Repository: UIHistories Project: Board of Trustees Minutes - 1986 [PAGE 129]

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118

BOARD OF TRUSTEES

[November 15

provisions for solely owned inventions to be reasonable and has recommended acceptance of the terms of the agreement and approval of the exception to the Rules. I concur. O n m o t i o n of D r . D o n o g h u e , t h i s r e c o m m e n d a t i o n w a s a p p r o v e d .

Agreement with W. R. Grace and Company (Exception to the Genera/ Rules)

(13) W. R. Grace and Company, through its Washington Research Center, Columbia, Maryland, has offered to support research on zirconia high-performance engineered ceramics, a project to be directed by Adjunct Professor Morris Berg of the Department of Ceramic Engineering, Urbana. As a condition of its support ($39,745), W. R. Grace has requested an irrevocable, roya'ty-free, nonexclusive license to use any University-owned patent resulting from the research. Such a requirement is a firm company policy, and the University's acceptance of it requires an exception to Article I I , Section 7 ( e ) , of the General Rules Concerning University Organization and Procedure. The University previously has accepted identical terms from other sponsors. The Department of Ceramic Engineering and the vice chancellor for research agreed that W. R. Grace's request is acceptable in the present case and recommended that the exception be approved. T h e University Patent Committee has recommended approval. I concur.

On motion of Dr. Donoghue, this recommendation was approved. Procedures for Acceptance and Disposition of Stock in Licensed Companies

(14) The University accepts stock from companies that license University-owned inventions in lieu of cash payments for license or option fees. Normally, these special license agreements are negotiated by University Patents, Inc. ( U P I ) in consultation with University officials and the inventors and involve embryonic technology requiring substantial development and risk. Although the agreements are usually with cash-poor, startup companies, in each instance U P I has determined that the companies (1) are financially capable of developing the technology and (2) are the sole, potential licensees. Acceptance of stock assists in the development of the technology by reserving limited cash for developmental work. T h e agreements commonly contain restrictions on the University's ability to dispose of the stock — such as providing for a specified holding period, or for the licensee's retention of a first-right-of-refusal to repurchase the stock. Other restrictions, stemming from Security and Exchange Commission regulations regarding new stock issues, also may apply. Thus, the University cannot realize cash income for distribution as contemplated by the General Rules Concerning University Organization and Procedure until such restrictions no longer are in effect. Accordingly, new procedures are proposed to provide for appropriate income distribution and to recognize the University's special obligations and interests in these licensing agreements. T h e University's present investment practices usually require the sale of stock in small companies as soon as it is contractually permissible to do so. In the instances described above, however, the University has an implicit commitment to its technology and to the company to which that technology is licensed. Since the technology often will be a major (if not the only) product of the company, the value of the company's stock should increase with the company's succcessful development of the technology. Creation of a separate portfolio for these stocks will permit and encourage investment decisions that reflect these special circumstances and conditions.