The following outlines the procedure to obtain approval from the Office of General Counsel and your Executive Vice Chancellor for a component institution's plan for managing potential conflicts of interest related to research sponsored by, or Board Intellectual Property licensed to, an entity in which an employee owns an interest or serves and an employee, officer, or member of the Board of Directors. The procedure does not negate the need for an employee to fully comply with the policies of the component institution or any funding agency, such as the NIH or NSF, which may have its own conflict of interest regulations, or to comply with other state or federal law that applies to these or related issues.
Conflicts of interest may arise when an employee participates in the business of, or has a financial interest in, a company that conducts business with a component institution in the area of the faculty members' responsibilities. This may happen in corporate sponsorship for research and in technology transfer. This procedure addresses both of these circumstances through examination of possible conflicts between what may be best for the University and what may be best for the employee and the company, where a company desires to sponsor research or license intellectual property belonging to the Board.
Conflicts of interest in the conduct of scientific research manifest themselves in two different, but related, ways: conflicts of interest and conflicts of commitment.
Either of these conflicts may lead to, or be accompanied by, the inappropriate transfer of state resources or assets to the sponsor or licensee company for its exclusive benefit. For example, a faculty member may hire an institutional employee to provide services to a licensee company, may operate a campus laboratory as though it were the company's laboratory, operate a business from a campus office, utilize the work of a graduate student for the sole benefit of the company, or assign University inventions to the company.
Merely owning an equity interest or participating in the business of a sponsor or licensee introduces only a potential for conflicts of interest. These procedures are designed to keep a potential conflict of interest from developing into an actual conflict of interest.
The Texas Legislature provides a legal mechanism for addressing potential conflicts of interest that may arise when a University employee involved in the development or creation of intellectual property acquires equity in, or serves as a board member, officer, or key employee of, a company that sponsors the employee's research or licenses the intellectual property. In exchange for permission to be involved with a company in this way, and if such involvement is permitted by the employee's component institution, the employee and the institution must successfully manage the potential conflict of interest to reduce or eliminate the likelihood that actual conflicts will arise.
The employee and institution should take the following steps to prevent actual conflicts of interest:
-- Assign independent departmental personnel to monitor the employee's research activities.
-- Require administrative review and approval of the employee's research projects that are subject to potential conflicts of interest.
-- Require modification of research plans or transfer portions of research to independent researchers, if necessary, to avoid actual conflicts of interest.
-- Consider divestiture or withdrawal from conflicted activity, if necessary, to avoid actual conflicts of interest where management appears unlikely to succeed.
-- grants of an equity interest to an employee that provide disproportionate compensation: (a) relative to the standard share of royalties a faculty member might receive for technology licensed to an unrelated company, or (b) relative to the services provided;
-- licensing of inventions covering basic research that may cause the licensee to compete with the institution for grant funding;
-- the present or near-term capacity to perform the essential functions outlined in the company's business plan;
-- contracts-back to the institution of development work, which suggests that the technology could not have been licensed to a company in an arm's length transaction (exception: unique facilities).
If attempts to manage potential conflicts of interest fail and actual conflicts develop (if there is actual bias in the design or reporting of research, derogation of employment duties, or transfer to a sponsor or licensee of state resources for the company's exclusive benefit):
Before you agree to be a company's director, you should understand your duties and obligations. By fulfilling them in good faith, you can avoid conflicts of interest and possible personal liability for company difficulties related to actions you take as a board member. Before you accept a board positions, be sure you understand what will be expected of you. Directors owe a fiduciary duty to their company. This fiduciary duty includes a duty of loyalty to the company and a duty to act with care in carrying out responsibilities.
-- attends meetings
-- actively participates by reviewing relevant reports and other materials, asking questions and investigating if unsatisfied with others' answers
-- consults professional advisors when necessary
-- understands any relevant laws, regulations, and company rules
If you perform these duties and make your decisions based on your good faith judgment about what is best for the company, the courts will not hold you liable if it turns out that your judgment was in error. In summary, keep your company's interests before your own, make decisions in good faith, that is, fully informed, and with due consideration for the impact of the decision on the company, and you will likely avoid personal liability for the results of the actions you take as a director.
Texas Education Code Section 51.912 requires that the Board approve an employee's business participation in a licensee company. The Regents' Rules and Regulations, Rule 90103: Equity Interests and Rule 90104: Business Participation delegates this authority to each component institution President and requires compliance with these procedures, which requires the appropriate Executive Vice Chancellor approve the employee's holding equity or participating in the business of a licensee. To assure that appropriate steps are taken in each case to minimize the likelihood of conflicts of interest, review and approval by the Office of General Counsel of the institutional plan to manage conflicts is required prior to approval by the Executive Vice Chancellor in accordance with the following procedures:
-- that they have read and understood this procedure and the institutional plan;
-- that they have disclosed and will continue to disclose their financial interests and business participation, as required by law;
-- whether any mitigating factors apply; and
-- the steps they will take to reduce or eliminate the likelihood of actual conflicts of interest.
-- the component institution's and the employee's names;
-- basic details of the associated transaction, if any;
-- whether the associated agreement contains standard liability safeguards (e.g. warranties and indemnifications);
-- any previous related institution transactions;
-- all relevant dates;
-- a clear and concise summary of those aspects of the related transaction that raise potential conflicts of interest (i.e. details of equity and/or business participation in a company by a faculty member or the Board);
-- mitigating factors, if any; and
-- the steps the institution will take to reduce or eliminate the likelihood of actual conflicts of interest.
Texas Education Code Section 51.912(a) requires that the Board approve an employee's business participation in a licensee company or research sponsor. In the Regents' Rules and Regulations, Rule 90103: Equity Interests and Rule 90104: Business Participation, the Board delegates this authority to each component institution President and requires compliance with the Procedure for Obtaining Approval of Plan to Manage Conflict of Interest.
Generally, sponsorship and license agreements, even ones that raise conflict issues, do not have to be submitted to the Office of Academic Affairs or the Office of Health Affairs Office for approval. Pursuant to the Regents' Rules and Regulations, these agreement are reviewed by the Office of General Counsel and signed by the Chief Administrative Officer or designee at the institution. However, final approval of agreements that raise conflict of interest issues is contingent on approval of the plan to manage the conflict of interest. Keep the original signed copies of the agreement at your office until approval of your plan to manage the conflict of interest has been received from the appropriate Executive Vice Chancellor.
-- A brief outline of the terms of sponsorship or the "deal" in the license agreement
-- Name of the employee(s) (including department and title), the facts that raise the conflict of interest issues, whether the employee currently holds equity in the company or will be holding equity in the future, and whether the employee currently serves or will serve on the company Board of Directors, Scientific Advisory Board, etc.
-- A description of the institution's plan to manage the potential conflict of interest to reduce or eliminate the likelihood that actual conflicts will arise--address each point outlined in Managing Potential Conflicts of Interest above
-- A description of the steps taken and an explanation of the basis for any conclusion that management appears unlikely to succeed--see Failure to Manage Potential Conflicts of Interest above
-- A request for approval