Conflict of Interest Road Mape - University of California Office of the President

12/13/01

Common Questions Related to Actions of UC Employees, Their Interactions with Private Industry and Conflict of Interest

The University of California has comprehensive and interrelated policies and guidelines that address the conduct of UC employees, their interactions with private industry and conflict of interest. The policies work together to set high standards for employees, ensure the integrity of UC research results, and guide interactions of UC employees in their partnerships with industry and other university-related activities.

The following information can help guide media and the general public to answers to some of the most commonly asked questions about these issues. This information is issued to support a general understanding of the objectives, policies and issues surrounding the questions. Since the information is taken out of context of larger documents, it should not be considered as definitive answers to specific situations. (See Disclaimer below.)

A. UC CONFLICT OF INTEREST CODE FOR EMPLOYEES, INCLUDING DESIGNATED OFFICIALS

1) What Is a Conflict of Interest Code?

http://www.ucop.edu/ogc/coi/what.html

(See paragraph 1)

The California Political Reform Act requires certain state and local government officials to publicly disclose their private economic interests on an official Statement of Economic Interests form and that all government (University) employees disqualify themselves from participating in decisions in which they have a personal financial interest. A conflict of interest code lists the position titles of those employees or officials (designated position) in an organization who are required to provide personal financial information, assigns disclosure categories to these positions, and indicates the types of economic interest which must be reported, such as investments, interests in real estate, or sources of income or gifts.

2) What Positions at UC Are Designated as Having to File Statements of Economic Interests, Form 700?

http://www.ucop.edu/ogc/coi/text.html

See Appendix A: (page 17)

Appendix A, Disclosure Categories for Designated Officials by location:

3) Where Can I Get a Copy of the Filed Forms?

http://www.ucop.edu/ogc/coi/text.html

See first sentence of first paragraph and additional sentence for principal investigators.

The Conflict of Interest Code Filing Officer for all matters dealing with this code is Ross Smith, Office of General Counsel, 1111 Franklin St., 8th floor, Oakland, 94607-5200. <Ross.Smith@ucop.edu>. Principal investigators and academic decision regulations are maintained at the campus that is involved with the research.

4) How Often Are Statements of Economic Interests Filed?

http://www.ucop.edu/ogc/coi/text.html

See Section 5 (A-D)

(5) SECTION 5. STATEMENTS OF ECONOMIC INTERESTS: TIME OF FILING.

Initial Statements. All designated employees employed by the agency on the effective date of this Code, as originally adopted, promulgated and approved by the Code reviewing body, shall file statements within 30 days after the effective date of this Code. Thereafter, each person already in a position when it is designated by an amendment to this Code shall file an Initial Statement within 30 days after the effective date of the amendment.
Assuming Office Statements. All persons assuming designated positions after the effective date of this code shall file statements within 30 days after assuming the designated positions, or if subject to State Senate confirmation, 30 days after being nominated or appointed.
Annual Statements. All designated employees shall file statements no later than April 1.
Leaving Office Statements. All persons who leave designated positions shall file statements within 30 days after leaving office.

5) What Must Individuals Report?

http://www.ucop.edu/ogc/coi/text.html

See section 6 and Section 7 (Pages 6 and 7)

(6) SECTION 6. CONTENTS OF AND PERIOD COVERED BY STATEMENTS OF ECONOMIC INTERESTS

Contents of Initial Statements. Initial statements shall disclose any reportable investments, interests in real property and business positions held on the effective date of the Code and income received during the 12 months prior to the effective date of the Code.
Contents of Assuming Office Statements. Assuming Office Statements shall disclose any reportable investments, interests in real property and business positions held on the date of assuming office or, if subject to State Senate confirmation or appointment, on the date of nomination, and income received during the 12 months prior to the date of assuming office or the date of being appointed or nominated, respectively.
Contents of Annual Statements. Annual statements shall disclose any reportable investments, interests in real property, income and business positions held or received during the previous calendar year provided, however, that the period covered by an employee's first Annual Statement shall begin on the effective date of the Code or the date of assuming office whichever is later.
Contents of Leaving Office Statements. Leaving Office Statements shall disclose reportable investments, interests in real property, income and business positions held or received during the period between the closing date of the last statement filed and the date of leaving office.

(7) SECTION 7. MANNER OF REPORTING.
Statements of economic interests shall be made on forms prescribed by the Fair Political Practices Commission and supplied by the agency, and shall contain the following information:

Investments and Real Property Disclosure. When an investment or an interest in real property (see footnote 3) is required to be reported , the statement shall contain the following:(see footnote 4).

A statement of the nature of the investment or interest;
The name of the business entity in which each investment is held, and a general description of the business activity in which the business entity is engaged;
The address or other precise location of the real property;
A statement whether the fair market value of the investment or interest in real property exceeds one thousand dollars ($1,000), exceeds ten thousand dollars ($10,000), or exceeds one hundred thousand dollars ($100,000).

Personal Income Disclosure. When personal income is required to be reported (see footnote 5) , the statement shall contain:
1. The name and address of each source of income aggregating two hundred fifty dollars ($250) or more in value, or fifty dollars ($50) or more in value if the income was a gift, and a general description of the business activity, if any, of each source;
2. A statement whether the aggregate value of income from each source, or in the case of a loan, the highest amount owed to each source, was one thousand dollars ($1,000) or less, greater than one thousand dollars ($1,000), or greater than ten thousand dollars ($10,000);
3. A description of the consideration, if any, for which the income was received;
4. In the case of a gift, the name, address and business activity of the donor and any intermediary through which the gift was made; a description of the gift; the amount or value of the gift; and the date on which the gift was received;
5. In the case of a loan, the annual interest rate and the security, if any, given for the loan.
Business Entity Income Disclosure. When income of a business entity, including income of a sole proprietorship, is required to be reported (see footnote 6), the statement shall contain:
1. The name, address, and a general description of the business activity of the business entity;
2. The name of every person from whom the business entity received payments if the filer's pro rata share of gross receipts from such person was equal to or greater than ten thousand dollars ($10,000).
Business Position Disclosure. When business positions are required to be reported, a designated employee shall list the name and address of each business entity in which he or she is a director, officer, partner, trustee, employee, or in which he or she holds any position of management, a description of the business activity in which the business entity is engaged, and the designated employee's position with the business entity.
Acquisition or Disposal During Reporting Period. In the case of an annual or Leaving Office Statement, if an investment or an interest in real property was partially or wholly acquired or disposed of during the period covered by the statement, the statement shall contain the date of acquisition or disposal.

6) When Must Employees, Including Designated Officials, Disqualify Themselves From making, Participating in or Influencing Decisions?

http://www.ucop.edu/ogc/coi/info.html

The following short publication lists when employees must disqualify themselves.

UNIVERSITY OF CALIFORNIA
Political Reform Act
Disqualification
Requirements

Prepared by the University Conflict
of Interest Coordinator
Office of the General Counsel

The State of California's Political Reform Act of 1974, (Gov. Code, § 81000, et seq.), (the "Act"), prohibits public officials from participating in governmental decisions when personal financial interests may be affected by those decisions. The Act requires that all government employees and officials disqualify themselves from participating in a governmental decision when a financial conflict of interest is present. The pertinent sections of the law provide:

No public official at any level of state or local government shall make, participate in making or in any way attempt to use his official position to influence a governmental decision in which he knows or has reason to know he has a financial interest. (Gov. Code, § 87100.)

...no state administrative official shall make, participate in making, or use his or her official position to influence any governmental decision directly relating to any contract where the...official knows or has reason to know that any party to the contract is a person [or entity] with whom the...official, or any member of his or her immediate family, has engaged in any business transaction or transactions on terms not available to...the public. (Gov. Code,
§ 87450.)

All University of California employees and officials, either directly or by application of the University's Conflict of Interest Code, are subject to those provisions of the Act which prohibit the making of or the participation in University decisions in which financial conflicts of interest exist. An individual who finds himself or herself in a conflict of interest is required to refrain from making, participating in the making of, or attempting to influence any University decision which may materially affect the individual's financial interests. As a member of the University, you, therefore, must be aware of what is meant by making or participating in making a University decision, what constitutes a conflict of interest, how to disqualify yourself, what could happen if you do not disqualify, and the academic decision exemption.

This document is intended to explain the disqualification requirements pertaining to financial conflict of interest. Definitions used in the subsequent explanation follow closely the legal definitions in the Act and regulations.
Nothing contained in this document shall abridge your rights as a citizen to appear before a governmental agency as a member of the general public to represent yourself on matters related solely to your personal interests.

What is Meant by Making or Participating in the Making of a Decision?

The meaning of "decision-making" within the scope of the Political Reform Act is basic since you must disqualify yourself if you have a financial conflict of interest in a University decision.

You make a decision when, acting within the authority of your office, you:

vote on a matter;
appoint a person;
obligate or commit the University to any course of action;
enter into any contractual agreement on behalf of the University;
determine not to act, within the meaning of the above subparagraphs, unless such determination is made because of your financial interest. (Cal. Code of Regs., tit. 2, § 18702.1.)

You participate in the making of a decision when, acting within the authority of your University position, you:

a. negotiate, without significant substantive review, with a governmental entity or private person regarding the decision; or
b. advise or make recommendation to the decision-maker, either directly or without significant intervening substantive review, by:
conducting research or making an investigation which requires the exercise of judgment on your part and the purpose of which is to influence the decision; or preparing or presenting any report, analysis or opinion, orally or in writing, which requires the exercise of judgment on your part and the purpose of which is to influence the decision. (Cal. Code of Regs., tit. 2, § 18702.2.)

Disqualification Requirement--A Financial Conflict of Interest

A public official (University employee) has a financial interest in a decision if it is reasonably foreseeable that the decision will have a material financial effect, distinguishable from its effect on the public generally, on the official, a member of his or her immediate family, or on any of the following:

any business entity in which the public official has a direct or indirect investment worth $2,000 or more;
any real property in which the public official has a direct or indirect interest worth $2,000 or more;
any source of income, other than gifts and other than loans by a commercial lending institution in the regular course of business on terms available to the public without regard to official status, aggregating $500 or more in value provided to, received by or promised to the public official within 12 months prior to the time when the decision is made;
any business entity in which the public official is a director, officer, partner, trustee, employee, or holds any position of management;
any donor of, or any intermediary or agent for a donor of, a gift or gifts aggregating $320 or more in value provided to, received by or promised to the public official within 12 months prior to when the decision is made. (Gov. Code, § 87103.)

