Guidelines for Navigating COI Issues when Faculty Start-Up Companies Engage in University Research

• Conflicts of interest (COIs) can arise in collaborations between the university and companies where an investigator has Significant Financial Interests (SFIs). These COIs may occur when a university employee with significant financial interests in a company (ownership or other) engages in either the company or the university side of the research. Inherent COI concerns include:
  • The potential for the research to be viewed as biased or not objective, as the investigator may financially benefit from the research outcome due to their relationship with the company and/or intellectual property resulting from the research.
  • The potential for the principal investigator (PI) to use university space, personnel, and resources to benefit the company portion of the research.
  • The potential for blurring the non-profit/for-profit boundary, where tax-exempt facilities could be used in a way that competitively advantages the for-profit company.
• Investigators should fully and timely disclose to the university any and all equity interests in non-publicly traded entities, such as start-up companies, as well as any other financial interests meeting the disclosure threshold for SFIs. Equity interests in non-publicly traded entities, even with zero or unknown monetary value, must be disclosed. These disclosures facilitate the research-related COI review process, in which external interests and relationships of university investigators are assessed to determine whether or not they create an actual or perceived bias in the design, conduct, or reporting of their research. 
• Please note that specific sponsor policies or requirements, if more restrictive, take precedence over university policies and this guidance.

• The university may accept research subcontracts from faculty start-up companies through various funding and award mechanisms. Relevant policies and practices around the selection of a subcontractor apply.

• Northwestern must demonstrate due diligence around the selection and/or engagement of subcontractors and vendors, particularly when an investigator involved in the activity has significant financial interests in the company. Sufficient documentation to support decisions around selection of the company (e.g., a sole source justification) is required. When applicable, justifications should stress scientific or technical specialization or superiority in addition to cost considerations.

• Consideration is given on a case-by-case basis. General principles include ensuring that the conflicted individual is not involved in contract, financial, or other transactions between the company and the university. Additionally, any proposed company use of university space, equipment, or other resources must be approved by the university under documented agreements that include the terms around the purpose, duration, cost, and other relevant specifics of such use.  

• Management strategies may include:
  • Disclosure of related financial interests to the study team and collaborators.
  • Disclosure of related financial interests in presentations and publications arising from the research.
  • Independent data analysis and independent compliance monitoring.

• Decisions relative to the involvement of conflicted investigators in university research involving a company in which they have significant financial interests involve consideration of the nature and extent of the significant financial interest, the nature of the research, and the extent to which objectivity in research design, conduct, or reporting, as well as human research participant welfare (if applicable) can be protected by COI management strategies. 

• Generally, an investigator may not serve as PI on such projects, absent compelling circumstances. The conflicted investigator may be involved in the research in certain capacities under COI management strategies but typically not as PI. Compelling circumstances may include the extent to which the investigator is (by virtue of specialized expertise) best positioned to carry out the research safely.  
• Considerations as to whether or not research objectivity and human participant safety can be adequately protected by COI management strategies primarily include review of the individual’s role in the study in conjunction with study structure and design. For example, a multi-site, randomized study with an external data safety monitoring board where the conflicted investigator is not involved in data analysis presents a situation in which there is little opportunity for bias or lack of objectivity in research design, conduct, or reporting, despite the existence of a conflict of interest. The Institutional Review Board (IRB) ultimately has responsibility for human participant safety, and will review conflict of interest management strategies associated with IRB protocols and will determine whether the conflict of interest management is sufficient, or if additional conflict of interest management is necessary to protect the rights and welfare of human research participants.   

• SBIR (Small Business Innovation Research) and STTR (Small Business Technology Transfer) are federal programs that provide funding to small businesses for research and development with the potential for commercialization. Both SBIR and STTR awards are made directly to a small business concern (SBC). STTR awards require the SBC to collaborate with a research institution (RI) for a certain portion of the award. SBIR awards do not require RI involvement, but SBCs often collaborate with RIs on SBIRs despite the fact that it is not required.

