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Academic Council adopts more explicit conflict of interest guidelines

In his most recent annual report, President Charles Vest noted that MIT has worked hard during the last few years to develop strong and appropriate research and educational relations with private industry, interactions that create new ways for the university to serve society. At the same time, he observed, we must pay careful attention to the implications of these new relationships -- on both an institutional and an individual level.

These new relationships further MIT's interest in promoting useful knowledge and entrepreneurial activity, which bring new technologies and new jobs to the marketplace. Professor J. David Litster, vice president and dean for research, noting the increase in new companies springing from MIT research, has observed that the Technology License Office is assisting in the formation of about 20 new companies per year, about twice as many as just two years ago.

Noting this increase in entrepreneurial activities, the Faculty Policy Committee, the Patent and Copyright Committee and the Committee on Outside Professional Activities have worked over the past year (and will continue to work) to refine and clarify MIT's guidelines with regard to intellectual property rights and outside professional activities.

The following addition to Policies and Procedures, adopted in November by the Academic Council, provides more explicit guidelines with regard to patent licensing and equity ownership in outside companies. The policy will also be made available on the web.


4.4 Conflict of Interest

4.4.1 Guidelines for Licensing and Equity Ownership

When companies license MIT inventions or other intellectual property, situations may arise that pose a conflict of interest for faculty and staff. Normally, this happens when they make decisions while fulfilling their MIT responsibilities that might materially affect their personal wealth or that of their immediate family members. Sometimes these conflicts can be managed; sometimes they must be avoided. These guidelines are intended as reminders of situations where conflicts may arise and suggestions for how to manage or avoid them. They are intended to be guidelines for thinking about conflicts rather than rules that cover all possible situations. Generally, prior full disclosure to an appropriate supervisor is the safest policy to follow.

The potential for conflicts is greater for those in managerial or supervisory positions (e.g., supervisors of students, department heads, laboratory/center directors, deans, and other officers of the Institute), but conflict of interest situations can arise for anyone. Staff in the Technology Licensing Office need to be especially diligent to avoid conflicts of interest, and they have their own guidelines in the Guide to the Ownership, Distribution and Commercial Development of MIT Technology. All members of the MIT community should consult with an appropriate supervisor when it appears there may be a conflict. In some cases, this may not be an immediate supervisor.

Conflicts can also arise in connection with performing outside professional activities related to licensing and intellectual property (see Section 4.5 Outside Professional Activities).

Individuals in managerial or supervisory positions should be aware that there may be personal legal and tax implications resulting from investing in companies that are based on MIT technology and that are founded by faculty, staff or students under their supervision. (See Internal Revenue Code Section 4958 Excess Benefit Transactions.)

Equity Ownership in Companies: Conflicts most commonly arise when a new company licenses MIT intellectual property, but can also occur when MIT intellectual property is not involved.

During the time that companies are still privately held, managers and supervisors, including supervisors of students, should not invest personally or own stock in business ventures of their subordinates or students, since there is a conflict of interest between the manager's supervision of the student or subordinate (e.g., assigning grades, approving promotions, determining salary levels, allocating space, etc.) and the manager's business partnership with the student or subordinate.

Faculty -- particularly department heads and laboratory/center directors -- have a special responsibility with respect to questions of determining ownership of intellectual property from research by investigators whom they supervise. All faculty and staff should weigh carefully their and the inventor's obligations to MIT in deciding whether the invention falls under MIT ownership. It is a direct conflict if a faculty member, department head or laboratory/center director responsible for determining the ownership of intellectual property intends to invest in or be a co-founder of a company with the inventor.

It is a conflict for an investigator/inventor to negotiate with MIT regarding the terms of a license before the matter of ownership has been definitively resolved. Faculty and staff who are founding companies should not personally negotiate the licensing terms with MIT. An attorney or a company executive with no connection to MIT should be appointed for this task.

Faculty and staff who own equity in a company should not attempt to influence the licensing terms that MIT offers to the company.

Faculty and staff who hold board positions with companies should recuse themselves on issues involving licensing terms with MIT.

Consulting: Faculty and staff who consult should remember that their primary employer is MIT and that they have a heightened responsibility to their primary employer when deciding whether to assign their inventions to MIT or to a company for whom they consult. If they have questions about the MIT policy on ownership, they should consult with their department head or appropriate supervisor when deciding to whom the invention should be assigned. (See also Section 4.5 Outside Professional Activities.)

Sponsored Research: It is a conflict for MIT faculty or staff to accept research sponsorship from a company in which they have a significant financial interest. The conflict arises because the outcome of the research could materially affect the personal wealth of the researcher or an immediate family member. This policy should not prevent an investigator from receiving research support from a large publicly held company just because the researcher or a family member owns some shares in the company. (See also Section 4.4 Conflict of Interest.)

A version of this article appeared in MIT Tech Talk on January 26, 2000.

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