In relation to the above, you have an indirect investment or interest if the investment or interest is owned by your spouse or dependent child, by an agent on your behalf, or by a business entity or trust in which you, your agents, spouse, and dependent children own a 10 percent or greater interest.
Whether or not a decision will have a material financial effect on one of the above financial interests is determined by financial increases or decreases as provided in a series of regulations found at California Code of Regulations, title 2, section 18705. The Regulations may be obtained from Coordinator Ross Smith, Office of the General Counsel.

Disqualification Requirement--Interest in a Contract

You have an interest in a contract when you know or have reason to know that any party to the contract is an individual or entity with whom you, or any immediate member of your family, have engaged in any business transactions on terms not available to members of the public, within 12 months prior to the time when the official action is to be taken, regarding:

a. any investment or interest in real property, or
b. the rendering of goods or services totaling $1,000 or more. (Gov. Code, § 87450.)

If you have an interest in a contract according to the criteria listed, you must disqualify yourself from making or participating in the making of a decision. If, in any specific instance, you are not sure you are required to disqualify yourself, you should contact the Conflict of Interest Coordinator at your campus or laboratory.

How to Disqualify Yourself from Decision-Making

If you determine that your financial interests require you to disqualify yourself from making or participating in the making of a University decision, you must refrain from participating in any way in the decision, and you must not use your official position to influence any other person with respect to the matter. The determination not to act may be accompanied by disclosure of the disqualifying interest, but disclosure is not required. (Cal. Code of Regs., tit. 2, § 18702.1(a)(5).)

Sanctions for Violations of the Disqualification Provisions of the Act

The Act provides that violators are subject to administrative, civil, and criminal penalties. In addition, persons violating an agency's conflict of interest code are subject to disciplinary action. (Gov. Code, § 91003.5.) Persons violating the Act:

a. may be subject to monetary penalties imposed by the Fair Political Practices Commission ("FPPC"). (Gov. Code, § 83116.);
b. may be enjoined or compelled to comply with the provisions of the Act in an injunctive action brought by any person living in California. (Gov. Code, § 91003.);
c. may be liable in a civil action. (Gov. Code, § 91005.5.); or
d. may be prosecuted for a misdemeanor and, if convicted, fined. (Gov. Code, § 91000.)

University Conflict of Interest Code

In addition to the disqualification requirements, the Act provides that every agency shall adopt and promulgate a Conflict of Interest Code. The University first adopted a Conflict of Interest Code with an effective date of April 1, 1980. The Code identifies specific positions held by more than 1,500 University employees and officials who are deemed to be "designated officials." A designated official by definition holds a position which the University or the FPPC has identified as having the potential for decision-making which could give rise to a financial conflict of interest. In addition to being subject to the Act's disqualification requirements, a designated official must file, as public documents, financial disclosure statements upon assuming or leaving a designated position and annually while holding the position. Coordinator Ross Smith is the University official responsible for receiving statements and placing them on file as public records. Coordinator Smith is located at the Office of the General Counsel, 1111 Franklin Street, 8th Floor, Oakland, California 94607-5200.

In order to keep the University's Conflict of Interest Code current with amendments to the Act and to Regulations as they occur, the Code is updated and republished each year.

Conflict of Interest Code Coordinators
Code Coordinators have been appointed to assist you with information regarding the Political Reform Act. If you have questions regarding the Act or the necessity of disqualifying yourself from making or participating in the making of a decision, you should contact the Coordinator for your location.

Academic Decision Regulation

Because of concern that the Act would operate to prohibit faculty and other members of the University with teaching and research responsibilities from making various decisions in the course of academic instruction and research, the FPPC adopted an academic decision regulation, (Cal. Code of Regs., tit. 2 § 18702.4(c) which provides:

Except as provided in subsection (b), neither disclosure of financial interest nor disqualification is required...in connection with:
1. Teaching decisions, including the selection by a teacher of books or other educational materials for use within his or her own school or institution, and other decisions incidental to teaching;
2. 2. Decisions made by a person who has teaching or research responsibilities at an institution of higher education to pursue personally a course of academic study or research, and all decisions relating to the manner or methodology with which such study or research will be conducted. Provided, however, that the provisions of this subsection(2) shall not apply with respect to any decision made by the person in the exercise of institution- or campus-wide administrative responsibilities respecting the approval or review of any phase of academic research or study conducted at the institution or campus.
Disclosure shall be required...in connection with a decision made by a person or persons at an institution of higher education with principal responsibility for a research project to undertake such research, if it is to be funded or supported, in whole or in part, by a contract or grant (or other funds earmarked by the donor for a specific research project or for a specific researcher) from a nongovernmental entity, but disqualification may not be required...in connection with any such decision if the decision is substantively reviewed by an independent committee established within the institution.

Two University documents provide for University implementation of the academic decision regulation:

University Policy on Disclosure of Financial Interest in Private Sponsors of Research (APM-028-0)
Guidelines for Disclosure and Review of Principal Investigator's Financial Interest in Private Sponsors of Research (APM-028-10)

Questions about the Academic Decision Regulation or the conflict of interest filing obligations of principal investigators may be directed to the Office of the Vice Provost for Research.

Request for Advice

If you have any questions concerning your obligations under the Political Reform Act, you may seek advice from the Legal Division of the FPPC. If the Commission advises an official in writing that disqualification is not necessary, and the official has truthfully provided all material facts, the official is provided with immunity against any administrative action brought by the Commission arising from the same conflict of interest charges. Reliance on the written advice also serves as evidence of good faith conduct in any civil or criminal proceedings bases on the same charges.

You may write or call the FPPC.

Fair Political Practices Commission
428 J Street, Suite 800
P.O. Box
Sacramento, California 95804
(916) 322-5901

B. POLICY ON COMMITMENT OF TIME FOR UC FACULTY

1. Does UC Have a Personnel Policy That Addresses the Types of Outside Professional Activities That Faculty May Engage In?

The Updated Conflict of Commitment policy that is effective July 1, 2001 can be found at http://www.ucop.edu/acadadv/acadpers/apm/apm-025-07-01.pdf

In addition, some professional or health sciences schools provide more detailed or specific guidance on outside activities.

2. What Principles Guide Faculty and Scholars in How They Should Spend Their Time?

See first three paragraphs under 025-6

In joining the University faculty, scholars accept as their own the University's responsibilities to advance and communicate knowledge. For purposes of advancement and promotion, the performance of faculty members in fulfilling their University obligations is evaluated by grouping their activities into four interrelated categories: teaching, research and creative work activity, professional competence and activity, and University or University-related public service.

Whether professional or non-professional, compensated or uncompensated, an outside activity that interferes with successful performance of the faculty member's University obligations represents a conflict of commitment.

Teaching and research or creative work activity are clearly the primary activities of the faculty and receive the largest commitment of effort and energy. A faculty member is obligated to have a significant presence on campus, to meet classes, to keep office hours, to hold examinations as scheduled, to be accessible to students and staff, to be available to interact with University colleagues, and to share service responsibilities throughout every quarter or semester of active duty.

Faculty members are also expected to participate in University activities and to use their professional expertise to contribute to their professions and to the community. University activities and outside professional activities can be positive contributors to fulfilling one's University obligations. The University sees great value in activities outside the University that advance and communicate knowledge through interaction with industry, the community, and the public, and through consulting and professional opportunities.

3. Is There a Time Limit for the Amount of Time That a Faculty Member May Spend on Outside Activities?

See three paragraphs under Time Limits on Compensated Outside Professional Limits (b)

Time Limits on Compensated Outside Professional Activities

The following time limits apply to each fiscal year. Allowable days not used one year may not be carried forward to the next year.

A full-time faculty member on an academic-year appointment normally may engage in compensated outside professional activities for up to 39 days from the start of the fall term through the end of the spring term (including inter-session), or during the equivalent of an academic year if the campus is operating on a year-round schedule. There are no restrictions on the number of days of compensated outside professional activity for academic-year faculty during the summer months (or equivalent term, if on a year-round schedule) unless an academic-year faculty member is receiving University compensation for the summer (or equivalent term). If an academic-year faculty member is receiving University summer (or equivalent term) compensation, then the applicable limit on compensated outside professional activities is the equivalent of one day per week during the period in which compensation is received.

A full-time faculty member on a fiscal-year appointment may engage in
compensated outside professional activities for up to 48 days during the months of active service. There are no restrictions on the number of days of compensated outside professional activity during the periods of vacation leave (unless the faculty member is earning additional University compensation during the vacation leave).

See question 5 (below) for information on health sciences faculty who are members of a compensation plan.

4. What Different Requirements Exists (as to prior approval, time limit and annual reporting) for the Three Different Categories of Activities?

See paragraph c

Categories of Compensated Outside Professional Activities

Compensated outside professional activities are divided into three categories in terms of the extent to which they may raise conflict of commitment issues. For each category, there are different requirements as to prior approval, inclusion in the time limit, and annual reporting. Each of the categories and the related requirements are described below.

(1) Category I activities are likely on their face to raise issues of conflict of commitment. In order to engage in such activities while an active member of the faculty, the faculty member must make a written request(see APM - 025, Appendix B) to the Chancellor or Chancellor's designee(s) and receive written approval. Requests must be submitted and approved annually, unless approved for a longer term, which may not exceed five years. Prior approval does not affect the scope of annual reports of professional activities. If permitted, Category I activities are counted within the 39/48-day time limit and must be reported annually (see APM - 025, Appendix C). Category I activities include the following:

Assuming an executive or managerial position in a for-profit or not-for-profit business, which is generally not allowable. For purposes of this policy, executive or managerial positions do not include:

a) serving on the board of directors of an outside entity, or
b) providing consulting services or engaging in professional practice through the faculty member's single member professional corporation or sole proprietorship. Also, providing professional services through a
more complex type of organization, in which the role of the faculty
member might potentially be classified as executive or managerial,
is ordinarily allowable in disciplines where the Chancellor has
determined that professional practice is generally accepted as being
integral to faculty work (e.g., in architecture or law). In such
disciplines, multi-year approvals, which may not exceed a five year
term, are appropriate.

Administering a grant outside the University that would ordinarily be conducted under the auspices of the University, which is generally not allowable (see the Policy on the Requirement to Submit Proposals and to Receive Awards for Grants and Contracts through the University (12/15/94)).

Establishing a relationship as a salaried employee outside the University. In addition, with the exception of delivering occasional lectures or participating in UC-sponsored continuing education programs, compensated teaching or research at another institution while employed as a full-time faculty member at the University is not permitted without prior written approval of only the Chancellor or Executive Vice Chancellor.

Engaging in other compensated outside professional activities which common sense and good judgment would indicate are likely to raise issues of conflict of commitment.

