Transcript Conflict of Interest and the Nonprofit Organization

Conflict of Interest:
A Tricky Issue for Universities
Karen Hersey, Professor
Franklin Pierce University
Nonprofit Technology Transfer Course
November 17, 2008
Used with Permission
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Four Categories of Conflicts
• Investigator Financial Conflict of Interest
– Financial interests of investigator may suggest a presumption of bias in
carrying out research; will the personal financial interests of the
researcher have a potential effect on the quality, outcome and/or
dissemination of the research undertaken?
• Investigator Conflict of Commitment
– Established by organization’s policy on duty owed institution as primary
employer
• Senior Officer/Supervisory Conflict of Interest
– Influence of senior officers representing their self interest or interest on
behalf of the institution may favor one research program over another,
one sponsor over another; sr. officers may try and influence licensing
negotiations; may cause confusion for students
• Institutional Conflict of Interest
– Conflict between institutional mission of education, dissemination of
knowledge etc and interest as an investor, equity holder in institutional
start-up companies, venture funds etc.
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Conflict of Interest:
Two Separate Types of “Conflict”
1. Financial conflict of interest leading to
potential bias in Research
• Administratively/Academically managed
• Some governmental regulation
2. Conflict resulting in preferential
treatment/bias in Technology Transfer
• Managed by the licensing group or an independent
patent committee, or vice president
• Not governmentally regulated (yet)
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Investigator Financial Conflict of Interest
in Research: A Definition
• American Association of Universities (AAU)
Definition
– The term individual financial conflict of interest in
science refers to situations in which financial
considerations may compromise, or have the
appearance of compromising, an investigator’s
professional judgment in conducting or reporting
research
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Investigator Conflict of Interest (Research):
The NIH Guidelines
• NIH: 45 CFR §94 (1995)
– Investigators applying for research funding must
disclose “significant financial interests”
• Includes financial interests of spouses and dependent
children
• Equity interest when aggregated (adding the interests of
family members) of more than $10,000 or
• Is equal to more than 5% interest in company that could
benefit from the research
• Or salary, payments etc. when aggregated (from all family
members) are more than $10,000 annually from company
that could benefit from the research
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Investigator Conflict of Interest (Research):
The NIH Guidelines
• NIH: 45 CFR §94 (1995)
– Institutions must:
• Have a COI policy
• Appoint a reviewing official
• Require PIs to submit statements of financial
interest that may reasonably be affected by the
research
• Provide guidelines for identifying conflicts and for
managing and eliminating them and
• Provide certifications to NIH at the time of
submitting proposals for funding
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Investigator Conflict of Interest (Research):
The NSF Guidelines
• Provided as NSF Policy Statements (not
regulation)
– Institutions basically self regulate by having policies in
place; requiring internal disclosures of Significant
Financial Interests directly/significantly affected by
proposed research.
• Aggregated financial/equity holdings worth more than $10,000 or
representing more than 5% ownership interest in an company that
could be directly or significantly affected by the proposed research
• Institutions must report only if there are conflicts they cannot
manage, but must keep records
• And, if there is an unmanageable conflict but the importance of the
research outweighs the conflict, the institution can go ahead with it.
• Does require certifications by institution as to policies, management
etc. in place and certifications by individual investigators that they
have read the guidelines and institutional policies
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Investigator Conflict of Interest:
(Technology Transfer)
• 3 areas of potential conflict of interest in
Technology Transfer:
– Licensing to companies in which an investigator has
a financial interest at bargain royalty rates
– Equity participation (by inventor/investigator) in
start-up companies that are funding research in the
inventor’s lab
– Consulting relationships with companies that may
directly benefit from the investigator’s research
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Institutional Conflicts of Interest in
Technology Transfer
• University as Start-up shareholder
• University as Start-up board member
• University managers as individual shareholders
in start-ups or in potential licensees
• University as Licensor & royalty beneficiary
• Licensee as sponsor of research
• Technology Transfer Office as “dealmaker”
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Institutional Conflict of Interest:
A Definition
• AAU Definition
– Where institution or senior management, sub-units, affiliated
foundations (etc) has an external relationship with a company
that itself has a financial interest in a faculty research project
– Where institutional officials serve on boards of companies that
have significant financial transactions with the institution
– Where an institution has equity holding or royalty expectations
that could influence how it conducts research, who it hires, etc.
• Suggested that firewalls must be erected between the
those in the institution that direct its financial holdings
and those in the institution that direct its research
activities
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Managing Conflicts of Interest in
Technology Transfer
• Commonly-used management tactics
1. Limit inventor’s activity w/start-up if inventor stays at university
2. Restrict/carefully monitor research funding from licensee (any
licensee, not just start-up); watch licensing of improvements
3. Limit start-up/licensee use of students
4. Require faculty to advise students of start-up activities
5. Insist upon arm’s length negotiations between licensee (start-up)
– no university employee or trustee interference
6. Limit university’s participation on board or in management
7. Require firewall between university equity-holder and technology
transfer, research etc.
8. Conflict avoidance policy for technology transfer professionals,
i.e. no personal investing, recuse if investment already held
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A Closer Look at Consulting
• Consulting activities are a matter of university
policy
– Commonly, faculty may consult one day a week
• Extent of institutional involvement in consulting
activities – split practice
– Some institutions require review and sign off
– Some require only annual reporting
– Due to conflict of interest reporting requirements, all
institutions should be managing conflicts in consulting
& research
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Faculty Consulting: Issues for the Faculty
and the Institution
• Use of university facilities for consulting raises
issues of tax liability, overlap w/faculty, student
research, conflict of interest, misuse of students
• Definitions in consulting agreements generally
“sweeping” (see sample)
• University sign-offs may result in breach of
agreements
• Faculty may inadvertently or purposely set off
areas of innovation reserved for consulting
• Faculty accept personal liability for consulting
obligations
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U.S. University Solution
• Adopt conflicts of interest policies that
meet the NIH and NSF requirements and
apply them to all research situations
• Require annual reports on consulting and
outside activities both for pay and pro
bono
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Resources for COI Information
• Recognizing and Managing Personal
Financial Conflicts of Interest, COGR,
2002
• Report on Individual and Institutional
Financial Conflicts of Interests (Oct. 2001)
access through http://aau.edu/research
• NIH: http://grants.nih.gov./grants/policy/coi
• NSF: http://nsf.gov Search Conflict of
Interest
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