patent will be awarded to the entity that can document the earliest date of invention.  The rest of the world is on the first-to-file system, and if two applications cover the same material, the patent will be awarded to the application that is filed first.  

     A.  Patentable Inventions

To be patentable, an invention must be new, useful, and non-obvious.  A novel invention must incorporate matter, a process, a machine, or an article of manufacture different from anything previously known.  A useful invention solves a problem, improves on or proposes a new use for an existing product, or produces a desirable result.  A non-obvious invention is one that would not have been obvious to a person having ordinary skill in the related technology or field at the time the invention was made.  A considerable amount of case law clarifies this standard, which is otherwise very difficult to interpret and apply.

     B.  Decision to Pursue Patents

Obtaining a U.S. patent on an invention typically costs between $10,000 and $20,000, and if foreign patent applications are also envisioned, the total cost to secure patent rights on a single idea can quickly reach several hundred thousand dollars.  Thus, before the University decides to proceed with seeking patent protection, consideration is given to any patenting obligations we have to the sponsors of the research, the commercial utility of the invention, its competitive superiority, the necessity for extensive development work, and the availability of a company that is willing to pay for a license to the invention. In cases where a licensee has been identified, patenting costs generally can be recovered.  The OTD pursues patents for all technologies where having a patent is crucial for commercial development and there appears to be patent protection available and a reasonable commercial opportunity.  

     C.  Inventor Role in Patent Filings

The OTD will select appropriate legal counsel to file patents on behalf of the University in the name of the inventors.  The inventor(s) will need to work with the attorneys to prepare the initial filing, and periodically review and respond to Patent Office Actions and requests for information from the attorneys as the patent is prosecuted.  It typically takes three to four years for a patent to be issued. 

     D.  U.S. Patent Application Process
 

Patent applications are filed with the United States Patent and Trademark Office (USPTO.)  In the US, there are two types of applications, a non-provisional application (also called full application or utility application) and a provisional application.  Either a provisional or non-provisional application must be filed within 12 months after publication of the invention to be eligible for consideration for a patent.

          1.  Non-Provisional Application for a Patent

A non-provisional application for a patent includes a written document that comprises a specification (description and claims), and an oath or declaration; a drawing in those cases in which a drawing is necessary; and filing, search, and examination fees. The portion of the application in which the applicant sets forth the claim or claims is an important part of the application, as it is the claims that define the scope of the protection afforded by the patent.  

Patent applications must adhere to strict standards and failure to do so can result in non-acceptance of the application.  The OTD uses North Carolina patent attorneys approved by the UNC System to prepare and monitor all aspects of patent preparation for UNC, under the advice and direction of the OTD.   A patent application may need to be revised several times over the course of its review in the USPTO.  An application may also be separated into multiple applications if more than one invention is described in the initial application.  Each non-provisional filing costs between $10,000 and $20,000 by the time of issuance. 

           2.  Provisional Application for a Patent

Since June 8, 1995, the USPTO has offered inventors the option of filing a provisional application for patent which was designed to provide a lower cost first patent filing in the United States and to give U.S. applicants parity with foreign applicants. Claims and oath or declaration are NOT required for a provisional application. Provisional application provides the means to establish an early effective filing date in a patent application and permits the term “Patent Pending” to be applied in connection with the invention. Provisional applications may not be filed for design inventions.  

The filing date of a provisional application is the date on which a written description of the invention, and drawings if necessary, are received in the USPTO. The applicant would then have up to 12 months to file a non-provisional application for patent as described above. The claimed subject matter in the later filed non-provisional application is entitled to the benefit of the filing date of the provisional application if it has support in the provisional application.  

Provisional applications are NOT examined on their merits. A provisional application will become abandoned by the operation of law 12 months from its filing date. The 12-month pendency for a provisional application is not counted toward the 20-year term of a patent granted on a subsequently filed non-provisional application which claims benefit of the filing date of the provisional application.  

A provisional filing costs between $500 and $1000.  UNC makes considerable use of the provisional filing option as this allows inventors 12 additional months to complete work on the invention and the OTD to market the invention to potential partners prior to investing in the costly non-provisional application. 

     E.  Foreign Patent Applications 

One must file a patent application in each country where patent protection is sought within 12 months of filing a U.S. patent application. 

