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An approach to managing conflict of interest in a changing world. (Feature).

Background

Creation and dissemination of knowledge has always been a central mission of higher education. As early as the 1920s, a few universities were transferring research results from the laboratory to the commercial marketplace for public use and benefit. But technology transfer as an enterprise did not begin to emerge until 1945, when Vannevar Bush's report Science--The Endless Frontier (1945) laid the groundwork for a new model of science and technology development. By articulating a persuasive argument that federal funding for university research could increase the flow of knowledge to industry and thus enhance the economy, Bush's report led to the establishment of new federal funding agencies such as the National Science Foundation and the National Institutes of Health. It was also instrumental in bringing about substantial increases in federal support for basic research. As a result, university research burgeoned.

It was not until the Bayh-Dole Act, however, that technology transfer became a major component of the university research landscape. University patenting increased particularly rapidly during the second half of the 1980s and early 1990s; over 30 percent of all patents issued to U.S. academic institutions from 1969 through 1991 were awarded in the three-year period from 1989 through 1991. The number of patents awarded to U.S. universities more than doubled from 1980 to 1988, but then nearly quadrupled from 814 in 1988 to 3151 in 1998. The number of academic institutions--both public and private--applying for and receiving patents also increased, from about 75 in the early 1980s to nearly 175 by 1998 (National Science Board, 1993, 2000).

The Bayh-Dole Act also provided a strong incentive for university-industry research collaborations. While industry support for university research is small in comparison with support from federal sources, it has doubled in the two decades since Bayh-Dole, from under 4 percent in 1980 to nearly 8 percent in 2000 (National Science Foundation, 1995, 2001).

As university patenting and collaboration with industry increased, questions have inevitably arisen regarding faculty members' potentially conflicting economic and professional incentives in such arrangements. Instances of faculty members having financial interests in companies that support their research or clinical trials have necessitated new approaches to the management of conflict of interest and focused attention on financial conflict. In addition, the egregious consequences of some faculty conflicts of interest have received widespread publicity, resulting in growing public pressure on universities to demonstrate accountability.

The upward trends in university patent activity, collaborations with industry, and potential for financial conflict of interest are likely not only to continue, but to accelerate. Universities, increasingly seeking additional sources of revenue, are stepping up their efforts to capitalize on faculty intellectual property, and a growing number of faculty in traditionally less entrepreneurial institutions are accepting technology transfer as a part of their scholarly and research activities. As a result, the culture in many universities is becoming substantially more entrepreneurial.

State legislatures are rapidly emerging as another force propelling universities toward heightened efforts to commercialize faculty research, as reported in the 29 March 2002 issue of The Chronicle of Higher Education.

As states convene their 2002 legislative sessions, the use of university research to spur economic development is in many cases at the top of their higher-education agendas. Nearly a third of the nation's governors have called on legislatures to pump money into public universities' research and technology transfer programs. In many cases, governors have proposed those expenditures even while making recession-driven plans to limit or cut state spending on other aspects of university operations.

Several states also are considering, or recently have passed., changes in their laws that eliminate barriers to collaboration between public-university faculty members and private companies. The measures are intended to give for-profit companies unprecedented access to public-university research facilities, while encouraging public universities and their employees to hold a financial stake in companies making use of research findings. (Schmidt, 2002, p. A26)

State lawmakers "are willing to put universities in the position of having to routinely wrestle with potential conflicts of interest if that is what it takes to give the institutions a larger role in economic development." They "express confidence that the institutions can be trusted to manage potential conflicts of interest." (Schmidt, 2002, p. A26)

Because of the size of the proposed budgets, these state initiatives have the potential to revolutionize universities' technology transfer efforts. In Florida, for example, the proposed figure is $100 million; in New York $250 million is being proposed; and in Ohio, the proposal is for $1.6 billion over 10 years. While it is recognized that the commercialization of research is more a function of institutions' cultures and reward systems than of state law; according to Louis Tornatzky, state leaders "can use financial incentives to entice the institutions to focus more on commercializing their findings." (Schmidt, 2002, pp. A26-27)

One University's Response

Like other institutions nationwide, Northwestern University recognized the need to address the changing research scene and new challenges posed by the heightened emphasis on technology transfer activities. Culminating a two-year development process, the new Northwestern University Policy on Faculty Conflict of Commitment and Conflict of Interest was issued, effective 1 September 2001. This paper describes the evolution of that policy, also addressing the underlying guidelines that shaped the policy content and the management procedures designed to implement the policy. Whenever possible the narrative draws directly from documents distributed during the course of policy development, as well as from the final policy text.

