HD6 - The Virginia Tech Library System


Executive Summary:
At the request of Speaker Philpott, the Commission authorized a study of the development of an automated library system for the Virginia Tech Newman Library and the assignment of this system to the Virginia Tech Foundation for marketing and distribution. The Speaker was concerned that the appropriate steps might not have been taken to secure the proprietary interest of the State and the taxpayers in the computer program. He was also concerned that the Virginia Tech Foundation may have been charging libraries in the Commonwealth an unfair price for the computer software.

Consistent with this study request, we examined the following questions: (1) Who owns the proprietary rights in the Virginia Tech Library System (VTLS)? (2) Who is entitled to royalties and to what extent should they be shared? (3) Does the University have the authority to transfer proprietary rights to the Virginia Tech Foundation? and (4) Is the Virginia Tech Foundation charging public libraries a fair price for installing VTLS?

The staff reviewed relevant federal and State laws, policies, and procedures; consulted with intellectual property specialists at The College of William and Mary and The University of Virginia; and requested the Auditor of Public Accounts to review certain financial accounting and auditing issues related to the development of VTLS. The findings of the Auditor are included in the appendix to this report.

The major conclusions of the JLARC special study are:

1. Development and sales of VTLS have resulted in substantial revenues that can be used by the Virginia Tech Foundation for the benefit of the University. The VTLS has received national and international attention. This can be attributed to the initiative and ingenuity of Dr. Vinod Chachra and to the entrepreneurial policies and attitudes of the University which foster the creation of intellectual properties by its staff.

2. Virginia Tech chose to include the development of VTLS under its patent policy. However, JLARC staff conclude that the application of the patent policy was a mistake because the computer software was not patentable and federal copyright law covers computer software. Thus, the University should have used its copyright policy in determining Dr. Chachra's share of the royalties.

3. Under the University's 1973 copyright policy, Virginia Tech owned an intellectual property developed as an assigned duty by a staff member and was not obligated to distribute royalties. The development of VTLS was an assigned duty only until 1978 and enhancements thereafter resulted from Dr. Chachra's independent scholarly research. Therefore, the President of Virginia Tech should determine the extent to which VTLS replicates the original computer software developed for the Newman Library in 1978, the year Dr. Chachra left his position as Director of the Systems Development Division.

That portion of the existing VTLS which has been replicated should be assigned a market value. The market value should be presumed to be at least $2500 (equal to one-half of the initial selling price of VTLS in 1980) unless the President can establish with reasonable certainty that the amount is different. Revenues that have accrued or that may accrue from the replicated portion of VTLS should be credited to the Foundation and not shared with Dr. Chachra.

4. Because the original VTLS was developed with general funds and as a part of the assigned duties of Dr. Chachra, the Foundation should reimburse the general fund $53,000 for the developmental expenses associated with the original software system.

5. University decisions regarding the assignment of proprietary rights to the Virginia Tech Foundation have been consistent with State laws and long-standing intellectual property policies of the University.

6. The revised VTLS pricing options for public libraries in Virginia seem fair and reasonable.