Legal Issues in Sponsored Research Agreements

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Conflicts can arise as a result of:. State lawUniversity's missionFederal lawContract administration. State Law Issues - Indemnification. A sponsor may request the UW to indemnify" it from any liability. Indemnify means:* An agreement to accept liability which arises under an activity regar

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Legal Issues in Sponsored Research Agreements

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1. Legal Issues in Sponsored Research Agreements Graduate School Seminar Series Ben Griffiths University Legal Counsel Office of Administrative Legal Services February 28, 2008

2. Conflicts can arise as a result of: State law University’s mission Federal law Contract administration

3. State Law Issues - Indemnification A sponsor may request the UW to “indemnify” it from any liability. Indemnify means: * An agreement to accept liability which arises under an activity regardless of fault * Usually an effort to shift risk to UW * Often accompanied by a requirement to provide a legal defense to sponsor * Equivalent clauses are also a problem (“hold harmless,” “be responsible for,” etc.)

4. State Law – Indemnification, cont. Accepting an indemnity clause in a contract is a problem because: * Under state law, the State only pays for a legal defense the costs of any judgments against an employee to the extent that (a) the liability arises from a negligence act or omission of an employee; and (b) the act giving rise to the liability is within the employee’s scope of employment. * Our legal defense is provided by the Attorney General, and Attorney General is not authorized to provide a legal defense to a non-state entity.

5. State Law - Indemnification, cont. So: any agreement to indemnify must be consistent with protection state provides to UW and UW employees Standard UW hold-harmless language often acceptable to sponsor Authorized signatory important to ensure defense and indemnity of employee by state Liability insurance through Risk Management is an option if negotiation fails

6. State Law - Jurisdiction Agreements may specify a particular locale or court outside of Wisconsin as the “jurisdiction” or “venue” for any lawsuits arising from the agreement. This is a problem because: * Art. IV, Sec. 27 of the Wisconsin State Constitution: “The legislature shall direct by law in what manner and in what courts suits may be brought against the state.” * Wisconsin statutes specify Dane County, Wisconsin as venue for any suits against the state. * Very murky area!

7. State Law - Insurance Agreements may specify insurance requirements such as: * Maintain an insurance policy that contains specified dollar limits for coverage * Provide sponsor with an insurance certificate or other proof of this insurance; * Name sponsor as an “additional insured” on our policy These requirements are a problem because: * State self-insures; no policy to provide (unless purchased) * Since no insurance policy, no ability to name sponsor as an “additional insured”

8. State Law – Insurance, cont. Risk Management has developed functional equivalent of insurance certificate Sometimes we need proof of insurance from the sponsor Contact Risk Management for information about insurance coverage if a contract anticipates shipping items, or loaning or borrowing equipment

9. State Law - Confidentiality Sponsors frequently want to keep information regarding the research project confidential. Confidentiality provisions can cover everything from confidential company information, to the terms of the sponsored research agreement, to the general existence of the research relationship. State law can be a problem because the Wisconsin Public Records Law mandates that, with limited exceptions, all records in possession of the UW are subject to inspection and copying by the public. “Sunshine on government” public policy purpose.

10. State Law – Confidentiality, cont. What can be considered confidential sponsor information? * Data and other information supplied by the sponsor to the UW (trade secrets) What can’t be considered confidential sponsor information? * The terms of the agreement itself * The existence of the agreement or the research relationship * The research data generated by the UW Other considerations: duration of confidentiality; labeling

11. State Law - Conflict of Interest Sometimes a company associated with a faculty or staff member will want to sponsor research in a UW lab. This is a complicated topic beyond the scope of this presentation, but there are some basic things to consider: * Criminal self-dealing statute creates need for advance attorney general review in some cases * UW’s conflict of interest policy reflects requirements of state and federal law http://info.gradsch.wisc.edu/research/policyrp/coi/index.html

12. Issues Relating to UW’s Mission UW-Madison mission is to create, integrate, transfer and apply knowledge. Mission expressed in various policies.

