Revenue share

There are four ways in which academics involved in commercialisation can enjoy direct and personal financial benefits:

1) Receiving an income share from licence revenue (via lump sum payments or royalties which are paid by a third party to the University of Sheffield);
2) Receiving a share of the University’s revenue from the sale of patents or other registered intellectual property to a spin-out company (via a lump sum payment paid by the spin-out to the University);
3) Receiving equity in a spin-out company personally as a founder (this will generate income for the individual only when they are able to sell their shares - equity realisation);
4) Receiving a share of the University’s revenue from the sale of shares in a spin-out company (equity realisation).

This will be determined by a) the individual’s contribution to the intellectual property being commercialised; b) the individual’s involvement in future commercialisation activities; and c) the preferred commercialisation route.

1)  Income share from licence and share sales revenue

Income generated from licensing Intellectual Property (IP) or where the University sells its shares in a company is paid to the University as owner of the IP (gross income). The University recoups from this income any costs of commercialisation of the IP, such as patent costs and legal costs (net income).

The UEB has approved the following split of net income:

Net income University/IP Group Inventor(s) Faculty Central
First £20K 50% 50% 0% 0%
Next £80K 50% 40% 5% 5%
Balance remaining (over £100K) 50% 30% 10% 10%

NB - Inventor share will be reduced by an amount costed to fund the University's liability to Employers NI, and the reduced amount will then be subject to payroll deductions (Employees NI and tax).

Should you wish to waive your right to take the income personally via payroll and re-invest it in your university activities you can nominate it to be paid into a University account for research-related activities.

2) Income share from sales of a patent to an IP Group company

Income generated from the sale of Intellectual Property (IP) is paid to the University of Sheffield as owner of the IP (gross income). The University recoups from this income any costs of commercialisation of the IP e.g. valuation of the IP (net income).

When the University receives income from the sale of a patent to a IPG company where a) the company is already formed and trading b) the input of the inventor is not necessary to the operation of the company and c) all parties agree that assigning the patent to the company is the most appropriate commercialisation route.

Inventors who benefit under this scheme will not be eligible for any additional revenue share from sale of shares.

In November 2009, UEB approved the following split of net income:

Net income     Inventor(s)           Faculty              Central            
First £20K 100% 0% 0%
Next £80K 80% 10% 10%
Balance remaining (over £100K)                     60% 20% 20%

NB - Inventor share will be reduced by an amount costed to fund the University's liability to Employers NI, and the reduced amount will then be subject to payroll deductions (Employees NI and tax).

Should you wish to waive your right to take the income personally via payroll and re-invest it in your university activities you can nominate it to be paid into a University account for research-related activities.

3) Equity split for founding academics in a spin-out company

Where the input of the inventor is necessary to the operation of the company and they are to play a role in the company’s activities they are called a founder. Because of the commitment required from them they will benefit from a direct and personal shareholding in a spin-out company.

The starting point for shareholdings in a spin-out company is set out below. The founders’ shares will be diluted equally alongside the University of Sheffield and IP Group (or any joint venture partner) when investment is made directly into the company and/or to facilitate recovery of pre-incorporation expenditure (e.g. patent costs incurred by the University). This is likely to happen immediately after this initial allocation if investment is required to operate the company. This means that each founding shareholder’s percentage ownership in the company is smaller, although the value of the company should have increased.

Where inventors have made a contribution to the intellectual property on which a company is founded, but will not have a significant and on-going contribution to the development and management of the company they will not receive shares. Instead they will receive a share of any revenue received by the University upon assignment of the relevant IP under 1) above.

Founders who hold shares in a spin-out company will not also be eligible for additional or further remuneration under any revenue-sharing scheme for IP which is assigned into that spin-out.

Equity split (shareholdings) Founder(s) University IP Group
40% 50% 10%

Where IP Group is not involved in a spin-out company the founder’s shareholding remains the same at 40% and the University will have 60%.