Policy Development

Early in 1999, management responsibility for the conflict of interest policy, which had been in effect since 1993, was transferred to the Office of the Vice President for Research, and the vice president was charged with the task of formulating a new, updated conflict of interest policy.

The Committee on Research Enterprise (CORE), chaired by the Vice President for Research, includes some 30 members, representing central administration offices, research intensive schools, and the General Faculty Committee (GFC). Because of CORE's broad representation, CORE subcommittees have spearheaded development of a number of university-wide policies, including, for example, the faculty and staff research appointment policies. In April 1999, the Vice President for Research appointed a CORE subcommittee, which included a member from the GFC, to compile an initial conflict of interest policy draft that would then be circulated more widely for comment and review.

To be effective, any policy must be appropriate to local conditions and take into account the local culture. However, in order to develop a conflict of interest policy in line with national trends and practices, as well as to build on the accumulated experience of peer institutions, Northwestern began the development process by reviewing a broad range of existing conflict of interest policies and extracting key elements and issues. The following is from an e-mail sent by the Vice President for Research to the newly-formed subcommittee on 30 April 1999.

In preparation for the first meeting of the CORE conflict of interest policy subcommittee, we are providing you with copies of the policies (and in one or two instances related materials as well) from ten "peer" institutions, along with Northwestern's current policy and reporting forms.

In addition to the policies you are being sent, we have policies from more than 20 other institutions which will be available at the meeting, should we wish to refer to any of them. If you are aware of a particularly good policy that we are not distributing, please let us know, and we'll circulate it prior to the meeting.

The early stages of policy development were summarized in a brief report from the Vice President for Research to the Northwestern University Board of Trustees Executive Committee 24 August 2000.

Development of the draft Policy on Faculty Conflict of Commitment and Conflict of Interest began with a comprehensive survey of the policies of peer institutions to identify "best practices." A writing committee appointed and chaired by Lydia Villa-Komaroff, Vice President for Research, reviewed the best practices to determine those appropriate for Northwestern University. The initial draft policy amalgamated key elements of the current Northwestern policy and the best practices from peer institutions.

Once the initial policy draft had been completed, the Vice President for Research asked each dean to designate a conflict of interest point person who would distribute the draft widely to that school's faculty and provide feedback to the writing committee. The Vice President for Research also met with faculty in [individual schools] to discuss the draft policy and solicit faculty feedback. The initial draft was revised a number of times as a result of this feedback.

The Board of Trustees Audit Committee reviewed the draft policy ... and further revisions were made as a result of this additional feedback.

The review of the draft policy by the Audit Committee proved to be a particularly critical step in the development process. The committee's comments provided a fresh perspective on the draft and helped to clarify unintended ambiguities. It was pointed out, for example, that most conflict of interest policies do two things: (a) stipulate that conflict situations must be disclosed and (b) require that the conflicted party step away from any decision-making role, including trying to influence the decision, as long as the conflict exists. While the draft policy covered the disclosure point, it was not clear on the no-influence point. The Audit Committee also noted that the draft policy did not make it explicit that activities involving a potential conflict must not only be disclosed and reviewed, but must also be approved.

Guidelines for a Conflict of Interest Policy

Faculty dissatisfaction with the 1993 conflict of interest policy was a critical factor in the decision to develop a new policy. As they emerged from campus-wide discussions, the reasons for that dissatisfaction shaped guidelines for the content of the new policy. This section summarizes those guidelines and provides excerpts from the final policy that illustrate how the guidelines informed the policy text (Northwestern University, 2001).

