SUBJECT:

Proposal for Revision to the Patent Policy

The current royalty distribution formula for University of California
inventions was adopted in an April 1990 revision to the patent policy.
Since that time, there has been ongoing discussion regarding
alternatives for the allocation of patent income.

Inventions are subject to the royalty distribution formula in effect
when they are reported. Under the pre-1990 policy, inventors received
a more generous share than that provided by most other major
universities. The primary rationale for the 1990 policy change was
that individual inventors should not become enriched as a result of
performing publicly funded research. However, concern has been raised
in various forums that the current formula is perceived by faculty as
a disincentive for participation in the technology transfer program.
There has been substantial support for changing the royalty
distribution formula to: (1) establish the inventor's personal share
at a rate somewhere between that of the pre-1990 policy and the
current policy and (2) add a direct research allocation as further
incentive for faculty participation.

The current proposal, which addresses the above concerns and also
supports other administrative objectives, is the result of several
years of discussion and review involving the Technology Transfer
Advisory Committee, the Academic Senate, and the Council of
Chancellors. Accordingly, the university proposes to revise the
Patent Policy, effective October 1, 1997, as summarized below:

*  Rescind the current policy and revert all inventions reported
  before the new policy's effective date to the pre-1990 policy.
  This would prevent the need to administer three separate formulas
  over many years and would eliminate a formula that is unpopular
  with many faculty members

*  Remove the 15% administrative assessment (used in the pre-1990
  policy and current formulas) from the new formula and define net
  income as total income less direct case expenses. This would
  simplify the royalty distribution formula by consolidating the
  portion of income available to cover program costs (currently the
  15% assessment against gross income plus the university's share of
  net income) into one general pool of net income.

*  For inventions reported on or after the effective date of the new
  policy, distribute net income by invention as follows:

35%  to the inventor's personal share. This would establish the
    inventor's share at a flat rate between that of the pre-1990
    policy and the current policy.

15%  to research at the inventor's campus or laboratory. This
    would require that a minimum 15% of net income from each
    invention be designated for research-related purposes and
    allocated based on plans developed at each campus and
    laboratory.

50%  to the general pool at the inventor's campus or laboratory.
    This pool would continue to support program costs, including
    the State share, operating expenses, and direct expenses of
    inventions not earning income. Any residuals would be
    available to chancellors and laboratory directors for
    educational and research purposes.

Proposed language changes in the Patent Policy and Patent Agreement
incorporate the above elements as well as other revisions needed to
more accurately reflect university organization and practices. The new
policy would apply to inventors at all nine campuses. Because of the
unique nature of the three laboratories, and their relationship with
the Department of Energy, these sites would each be permitted to submit
alternative royalty distribution proposals to the President for
consideration.

Further details and a brief comparison of formulas regarding this
policy proposal are available on-line at:

        http://www.ucop.edu/ott.

Hard copies of the proposal and comparison formulas are also available
in the Human Resources Office of Policy Development and Quality of
Work/Life.

Comments regarding the proposed Patent Policy changes should be
directed to Jonnie Craig-Winston, Director of Policy Development and
Quality of Work/Life, either at extension 49659 or via electronic mail
at jcraig@ucsd.edu. All comments received no later than close of
business, May 27, 1997 will be summarized and forwarded to the UC
Office of the President.

Rogers Davis Assistant Vice Chancellor - Human Resources