7

Study on “Problems Concerning Creation, Protection,and Use of Intellectual Property in Universities”

In this study, examination was made on various problems concerning IP creation, protection, and use inuniversities from broad perspectives. Firstly, the significance of IP management for universities was confirmed,
and the ideal style of efficient and effective IP management was discussed by introducing examples of actual
measures taken by universities and also focusing on development of IP experts. Secondly, accounting-related
problems that arise from IP management by universities were discussed. Specifically, budgetary considerations
and accounting systems were identified, and tax considerations concerning patent transfer or other technology
transfer were reviewed. Thirdly, examination was made on problems related to the patent system, namely
problems concerning application of the exception to lack of novelty and problems concerning the attribute ofresearch findings in universities. Lastly, problems concerning joint research were discussed. Specifically,
problems in joint research between a company and a university, problems in concluding a nondisclosureagreement with students, and points to consider when concluding an agreement with a foreign company were
examined.

Ⅰ Introduction
Gradual improvements are seen in theenvironment for universities to manage and use
intellectual property (IP).
Many universities throughout Japan manage
IP in a centralized manner by establishing an IP
policy and related regulations and stipulating thatthe right to obtain a patent will be transferredfrom the inventor to the university upon creationof an invention, while also establishing an IP
management framework within the university.
Furthermore, they promote the use of theirresearch findings in collaboration with technology
licensing organizations (TLOs).
In this study, examination was made on
various problems concerning IP creation,
protection, and use in universities from thefollowing broad perspectives, while considering
the current status of environmental improvements
regarding the IP of universities. Firstly, thesignificance of IP management for universities
was confirmed, and the ideal style of efficient andeffective IP management was discussed byintroducing examples of actual measures taken by
universities and also focusing on the developmentof IP experts. Secondly, accounting-related
problems that arise from IP management by
universities were discussed. Specifically, budgetaryconsiderations and accounting systems wereidentified, and tax considerations concerning
patent transfer or other technology transfer werereviewed. Thirdly, examination was made on
problems related to the patent system, namely
problems concerning application of the exception
to lack of novelty and problems concerning theattribute of research findings in universities.
Lastly, problems concerning joint research were

IIP Bulletin 2005

discussed. Specifically, problems in joint research
between a company and a university, problems inconcluding a nondisclosure agreement withstudents, and points to consider when concluding
an agreement with a foreign company were
examined.
It is hoped that this report and discussions invarious other arenas will help universities takemore effective initiatives based on their own IP
policies and promote creation, protection, and useof IP.

Ⅱ Significance and Ideal Style of IP
Management by Universities
1

Significance
universities

ofIP

managementby(1) Necessity of acquiring patents forresearch findings in universities
Research at universities is not originallyintended for the acquisition of patents.
Nevertheless, it is extremely important toacquire patents for new inventions that result
from such research from the viewpoint of utilizing
research findings in society.
Moreover, if an invention is protected by apatent, the university will gain a range of choices
depending on the type of technology. For example,
it would be possible to promote commercializationof the technology by granting a license to a
specific company or achieve commercialization ina wide-range of fields by granting non-exclusive
licenses for general-purpose technology tomultiple companies. In this manner, patenting of
an invention will enable the university to promotecommercialization of the invention as well as
benefit the public.

● 46 ●

(2) Necessity and challenges of university
engagement in IP management
Since the government has shifted its policy
to the principle of attributing IP rights to theorganization rather than the individual, manynational universities have also adopted thisprinciple and revised their working regulations orprovisions on employees' inventions uponincorporation to make the IP developed byresearchers attributable to the university(regarding patents, for example, having theinventor transfer the right to obtain a patent for
his/her invention to the university).
However, the objective of making effective
use of IP in society cannot be achieved by merely
shifting from the conventional principle of
attributing the rights to the individual to theprinciple of attributing them to the organization,and having the created IP attributable to theuniversity in principle after taking the necessary
procedures. It is critical that the university
conduct appropriate IP management after thetransfer of the IP. IP can be used effectively insociety only if the university establishes asystem (institution or framework) for such IP
management and takes the initiative in managing
the IP.
2