Purpose

The rationale for supporting research institutions with public funds is that society at large benefits from university research. However, to the extent that faculty members are actively involved in transferring their ;research to the public sector, the potential for conflict of interest is inevitable. The purpose of a policy is to address those conflicts, and this purpose must be stated clearly. (Terms capitalized in the text are used as defined in the policy.)

The intent of this Policy is to enable Faculty Members to recognize situations that may be subject to question and to ensure that such situations are properly reviewed and, if necessary, supervised or monitored. Thus, an integral part of the Policy is a disclosure mechanism whereby Faculty Members regularly report their activities for review and approval by the department chair, center director, dean, or Vice President for Research (see "Reporting responsibility and approval authority"). As discussed in detail below, activities which may be subject to questions of Conflict of Commitment or Conflict of Interest must be approved before the activity is undertaken.

The Policy fulfills two other purposes as well. First, it provides Faculty Members with meaningful guidance for the continued development and future structuring of productive relationships with industry. Second, by virtue of its provision for full disclosure, the Policy provides assurance to Faculty Members, the University, and, most important, the public, that such relationships have been examined and will be conducted in a manner consistent with institutional and public values. (Section I. Preamble)

Context and Rationale

The advent of Web-based instruction and distance learning has significantly increased the opportunities for conflict in fields where there is no history of conflict or experience with conflict management. For example, a philosophy professor now has the possibility of selling lectures and with that possibility of sale there is the potential for conflict of interest. A policy which might be understood and accepted in those parts of the university where there is a history of dealing with conflict of interest might be misunderstood and perceived as threatening in areas where conflict of interest is a relatively new phenomenon. Thus, sufficient explanation and rationale must be provided to make the policy comprehensible to the least experienced segments of the university. The introduction/preamble to the policy provides context and explains the rationale behind the policy.

The premise of this Policy is that each Northwestern University Faculty Member has a fundamental obligation to act in the best interests of the University and must not let outside activities or outside financial interests interfere with that obligation. The purposes of this Policy are to educate Faculty Members about situations that generate Conflicts of Commitment and Conflicts of Interest, to provide means for Faculty Members and the University to manage those conflicts, and to promote the best interests of students and others whose work depends on Faculty Members' direction. (Introduction)

Conflicts of Interest are common and practically unavoidable in a modern research university. At Northwestern, Conflicts of Interest can arise because a mission of the University is to promote public good by fostering the transfer of knowledge gained through University research and scholarship to the private sector. Two important means of accomplishing this mission include Faculty Members' consulting and the commercialization of technologies derived from Faculty Members' research. It is appropriate that Faculty Members be rewarded for their participation in these activities through consulting fees and sharing in royalties resulting from the commercialization of their work. It is inappropriate, however, for actions or decisions made in the course of a Faculty Member's University activities to be determined by considerations of personal financial gain. Such behavior calls into question the professional objectivity and ethics of the Faculty Member, and it also reflects negatively on the University. Northwestern University is an institution of public trust; Faculty Members must respect that status and conduct their affairs in ways that will not compromise the integrity of the University. (Section I. Preamble)

Definitions

The policy must also define conflict interest and stipulate disclosure requirement

In general, a Conflict of Interest occurs when there is a divergence between a Faculty Member's private interests and his/her professional obligations to the University, such that an independent observer might reasonably question whether the Faculty Member's professional actions or decisions are determined by any considerations other than the best interests of the University.

Disclosure of consulting and other Compensated Professional/Commercial Activities is required if the amounts received from these activities total more than 10% of the Faculty Member's University salary, except under special circumstances as defined by the school dean and the Vice President for Research. External Financial Interests must be disclosed as well. (Section III-A. Conflict of Interest: Definition and disclosure requirements. See appendix for definitions of Financial Interests and External Financial Interests.)

Disclosure

As Northwestern is not an institution steeped in entrepreneurial tradition, it is necessary to bring faculty to the point where they are willing to disclose their activities; unless potential conflicts are disclosed, they cannot be approved, disapproved, or managed. For faculty to be willing to disclose, they must understand that the university is not primarily concerned about dollar amounts, but rather about time commitments and potential conflict of financial interests.