An alternative to filing international applications in each country within 12 months after filing in the U.S. is to file a Patent Cooperation Treaty (PCT) application.  The PCT is an international patent law treaty, concluded in 1970.  It provides a unified procedure for filing patent applications to protect inventions in most major countries with a single application  The main advantages of the PCT procedure are the possibility to delay as much as possible the national filing procedures, fees and translation costs, and the unified filing procedure.  PCT applications must be converted to national applications in all countries where protection is sought 18 months after filing the PCT application (30 months after the initial patent filing in the U.S.)   

UNC frequently uses the PCT approach to provide the longest possible time to complete research and marketing prior to having to make investment in non-U.S. applications, which can cost $20,000 - $50,000 per country.  UNC typically cannot absorb the costs associated with international patent filings unless a company has licensed the technology and is reimbursing the patent costs. 

     F.  Publications Establish Bars to Patenting or Loss of Rights

A publication of a potentially patentable invention can prevent the opportunity to obtain a patent for the idea if the publication is made more than 12 months prior to filing a patent application in the U.S., under the current rules. In the rest of the world, patent rights are lost if an invention is publicly disclosed prior to filing a patent application.

Generally, a 'publication' that would trigger a bar or loss of rights must be printed and available to the public, though questions arise concerning publications of dissertations, tape recordings, TV interviews, and even reports made to government agencies or in grant applications.  While an oral presentation at a scientific meeting may not be considered a publication in the U.S., an abstract or a newspaper article describing the invention in question is.  An oral presentation alone generally constitutes a bar to patenting in most foreign countries.  Many journals are not producing electronic abstracts or manuscripts for on-line distribution of articles they plan to publish.  If an electronic abstract of a paper is made available on-line, the clock is started on the one-year period available to file a U.S. patent application and most foreign rights are immediately lost--this patent bar can occur even though a paper has not yet been "published" in the journal.  To ensure patentability, one should ask the publisher to provide notice if and when an electronic abstract or manuscript of your paper will be prepared.  It is important to report an invention to the OTD well in advance of these potential bars to patenting.  

VI.  Types of Licensing Transactions

     A.  General

The OTD prepares a variety of licenses to transfer rights in intellectual property to other parties.  Licenses may be exclusive or non-exclusive, and may be limited in terms of field of application or territory of use.  The OTD’s objective is to ensure the broadest possible use for an invention  and, where appropriate, will seek to license non-exclusively to multiple parties for different applications.  License terms differ by market sector, commercial value, scope of rights granted, and other terms, and are negotiated on a case by case basis.  Typically the University will receive payments for patent cost reimbursement and royalties on products sold.  Licenses will also include provisions for payment as part of commercial development milestones.  If desired, inventors will be kept apprised of licensing negotiations; however, the OTD negotiates acceptable terms on behalf of the University.  The OTD will not accept any obligations on behalf of inventors unless inventors fully understand and are willing to accept the obligations. The licensing process can be very brief if all parties agree on what rights and responsibilities will be granted in the license, or can take considerable time if terms are complex or several parties are involved.  The OTD has authority to execute all licenses and has processes in place so that most negotiations do not get delayed at the University’s end.     

Unless a licensee is established when the invention is reported to the OTD, the OTD’s project managers will (i) meet with inventors to fully understand the potential uses of the invention, (ii) seek assistance from the inventors to develop marketing materials, and (iii) identify if the inventors know of companies who may have expressed an interest in their work or are working in the same field.  Inventors are expected to respond to questions from the OTD, and to make themselves available to discuss technical aspects of their inventions with patent attorneys and prospective licensees, as required.  Inventors will need to complete a conflict of interest review prior to completion of the license agreement.

     B.  Licenses to Startups

Licenses to start up companies typically take longer to complete as the company is still in the process of forming at the time of the license.  The University often takes equity in the company in lieu of a portion of license fees to ease the financial burden on startups and support the venture.  The OTD and UNC support licensing to inventor startups and work with inventors to find sources of funding, legal assistance, and leadership for the new company.  Terms to inventor startups need to be fair to all parties and not overly favorable to either the University or the inventors, and thus are based on appropriate industry standards for similar transactions and take into account the stage of development of the invention and the company.
 

