Financial Services for Faculty

Overview of distributions, revenue, and common financial questions for Penn researchers and faculty

PCI distributes Gross PCI Revenues (including license revenues from patents, patent applications, tangible research materials, know-how and copyrights ) according to the Penn Patent Policy:

  • For a detailed definition of PCI Gross Revenues, please refer to section 4.0.13 of the Penn Patent Policy. Examples of the types of revenue distributed include, but are not limited to, license fees, royalties, and milestones.
  • For a detailed description of the distribution formula, please see the hypothetical example in Appendix C of the Penn Patent Policy.
  • License revenues from copyright licenses are also subject to the Faculty Handbook Section III.D, “POLICY RELATING TO COPYRIGHTS AND COMMITMENT OF EFFORT FOR FACULTY.”

Who receives a distribution under the Penn Patent Policy?

  • Inventors receive a personal share of income (Section 2.3.1.1)
  • Inventors Research Activity (2.3.1.2)
  • Department of Inventors (2.3.6)
  • School of Inventors (2.3.7)
  • University (2.3.8)
  • PCI
    • Operating Expense (“Aggregate PCI Operating Costs” Section 4.0.3) and
    • Initial Deduction (Section 4.0.14)

How does distribution work?

Each license agreement involves one or more technologies or inventions under the Penn Patent Policy.  PCI Finance circulates an income allocation agreement to the inventors of each technology.  Inventors can unanimously agree upon the % share of revenue that each inventor will receive for that technology. When a license agreement generates revenue, PCI Finance allocates the revenue received to the technologies that generate the revenue and distributes the allocated revenue according to the percentages in the income allocation agreement for a technology. In the absence of an agreement among the inventors, PCI will determine the allocation among the inventors of a technology. Please see below section for the timing of distributions.

Distributions to inventors for the inventors’ personal share of income are processed through the Penn Marketplace. Inventors receive a unique supplier number and can log in to the Penn Marketplace to provide payment instructions, change their address, review payment statuses/history, etc.

Distributions to Research Activity, Department, School and University shares are processed via an accounting journal entry to the account [general ledger 26-digit chart of account number] on file for each recipient.

Financial Services FAQs

When do recipients receive their shares?

Inventor Shares: If an individual inventor’s share of distributable funds for an agreement is calculated as being greater than or equal to $5,000.00 during any quarter of the fiscal year, the inventor will receive a distribution within 45 days after the end of that quarter. If an individual inventor’s share of distributable funds is less than $5,000.00 during any quarter of the fiscal year, that inventor will receive a distribution within 45 days of the end of the fiscal year.

 

Inventors Research Activity Share: All research activity shares are distributed quarterly within 45 days after the end of each quarter.

 

School, University, and Department Shares: These shares are distributed annually within 45 days after the end of the fiscal year in which the distributable funds were actually received.

How does my research activity or department receive its share of revenue?

The revenue is transferred via an internal accounting entry from PCI to the 26-digit chart of account on file for the inventor’s research activity and the inventors’ department.

Please contact the Distribution Analyst, Hector Galarza, to ask specific questions or to request further information.

How can I know how much revenue my research activity or department has received?

Please contact the Distribution Analyst, Hector Galarza, and copy your business administrator on the request.

How do Penn’s distribution policies benefit faculty inventors?

Quarterly Distributions: Quarterly distributions to inventors’ research activities enable income to be available as soon as practicable following receipt by Penn.

 

Initial Deduction Reduction: Effective FY2020, at the recommendation of the Executive Committee of the Penn Center for Innovation and following review by the Office of General Counsel, the Faculty Senate Executive Committee, and the Faculty Senate Committee on Faculty and the Administration, the initial deduction rate was decreased and the lower limit to the initial deduction for future distributions was decreased. This increases the revenue distributed to inventors and inventors’ research activities as well as all other recipients under the Penn Patent Policy.

What if I personally receive equity (stock) from a company?

Under the Patent Policy, inventors who receive equity from a licensee directly, outside of the equity pool that Penn negotiates to receive, are not entitled to receive a share of the equity pool except with the approval of the University. Equity is defined under the Patent Policy as ownership interests or securities, including but not limited to shares of stock or securities; stock options; warrants or any other rights to purchase stock or securities; debt instruments; partnership interests in a general or limited partnership; or membership interests in a limited liability company or partnership.

The Equity Pool is defined in the Patent Policy as “the total allotment of Equity negotiated by the University as consideration for a license of the University’s interests in an Invention or Tangible Research Property.”

What are the tax implications of any revenues I receive from Penn?

Income distributed from license agreements to inventors are reported on Form 1099-Misc as Royalties.

Note: The University issues the Form 1099-Misc only if the total amount to report is equal to or greater than $600. We strongly encourage you to consult your own tax adviser for specific advice and guidance.

Resources

Download Our Commercialization Guide

PCI’s Guide overviews the basics of commercialization, specifically focused on Penn technology transfer.

Financial Services Contacts

For the quickest response, email Hector Galarza, Distributions Analyst at hectorg@upenn.edu

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