Summary of the Agreement between Fusion IP and the University of Sheffield
1. Purpose
This document is intended to provide a broad overview of the agreement between the University of Sheffield and Fusion IP; the `Agreement´. It is primarily aimed at staff interested in the terms of the Agreement between the University and Fusion IP, relating to the exploitation of University of Sheffield intellectual property (IP) (1) and is not intended to be a comprehensive guide to the detailed operation of the agreement.
2. Background
The University of Sheffield aims to make an impact on the wider world by turning its research into high-impact commercial applications for the benefit of our economy and society. In order to help maximise the commercialisation of IP arising from our ideas and inventions through licensing opportunities and the creation of spin out companies, the University has entered into a partnership with Fusion IP (2). In November 2009 Fusion IP announced a £3.2 million deal with IP Group Plc, the leader in the field of commercialising university intellectual property. The partnership with the IP Group strengthens the capacity to commercialise University IP.
The Agreement enables Fusion IP to work with the University to commercialise University IP but is not intended to prevent the University from undertaking research activity where the funder may require access to, or ownership of, IP arising from the funded work.
3. Overview
The Agreement sets out the arrangements between the University of Sheffield and Fusion IP for the commercialisation of IP. The Agreement gives Fusion exclusive rights to commercialise IP emerging from research undertaken by the University where such IP is owned wholly or in part by the University. The arrangements have been in place since February 2005 for Medical IP and since August 2008 for all other (i.e. Non-Medical) IP. The Agreement term is 10 years from the start of each arrangement. In return for these rights Fusion have raised money for investment in the University´s IP and have issued shares in Fusion to the University (3).
The structure of the arrangements between the University and Fusion, whereby the University holds shares in Fusion means that it is in both parties interest to ensure effective IP commercialisation.
It was important for the University that the Agreement did not interfere with its research activities, such as undertaking research funded by third parties where the funding party may require ownership of the IP arising from the work funded. Therefore under the Agreement the University continues to undertake research or consultancy agreements in the ordinary course of business unless the object of such agreement is to entitle any person rights to arising IP where it has not funded the work from which that IP is generated. This allows the University freedom to enter into research or consultancy arrangements with third parties where the third party is funding the work and where the IP in such arrangements is partly or totally vested in that third party. IP owned by the third party under these arrangements will be outside the Agreement.
- Intellectual property (IP) refers to creations of the mind such as inventions (patents) trademarks, industrial designs and copyright which includes literary and artistic works
- Fusion IP plc is an AIM (Alternative Investment Market) listed company
- At the time of writing the University owns 24% of the shares of Fusion IP plc and the University´s Director of Finance is a Board Director of Fusion plc.
However the University must not bypass the Agreement by providing University IP to third parties who have not funded the work.
Illustration of how the Agreement works
A member of staff is supervising four related projects, as follows:
Fusion will have first rights to exploit the IP from Project A, the IP owned by Sheffield from Project C and the IP arising from Project D assuming the funder gives permission for Fusion to act for the University. Fusion has no rights to the IP arising from Project B or the IP owned by University Z arising from Project C. The Company only have rights to IP arising from Project B, University Z only to the IP vested in them under the agreement for Project C and the Charity only to the agreed rights in respect of the IP arising from Project D.
The above illustration only describes rights associated with IP that is generated from the undertaking of that project. Any other University owned IP, whether already in existence or arising from undertaking other projects, is usually made available to the funder for free only for the purposes of undertaking the project. However if the funder requires access for any other purposes this would normally require a license to the funder. The terms for this licence (like others arising from the University) would be negotiated by Fusion and the University.
4. Commercialisation
If Fusion are interested in IP that they have rights to under the Agreement, Fusion may commercialise this IP by (a) assigning the IP to a new/existing spin out company, (b) by licensing the IP to a new/existing spin out company or by (c) licensing the IP to a third party. The University maintains the right to use any IP for its own internal academic use.
