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Louisiana Tech University


Policies & Procedures

Policy 7121 - Intellectual Property Policy

Effective Date: 9/20/2006

Responsible Office: Office of Intellectual Property and Commercialization

Reference: Louisiana Tech University Intellectual Property Policy (7112)


Introduction

One of the main objectives of Louisiana Tech University’s Intellectual Property Policy is “to make intellectual property developed in the course of University research available to the public under conditions that will promote its effective utilization and development.” One way the University accomplishes this is by supporting an active technology transfer program. By its nature, University technology is often at an early stage of development with uncertain market potential. A company wishing to commercialize the technology may need to expend considerable funds on further developmental research and product development to do so. The combination of development cost and risk occasionally makes it challenging for the University to find a licensee willing to assume those costs and risks. Unless it is extremely well financed, a start-up company may not have sufficient funds for both licensing costs and development costs. Accordingly, in order to see that the best interests of the public are served, the University may accept equity in a company as partial consideration for a license to its technology in appropriate circumstances. One advantage of equity is that the holder will stand to benefit if the company does well regardless of which product is responsible for its success. In contrast to a running royalty, the licensor will only do well if the licensed product is successful in the marketplace. Sometimes when an organization holds a sizable percentage of stock in a company it will be offered a Board of Director’s position. To avoid any perceptions of a conflict of interest, Louisiana Tech University has decided not to accept any voting Board positions. When accepting equity Louisiana Tech University will conform with the following guidelines.

  1. Tech or its agent (e.g., Louisiana Tech University Research Foundation), may choose, under certain circumstances, to accept equity in partial consideration for a license to its technology. Generally, stock is not taken in preference to cash, but rather in the absence of sufficient cash compensation for the license it is taken as added compensation to facilitate the practical application of the technology for the public benefit.

  2. Tech should not hold Board positions, nor exercise any voting rights on Board actions, but may hold a non-voting, observer or ex-officio position.

  3. Tech shall handle all subsequent relationships with the company in which Tech has accepted equity in a business-like manner pursuant to relevant Tech policies.

  4. In the event that Tech inventors hold (or will hold) stock in the company, the requirements of Conflict of Significant Financial Interest Policy (7114) and Authorizing Contracts Between the University and a Member of the Faculty, Research Staff, or Coaching Staff or a Company in Which the Employee had an Interest Under Specified Circumstances (7119)shall be followed. 

  5. Tech’s equity position should be a minority one (generally less than 15%), and that position may be diluted as the company raises additional capital. 

  6. Tech should not invest directly in the formation of the company. This does not, however, preclude investments by venture capital firms in which Tech or its Foundation has invested since decisions by these venture capital organizations are made at “arms length” from Tech and/or its Foundation. 

  7. The equity will be held in a separate account established for Louisiana Tech University Research Foundation. The equity will be sold according to procedures which insure that decisions to sell are made at arms length from the Faculty or administrative unit which originally licensed the technology. 

  8. Normally, one third of the stock will be sold as soon as it is practically possible to sell it in the open market (i.e., once it is publicly traded and any “lock-out” period has expired). One third will be sold within 5 days of the one year anniversary date of the first sale and the last third will be sold within 5 days of the two year anniversary date of the first sale. 

  9. Tech or its agent, shall distribute the cash proceeds, upon conversion of equity to cash, in accordance with the formulas established in the Louisiana Tech University Intellectual Property Policy (7112).


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