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One Student’s Fight to Reclaim IP Revenues For Undergrads’ Startups

Caleb Carr is searching for a fair shake for business builders who haven’t graduated yet.

One Student’s Fight to Reclaim IP Revenues For Undergrads’ Startups
[Students: Wavebreakmedia via Shutterstock]

American culture loves to lionize iconoclasts who drop out of college to build fabulously lucrative startups.

What’s often not commented upon is that this is often a smart financial move for them, since revenue from their creations can end up being diverted to their universities as well. In its annual published survey, the Association of University Technology Managers said in 2013 alone there were “more than $22 billion in sales of products created and based on academic research.” How much of that revenue goes to universities is unknown given that agreements vary and may be confidential in some cases.

Caleb Carr, a student at University of Colorado-Denver, is trying to make sure that students are getting their fair share of that revenue. In the past year, Carr, along with a core team of about seven other students, has met with dozens of lawmakers in the hope that legislation will be proposed in early 2015 that would redefine how a student and a university can benefit financially from student ideas built with campus resources. In the second week of February, Carr and his colleagues will be in Washington for another round of meetings with legislators.

Their goal: a 75/25 split in favor of students when their built-on-campus idea become revenue-generating.

Caleb Carr

Carr may not seem like a natural community organizer. He is working on technology that would stabilize hoisting systems used by rescue helicopters. The sway of the hoisting system makes rescues in battlefield situations especially challenging. It was in trying to bring this technology to market that Carr came upon the intellectual property issue.

Universities are natural incubators, supplying the labs, the networks, and critical expertise to get many of business ideas off the ground. Major universities have tech transfer offices that provide guidance and expertise to students who have an idea that is potentially marketable (It’s the tech transfer office that usually formulates intellectual property right policy and then puts the policy into practice. The rate varies dramatically from school). Tech transfer offices have been around long before the rise of the entrepreneur class–the offices often worked closely on government-funded research and in many cases still do.

Broadly speaking, here’s how it works: When a researcher is being paid to do a very specific kind of work, any financial windfall has likely been agreed upon by all the parties. This kind of intellectual property is not the source of confusion. Nor are dorm room epiphanies by undergrads scarfing down pizza at 3 a.m. (Any revenue resulting from these types of inspirations usually goes to the student.)

Carr and others are focused on the space between, particularly around the concept of “significant use” of the university’s equipment. “When it comes to ‘significant use’ it’s a really gray area and hard to understand,” said Steven Monda, a Saint Louis University student who is working with Carr on intellectual property rights.

Phil Weilerstein, CEO of VentureWell, a non-profit supporting innovation in higher education, agrees that clarity in IP issues is a problem, especially when it comes to undergraduates. Weilerstein worked on a study in which 71% of tech transfer managers said that faculty’s understanding of IP policy regarding undergraduates was either fair or poor. For graduate students the figure was 52%.

“The issue at hand is to understand IP and how it might be applied,” Weilerstein said. “That’s a challenge regardless of the policy.”

The lack of certainty is hampering innovation, Carr says. Given that many of the innovations are in health care, patients are being denied products: Carr said he knows students who have held off on working on ideas while in school for fear that the university would reap the monetary rewards.

Young entrepreneurs “are very savvy at a young age and really understand what it takes to launch a company,” said J. Cale Lennon, of the Tech Transfer at Emory University in Atlanta.

Monda had a similar experience when he was working with a team on an idea to reduce bed sores. “We thought, ‘If (our work) becomes a company, how much will we own and how much will the university own?’”

At Saint Louis, the IP agreement would have given Monda and his colleagues 40% of earnings.

”We routinely heard from students that the University was going to claim their IP regardless,” said one of the tech transfer managers who responded to the study Weilerstein was a part of, “and therefore, they should save their best ideas … and do something silly, meaningless for a senior project.”

Carr notes that some universities have been out front on the issue of students’ intellectual property. He mentioned Clemson, Purdue and Emory as examples. Emory’s Lennon believes it makes sense for schools to get the reputation as being entrepreneur-friendly. “We understand the culture and the challenges and what it takes to incubate an idea and to get them to a point where they can be successful.”

Carr, meanwhile, is hopeful that more schools will follow Emory’s lead: “We have a real chance to change undergraduate education. We’ll never see the fruits of this. But we know we’re empowering undergraduates in the decades to come.”

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