It is vital that students and faculty be informed of their legal rights that they might be giving up by signing the Proposal. How else could an individual be expected to judge the merits of entering into such a significant contract? The Principles and Objectives section of the Proposal, which is a preamble of sorts, is an excellent place to provide an overview of the rights granted under the law in the first instance to inventors. Unfortunately both the tone and the language of Principles and Objectives do the exact opposite, obfuscating legal rights that potential inventors may not know they have.
Intellectual property is the product of a cooperative relationship between academic, administrative, and support staff and students and derives from the creative energies of the individual fostered by the academic community and the environment provided by the University.
This statement is incompatible with the foundation of intellectual property protection, patents and copyrights. Invention is chiefly the product of the labor of individuals, and society recognizes this contribution by awarding those individuals patents. Universities and corporations cannot apply for patent protection, only individuals can. By placing statements that emphasize the contributions of the University and minimize the contribution of the individual within Principles and Objectives, the University makes the policies of the Proposal more palatable, albeit deceptively so.
The Inventor and the University (and affiliated institutions) have a shared interest in the intellectual property.
Although the word ‘interest’ can mean many things depending on the context in which it is used, in the context of a legal document (which the Proposal purports to be), ‘interest’ suggests a property interest. Under the rule of law, intellectual property belongs entirely to the inventor until he or she assigns the interest to another party [FN1]. The Proposal here misleadingly indicates that from the outset the University has a legal claim to inventions, when in fact this is not the case. Absent an agreement to the contrary, inventors ordinarily have an exclusive property interest in their inventions. This sentence tends to conceal the true rights and obligations the Proposal imposes on potential signatories and makes a free decision all but impossible to those without familiarity with intellectual property law.
Since the University draws its operating and research funds in large measure from the governments of Quebec and Canada, the commercial development of its intellectual property, must, to the extent possible, result in benefits to Quebec and Canada.
The conclusions reached by the authors of the Proposal here have no logical basis. There should be no expectation, implicit or explicit, by governments that operating and research funds are provided by Quebec or Canada in exchange for monies derived from the commercialization of intellectual property. The reward for public investment in McGill is the maintenance and development of educational opportunities and a first class research institution. The idea that the University is a mercenary for governments is both crass and irreconcilable with the ideal of intellectual freedom to which the University aspires. This statement also adds an inappropriate political dimension to the Proposal that has been criticized by others [FN2]. Furthermore, if the University vigorously enforces this element of the Proposal, it will probably encounter conflicts of interest that may induce it to breach its fiduciary duty to inventors [FN3].
“Contract of Employment” means a contract by which a person undertakes to do work for remuneration, according to the instructions and under the direction or control of the University.
It is unclear whether students would qualify as contracted employees under this definition.
3.1 Copyright: In relation to any work, the Author owns copyright and is entitled both to determine how the Work is to be disseminated and to keep any income produced.
Intellectual property consists of that material which can be copyrighted or patented. According to Article 3.1 the University asserts that intellectual property which is copyrightable belongs to the author. In Articles 4.4 and 5, the University claims significant rights to intellectual property that is patentable. Yet in Principles and Objectives the authors state “…the University (and affiliated institutions) have a shared interest in the intellectual property.” Why is it that the University claims rights to patentable material but not to copyrightable material? Surely producing these two types of intellectual property demands the same creative energies and are supported by same “operational and research funds”. Quite simply, the University claims these rights because it feels that it can. The protection of rights to written work by university authors is a cherished tradition that dates to the very origins of the medieval university [FN4]. There is no precedent to support a move by the University to assert control over copyrightable material. The addition of technical arts to the university curriculum is a modern phenomenon. Unfortunately, inventor’s rights within the University do not have the benefit of hundreds of years of tradition to protect them and are therefore vulnerable to reappropriation. The result is a University that has two classes of students and faculty, those that can benefit from their creative energies and those that cannot. The University says that all scholarly output is equal, yet it does not protect all scholarly output equally. This doctrine of ‘separate but equal’ should trouble any member of the McGill community.
3.3 The University shall automatically be granted a non-exclusive, royalty-free irrevocable license to reproduce all such Works for academic purposes. The license granted herein does not confer any commercial rights to copyrighted work.
