See also "Best Practices for Faculty Start-Ups".
While conducting research funded by the National Science Foundation, Dr. Smith developed a technology that Stanford University patented and successfully licensed to a number of companies. Dr. Smith now serves on the Board of Directors, the Scientific Advisory Board, and consults for one of the companies that has licensed this technology. For these services Dr. Smith receives between $50,000 and $100,000 a year in income, and has received stock and stock options valued at over $100,000 but less than .5% of the total value of the company.
The NSF, like the National Institutes of Health (NIH), requires disclosures of financial interests over $10,000 or 5% of equity in any company whose interests would reasonably appear to be related to a research project. These regulations also require the conflict be eliminated, mitigated, or managed where those interests are found to have a direct and significant affect on the research.
Dr. Smith is now preparing a new proposal for NSF funding to continue basic research related to this particular technology. The proposed research could potentially generate knowledge leading to significant enhancements of the earlier invention.
Here are some questions and answers to think about in considering this situation.
Would Dr. Smith's financial interest reasonably appear to be related to the company?
Yes, since the company has licensed intellectual property developed or discovered during the course of this federally funded research.
Would Dr. Smith have to disclose his financial interest in this company on the new NSF proposal?
Yes. That is because Dr. Smith has income from this company over the $10,000 federal threshold, even though the equity interest is below the federal threshold.
Must Dr. Smith disclose his financial interest in this company to Stanford University?
Yes. Dr. Smith should have disclosed all relationships with the company on his annual certification and financial disclosure. Dr. Smith's equity interest exceed's Stanford University's threshold, requiring disclosure in accordance with University policy. In addition, when Dr. Smith prepares his new proposal for NSF funding, he must note a potential conflict of interest on the Stanford proposal routing sheet, and must disclose to his School Dean how his financial interests relate to this project.
What are some of the issues the University must consider in this case?
Is this research appropriate to the University?
Yes, it is peer-reviewed basic research.
Is this an appropriate use of University resources and facilities?
As long as this is basic research, and Dr. Smith's lab does not serve as a laboratory for the company, it is appropriate.
Could Dr. Smith's financial interest in this company provide it exclusive or early access to the results of his/her federally funded research?
Clearly this kind of relationship poses this risk. We assume that Dr. Smith will uphold the highest standards of ethical scientific practices. Often service on bodies like scientific advisory boards offers faculty an exciting opportunity to interact with other scientists on the cutting edge of their research expertises. In order to further protect the appropriate dissemination of research results it is important to ensure that the investigator has not entered into any contracts with the company granting it exclusive results of the research or intellectual property, or delay of publication.
Could Dr. Smith's financial interest have a direct and significant affect on the research
In order to assess this, we must know what the science in Dr. Smith's lab is and what the science of the company is. It might appear at first glance is that these scientific objectives are one and the same. On further inspection, these interests may overlap in a very basic way, as the company has a broader range of scientific objectives or products. Conversely, the company could be operating on the same scientific trajectory as Dr. Smith's lab, albeit in a more applied than basic way. But let's assume in this case that, since the company has licensed intellectual property, that the interests overlap to a degree that Dr. Smith's financial interest could have a direct and significant affect. And remember: federal regulations require that where the financial interest has a direct and significant affect on the research, it must be mitigated or managed.
How could Stanford manage the potential conflict?
Some possible ways to manage such conflicts include, but are not limited to:
Disclosure of the financial interest in publications and public discussions
Divestiture of stock or elimination of an activity or activities that pose a significant conflict
Disqualification from participating in all or a portion of the research
Replacing the investigator with an investigator who does not have a conflict of interest
Modification of the research plan
Appointment of an oversight committee.
At the very least, Stanford would likely require disclosure in publications and public discussions. Other strategies for managing the conflict would require closer scrutiny of the financial interests, the science being carried out in the lab, and the scientific interests of the company to decide how best to protect the research.