• No, a university is not an SBC and is not eligible to be a direct recipient of SBIR or STTR awards. However, a university can serve as an RI for SBIRs and STTRs. Involvement of a university in these projects occurs via a subcontract from the SBC to the university. In cases where there is a subcontract between the SBC and the RI, there is an SBC PI and an RI PI (i.e. a PI for each side of the collaboration). 

• No, the PI of the company portion of the research and the university portion of the research may not be the same individual. Although STTRs/SBIRs are collaborations, STTR/SBIR policy, instructions, and effort requirements make clear that establishing a separation of entities and roles is important. Having the same person on both sides of the collaboration blurs the respective parties’ commitments. Most university researchers are fully committed at the university and do not have the effort available to meet the requirements of serving as the company PI of an SBIR or STTR. Ultimately, an individual may be listed on the SBC budget or the RI budget but not both.

• The PI of the company side of SBIR awards must be primarily employed by the company. For NSF, this requirement also applies to the company side of STTRs. Primary employment is measured and determined by percentage employment/appointment. Therefore, university employees who have a university appointment or position of 50% or greater may not serve as the company PI on SBIRs (or NSF STTRs) relative to research in which university is engaged. University employees serving as the company PI relative to SBIRs (or NSF STTRs) in which the university is party to the activity via proposed or contracted collaboration must have a university position or appointment no greater than 49%.  

• Department research administrators should help prepare Northwestern’s subcontract package but must not prepare the company’s portion of the submission. The subcontract package must include a statement of work that clearly delineates Northwestern’s work on the project.

• Faculty may not commit the University to participation in an award as a subcontract partner, rather, Sponsored Research must provide the appropriate letter of support on behalf of the institution. If the submitting PI is on the University side, the SBC must provide evidence that an SBC PI exists and that the submitting PI is not named on both budgets.

• University resources may not be used for company activities, including the company portion of a research collaboration, except under specific documented agreements between the company and the university. Agreements can take different forms depending on the situation and purpose, such as direct research agreements, testing agreements, manufacturing service agreements, equipment use agreements, memorandums of understanding, collaboration agreements, etc. Sponsored Research can serve as a starting point for helping to assess the appropriate agreement for such arrangements. 

•  For example:

  • Use of university core facilitates may be allowed under documented agreement and payment of external rates as well as in accordance with university core facility procedures (sign-up, scheduled time, etc.)
  • Use of university equipment may be allowed under documented agreement and payment for use (unless otherwise specified) in accordance with university procedures for use (sign-up, scheduled time, etc.)

• Considerations include:
  • There should be a specific reason that relates to an aspect of the university mission that the company has to lease university space and not non-University space (e.g., specific collaboration where close access to university space/specialized equipment being used via documented research/use agreement, etc. is needed).
  • The agreement should include a specific and limited duration consistent with the company need.
  • There must be an active option or license for Northwestern intellectual property.
  • Any conflicted university employee cannot be involved in negotiations or any financial or other transactions on behalf of the company (or university) with respect to the arrangement.
  • The agreement terms, cost, etc. should be consistent with market considerations and rates.

The Innovation and New Ventures Office (INVO) can serve as a starting point to request company lease of university space, as there are programs and initiatives that support this type of activity. Any agreements between companies and the University should specify terms for intellectual property ownership for any intellectual property developed by the company while using University resources, space, or equipment. 

• Small businesses certify in their SBIR and STTR applications and award documents to the federal government that the small business portion of the research and research development will occur in company facilities using company employees unless otherwise indicated in the SBIR or STTR application and approved in the funding agreement. Therefore, performing the company portion of such research in university space using university resources, unless specifically approved by the funding agency and allowed by the university under documented agreement, subjects the company to potential criminal, civil, or administrative sanctions.  

• Licensed electronic information resources, including Library databases and other online tools and services, must be used in accordance with Northwestern’s license terms and conditions. These resources are restricted to University research and educational purposes, and may not be used for activities of a company or a commercial service. The University cannot enter into any agreement that allows companies to access or use licensed Library resources.