This statement should perhaps be elaborated to read “…non-exclusive, non-transferable, royalty-free irrevocable license to reproduce all such Works for academic purposes for the duration of the copyright.”
4.1 Ownership of Rights: Rights to all Software and Inventions developed by Inventors are owned by the Inventor, but are subject to the disclosure requirements of Article 4.4.
This article seems to assert inventor’s rights, but crucial rights are later reassigned in Articles 4.4 and 5. According to Vice Principal Bélanger, under the new policy, “The University has no intention to exercise control over intellectual property until it is put forward for commercialization.” [FN5] The idea that University inventors own their inventions until the point of commercialization is ludicrous. Strictly speaking, there is no invention without a patent. The patent exists solely for the purposes of commercialization. To own an invention until the point of commercialization is to own nothing. The University does not intend for inventors to commercialize their inventions. Article 4.1’s statement that “Rights to all Software and Invention developed by Inventors are owned by the Inventor” is effectively meaningless and obscures the true conditions imposed by the Proposal.
4.4 Disclosure: All Inventors are required to disclose those Inventions and Software that they wish to develop for protection and/or commercial purposes. This disclosure is to be made to OTT, acting as the delegate of the Vice-Principal (Research), through a "Report of Invention". After receiving a Report of Invention, OTT shall acknowledge receipt of the report and shall, within a 30-day period, arrange to meet with the Lead Inventor. Following such consultation, a memorandum of understanding shall be prepared within 90 days of the original disclosure describing a plan of action for the management of the Invention to which both parties (Inventor and University) shall agree, in the event that both the Lead Inventor and OTT wish to proceed with commercialization. The plan may address issues such as the need for further evaluation (in confidence) by recognized experts, the need for additional research, and the need for intellectual property protection. The plan shall delineate the responsibilities that each of the two parties shall assume and the time-frame needed. By mutual agreement the Lead Inventor may at his/her discretion request that the memorandum of understanding be amended to cede to the University the total financial and management responsibility for obtaining intellectual property protection on behalf of the Inventor, negotiating assignments or licenses and taking whatever other steps are deemed necessary for the commercialization of the innovation. Ownership becomes joint between the Inventor and the University upon completion of the memorandum of understanding.
OTT’s Report of Invention form reads: “I (We) agree to assign to McGill University my (our) rights in the invention.” [FN6] The Report of Invention form will have to be changed in order to conform with Article 4.1. Furthermore, Article 4.4 indicates that ownership becomes joint upon completion of the memorandum of understanding, suggesting that Article 4.1, which says that inventors own their inventions, is a façade (vide supra).
The Proposal does not elaborate what happens when the inventor and OTT cannot agree on a memorandum of understanding. Presumably neither the inventor nor OTT will be able to proceed with commercialization, but this places an unfair burden on the inventor, who is eager to commercialize his or her invention, while OTT oversees many patents and has little to lose by ‘stonewalling’ the inventor. Thus OTT is in a far superior bargaining position and may coerce the inventor into making an unfavorable agreement in the memorandum of understanding.
Furthermore, the Proposal indicates that the memorandum of understanding is agreed upon only by the lead inventor and OTT. The memorandum should require the signatures of all the inventors to ensure that each inventor has an opportunity to negotiate with the University.
5. Commercialization
Inventors are not obliged to seek commercial development of their work. However, Inventors shall not pursue independently of the University activities aimed at protecting or commercializing Inventions or Software. Except where specifically provided otherwise in this Policy, protection, for-profit distribution, revenue-generating licensing, and commercialization of any Invention or Software is the sole responsibility of the University. The University shall exercise due diligence in these tasks.
To ensure that the memorandum of understanding is respected, this section should be reworded to say: “Except where specifically provided otherwise in this Policy or the memorandum of understanding, protection, for-profit distribution, revenue-generating licensing and commercialization of any Invention or Software is the sole responsibility of the University.”