13. UW Mission, cont. Main areas where conflicts between UW mission and wishes of sponsor can arise involve: Publication of research results Confidentiality of research Ownership of data

14. UW Mission – Publication Sponsors may seek the right to approve publications resulting from the research. This is a problem because: * UW System Policy G2 provides that “No agreement shall be entered into with any extramural sponsor which prohibits the right of a University employee to publish the results of the project. The University and its employees have an obligation to assure that project results are made known to the general public.” * Granting sponsor approval over publications effectively gives the sponsor the right to prohibit a publication * Impact on tenure, dissertations, export controls

15. UW Mission – Publication, cont. What rights can we give a sponsor over publications? * Ability to review and comment * Ability to identify and request deletion of sponsor confidential information * Ability to request a publication delay - 30/90 rule (30 days to review, up to 90 days total delay if needed to protect IP). Additional time subject to Grad School approval. * In some cases even 90 days is too long!

16. UW Mission – Data Ownership A sponsor may request ownership of data arising from the research. This conflicts with: * UW System Policy G2: “No agreement shall be entered into with any extramural sponsor which allows for the transfer of the ownership of data. (This is not meant to cover proprietary data originally belonging to the sponsor.)” Policy considerations: * Data is foundation for publication * UW mission to disseminate knowledge * Need access to original data should publication be challenged, misconduct alleged

17. UW Mission - Confidentiality Sponsors may want information relating to the research, including research data, to be considered the sponsor’s confidential information. In addition to conflicts with the public records law, this conflicts with: * UW System Policy G2 (“The University and its employees have an obligation to assure that project results are made known to the general public.”) Policy permits UW to keep information provided by sponsor confidential (see slide 16) Policy does not permit UW to agree to keep information generated by UW confidential (see slides 14 and 16) Publicity/press releases treated differently

18. Issues Relating to Federal Law – Bayh-Dole Act (patents) Industry sponsors may seek ownership of or preferential access to inventions arising from UW research. This can create conflicts if there are multiple funding sources that contribute to the invention. That is because: * The general rule at the UW is that faculty and staff own their own intellectual property and are free to dispose of it as they see fit. * But, the federal Bayh-Dole Act is a major exception to this rule. It gives UW (or its designated patent management entity, i.e., WARF) the option to elect title to patents (including plant varieties under the PVPA) that arise or are reduced to practice in the course of federally-sponsored research.

19. Federal Law – Bayh-Dole Act, cont. A conflict can arise if grant or contract terms give ownership of a patentable invention arising from the research to an industry sponsor, yet some part of the invention was conceived or reduced to practice in the course of a federally-sponsored project Advisable to consult with WARF before agreeing to assign IP to sponsor Affirmative obligation to assign to WARF if invention resulted from federal funding: http://info.gradsch.wisc.edu/research/ip/obligations.html#3

20. Federal Law – Bayh-Dole Act, cont. Funding source for inventions (and thus who may have claims to inventions) determined by Equity Review Process. Equity Review Process is after-the-fact: http://info.gradsch.wisc.edu/research/ip/disclosure.html Equity Review Process may be prudent even for IP arising under consulting agreements

21. Federal Law - Export Controls An agreement may specify that certain information used in the project is subject to US export control laws. * Federal laws control the export of goods or services to foreign individuals and countries * Two main laws are the Department of Commerce’s Export Administration Regulations (EAR), and the Department of State’s International Traffic in Armaments Regulations (ITAR) * “Deemed export” problem

22. Federal Law – Export controls, cont. Problems can arise in the following areas: Presence of export-controlled information may prevent international students or scholars from participating, and may limit international collaborations Contracts for export-controlled research may include provisions that conflict with UW research policy, such as publication restrictions or contract terms prohibiting or requiring approval for participation of foreign nationals Export-controlled research may require security precautions

23. Federal Law – Export Controls, cont. Also: embargoes are in effect for certain countries, administered by Office of Foreign Asset Controls (OFAC) Specially Designated Nationals List, etc. Licenses can be obtained as last resort Complicated area – contact me!

24. Federal Law - Tax Issues Exempt organizations pay Unrelated Business Income Tax (UBIT) on income from: * trade or business * regularly carried on * not mission-related Expenses can offset income Broad exception for research

25. Federal Law – UBIT, cont. Primary situation where UBIT can arise from UW research activities is in context of services agreements, sale of excess capacity, or provision of routine testing services Not bad, just taxable Strategies

26. Contract administration Most problems can be avoided by good business practices: * Maintain regular communication with RSP * Stay on top of invoicing and billing * Do not allow significant balances to accrue * Scrupulously abide by reporting schedules

27. In conclusion…. Be aware of requirements imposed by state and federal laws and UW policy when submitting proposals or entering contractual relationships Problems identified early are easier to fix You are always welcome to contact me: Ben Griffiths University Legal Counsel [email protected] 263-7400

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