• Sponsored Research (SR) may not assist companies/small businesses with the company portion of an SBIR/STTR or other company proposal for research. SR provides research support services for university research, and with respect to SBIR/STTR or other collaborations with companies, SR provides service and support only for the university side of the research (e.g., letter of intent for collaboration, subcontract execution, etc.).

• Northwestern’s Institutional Review Board (IRB), Institutional Animal Care and Use Committee (IACUC), and Center for Comparative Medicine (CCM) services are for Northwestern research activities (i.e. research projects awarded or contracted to Northwestern University or its affiliates (NMH, Lurie Children’s, and SRALab) directly or through subcontract, and/or other research activities (funded or unfunded) that involve Northwestern researchers acting in their Northwestern capacity.    

  Northwestern’s human research protections and animal care and use programs are heavily federally regulated, and the responsibilities and risks associated with conducting human and animal research are significant. Individuals engaged in Northwestern research involving humans or animals are subject to federal requirements overseen and administered by the IRB, IACUC, and CCM offices. In no circumstances may external entities or parties, such as faculty start-up companies or a physician’s private practice, use the services of these offices for IRB or IACUC approval or animal services under the pretext of Northwestern research activity unless Northwestern is engaged in a particular research project through a subagreement with the company and/or there is a specific documented arrangement between the company and Northwestern. Determinations about whether Northwestern University will engage in an agreement with an external entity for the use of Northwestern’s IRB, IACUC, or CCM services are at the discretion of the applicable Institutional Official(s).    

• Involving students and postdoctoral fellows in faculty start-up company activities can enhance their academic experience and be valuable to the work. However, care must be taken to ensure their involvement is voluntary, beneficial to their development, and does not interfere with their training or academic progress.

• Questions to consider include:
  • Will these activities interfere with the student’s progress towards their degree or the postdoctoral fellow’s training timeline?
  • Will these activities negatively impact the student’s graduation requirements?
  • Will these activities restrict the publication of a student’s thesis, dissertation, or other academic work?
  • Is the student or postdoctoral fellow supported by funding that restricts work on for-profit enterprises?
  • Will these activities negatively impact the advisor/advisee relationship?
  • Will the student’s ability to maintain full-time enrollment be impacted?
  • Is TGS’s “Permission to Work” policy applicable?
  • Are there visa status restrictions related to engagement in external activities?
  • What is the anticipated duration of the start-up activities, and how does it align with the student’s graduation timeline?

• Prior to engaging students in any faculty start-up company activities, the faculty member should engage in a discussion with the student(s) around the topics included in the Student-Faculty Agreement - Student Engagement in Faculty Enterprises. If a faculty member is the sole research advisor for a student he or she wishes to involve in his or her external start-up activities, a research co-advisor must be identified for the student. A co-advisor works with the student to develop a research topic, formulate ideas and structure, and guides the progress of the thesis/prospectus/dissertation. Per TGS policy, it is the responsibility of the student’s academic program to approve the appointment of a co-advisor.  If the faculty member and the student mutually agree to proceed with the engagement, the faculty member must submit the completed agreement to their School Dean’s Office and Northwestern’s Conflict of Interest Office.

  Prior to engaging postdoctoral fellows in any faculty start-up company activities, the faculty member should have a discussion with the postdoctoral fellow around the topics included in this guidance. Postdoctoral fellows are considered staff members, and any external activities must be approved in advance by the individual’s supervisor. External activities must occur outside of Northwestern work hours and must not involve Northwestern resources. If a faculty member is the primary postdoctoral supervisor and also engages the postdoctoral fellow in their external start-up activities, a COI management plan should be established that adjusts the individual’s administrative reporting line or assigns independent oversight, as the faculty member may not be in the most objective position to assess whether the postdoctoral training and the activities within the start-up company are in conflict and whether the external activities are interfering with or detracting from the individual’s Northwestern responsibilities and engagement in postdoctoral training. 

