Sign research contracts in a private university or create a "ghost" company

Question

We are a research group from some private university and we offer research contract services. The problem is that when we get customers, the contract is signed by the highest authority of the university, and we appear on the contract as second players. Also they get 20% on the budget, and all intellectual property that might come from our work. I do not know whether the same situation is in public universities, but we do not like this and we are thinking about other alternatives, for instance, since we have now a lot of potential customers and contacts, to sign the contracts through a smallest possible company that we would create, so that our university would never know about this. The problem is that with this approach, we can not hire people for working on the projects in our university, so they should work out of academia, and we would never get officially recognition for this work. So it seems we have only two options, we stay in this university and accept the situation, or we leave completely and create a spin-off. I would like to know your opinion or advice about this, or what would you do in our situation.

Answer 1

The situation you describe is fairly typical of research contracts—if you are employed at a university, then normally the university is the one that negotiates contracts on your behalf. This is usually for legal reasons, although it does, as you indicate, usually come at the cost of having to give the university some of the money in the contract as "overhead."

As you also indicated, however, it is possible to form a start-up company; there's nothing wrong with doing so in most countries, and such companies can engage in contract work with private firms. However, there are often restrictions on receiving government research awards unless they're partnered with universities or other approved non-profit organizations.

Some points to consider:

• How much of your business leads are the result of the identification of your group with your host university?
• Will you have enough outside business to support your staff through this outside research income?
• It is quite likely that much of what you save in overhead payments to your university may go out to your government in the form of taxes as well as to pay for other business expenses you have.

You cannot expect to run a company while on-campus, using university resources. If this is discovered, you can almost certainly expect to be terminated for misuse of university resources (and worse, possibly public resources as well, depending on what country you're in). At a minimum, you would expect to have to have off-campus resources, and employ your contract employees separately, if you want to maintain this arrangement.

Answer 2

Also they get 20% on the budget, and all intellectual property that might come from our work.

Only 20%, that is a dream rate, are you sure it is right? For research related activities from fedral agencies in the US 70% is not unheard of. See this table from Harvard. Charitable foundations often get discounted rates, while industry partners often have to pay extra. At my country university industry contracts usually carry at least a 100% overhead rate.

As for the IP, universities tend to be willing to let you give away the IP, they just want to make sure they get a cut if you try and make money on the IP. Whether or not the support the university puts in makes them a reasonable investor is a hard call. You have to make a business case to determine if you are better off going independently.