Academic Policies

19: Guidelines for Faculty Consulting Agreements

Policies

The main Penn State policies and procedures relating to faculty consulting activities include the following:

RA05 — Significant Financial Interest Disclosure for Sponsored Project's Investigators
RA12 — Technology Transfer and Entrepreneurial Activities (Faculty Research)
FN14 — Use of Tangible Assets, Equipment, Supplies and Services
HR80 — Private Consulting Practice
HR91 — Conflict of Interest

All of these policies are available online.

Amount of Consulting Allowed

All those individuals who carry the rank of Penn State faculty are allowed to engage in consulting up to a maximum of four days per month during their appointment period. There are two other limitations: 1) consulting activities may not interfere with the performance of University duties or other contractual obligations of the University and 2) the consulting activities should enhance the faculty member's professional stature or academic proficiency.

Required Approval

Faculty members are required to inform their department head or campus executive officer of the nature, type and extent of their consulting activities (undertaken with or without compensation) so that the department head or campus executive officer may judge the appropriateness of the consulting activity in relation to the performance of the faculty member's regular duties.

A faculty member may not provide special service to the Commonwealth of Pennsylvania for additional compensation without the prior written approval of the President of the University per HR42 — Payment of Personal Compensation by a State Agency or Department of the Commonwealth.

Required Reporting

Per HR80 department heads and campus executive officers are required to report annually to their vice president or dean concerning the levels and amount of private consulting by faculty and staff within their authority.

Responsibility for Private Professional Services

Per HR80 the University assumes no responsibility for private professional services performed by members of its faculty. The name of the University is not in any way to be connected with the service rendered or the results obtained. The faculty member must make it clear that his or her consulting work is a personal matter. He or she must not use the official stationery of the University nor stationery having a University address or a University telephone number.

A faculty member shall not accept or retain employment which would bring him or her as an expert or in any other capacity, into conflict of commitment or in competition with the interests and purposes of the University or the Commonwealth of Pennsylvania and federal agencies.

Use of University Facilities and Resources

FN14 prohibits the use of University facilities and resources including specialized equipment, specialized software, supplies and services for faculty consulting activities. This does not preclude use of standard office facilities including e-mail, internet, local telephone, PCs, etc., subject to a test of reasonableness. Faculty consultants may access University facilities in the same manner available to non-University personnel. The utilization of University resources for consulting purposes must be approved by University administrators and documented in a Memorandum of Understanding. The Memorandum of Understanding clearly identifies the extent and nature of the facilities being utilized and establishes use charges based on the cost to the University of maintaining said facilities. The financial officer of the College or administrative unit should establish the appropriate charge out rate.

Involvement of Students and Staff

The involvement of students and staff in faculty consulting activities should be undertaken with caution. Faculty may not involve students or staff in consulting activities within the scope of the student's or staff member's University duties. Faculty may hire students or staff to assist with faculty consulting activities outside the scope of the student's or staff member's University duties. Such arrangements require the full knowledge and approval of University administrators and must be codified in a Memorandum of Understanding. Safeguards must be instituted on a case-by-case basis to ensure that the performance of University duties and the scholarly mission of the University are not compromised. In particular, faculty must avoid even the appearance of directing students into research activities that serve their own personal interests at the expense of scholarly achievement.

Rate of Compensation and Tax Consequences

The University will not comment on or offer input regarding the rate of compensation or the tax consequences associated with faculty consulting activities.

Intellectual Property Issues

All faculty are required to sign the Penn State Intellectual Property Agreement which states that all faculty agree as a condition of employment by the University to abide by the University's Intellectual Property Policies and Procedures and to assign to the University all rights to intellectual property developed (a) with the use of University facilities or resources or (b) in the field of expertise and/or within the scope of responsibilities covered by their employment/appointment/association with the University.
Faculty may, within the scope of a consulting agreement, assign rights to intellectual property developed under consulting agreements to organizations engaging their services where the organization has a legitimate prior claim to the technology being developed. Examples include consulting activity leading to the refinement of an organization's existing product or process or to a development for which the organization has background patents or prior art claims.
It is inappropriate for faculty consultants to assign Penn State intellectual property to organizations engaging their services.
Consulting agreements should be examined to ensure that the assignment of rights to intellectual property evolving from consulting activities does not conflict with the Penn State Intellectual Property Agreement.
Faculty consultants must avoid entering into consulting agreements that are in violation of the terms of their employment by the University.
By assigning intellectual property rights to organizations engaging their services faculty consultants may: 1) be prohibited from further activities in that field, 2) limit opportunities to profit from commercial applications or their work, 3) limit opportunities to obtain funding from industry and 4) restrict freedom to publish.

Terms and Conditions Recommended for Inclusion in Faculty Consulting Agreements

Consulting agreements should recognize that all faculty members have signed the Penn State Intellectual Property Agreement and that Penn State intellectual property cannot be transferred to a company via a consulting agreement. Consulting agreements should also recognize that a faculty member's first duty and first responsibility is to Penn State. The University recommends including the following language: "Company agrees and understands that Consultant is an employee of The Pennsylvania State University. Consultant's primary responsibility is to the University. In connection with such employment, Consultant has entered into certain agreements with the University relating to ownership of intellectual property rights, conflicts of interest and other matters, and is subject to certain policy statements of the University (collectively the "Institutional Agreement"). If any provision of this Agreement is hereinafter determined to be in conflict with the Institutional Agreement, then the Institutional Agreement will govern to the extent of such conflict, and the conflicting provisions of this Agreement will not apply. Consultant is not aware of any such conflict."
Consulting agreements should acknowledge the importance of documenting the nature and scope of the consulting activities and outline a process for preparing a written summary or minutes of the consulting activities. All written information provided by the company to the consultant should be clearly marked "Confidential" or "Proprietary". The University recommends including the following language: "The Company shall from time to time prepare a written summary or "minutes" of the consulting activities of Consultant. Consultant shall also record all documentation relative to Consulting Services separate from his/her other work, including work for the University. The parties shall have the right to periodically compare said documentation to ensure both parties have a consistent understanding as to the scope and nature of consulting services provided hereunder."
Consider including language such that the consultant has the right to refuse to accept company confidential information. The University recommends including the following language: "Prior to disclosure of Confidential Information hereunder, Company shall make a non-enabling summary disclosure to Consultant so that Consultant may determine whether to accept disclosure. Said summary shall be sufficient to enable Consultant to determine whether the disclosure involves technology or information already under development in Consultant's University Laboratory, or whether he/she is otherwise bound by confidentiality concerning related information and/or technology.

Company will take reasonable precautions to clearly mark information disclosed hereunder as "confidential" or "proprietary." Company will provide to Consultant a written summary of the matters discussed or considered during consulting provided hereunder in a timely manner.

The confidentiality restrictions hereunder will not apply where the information was previously known to or developed by Consultant or Consultant's research group, where the information is part of the public domain, or where the information came into the possession of Consultant through no fault or wrongdoing of Consultant."

Terms and Conditions to be Avoided in Faculty Consulting Agreements

Avoid accepting "fiduciary" duty or responsibility. Consultants required to accept "fiduciary" responsibility should be covered by insurance protection provided by the company.
Consulting activities should be performed in a relatively narrow and well-defined field. Avoid broad definitions such as "Company Business".
Avoid or use caution in accepting exclusive consulting arrangements. Consider the ramifications of agreeing to consult with only one company in a broad field.
Carefully consider the term (duration) of the consulting agreement. Is there an exit? Can the faculty member terminate the consulting agreement "without cause"?
Carefully review any requirements for representations and warranties, especially with regard to intellectual property issues.