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Use proactive measures to prevent contentious IP disputes with researchers

The article below appeared in the August 2009 issue of Technology Transfer Tactics. Click here to subscribe.

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Most tech transfer professionals have experienced at least some degree of contentious wrangling between their university and inventors over IP ownership, but thankfully pitched legal battles over IP remain the exception. Even in those cases, experts say, the events that lead to the courtroom steps are rife with missed opportunities to solve a dispute amicably.

Consider the current argument between the Mayo Clinic in Rochester, MN, and former employee Peter L. Elkin, MD, who last summer joined Mount Sinai Medical Center in New York. During his 12-year tenure at Mayo, Elkin developed a software program for bioinformatics, attracting millions of dollars in federal grants to complete his research. The core “natural language” function in the software is designed to read and understand text dictated or typed into a computer by clinicians, resulting in a standardized patient medical record. Although the software was a sidelight to Elkin’s primary role at Mayo, electronic medical record (EMR) platforms are now in the spotlight, given the Obama Administration’s emphasis on information technology as a component of health care reform. Thus, an effective EMR design could be worth a pretty penny.

Exactly what happened between Mayo and Elkin and who owes what to whom will now be decided by the U.S. District Court in St. Paul, which will hear the case of Elkin v. Mayo Clinic et al. In court documents, Mayo says it granted an exclusive license to Conceptual Health Systems (CHS), a start-up formed by Elkin, to market the software in return for equity in the company and a continuing royalty stream. Elkin maintains he developed the natural language software before coming to Mayo and assigned a different portion of the software system to Mayo. He also contends he was due 40% of the royalties but received nothing for his work. Elkin is named both as the plaintiff and counter defendant in the suit, with Mayo Clinic, Mayo Foundation for Medical Education and Research, and Cerner Corporation — which negotiated a 2008 deal with Mayo for the software — named both as defendants and counter claimants.

M. Todd Sullivan, an attorney with Womble Carlyle Sandridge & Rice, PLLC, in Raleigh, NC, who focuses on trade secrets litigation, says “it seems clear that the parties anticipated, discussed, and negotiated agreements that were designed to assign ownership” of some IP to Mayo for commercialization purposes. In fact, court documents allude to a number of contractual arrangements.

Elkin claims Mayo conspired with Cerner to deprive him of his rights to the software, citing Mayo’s failure to pay royalties in breach of an “invention and assignment agreement” that was in place, Sullivan explains. Elkin also contends the institution seized a critical source code that he had never assigned to the clinic. Furthermore, he charges that Mayo tried to block his educational and research work by issuing a demand letter that he stop speaking about the software at medical conferences.

“As is normally the case, the Mayo Clinic has a different version of the facts,” Sullivan points out. Mayo claims Elkin had signed over all ownership and control of the software to the clinic, per its standard policy. Because Mayo claims ownership of the software, the clinic contends it was authorized to negotiate the contract with Cerner. Mayo further maintains that employees may retain ownership of any IP they develop “separate from and prior to employment” provided they follow certain procedures, such as filing an invention disclosure form — which apparently is not part of Elkin’s employment record.

Documentation can head off disputes

The circumstances of the case suggest that Elkin may have recognized that “the commercial value of [the software] had increased exponentially,” given the growing emphasis on health care information technology, and believed he was “getting a raw shake,” Sullivan suggests. “He’s arguing that he has a right to the software because the agreements don’t cover the entire technology and because Mayo breached agreements with him that would have covered everything.”

Arguments of this nature are rare when inventors work for large companies, which have meticulous processes in place to protect their IP. But, despite the fact that some universities and research institutions have tightened their procedures to prevent such disagreements, “this is still a recurring problem” for TTOs, says Stephen B. Maebius, partner in the Washington, DC office of Foley & Lardner, LLP.

“What happens with IP disputes is that, by the time people start looking into the details, the patent is worth money,” Maebius points out. Once money is involved, any party with a possible financial interest is focused solely on protecting that claim.

Still, these cases don’t need to land in court, experts agree. TTOs have a variety of contracts and agreements at their disposal to prevent disputes, Sullivan points out, including nondisclosure agreements, material transfer agreements, invention and copyright disclosure forms, assignments of inventions or authored work, collaborative sponsored research agreements, and licensing agreements. The key is to use the appropriate document with the appropriate language at the appropriate time. For example, a disclosure form always should be used “before a relationship is struck up” to ensure that a disagreement doesn’t arise later about the date that an invention or copyright was created, Sullivan says.