7.1 Sharing of Income: The first $10,000 of Net Income from the commercialization of Inventions or Software accrues solely to the Inventor, after which Net Income shall be shared between the Inventor(s) and the University on the following basis: 60% of Net Income shall go to the Inventor(s) and 40% to the University. Should the University decline to pursue commercial development and assign its rights to the Inventor(s) under the provisions of Art. 8.3, the University shall be entitled to 20% of the Net Income. Should the University decline to pursue commercial development and assign its rights to the Inventor(s) under the provisions of Art. 9.4, the University shall be entitled to 20% of the Net Income.
To ask that inventors turn over 20% of profits of an invention the University has declined to commercialize is grossly unfair. Inventions can languish for months before the University finally decides to abandon commercialization. All this time spent within the University decreases the value of the invention. To be perfectly fair, the University should have to reimburse the inventor for the value of his or her invention that was lost over time, not demand 20% of what the inventor manages to salvage.
The 60:40 royalty split between inventor and University will replace the more inventor-friendly 65:35 split of the previous policy. As it is predicted that the University will need to embark on a major faculty recruitment effort in the coming years, it can ill afford a cold reception for incoming inventors when other universities can exceed McGill’s salaries and benefits [FN7].
The assignment of the first $10,000 to inventors is a laudable step in promoting University inventorship, but presents a quandary. By including this provision, the Proposal will discourage OTT from vigorously pursuing commercialization of small projects. Instead, OTT will decline to commercialize the small project, assign rights to the inventor, and then take the 20% of whatever profits come out of the venture, having invested none of its limited resources, which are better spent on larger projects that will produce more money for OTT and the University. The Proposal must ensure that small ventures are not overlooked by OTT.
7.7 Exception: Inventions or Software resulting from
activities carried out by an Inventor who is a member of
administrative and support staff under a Contract of Employment are
excluded from the provisions of this section, unless there is a
written agreement to the contrary between such Inventor and the
University.
The fact that administrative and support staff are excluded from the provisions of the Proposal suggests that the authors of the Proposal view faculty and students in the technical arts as ‘hired to invent’, a view that shores up arguments for reassignment of rights from inventors to the University. The fact of the matter is that legal precedent and commentators agree that faculty and students are not hired to invent [FN8]. The policy, if it is truly fair, can safely be extended to all staff whether technical arts faculty, liberal arts faculty, administrator, or student, should it not?
8.1 Role of the University: In consultation with the Lead Inventor, the University pursues commercial development of Inventions and Software through licensing, distribution, or transfer to third parties, or by assisting in the creation of joint ventures or new enterprises. This is normally done by OTT. OTT shall consult the Vice-Principal (Information Systems and Technology) in cases involving Learnware. Inventors shall support and cooperate with OTT in its efforts to commercialize Inventions and Software as their involvement is critical to success.
Article 8.1 awards OTT a complete monopoly on the commercialization of all McGill inventions. OTT does not and will not compete with private technology transfer companies. Competition is the only way to ensure that OTT is competent to represent inventors. Furthermore, it is painfully obvious to this commentator and to others that confidence in OTT (excluding the opinions of Vice Principal Belanger and the OTT staff itself) is at an all time low [FN9]. Utilization of an ineffectual technology transfer organization is a poor way to develop important new technologies. A more equitable, and arguably more effective, policy would adopt a strategy similar to that of the University of Wisconsin’s Alumni Research Foundation (WARF). Wisconsin faculty retain all intellectual property rights, so WARF must compete with similar non-university technology transfer companies, and it does so successfully: most Wisconsin faculty choose to let WARF commercialize their inventions though they are by no means required to do so. This arrangement has allowed WARF to donate over half a billion USD towards University of Wisconsin research [FN10].
Article 8.1 also states that: “Inventors shall support and cooperate with OTT in its efforts to commercialize Inventions and Software…”. This suggests a framework where the inventors exist only to assist OTT, when in fact OTT should by all measure exist solely to aid inventors. In addition, under this provision, inventors could expose themselves to disciplinary actions from the University if they resist OTT, even if they do so for good reason. Perhaps Article 8.1 should instead read: “OTT and inventors shall render mutual assistance and cooperation in the effort to commercialize Software and Inventions.”
11.
