Invention Disclosures and Status:
Stanford faculty, staff or students should disclose an invention to OTL if they believe their research could be commercialized for public use and benefit. University inventions are typically in the very early stages of development and require a significant investment before bringing a product to market. Intellectual property protection often provides the necessary incentive for a company to pursue such a project.
The University's patent policy requires that potentially patentable inventions be disclosed on a timely basis to the University. This allows the University to fulfill its obligations both to the Federal Government under the Bayh-Dole law and to other companies or organizations that sponsor research at Stanford.
Alternatively, inventors may place their inventions in the public domain if they believe that would be in the best interest of technology transfer and if doing so is not in violation of the terms of any agreements that supported or were related to the work.
You should complete an Invention and Technology Disclosure whenever you feel you have discovered something unique with possible commercial value. This should be done well before presenting the discovery through publications, poster sessions, conferences, or other communications. Once the invention is publicly disclosed (i.e. published or presented in some written form to non-Stanford listeners), potential patent rights are limited. Be sure to inform OTL of any imminent or prior presentation, lecture, poster, abstract, website description, research proposal, dissertation/masters thesis, publication, or other public presentation of the invention.
The U.S. now has a “first inventor to file” system. While this system does preserve a nominal one-year grace period for an inventor to file a patent application in the U.S. after making a public disclosure, OTL feels that it makes sense to proceed as if the U.S. had transitioned to a true “first to file” system. For this reason, OTL will not file a patent application on subject matter that has been published. More information about the “first inventor to file system” can be found in Frequently Asked Questions about the Leahy-Smith America Invents Act (AIA).
Delayed Release (Embargo) of a Thesis. Please note that the laws of different jurisdictions vary on what constitutes a public disclosure that could prevent or impede one’s ability to obtain patent protection for inventions disclosed therein. Stanford takes no position with regards to whether the delayed release (embargo) of a thesis will safeguard the ability to obtain patent protection for inventions disclosed therein. Instead, Stanford recommends that any patent filings relating to material described in the dissertation occur prior to thesis submission, whether or not the thesis is under delayed release (embargo).
Inventorship and Ownership:
Authorship of a scientific publication and inventorship have different criteria and are not equivalent. Inventorship is a matter of law, depending on what is specifically claimed in the patent as written. A patent that fails to name the correct inventors may be ruled invalid under certain circumstances. The law does not recognize individuals as inventors who merely follow someone else's instructions or simply provide lab space, funding and/or equipment. Because patent claims may change while the patent application is undergoing review by the patent office, inventorship may change as well.
For the purpose of your invention disclosure form, name any individual who has made a creative contribution to the invention. When necessary, OTL will initiate a formal inventorship determination using outside patent counsel. The order inventors are listed bears no relationship to their contribution to the invention. Additional information about inventorship can be found on our Patents page.
Ownership depends upon the employment status of the creators of the invention and their use of University resources. Considerations include:
· What was the creator's employment status at the time the intellectual property was made?
· Were University resources used in creating the intellectual property?
· What are the terms of any agreement related to the creation of the intellectual property?
As a general rule, the University owns inventions conceived or reduced to practice in whole or in part by members of the faculty or staff (including student employees) of the University in the course of their University responsibilities or with more than incidental use of University resources. The University’s copyright policy describes the applicable rules for copyrightable works. In some cases, the terms of a Sponsored Research Agreement or Materials Transfer Agreement may impact ownership. When in doubt, please call OTL for advice. Stanford’s full policy on ownership of inventions is stated in the Research Policy Handbook.
If the invention was created in the process of research funded by the government, the government retains certain rights in the invention.
Please include the non-SU inventor in the invention disclosure form and inform us of any related agreements we should review and/or technology transfer contacts from the non-Stanford institution. Absent any contractual obligation, we rely on patent law which allows joint inventors joint rights in an invention.
Under Stanford policy, the University owns inventions conceived or reduced to practice in whole or in part by members of the faculty or staff (including student employees) of the University in the course of their University responsibilities. “University responsibilities” often include ideas conceived off-campus, if they are related to your work done at the University. When in doubt, please call OTL for advice at: (650) 723-0651.
Intellectual property, also known as "intangible property", is different from “tangible property” such as land, a building, a computer, etc. Intellectual property may be protected under the patent, trademark and/or copyright laws. More information about these types of intellectual property can be found at https://otl.stanford.edu/intellectual-property/types-intellectual-property.