Ideal style of efficient and effective IP
management by universities(1) Approach to IP management according
to the progress of universities'
engagement in IP activities
This section thoroughly explains the
background history, current problems, and thefuture revision plan of Tohoku University's IP
management activities.
The act of obtaining IP for their researchfindings and using that IP as an organization may
become a very significant strategy for universities
for achieving their own development as well as
for contributing to the growth of Japanese industry.
In doing so, it would be effective to choose aphased IP management method that suits thecircumstances of the respective universities.
Each university is expected to uphold amission for achieving its role in the form of aclear policy (university's philosophy, industryuniversity collaboration policy, IP policy, etc.) andto conduct activities toward achieving thismission by utilizing its organizational power,
while respecting the independence of therespective researchers and students.
Therefore, at the present stage when
university corporations are still searching for the
new path to be opened up for university
corporations themselves, IP management by auniversity needs to be discussed together withthe university's research support activities basedon its policy.
(2) Ideal style of IP expert development by
universities
Lack of people who can deal with IP is posing
a large problem in promoting industry-university
collaboration. Therefore, this section summarizes
and examines issues on experts that manage anduse university IP, including the utilization of
external experts and development of experts
internally.
The activity pattern of IP management canbe roughly divided into two operations: (i) the
operation to create IP, acquire IP rights, andmaintain/use them; and (ii) the operation to
exercise/use IP rights. These two phases requiredifferent qualities, knowledge, and skills. The
former operation requires an entrepreneurial
sense with eyes of a connoisseur, and the latter
operation requires a marketing sense and amanagement sense.
For operations centering on IP management,
including discovery of inventions and acquisition/
maintenance of IP rights, and for operations
involving the use and exercising of those rights, itwould be effective to secure external persons,such as ex-corporate practitioners, patent
attorneys, and attorneys at law, as ready experts.
In terms of using internal persons, it would
be possible to use university officials, graduate
students, and undergraduate students for
management operations involving mainly office
work management. In that case, it would bedesirable for the assigned persons to gain work
experience through on-the-job training withexperienced persons. Use of graduates ofundergraduate/graduate courses would be on thepremise that they had acquired knowledge on thebasics and key domains of IP in their courses.
3

Ideal style of IP management by medical
universities(1) Current status of IP in medical
universities
Generally there are prosperous researchfunds and active research activities in the medical
field. However, a high hurdle exists with regard tocommercialization of the findings because thefindings affect the human body. Thus, an effective
strategy for making a business out of the findings
is essential. The core of the strategy would be
patents, but there are problems with bothresearchers and institutions regarding patents.
The problem with researchers is their low patent
awareness. This is because they have rarely
needed to rely on patents (except forpharmaceuticals and medical equipment). First ofall, efforts must be made to raise the awarenessof the researchers. The institutional problem isthat patents are not yet granted on treatment● 47 ●IIP Bulletin 2005

methods in Japan. Therefore, effective businessmodels cannot be developed for cutting-edge
technology such as regeneration medicine andgene therapy. As a result, development andcommercialization of medical technology aremostly conducted overseas.
(2) Challenges of IP management by
medical universities(i) The IP management system in medical
universities must be rationalized due to the sizeand purpose of establishment of the universities.
A possible solution would be to have a small,internal TLO take charge of IP management as
well, or to establish a small division that studies
medical IP strategies and have the division
educate graduate students and supervise theoffice work. It is important to raise the IP
awareness of graduate students of various fields.
Such efforts are expected to contribute todeveloping experts with a good knowledge of both
IP and medical technology.
(ii) Ideas are particularly required for affording
the cost for patenting basic research findings. It isnecessary to value and utilize the research cycleinwhichhigh-quality
research
findings(particularly the IP on those findings) help raiselarger amounts of government and private funds
and further accelerate development of theresearch. It will also be important to establish aframework for securing the funds required for
acquiring patents as part of the research funds.
(iii) Development of human network and knowhow for promoting collaboration with otheruniversities, experimentation and research
institutes, companies, the administration, andtechnology transfer organizations is important fortechnology transfer. One option would be toeffectively use a core TLO specializing in medical
technology. In addition, since the surrounding
environment is improving, starting up a venturecompany will become an increasingly important
technology utilization strategy especially forpromising technologies.

Ⅲ Identification of Accountingrelated Problems that Arise from
IP Management1

Budgetary considerations for universities
with regard to IP management(1) Revenue and expenditure structure of
IP management
The structure is verified based on an actual
example of a certain national university
corporation.
(2) Financial challenges and countermeasures
It would severely damage IP management
activities if they were unable to employ persons
continuously.

