FITT Toolbox: Financial Incentives - Income Distribution


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The Income Distribution Rule is a fair manner of rewarding researchers in case of successful valorisation of the technology they developed, and it is also an incentive in order to make researchers more involved in the IP protection and technology transfer processes.

The distribution keys described in this document is in place in the French speaking Universities of Belgium (LIEU network) or comes from French regulations (INRIA). They grant the researcher a 25% to 50% share on technology licensing revenues.

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FITT Toolbox: Financial Incentives - Income Distribution

  1. 1. Financial Incentives – Income Distribution FITT – Fostering Interregional Exchange in ICT Technology Transfer – Except where otherwise noted, this work is licensed under a Creative Commons Attribution 3.0 License.
  2. 2. Practice in general   The income distribution rule is a distribution key of the revenue resulting from technology transfers.   In other words, it is a reward given to researchers and laboratories in the case of a technology transfer.   It consists in granting all major actors of the University involved in a technology transfer a fair revenue share in order to keep them involved and motivated, if not during the whole lifetime of a technology transfer project, at least during the first critical steps.   Moreover, this fair revenue is also supposed to incent all actors to launch and achieve more technology transfer projects.February 2010 Financial Incentives - Income Distribution
  3. 3. Parts of the Practice   Definitions: •  The gross income is defined as the amount paid to the University for a licence or a know-how: -  a down payment and/or royalties (if licence or know-how), -  dividend, (if spin-off) -  etc. •  Licence income distribution is done after deducing : -  the cost of the patent (patent filing, patent agents, consulting, audit, translation) -  the overheads (either at real cost, or at least a fee from 10 to 25 % depending on the University) -  NB: Inria does not deduce any overhead from the gross income. However some french universities (with distinct transfer office) can deduce such a fee, between 10 and 15 %.February 2010 Financial Incentives - Income Distribution
  4. 4. Parts of the Practice   Income distribution key in LIEU •  The net income is distributed among: -  1/3 for University -  1/3 for the laboratory -  1/3 for the inventors •  Repartition among the inventors is defined by the laboratory director regarding the contribution of each inventor.February 2010 Financial Incentives - Income Distribution
  5. 5. Parts of the Practice   INRIA •  The net income is distributed : -  50% for the inventors -  50% for the INRIA (INRIA does not have the “notion” of laboratory) •  If the 50% for the inventor is superior to the annual salary => amount perceived is reduced by 25% •  Mutual agreement on the contribution percentage. If conflict, solved by INRIA research centre directorFebruary 2010 Financial Incentives - Income Distribution
  6. 6. Parts of the Practice  Are there different steps included? 1.  Identify what asset is really transferable 2.  Identify who are the “Inventors”, regarding the contributions 3.  Signature of the income distribution sheet by all parties involved 4.  Update the sheet if the weight of the researchers contribution evolve (At Inria, contributions can be added, others diluted)  How does this fit in the organizational structure? •  The Rule has been progressively adopted (with slight variations) by all the members of the LIEU network. Example: Liège (1999), Mons (2002) … •  By default, the “3 thirds” rule is applicable. All the parties must agree for any other distribution. •  The inventors can abandon their “third” to the benefit of the laboratory.February 2010 Financial Incentives - Income Distribution
  7. 7. When, who, where ? LIEU INRIA Decision and Rule adopted by the Board ot Rule adopted by the French application the University and is registered government in 1996 and applied in the minutes of the meeting. at Inria in summer 1997. The Applied in 1999 in Liège, and in « 3000€ » rule is a french law 2002 in Mons adopted in 2005 Responsible The Technology Transfer Office INRIA Department of Transfer for application of the university Document Income Distribution Sheet Inventorship Declaration Where All the universities of LIEU All INRIA research centres and in network (7 locations) most PROs in France (as CNRS, INRA, INSERM…) and in some universitiesFebruary 2010 Financial Incentives - Income Distribution
  8. 8. Pro’s & Cons   Pro’s •  Institutional rule: written in the general rule about IP, protection and valorisation of research results inside the University •  The rule acts as an incentive towards Researchers and Laboratories •  Creates a clear and professional framework for TT •  Favourable to the financial subsistence of the patent management •  Clarity, equity, no privilege, no individual approach, no exception   Cons •  Laboratory directors must define clearly the “inventors” and the relative weight of their contribution •  Revenue sharing key could create stress between colleagues •  Money expectation could generate tension in a team •  The 50% rule brings some difficulties sometimes to follow the transfer contracts giving revenue specifically when royalties are asked for.February 2010 Financial Incentives - Income Distribution
  9. 9. Why?  Rationale: “Why was the Practice established?” •  Basically, TT is not a traditional / prior mission for University / researchers •  Each case was dealt individually : negotiations, time loss, stress… •  Lesson from US Universities, European benchmarks, Proton Recommendations •  Rule adopted: -  to make TT enter the researchers culture -  to ensure a fair return in favour of researchers -  avoid disputes, time losses, useless negotiation -  create a clear and professional framework for TTFebruary 2010 Financial Incentives - Income Distribution
  10. 10. Why?  Impact: •  create a clear and professional framework for TT •  ensure transparency and a fair return to Inventors and Laboratories •  avoid disputes, negotiations, comparison, stress, competition… •  act as an incentive and contributes to raise researchers awareness about TTFebruary 2010 Financial Incentives - Income Distribution
  11. 11. Outcome   What happened after the implementation? •  Rule is no success “in se” •  Rule acts as a facilitator, contributes to create favourable climate •  Difficulties for the laboratory Director to determine the inventors and the relative weight of their contribution   Plans for the future? •  A study could be made about researchers satisfaction •  Possible improvement : •  Increase the percentage dedicated to researchers when the generated revenu is lowFebruary 2010 Financial Incentives - Income Distribution
  12. 12. Lessons Learned   Rule exist, but need for a clear communication about it   Rule is not sufficient “in se” to ensure motivation: other tools must be deployed   Rule could be improved with variable percentage in case of low financial return (example) -  Researchers: 50 % if low profitability 33 % if high profitability -  Laboratory: 25 % 33 % -  University: 25% 34%February 2010 Financial Incentives - Income Distribution