It typically costs $25,000 to $35,000 to file and prosecute a U.S. patent application. This includes patent attorney costs and the filing fees paid to the USPTO. If the technology is unlicensed, Stanford pays the patent costs. These expenses are reimbursed by the licensee if the technology is exclusively licensed.
OTL relies on the inventors to review patent applications to ensure that they capture the invention. You should review the application to make sure that it accurately and completely describes the invention and that all those who contributed to the conception of the invention are named as inventors. It is important to respond to the attorney in a timely manner so that the attorney can make the necessary revisions and file the application in the patent office prior to any deadlines (typically before a public disclosure of the invention). Additional information can be found in Instructions for Reviewing Your Patent Application (reprinted with permission of Fenwick & West LLP).
There are certain types of technologies, such as software and biological materials, that do not require patenting in order to be successfully licensed. For other inventions, if OTL decides not to pursue patent protection and/or chooses not to actively market the invention, the inventor can sometimes pursue development of the invention while the University maintains ownership. In such cases, the inventor typically pays all the patent costs. Your OTL licensing specialists can discuss alternatives based on the specific circumstances of a particular invention.
Licensing and Negotiations:
A license is a contract whereby the owner of intellectual property grants permission for another party to act under all or some of the owner’s rights. OTL typically transfers Stanford intellectual property through a license agreement in which the University grants its rights in the defined technology to a third party for a period of years, sometimes for a particular field of use, and sometimes limited to certain regions of the world.
The process of protecting the technology and finding the right licensing partner may take months to years to complete, if ever. The amount of time will depend on the development stage of the technology, the market for the technology, competing technologies, and the amount of work and money needed to bring a new concept to the marketplace. Because university technologies are often too early stage for industry to invest in, we are not able to find licensees for many technologies.
If OTL finds a licensee, negotiations can proceed quickly if the company can agree to the terms of OTL’s standard agreement (see Sample Agreements). From there, the timeline for negotiation is usually determined by how many contract provisions the potential licensee wishes to negotiate. Financial terms rarely require long negotiating times. But, it is common for non-financial provisions such as field of use, term of the license, or indemnification to entail more discussion. If terms are agreed to quickly, OTL has signed an agreement within one day.
Typically, a university does not have multiple potential licensees bidding on an invention. If there are several parties interested in a license, OTL will endeavor to either grant non-exclusive licenses or to accommodate multiple parties by dividing the field of use for exclusive licenses. Occasionally, OTL must choose one company among several choices to enable effective development; the choice will be based on the ability of a committed company to bring the technology forward to society as quickly as possible. Sometimes an established business with experience in similar technologies and markets is the best choice. In other cases, the focus and intensity of a start-up company is a better option.
Different inventions require different licensing strategies. For example, a basic new scientific tool likely to be widely used is typically licensed on a non-exclusive basis. In contrast, an invention which requires significant investment of resources by a company is typically licensed on an exclusive basis. The exclusive license provides an incentive for the licensee to commit risky capital investments required for product development. License terms for a start-up company can be different than those for large companies.
Regardless of the type of the technology or the size of the company, Stanford license agreements usually include provisions to ensure that the licensee will diligently develop the technology. Click here for Sample Agreements.
During negotiations, the inventor’s role is limited. The OTL licensing professional will generally inform the inventors when they are in the process of negotiating a license agreement. He or she may also ask the inventors to help evaluate a company’s capacity to develop licensed products.
In the case of an inventor start-up, the inventors do not participate in the actual negotiation of license agreements with potential licensees. This approach is based on the principle that Stanford faculty/employees cannot represent the company and the university at the same time. Therefore, the inventor’s role should not include representing the potential licensee or negotiating directly with OTL. In addition, if an inventor has a potential conflict of interest (COI), he or she will need to participate in a COI review.
Information about COI review and the inventor’s role at other stages of technology transfer can be found at http://otl.stanford.edu/inventors/resources/inventors_otlandinvent.html.
