- Compromising Future Research Funding
- Obligations to the University
- Separating Consulting from University Research
- Acceptance of Confidential Information
- Involvement of Students and Postdocs in Consulting
Although permissible consulting activities are performed on a faculty member’s own time and are personal arrangements between the faculty member and the company, the terms of any formal contractual agreements should be carefully reviewed by the faculty member before signing in order to assure that the terms do not jeopardize present and future university research programs. Legal review is also recommended.
The faculty consultant’s obligations to a company under a consulting agreement need to be subordinate to the consultant’s obligations to the university, including with respect to the duty to disclose and assign inventions to the university. Problems can occur because companies employing consultants typically require assignment of title to inventions made during the course of the consulting relationship. Since the actual consulting frequently occurs concurrently with the researcher’s university projects, it is essential to ensure that the assignment of title is restricted to inventions made “under the scope of the consulting agreement” rather than “during the time of the consulting agreement.” If this is clear in the consulting agreement, it will help to avoid later title disputes for inventions made at the university during or after the period of the consulting.
A related issue concerns separation of a faculty member’s consulting activities from university research being conducted in the faculty member’s laboratory. Because faculty member’s consulting services are sought based on her/his academic expertise, and since consulting agreements typically include very broad and general references to the scientific area of consulting, the agreement will often appear to overlap with or be indistinguishable from university research projects. It is therefore incumbent upon the faculty member to separate specific university projects from consulting activities. Since the university will assert ownership to any inventions outside of Permissible Consulting, potential misunderstandings and disputes can easily occur without such a clear and distinct separation.
In addition, faculty members that consult for companies that also seek to fund their research will have to disclose their consulting relationship and submit the disclosure for review by the Conflict of Interest (COI) Committee. If the consulting income is significant, the COI committee may determine that the consulting constitutes a conflict of interest and will either recommend a strategy to manage the conflict or recommend that the research funds not be accepted.
It is not uncommon for a company to disclose proprietary information to a consultant. In doing so, the company often wants written assurance that this information will be kept confidential. Confidentiality can present challenges for a faculty member involved in open, free exchanges of information in a public university setting, and the company’s documentation in this regard should be scrupulously examined.
Disclosure of proprietary information, either intentionally or unintentionally, may be actionable under both criminal and civil law. Therefore, it is essential to limit the amount of confidential information received when consulting and to have the company agree to clearly identify such proprietary information by marking it as “confidential”. Consulting agreements should always include a statement about the transmission of proprietary information and a “no-fault/no liability” statement regarding unintentional disclosure.
Additionally, accepting confidential information from a company could compromise the university’s ability to rely on the fundamental research exception to the export control regulations. If we cannot rely on this exception and the confidential information the investigator receives is controlled under the export control regulations, the investigator will not be able to share the information with any foreign national (including those working the investigator’s lab) without obtaining an export license.
Students and postdocs may not undertake training in, be employed by, or consult for companies in which their mentors/advisers have a significant financial interest.
It is very important to remember that the university’s duty to defend and indemnify its faculty members as university employees does not extend to consulting activities. Therefore, by signing the consulting agreement, the consultant assumes any risk of legal liability, including those referenced above, and the faculty member should consider personal insurance for such liability.
Consultants are normally asked to provide advice to the company which may or may not be accepted or may be interpreted by the company in a different manner than what was intended by the consultant. Further, the consultant generally has no control over how the results are used in practice. Therefore, it is very important that consulting agreements limit the consultant’s responsibilities to negligent acts on the part of the consultant only. A consultant agreement should not include language which makes the consultant responsible for general liability or liability for any product based on the consulting.
Some consulting agreements may also attempt to require that the consultant actually assume the financial costs of defending lawsuits against the company which result from the consulting activities. University employees should seek to eliminate such language from any consulting agreement they enter into.