IIP Bulletin 2005

Universities that are reinforcing IP
management face the following urgent issues: tosecure the personnel cost for IP management
staff that are currently sent to their universities
from external organizations; and to be able toafford the personnel cost and expenses that are
currently covered by the subsidy for thedevelopment of university IP headquarters when
the term for receiving the subsidy expires.
Possible measures for securing funds would be:(i) increasing the influential power in theuniversity's budget compilation; (ii) acquiring
revenue from dealings for which conditions can be
attached; and (iii) increasing overall revenue.
With regard to (iii), the current potential income
sources are: (a) royalty income; (b) capital gains
through stock dealings; (c) use of venture funds;and (d) overhead costs. Universities must makestrategies on how these income sources should
be combined and expanded.
2

Identification of accounting frameworks
concerning IP management

The differences in the handling of patents incorporateaccounting,schoolcorporationaccounting, and national university corporationaccounting are identified.
(1) Property nature of patents in accounting
Patent rights justifiably have property
nature.
(2) Corporate accounting
The patent assessment values in financial
accounting are discussed. In many companies, IP
rights are processed as expenses, so information
on a company's IP cannot be read from thefinancial statements. An increasing number ofcompanies are creating an "IP report" as a meansfor disclosing the status of IP to the stakeholders
such as investors, and the importance of thisreport is expected to further increase in the
future.
(3) School corporation accounting
The patent assessment values in financial
accounting are discussed. In accounting, mostprivate universities do not include patents intheir assets due to their conventional accounting
practices. However, they may come to include
patents in their assets in the future due to theimportance and marketability of patents.
Nevertheless, school corporations have varied
standards regarding the amounts to be included asassets, and patents would be included as assets
only when the acquisition cost (filing fee, patent
attorney fee, etc.) exceeds the amount specified
in the accounting regulations, regardless ofwhether the patents were externally acquired orinternally acquired.
(4) National university corporation accounting
The patent assessment values in financial● 48 ●

accounting are discussed. Regardless of whether
the patents were externally acquired orinternally acquired, the patents are only included
as assets in accounting when the acquisition cost(filing fee, patent attorney fee, etc.) is 500,000
yen or more.
3

Tax considerations concerning patenttransfer and other technology transfer(1) The tax treatment of the royalty on patents
attributable to individuals and the tax treatmentin the case of transferring an individual's
invention to a university are discussed.
(2) The tax treatment of the remuneration or
royalty for an employee's invention that will bereceived by the school staff concerned withregard to a university-owned patent is discussed.
Discussion is also made on the case oftransferring a university-owned patent.
(3) The New Japan-US Income Tax Convention
stipulates that a patent royalty and aperformance-based
remunerationfor
anemployee's invention will be tax-free in thesource country, and they will only be taxable inthe country of residence of the recipient.

Ⅳ Identification and Examinationof Problems related to the
Patent System
1

Problems concerning application of the
exception to lack of novelty

The patent system provides for an exception
to lack of novelty, and the 1999 amendment wasestablished in order to make the system moreuser-friendly. However, the following problems
still remain.
(i) Although applicants must often consider
filing foreign applications, the cases to which the
exception to lack of novelty is applied differ fromcountry to country.
(ii) In a case where an inventor conducts an act
that calls for the application of the exception tolack of novelty, but a third party files a patentapplication for the same invention, and the firstinventor files a patent application after the second
inventor by claiming the application of the
exception to lack of novelty, the invention will bedeemed to be novel and involve an inventive step
due to the application of the exception, but it will
not be patented since it is a later application.
(iii) The relationship with a separate, third
party's act that triggers lack of novelty
In a case where a third party separately
conducts an act that triggers lack of novelty after
the inventor conducts an act that calls forapplication of the exception to lack of novelty, andthe inventor later files an application by applying

the exception, the invention will lack novelty
based on the third party's act.
(iv) There are still aspects that allow room forvaried interpretations.
(v) It will give rise to a new point of controversyin acquiring a patent or enforcing a patent.
Accordingly, it would be desirable not to relyon the exception to lack of novelty if possible.
Apart from occasions that arise against one's
will, the time for making a presentation or
publication of the invention is often clear inadvance, so efforts should be made to file thepatent application in advance so as to avoid
disclosing the invention in a presentation or
publication before the filing.
This will be possible if the inventor takes thefiling procedure concurrently with presentations
made at study meetings.
2

