In Part 1 of “Dag Wagging Dog,” we looked again at Rev Proc 47-2007 and how university administrators have used this tax guidance to create an artificial barrier to industry-sponsored research. Now let’s turn to how the universities have used this same tax guidance to manipulate faculty research. In Part 3, to follow, I provide three alternatives to the usual university tech transfer office position on the Tax Reform Act of 1986 and Rev Proc 47-2007. As always, this is management advice, not legal advice. For legal advice, consult your legal counsel–but you might ask if your university legal counsel has already decided to support the conventional university administration approach. If so, getting help supporting a faculty or industry or innovation-favorable or public service orientation will take a courageous and informed legal advisor willing to rethink the situation.
Faculty “Employment”
The issue in university copyright used to be simple until it was gummed up by administrators on the hunt for ways to own and profit from what was never theirs. Faculty owned their scholarship of all sorts. Faculty members are appointed; they join the faculty of a school or college. They were and are “members.” They are paid a salary or stipend. They are provided with facilities and supplies to do their work. They teach and conduct research and study and interact with members of the community. This activity, taken as a whole, is in the public interest.
Faculty are much like state legislators–provided with resources of the state to perform a public function, but not prevented from having their own livelihoods and even representing their private interests and the private interests of those they represent in the conduct of their public “duties.” Their public duties include the representation of private interests, including their own.
Faculty are “employed” by universities in a narrow sense only–most of what faculty do for a university is not a matter of employment, no matter how administrators make documents read for managing money. “Employment” is itself a relatively recent term. Check out this Ngram. While “professor” and “faculty” have a long history, “employee” use begins around 1880 and rises in the 1930s and again in the 1970s. Even “faculty member” is relatively recent, with usage growing after about 1920. Certainly, the American university has changed character in the past century. Professional programs have been added, extramural research, medical centers, and intercollegiate sports have come to dominate priorities. And university administrations have become a professional class of managers, seeking to make universities operate like corporations–fundamentally seeking profit–rather than as public service institutions in which individuals might exhibit some altruism in support of a broader public interest. The question arises, however, whether the corporate point of view, especially in public universities, is anything more than a mindset. That is, just because administrators are attracted to the idea of corporate power, does this attraction overturn the fundamental relationship that faculty have with their university? Or, put another way, if a corporation runs the university, and the corporation is an instrument of the state, is it a necessary conclusion that the state desires to own and control the work of university faculty?
The issue is a matter of state control of faculty scholarship. The idea of academic freedom works against the state control of scholarship. Academic freedom argues that it is not in the public interest, nor the state’s interest, and certainly not the university’s interest, that the state own and control scholarship. This issue is at the heart of the university as an institution. Intellectual property comes into the picture as a means of making formal ownership of certain forms of scholarship. Start with copyright.
A copyright vests in any original work of authorship fixed in any tangible medium of expression. Copyright happens. The author of an original work owns the copyright. In the case of a work made for hire, the author of the work is the employer or commissioning party. A work is made for hire when it is prepared by an employee within the scope of his or her employment. Employment, in term, has to do with a multi-point test for agency established by the Supreme Court in Reid v CCNV (notes removed):
We turn, finally, to an application of § 101 to Reid’s production of “Third World America.” In determining whether a hired party is an employee under the general common law of agency, we consider the hiring party’s right to control the manner and means by which the product is accomplished. Among the other factors relevant to this inquiry are the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party’s discretion over when and how long to work; the method of payment; the hired party’s role in hiring and paying assistants; whether the work is part of the regular business of the hiring party; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party. See Restatement § 220(2) (setting forth a nonexhaustive list of factors relevant to determining whether a hired party is an employee). No one of these factors is determinative.
In this list of factors whether to determine if someone is an employee, the key issue is the scope of the employment. For faculty members, the analysis is split among these factors. The university administration does not control the manner and means by which instruction or research is accomplished, but does pay a salary and benefits, and is in the business of providing instruction and support for research. The payment of salary and treatment of faculty as employees for the purpose of tax treatment creates an ambiguity as to the scope of that treatment. What is it that a faculty member is hired for, to provide a service to the university itself, over which the state has control? In the case of copyright, for most university policies, only those works for which the university expressly contracts with a faculty member, outside regular “duties,” and for which the university offers additional compensation, such as release time from teaching.
Thus, faculty may be treated as employees of a public university for tax purposes, and there may be specific duties that a given faculty member owes to the university, such as meeting classes in assigned university facilities. But university faculty members are not required to conduct extramural research, and when they do, the university asserts no control over the methods used, other than required reviews for protection of human subjects and animal care–that is, compliance with laws and conditions of sponsored awards, not direction with regard to the work itself. A similar analysis holds for discourse and publication. Faculty members are reminded to be respectful and to make clear when they are speaking in the capacity as private citizens and that their speech reflects as well on their institution. But faculty members are not told by the university administration what they can say and not say, nor what how they choose to teach, nor what they choose to study, nor how and when and by what means they publish their ideas.
For most of what faculty members do at a university, they are not employees. They have no administrative masters. They do not do their work to provide “services” under the control of the university. A portion of faculty work may be construed as employment. But as far as copyright goes, the employer has to exert (or have the right to exert) control over the work being created. Faculty are not “working for hire” for their university unless they expressly agree to do so. The scope of faculty activity is much broader than the portion of their work that they cede to the university administration as directed and controlled by the university. The whole point of a university is that faculty work is free of such direction and control.
This is why universities exist: to push back on the political control of ideas, whether that control is exercised by government, church, industry, pressure groups, secret societies, organized crime, terrorists, or other adversaries of free inquiry. If a university touts “innovation” as a key output of this activities, that university cannot also demand to own and control faculty scholarship. It’s nonsense, administrative spout, legal confusion, innovation-damning stuff. Bureaucracies don’t innovate. They suck life out of innovation.
The scope of a faculty member’s professional interests may be much broader than the specific activities he or she undertakes within the context of a university. Within the university, the scope of that faculty member’s activities–research, instruction, advising, study, public service–is broader than those activities that form the “official duties” of the faculty position. Those “official duties”– the formal obligations owed by the faculty member to the university as employer–are remarkably narrow: to meet scheduled classes, to turn in grades, to serve on various committees. The rest is not employment. The broader activities may be supported by the university, but the university is no employer as a result of that support. The university cannot unilaterally change the “scope of employment” for a faculty member whenever an administrator feels the urge, regardless of what the administrator might put into a policy document. A change in scope requires the consent of the faculty member as well.
There are good reasons why academic freedom is allowed, even encouraged. Academic freedom has been developed over nearly a thousand years of university faculty activity. In the case of state supported or operated universities, state control of knowledge is not desired. The state does not “employ” university faculty in order to bring them within its power to dictate what they can teach or study. A third is that, technically, universities have not contracted to eliminate academic freedom, nor have they conducted the necessary supervision and control that would come with employment that eliminated academic freedom, including the freedom to control the results of teaching and inquiry, including copyrights and patents. We will get back around to university IP policies over the past thirty-five years–so hold that thought.
The outcome of this part of our discussion is that both students and faculty are, for much of their activities, members of the “general public.” They are not engaged in a trade or business when they conduct research or invent. They have access to university facilities because it is a public purpose of the university to provide that access, and other members of the general public may also gain access to those facilities on reasonable terms (by, for instance, matriculating as students showing qualifications to benefit from such access). They are, in short, professors and students, not employees, even if for some narrow portion of their relationship with their university they are also “employees.”