Litigation may result when agreements are not clear, precise, and thorough — “especially when the commercial interests of some inventions and developments are so valuable,” Sullivan says. “Disputes essentially arise like a phoenix from the ashes of poorly drafted agreements.”

Obtain full disclosure during hiring

One strategy to prevent IP disputes is to require researchers to list existing IP as part of their employment agreement, suggests Ronald I. Eisenstein, IP partner at Nixon Peabody LLP in Boston. TTOs also can help manage the transition of researchers to and from their universities by working with the faculty member, the department, and the other university to create a “tailing” period between the two institutions.

“Research doesn’t stop when a faculty member moves from one university to another,” agrees Patrick L. Jones, PhD, director of the Office of Technology Transfer (OTT) at the University of Arizona (U of A) in Tucson and former president of the Association of University Technology Managers. A researcher may embark on new projects but rarely makes a clean break from existing work, he points out. When TTOs are in the hiring loop, they have the opportunity to “set the stage” for researchers coming from other institutions.

Many research institutions hire hundreds of new faculty each year, so apprising the TTO about the transfer of faculty members as well as related materials and grants is a daunting challenge. Because it’s difficult for universities to “institutionalize” the hiring process, TTOs should reach out to individual departments and make them aware of the services they can provide to incoming researchers, Jones says. At a minimum, TTOs should secure a snapshot of a researcher’s existing IP portfolio. A report or recent conference presentation in the form of a project disclosure may suffice.

And when a researcher files an invention disclosure soon after joining your institution, “ask the right questions,” Eisenstein suggests. Was the faculty member on staff at the time he or she reported developing the technology? Did the researcher arrive shortly before filing the disclosure? If so, “you need to ask even more questions,” he maintains. The answers may prompt you to contact the previous institution to explore its connection to the technology.

“When we get a new invention, we try to determine whether another institution has an interest, either because they’ve got a prior invention that goes along with the new one or because part of the invention may have been made when the faculty member was at the other institution,” explains Wesley D. Blakeslee, JD, executive director of technology transfer for Johns Hopkins University in Baltimore. In other situations, the previous employer may have an interest in IP that becomes marketable after the researcher discovers or invents a new technology. “We try to tease out all of those details and make sure all of the right agreements are in place,” Blakeslee adds.

As collaborations grow among scientists at different institutions, TTOs must become more adept at working together to commercialize IP while maintaining their individual interests in inventions and discoveries. Blakeslee recently handled a transaction that involved multiple researchers — one of whom was leaving Johns Hopkins. “We had to make sure we got the reports of invention in, with the assignments of everything that had been invented at Hopkins” so the school could preserve its ownership and the researchers remaining there could continue their research. “It was a little more complex because it involved animals, materials, and intellectual property, but everyone was very cooperative,” he says.

Develop formal dispute resolution

A tail provision likely wouldn’t have prevented the Elkin v. Mayo case because the allegation doesn’t involve Elkin’s current employer. Moreover, tail provisions may be illegal in some states, such as California, if they violate state laws that prohibit employee noncompete agreements, Sullivan points out. Consequently, TTOs need additional mechanisms to resolve IP disputes before they escalate into legal fights. Jones advises research institutions to incorporate a formal IP dispute resolution process into their standard operating procedures, mirroring the structure they create to resolve disputes over academic matters.

One function of the University of Arizona’s IP committee is to serve as the first intermediary in any formal dispute resolution process that involves IP — for example, the committee would review disagreements between the OTT and a faculty member over the assignment of ownership rights or between two researchers about “who did what” in designing an invention. Either side involved in such a dispute can bring the matter to the committee, which is composed of no fewer than five members, with at least half of the appointments based on the recommendations of the chair of the Faculty Senate. Committee members weigh the facts of the dispute before offering a decision, which the university considers a binding resolution. The process “gives people well-defined pathways to begin to address issues in a forum that has credibility with all parties,” Jones explains.

Universities and TTOs also must work continuously to maintain communications and “set expectations” with researchers. For example, Blakeslee attends every orientation meeting for new Johns Hopkins faculty to introduce himself and explain the role of the TTO.

