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NCSU tries to avoid business disputes with startup partners

Some universities partner with startup companies by assisting them with research, funding and other joint supportive activities. This has historically been a successful model for “jump-starting” new businesses. In fact, the North Carolina State University has a stellar reputation in that respect. However, a state law has hampered the university’s efforts and provided the fuel for a number of potential deal-breaking business disputes with the participating companies.

The University has helped to start up over 100 companies. However, one law has been having a restrictive effect on the success of the business development program. That law, which is the North Carolina public records law, requires public agencies such as the University to disclose records to the public upon request. This is interpreted to include records of possible proprietary information, which is a no-brainer and a non-starter for small businesses with closely-guarded secrets about its discoveries and developing products. Rather than risk potential business litigation, the companies may choose to stay out of the relationship altogether.

Thus, certain companies will not partner with the University because it cannot protect the confidentiality of the company’s internal research and development information. Even if the information is never requested by anyone to be made public, companies may stay away from the university strictly on the fear of possibly facing such an intrusion. Deeper examination of the problem, however, indicates that part of it may be illusory. That is because in reality the university does not receive very many such requests for information, according to school officials.

Another suggested resolution to reduce potential business disputes is for the company to withhold its proprietary trade secrets from professors and thus diplomatically work around the problem. Others are working on lobbying the legislature to come up with exemptions in the law that will assure the freedom of joint research and development projects for North Carolina State and others. That may be the more ideal and long-term resolution that will cut the problem out at its roots.

Source:, "NCSU: State law causing school to lose money, business", Kelly Hinchcliffe, July 3, 2014

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NCSU tries to avoid business disputes with startup partners | Britton Law, P.A.