Utah Board of Regents endorses Amendment No. 2

The State Board of Regents on Tuesday endorsed a resolution in support of Constitutional Amendment No. 2.

The amendment, if passed by voters on Nov. 2, would legally allow the U to do something it has been doing for years: trade intellectual property for stock in companies that use that property.

In the past, the constitutionality of the connection between institutions of higher education and businesses has been questioned.

If Utah voters pass the amendment, the board believes that confusion would be eliminated.

“The constitution says state entities cannot subscribe in the private stock of companies, but the university’s position is that what we do is not subscription to stock,” said Robert Payne, associate general counsel to the U. “There has been a lot of talk about how to clarify this, and this amendment came out of those talks and it says we can do it.”

U President Michael Young summed up the basis of the relationship between businesses and institutions as having both a positive and negative impact.

“If your company takes off, then we will share in that…if this technology does not turn out to be helpful and doesn’t have commercial profit, we share in the risk as well,” he said.

According to Payne, it is not uncommon for the U to share its technology with startup businesses.

“We’ve helped companies get started by getting [them] technology,” said Brent Brown, U associate director of technology transfer.

In fact, Brown said the U has assisted about 85 startup companies-though not always in return for equity-in the past 20 years.

The U has generally taken a combination of cash, royalty and equity because “equity is only appropriate in some cases,” according to Brown. “We’ll take equity where it makes sense to help [businesses] in the commercialization process.”

By taking equity where funds are scarce, the university does not hinder the private companies’ ability to get started in their respective ventures.

“Those startup companies typically do not have financial resources,” Payne said. “What they have is interesting ideas and interest in getting them to the marketplace…it is in our interest and the state’s to get those to the marketplace, so we license them to the company in exchange for stock.”

The Board of Regents believes Utah’s economy will benefit if voters pass Amendment No. 2 and legally allow this act to go forth.

“Approval of this amendment is critical to the continued success of our research institutions, and could result in economic benefits for the state of Utah through the commercialization of research,” said Richard Kendell, commissioner of higher education for the Board of Regents.

In the past year, Utah’s two research universities-the U and Utah State-have attracted a combined investment of $500 million in research grants and contracts, according to the regents’ resolution.

Because the state has allowed private businesses to exploit those efforts, Utah’s economy has been the recipient of “significant economic benefits…including the creation of new companies and jobs,” according to the resolution. “Failure to approve Constitutional Amendment No. 2 would likely have serious negative consequences on the ability of research universities to commercialize intellectual property.”

Young stressed the positive aspects of the proposed amendment.

“It’s something we’re very supportive of,” he said. “It’s designed to help keep businesses in the state and it’s designed to facilitate the exploitation of technology so you can really move these great scientific ideas with success into the market, and it does it essentially with absolutely no loss in revenue to the state because it isn’t asking the state to put any money up.”

Proponents of Constitutional Amendment No. 2 said it would foster business growth in Utah, recruiting venture capitalist companies to the state and sending a message to the business community.

“This is absolutely an essential ingredient for economic development potential, so we thought it would be useful as the Board of Regents to pass a formal resolution in favor of it,” Kendell said.

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