“We’ll never eliminate disputes” over IP, Jones concedes. “Reasonable people may look at a given fact set and arrive at different conclusions. The question is: Where do we go from there?” In virtually every case, experts agree, it’s in the best interest of all parties to settle differences without turning to the courts.

That’s especially true in today’s environment, where IP disputes may drive off scarce licensing dollars. “You don’t want to have this type of fight,” Eisenstein insists. “Having any type of cloud over your research puts you in a difficult situation. Who’s going to invest in technology that’s involved in a dispute when there’s plenty of good research they can fund at other institutions?”

Keep disputes from becoming ‘viral’

Preventing a contentious IP dispute from spreading like a virus through the faculty may be even more complicated.

“These disputes can have an impact on the personal relationships in an institution,” Maebius cautions. To set the record straight, he advises tech transfer staff to visit key researchers, offer the assistance of the TTO, and reemphasize the importance of clarifying IP rights at the earliest stages of a discovery. Sometimes, these conversations may prompt researchers to come forward to discuss work that might form the basis of a disclosure or patent, he says.

Faculty also will respond to the issue of fairness, Eisenstein says. When researchers feel that a TTO is “doing its best” to structure licensing deals that provide them with an equitable share of revenues, they’re less likely to look askance at an IP dispute with an individual faculty member. However, the opposite also is true.

Emphasizing fairness will become increasingly important as TTOs devise licenses that require multiple inventors from one or more institutions to share revenue streams. Any time a group of scientists collaborate on a discovery, it raises the potential for complications in assigning, licensing, and compensating those rights. “Look at your policies and try to anticipate as many problems as you can,” Blakeslee advises. For example, most TTO policies don’t have built-in mechanisms to handle licensing arrangements when co-inventors disagree with the university or among themselves about how to split revenues, he says.

“The issue of ambiguity of ownership is a constant problem — not only at universities but also at small companies that have many collaborations without a full awareness of intellectual property rights,” Maebius agrees. “When people get excited about their research, they sometimes forget to get the IP rights ironed out at the beginning.”

The facts surrounding discoveries and technologies also are “evolving,” Sullivan adds. “Over time, the development of more and more valuable information sets and technologies is going to result in arguments — especially post hoc arguments — that challenge agreements as inappropriate or as somehow violating a researcher’s rights.”

With that in mind, here are some additional tactics you can use to prevent IP disputes:

  • Establish expectations about IP ownership when researchers join your institution. Create an agreement separate from the standard employment contract that defines the ownership of IP related to the scope a researcher’s employment, Maebius suggests. Require that researchers read and sign the document, acknowledging that they’ve disclosed any existing inventions or discoveries, which should be carved out of the employment agreement. The same situation applies when a research project is covered by a government grant, which generally stays with the principal investigator when he or she moves to another institution.
  • Meet periodically with researchers to discuss IP policies. Because TTOs aren’t always in the hiring loop, conduct educational seminars for researchers at regular intervals to discuss the scope of employment and explain the institution’s IP policies. To ensure that no one slips through the cracks, provide all researchers with a copy of the IP guidelines every year or two — not just when revisions are made — and require them to sign and return the agreements, acknowledging they’ve read and understood the policy, Maebius suggests.
  • Try to mediate any IP dispute quickly. Consider placing a mandatory mediation clause in all IP agreements so that both sides commit to meeting with a neutral third party to try to reach a resolution before taking a disagreement to court. Trying to sort out the details of an invention or discovery is “messy” and difficult to resolve through the court system, Maebius says. “In complex IP disputes, it’s better for the parties to settle as soon as possible,” he counsels.
  • Handle all communications involving a dispute in an open and honest manner. “The real trick in all of this is to be open, honest, and straightforward,” Blakeslee says. TTOs should not be perceived as “tilting” toward one party or another “but just trying to get toward an answer that’s fair and reasonable.”

“What’s normal in litigation is that everybody treats information as a lockbox,” Sullivan adds. “But anybody who has access to the Internet can find the complaint, the answer, and all of the other documents related to the lawsuit.” Explain the facts of the situation to other faculty members as accurately as possible “so they don’t assume the worst of the university and assume the best of their colleague,” he says. Reassure other researchers that “not everybody who leaves the institution is going to find themselves in litigation.”

Contact Blakeslee at 410-516-8300 or; Eisenstein at 617-345-6054 or; Jones at 520-621-5000 or; Maebius at 202-672-5569 or; and Sullivan at 919-755-2159 or

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