Effective April 17, 2002
A formal plan to manage institutional conflict of interest related to technology transfer will be developed by the KUMC Conflict of Interest Committee, with concurrence by the KUMC Research Institute and the Vice Chancellor for Research.
Institutional conflicts of interest represent an area of growing concern for universities, federal regulators, and the public at large. Although federal agencies only recently have turned their attention to this area, professional societies such as the Association of American Universities and the Association of American Medical Colleges are encouraging universities to disclose and manage conflicts of their institution and its top decision-makers. Increasingly institutions around the country are recognizing the need to have written policies that govern research in which the university would benefit financially from a successful outcome. The purpose of this policy is to mitigate institutional conflicts and to avoid the creation of other personal conflicts with regard to the universitys equity holdings. Further background information is found in the Appendix to this policy.
The plan will adhere to the following principles, procedures and practices.
Institutional Conflict of Interest: Institutional conflict of interest may occur when the university, members of senior administration (chairs, deans, vice chancellors, directors), or affiliated organizations have a financial interest in a company that is associated with university research. Examples of potential conflicts include investments in start-up companies associated with faculty inventions, ownership in companies that make significant contributions for facilities or endowed chairs, or stock ownership in companies that conduct research at the university.
Financial Interest: Financial interests include consulting income; value or potential value from stock shares, equity holdings, and royalties; and membership on a companys Board of Directors.
University of Kansas Medical Center
University of Kansas Medical Center Research Institute, Inc.
None
Faculty and Unclassified Staff Handbook, Conflict of Interest
Management of Inventor Conflict of Interest
Technology Transfer Revenue Distribution
Kansas Board of Regents Intellectual Property Policy
KUMC Equity Disclosure Form – contact the Research Institute
State of Kansas Statement of Substantial Interests (PDF)
John R. Finley, JD, MPH
Associate Vice Chancellor for Compliance
University of KS Medical Center
1040 Wescoe, Mail Stop 2014
3901 Rainbow Blvd.
Kansas City, KS 66160
Ph: 913-588-1206
FAX: 913-588-1224
Various conflicts of interest may arise when the University of Kansas Center for Research, Inc. or the University of Kansas Medical Center Research Institute, Inc. (each individually Research Foundation) holds equity in companies that license technology and/or support ongoing research at the University of Kansas (University). The Lawrence campus (KULC) and the Medical Center campus (KUMC) of the University of Kansas each have a conflict of interest committee (each individually Conflict of Interest Committee) for overseeing and managing the conflicts of interest for the respective campuses. This policy concerns conflicts of interest other than personal conflicts of interest that may arise when a faculty member or other employee stands to benefit financially from the results of his/her own research. The University has policies in place to deal with these conflicts. Basically, these personal conflicts are managed by requiring disclosure to the Chairperson/Director, Dean/Vice Chancellor, a Conflict of Interest Committee, and the Vice Chancellor for Research/Provost as appropriate. A management plan for personal conflicts is developed through a Conflict of Interest Committee and approved of by the Vice Chancellor for Research/Provost.
An institutional conflict may develop when the institution (such as a department, center or school, the applicable Research Foundation, or the University) stands to benefit financially from the outcome of research ongoing at the University to support a license or a research agreement. A Research Foundation, and/or units at the University, along with inventors, may receive future financial rewards by way of royalties or other fees if the product or service is commercially successful. Therefore, they have a financial interest in ensuring the success of the product. If the returns are in the form of royalties, there is a control, however. The market must buy the product or service and will judge it on its merits, not on earlier university actions. Otherwise, there are no royalties.
A Research Foundation may hold equity in licensees, most often equity taken in lieu of royalties or other license fees. In these instances the potential institutional conflicts become more likely for several reasons:
Acceptance of equity in licensees of university technologies is within the overall mission of each Research Foundation. There are two compelling reasons:
Hypothetical Situation:
To illustrate the issues involved in institutional conflicts of interest,
consider the following hypothetical case. A Research Foundation licenses
a drug developed at the University to a start-up biotechnology company
(BIO). As an alternative to a license fee, a Research Foundation takes
100,000 shares of BIO stock that is 10% of the founders shares.
The stock has no market value initially and is carried on the books
at a value of zero. Suppose that after the license agreement is entered
into, the entrepreneur is successful in a private placement and raises
$5,000,000 for future research and development from venture capitalists
at a price of $4 per share. Thus, a Research Foundation position has
now effectively grown to $400,000 although there is no market for the
stock. The venture capitalists that invested in BIO anticipate that
if the drug goes through clinical trials, it will create a valuation
at 20 times their investment. Thus, a Research Foundation looks at a
potential stock price at a public offering of $80. A Research Foundations
position would then be worth $8,000,000. Under current policy, a Research
Foundation would sell the stock as soon as practicable when it becomes
publicly traded. The revenues would be distributed to the inventor,
the researchers department or center, and a Research Foundation
according to University policy. Additionally, if the stock reaches this
value, it is likely that there will be many millions in royalty income
over the life of the patent. These funds will also accrue to the inventor,
the department or center, and a Research Foundation.
With a potential $6 million from the sale of stock, plus future royalties coming to the University, there is a large incentive for units to make this technology successful. Developmental research may be the key to success. This is widely known by the financial community that will become very interested in research progress reports. If research continues on the invention at the institution, and particularly if that research is partially or wholly conducted by the inventor, conflicts of interest or the appearance of such conflicts may occur. (The following analysis is taken from the University of Florida Research Foundation Conflict of Interest Policy regarding Equity Holdings and borrows heavily from Ezekiel Emanuel and Daniel Steiner, Institutional Conflict of Interest, The New England Journal of Medicine, January 26, 1995.)
Examples of situations in which such conflicts may lead to decisions not in the best interests of the University or a Research Foundation are:
We gratefully acknowledge information from the University of Florida Research Foundation in developing this policy and appendix.
top of page