(2) Category II activities are unlikely to raise issues of conflict of commitment and are ordinarily accepted as regularly performed compensated outside professional activities. Because of this, they are ordinarily allowable without prior approval. Category II activities are counted within the 39/48-day time limit and must be reported annually(see APM - 025, Appendix C). Examples of Category II activities include the following:

Providing expert testimony in administrative, legislative, or judicial
proceedings.

Providing consulting services or referrals or engaging in professional practice where such activities are provided by the faculty member acting as an individual or are provided by the
faculty member through his or her single member professional corporation or sole proprietorship. Providing such services through other types of organizations or arrangements (e.g., through a
publicly held corporation) requires prior approval in accordance with APM - 025-10-c(1).

Serving on the board of directors of an outside entity.

Providing a workshop for industry.

Undertaking compensated outside professional activity not mentioned in Categories I or III and that common sense and good judgment indicate are not likely to raise issues of conflict of commitment.

In addition, in accordance with APM - 662, faculty members may receive additional compensation for specified additional University teaching activities (i.e., UNEX courses and programs, other continuing education programs run by the University, and self-supporting UC degree
programs), and these activities are also reportable and counted within the 39/48-day limit.

(3) Category III activities are integral to all disciplines and ordinarily do not present issues of conflict of commitment. They are accepted as part of the faculty member's scholarly and creative work. Even if compensated, they are allowable and not counted within the 39/48-day limit. Category III activities do not need to be reported annually; however, the Chancellor or his or her designee(s) may under certain circumstances ask for information about them (see Additional Relevant Information, APM -025-20-c). Examples of Category III activities include the following:

Serving on a federal, state, or local government agency, committee, panel, or commission.

Acting in an editorial capacity for a professional journal.

Reviewing journal manuscripts, book manuscripts, or grant or contract proposals.

Attending and presenting talks at scholarly colloquia and conferences.

Developing scholarly communications in the form of books or journal articles, movies, television productions, and similar works, even when such activities result in financial gain.

Serving as a committee member or as an officer of a professional or scholarly society.

Accepting a commission for an artistic work or performance that is considered an integral part of a faculty member's academic portfolio(e.g., a work of art or a dance performance).

Accepting honoraria (other than those received for Category II activities) and prizes.

See question 5 (below) for information on health sciences faculty who are members of a compensation plan.

5. What Types of Additional or More Detailed Guidelines Are Established in the Health Sciences Schools?

Health sciences faculty who are members of a compensation plan may only retain professional income in accordance with the terms of the compensation plan. Compensation plans have limits on the number of days faculty can devote to outside activities and may also have an annual outside professional earnings approval threshold.

For more information, see APM-670 Health Sciences Compensation Plan and Guidelines on Occasional Outside Professional Activities by Health Sciences Compensation Plan Participants and local implementing procedures.

6. What Are the Guidelines for Involving Students in Outside Professional Activities of Faculty?

See last two paragraphs

Guidance for Involving Students in the Outside Professional Activities of Faculty

Part-time involvement of students in the outside professional activities of a faculty member may, under certain conditions, offer the potential for substantial benefit to the education of the student. Before involving a student in an outside professional activity in which the faculty member has a financial interest, the faculty member must obtain prior written approval from the official designated by the Chancellor, with a copy to the Dean, after discussion with the department chair and the student. In this context, involvement means any substantive activity, whether paid or unpaid. If the faculty member has a role in supervising the student's thesis or in supervising the work of the student as a graduate teaching assistant, the faculty member must take care to avoid potential conflicts of interest in the evaluation of the student's performance.

If a faculty member is already associated with a student in outside professional activities and the faculty member has a financial interest in the activity, he or she must obtain the approval of the official designated by the Chancellor before becoming a research supervisor, academic program advisor, or examiner for an advanced degree for the student. Within a University research laboratory or academic unit, faculty members must take care not to favor or give the impression of favoritism to students with whom they are associated in outside activities.

C. THE POLITICAL REFORM ACT AS APPLIED TO UC

1) What is the California Political Reform Act?

http://www.ucop.edu/ogc/coi/disqual.html (See paragraph 1)

No public official at any level of state or local government shall make, participate in making or in any way attempt to use his official position to influence a governmental decision in which he knows or has reason to know he has a financial interest. (Gov. Code, § 87100.)
...no state administrative official shall make, participate in making, or use his or her official position to influence any governmental decision directly relating to any contract where the...official knows or has reason to know that any party to the contract is a person [or entity] with whom the...official, or any member of his or her immediate family, has engaged in any business transaction or transactions on terms not available to...the public. (Gov. Code, § 87450.)

2) Does It Apply to All University of California Employees?

http://www.ucop.edu/ogc/coi/disqual.html (See paragraph 2)

3) What Is Meant by Making or Participating in or Influencing a Decision?

http://www.ucop.edu/ogc/coi/disqual.html (See paragraph 3 with same question)

The meaning of "decision-making" within the scope of the Political Reform Act is basic since you must disqualify yourself if you have a financial conflict of interest in a University decision. You make a decision when, acting within the authority of your office, you:

vote on a matter;
appoint a person;
obligate or commit the University to any course of action;
enter into any contractual agreement on behalf of the University;
determine not to act, within the meaning of the above subparagraphs, unless such determination is made because of your financial interest. (Cal. Code of Regs., tit. 2, § 18702.1.)

You participate in the making of a decision when, acting within the authority of your University position, you:

a. negotiate, without significant substantive review, with a governmental entity or private person regarding the decision; or
b. advise or make recommendation to the decision-maker, either directly or without significant intervening substantive review, by:
conducting research or making an investigation which requires the exercise of judgment on your part and the purpose of which is to influence the decision; or preparing or presenting any report, analysis or opinion, orally or in writing, which requires the exercise of judgment on your part and the purpose of which is to influence the decision. (Cal. Code of Regs., tit. 2, § 18702.2.)

4) What Is Meant by a Financial Interest?

See question in following URL
http://www.ucop.edu/ogc/coi/disqual.html

A public official (University employee) has a financial interest in a decision if it is reasonably foreseeable that the decision will have a material financial effect, distinguishable from its effect on the public generally, on the official, a member of his or her immediate family, or on any of the following:

a. any business entity in which the public official has a direct or indirect investment worth $2,000 or more;
b. any real property in which the public official has a direct or indirect interest worth $2,000 or more;
c. any source of income, other than gifts and other than loans by a commercial lending institution in the regular course of business on terms available to the public without regard to official status, aggregating $500 or more in value provided to, received by or promised to the public official within 12 months prior to the time when the decision is made;
d. any business entity in which the public official is a director, officer, partner, trustee, employee, or holds any position of management;
e. any donor of, or any intermediary or agent for a donor of, a gift or gifts aggregating $320 or more in value provided to, received by or promised to the public official within 12 months prior to when the decision is made. (Gov. Code, § 87103.)

Whether or not a decision will have a material financial effect on one of the above financial interests is determined by financial increases or decreases as provided in a series of regulations found at California Code of Regulations, title 2, section 18705. The Regulations are from Coordinator Ross Smith, Office of the General Counsel.

5) What Is Meant by Interest in a Contract?

See question in following URL
http://www.ucop.edu/ogc/coi/disqual.html

You have an interest in a contract when you know or have reason to know that any party to the contract is an individual or entity with whom you, or any immediate member of your family, have engaged in any business transactions on terms not available to members of the public, within 12 months prior to the time when the official action is to be taken, regarding:

a. any investment or interest in real property, or
b. the rendering of goods or services totaling $1,000 or more. (Gov. Code, § 87450.)

D. INDUSTRY-SPONSORED RESEARCH AND CONFLICT OF INTEREST

1) How Does the University Identify Conflict of Interest When Investigators Are Working with Private Sponsors of Research?

UC policy on conflict of interest implements federal disclosure requirements as well as state disclosure requirements. UC's policy can be found at http://www.ucop.edu/research/disclosure.html. Section II. B. 1 describes federal requirements. Section II.B.2 describes state requirements.

2) When Positive Financial Interest Is Disclosed in a Research Sponsor, How Is It Reviewed and Managed?

Information on conflict of interest management is contained at Section VIII or the following URL: http://www.ucop.edu/research/disclosure.html

More specific information on clinical trials is found at Section V of the following URL: http://www.ucop.edu/raohome/cgmemos/95-05.html/

E. GIFTS AND GRATUITIES

1) What Is Considered a Gift?

http://www.ucop.edu/ucophome/coordrev/policy/1-24-01.html

(see D)

The Political Reform Act defines a gift as any payment for which the recipient does not provide equal or greater consideration in return. (Gov. Code, § 82028, subd. (a).) The term "payment" is very broadly defined. It includes any "payment, distribution, transfer, loan, advance, deposit, gift or other rendering of money, property, services or anything else of value, whether tangible or intangible." (Gov. Code, § 82044.)

Thus, anything of value received by an official for which the official has not provided adequate consideration in return is deemed a gift, unless an exception applies. The exceptions are discussed below. Examples are used to illustrate their application.

2) What Is the Financial Limit of Gifts?

coi - gift guidelines 2001_v11.pdf
(see A)

Gifts can trigger disqualification requirements on the part of every University official or employee if he or she receives gifts which aggregate to $320 or more from a single source during a 12-month period.

3) Can You Provide Specific Examples of What Is a Gift?

coi - gift guidelines 2001_v11.pdf
(see E)

What is a Gift? Specific Provisions of the Act and Regulations.

Wedding gifts are "gifts." Wedding gifts are treated as gifts for purposes of reporting and disqualification, unless they are from specified family members or are exchanged with the donor and not substantially disproportionate in value. (See § F.7, infra.) However, wedding gifts are excluded from the prohibition on receiving gifts found in the Ethics in Government Act. (See Gov. Code, § 89503, subd. (e)(2).)

Wedding gifts are generally treated as given equally to each newlywed.
If an official is getting married, wedding gifts are treated as being intended jointly for the two newlyweds, regardless of to whom given, unless they are uniquely suited for use by only one of them (a tie for him, a scarf for her). Thus, a wedding gift with a value of $85 would not require disclosure because the official's portion would only have a value of $42.50. A gift with a value of $140 would be reportable as a $70 gift on Schedule E of the official's annual statement of economic interest. If the gift is from certain relatives, it is excluded entirely. ( See § F.7, infra.) In addition, wedding gifts are not subject to the $320 gift limitation. (Gov. Code, § 89503, subd. (e)(2).)

