Legislature(2005 - 2006)BUTROVICH 205
03/02/2006 08:30 AM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB249 | |
| SB284 | |
| HB92 | |
| SB298 | |
| HB318 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 298 | TELECONFERENCED | |
| + | HB 92 | TELECONFERENCED | |
| + | HB 318 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 284 | ||
| = | SB 249 | ||
HB 92-UNIV. OF ALASKA & NONPROFIT CORP STOCK
8:53:38 AM
CHAIR RALPH SEEKINS announced CSHB 92(JUD) to be up for
consideration.
REPRESENTATIVE MIKE KELLY, bill sponsor, advised the committee
of a new committee substitute (CS) for the bill. SCS CSHB 92
version X would permit the University of Alaska to invest in
corporations who would produce and market inventions coming from
the university. The bill that passed the House limited the
investment to non-profit organizations but the current CS would
allow for investment opportunities in profit corporations as
well. The university has seen tremendous growth in money coming
in for sponsored research and that has a tremendous multiplier,
creating thousands of jobs. That has been instrumental in
changing the university's funding from a majority of state
funding to tuition and other funds.
Part of a successful research university is the ability to "spin
off" intellectual properties into applied science and to
contribute to the economy. Presently the university is prevented
from investing in corporations due to fear of liability
associated with "piercing the corporate veil." HB 92 would make
it possible for the university to invest in corporations but
would not allow the university to be liable for the
corporation's debts.
When the House stripped away the for-profit corporation ability,
it took away a large portion of the potential benefit of the
bill. The current CS would add that ability back in.
8:57:47 AM
SENATOR GENE THERRIAULT moved 24-LS0344\X as the working
document before the committee. Hearing no objections, the motion
carried.
DR. CRAIG DORMAN, Vice President of Academic Affairs for the
University of Alaska Statewide System, explained that the basis
of the university's request was based on public law that permits
universities to take ownership of inventions that are made with
federal funding. To take advantage of the inventions, it
requires that things move into the commercial line of business
and would start by encouraging the individual who made the
invention to patent or license it.
9:00:28 AM
DR. DORMAN said when a scientist invents a piece of equipment
used to further his research it can be useful for other
researchers around the world. The form of ownership that it
would typically take could include the university putting up
it's own portion of the invention rights as outlined in a
collective bargaining agreement or have stock rights or partial
interest in a corporation.
DR. DORMAN gave an example of using a non-profit last year.
Currently the university is involved with the Alaska Ocean
Observing System. The university is in the process of
establishing rules and governance processes whereby it becomes
part of the national federation of regional agencies and thus it
could accrue significant federal funding, he noted. Although the
university wants to be involved in such ventures, there is
concern with regard to the university being seen as a "deep
pocket." Therefore, the intent of HB 92 is to avoid losing the
university's assets by allowing it to participate in start-up
ventures and charitable nonprofits.
9:02:16 AM
SENATOR GRETCHEN GUESS asked Dr. Dorman the amount of public
universities that have the same provision.
DR. DORMAN said from his experience it was common practice.
Universities have a variety of ways of allowing for this type of
thing.
REPRESENTATIVE KELLY explained to the committee that the
university legal counsel was unable to be present today but they
put the language for the original bill together. There are
several states that have similar language as HB 92.
9:03:28 AM
SENATOR GUESS asked Representative Kelly whether the normal
practice was for someone to form a corporation but leave the
university not liable for losses. She said she did not
understand why anyone would enter into an agreement such as
that.
REPRESENTATIVE KELLY responded they would be liable within the
corporation and so the investment would be at risk. It would not
be any different than the average person in that the corporation
couldn't reach into the university.
CHAIR SEEKINS said it was more of a corporate iron curtain than
a corporate veil.
SENATOR GUESS posed a hypothetical example. If the university
owns forty percent of a corporation and that corporation goes
bankrupt and incurs $100,000 worth of losses, she asked who
would pay the liable loss.
REPRESENTATIVE KELLY explained that it would be the same as any
investment in a corporation and that the university's investment
would be at risk but the corporation could not submit that bill
to the Board of Regents. It would be strictly within that profit
or non-profit corporation.
SENATOR GENE THERRIAULT commented it was no different than any
other corporation. The assets of the business are at risk but
the bank could not reach through to confiscate anyone's home.
9:07:47 AM
REPRESENTATIVE KELLY commented that the bill was timely because
currently there is approximately $150 million dollars a year
brought in from the outside into the university system. He said
he is very comfortable with the bill and reminded the committee
that it involves the Board of Regents and is very tightly
controlled.
SENATOR CHARLIE HUGGINS expressed support for the bill.
9:09:45 AM
SENATOR THERRIAULT asked Representative Kelly the reason the
House dropped out the for-profit corporations in the bill.
REPRESENTATIVE KELLY said it happened in the House Economic
Development and Tourism Committee out of a "fairness" concern
that there be no injury to the public.
SENATOR THERRIAULT said he did not understand why there would be
any difference.
REPRESENTATIVE KELLY commented the concern was about tort and
fraud but the bill would actually protect the university from
those sorts of things.
CHAIR SEEKINS speculated the reason the committee dropped non-
profit from the bill was due to a basic misunderstanding of
corporate law.
SENATOR HUGGINS asked Representative Kelly whether the House
Economic Development and Tourism Committee now understood their
mistake.
REPRESENTATIVE KELLY said he couldn't comment. There was another
side to the issue, which was that the bill now clarifies that
the corporate entity of the university does not enter into
liability with the corporation.
9:13:13 AM
SENATOR HOLLIS FRENCH said he had a question for the university
legal counsel and hoped to be able to question someone before
the bill left committee. He said he wanted to know the other
states that use the same model that the bill proposes.
BRIAN ROGERS, member, University of Alaska Fairbanks Board of
Regents, expressed support for the bill. Testimony last year
indicated that the legal protections the bill provides the
university are identical to those that are provided to state
agencies, such as Alaska Industrial Development and Export
Authority (AIDEA). The university has been trying to transfer
technology to the private sector for some time. They tried in
the early 1990s to set up a technology development corporation
but were not successful.
9:16:12 AM
MR. ROGERS gave an example of an invention that identifies pin
bones in a fish and removes them, making for a better product.
Without a corporate veil or legal protections the university
could become liable if someone were to choke on a pin bone that
did not get removed. The standard university stance is to not
take risks and so the bill provides a balance so that the only
risk to the university would be the investment. HB 92 balances
the protections yet allows them to create economic development
from the university and in the long run, provides revenues to
the university.
CHAIR SEEKINS announced a brief recess at 9:18:07 AM.
9:25:11 AM
CHAIR SEEKINS held the bill in committee.
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