How to equitably divide the economic benefits of a licensed patent among academic inventors?

Question

I am PI of a research group and in different projects regarding sample analyses, it looks like we will be able to license 4 patents to 4 different companies. I can tell you this success was not neither expected nor planned. And now the problems come; the money we receive from each patent, how to distribute it among the different participants. In order to avoid problems, I decided to distribute it equally between the number of people involved on each patent, which varies from 5 to 7, including me.

But some people are disappointed because they consider that other people did much less and should receive less percentage. In addition, I do not like this completely since I got all the funding for the projects, infrastructures and negotiate it hard with the companies, so I think I should deserve it a bit more, but I know that with this I will have problems in the group. Of course, I should have written everything down, the regulations, before starting the projects, but now it is too late. In order to solve this I thought about preparing a document, in which everybody writes down what they think they did, and how that part contributed to the invention. Then I think we could start a reasonable discussion, so people that did less, could not say the opposite, and finally we would reach an agreement. Another solution I thought would be to leave my University to decide on this.

My questions here is, how would you solve this problem, and if you think (and why) that a PI should get more part of the contribution.

Answer 1

(Expanding a bit on Buffy's answer)

Short answer: Use some math to make everyone happy.

This is actually a well-explained problem in economics for which there is a solution.

It is possible to mutually assess everyone's contribution, without anyone unfairly boosting their own contribution, so that the proceeds are distributed in a way that everyone is likely to be satisfied with. This is, as Buffy said, a type of cake-cutting algorithm.

A Tool

If you'd like to skip the theory and go straight to a solution, check out spliddit.org/apps/credit. They provide a web app for everyone to subjectively assess everyone else's contribution and computes the fair proportions. The theory behind it is pretty clever, and you will likely find that everyone finds the splitting to be satisfactory.

A Theory

If you're looking for a more principled answer (other than "try this tool"), here's the paper that describes the theory and method used by Spliddit in rigorous depth: Impartial Division of a Dollar - Clippel, Moulin, Tideman

The method satisfies two formalized criteria:

Impartiality - no one assesses or covertly influences the assessment of their own contribution

Consensus - the ultimate division is compatible with every individual's assessment of others' contributions

Good luck!

Answer 2

Google translation of original:

First clarify what right the university can have. The balance is distributed. That is easy. Now, each invention can be quantified by the scope and number of claims. A list of the participants indicating their participation in each claim would be a starting point. This would be worth 50% of the patent. The rest of works, direction, administration, investigation. writing, experiments, would complete the other 50%. Then each participation is valued over 100 and calculates the individual percentage. This may be the combined result of various participations. In this way, a more objective map of the situation could be obtained. Differences and means by error are compared, and a value is attributed to each participant. Then each can negotiate with the group, which for this or that reason should touch something else. By vote the claim is granted or not. Previously, limits were set to the percentage negotiable with the group and determined the percentage of votes that approved a claim. It may be a low percentage. eg 30% if there is trust and camaraderie.

Original Spanish:

Primero aclarar que derecho puede tener la universidad. El saldo se reparte. Eso es facil. Ahora, cada invento se puede cuantificar por el alcance y numero de reivindicaciones (claims) . Una lista de los intervinientes indicando su participación en cada claim , sería un punto de partida. Esto valdría el 50% de la patente. El resto de trabajos, direccion, administración, investigacion. redacción, experimentos , completarían el otro 50 %. Luego se valora sobre 100 cada participación y calcula el porcentaje individual. Este puede ser el resultado combinado de diversas participaciones. Asi se podría obtener un mapa más objetivo de la situacion. Se compara las diferencias y las medias por error, y se atribuye un valor a cada participante. Luego cada uno puede negociar con el grupo, que por tal o cual razón le deba tocar algo más. Por votación se concede o no el reclamo. Previamente se pone límites al porcentaje negociable con el grupo y determina el porcentaje de votos que aprueba un reclamo. Puede ser un porcentaje bajo. ej 30% si hay confianza y camaradería. Abrazos.

Answer 3

How to equitably divide the economical benefits of a licensed patent among academic inventors?