  If postdoctoral fellows or students are involved in Northwestern University research, even if sponsored by or involving a faculty member’s start-up company, it is considered university activity. Conversely, if they are engaged on the company side of research (e.g., serving as a PI or researcher on the company side of an SBIR or STTR award to the faculty start-up company), that is considered external activity and a COI management plan should be considered with respect to their Northwestern role and responsibilities.  Northwestern’s Conflict of Interest Office should be consulted for guidance

• The University must perform due diligence, especially when an investigator involved in the purchase or activity has significant financial interests in the company. Sufficient documentation to support decisions around sole source justifications and the selection of companies over comparative companies is important. Justifications involving scientific or technical specialization or superiority should involve individuals with relevant scientific or technical expertise to assess the request and aid in the University’s decision.
• If a start-up company is being proposed or selected for a purchase by Northwestern, ensure the related interest of the faculty member (or other individual with company interests) is disclosed on the vendor selection form, sole source justification form, or bid documentation form (as applicable). 
• Some research sponsors consider conflicts of interest in procurement actions something that needs to be requested of or disclosed in advance to the sponsor, or reported to the sponsor. Please engage Sponsored Research and Northwestern’s Conflict of Interest Office if there is a request or intent to purchase equipment or services from a company in which a faculty member on the award has significant financial interests prior to proposal submission. 

• More information on can be found by going to  Purchasing and Payment Policy and Procedures.

• Ensure that your interests in the company have been fully disclosed in eDisclosure; any equity (e.g., ownership) interests in a start-up company, even if the value is currently nothing or unknown, meet the criteria for “significant financial interest” and need to be disclosed
• Carefully review the solicitation to verify your PI eligibility (e.g., some sponsors may prohibit the university PI on the STTR from having any financial interests in/with the SBC, etc.)
• Ensure that the PIs of the SBC and the University portions of the proposals not the same individual
• Ensure that your company has the adequate resources to carry out the company portion of the work being proposed (including but not limited to personnel and effort, place of performance, space and equipment needed to carry out the research, etc.)
• Ensure you have a compliant plan around what the company portion of the work and the University portion of the work, respectively, will entail (including but not limited to personnel and effort, place of performance, space and equipment needed to carry out the research, etc.); if University resources or equipment are needed for any aspect of the company portion of the research, engage SR to ensure that appropriate agreements and budgetary issues are considered
• Reach out to your school dean’s office and/or NUCOI to facilitate proactive consideration of the situation, to ensure that the COI can be adequately managed, and a COI plan instituted (if/as needed) for all relevant parties

• The research scientist may not serve as PI for the company side of the SBIR unless they reduce their university appointment to no greater than 49%. Eligibility requirements to serve as the company PI for an SBIR require that the individual be primarily employed by the company, which is 51% or greater employment at the company; one cannot be primarily employed by the company and meet these eligibility requirements if they are employed by the university at greater than 49%. Reducing one’s university appointment to 49% or less, taking a temporary leave of absences from the university for entrepreneurial pursuit, or assigning a non-University employee to be PI of the company SBIR are ways to ensure that the company SBIR PI eligibility requirements are met. 

• Consider whether or not a qualified colleague could truly contribute to the university side of the research collaboration as university PI, with your guidance (and you serving as company PI). If you truly are the only qualified individual to serve as PI on both sides of the research (i.e. company and university), you may wish to consider applying for a different research award mechanism (rather than an SBIR or STTR), or consider mentoring/training a colleague in the research area to be at a point in the near future where they would appropriately have the qualifications to serve as university PI on an SBIR or STTR collaboration with your company. 

• Purchasing and Payment Policydictates that an employee must not be in a position to make a purchasing decision if their personal, professional, or economic interests may be directly influenced or affected by the outcome. A Conflict of Interest attestation will be required when making a purchase and a sole source justification will be required. When justifications involve scientific or technical specialization or superiority, it is critical to involve individuals with the relevant scientific/technical expertise to perform an assessment of the request and aid in the university’s decision.

• The university may accept sponsored research agreements from faculty start-up companies and may subcontract research to faculty start-up companies through various funding and award mechanisms, all of which must go through Sponsored Research. Gifts are not the appropriate mechanism for start-ups to engage in research collaborations with the University.