On an annual basis, all full- and part-time Faculty Members, including research faculty, must provide information on the nature and extent of their Non-compensated Professional Activities and Compensated Professional/Commercial Activities, not including the amount of income derived from such activities. (Section IV-A. Implementation: Reporting responsibility and approval authority)

Possible Conflict Situations

A conflict of interest policy must make clear to the faculty what they can and cannot do if they engage in entrepreneurial activity. Therefore, the policy incorporates broad and fairly complete descriptions of the types of situations that may create conflict of interest, including a section devoted specifically to clinical trials. The following excerpt from the table of contents illustrates the range of topics described in the text.

Situations that may create a Conflict of Interest

1. External Financial Interests

2. Consulting and other Compensated Professional/Commercial Activities

3. Use of students/support staff on outside activities

4. Use of University resources

5. Clinical trials

6. University dealings with entities with which Faculty Members have a relationship

Faculty and University Responsibilities

The policy must clearly articulate the responsibilities of both the faculty member and the university.

The responsibility for disclosing potential Conflicts of Commitment or Conflicts of Interest rests with the individual Faculty Member. It is the responsibility of the University to determine if the disclosed interests could directly and significantly affect the Faculty Member's performance of University responsibilities and, if so, to require the management, reduction, or elimination of the conflict. (Section I: Preamble)

Addressing University Cultures

Each university has its own particular culture and subcultures. A conflict of interest policy must address all the subcultures without discouraging the innovative scholarship of faculty motivated to move their research into the commercial world.

Determination of whether a Conflict of Commitment or Conflict of Interest exists in a particular instance will always be a matter of judgment.... The activities of Faculty Members must be governed by thoughtful and shared consideration of individual circumstances, rather than rigid rules; sound administrative discretion is an integral part of the University's Conflict of Interest system. (Section I: Preamble)

Flexibility in Implementation

There must also be flexibility in the policy implementation procedures to accommodate different practices and different expectations within different university subcultures. At Northwestern, therefore, responsibility for policy implementation was placed at the school level. The Vice President for Research is responsible for interpreting and overseeing implementation of and compliance with the policy; the vice president is also expected to ensure that the policy is implemented with reasonable consistency across the university. Responsibilities of the school dean, and the flexibility the policy allows for addressing the local culture, are described in the following section.

Each school dean is responsible for establishing guidelines for accepted standards for Non-compensated Professional Activities, including reporting thresholds; for developing disclosure/certification forms for the school; for the timely collection and review of annual disclosure/certification forms, as well as ad hoc disclosure reports, by the department chairs; and for approving or rejecting activities proposed to be engaged in by Faculty Members. Individual schools may have more, but not less, restrictive internal policies than those set forth by the University in this Policy, and individual school disclosure/certification forms may request more, but not less, information than that specified in "Annual disclosure reports disclosure and certification of compliance." The dean should use his/her discretion and knowledge of local conditions to set up a system that works well for the school. Each school's disclosure/certification forms, guidelines, and plans for distribution, receipt, processing, review, and app roval of disclosure/certification forms by the dean, or the dean's designee, must be submitted to and approved by the Vice President for Research.

The school deans will provide the Vice President for Research with a summary of the results of their reviews of the reports submitted to their offices no later than December 15 of each year. (Section IV-F: Implementation: Responsibilities of the school dean)

Decision-making Guidelines

Faculty members must know who makes decisions regarding their potential conflicts of interest. The implementation section of the policy includes a subsection "reporting responsibility and approval authority" that specifically addresses faculty members in schools with departments, faculty members in schools without departments, faculty members who receive salary through research centers, and faculty members who are deans or directors of university research centers. Faculty must also know how decisions regarding potential conflicts will be reached. The policy provides those guidelines.

Within this framework, any review of a potential conflict will be undertaken in light of four general propositions:

First, Conflicts of Commitment and Conflicts of Interest are inevitable.

Second, Faculty Members must disclose activities that may give rise to Conflicts of Commitment and Conflicts of Interest for administrative review and approval.

Third, Faculty Members may act in dual roles as long as the proposed activity has been disclosed and approved.

