Guidance for Researchers Entering into Outside Consulting Agreements
UW–Madison researchers are allowed to engage in outside activity so long as the activity does not conflict with the researcher’s responsibilities to the University, so long as the appropriate outside activity reports are completed and provided to the University, and so long as any potential conflicts of interest are properly managed. This Guidance Document will attempt to assist UW–Madison researchers in navigating the potential pitfalls present when entering into an agreement to act as a consultant for an external entity.
Consulting Agreements are not negotiated, reviewed, or signed by the University
When negotiating, entering into and performing services under an agreement for outside consulting, a researcher is acting outside of the scope of his or her employment with the University. For this reason, such agreements are not negotiated, reviewed or signed by the University on a researcher's behalf. The Office of Administrative Legal Services is available to provide information as to how the University might view certain terms in a potential agreement, but cannot act as legal counsel for a researcher in this setting. Accordingly, it may be advisable for a researcher to consult with his or her own attorney before entering into a consulting relationship. The University of Wisconsin Law School's Law and Entrepreneurship Clinic is one resource available to UW–Madison researchers looking for guidance related to outside consulting arrangements. The Clinic's website is http://www.law.wisc.edu/academics/clinics/le/
Despite the fact that the University and its legal counsel cannot act on a researcher's behalf in dealing with such outside consulting arrangements, the University does wish to identify certain issues that may be problematic for a researcher related to his or her continued employment at the University. The remainder of this guidance document will highlight issues related to: 1) problematic terms that may be found in outside consulting agreements; 2) outside activity reporting related to consulting work; and 3) conflict of interest issues that may arise.
Problematic Issues in Consulting Agreements
When contracting with consultants, companies are generally concerned with protecting their intellectual property, acquiring new intellectual property and maintaining other strategic advantages over competitors. These industry goals can often conflict both with a researcher's obligations to the University and the ability to continue with his or her desired course of study in an unrestricted manner. Accordingly, when entering into an outside consulting agreement with a company, a researcher would be well-served to 1) avoid granting rights to intellectual property that is already encumbered or is the property of another; 2) avoid agreeing to limitations on future funding from other sources; 3) avoid agreeing to refrain from research on certain related topics of inquiry; and 4) avoid giving warranties regarding any deliverables that may be called for as part of the consulting relationship.
Intellectual Property Issues
From the University's perspective, the most concerning issue related to outside consulting is the potential for improper grants of intellectual property to the external entity. This should be a primary concern for the consultant as well, as a poorly-worded or overly broad intellectual property grant could result in negative consequences for the researcher, including a future breach of the consulting agreement or a future breach of the responsibilities the researcher may have to the University or other external sponsors.
As a starting point, it is important to note that UW–Madison researchers are generally allowed to retain ownership of their own intellectual property, subject to any funding arrangements that require otherwise. The UW System's Patent Policy (G34) states as follows:
Historically, most universities of the UW System have not claimed proprietary rights in any invention generated by the faculty, staff, or students. However, patent agreements between individual faculty, staff, or students and the institution may be entered into at universities in the UW System. In the absence of contractual provisions obligating transfer of all or some proprietary rights in an invention, the inventor traditionally is free to dispose of those rights in the manner of his or her own choosing.
Because UW–Madison, in accordance with UW System Policy, does not require its researchers to enter into any overarching patent agreement assigning intellectual property rights to the University, researchers are generally free to manage their intellectual property how they wish. However, the Patent Policy also recognizes broad exceptions to researcher ownership of intellectual property based on the source of research funding:
Much of the research is funded by outside parties through formal grants and contracts, with various Federal agencies constituting the major research funding source. The University of Wisconsin System Board of Regents is the legal recipient of all grants and contracts which are accepted on behalf of faculty, staff and students and, as such, has the legal responsibility for complying with all contractual obligations. Consequently, when an invention is generated, it is necessary that the designated authorities at each university review and make determinations with regard to patent rights as set forth by those funding sources which contributed to the making of that invention. For more information please review UW System's Administrative Policy 346, Patent Policy.