Enforcement
Acceptance of this Policy is a condition of
employment by the University, or engagement as a visitor in any
University program. Students registered at McGill are also bound by
this Policy. This Policy also applies to McGill academic staff on
sabbatical leave unless the host institution or company has rules
which preclude the application of this Policy or other arrangements
are agreed to by the University in writing.
The Policy shall apply to any and all Work, Invention and Software disclosed after the date of final approval of the Policy.
The issue of enforcement raises serious questions about the legality of the Proposal, questions that so far the authors have been quick to dismiss. Since the Proposal purports to impose legally enforceable obligations (at least on inventors), it is worth inquiring whether this presumption is justified under applicable law. McGill University and its inventors are subject to the laws of the province of Quebec, which, for historical reasons, are rooted in the tradition of civil law – a legal system differing in various ways from the common law tradition prevalent in the rest of Canada as well as in Great Britain and the United States. Despite assurances from the authors, the question of whether the Proposal represents a legitimate exchange of obligations, freely consented to, leaves in doubt the eventual enforceability of the Proposal. Legal counsel for the University indicated to Vice Principal Bélanger and the Advisory Committee that certain legal points raised in a previous commentary on the Proposal (which made instructive references to the better-developed common law in this domain) were non-issues under Quebec law [FN11]. Even a cursory examination of Quebec law suggests otherwise, however.
The concept of the contract of adhesion is well-established in Quebec law, and closely resembles its common law counterpart inasmuch as both bodies of law identify a contract of adhesion by the following basic hallmarks: (1) the superiority, economic or otherwise, of one party over another, such that the stronger party is in a position to dictate terms to the weaker party without meaningful bargaining; (2) contractual terms drafted by and generally favoring the stronger party; and (3) the non-negotiable, “take-it-or leave-it” quality of the instrument [FN12]. While a contract of adhesion is not unenforceable per se (e.g., an airline ticket is technically a contract of adhesion), the current state of Quebec law reflects an increasing awareness of the risks presented when such contracts are formed [FN13]. For example, in case of doubt, a contract of adhesion is interpreted in favor of the weaker party [FN14]. In addition, the Quebec Civil Code grants judges broad powers to modify and even invalidate contracts of adhesion to correct the injustices they may engender [FN15]. A court will generally not hesitate to exercise this power where a contract of adhesion contains “clauses abusives” (abusive clauses), i.e. terms excessively or unreasonably advantageous to the stronger party (or onerous to the weaker party) [FN16]. Notwithstanding the current effort to “negotiate” the content of the Proposal on behalf of inventors, it seems highly probable that a court would recognize the Proposal as a contract of adhesion (to the extent it may be considered a contract at all). Plausibly, the court might also determine that the Proposal is so one-sided in favor of the University that it should be reformed or nullified.
Although the common law notion that contracts require adequate consideration in order to be valid has no direct counterpart in civil law jurisdictions, there exists in Quebec law the somewhat analogous concept of “cause” (cause) [FN17]. The Quebec Civil Code provides that contracts and the obligations contained therein must have a legitimate cause or reason for which the parties undertake their respective commitments [FN18]. If one party truly gains nothing in return for their commitment to a contract, the party’s obligations are said to be without cause and the agreement will not be enforced. It is difficult to discern what would motivate an individual already employed by or enrolled at McGill to sign the Proposal, as that person would actually wind up with less than he or she started with. In practice, a reasonable faculty member or student would only sign the Proposal to avoid reprisal from McGill, up to and including an otherwise unwarranted dismissal from the University. This would probably not be viewed as a legitimate cause under Quebec law, however. If inventors challenged the Proposal in court, the judge might find that the agreement suffered from a “défaut de cause” (defect of cause) and nullify it. The problem of cause (among others) might be resolved or at least mitigated if the Proposal were applied in the future only to incoming faculty and students to whom it was presented in advance as a condition of employment or enrollment, but this is not the University’s stated intent.
The foregoing discussion necessarily simplifies the relevant legal concepts, and is far from comprehensive. Nevertheless, it suffices to suggest some potential legal pitfalls in the path the University appears to be taking with the Proposal.