In (a) above the parties undergo a valuation process by an independent valuer prior to any assignment taking place. As IP is generally at a very early stage valuations have not historically been material and generally cover any IP maintenance costs as a minimum.
Where an assignment of the IP into a new company takes place the inventors generally receive a share of the Company. Historically the University of Sheffield has awarded 40% of shares to inventors, and subsequent to the Agreement Fusion has undertaken to similarly grant this level of equity to inventors.
In (b) and (c) Fusion may act as the University representative in negotiating with and reaching agreement with third parties but Fusion does not have the rights to bind the University without University agreement. The IP will continue to belong to the University and the University will collect and distribute licence income.
In (b) and (c) above the Net Income (being gross income less University costs for IP protection and implementing the licence) is split 50% to the University and 50% to Fusion. In November 2009 UEB approved the following share of the University´s 50%.
| Net income | Fusion | Inventor(s) | Faculty | Central |
|---|---|---|---|---|
| First £20K | 50% | 50% | 0% | 0% |
| Next £80K | 50% | 40% | 5% | 5% |
| Balance remaining (over £100K) | 50% | 30% | 10% | 10% |
5. Confidentiality
The Agreement contains confidentiality provisions so any IP University staff disclose to Fusion personnel is fully protected. University members are therefore free to discuss their ideas with Fusion. University members should not disclose any information relating to their idea, or information they receive from Fusion, without written permission.
6. Time Limits
The University can time limit Fusion´s rights under the Agreement in a number of extreme circumstances. The intention of these provisions of the agreement is to protect the University from Fusion operating too slowly and preventing or delaying the commercialisation of University IP. The timescales below are broad summaries of complex contractual rights.
The University may request that Fusion make a decision relating to assignment or licensing if Fusion have not commercialised IP within 18 months of IP being disclosed. If Fusion demonstrates a business plan to commercialise the IP within the following 12 months and adheres to the plan then Fusion´s rights will continue. If Fusion does not provide a business plan within 30 days the IP may be excluded from the Agreement. If Fusion makes no further declaration relating to assignments or licences within 12 months the IP is excluded from the Agreement.
If a Fusion spin out company makes no use of IP after it has been assigned into the company for a continuous period of 18 months the University may give notice requesting reassignment back to the University. If Fusion demonstrates and adheres to a reasonable business plan for commercialisation within 12 months following the notice no such reassignment shall occur. If Fusion does not adhere to the business plan during the 12 months the University may obtain reassignment of the IP.
7. Procedure if Fusion does not wish to exercise their right to commercialise IP
If Fusion decline the right to commercialise IP, their decision will first be discussed with the proposer(s) of the idea. A recommendation will then be made to the Commercial Assessment Review (CAR) Group, chaired by the PVC for Research and Innovation, that the project is not suitable for commercialisation via the Fusion route.
If the proposer believes that the project should be maintained in the Commercial Assessment System (CAS) they should discuss the matter with the Director of Research and Innovation for their faculty and seek support for a request to CAR. The proposer should also submit a short case outlining the benefits and costs to the University of maintaining the project in CAS.
If CAR accepts the case for continuing the project is strong, CAR will decide how the project will be progressed. Any project continued in this way will be outside of the Agreement as Fusion has formally declined the opportunity to commercialise the IP.
If a project is not to be maintained in CAS and the proposer wishes to have access to University intellectual property which may subsist in the project then this can be raised with a member of the Commercialisation of IP Team.
8. The University of Sheffield Commercial Assessment System
The process by which the commercial viability of research and research-related activities undertaken at the University is assessed and progressed is referred to as the commercial assessment system (CAS). The Commercialisation of IP Team within Research and Innovation Services manages the University-wide functions relating to CAS. The team works closely with colleagues from Fusion to ensure that effective commercialisation processes are in place.
If you have any queries about the Agreement or the University Commercial Assessment System please contact the Commercialisation Team.