by Becky Mahurin
Universities in this day are very interested in facilitating economic development activities in
their region. Of particular interest are new businesses in the high-tech area. New and expanding
businesses provide student internships, employment for graduates, sponsored and collaborative
research, potential licensees for new technologies and, of course, increased tax base to support
education. And, high-tech businesses in the Gallatin Valley have an average wage almost double
that found in the community as a whole.
Universities are creating technologies that have potential for start-up companies. Also, universities
have talented faculty and students who may be interested in trying their hand at a commercial
endeavor complementary to their technical interests. So spin-off companies are challenges. Are
there inherent conflicts of interest, conflicts of commitment, state statutory issues, even IRS
issues? Often, yes. Over the next few months, I will address some of the issues that academia faces
in working with faculty and their start-ups.
Let me also make clear that this is an evolving area. Many universities are working to meet the
challenges associated with spin-offs, knowing, as we do, that the benefits to the area economy can
be significant. Strategies to deal with the issues that I will address are somewhat fluid. There
is no blueprint to follow. And, I would welcome any input faculty have in regard to mitigating the
challenges which ensue.
Conflict of Interest
University administrations are especially concerned about conflict-of-interest issues regarding
spin-off company formation. Federal conflict-of-interest policies must be taken into account. Both
NIH and NSF have policies stating that if an investigator has equity of 5 percent or greater or
has/receives value of $10,000 or more from a company, then a review must be performed by the
university to determine if a conflict exists. If so, the conflict must be managed or eliminated.
Montana State University has adopted this conflict-of-interest policy for all research, not just
federally sponsored research.
Other circumstances may also constitute conflict of interest and must be considered when allowing
for a spin-off company involving a faculty member of the university. Is the faculty/founder an
officer of the company? Does the faculty/founder perform paid consulting for the company? Does the
faculty/founder have sponsored research in his/her university lab from the company? Does the
faculty/founder perform research for competitors of his/her company in the university lab? Is the
faculty/founder on either an advisory board or board of directors for the company? Some universities
do not allow a faculty/founder to accept sponsored research from his or her company. Many do not
allow a faculty/founder to hold a line position or be an officer of the company.
How many of the above will be allowed? Generally no more than two or three of the above situations
(including holding equity) are allowed. Each situation is unique and must be decided on a case-by-case
If yhou have questions about conflict of interest, please contact me at 994-7868. In an upcoming column,
I'll address the issue of who owns the faculty/founder's intellectual property.
Becky Mahurin, Director of the Technology Transfer Office at MSU.