Tickets to sporting, entertainment, or other non-fundraising events are gifts to an official unless treated as gifts to the University under FPPC regulations. These items are gifts to the official if given to and then used or given away by the official. When the tickets or other items are given to the University and dispensed by a responsible University official, they are viewed as gifts to the University, not to the official. (See § F.18, infra.) California Code of Regulations, title 2, section 18946.1 provides as follows regarding their value:

A pass or ticket which provides one-time admission or access to facilities, goods, services, or other incidental tangible or intangible benefits (including a pass to motion picture theaters, amusement parks, parking facilities, country clubs, and similar places and events, and also including a ticket for theater, opera, sporting, or similar event, but not including travel or lodging) shall be valued at the face value of the pass or ticket, provided that the face value is a price that was, or otherwise would have been, offered to the general public. A pass or ticket has no value unless it is ultimately used or unless the official transfers the pass or ticket to another person.

A pass or ticket which provides repeated admission or access to facilities, goods, services, or other incidental tangible or intangible benefits (including a pass to motion picture theaters, amusement parks, parking facilities, country clubs, and similar places and events, and also including a season ticket for theater, opera, sporting, or similar season events, but not including travel or lodging) shall be viewed as follows:

"For purposes of disclosure and the gift limits, the value shall be the fair market value of the actual use of the pass or ticket by the recipient official, including guests who may accompany the official and who are admitted with the pass or ticket, plus the fair market value of any possible use by any person or persons to whom the official transfers the privilege of use of the pass or ticket."

Testimonial dinners and events are gifts. When an official is invited to attend a testimonial dinner or event, either as a guest or as the honoree, the value of the gift is the pro rata cost for food, beverage, entertainment, etc. If the official is the honoree, any gift given in honor is a gift to the official, unless otherwise subject to an exclusion under these rules (such as a personalized plaque or trophy with a value of less than $250. See § F.9, infra). Special rules apply to political or charitable fundraising events. (See § F.17, infra.)

Meals are gifts. In general, business meals are treated as gifts. Meals provided by non-business friends and acquaintances are also gifts, except for exchanges on special occasions. (See § F.14, infra.) Meals received in the course of an official fundraising activity are not gifts. (See §§ F.18 and F.19, infra.)

Example: An official is invited to represent the campus at a dinner reception for a visiting dignitary. Other local dignitaries are similarly invited. The official engages in conversation with the other dignitaries at the reception and over dinner. However, no speech is given. The value of the food and beverage consumed by the official is a gift to the official. One method for determining this value is to determine the pro-rata cost per attendee. However, if alcoholic beverages were served and the official chose not to drink, the value would be reduced accordingly. Similarly, if the official had a conflicting engagement and could only stay for the reception and had to beg off from dinner, the value of the dinner would not be a gift to the official, only the value of what was consumed at the reception. (FPPC Advice Letter No. 91-347; FPPC Advice Letter No. 92-580.)

Example: An old college classmate comes to town. He or she invites the official out to dinner. The classmate treats. The value of the official's dinner, including food, beverage, and the proportionate share of tax and tip comes to $48.13. Assuming that the classmate makes no other gifts to the official during the reporting period, the dinner is not required to be reported.

Example: Assume the same situation, but the classmate also sends a gift of oranges worth $11.42, including delivery charges. These occur during the same reporting period. In that case, if the classmate is a source of income covered by the official's disclosure category, then these two gifts are required to be disclosed on the official's next Form 700 filing.

Example: The official has a business meeting with a non-University individual. The meeting continues through the lunch-hour and they go to lunch where the business discussions continue. The other individual picks up the tab. The official has received a gift. The value is the cost of the official's lunch, plus the proportionate share of the tax and tip. Assuming the value is less than $50 and no other gifts are received from the same source during the reporting period, no reporting is required. However, if multiple lunches occur and the cumulative value equals or exceeds $50 from the same source during the reporting period, then all the lunches would become reportable, even though no single lunch was anywhere near $50 in value.

Example: The official is in a business meeting. Lunch is ordered out and brought in as the meeting continues. The lunch is paid for by another participant in the meeting. The value of the lunch is a gift to the official, whether the donor is a University individual using his/her own funds or a non-University individual. The same rules regarding aggregation per source to determine if the threshold for reporting is met would apply.

Example: The official is in a business meeting at the University with both University and non-University individuals. The group continues the meeting through lunch at the faculty club and the University picks up the tab. There is no gift to the official since the meal was paid for by the official's employer as part of his/her compensation.

Government Code section 82030, subdivision (b)(2) provides for an exclusion where an official receives payment for travel or per diem expenses from a bona fide non-profit entity exempt from taxation under section 501 (c)(3) of the Internal Revenue Code and has provided adequate consideration in return. Therefore, if the business meeting were the board of directors' meeting of a charitable or academic or educational organization, the working lunch would not be considered a gift.

Example: "Reciprocity" regarding meals and other forms of entertainment has been held by the FPPC to not equate to a "pay-down" of a gift and, therefore, cannot be relied upon to negate the receipt and reportability of the gift. Therefore, if an official is taken to dinner by a friend or business associate, the official cannot negate the value of the gift by agreeing to take the donor to dinner "the next time." (See § F.6, infra; FPPC Bulletin, Vol. 13, No. 6, p. 1.)

4) Can You Provide Specific Examples of What Is Not a Gift?

coi - gift guidelines 2001_v11.pdf
(see F)

What is and is not a Gift? Specific Exceptions Under the Act and Regulations.
A discount or rebate in the normal course of business is not a gift.
A discount or rebate is generally a gift, since full consideration has not been provided. However, where the discount or rebate is provided in the normal course of business and without regard to the official's status, then the discount or rebate is not considered a gift. (Gov. Code, § 82028, subd. (a).)

Example: A local department store offers television sets at $50, which normally sell for $150. They are to be available for purchase by the first 100 customers on the day of the sale. If an official is one of the first 100 customers to purchase a television set at $50, the $100 discount is not a gift to that official because it was made in the normal course of the department store's business on terms available to the general public and the official obtained the rebate by being among the first 100 customers. Thus the discount was made without regard to the official's status as a public official.

Example: However, if a chancellor were seeking a loan from a local bank and the banker said the bank would provide a better than normal interest rate because the chancellor was the chancellor, then that reduction in the interest rate would constitute a gift.

Informational materials are not gifts. Informational materials such as books, reports, pamphlets, calendars, or periodicals are not gifts. However, no payment for travel or reimbursement for any expenses shall be deemed "informational material." (Gov. Code, § 82028, subd. (b)(1).)

The FPPC has adopted a regulation which defines further the term "informational material." California Code of Regulations, title 2, section 18942.1 reads as follows:

"Informational Material" means any item which serves primarily to convey information and which is provided to an official for the purpose of assisting him or her in the performance of his or her official duties. Informational material may include:

Books, reports, pamphlets, calendars, periodicals, videotapes, or free admission to informational conferences or seminars. Scale models, pictorial representations, maps, and other such items, provided that where the item has a fair market value in excess of $320, the burden shall be on the official to demonstrate that the item is informational material. On-site demonstrations, tours, or inspections designed specifically for public officials. No payment for transportation to an inspection, tour, or demonstration site, nor reimbursement for any expenses in connection therewith, shall be deemed "informational material" except insofar as such transportation is not commercially obtainable.

Example: If an official is invited to an informational conference or seminar and is provided free admission to attend (not to speak or participate in a panel), the free admission would not be a gift so long as the conference or seminar is provided to the official for the purpose of assisting him or her in the performance of his or her official duties. Thus, a conference on new technologies in the field in which an educator teaches and conducts research would fall within this exclusion. However, the exclusion applies only to free admission. If the conference includes a meal, coffee and donuts, etc., those would be considered gifts to the official under these circumstances. Similarly, providing transportation to the conference for the official would constitute a gift to the official.

Example: An official is given an informational tour of a new facility in order to see how it functions. The tour itself is "informational material." Therefore, it does not constitute a gift to the official. However, food, beverage, and transportation to and from the site would be considered gifts to the official. On the other hand, the regulation and FPPC advice provide that in the situation when the official cannot get to the site via normal methods (commercial transportation or private car) then transportation to and from the site becomes part of the informational tour. For instance, a tour of one of the Channel Islands, under private ownership by The Nature Conservancy, may only be conducted if the official travels on a boat or plane which has permission to use the private dock or air strip. Thus, the boat or airplane trip to and from the island is not deemed to be a gift, but is part of the "informational tour." However, transportation from the official's home to the mainland boat dock or airstrip would be treated as a gift. Gifts returned to the donor or donated to the University or another charity are not "gifts."
Gifts which are not used and within 30 days of receipt by the official are either (i) returned to the donor, or (ii) delivered to a charitable organization or a governmental entity without being claimed as a charitable contribution by the official for tax purposes are not gifts. (Gov. Code, § 82028, subd. (b)(2); Cal. Code of Regs., tit. 2, § 18943.)

Example: Officials of the University sometimes are sent gifts of flowers, plants, fruit baskets or other items. The items must be placed in public areas for the benefit and enjoyment of staff and public alike, in order to assure they are not viewed as benefiting the official. Similarly, other types of gifts may be received from visiting foreign, dignitaries or representatives of foreign universities etc. Where these items are timely donated to the University and are neither personally used by the official nor claimed as a personal income tax deduction, they are not gifts to the official.

University policy documenting donation of gifts to the University.

In order to assure that donated items will not be deemed a gift to the official to whom they are directed, University policy requires the official to document that items are turned over to the University within 30 days of receipt, and are unused personally by the official.

Example: If an official receives a gift either at home or while on a trip, then the gift must not be used personally by the official and must be delivered to the University or other charitable or government organization within 30 days of receipt. A written record should document this fact. The official may not claim the donation as a personal income tax deduction.

Pay-down of gifts reduces value. An official who receives a gift may also reduce the value of the gift by "paying-down" the value. This may be done by making a payment of money to the donor of the gift within 30 days of receipt of the gift. If the official pays equal value, then since equal consideration has been provided to the donor, there is no gift. If something less than equal value is paid, the value of the gift is reduced by the amount paid and, therefore, becomes the difference between the total value of the gift less the partial repayment.

Reciprocity does not apply.

The FPPC concludes that "reciprocity" does not apply. (See FPPC Bulletin, Vol. 13, No. 6, p. 1.) It is not sufficient that the official say that he/she will get lunch or dinner the next time. However, under certain circumstances involving exchanges of gifts on special occasions, there can be an "offset" as to gifts. This limited exclusion is discussed at paragraph F.14.

Gifts from certain relatives are not "gifts" under the Act. (Gov. Code, 82028, subd. (b)(3).)

Gifts from family members and certain close relatives are not treated as gifts to an official, so long as the family member or relative is not acting as an intermediary for a gift from a third party who does not fall within the exclusion. The persons who may make gifts under Government Code section 82028(b)(3) are:

[A]n individual's spouse, child, parent, grandparent, grandchild, brother, sister, parent in-law, brother-in-law, sister-in-law, nephew, niece, aunt, uncle, or first cousin or the spouse of any such person, provided that a gift from any such person shall be considered a gift if the donor is acting as an agent or intermediary for any person not covered by this paragraph.