First and foremost, you must abide by the law:

1. Establish who owns the patent, it mightn't be the inventors;
2. Establish how ownership is distributed, according to the law; and
3. Distribute accordingly.

You'll probably need to hire an attorney, since you may be liable if you get it wrong.

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Without an agreement asserting otherwise, ownership will be defined by patent law (my emphasis):

Under patent law, each co-inventor...owns [the patent]. In the absence of any agreement, each co-inventor owns 100 percent of the patent, regardless of how much each individual contributed to the invention. Patent law gives co-owners of a patent the right to make, use, license, sell and import the patented invention within the United States in whatever way they please, without the consent of the other co-owners.

Thus, under US patent law, it seems the OP has the sole right to license and collect royalties, unless an agreement asserts otherwise. The OP believes the university gets 70% of royalties, since that's what other researchers have said. To be sure, contractual agreements must be checked, and ownership is then defined under the terms of any such contractual agreements.

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Only when the law has been followed can royalties be further distributed. For instance, supposing the OP collects all royalties, then they may choose to gift their newly established wealth, noting that royalties and gifts may be subject to tax.

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For small royalties, the costs incurred in establishing who gets what might well outweigh the royalties themselves...

Answer 4

As others have said, a lot will depend on your legislation since it may prescribe a particular way of arriving at the fractions for each co-inventor.

I thought about preparing a document, in which everybody writes down what they think they did, and how that part contributed to the invention

In germany certain questions are asked and particular answers decide scores each of the co-inventors gets.

• This is not only how much "brilliant ideas"/work/other ressources each co-inventor put in, but also
• how much guidance they received (someone who solves a problem they identify on their own gets more "points" than someone who's told to solve a particular problem and maybe given a literature list/guidance how to approach a solution), and
• how this compares to the expectation according to their job.

The proverbial contrast is the R&D engineer whose job is to develop an instrument solving problem x vs. the janitor seeing high-tech problem x when cleaning the lab and developing the solution in their free time at home.

But some people are disappointed because they consider that other people did much less and should receive less percentage.

The questions above won't completely solve the issue (even though in Germany even lists of scores for particular situations are prescribed), but they may help in the negotiations.

Speaking of negotiations, if you as PI have an interest (are co-inventor) as well, I'd think it proper to have a professional mediation here. At least if there are students involved you may have a conflict of interest if you have a duty to make sure the students are not exploited due to their dependence on you/the institute (that would be the case e.g. for a German professor and their Bachelor or Master student until graduation)

In addition, I do not like this completely since I got all the funding for the projects, infrastructures and negotiate it hard with the companies, so I think I should deserve it a bit more, but I know that with this I will have problems in the group.

• The special stakeholder who gets credit for providing the infrastructure is usually the university rather than the PI as person - and the percentage may be fixed/non-negotiable.
  Universities here in Germany have rules how that money is distributed between university, faculty and research group.

• As for the PI position from what I know of the German system, a group leader will usually get rather less unless in addition to providing guidance they put in substantial amounts of work (this is about the money the PI gets as person, not for their group). The reasoning behind that is that guiding R&D work is their job for which they are paid their salary. So a patentable invention sticks out of what is expected of them less than it sticks out of, say, a not-yet-graduated student Master student who isn't paid any wage for their thesis work.

Answer 5

Research has been done on questions like this.

The Cake Cutting Algorithm is about fair distribution of a resource. Perhaps you can apply it here, or a modification of it.

In fact, the current (April 2020) issue of Communications of the ACM has a new article that also gives background on the problem: Aziz and Mackenzie, A Bounded and Envy-Free Cake Cutting Algorithm.

And, because of the current pandemic the ACM Digital Library has been opened for free access for now, though it is a temporary action. It contains essentially everything published by the ACM. Recent things, at least.

Answer 6

If any of the people involved have outstanding rights to the IP get a lawyer. That's not likely though.

If the patents were assigned to the university tech transfer organization and this is the kickback from them put it into a lab slush fund. Having money unencumbered by oversight will be useful to you. Use some of it to career boost the people who did the work.