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Licensing with faculty-owned or faculty-employed companies

The Higher Education Modernization Act (Act 132 of 2012, known as the State System of Higher Education Intellectual Property Act) provided for ease in licensing faculty inventions to private companies that employ or are owned by faculty. The Question and Answers that follow provide some background information about the impact of the law.

What does this Act allow PASSHE universities and faculty to do?
​Prior to the enactment of the new legislation, a PASSHE university could market intellectual property created by a PASSHE employee, including faculty and student-workers, using an arrangement with the Penn State Research Foundation, which provides technology licensing assistance. Act 132 creates new avenues for the commercialization of products and inventions. Universities are now allowed to enter into license agreements (for the production, distribution and sale of faculty-invented intellectual property) with a company owned by the faculty-inventor or a company that employs the faculty-inventor.

How is this new?
The State Adverse Interest Act previously prohibited any "agreement" between the university and its employees. Act 132 specifically allows economic development agreements between the university and employees (including faculty). Other agreements between the university and an employee that do not qualify as economic development transactions continue to be prohibited by the Adverse Interest Act.

Does this allow agreements of a general business nature?
The Act is very specific in defining allowed activities. It authorizes "economic development agreements" which are defined as agreements that allow a PASSHE university to develop and market intellectual property owned or created by a PASSHE employee, including faculty and student-workers. Therefore, any transaction must involve intellectual property and a demonstrated potential for success in the commercial marketplace. General business agreements are not allowed.

How will this work?
All transactions, including the development and marketing of the intellectual property will be accomplished as outlined in the existing System’s "Technology Transfer and Commercialization Guidelines". (Available at All provisions of the faculty CBA will be honored. In order to market (i.e. license) the Intellectual Property to an employee-owned company or a company that employs the PASSHE employee, the employee must enter into an "economic development transaction" with the University.

Does this Act apply to journal articles or book publications?
While these examples involve intellectual property, they are not within the scope of the Act. In such cases, faculty members typically assign their copyright to the publisher who, in turn markets the work to the public. The university has no role in marketing the works, nor is a faculty-owned company likely to be involved in the production of the book.

Moreover, the faculty CBA and the System’s "Technology Transfer and Commercialization Guidelines" clearly designate scholarly and artistic work as the property of the creator, unless completed under a work-for-hire agreement specifically for the university.

What else is in the Act?
The act states that the agreements are reviewed by University Legal Counsel, Governor's Office of General Counsel, and the Office of Attorney General.

The agreements are public documents and will be posted on the Commonwealth's eContracts web site, just as other university contracts over a threshold amount.

The Act requires an annual report to the Senate and House committees. Universities will report any "economic development agreements" with employees, via the Office of the Chancellor, so the System can submit one joint report.