A devise or inheritance is not a gift. (Gov. Code, 82028, subd. (b)(5).)

Personalized plaques and trophies valued at less than $250 are not gifts. (Gov. Code, § 82028, subd. (b)(6).)

Where an official gets something which is personalized, such as an honorary degree or plaque honoring the official for some service or distinction, there is no gift so long as the value of the plaque or trophy is less than $250.
Reimbursement for travel or per diem expenses provided to an official by a bona fide non-profit entity exempt from taxation under section 501 (c)(3) of the Internal Revenue Code.

Such payments are not treated as gifts so long as the official has provided adequate consideration in return. (Gov. Code, § 82030, subd. (b)(2).) This would include such services as acting as a speaker, master of ceremonies, serving on a board of directors, etc.

Travel expenses in conjunction with a speech are sometimes not a gift.

Under some circumstances transportation, lodging, and meals in connection with a speaking event are excluded from the definition of gift or income for reporting or disqualification purposes. The rules divide the travel expenses into two basic categories: (1) lodging and subsistence (i.e., meals and beverages, etc.); and (2) actual transportation costs (Cal. Code of Regs., tit. 2, § 18950.3).
Lodging and subsistence which are directly in connection with a speaking event and necessary to the official's presence for the speech or panel discussion or similar service, are entirely exempt from being reportable as either a gift or as income on the official's statement of economic interests. This is true regardless of where the speaking event is held. It can be in California, outside of California, or in a foreign country.

Actual transportation costs which are incurred to travel to and from the site of the speaking event for an event within the State of California are also entirely exempt. However, for travel to a site outside of California, the travel costs are considered to be a gift unless another exclusion applies. The most likely exclusion for University officials would be that the source of the travel payment is an academic, educational, or charitable organization, providing such entities are bona fide non-profit entities exempt from taxation under section 501 (c)(3) of the Internal Revenue Code. In that case, so long as the speech or other participation by the official provides adequate consideration to the sponsoring organization, the travel is not reportable as a gift or income, even if it is outside of California.

Examples concerning treatment of travel expenses in connection with a speech.

Example: A University official is invited to speak at a symposium being sponsored by the Association of Realtors. The speech will be on a topic of state or national public policy and will occur in Palm Springs on a Tuesday morning from 9:00 a.m. to 10:00 a.m. The earliest flight into Palm Springs from the official's location arrives at 10:20 a.m. Thus, it is necessary for the official to travel the night before and receive lodging and dinner that night and breakfast the next morning. A luncheon is scheduled for noon on Tuesday, to which the official is also invited. No speech will be given by the official at the luncheon. There is a return flight out of Palm Springs that afternoon leaving at 4:30 p.m. The official takes that flight home. What things would be reportable?
None of the payments would be reportable. The travel is in California. The lodging and meals are necessary to the official being there for the speaking event at 9:00 a.m. They are also directly in connection with the official's speaking at the event. The luncheon is also exempted because it is a meal at the event on the same day the official speaks. Thus, even if the official could have caught a 1:00 p.m. flight home, staying for the meal would not cause the luncheon to be considered a gift.

However, if the official stayed over Tuesday night before flying home on Wednesday, the second night's lodging and the second morning's breakfast would be considered gifts. Because they occur on the day of and the day after his speech, which was on a subject of State policy, these payments would not be subject to the $320 per year gift limit, but would be reportable on Schedule F of the official's statement of economic interests. The meal on Tuesday evening would not be reportable since it was on the same day the official spoke, so long as the meal was at the event. However, if someone took the official out to dinner at a restaurant separately, that would be a reportable gift if its value equaled or exceeded $50 either alone or when combined with other gifts from that source during the calendar year. This would be reportable on Schedule F if the dinner was provided by the sponsor or on Schedule E if provided by someone else.

Example: Assume the same facts, but instead the event will be held out of state. Under these facts, the lodging and meals would be treated the same as the in-state speech but the travel would be a gift. However, if instead of a business group the sponsor were a charity or educational institution, the travel costs would also not be a gift so long as the official provided adequate consideration (the speech) in return.

Home hospitality is not a gift.

Hospitality (including food, beverages, or occasional lodging) is not a gift if provided to an official by a host in his or her home when the host or a member of the host's family is present. This has been interpreted to include a second home or a vacation home which is owned or leased by the host. It has been determined not to include a condominium or hotel suite simply rented on a short term basis by the host.

Gifts exchanged on special occasions are not "gifts."

Gifts, such as meals or presents, exchanged between an official and another person (who is not a lobbyist) on holidays, birthdays, or similar occasions are not gifts to the official provided that the presents exchanged are not substantially disproportionate in value. Thus, where individuals exchange holiday gifts each year of approximately equal value, the gift received by a University official is not disclosable and does not give rise to disqualification requirements. In addition, such gifts are not subject to the $320 limitation. (Gov. Code, § 89503(e)(2).)

Gifts to members of a University official's family are generally not gifts to the official.

Gifts which are designated by the donor to a member of an official's immediate family (spouse and dependent children) are generally not treated as gifts to the official. Thus, if an invitation to a dinner comes addressed to Mr. & Mrs., or Dr. & Ms., or Ms. & Mr., etc., it is the intention of the donor to make a gift of one dinner to the official and the other dinner to the official's spouse. The gift to the official's spouse is not reportable by the official and does not count toward either the $50 reporting threshold or the $320 gift limit. Similarly, a holiday gift to the official's minor child does not count toward the official's threshold or limits from the same donor.

However, under certain circumstances a gift, ostensibly made to the family member, will be treated as a gift to the official. One such instance is if two tickets addressed to Mr. & Ms. are provided to an event. However, the spouse of the official does not want to go and so the official uses both tickets and takes a child or a friend. Under those circumstances both tickets are treated as a gift to the official.

Similarly, if the official is simply provided with two tickets to the event, with no designation of the spouse or a child as the recipient of the second ticket, both tickets are treated as gifts to the official if they are used by the official or given by the official to anyone else to use.

Lastly, if a gift to a spouse or dependent child is the type of gift which the official will also use, such as an automobile or a color television set for the home, then those gifts are treated as gifts to the official no matter how they are designated.

Prizes and awards from bona fide competitions are not gifts, but are treated as income.

A prize or award received by an official shall be reported as a gift, unless the prize or award is received in a bona fide competition not related to the official's status as a University official. A prize or award which is not reported as a gift shall be reported as income if the source is a reportable source and the value equals or exceeds $500.

Tickets to tax-exempt charitable or political fundraising events are not gifts.

The rules for charitable or political fundraising events differ from sporting or entertainment events discussed above. If an official receives a ticket to a fundraising event for a charitable organization which is tax exempt under Internal Revenue Code section 501(c)(3)--most educational institutions or their fundraising arms are exempt--the ticket is not reportable and does not count as a gift, regardless of who donated the ticket to the official.

If the ticket is to a non-profit organization's fundraiser, but the non-profit is not a tax-exempt 501(c)(3) organization, then the ticket is a gift with a value equal to the face value of the ticket less the amount of the donation to the organization. Where this is not disclosed on the face of the ticket, the value of the gift is the fair market value of any food, beverage, or other tangible benefits provided to each attendee.

If the ticket is to a political fund-raiser, the ticket is not reportable and does not count as a gift, regardless of who donated the ticket to the official because such a ticket is deemed by the FPPC to have no value.

Gifts given to the University which are used by a University official are sometimes not gifts.

Certain gifts which are provided to an official's agency and then given by the agency to the official are not "gifts" to the official. Generally, these include such matters as gifts of travel, or of tickets for admission to theatrical or sporting events. The FPPC has adopted Regulation 18944.2 which provides that such matters will be deemed a gift to a public agency and not a gift to the public official if all of the following requirements are met:

The agency receives and controls the payments.

The payment is used for official agency business.

The agency, in its sole discretion, determines the specific official or officials who shall use the payment. However, the donor may identify a specific purpose for the agency's use of the payment, so long as the donor does not designate the specific official or officials who may use the payments.

The agency memorializes the payment in a written public record which embodies the requirements of subdivisions (a)(1) to (a)(3) of this regulation set forth above and which:

Identifies the donor and the official, officials, or class of officials receiving or using the payment;

Describes the official agency use and the nature and amount of the payment; and is filed with the agency official who maintains the records of the agency's statements of economic interests where the agency has a specific office for the maintenance of such statements, or where no specific office exists for the maintenance of such statements, at a designated office of the agency, and the filing is done within 30 days of the receipt of the payment of the agency.
An exclusion under this regulation exists for officials who are invited specifically to attend an event in order to perform a ceremonial function at the event. Thus, the ticket to an event is not a gift if the official is required to throw out the first ball, conduct a coin toss, present a trophy, etc.

Meals are sometimes not gifts.

Meals received in the course of an official fundraising activity, which qualify under federal and state law for a deduction as a charitable contribution for educational purposes, are gifts to the University, not the official. Such gifts are not reportable or subject to the gift limitation. (Cal. Code of Regs., tit. 2, § 18944.2.)

Valuation and reporting of gifts from multiple donors.

A gift with a value of $50 or more, but which is from a group of donors, is reportable. However, the individual donors need not be disclosed so long as no one donor contributed $50 or more to the cost of the gift. It is sufficient to describe in general terms those who gave the gift. If any individual contributed $50 or more, then the name of that donor must be disclosed.

Ethics in Government Act Prohibition on Acceptance of Gifts and Honoraria by Designated Officials. (Not Applicable to Regents)

Prohibition on receiving gifts.

In addition to the reporting and disqualification requirements discussed above, the Ethics in Government Act of 1990 prohibits a designated official from accepting gifts worth more than $250 in a calendar year from any source which the official would be required to report on his or her statement of economic interests. The $250 figure is subject to a Consumer Price Index escalator, making the figure $320 as of 2001. The prohibition on gifts does not apply to members of the Board of Regents. (Gov. Code, § 89503 (2)(d).)

Exceptions to prohibition on receiving gifts.

The following gifts are excluded from the prohibition on gifts:

All gifts otherwise not "gifts," as discussed in section F, above.
Gifts of travel and related meals and lodging reasonably related to a legislative or governmental purpose, or to an issue of State, national or international public policy if: (i) the travel, etc. is provided by a domestic or foreign governmental agency, a bona fide educational institution, a non-profit charitable or religious organization exempt from taxation, or a similar foreign entity which would substantially satisfy U.S. requirements for tax exempt status; or (ii) if the travel, etc., is funded by any other type of entity, the travel is in connection with a speech, and the payment for lodging and meals is limited to the day immediately before, the day of and the day following the speech, and the travel is in the United States.