When research is funded by the federal government, inventions made during such research are governed by the Bayh-Dole Act. See www.access.gpo.gov/nara/cfr/waisidx_02/37cfr401_02.html.
Under the Bayh-Dole Act, both the University and the federal government are entitled to certain rights in the invention. The University may elect to retain title to inventions developed under federally-funded research programs, while the federal government is given the right to use the inventions and the ability to ensure that the inventions are being properly commercialized by the University (generally through licensing arrangements with industry).
When research is funded by an outside entity, it is common for the outside entity to also request certain rights in any intellectual property that may arise under the sponsored work. In this setting, a researcher must agree to encumber his or her personal intellectual property in exchange for the external funding.
Grants of Intellectual Property to Industry
Given this intellectual property ownership framework, it is important that a researcher avoid granting rights to otherwise encumbered intellectual property to an outside entity through a consulting relationship. The two most common ways in which consultant would make such an improper grant of rights are by "commingling" funding to the point where an invention is paid for by two separate parties with separate claims to the intellectual property rights, or by entering into a contract with an outside entity that confers intellectual property rights to which they should not be entitled.
To avoid commingling, a researcher should avoid entering into multiple agreements with similar scopes of work. From the Graduate School's policy, University of Wisconsin–Madison Office of the Vice Chancellor for Research and Graduate Education's Intellectual Property Policies and Procedures for University Research, at http://research.wisc.edu/projectagreementsip/intellectualprop/ippolicies/
In any agreement with an extramural research sponsor, the principal investigator must consider the existing contractual obligations of the University or the researcher(s). This is especially important where the agreement under negotiation is for research that has the same or similar purpose as research conducted using personnel or resources that are funded, however minimally, by another sponsor. Obligations under existing federal or other extramural sponsorship agreements must be identified and reconciled with the agreement under negotiation. Failure to reconcile potentially conflicting claims to ownership of intellectual property may result in a lawsuit for breach of contract against the University and damage the professional reputation and credibility of the researcher.
This Graduate School guidance is equally applicable to outside consulting relationships, and it is prudent to avoid undertaking the same inquiry for an outside entity and for a federal or industry sponsor of a University Research. While avoidance of commingling is an important step to prevent an improper grant of intellectual property rights to an external entity, an equally important step is making sure that the consulting agreement is not overly broad with regard to intellectual property.
Problem Intellectual Property Terms and Potential Solutions
As a basic premise, an external entity employing a UW researcher as a consultant should only be entitled to intellectual property created by the consultant solely in the course of the consulting relationship. Problems arise when an external entity requests rights to "background intellectual property" or rights to "all intellectual property created during the term of the consulting relationship." Allowing such terms to remain in a consulting agreement could easily create a situation in which a researcher has promised intellectual property resulting from his or her research to multiple parties. It could also result in an improper grant of another UW researcher's intellectual property to an external entity. Finally, such overly broad language could result in the University being unable to comply with its own obligations to the federal government and other external sponsors.
A best practice is to include specific language in any consulting agreement that recognizes that the researcher may have pre-existing obligations regarding intellectual property, and that the consulting relationship does nothing to conflict with those obligations. By way of example:
It is acknowledged and agreed by the Company and the Consultant that (i) the Consultant's primary employment is through the University of Wisconsin–Madison ("UW") and Consultant's employment duties shall take precedence over consulting services; (ii) nothing in this agreement shall prevent Consultant from engaging in any activities that are part of his duties as an employee of UW, including but not limited to participating in research activities sponsored at UW by any third party; (iii) Company shall have no right to concepts, information, inventions, or other intellectual property developed by Consultant while performing his duties as an employee of UW; and (iv) Consultant shall not use for the Company's benefit, any information relating to or arising out of Consultant's work conducted at UW, or utilizing the funds, personnel, facilities, materials or other resources of UW, until such information has been published.