OTL is responsible for managing the intellectual property assets of the University for the public good. Specifically, OTL, with input from the inventors: evaluates promising technologies generated by Stanford faculty, staff, and students determines intellectual property strategy and manages patent prosecution (including payment of patenting costs for unlicensed technologies) markets the invention to industry with the goal of finding one or more companies interested in developing products based on the technology determines licensing strategy negotiates license agreements with interested companies (i.e. licensees) maintains long-term relationships with the companies developing products based on the licensed technology collects and distributes royalties from licensing the invention OTL has signature authority on behalf of the University for license agreements, material transfer agreements, industrial contracts, and other agreements that pertain to intellectual property. University faculty and other inventors are not authorized to sign agreements that obligate the University to assign or license intellectual property rights to another entity. OTL and OTL personnel have no financial stake in University licenses. If the administrative overhead portion of licensing revenue exceeds OTL’s budget, the remaining funds are allocated to the OTL Research Incentive Fund under the control of the Dean of Research, for the support of research and education across the University. As a result, we believe OTL functions effectively as an unbiased agent serving the goals and interests of the University, as well as those of inventors and others. Inventors have many vital and valued roles during the licensing process, while final decisions are made by OTL.
Consulting and Start-Ups:
OTL does not make licensing decisions based on consulting arrangements nor does it negotiate or review consulting agreements on behalf of inventors. If a potential licensee is interested in having an inventor consult with the company, negotiations would be directly between the inventor(s) and the company.
If an inventor is planning to remain at Stanford while consulting with a company, the inventor should familiarize themselves with the policies of Stanford and their school relevant to consulting activities. The inventor is expected to ensure that the terms of the consulting arrangement are consistent with University polices, including those related to IP ownership and employment responsibilities (See http://otl.stanford.edu/inventors/inventors_policies.html?#links for the different polices for faculty, staff and students. Faculty should also refer to the requirements for faculty consulting activities and agreements - https://doresearch.stanford.edu/sites/default/files/documents/consulting...).
Consulting and other outside professional activities can provide an important means of continuing education for the faculty and can provide them with a currency and experience in aspects of their professional fields outside the context of the University itself. These activities can also provide a mechanism for transfer of knowledge from the University to the public good. These attributes of consulting may make faculty better scholars and teachers. However, the employer-employee nature of the consulting process has in it the potential for diversion of faculty from their primary activities and responsibilities. Therefore, the basic principle of this policy statement is that there needs to be a limitation upon the time that a Stanford faculty member may spend in consulting. The limits set forth in policy (https://doresearch.stanford.edu/policies/research-policy-handbook/confli...) are intended to strike a fair balance between consulting and regular faculty duties within the University, serve to safeguard the interests of both parties, and comply with federal regulations. These arrangements are Outside Professional Activities, subject to annual (or transactional) review by the University.
Inform the Licensing Associate responsible for the invention so they can take that into consideration when planning patenting, marketing, and licensing strategy. Although Stanford does not give preferential treatment to its inventors and their start-ups, OTL and the University recognize the importance of the inventor’s role in helping to transfer technology and in evaluating the ability of a company to develop licensed products.
More information related to start-ups can be found on this website:
Conflict of interest issues considered when licensing inventor-associated companies
Licensing faculty-associated companies
Best practices for Faculty Start-Ups
Best practices for Student Start-Ups
Inventor FAQs for Equity Tax Issues:
Stanford may at times accept equity from a company as part of the financial consideration for the license. Net equity, i.e., the value of the equity after the deduction of 15% to cover OTL administrative costs, will be shared between the Inventor(s) and the University per Stanford policy. The inventor shares will go directly from the company to the inventors. For more information, please see DoR handbook on Equity Acquisition in Technology Licensing and Distance Learning Agreements
No, you do not have to pay for the shares. The shares are granted to you through the license agreement between Stanford and the company. However, you may need to pay taxes based on the value of the shares and your current residency.
Maybe, as it depends on the value of the equity. Equity is considered miscellaneous income so you may receive an IRS Form 1099 or 1042S from Stanford. Depending on your citizenship status and your California residency status, you may be required to pay an estimated tax withholding once we've notified you and the license agreement with the company has been signed.
We send it to the IRS and/or the California Franchise Tax Board as an estimated tax payment on your behalf.
We need this information to determine whether you will need to send us an estimated tax withholding check. In addition, we will need your contact information in order to send you any income, IRS forms and to provide to the licensee so that they can send you the equity associated with the license agreement.