Travel and related meals and lodging provided by the University are exempt, of course.

Travel and related meals and lodging are exempt if they are reasonably necessary in connection with the practice of a bona fide business, trade or profession, and payment for them would satisfy the criteria for deduction as a business expense for Federal income tax purposes. This exception is not available if the sole or predominant activity of the business, trade or profession is making speeches.

The FPPC has issued a lengthy and complex regulation governing what constitutes a bona fide business, trade or profession. In general, a business is presumed to be bona fide only if records are kept consistent with the operation of a business. (See Cal. Code of Regs., tit. 2, § § 18932.1)
A profession is generally presumed to be bona fide only if it is licensed; however, employment as a researcher or member of a university faculty does not require licensure in order to be considered a bona fide profession. (Cal. Code of Regs., tit. 2, § § 18932.1, subd. (c)(2).)

Are gifts of travel exempt from the prohibitions still subject to reporting and disqualification requirements?

Yes, unless otherwise excluded under the Act. (Gov. Code, § 89506.) Please note, however, that reimbursement for expenses or per diem from a government agency at which you are employed or travel expenses and per diem from a bona fide educational, academic, or charitable organization, providing entities are bona fide non-profit entities exempt from taxation under section 501 (c)(3) of the Internal Revenue Code, where you provide adequate consideration in return, do not create a financial interest and therefore are not reportable and do not give rise to disqualification. (Gov. Code, § 82030, subd. (b)(2).)

5) When Must a University Official Disqualify as a Result of Receiving Gifts?

coi - gift guidelines 2001_v11.pdf
(see C)

Disqualification as a Result of Receiving Gifts.

When is disqualification required as a result of receiving gifts?
Whenever you receive gifts from a single source which total $320 or more in any 12-month period, you may not "make, participate in making, or in any way attempt to use [your] official position to influence" a University decision in relation to the source which will have a "material financial effect" on you, on a member of your immediate family, or on the source of any gifts. You are disqualified for a period of 12 months following any point in time your gifts reach the $320 limit. (Gov. Code, §§ 87100, 87103, subd. (e).)

6) Can Employees Accept an Honorarium?

coi - gift guidelines 2001_v11.pdf
(see G. 4 and G. 5 and G. 6)

Prohibition on acceptance of "honoraria."

The Ethics in Government Act also bans acceptance of "honoraria" in any amount by designated employees. These provisions, like the gift prohibitions, do not apply to members of the Board of Regents.
Definition of "honorarium."

"Honorarium" means any payment made in consideration for any speech given, article published, or attendance at any public or private conference, convention, meeting, social event, meal or like gathering.

"Honorarium" does not include earned income for personal services which are customarily provided in connection with the practice of a bona fide business, trade, or profession, unless the sole or predominant activity of the business, trade, or profession is making speeches. (Gov. Code, § 89501, subd. (b)(1).)
Exceptions to the prohibition on receiving honoraria.

The following payments are excluded from the prohibition on acceptance of honoraria.

Payments which would be excluded from the definition of a gift, as discussed above in section F are also not honoraria. For example, such things as a personalized plaque or trophy with a value less than $250 would not be an honorarium. Travel payments are treated the same as gifts of travel. (See §§ F.10-F.12, above.)

Payment for admission to an event or the cost of a meal are not considered honoraria.

Payment for an official's admission to an event or his or her meal or beverage are not considered "honoraria" where the official does not speak at the event and otherwise receives no money for attending or appearing at the event. Such meals or beverages may, however, be considered gifts, as discussed above.

Payments for services in connection with a faculty appointment are not considered honoraria because being a member of the faculty is a bona fide profession.

The Ethics Act permits payment for a speech, article, or attendance at a gathering if it is in connection with a bona fide profession. FPPC regulations presume a teacher, researcher, or member of a university faculty to be a bona fide professional. Thus, any such payment received in connection with the teaching, research, or public service functions of a university faculty member is not covered by the prohibition on honoraria. This may mean that an administrator who has a faculty appointment may receive a payment under certain circumstances, whereas a colleague without a faculty appointment could not. The administrator with a faculty appointment may still be subject to reporting and disqualification requirements.

There is no ban on providing services in connection with a bona fide business of a university official. The FPPC has issued a lengthy and complex regulation governing what constitutes a bona fide business. In general, a business is presumed to be bona fide only if records are kept consistent with the operation of a business. (See Cal. Code of Regs., tit. 2 § 18932.1.)
Return of gifts or honoraria negates acceptance.

Any gift or honorarium received by an official may be returned to its source within thirty days and the acceptance is negated. Or it may also be donated to a charity organization, or a State, local or Federal government agency without claiming any deduction for tax purposes. (Cal. Code of Regs., tit. 2, §§ 18932.5 and 18933.)

Honoraria may be donated directly to a bona fide charitable, educational, civic, religious, or similar tax-exempt, nonprofit organization, providing it is not delivered to the official. An official may ask that the honorarium be donated directly to one of these organizations, but may not make the donation a condition for his or her speech, article, or attendance, nor may the official claim the donation as a deduction for tax purposes. (Cal. Code of Regs., tit. 2, § § 18932.5.)

Honoraria received by an official may be returned, unused, to its source within thirty days and the acceptance is negated. The official may also deliver the honorarium to the Controller for donation to the General Fund, without claiming any deduction for tax purposes. (Cal. Code of Regs., tit. 2, § § 18933.)
Examples of application of gift and honoraria prohibitions under the Ethics in Government Act.

Example: A University official is asked by another university to observe the conducting of a scientific experiment. All travel expenses will be paid for by the other university. Because the other university is a bona fide public or private educational institution which is or would be exempt from taxation under section 501 (c)(3), the travel would be exempt from the $320 gift limit, so long as disclosed on the official's annual statement of economic interests (Form 700, Schedule F). However, if the official was also being asked to provide personal services, such as participation in a dialogue regarding the subject of the experiment, the official would be providing "adequate consideration" in return. Therefore, because the other university is a bona fide academic or educational institution, the reimbursement for travel and per diem would be excluded entirely from being reported.

Example: Suppose under the example above, the University paid for the University official's travel. There would be no "gift" at all. Travel paid for by the official's own employing government agency is not considered a gift. (Gov. Code § 82030, subd. (b)(2).)

Example: A University official is asked to deliver the commencement address at another university in another state. The official's travel is paid for by the other university. No honorarium is offered. There would be no reportable gift. Since the travel is a reimbursement by a bona fide educational or academic institution for which adequate consideration is provided in the form of the commencement address, the travel reimbursement is again entirely exempt from being considered a reportable gift (or income for that matter).

Note: University faculty members may receive honoraria for speeches which fall within the public service obligations of a faculty member. (See Cal. Code of Regs., tit. 2, §§ 18932 and 18932.1, subd. (c)(2).) Honoraria paid to persons employed as faculty members or researchers are exempt from the honoraria prohibitions because they are earned income for personal services provided in connection with the practice of a bona fide profession. (Gov. Code, § 89501, subd. (b)(1).)

Example: A University administrator (not a faculty member) is asked to speak at the annual shareholders' meeting of a private, for-profit corporation held in another state. The topic is "New Horizons on the Pacific Rim." This is a topic of "international public policy." The private corporation offers to pay for all travel expenses for the day before, the day of and the day after the speech. The out-of-state air fare is reportable income. Some of the lodging and meals may also be reportable, while others may be exempted under rules which were discussed above. However, so long as those items which are reportable are, in fact, disclosed, then they are not subject to the $320 per calendar year limit.
Example: A University official has an outside consulting practice in the official's field of expertise, for which the official keeps business records. In the course of that practice the official is asked to visit a manufacturing plant and evaluate its procedures. The outside consulting contract provides for all travel to be paid for by the client. The client pays for this travel. The travel would not be subject to the gift or honorarium limits, since it was "reasonably necessary in connection with a bona fide business, trade or profession." However, the income from the client, including the travel reimbursement, would be disclosable as income on Schedule C of the official's Form 700, and would require disqualification for a one-year period if the payment exceeded $250.

F. INVENTIONS AND PATENTS

1) What Is the University's Patent Policy?

http://www.ucop.edu/ott/patentpolicy/pat-pol.html

OFFICE OF THE PRESIDENT
CHANCELLORS
LABORATORY DIRECTORS September 4, 1997

Dear Colleagues:

The enclosed University of California Patent Policy will be effective October 1, 1997. This policy supersedes the November 18, 1985 policy, and rescinds the April 16, 1990 revision to that policy (a one-page Summary of Changes is provided). Inventions reported on or after October 1, 1997 will be subject to the new policy. Inventions reported before the effective date will be governed by the November 18, 1985 policy. Also enclosed is a "Patent Acknowledgment" to be signed by all new employees as of October 1st. This form replaces the "Patent Agreement."

The purpose of the new policy is to simplify and restructure the formula for distributing royalty income from inventions, and to establish a new campus and Laboratory research allocation. This policy is the result of extensive review and discussion within the University community. Additional information regarding implementation of the new policy will be published in the near future by the Office of Technology Transfer.

The enclosed policy applies to all employees and others specified within the policy, except individuals in the following collective bargaining units: Research Support Professional, Technical, and Police. Until collective bargaining agreements have been ratified by both parties in these units, affected employees will remain subject to the requirements of the April 16, 1990 Patent Policy.

Sincerely,
Richard C. Atkinson
President
Enclosures
cc:
Members, President's Cabinet Academic Council Chair Weiss Members, Technology Transfer Advisory Committee Academic Vice Chancellors Administrative Vice Chancellors Research Vice Chancellors Executive Director Feuerborn Special Assistant Gardner Principal Officers of the Regents

UNIVERSITY OF CALIFORNIAPATENT POLICY

Effective October 1, 1997

PREAMBLE
STATEMENT OF POLICY
PATENT RESPONSIBILITIES AND ADMINISTRATION

I. PREAMBLE
It is the intent of the President of the University of California, in administering intellectual property rights for the public benefit, to encourage and assist members of the faculty, staff, and others associated with the University in the use of the patent system with respect to their discoveries and inventions in a manner that is equitable to all parties involved.

The University recognizes the need for and desirability of encouraging the broad utilization of the results of University research, not only by scholars but also in practical application for the general public benefit, and acknowledges the importance of the patent system in bringing innovative research findings to practical application.

Within the University, innovative research findings often give rise to patentable inventions as fortuitous by-products, even though the research was conducted for the primary purpose of gaining new knowledge.

