Management Guide to Intellectual Property for State Departments of Transportation (2015)

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17 3.1 Organizational Structure and Responsibility Creating an effective IP management group or unit may require repurposing skills that are currently used in state DOT activities, but applying them in a new way. IP management typically involves the convergence of: • Basic IP law. • Business and financial principles and concepts. • Technology transfer. • Organizational policy and structures. These are all areas currently found within a state DOT, but they may not be focused primarily in the area of IP management. IP management is about making the appropriate strategic management decisions about the protection and exploitation of the state DOT’s IP and its IP rights. To support success decisions, the state DOT’s IPM program will involve many tasks, including: • Identifying, documenting, and tracking potential IP assets. • Advising on protecting assets as IP. • Accessing the value of IP. • Negotiating and structuring licensing agreements. • Monitoring the use and deployment of IP, both internally and by third parties. • Training employees and staff about IP. • Championing proactive IP management. • Helping establish and implementing organization-wide IP management policy. • Working with legal counsel when needed. • Articulating IP issues effectively to many different stakeholders. In general, the IP management office should be run by someone who understands the details of running a business. Furthermore, it needs to be staffed by individuals who have some familiarity with the types of IP that might arise within a state DOT. It takes time to build and establish a successful IP management office. The start-up time is typically 5 or more years (20). During the start-up phase, most of the resources focus on creating the process for capturing potential IP within the organization, assessing the value and leverageable opportunities of potential IP, marketing IP, and building relationships with potential licensees and other stakeholders. Best practices suggest that a critical mass of R&D activity ($100 million to $500 million) is necessary to justify the cost of a fully-functioning IP management office (21). Although an organization may not create a fully functioning IP management office, many components of IP management can be implemented alongside the organization’s existing technology transfer processes. C H A P T E R 3 Responsibility for IP Oversight

18 Management Guide to Intellectual Property for State Departments of Transportation A key decision that a state DOT will need to make is to what extent IP management activi- ties will be administered as an internal operation, or whether activities will be outsourced via a contracting service. State DOTs vary in size, budget, and complexity. Some larger agencies may have significant research units for example, and may administer many IP management activities internally, whereas smaller agencies may outsource most activities. Decisions for how to allocate administration of IP activities will be based on the resources available at the agencies. Another alternative is for state DOTs to join together, forming a consortium that administers IP management activities for all members of the consortium. In this case, it is important for each participating state DOT to decide which tasks and activities will be performed by the consortium and which will be performed by the state DOT (22). 3.2 Operational Cost A review of the operating budgets of technology transfer offices at universities shows a strong correlation between the total research budget and the technology transfer office operating budget. Organizations with research expenditures ranging from $250 to greater than $500 million had IP management staff ranging from 10 to more than 25 individuals. Some of these organizations’ annual budgets approached $10 million (23). Much of this includes operational cost, salaries, IP office fees for patents and trademarks, outside counsel fees, patent prosecution fees, marketing activities, and other technology commercialization activities (e.g., licensing, negotiations). The following tasks and activities are typical for organizations with a well-developed IP man- agement program: • Establish an IP management office and a director of IP that typically reports to a research administrator, a board of directors, or a standing committee. • Within the IP management office, employ technology managers/specialists with expertise in a particular technology or IP field, as well as attorneys, marketing specialists, and business development experts. • Provide lots of educational and training seminars developed by the IP management office for employees and staff. The organization often puts in place an organization-wide education program on IP (24). The organization’s IP management office also provides outreach activities to potential licensing and development partners and serves as a clearinghouse for IP issues in the organization. 3.3 Training, Education, and Outreach To successfully implement IP management within an organization, it is important that all employees and stakeholders be made aware of the importance of managing the organization’s IP. For the state DOT, personnel should be trained not only on the relevant IP laws, but also on the process of submitting a disclosure if an employee believes he or she has something that should be protected as IP. Different staff groups require different training programs. Training for a researcher, for example, may focus be on documentation standards and procedures for inventions. For a manager, the training may focus on the implementation of IP policies, processes, and procedures. Table 3 shows a summary of personnel groups within the state DOT and areas of potential training focus for those groups. Ideally, state DOTs would develop training materials tailored to their IP management strategy and targeted to each of the personnel groups listed in Table 3. State DOT training resources