Fourth, a conflict may be so profound that the Faculty Member will not be allowed to participate in a particular transaction and/or activity, or to make a decision for the University, or to attempt to influence a decision made or to be made by the University. (Section I: Preamble)

Policy Implementation

On 21 August 2001, the Vice President for Research sent the following blanket e-mail to all faculty.

This blanket e-mail is to give you advance notice that the revised Policy on Faculty Conflict of Commitment and Conflict of Interest, effective September 1, 2001, is now posted on the Web site for the Vice President for Research at http://www.northwestern.edu/research/policies/facultyconflict.html. The memorandum which precedes the policy provides an overview of the implementation process that will begin in the fall.

The Vice President's memorandum of 17 August 2001 to which the e-mail refers follows.

Following is the revised Policy on Faculty Conflict of Commitment and Conflict of Interest, which is effective as of September 1, 2001. This policy was developed in response to questions raised by the faculty regarding the previous policy. To ensure broad faculty input during the revision process, each school was asked to identify a "point person" responsible for issues pertaining to conflict of commitment and conflict of interest. The point people worked with me to address faculty concerns and to identify issues that should be taken into account as the revision process moved ahead.

I have now asked each school to identify a point person to work with me and assist the deans and department chairs with the implementation process; those individuals are listed below. Although the new policy stipulates that annual summary reports from the deans are due December 15th, for this transition year, I am extending that deadline to the end of January 2002. This "trial run" should enable us to make whatever adjustments may be needed in the reporting process for the first complete reporting cycle, which will conclude December 15, 2002.

I would like to underscore the importance of compliance with the reporting requirements of the new policy. The policy's governing premise is that conflict, per se, are not necessarily a problem, but they must be managed. The primary concern is not dollar amounts, but time commitments and potential conflict of financial interests of faculty and outside entities. Compliance with reporting requirements affords an opportunity to manage potential conflict, thereby minimizing the likelihood of future problems for either the faculty member or the University. The revised policy stipulates the essential information that must be reported, but also provides each school the opportunity to develop its own forms, thereby permitting deans to use their discretion and knowledge of local conditions to set up a system that works well for the school.

I encourage the faculty to work with their deans in the development of policy implementation plans for their schools, and I emphasize again the importance of complying with the procedures established.

Current Status

At the school level, conflict of interest reporting forms have been developed and distributed to all faculty; deans have submitted summary reports to the Vice President for Research. Schools are also establishing conflict of interest management plans and conflict of interest advisory committees. As cases are referred, these committees assess the nature of the conflict, determine if it is manageable, and, if it is, develop a management strategy.

At the university Level, the conflict of interest point people are meeting with the Vice President for Research to review and discuss all aspects of the initial implementation process and to identify areas in which modifications should be made for the first full reporting cycle.

The policy provides for the Vice President for Research to adjudicate situations in which faculty members wish to appeal a decision of a school dean or a university research center director. Appeals of decisions made by the vice president may be presented to the university's provost. The Vice President for Research has appointed a university-wide conflict of interest committee--comprised of faculty, research staff, and administrators--to advise the vice president on particularly challenging conflict situations. This committee, while not prescribed by the policy, provides an additional check on the process to ensure that the policy is being applied equitably and fairly.

The elements required for successful policy implementation are in place. Only time and experience can determine whether the goal, successful management of conflict of financial interests, will be achieved.

Appendix

For purposes of this Policy, "Financial Interest" means that a Faculty Member or any members of his/her immediate family (spouse, dependent children as determined by the Internal Revenue Service, or domestic partner) have an interest in a business consisting of:

(1) any stock, stock option, or similar ownership interest, excluding any interest arising solely by reason of investment in such business by a mutual, pension, or other institutional investment fund over which the Faculty Member does not exercise control: and/or

(2) receipt of, or the right or expectation to receive, any income from such business, or from an agent or other representative of such business, whether in the form of a fee (e.g., outside consulting), salary, allowance, forbearance, forgiveness, interest in real or personal property, dividend, royalty derived from the licensing of technology, rent, capital gain, real or personal property, or any other form of compensation, or any combination thereof.