The following University of California Patent Policy is adopted to encourage the practical application of University research for the broad public benefit; to appraise and determine relative rights and equities of all parties concerned; to facilitate patent applications, licensing, and the equitable distribution of royalties, if any; to assist in obtaining funds for research; to provide for the use of invention-related income for the further support of research and education; and to provide a uniform procedure in patent matters when the University has a right or equity.

II. STATEMENT OF POLICY

An agreement to assign inventions and patents to the University, except those resulting from permissible consulting activities without use of University facilities, shall be mandatory for all employees, for persons not employed by the University but who use University research facilities, and for those who receive gift, grant, or contract funds through the University. Such an agreement may be in the form of an acknowledgment of obligation to assign. Exemptions from such agreements to assign may be authorized in those circumstances when the mission of the University is better served by such action, provided that overriding obligations to other parties are met and such exemptions are not inconsistent with other University policies.
Those individuals who have so agreed to assign inventions and patents shall promptly report and fully disclose the conception and/or reduction to practice of potentially patentable inventions to the Office of Technology Transfer or authorized licensing office. They shall execute such declarations, assignments, or other documents as may be necessary in the course of invention evaluation, patent prosecution, or protection of patent or analogous property rights, to assure that title in such inventions shall be held by the University or by such other parties designated by the University as may be appropriate under the circumstances. Such circumstances would include, but not be limited to, those situations when there are overriding patent obligations of the University arising from gifts, grants, contracts, or other agreements with outside organizations. In the absence of overriding obligations to outside sponsors of research, the University may release patent rights to the inventor in those circumstances when:
1. the University elects not to file a patent application and the inventor is prepared to do so, or
2. the equity of the situation clearly indicates such release should be given, provided in either case that no further research or development to develop that invention will be conducted involving University support or facilities, and provided further that a shop right is granted to the University.
Subject to restrictions arising from overriding obligations of the University pursuant to gifts, grants, contracts, or other agreements with outside organizations, the University agrees, following said assignment of inventions and patent rights, to pay annually to the named inventor(s), or to the inventor(s)' heirs, successors, or assigns, 35% of the net royalties and fees per invention received by the University. An additional 15% of net royalties and fees per invention shall be allocated for research-related purposes on the inventor's campus or Laboratory. Net royalties are defined as gross royalties and fees, less the costs of patenting, protecting, and preserving patent and related property rights, maintaining patents, the licensing of patent and related property rights, and such other costs, taxes, or reimbursements as may be necessary or required by law. Inventor shares paid to University employees pursuant to this paragraph represent an employee benefit. When there are two or more inventors, each inventor shall share equally in the inventor's share of royalties, unless all inventors previously have agreed in writing to a different distribution of such share.

Distribution of the inventor's share of royalties shall be made annually in November from the amount received during the previous fiscal year ending June 30th, except as provided for in Section II.D. below. In the event of any litigation, actual or imminent, or any other action to protect patent rights, the University may withhold distribution and impound royalties until resolution of the matter.
The DOE Laboratories may establish separate royalty distribution formulas, subject to approval by the President. Distribution of the inventor's share of DOE Laboratory royalties shall be made annually in February from the amount received during the previous fiscal year ending September 30th. All other elements of this policy shall continue to apply.
Equity received by the University in licensing transactions, whether in the form of stock or any other instrument conveying ownership interest in a corporation, shall be distributed in accordance with the Policy on Accepting Equity When Licensing University Technology.
In the disposition of any net income accruing to the University from patents, first consideration shall be given to the support of research.

III. PATENT RESPONSIBILITIES AND ADMINISTRATION

Pursuant to Regents' Standing Order 100.4(mm), the President has responsibility for all matters relating to patents in which the University of California is in any way concerned. This policy is an exercise of that responsibility, and the President may make changes to any part of this policy from time to time, including the percentage of net royalties paid to inventors.
The President is advised on such matters by the Technology Transfer Advisory Committee (TTAC), which is chaired by the Senior Vice President--Business and Finance. The membership of TTAC includes the Provost and Senior Vice President--Academic Affairs, the Director of the Office of Technology Transfer, and representatives from the campuses, DOE Laboratories, Academic Senate, the Division of Agriculture and Natural Resources and the Office of the General Counsel. TTAC is responsible for:
1. reviewing and proposing University policy on intellectual property matters including patents, copyrights, trademarks, and tangible research products;
2. reviewing the administration of intellectual property operations to ensure consistent application of policy and effective progress toward program objectives; and
3. advising the President on related matters as requested.
The Senior Vice President--Business and Finance is responsible for implementation of this Policy, including the following:
1. Evaluating inventions and discoveries for patentability, as well as scientific merit and practical application, and requesting the filing and prosecution of patent applications.
2. Evaluating the patent or analogous property rights or equities held by the University in an invention, and negotiating agreements with cooperating organizations, if any, with respect to such rights or equities.
3. Negotiating licenses and license option agreements with other parties concerning patent and or analogous property rights held by the University.
4. Directing and arranging for the collection and appropriate distribution of royalties and fees.
5. Assisting University officers in negotiating agreements with cooperating organizations concerning prospective rights to patentable inventions or discoveries made as a result of research carried out under gifts, grants, contracts, or other agreements to be funded in whole or in part by such cooperating organizations, and negotiating with Federal agencies regarding the disposition of patent rights.
6. Approving exemptions from the agreement to assign inventions and patents to the University as required by Section II.A. above.
7. Approving exceptions to University policy on intellectual property matters including patents, copyrights, trademarks, and tangible research products.

2) Who Must Sign the University's Patent Acknowledgment?

http.www.ucop.edu/ott.ttprog.html
(See page 2 UC Patent Acknowledgment)

University employees, persons not employed by the University but who use University research facilities, and persons who receive gift, grant, or contract funds through the University are all required to sign the University Patent Acknowledgment. Visiting scientists who are not employed by the University but who visit the University and use University funds and facilities are required to sign the University Patent Acknowledgment. The Patent Acknowledgment requires assignment of inventions and patents to the University, except those resulting from permissible consulting activities without use of University facilities. Persons signing the Patent Acknowledgment agree to disclose promptly all potentially patentable inventions to the University.

University employees who engage in consulting, or in summer or incidental employment, outside the University are advised to consider any proposed agreements with industry carefully to ensure that no conflict exists with the University's Patent Acknowledgment.

Certain individuals are affected by special circumstances and may or may not be required to sign the Patent Acknowledgment. Students are generally not required to sign the University Patent Acknowledgment, but graduate and undergraduate students are required to sign the University Patent Acknowledgment if they are also University employees or if they participate in an extramurally-supported research project. Contact campus or laboratory Patent Coordinator or OTT Campus Liaison Group for questions about this policy.

3) How Does the Technology Transfer Process Work?

See No 4: http://www.cogr.edu/qa.htm

The major steps in technology transfer are: disclosure of inventions; record keeping and management; evaluation and marketing; patent prosecution; negotiation and drafting of license agreements; and management of active licenses. University technology transfer is mainly a system of disclosure, patenting, licensing and enforcement of patents and licenses.

The disclosure document contains information about the invention, the inventors, the funding sources, anticipated bars to patenting (such as publications), and other data (such as likely candidates for licensing). The disclosure is reviewed by the licensing staff or a university committee, who make a preliminary decision about ownership and the invention's potential commercial value and patentability. The technology transfer office takes action to insure that the newly disclosed intellectual property will be handled in compliance with federal and university policies.

Other University action can include seeking an opinion on the patentability of the invention to or filing a patent outright. The technology transfer office then markets the invention to industry. A nonconfidential summary is sent to companies that are likely to be interested. If a company expresses interest, it will be asked to sign a secrecy agreement (to protect patent rights) prior to receiving confidential information from the university. If the company continues to be interested after reviewing the confidential information, an agreement with the company is negotiated. This can be a letter of intent; an option; or a license.

In conjunction with any one of these options, a research agreement may be negotiated to continue work on the invention at the university. Most university inventions are embryonic and require further research and development before they are ready for the market place. Thus, there is a high level of risk for the licensee - a fact that is taken into account in the licensing negotiation.

--from the Council on Governmental Relations publication on Q&A on Technology

Transfer

4) What Percent of Income Generated by an Invention Is Paid to the Inventor?

See II C

C. Subject to restrictions arising from overriding obligations of the University pursuant to gifts, grants, contracts, or other agreements with outside organizations, the University agrees, following said assignment of inventions and patent rights, to pay annually to the named inventor(s), or to the inventor(s)' heirs, successors, or assigns, 35% of the net royalties and fees per invention received by the University.

For a more complete discussion of licensing revenue, visit pages 16 to 27 or the Annual Report from the University of California Technology Transfer Program, Fiscal Year 2000. URL: http://www.ucop.edu/ott/ars/ann00/ar00.pdf

5) When a Patent Has Been Issued, Is It a Public Document?

When patents are issued by the United States Patent and Trademark Office, they become public documents. All U.S. patents are listed for the general public at: http://www.uspto.gov/patft/

G. POLICIES ON LICENSING TECHNOLOGIES

1. Why Does the University Partner With Private Industry?

Statement from President Atkinson

"We seek cooperative research relations with industry not simply to generate royalty revenue and stimulate economic growth, but to create relationships with industry that will help faculty in pursuing their own research and in training graduate students."

--Richard Atkinson, president of the University of California, from a publication released by the Business-Higher Education Forum entitled "Working Together, Creating Knowledge: The University-Industry Research Collaboration Initiative."

(ALSO)
--Answer from Technology Transfer

See http://patron.ucop.edu/ottmemos/docs.ott00-05a.html

The purpose of licensing University inventions is to provide a mechanism to encourage the practical application of the results of University research for the broad public benefit; address the needs of sponsors of University research; build research partnerships with industry to enhance the research and educational experience of researchers and students; and generate royalty income for the further support of research and education and as an incentive for inventor faculty retention and support of the University technology transfer program.

2. How Is the Licensing Value (fees/royalties) of Technologies Determined?

http://patron.ucop.edu/ottmemos/docs.ott00-05a.html

(See no. 4)

The value of the consideration to the University negotiated by the Licensing Professional (LP) should be based on profitability of the expected licensee's product or services. Other factors may include the level of access and exclusivity to the invention granted to the licensee, the strength of patent protection sought/obtained by the University, the respective parties' contributions to the invention and the development of a product to commercial introduction, the contribution of the invention to the ultimate commercial product, the financial significance of the planned commercial activity and other relevant industry standards. In general, the level of consideration to the University that is negotiated should reflect the relative risks and rewards of the commercial pursuit. For example, the LP may consider the following factors in negotiating the value of the commercial license to the extent they are known or reasonably estimated:

type of technology and industry
stage of development
size of potential market and potential success of penetration into market
the projected cost of product development and bringing the product to market
utility over alternative products
the profit margin of the anticipated product
comparable prices for similar technologies or products
the amount of commercial risk perceived
the strength of the University's patents
decrease in the current cost of production or R&D expenditures

3. What Are the Top Royalty-Producing Inventions?

The top 25 royalty-producing inventions are routinely listed in the Annual Report of the University of California Technology Transfer Program. For fiscal year 2000, go to page 18 of the following URL: [This URL does not seem to be working. Will be fixed.]

