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Appendix A7.13

Distribution of exploitation income

1. Introduction

It has been agreed that these arrangements are a relevant collective agreement under the provisions of the Patents Act 1977.

2. General arrangements

2.1. The establishment will keep income received by BBSRC-sponsored establishments and other JNCC employers from the successful exploitation of intellectual property. The establishment will distribute a proportion of the income among the relevant employees involved in the exploitation, calculated as per paragraph 4 for income for plant breeders' rights and  for all other forms of income and covering the following forms of income:

a) royalties and licensing payments

b) the outright sale of intellectual property

c) advance or milestone payments for a licence

Unless agreed locally, this agreement excludes any other form of income not covered by points a) to c).

2.2. This agreement does not cover intellectual property which is sold/exchanged in return for funded research activities which incur salary and consumable costs.

2.3. The establishment will inform the NCC (Negotiating and Consultative Committee) at least annually about the level and use of income to the establishment from exploitation. The NCC will have an opportunity to comment.

2.4. These arrangements apply to income received from exploitation from 1 April 2008.

2.5. These arrangements do not supersede any agreed local arrangements already in place at an establishment prior to 1 April 1994. In the case of intellectual property rights established before 1 April 1994 which give rise to exploitation income, establishments have the right to make an award under arrangements which existed at that time.

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3. Determination of the relevant employees

3.1. A panel comprising of:

  • the Director of the establishment
  • a senior scientist not involved in the exploitation, or the Head of Operations, or the Commercial Manager
  • a nominee of the local Trade Union Side of the NCC, who is not personally involved in the exploitation

will decide:

  • the employees who have contributed in a material way to the identification and development of the intellectual property. These may include students, visiting workers, casual employees and former employees
  • how the monies are to be divided between the relevant employees

3.2. The panel will normally identify the relevant employees for the purpose of the distribution of exploitation income immediately prior to the conclusion of an exploitation agreement for the intellectual property. The panel will inform all the relevant employees.

3.3. Relevant employees who leave BBSRC or the establishment before any award has become payable will continue to be eligible for payments under the scheme.

3.4. In the event of the death of a relevant employee, we will make payment to any surviving dependants in receipt of benefits payable under the Research Councils' Pension Scheme. Should there be no surviving dependants in receipt of such benefits, the payment will, at the panel’s sole discretion, be paid either to the relevant employee’s estate or will revert to the establishment.  

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4. Distributing income resulting from exploitation of plant breeders' rights

4.1  It is recognised that the creation of new plant varieties involves a large number of staff over many years and from across the establishment. Income in relation to plant breeding rights registered with the Community Plant Variety Rights Office (CPVO) after July 2010 will be dealt with as set out below. Income from plant variety rights registered before this date would be covered by the existing arrangements as set out in paragraph 5. However, individuals eligible for receiving payments for plant breeding rights registered prior to 1 August 2010 may choose to waive their existing rights and be included in the scheme set out below.

4.2  We aim for income from plant breeders' rights to be used to spread the benefits as widely as possible within the organisation. The Exploitation Income Panel (paragraph 3) will make decisions on how the income should be allocated, with the focus being on group events. The funds will normally be made available to a department or group of individuals (but may be allocated to specific individuals in exceptional circumstances, at the discretion of the Panel. Examples for the use of such funds include:

a) funding attendance of staff at appropriate events such as agricultural/horticultural shows
b) a contribution to social functions organised by the establishment staff association/social club

Full consideration will be given to diversity and equality issues when deciding on how the income will be used. The Panel may also seek other suggestions from staff at the establishment in order to develop a portfolio of staff benefits.

4.3  Should the income to be paid out under this scheme grow to exceed £10,000 per annum, the distribution of funds will be re-evaluated by the Exploitation Income Panel.

5. Distribution of the income

The distribution of the establishment’s exploitation receipts will be as follows:

Distribution of the income

    Establishment Relevant employees
Gross receipts
  • the first £1,400
  • from £1.4k - £50k
  • 0%
  • 66.7%
  • 100%
  • 33.3%
Net receipts
  • over £50k
  • 66.7%
  • 33.3%

5.1. The distribution of funds beyond the first £50,000 of income will be based on the establishment’s net exploitation receipts, i.e. after deduction of allowable costs. Allowable costs are defined as those arising from:

  • filing and prosecuting applications and procuring and maintaining patents and other intellectual property rights
  • proceedings before the Patent Office or other appropriate forum or any appeal tribunal in any country
  • professional advice on patent and other intellectual property matters relating to the technology
  • proceedings by or against the establishment in any court or tribunal in any country from the enforcement of defence of any patent, plant breeders right or other intellectual property right, or for revocation of or opposition to any patent or application, or for the recovery of royalties, or for any other cause (including any costs or sums awarded against the establishment in any such proceedings)
  • the establishment’s costs relating to the preparation of patent applications or other protection, and to the exploitation of intellectual property
  • agent's commission
  • any other expenditure which may be determined from time to time by the establishment

5.2. The establishment will pay the share of exploitation receipts to relevant employees within three months of the end of the financial year in which the establishment receives the receipts. Payment to existing employees will be made with salary and be subject to statutory deductions.

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6. Formation of a spin out company and staff equity

6.1. In cases where intellectual property is to be commercialised though the formation of a spin out company the establishment expects to be a significant shareholder in the spin-out company because of the investment, resources and permissions it makes available to the spin-out. The maximum equity that founder researchers may receive will not exceed one third of that vested in the establishment at the point of incorporation of the company. If there is more than one founder the sum of the equity awarded may not exceed one third and their individual entitlements must be covered by an agreed division of the staff equity share. In determining the exact ratio there are a number of factors to be taken into account: for example, the roles of the individual researchers, the value of the intellectual property, the amount of capital required, the involvement of the individuals in reaching the stage where a spin-out is possible, and the importance of the association with the establishment.

6.2. The division of spin-out equity between all those involved and the management and employees is a key issue and must be addressed early in the procedure. Since it will be a multi-party negotiation it is rarely easy. Having agreed their respective shareholdings, the researchers and the establishment can then negotiate together with the investors as to what percentage of the company they wish to sell to the investors for their cash investment. In practice it is rarely as simple as this and an iterative, three-way negotiation usually results.

6.3. Where relevant employees have received an equity share in a spin out company, any revenue generated from the sale of the Establishment’s spin-out equity will not be subject to the income distribution rules at paragraph 4.

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7. Disputes and arbitration

If you are not satisfied with a decision by the local panel relating to the apportionment of receipts/equity, you may submit a claim to an Arbitration Panel comprising the BBSRC Chairperson, the BBSRC Executive Chair, another member of BBSRC Council representing an industrial user community and a BBSRC JNCC Trade Union Side nominee. The decision of the Arbitration Panel will be final. A separate Arbitration Panel exists for employees at an MRP establishment wishing to submit a claim. This panel will comprise of the relevant GB Chair, an "industrial" GB member and a JNCC TUS nominee. The decision of the Arbitration Panel will be final.

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Last updated 31/10/13
Amendment 164  - October 2013