Problems concerning attribution of theresearch findings in universities

Examination is made on three points: (1)attribution of the rights on an invention madewithin a university by a university instructor; (2)attribution of the rights on an invention madewithin a university by a university student; and(3) attribution of the rights on an invention madewithin a university by a corporate researcher
on-loan or an invention made by a university
instructor at the site of their secondary
workplace(1) Attribution of the rights on an invention
made within a university by a university
instructor
It would be a problem to collectively
consider all inventions made within a university
by university instructors to be employees'
inventions. It would be desirable to divide theresearch within a university into ordinary
research activities in which individual initiativesof the instructors should be respected as much as
possible and special research activities designed
for "protection and use of IP," and to treat
inventions in the former activities as freeinventions and inventions in the latter activities
as employees' inventions. Inventions created as aresult of instructors' research activities under theorganizational control and protection of theuniversity would deserve, in substance, to becalled employees' inventions of the university.
While the change of the policy in practice toward
attributing inventions to the organization ispositively evaluated, in order to achieve theobjective of the policy change, which is toeffectively use universities' IP, it would be
important above anything else for universities toestablish a framework for managing and using
instructors' inventions, which would satisfy theindividual instructors.

● 49 ●IIP Bulletin 2005

(2) Attribution of the rights on an invention
made within a university by a university
student
An invention made within a university by auniversity student will inevitably be construed as
a completely free invention of the student.
Therefore, in order for the university to acquire
the right to obtain a patent for the student's
invention, it must conclude an individual
agreement with the student. In this case, theright cannot be transferred based on a stipulationin advance, so the transfer of the right will bebased on an individual agreement after thecompletion of the invention. Special considerations
are required regarding the student's freedom ofusing the invention for an academic purpose(freedom of making the research findings public)
and the remuneration for transferring the right. In
order to ensure a rational remuneration fortransfer of the right, an amount equivalent to thereasonable remuneration for an employee's
invention made by an instructor should be paid tothe student.
(3) Attribution of the rights on an invention
made within a university by a corporate
researcher on-loan or an invention madeby a university instructor at the site of
their secondary workplace
Whether or not an invention made within auniversity by a corporate researcher on-loan andan invention made by a university instructor at
the site of their secondary workplace can be
regarded as an employee's invention must be
determined on a case-by-case basis. Therefore,
even if a university adopts a policy to gain
ownership of such inventions, things may notturn out as intended. Accordingly, in order for theuniversity to gain ownership of such inventions, itwould be desirable to also make contractual
arrangements in advance with the company of theresearcher on-loan or the company for which the
instructor works their secondary job, as apreventive measure.

Ⅴ dentification and Examination of
Problems
concerning
Joint
Research
1

Problems in joint research between acompany and a university(1) The University of Electro-Communications
The University of Electro-Communications
is considering various measures for resolving the
problems with the main focus on the promotion of
joint research. Firstly, the university is in theprocess of revising the content of its joint
research agreement. The current joint research
agreement has a complicated structure,
incorporating a joint patent filing agreement and a

IIP Bulletin 2005

licensing agreement. In order to conclude these
agreements smoothly, it is necessary to conclude
them individually after systematically organizing
the agreements. There is also a problem that theinventors are not identified appropriately. The
standards for identifying the inventors should beclearly defined, and whether or not the invention
is a joint invention should be appropriately
determined. Also, in many cases, the university
cannot charge the company all the costs
necessary for the joint research. A balance mustbe achieved between "the joint research fee paid
to the university by the company" and "theresearch findings transferred to the company by
the university" in order to promote joint research.
Otherwise, it will be difficult to build a trusting
relationship between the university and thecompany.
In the negotiation for a licensing agreement,
the following matters should be evaluated foreach joint research project, and common groundshould be sought: (i) content of the joint research;(ii) scope of application of the invention/patent;(iii) potential of the invention/patent; (iv) licensefee; and (v) period of the monopolistic license.
(2) Yamaguchi University
Yamaguchi
University
conducted
aquestionnaire survey and an interview survey oncompanies in order to investigate how companies'
awareness of universities has changed with theincorporation of national universities. Companies
are placing expectations on the "knowledge ofuniversities." In order for universities to respondto industrial needs, to establish a win-win
relationship with companies, and to use theirfindings for increasing Japan's industrial
competitiveness, it would be important for both
universities and companies to make cooperative
efforts toward resolving problems.
In addition, one must not forget that
universities, which are tax funded social assets,
are accountable to society. Since the ideal form ofjoint research costs has not been sufficiently
studied in the past, study should be made on thisissue as one of the biggest challenges in the
future.
2