See http://www.ucop.edu/ott/ars/ann00/ar00.pdf

4. What Factors Are Involved in Selecting Licensees?

http://patron.ucop.edu/ottmemos.docs.ott00-05a.html

(See no. 2)
The Licensing Professional, in selecting a licensee, should consider factors such as whether that the potential licensee:

has or can secure the technical resources to develop and move the invention to the marketplace in a timely manner

has or can arrange adequate financing of any research or product development required to advance the invention to a marketable condition

has a general business plan that supports the commercialization of the University's invention

has relevant experience in developing and commercializing technology comparable to the subject invention

has appropriate marketing capabilities

o possesses a strong desire and commitment to make the product/technology a success

o is able to meet regulatory requirements for introduction of the technology into the marketplace and to satisfy the market demand for the technology

o is able to integrate the University's invention with other technologies competing for resources and/or commitments of the company

o has access to personnel with understanding of the invention to help ensure successful technical development and commercialization.

5. How Does UC Manage Potential Conflict of Interest in Licensing Activity?

See http://patron.ucop.edu/ottmemos/docs/ott01-02.html

PATENT COORDINATORS
CONTRACT AND GRANT OFFICERS
VICE CHANCELLORS - RESEARCH/ADMINISTRATION
ADMINISTRATIVE CONFLICT OF INTEREST COORDINATORS

SUBJECT: Managing Potential Conflicts of Interest in Licensing Under the California Political Reform Act

Dear Colleagues:
In a June 18, 2001 letter to Chancellors and Laboratory Directors (Exhibit A), Provost King and Senior Vice President Mullinix asked campuses and Laboratories to implement the requirements of California's Political Reform Act with regard to licensing University research results. To accomplish this, campuses and Laboratories were asked to establish local plans to ensure that intervening substantive review of University decisions relating to such licensing activities are carried out as required by the Act. To distinguish this from other intervening substantive review processes under the Act, intervening substantive review of licensing decisions will be referred to as Licensing Decision Review (LDR). LDR plans must provide for intervening review by an appropriately disinterested official or committee if an inventor or author participates in or influences University licensing decisions and has a disqualifying personal financial interest in those decisions as defined in the California Political Reform Act.

The Provost and Senior Vice President directed OTT to issue systemwide guidance for use by campuses and Laboratories in establishing their Licensing Decision Review plans. Accordingly, I am enclosing the new University of California Guidelines on Managing Potential Conflicts of Interest in Licensing (Exhibit B). These guidelines have been developed after extensive consultation with University Patent Coordinators, licensing personnel, Conflicts of Interest Coordinators, and representatives from OTT, the Office of Research Policy, and the Office of General Counsel. The guidelines address some of the most common issues concerning potential conflicts of interest in University licensing activity, and should be followed to implement the requirements of the California Political Reform Act. They are developed to clarify the roles of both inventors and licensing professionals, and to assist them in complying with the Act. The guidelines also apply to authors whose works will be licensed by the University. Also enclosed is Exhibit C, "Required Elements for Campus/Laboratory Plans for Licensing Decision Reviews," which outlines the elements that any local LDR process must include to be in compliance with the Political Reform Act. UC Form TT-100, "Inventor Statement Concerning Involvement in Licensing Decisions" (Exhibit D) must be used in accordance with the Guidelines.

Campuses and Laboratories have broad discretion in shaping their local LDR processes. As long as the enclosed Guidelines (Exhibits B) and the Required Elements (Exhibit C) are satisfied, some of the areas of local choice and flexibility include:

the extent to which inventors should be encouraged to participate in the licensing decision-making process;
choice of conducting LDR by individual UC officials or by committee review;
levels for reviews of varying rigor based on the level of inventor financial interest;
nature of materials to be reviewed, instructions to reviewers, scope of potential remedies, and authority for final decisions.

For your information and as a reference I have also included OTT's own Plan for Carrying Out Licensing Decision Reviews (Exhibit F) including a sample notice that OTT will provide to inventors, "What Inventors Need to Know about Conflict of Interest in Licensing" (Exhibit E). I consider OTT's own plan an interim one until we have gained experience in this area. It may be revised from time to time based on our experience and feedback from inventors, campuses, and Laboratories. Campuses and Laboratories should feel free to incorporate any elements of the OTT plan, or to construct something quite different, as long local plans include all the Required Elements (Exhibit C). If campuses or Laboratories wish to have OTT occasionally conduct an LDR for an invention managed by the local licensing office in unique case circumstances, then the local LDR plan may provide for that option.

Finally, all sites--regardless of whether or not they have independent licensing offices--should indicate how they wish to handle LDRs of inventions that are under OTT management. These inventions may be covered by the local LDR process or by the OTT LDR plan (this will be the default). To the extent that local LDR plans will address cases for which OTT will be the authorized licensing office, those aspects of the LDR should be coordinated with OTT and agreed upon in a memorandum of understanding between the two offices.
Campus and Laboratory LDR plans should be submitted to my attention by October 31, 2001. If in developing these plans, you have any questions or need any policy or legal advice, please feel free to contact Joe Acanfora at (510) 587-6011 or Marty Simpson at (510) 987-9763.

Sincerely,
Alan B. Bennett
Executive Director
Research Administration and Technology Transfer

Exhibit A - Letter from Senior Vice Presidents King and Mullinix, June 18, 2001
Exhibit B - Guidelines on Managing Potential Conflicts of Interest in Licensing
Exhibit C - Required Elements for Campus/Laboratory Plans for Licensing Decision Reviews
Exhibit D - UC Form TT-100, "Inventor Statement Concerning Involvement in Licensing Decisions"
Exhibit E - Sample Notice: "What Inventors Need to Know about Conflict of Interest in Licensing"
Exhibit F - OTT Plan for Carrying Out Licensing Decision Reviews
cc: OTT Associate Directors and Managers Academic Conflict of Interest Coordinators
Go Back Use first two paragraphs under Guidelines. The Political Reform Act of 1974 etc.

6. What Factors Influence Decisions to License Patents Either Exclusively or Non-Exclusively?

See No 6: http://www.cogr.edu/qa.htm

University decisions on whether to license a patent only to one company or to a number of companies are based on several factors. However, universities are generally most influenced by two major determinants: (1) what kind of licensing is most likely to lead to rapid commercialization; and (2) what kind of licensing is in the public interest.

Patents which are broad in scope and can be used in multiple industries, or patents that are so basic that they form the building blocks for new technologies are most likely to be licensed non-exclusively, or by fields of use. An exclusive, "field-of-use" license is a way to protect a market for a company while enabling the university to identify more than one licensee to assure public utilization of the technology in all markets.

Stanford University's Cohen-Boyer patent is an example of a basic patent that was licensed to all companies needing it. Non-exclusive licensing is preferred by universities when the technology can be used to foster product development in many fields of use. For example, if a technology will be of greatest benefit to the public if it becomes an industry standard, the university will make it readily accessible to all interested parties.

Universities most frequently will grant exclusive licenses to patents that require significant private investment to reach the marketplace or are so embryonic that exclusivity is necessary to induce the investment needed to determine utility. Frequently, these are new drugs requiring time-intensive and capital-intensive development or they are technologies that have only a tenuous link between the workbench and production. As such, they require a company willing to dedicate financial backing and the creativity of its own scientists on a long-range basis.

At the final call, the decision to license on an exclusive or non-exclusive basis is inevitably driven by market interest. Not only does the interest relate to the value of the invention, but also to the investment required to develop new products and the risk associated with that technology.

--from the Council on Governmental Relations publication on Q&A on Technology Transfer

7. To Whom Do Universities License Their Technologies?

See No 6 in the NEW URL: http://www.cogr.edu/qa.htm
--from the Council on Governmental Relations publication on Q&A on Technology Transfer See 7: To Whom Do Universities License? (last paragraph)

Universities license technology to a broad spectrum of organizations and individuals, ranging from the large for-profit corporation to a small non-profit research institute. For example, a license may be given to a multi-national pharmaceutical company for a new application of a known drug because that company may hold the patent on the compound. A non-exclusive license may be granted to a number of computer hardware and software firms to incrementally improve product lines. A royalty-free license may be granted to another non-profit research institute to enable a researcher to practice the invention for research purposes. Included in these examples must also be a license to a early stage firm whose founding purpose was to commercialize the technology. While these kinds of licenses are probably the riskiest in terms of eventual commercialization and subsequent payoff, those licensee companies are sometimes the most effective at transferring the technology for the public good.

Universities search for the licensee most capable of commercializing the technology. Examples of criteria used in identifying the licensee are: financial and technological resources; "fit" within the company business plans; previous experience, and marketing capabilities. Desire of the licensee to commercialize the technology and the relationship of the inventor to the licensee are also important. Commercialization of technology is not dependent only on intellectual property rights such as patents, but also on the ideas and know-how of the inventor. Therefore, the ability of the inventor to relate to the licensee is often a key factor in a license transaction.

When an entrepreneurial inventor is involved, the licensee may be an early stage company formed around the technology. These entrepreneurial ventures may bring with them a myriad of potential conflict of interest issues which must be resolved before a license is consummated. Nevertheless, they often are the most desirable because they have several of the key licensing components: desire by the licensee to make the product/technology a success, and involvement by the inventor in assuring success. One other factor in licensing to early stage companies is that these companies make that technology their business, whereas in established companies the technology must compete for resources with other development projects.

8. Are Licensing Agreements Public Documents?

Licensing agreements with a private company include proprietary information as they often contain information that is part of a company's confidential business and marketing plans. Information only can be released upon agreement by the industry.

H. RELATED INFORMATION

1. UC Systemwide Summary of Policies and Guidelines (Business and Finance Bulletin, G-39)

http://www.ucop.edu/ucophome/policies/bfb/g39toc.pdf

2. The Bayh-Dole Act-A Key Law for Tech Transfer at Universities

http://www.ucop.edu/ott.bayh.html

3. The Technology Transfer Annual Report

http://www.ucop.edu/ott/ttimport.html

4. University Technology Transfer - Questions and Answers (from the Council on Governmental Relations COGR)

http://www.ucop.edu/ott.tech.html

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