Considerations for Faculty when entering into Consulting Agreements¹

Outside professional activity of the faculty often takes the form of consulting. Consulting that does not interfere with the faculty member's teaching and research obligations is supported and encouraged by the University. Faculty consulting provides opportunities for university researchers to confront "real world" challenges, identify and work with practicing industrial collaborators, and contribute expertise that helps fuel economic development. These agreements, however, are personal agreements and, if not handled properly, can create risk as well as conflict with prior obligations of the faculty to the University of California. The Office of Intellectual Property Administration (OIPA) provides guidance as an informal but hopefully helpful aid to those UC employees who do get involved with consulting activities. OIPA will provide informal and confidential reviews of consulting agreements on request by the faculty. This guidance, however, should not be construed as legal advice and, when in doubt, the services of a qualified attorney should be sought.

The most frequent issues that arise with consulting agreements and some suggested responses are summarized below.

Employment status of the faculty consultant: In faculty consulting agreements, it is always a good idea to include a statement that the consultant is an employee of the University of California with pre-existing obligations to the Regents. One of the most important obligations the company needs to know about is the Patent Agreement you signed as a condition of your employment with UC. The following phrase is suggested for the patent rights clauses and should provide sufficient notice:

"Company X acknowledges Consultant is an employee of the University of California with pre-existing obligations to disclose and to assign patent rights to the Regents consistent with the Patent Agreement provided as Exhibit A and made a part of this agreement."

Incorporating the Patent Agreement as an exhibit will help avoid making conflicting obligations to two entities. If the company is unwilling to include this phrase and allow your Patent Agreement to be included as part of the consulting contract, watch out! OIPA will be happy to talk with the company to explain the circumstances, but if this can't be worked out, you may want to reconsider your decision to consult for this company. A sample of the current UC Patent Acknowledgment can be obtained from the OIPA office.

Confidential information: In most cases, it is necessary for the company for which you are consulting to disclose proprietary information to you. In so doing, the company will want assurances in the contract that you will keep their proprietary information confidential.

Confidentiality can be tricky for a faculty member involved with open, free exchanges of information in a public research university setting. It can also be dangerous in that disclosing confidential information intentionally or unintentionally is a criminal offense as opposed to a civil offense which carries with it attendant penalties. It is wise, therefore, to limit the amount of confidential information you receive to the absolute minimum and to insist that any and all such information is transmitted to you in writing marked "confidential." That way you will know precisely what information you are responsible for keeping confidential. It is also a good idea to write into the contract that any verbal transmission of "confidential information" be reduced to writing within thirty days and sent to you marked 'confidential.

There are also some circumstances where the confidential information could be disclosed through no fault of yours and you don't want to be responsible for such disclosure. The following "outs" should be included in the agreement to protect yourself from this event: a suggested clause is provided below.

The foregoing obligation of non-use and non-disclosure shall not apply to any portion of the Confidential Information which:

1. is or shall have been known to the consultant before his/her receipt thereof;
2. is disclosed to the consultant by a third party; or
3. is or shall have become known to the public through no fault of the consultant.

Again, if the company is unwilling to include these clauses, let OIPA help you explain the situation. If the company still won't accept the terms, reconsider your decision to consult with them.

Finally, many consulting agreements will either have no time limitation on keeping information confidential or will include an unreasonably long time period. Be sure you get the time period specified and keep it to a reasonable minimum. Two to three years is normal but time periods longer than five years become hard to manage and to keep track of.

Intellectual property rights: Companies normally would like to have all patents and other intellectual property assigned to them as a condition of the consulting arrangement. It may be possible to make such assignments when the work is done without the use of University resources, in the company's facilities and outside the scope of the faculty member's primary University responsibilities. An assignment of patent rights, however, may only be made after disclosing any new invention to the University. OIPA and the Office of Technology Transfer will determine the degree to which the University will assert rights to any new invention based on the circumstances of the invention's derivation.

Liability: Try to limit your liability under the consulting agreement to responsibility for negligent acts on your part only and not general liability and certainly try to avoid liability for the products you produce. Consultants normally provide advice that can be accepted or rejected by the company, and usually the consultant has no control over how the results are used in practice. Try to make sure any liability clauses are reciprocal and that you have proper insurance for the liability exposure you face under this personal agreement -- the University will not be responsible for defending you or paying any claims should there be a dispute.

Choice of law: Most consulting agreements will indicate that the laws of a particular state or country will be used in any dispute. If you agree to any venue but California, you will have to hire an attorney and physically litigate any dispute in that state or country. This could be very costly and disruptive to your schedule. Many companies will be inflexible on this point, but it is always worth trying to have California law apply to your agreement.

For University policy on Outside Professional Activities of Faculty Members, see Academic Personnel Manual Section 025.

¹ Adapted from guidelines developed at UCI by David Schetter.
²This document was prepared for informational purposes only, and should not be construed as legal advice.