Obligation
students

ofconfidentiality

of

the

Confidentiality of the results of joint R&D
and other relevant information is an important
issue for companies engaging in industryuniversity collaboration. In such collaboration,
not only instructors, but also undergraduate
students and graduate students could be exposed
to secrets relating to joint R&D through factual
acts, such as experiments. Therefore, there
would be cases where a company will seek toconclude a confidentiality agreement with the● 50 ●

students in order to impose an obligation ofconfidentiality.
However, the students may suffer adisadvantage through concluding a confidentiality
agreement with the company, such as being
deprived of the opportunity to present the resultsof the joint R&D or becoming unable to publicize
the results of their laboratory work when
job-hunting. Considering that the primary goal ofa student is to produce achievements in theirlearning and research, and that they do notprovide services for remunerations like corporate
researchers (workers), an agreement that
imposes an obligation of confidentiality on
students despite the lack of need orreasonableness would likely be deemed to offend
public order and morals and judged invalid.
Promotion of industry-university collaborations
is an important national task, and in that process,there could be cases where companies andstudents become inevitably involved with eachother. However, the main business of students is
to receive education and engage in research; notproviding cheap "labor" to certain companies.
There is no doubt that a company's act ofconcluding a confidentiality agreement withstudents and using them as if they were thecompany's employees under the confidentiality
restrictions is not at all close to the philosophy ofindustry-university collaboration. Nevertheless,the reality is that when a company imposes anobligation of confidentiality to a student, it isdifficult to be certain that the company has nointention of using the students as if they were thecompany's employees. Both companies anduniversities must not forget that the promotion ofindustry-university collaborations will help makeJapan an IP-based nation only by fully recognizing
the difference between the primary business ofstudents and universities and that of companies.
3

partner, the university must confine its assets in aself-defensive measure by getting the assets
notarized or filing patent applications in order toprevent confusion over the university's
information and the counterpart's information.
In making the agreement, it is desirable tofirst discuss the items requisite for securing anenvironment for starting R&D, such as funds,
resources, and facilities, and then consider
IP-related provisions. In the event the negotiation
is made in the reverse order, if an agreement
cannot be reached on the key issues it may takemore than the necessary length of time and theparties' objective to jointly engage in the R&D
may be watered down. In addition, the joint R&D
would be launched without building an important
trusting relationship, which is an unfavorable
situation.
Generally speaking, a university should
conduct negotiations and check the writtenagreements by fully recognizing the weight of therights and obligations that arise from theagreement. If a university concentrates on
pursing rights, it tends to underestimate thepertaining obligations. Foreign companies arestrict on breaches of obligation clauses. Therefore,
the university should establish a contract
management framework in order to avoid
carrying liabilities for damage. At the least, theuniversity must be able to perform its obligationof confidentiality without fail. Otherwise, anagreement with a foreign company would be
extremely risky. Another point to note is that thecontent of the agreement and the items checkedvary according to the place of conducting the joint
R&D. The university must be careful that if the
R&D is conducted in the United States, thecontent of the agreement must comply with U.S.
statute law and case law.
(Researcher: Takahiro Hiraiwa)

Points to consider when concluding anagreement with a foreign company

While this also applies to an agreement witha Japanese company, the first major point forsmoothly concluding an agreement with a foreigncompany is to clarify the objective of theagreement. Sometimes universities are found to
take a stance of valuing the remuneration higher
than the fulfillment of the objective (a turf war
sticking to the agreement format), but the top
priority issue should be the purpose forconcluding
theagreement.
Next,
good
preparations should be made in advance. A
university should look for a desirable joint R&D
partner of its own accord based on its regular
information sending, information gathering, andinformation analysis activities. In addition, before
furthering the relationship with the potential● 51 ●IIP Bulletin 2005