VII.   Distribution of Revenue Received by the OTD

The OTD receives revenue from licensees and distributes receipts on a monthly basis to inventors, departments and University in accordance with University Policy for Patents and Inventions and Copyrights:

*see University Copyright Policy linked above for definitions and distinctions.

In the event that there are multiple inventors, by default each receives an equal share from the relevant distribution.  If the inventors prefer an alternate split scenario, the alternative split must be presented to OTD in writing and signed by all the inventors. Where inventors have appointments to more than one department or are associated with other University centers or institutes, it is the responsibility of the department and/or center/institute heads to determine the allocation of the departmental share of the income and convey that information to OTD.

 Individual inventors who are due a share of license income under University policy may not have their share diverted to their lab or department due to taxation regulations.  Inventors may gift their share to their department (or to any other third party) after receipt but will remain responsible for the tax on the full amount of the revenue received them.  While an inventor may receive a deduction for the gifted portion, that matter is outside the University’s purview and should be addressed by the inventor with an appropriate tax professional.

 Revenue may be received over a period of many years, and therefore inventors must inform the OTD of any changes of address to ensure timely receipt of future income.  An inventor’s right to revenue may be forfeited if OTD is unable to contact such inventor over a long period of time due to the inventor’s failure to notify OTD of a change of address.

VIII.  The OTD Case Closure and Waiver or Release of University Rights

The OTD may elect not to pursue patents and commercialization of an ROI when, upon completion of its initial assessment, it concludes that the business opportunity is not sufficient to warrant investment in patent protection or that there are unresolved barriers to commercialization.  The OTD may also elect to discontinue pursuit of patents and commercialization at a later date if it is unsuccessful in finding a commercial partner. If such a decision is reached, the OTD will recommend that the ROI be closed indicating that the OTD will not pursue the case further.  The OTD will inform the investigators, at which point the inventors may request that the University release its rights in the invention, so that the investigators may pursue the invention on their own in accordance with the procedures set forth in the Invention and Patent Policy.  The process the OTD will use to determine case closure and discontinuation of patents is provided below

     A.  The OTD Closure of an ROI after Initial Assessment

If the OTD elects not to pursue patent protection and commercialization of an invention, it will inform the investigator of this decision.   Further, if the invention arose from federal funding, the OTD will inform the funding agency that UNC is not electing rights in an invention, if applicable. 

 The OTD may elect to close an ROI after its initial review if (i) the disclosure is incomplete*, (ii) it deems that the invention is not adequately ready for commercialization*, (iii) there are unresolveable disputes or encumbrances, (iv) no or limited patent protection is available, or (v) there is no suitable commercial opportunity to warrant investment in patents.  Such a ruling also could arise if the invention disclosed is non-patentable subject matter – e.g. there are concerns with the patent requirements of novelty, utility, non-obviousness, enablement or enforcement; or publication bars or dominating patent rights exist. 

 *if disclosure is later completed or the invention becomes ready for commercialization, the ROI can be reopened or a new ROI can be submitted.

      B.  The OTD Discontinuation of Patenting and Commercialization after Initial

           Assessment

The OTD may elect to discontinue pursuit of patent applications if, in OTD’s judgment, it will be unsuccessful in commercializing the invention and recovering the cost of pursuing patents.  The OTD will review patent decisions as it approaches filing deadlines to convert provisional applications to full utility applications (1 year after the provisional filing), and at foreign filing stages.  The OTD will discuss patent issues with inventors and their departments prior to making a final decision on patenting.

     C.  Criteria for Consideration of Returning Rights to Inventors

If the OTD has elected not to file or to discontinue patent applications, inventors may request that the invention be released to them.  The OTD will consider all such requests and will generally support release to inventors when (i) the invention is not related to any ongoing work in the inventor’s laboratory, or (ii) the inventor is no longer at the University, and (iii) all inventors and the department are in agreement with the release.  If the OTD does not agree to release the invention to the inventor, the inventor may opt to start a company to develop the invention and the OTD will license the invention to the company on favorable terms with minimal return to the University.  In any such license the University will retain a right to use the invention  for research and educational  purposes and the company will agree to repay patent costs and provide a nominal royalty to the University should the venture be successful in securing funding and developing commercial products.