Industry-Sponsored Research Week
Industry-Sponsored Research Management

With closer industry ties in sponsored research agreements, ignore tax issues at your peril


By David Schwartz
Published: February 21st, 2017

More universities are getting comfortable with deeper, more integrated forms of sponsored research as they attempt to improve industry relationships and move more IP to market. But industry-sponsored research programs must be careful not to violate certain tax rules that these arrangements can violate — such as restrictions on the use of publicly funded buildings by for-profit entities. Without attention to detail in constructing these agreements, the severe consequences of violating the tax rules could outstrip by far any gains made by the sponsored research office.

The biggest area of concern is the clash between sponsorship and the tax-exempt bond issues that most 501(c)3 organizations use for capital improvements such as university buildings, says Tom Wintner, JD, a partner at the law firm of Edwards Wildman in Boston who has extensive experience with IP litigation and other legal issues involving universities. The bonds and the earned interest are not taxed, which makes them quite attractive and gives universities an advantage in the marketplace, Wintner explains. “They have to be careful, though, that the money they are raising does not go to so-called private business uses,” he explains. “Instead, money must be used for the purpose and the mission of the institution.”

The tax issue can arise unexpectedly, Wintner says. If a university wants to build a new laboratory for $100 million, for instance, it issues that amount in bonds to investors. Once completed, the lab might be used for a few years by faculty, staff and students. But then a biochemist strikes up a relationship with a pharmaceutical company that spurs an offer to fund cancer research at the lab. “Now you have a researcher working in a facility that was financed with tax-exempt bonds but they’re doing something that could constitute private use,” Wintner says. “So the question becomes how you can fulfill your agreement with this company and also comply with IRS tax law. That is not always so easy.”

A key determinant of compliance with the IRS requirements is known as the “5% rule,” he explains. This rule of thumb says that 5% of the bond funds — or 5% of the lab in this example – can go toward private use without triggering problems with the IRS, Wintner says. “There’s always a little bit of a safe harbor built in because the IRS realizes there may be some minimal private use that should not invalidate everything else that happens in the building,” he says.

How to measure that 5% is not detailed by the IRS. The 5% could be a measure of floor space, annual revenue, or other factors that represent a percentage of the funds coming from the bonds.

The IRS has provided two more safe harbors for sponsored work in a bond-funded facility,

Wintner adds. Both apply only to “basic research,” which the IRS defines as “original investigation for the advancement of science and technology, not having a specific commercial objective.”

“The intricacies of that definition can be debated, but there are some things that are obviously not basic research,” Wintner says. “A company can’t give the university a bunch of compounds for clinical testing. That’s not basic research.”

Sponsored research agreements that involve more specific research that has an easy connection to the commercial market cannot be performed in a publicly funded building. The risk of non-compliance lies with the university, not the sponsor, so sponsored research offices must be careful to structure the deals properly with the aid of legal counsel, Wintner says.

A detailed article offering specific guidance on avoiding tax compliance issues in industry collaborations appears in the premiere issue of Industry-Sponsored Research Management. To subscribe and access the full article, or to request a free copy of the premiere issue, CLICK HERE.

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University-industry collaborations aspire to pharmaceutical innovation


By David Schwartz
Published: February 21st, 2017

Three collaborations have been established in the United Kingdom in recent weeks that illustrate a growing collaborative atmosphere and new strategies being used to link university research with pharma companies seeking to build their product pipelines. continue reading »

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Webinar next Tuesday: Building International Sponsored Research Collaborations


By David Schwartz
Published: February 21st, 2017

Globalization has made the opportunities for research partnerships in Europe, Asia, and elsewhere more abundant than ever. But along with that opportunity come tremendous challenges and complexity. Unfamiliar cultural issues as well as critical differences and in contracting, compliance, and IP protection must be addressed.