Responsibility for IP Oversight 19 are limited, however; it may be cost-prohibitive to send all members of a personnel group to a class for a day, and the state DOT’s legal counsel may not have the time or expertise to develop and provide the targeted training. Therefore, an important consideration in developing an IP management strategy for a state DOT will be how to implement the strategy given the state DOT’s available training resources. One option is to integrate IP training into existing in-house training activities such as mandatory human resources training. For state DOTs that provide or reimburse for continuing education coursework for professional employees, another option could be to steer appropriate employees into IP training courses that are, preferably, tailored to the state DOT’s IP management strategy. 3.4 Outsourcing Alternatives for IP Management Although a state DOT may desire to prioritize IP management, resource constraints and higher-priority activities may take the focus away from IP-related activities. An important con- sideration in developing an IP management strategy for a state DOT will be what resources are available to implement the strategy. Organizations that do not have the resources to dedicate to IP management need to explore other alternatives. Most discussions found in the literature focus on building resources internally to manage IP; however, two primary alternatives are sometimes cited—contracting services and building a consortium with similar organizations. It is impor- tant to note that these external IP management options may or may not be viable for a particular state DOT given the legal framework (e.g., state statutes and regulations) within which the state DOT must operate. (Chapter 6 addresses state-specific legal issues.) A number of IP management service organizations exist with which a state DOT may contract to successfully manage its IP. Such organizations may currently manage IP activities for universi- ties, colleges, and firms that do not have the needed in-house capabilities. As in any contract Personnel Groups Training Focus Researchers, scientists Organizational IP policy guidelines and proceduresImportance of confidentiality, non-enabling descriptions of inventionsBasics of IP agreements relating to researchBasics on the forms of IP protection Submitting disclosures to IP management of�ice/personnel Operations personnel (Finance, Human Resources, Legal) IP royalty management and accounting Con�licts of interest Basics on the forms of IP protectionIP contracts and agreementsMediation, arbitration, litigation, and negotiation in IP IP managers IP contracts and agreementsReviewing technology disclosures IP negotiations and marketingIP licensing Other personnel Disclosures and con�identialityBasics on the forms of IP protectionIP guidelines and procedures Research managers/directors Basics on the forms of IP protectionImplementing IP policy and procedures Bene�its of proactive IP managementInvestment requirement for IP management Executive directors IP policyInvestment requirement for IP management Bene�its of proactive IP management IP management risks In-depth knowledge on the forms of IP protection Table 3. Targeted training within the state DOT.

20 Management Guide to Intellectual Property for State Departments of Transportation agreement, there are risks and costs. It is important that the state DOT assess the risks and understand the total cost (e.g., operational cost, transactional cost) before committing to a contract with a service organization. Table 4 suggests key decision factors for the state DOT to consider when choosing a contractor to manage IP. Before outsourcing IP activities, it is important that the state DOT decide which tasks should be managed internally and which should be outsourced. Outsourcing may offer many benefits, such as lower overhead costs or less-expensive access to required skills, but outsourcing may not allow personnel at the state DOT to acquire and practice the skills that build competency in managing IP proactively. Several key activities are involved in proactive IP management, such as: • IP audit. An IP audit focuses on identifying IP assets that are used and owned by the organiza- tion to assess the importance of specific IP to the organization’s current and future activities. An IP audit also should include a review of any licenses and agreements with third parties to ensure that sufficient agreements are in place to protect the agencies from potential infringe- ments. (See Chapter 2 for more information on IP audits.) • IP inventory. An IP inventory should provide a comprehensive assessment of all forms of IP owned by the organization. This assessment may include expiration dates, maintenance fee due dates, license agreements with licensees, conception dates, and potential IP in the pipeline. • IP valuation. IP valuation focuses on placing a financial value on an IP asset. IP valuation is important if the state DOT wishes to sell the IP, license the IP, or even donate the IP. Three common valuation methods are used in practice: the income approach, the market approach, and the cost approach (25). • IP protection. A threshold determination is made by assessing the best form of IP protection to pursue for each IP asset (patent, trademark, trade secret, or copyright). Additionally, the state DOT must consider and decide whether or not to release the IP asset to the public domain. Decision Factor Key Questions Contractor capability and reputation Does the contractor understand the transportation sector and the key factors of effective IPmanagement? Contractor core competencies In what areas does the contractor have experienceand know-how (e.g., patents, copyrights, and/ortrademarks)? What are the contractor’s key technical areas ofcompetency (e.g., materials, electronics, wireless,sensors, etc.)? Contractor IP management experiences What processes and procedures does the contractorhave in place to support the numerous IPmanagement tasks? Contractor service offerings Does the contractor offer IP management training?Is the contractor only an IP broker, or does thisorganization also engage in product/servicedevelopment using third-party IP? Does the contractor provide sublicensing services?Do decision-makers and other staff at the state DOT understand the business model of the contractor? Does the contractor offer IP policing and monitoring services? Table 4. Choosing an IP management contractor.

Responsibility for IP Oversight 21 • IP licensing. IP licensing focuses on negotiating the rights to an IP asset either as a licensee or licensor. The license can be structured in a number of ways; the key requirement is that all parties understand the terms of the agreement. • IP commercialization. IP commercialization focuses on exploiting the IP rights in new business opportunities. Ideally, commercialization activities are undertaken to create a revenue stream. • IP management training. IP management training consists of programming designed to educate employees, contractors, and affiliates with the organization’s IP management policy, processes, and engagements. • IP management policy development. IP management policy development focuses on the rules and strategies that will govern how issues regarding IP will be addressed by the organization. An IP management services contractor typically can carry out most of these activities, except perhaps IP management policy development. Most contractors can provide guidance on policy development and can manage the outcomes that result from the policy; however, the policy itself should be developed and administered by the state DOT. Having an outside firm evaluate each potential IP asset can benefit the state DOT through application of an unbiased viewpoint, which can be helpful in identifying new opportunities for the state DOT’s IP that may not be considered by an internal team only. Whether or not a state DOT plans to outsource IP management services, it is important that the DOT develop and communicate clear objectives for its IP management program. For any state DOT that chooses to outsource all or a portion of its IP management, a thorough under- standing of the state DOT’s objectives will help the IP management services contractor better focus its activities and provide the best value to the state DOT.