Financial Interest does not include current or pending ownership interests in an entity that, when aggregated for the Faculty Member and members of his/her immediate family, amounts to less than $100,000 in financial interests and also represents less than one-half percent (0.5%) of the company's equity. Financial Interest does not include ownership interests such as mutual funds that are managed by an independent third party.

"External Financial Interests" are those Financial Interests that do not involve the University as an institution. The receipt of royalties from a patent license is a Financial Interest, but a Faculty Member's receipt from the University of a share of royalties from a University license of his/her invention/creation is not an External Financial Interest for purposes of this Policy. (Section III-B-I. Conflict of Interest Situations that may create a Conflict of Interest External Financial Interests)

References

Bush, V. (1945). Science--The Endless Frontier. Washington, DC: United States Government Printing Office. Reprinted 1990, Washington, DC: National Science Foundation.

National Science Board (1993). Academic research and development: Financial resources, personnel, and outputs. Chapter 5 in Science & Engineering Indicators-1993. Hypertext version: National Science Foundation at http://www.nsf.gov/sbe/srs/seind93/chap5/doc/5e293.htm

National Science Board (2000). Academic research and development: Financial and personnel resources, support for graduate education, and outputs. Chapter 6 in Science & Engineering Indicators-2000 (NSB-00-01). Arlington, VA: National Science Foundation.

National Science Foundation (1995). National expenditures for R&D, by performing sectors and sources of funds: 1953-94. Table B-2 in National Patterns of R&D Resources: 1994 (NSF 95-304). Arlington, VA: National Science Foundation.

National Science Foundation (2001). National expenditures for R&D, by performing sector and sources of funding: 1993-2000. Table LA in National Patterns of R&D Resources: 2000 Data Update (NSF 01-309). Arlington, VA: National Science Foundation.

Northwestern University (2001). Policy on Faculty Conflict of Commitment and Conflict of Interest. Evanston, IL: Northwestern University. Available online at http://www.northwestern.edu/research/policies/faculty-conflict.html

Schmidt, P. (2002). States push public universities to commercialize research. The Chronicle of Higher Education, XLVIII, 29, A26-A27.

Lydia Villa-Komaroff, PhD, is Vice President for Research at Northwestern University. She joined Northwestern in 1996 as Associate Vice President for Research and was appointed Vice President in 1998. Her previous positions were Associate Professor of Neurology at Harvard Medical School and Associate Director of the Division of Neuroscience at Children's Hospital in Boston. She is a member of the American Association for the Advancement of Science Board of Directors, Advisory Council of the National Institute of Neurological Diseases and Stroke, and Institute of Medicine Committee on Assessing the System for Protecting Human Research Subjects. Dr. Villa-Komaroff received her PhD in cell and molecular biology from the Massachusetts Institute of Technology, and her research covered a wide spectrum of topics in cell and developmental molecular biology.

Leila S. Edwards, PhD, is Executive Director of Research Analysis and Publications in the Office of the Vice President for Research at Northwestern University. Prior to coming to Northwestern, she was Professor of Psychology and Associate Dean of the Graduate School at the University of Rhode Island. At Northwestern, she served as Senior Associate Dean of the Graduate School before assuming her current position. The author of numerous articles in professional journals in the fields of both statistics and psychology, she earned her PhD in psychology from Case Western Reserve University in Cleveland, Ohio.

Author's Note: The authors gratefully acknowledge the assistance of Lawrence B. Dumas, Northwestern University Provost; the point people designated by the school deans who worked with the vice president to address faculty concerns and to identify issues that should be taken into account during the revision process and again during the implementation process; and R. Eden Martin, member of the Northwestern University Board of Trustees. Correspondence should be addressed to Leila S. Edwards, PhD, Executive Director of Research Analysis and Publications, Northwestern University, 633 Clark Street, Crown 2-568, Evanston, Illinois 60208-1108. Phone: 847-491-8479 Fax: 815-352-1624 E-mail: l-edwards@northwestern.edu
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Author:Edwards, Leila S.
Publication:Journal of Research Administration
Date:Jul 1, 2002
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