To help you tap into the growing international opportunities for sponsored research deals — while also ensuring key issues surrounding IP and other contract terms are appropriately addressed — our Distance Learning Division has secured two experts to present this practical and essential webinar: Building International Sponsored Research Collaborations: Navigating Culture, Contracting, Compliance, and IP Protection, scheduled for next Tuesday, February 28th.

For complete program and faculty details or to register, CLICK HERE.

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UT Southwestern researchers join with biotech firm to develop potential treatment for polycystic kidney disease


By David Schwartz
Published: February 21st, 2017

Researchers at UT Southwestern Medical Center and a California biotech firm have jointly developed a potential drug candidate to treat polycystic kidney disease. continue reading »

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Survey reveals university strategies for winning NIH grants


By David Schwartz
Published: February 21st, 2017

The Survey of Higher Education Strategies to Win Grants from the National Institutes of Health includes data and in-depth commentary and analysis based on extensive survey results from more than 30 research universities and medical schools pursuing NIH grants. This 132-page resource provides a rich set of data to compare your practices in pursuing NIH research grants with other research institutions. It’s jam-packed with dozens of easy to scan charts and figures displaying critical data you can’t find in any other publication.

The data in this comprehensive report are broken out separately by criteria such as college size and type, as well as by NIH grant volume. Data is also presented separately for research universities, medical schools, and other institutions to ensure you’re comparing your university to true peers.

For complete details and to order, CLICK HERE.

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Royal College of Surgeons, Almac Discovery enter research collaboration to target therapy-resistant tumors


By David Schwartz
Published: February 21st, 2017

The Royal College of Surgeons in Ireland (RCSI) and Almac Discovery, a biopharma company focused on discovering new cancer treatments, have announced a major research collaboration that aims to determine novel ways of targeting tumor cells that are resistant to cancer therapies and cause cancer to spread to other parts of the body. continue reading »

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Standardized four-phase process leads to influx of industry partnerships


By David Schwartz
Published: February 14th, 2017

The Office of Innovation and Industry Alliances at Moffitt Cancer Center in Tampa, FL, recently announced a three-year deal with Incyte Corp. in Wilmington, DE, to fund three new oncology research programs. This latest agreement capped off a roughly two-year span where the Innovation Office has reaped some $35 million in funding from industry partnerships with such companies as Forma Therapeutics, Celgene Corp., Biotheranostics, Signal Genetics, Lion Biotechnologies, and Bristol-Myers Squibb.

The foundation of the Innovation Office’s success is a standardized four-phase process that brings potential partnerships along in a carefully scripted, step-wise progession. “The benefit of a standardized process is that it communicates the same information to everyone in the office, including new full-time staff and temporary staff such as interns,” says Jarett Rieger, Esq, MBA, senior director of the Innovation Office. “As a result, the work product is of high value and is consistent regardless of who produced it. A standardized process is particularly important as your office grows if you want to achieve consistency from anyone working on a project.”

In addition, the approach helps keep both sides in the partnership accountable and on track, says Latanya Scott, PhD, senior industry alliance development manager. “You always know where you are going and what your goal is. If you are able to orient yourself as to where you are in the process at any given moment, then you can say, ‘This has gotten off track. Here is what we need to do to prod the company,’ or ‘Here’s what we need to do to prod ourselves to get back on track and keep the momentum going.’”

The process includes these four phases:

  • Concept Phase. In the concept phase, potential sponsors, Moffitt investigators, and/or the Innovation Office can seek out industry alliances, says Ruan Cox, PhD, industry alliance development associate. “With one of our partners, for example, their head of pharmacology and toxicology learned about a Moffitt investigator’s proprietary patent-protected platform at a meeting and wanted to explore the idea of collaborating.” Once the initial idea is broached, the Innovation Office fulfills two important functions in this phase:
    • assessing partner suitability, which includes a scoring system that gauges potential partnerships on seven criteria; and
    • developing a blueprint for collaboration, which addresses issues such as oversight and scope of work.
  • Research Plan Phase. In this phase the Innovation Office leads the development of a statement of work that is mutually aligned for Moffitt investigators and the company. “The goal is to develop a succinct project description that clearly defines the roles and responsibilities of both parties,” says Rieger. “That is easier said than done. In my experience, many research plans are too detailed. They throw in the kitchen sink, and they are aspirational in nature,” he points out. “So our job is to work with the parties to make sure that they specify the scope of the project. We want to make sure that a plan has well-defined, realistic milestones.”
  • Budget Phase. The office works closely with the company and with its internal stakeholders including the researchers themselves in this phase to nail down costs in a very detailed and comprehensive manner.
  • Contract Phase. Assuming the first three phases have been conducted properly, everyone at this point should be on board, and the contract discussions mainly center on specific terms surrounding the university’s rights to use any results of the collaboration in future research.

A detailed article on Moffitt’s four-phase approach appears in the premiere issue of Industry-Sponsored Research Management. To subscribe and access the full article, or to request the premiere issue and get more details on the publication, CLICK HERE

CHARTER OFFER FOR INDUSTRY-SPONSORED RESEARCH MANAGEMENT

Save $100 and get the distance learning collection “Best Practices in Forming and Managing Industry-University Partnerships” (a $397 value) FREE!. Click here for details >>

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U Maryland Senate courts controversy as it considers amending restricted research policy


By David Schwartz
Published: February 14th, 2017

The University of Maryland’s Senate is voting on a controversial set of measures, opposed by supporters of open research, that would make it easier to collaborate with the intelligence community by limiting transparency by embracing what is termed “restricted research.” continue reading »

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Building International Sponsored Research Collaborations: Navigating Culture, Contracting, Compliance, and IP Protection


By David Schwartz
Published: February 14th, 2017

Globalization has made the opportunities for research partnerships in Europe, Asia, and elsewhere more abundant than ever. But along with that opportunity comes tremendous challenge and complexity. Along with the cultural issues, critical differences and challenges must be addressed in contracting, compliance, and IP protection.

To help you tap into the growing international opportunities for sponsored research deals — while also ensuring key issues surrounding IP and other contract terms are appropriately addressed — Technology Transfer Tactics’ Distance Learning Division has secured two experts to present this practical and essential webinar: Building International Sponsored Research Collaborations: Navigating Culture, Contracting, Compliance, and IP Protection, scheduled for February 28th.

For complete program and faculty details or to register, CLICK HERE.

ALSO COMING SOON:

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Volvo funds research in energy efficient vehicles through ‘Innovation Gateway’


By David Schwartz
Published: February 14th, 2017

Penn State University’s Innovation Gateway, an open innovation tool just launched in the fall of 2016, has attracted a big player, The Volvo Group, which will fund a new research project from the Department of Mechanical and Nuclear Engineering at PSU as a result of its participation in the gateway. continue reading »

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Survey report examines university export control compliance practices


By David Schwartz
Published: February 14th, 2017

The survey report US Export Controls Compliance Practices Benchmarks for Higher Education is a one-of-a-kind resource providing a rich set of benchmarks and data to compare against your own practices and procedures regarding compliance with U.S. export control regulations and related strictures. You’ll find detailed data on staffing, budgets, data protection, legal costs, compliance training, and risk assessment, along with invaluable peer advice from compliance programs at 21 universities.

This study is jam-packed with dozens of easy to scan charts and figures displaying critical data you can’t find in any other publication. Unlike any other available resource, US Export Controls Compliance Practices Benchmarks for Higher Education provides you with an in-depth look into key data so you can compare your practices and see how you stack up against other organizations — and use the data to point you to areas for improvement. For complete details, CLICK HERE.

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Texas A&M center to pair research, industry to rebuild infrastructure


By David Schwartz
Published: February 14th, 2017

The Texas A&M University System Board of Regents last week approved the official establishment of a new facility designed to spur new industry-university collaborations focused on solving infrastructure challenges facing the state and the U.S. as a whole. continue reading »

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