If included, such language would resolve almost all of the University's concerns regarding a researcher's outside consulting activities. Recognizing that outside companies may be hesitant to include such broad language in a consulting agreement, another example may be appropriate:
Company recognizes that Consultant has pre-existing obligations to disclose inventions made with University of Wisconsin–Madison ("UW") or federal funds to the UW, and that Consultant has pre-existing obligations to assign inventions conceived or reduced to practice under UW or federal funding to the University. Nothing in this agreement is intended to modify those obligations, and any grant of intellectual property herein is subordinate to such obligations.
Addition of these (or similar) clauses, in combination with removal of other overly broad intellectual property clauses and vigilance against commingling, will go a long way to ensure that an external consulting relationship will not cause conflict with a UW researcher's obligations to the University.
Limitations on Other Funding or Future Research
In an effort to limit potential competition, some outside entities attempt to limit a researcher's future inquiry through the terms of a consulting agreement. Often, this effort is manifest through a contractual term preventing the researcher from "competing' with the outside company for a period of time. It is prudent for UW researchers to avoid any such limitations.
A UW researcher should be wary of, and likely seek to remove, any of the following: agreements to refrain from "competing' with the outside company; restrictions on application for or acceptance of future funding; restrictions on publication; restrictions on continued research in a certain field for any amount of time; and restrictions on accepting engagements from other external entities, whether in a similar industry or otherwise.
Another way a researcher's future work can be limited by a consulting contract is through overly broad restrictions on the use of "confidential information" provided by the company or created in the course of the consulting relationship. When these restrictions are drafted broadly, they can prevent a researcher from utilizing information that either was or could have been discovered regardless of the consulting relationship. Below is some suggested language to add to a "confidential information" section of a contract that should help prevent such a situation from arising:
'Confidential Information' does not include: information developed by Consultant outside of the provision of services under this Agreement; information which can be shown to have been known by Consultant prior to Consultant's receipt from Company; information which is, or lawfully becomes, generally known to the public; or information which is lawfully acquired from third parties who have a right to disclose such information.
So limiting the definition of Confidential Information, along with removing other limits on a researcher's line of inquiry, are important steps to making sure a researcher is able to continue to add to his or her chosen body of work.
Warranties of Non-Infringement
Companies occasionally ask consultants to promise or warrant that any deliverables of information the consultant will share with the company does not infringe or contain the intellectual property of others. This request is usually unreasonable. Whether or not a deliverable might infringe another individual's or entity's intellectual property is a complicated question that would necessitate a review of all potentially relevant intellectual property to answer. We suggest trying to remove such warranties from consulting agreements. At the very least, the consultant should only be asked to refrain from knowingly providing deliverables that infringe another's intellectual property or knowingly sharing another's confidential information with the company.
Conflict of Interest Issues
Participation in consulting activity could have the potential or perceived potential to influence the outcome of research or the health of human subjects participating in research. While the UW–Madison encourages its researchers to engage in outside activities the University has both a legal and ethical responsibility to review and, where appropriate, to reduce, eliminate, or manage conflicts of interest or potential conflicts of interest related to university research. The management of conflict promotes unbiased research and ensures the safety of research participants.
Conflicts are identified through the University review of a mandatory, yearly, report of outside activities, and are managed by the UW–Madison Conflict of Interest Committee. Researchers participating in consulting activity must be aware of their obligation to file a yearly outside activity report and the need to update the report if their consulting arrangement changes.
Outside Activity Reporting
Federal and state regulations and University policy require faculty, staff, and some graduate students to complete outside activity reports. These reports are reviewed by the University Conflict of Interest Committee to identify and review the outside activities of individuals who are PIs, co-PIs, or key personnel on federally funded research, or who conduct human subjects research. Individuals who report specified levels of compensation, ownership, or leadership and, whose outside activities overlap in scope with their University research, are managed to prevent any actual or perceived conflict of interest.
For more information on management plans and filing or updating an Outside Activities report go to http://www.grad.wisc.edu/research/policyrp/oar/index.html