Article 11 also states that the Proposal applies to “…all Work, Invention and Software disclosed after the date of final approval of the Policy.” What about intellectual property that was conceived before a faculty member or student came to McGill? As currently written, the Proposal implies that this, too, belongs to McGill. McGill faculty and students should have the opportunity to disclose intellectual property to the University before signing the Proposal: the University would then be unable to claim ownership of this intellectual property.
Article 11 declares that the persons bound by this policy are employees, students, visitors, and academic staff on sabbatical leave. There is one salient party to the policy who is not described as bound: the University itself. The fact that the authors of the Proposal neglect to include the University as a party bound by the conditions set out by the Proposal reinforces the notion that the Proposal hasn’t even set out any conditions for the University and thus requires faculty and students to give up their legal rights of inventorship to the University without being given anything in return.
FOOTNOTES
[FN1] United States v. Dubilier Condenser Corporation, 289 U.S. 178, amended, 289 U.S. 706 (1933). “A patent is property and title to it can pass only by assignment. If not yet issued an agreement to assign when issued, if valid as a contract, will be specifically enforced.”
[FN2] Minutes of the McGill University Senate December 1, 1999, 3. “Regarding Article 8.2, [Professor Noumoff] noted that saying that ‘the University will, to the extent possible, seek to ensure benefits to Canada, if possible Quebec’ seems to be an unintentional political statement and should be modified.”
[FN3] There are many situations where conflicts of interest arise under the Proposal. Take for example: a Quebec company is bidding on the licensing rights to a McGill invention. The Quebec company is unwilling or unable to outbid a British company for the license. OTT however, has a mandate to ensure that benefits of the technology go to Quebec wherever possible. In addition, OTT knows that transferring the technology to a Quebec company is a wise political decision: it enriches the constituency of Quebec politicians, who then might be more inclined to increase the funding of McGill. Thus, the University chooses to breach its fiduciary duty to the inventor, and the license goes to the Quebec company even though the inventor would have benefited more if the license had gone to the British company.
[FN4] See Sunil R. Kulkarni, All Professors Create Equally: Why Faculty Should Have Complete Control over the Intellectual Property Rights in Their Creations, 47 Hastings LJ 1995 at 229.
[FN5] See supra note 2 at 1.
[FN6] OTT’s Report of Invention form can be found at www.mcgill.ca/fgsr/ott/rep-inv.doc.
[FN7] See Bronwyn Chester, Academic renewal, yes but…, McGill Reporter, April 6, 2000. Some prominent universities with intellectual property policies favoring inventors (e.g. Stanford University) acknowledge that they use their policies as a recruitment tools for new faculty.
[FN8] See Pat K. Chew, Faculty-Generated Inventions: Who Owns The Golden Egg?, 1992 Wis. L. Rev. 259.
[FN9] One anonymous administrator within the School of Management commented that OTT was “incompetent”. The Advisory Committee on the Proposal for a Policy on Intellectual Property has received numerous unsolicited communications from faculty members who were deeply dissatisfied with their dealings with OTT. Finally, one tenured professor in the Department of Chemistry went so far as to publish a harsh indictment of OTT’s competency in an op-ed article in the McGill Reporter (see Bryan Sanctuary, Op-Ed: Marketing intellectual property, McGill Reporter, April 6, 2000).
[FN10] For more information on the University of Wisconsin’s remarkable technology transfer office, the Wisconsin Alumni Research Foundation, visit the WARF homepage at www.wisc.edu/warf.
[FN11] Comment made by University counsel Line Thibault transmitted to Ph.D. Senator Robert Sims by Vice Principle Bélanger. For a discussion on the contractual considerations of the Proposal under common law see Brian O’Connell, Is there a case against the Proposal for a Policy on Intellectual Property?, www.cim.mcgill.ca/~simra/IP/OConnell.html.
[FN12] See Quebec Civil Code art. 1379.
[FN13] See Jean-Louis Beauduin & Pierre-Gabrial Jaubin, Les obligations, 5th ed., 1998, at 197.
[FN14] See Quebec Civil Code arts. 1432, 1435-37.
[FN15] See Quebec Civil Code art. 1437.
[FN16] See supra note 13 at 72-73.
[FN17] See supra note 13 at 307-312.
[FN18] See Quebec Civil Code arts. 1371 and 1410.