Here are links to information about the IRS and California (CA) Tax Forms:
IRS Form W9 – Request for Tax Payer Identification Number and Certification
IRS Form W8BEN - Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals)
IRS Form 1099 – Miscellaneous Income
IRS Form 1042S – Foreign Person’s US Source of Income Subject to Withholding
CA Form 592-B – Resident and Non Resident Tax Withholding Statement
Your 1099 or 1042S form will list the total of all of your miscellaneous income from Stanford. This could be your share of cash royalties and the value of the equity that you have received from companies associated with the license of one or more of your inventions. Please keep a copy of your equity letter(s) with your tax forms so you have a record of the value of your equity included in this lump sum.
In licenses to start-up companies, OTL will often negotiate a certain percentage of the equity of the start-up as part of the upfront consideration for the license. Per policy, the inventors' share of the equity is 28.34% of the total shares owed under the license, which are then split based on the royalty sharing agreement for the licensed docket(s). The value of the shares is provided by the company.
OTL will request current residency and contact information from the inventors to determine whether any withholding is required to receive the shares. Once OTL receives the information, OTL will send a letter to each inventor asking whether the inventor would like to receive their share of the equity and the requirements, if any, for tax withholding. The letter will also provide information about the number of shares and the valuation of those shares. You should promptly determine whether you want to receive the equity shares or not, and then send your signed letter back to OTL along with any withholding check, if necessary. OTL will then provide your contact information to the company, which will reach out directly to you regarding any additional paperwork necessary for you to receive your shares.
The 83(b) election relates to vesting schedules. All of the equity that OTL negotiates as part of the license are outright grants of equity, so none of our inventors has to file an 83(b). It is NOT necessary for an inventor to file an 83(b) since the inventors will be taxed on all the shares in the year they receive them.
You should seek advice from a tax advisor.
In order to understand your tax liabilities related to receipt of equity, or any write-off possible if a company ceases to exist, you should seek help from a tax advisor. There are many specialized tax advisors available in the area to assist with your questions.
Yes, you can still receive your shares if you move, although you may be required to pay withholding taxes based on your new residency.
We must have the signed letters before we can execute the license agreement and will remind you if we have not received your letter by the requested date. If for some reason you do not respond, our default is for you to receive the equity.
Contact your OTL Associate to discuss.
A Stock Purchase Agreement is the definitive agreement that finalizes all terms and conditions related to the grant of the shares from a company. The company will often require that you sign a Stock Purchase Agreement before you can receive your shares.
No, you should seek outside legal counsel to review the agreement for you.
Contact your OTL Associate or the company contact named in the inventor equity letter.
The company licensed one invention and issued 100,000 shares to Stanford. The share value is $0.30 per share. The two inventors will evenly split the shares for the inventors and in this specific case that turns out to be 14,170 shares each.
Inventor A is a US resident and non-CA resident. Upon signing and accepting the shares in the inventor equity letter, Inventor A will need to pay Stanford the CA withholding of $297.57 ((14,170*0.30)*.07 (CA w/h)).
Inventor B is a non-US resident from China and non-CA resident. Upon signing and accepting the shares in the inventor equity letter, Inventor B will need to pay Stanford the US federal withholding of $425.10 ((14,170*.30)*.10 (Fed w/h for China)) and the CA withholding of $297.57 ((14,170*0.30)*.07 (CA w/h)), totaling one check for $722.67.
The company licensed one invention and issued 100,000 shares to Stanford. The share value is $0.03 per share. The two inventors will evenly split the shares for the inventors and in this specific case that turns out to be 14,170 shares each.
Inventor A is a US resident and non-CA resident. Upon signing and accepting the shares in the inventor equity letter, Inventor A will not need to pay Stanford the CA withholding of $29.76 ((14,170*0.03)*.07 (CA w/h)) because the value of the shares does not exceed the CA minimum required for estimated tax withholding. The total value of the shares will still appear on the inventor's 1099 form from Stanford.
Inventor B is a non-US resident from China and non-CA resident. Upon signing and accepting the shares in the inventor equity letter, Inventor B will need to pay Stanford the US federal withholding of $42.51 ((14,170*.03)*.10 (Fed w/h for China)). However, as in the situation for Inventor A, Inventor B will not have to pay the CA tax withholding since the total value of the shares does not exceed the CA minimum required for estimated tax withholding. Read here