This is an updated version of an article first published as a chapter in The Innovation Handbook, endorsed by the UK IPO. © The Innovation Handbook 3rd edition, published by Kogan Page 2013. Reproduced by permission of Kogan Page Ltd.
The purpose of research collaborations
In a research collaboration two or more parties cooperate in carrying out a research project, usually with a view to the technology generated by that project being used commercially. By cooperating with each other in this way, the participants can pool resources and expertise and take advantage of intellectual property and facilities they may not necessarily own themselves.
For example, a company with a drug and a company with a drug delivery device may collaborate in exploring how the drug can be incorporated into the device so that the two can be sold as a single product. Existing intellectual property will be applied to the project and, if either the drug or the device needs adapting in order to ensure compatibility, new intellectual property will come out of the venture. The parties will then need to determine how that intellectual property will be owned and what exploitation rights will apply to it.
Alternatively, one or more industrial partners may commission a university or research body to carry out an agreed project. In return for granting exploitation rights over the results, the university may be given funding, the right to continue to use those results for internal research purposes and publication rights.
This chapter explores the intellectual property and commercial issues thrown up by such collaborations, the problems which can arise and how to avoid them.
Many research collaborations qualify for funding available under UK or European schemes such as the European Horizon 20/20 Programme. A non-exhaustive list of such schemes available in the UK and the EU at the time of writing can be found in the Appendix. Needless to say, given the recent political developments, UK applicants’ eligibility for some EU grants may change. However, the EU grant regime is always evolving and the range of UK grants on offer changes with each government, so none of this is set in stone anyway.
Such grants are a useful option in the current economic climate in which funding from other sources is not as easy to obtain as in previous years. However, they should not just be viewed as “easy money” that can be obtained with little trouble and with no strings attached, because:
- Applying for a grant can be a time-consuming and complex process.
If the applicant does not meet the grantor’s criteria, fills out the application form incorrectly or misses the deadline, it will all have been for nothing. Applicants should therefore verify that they qualify and that the grant meets their needs before beginning the application process.
- The grant offer will contain numerous conditions and non-compliance could mean further funding being refused and sums already paid being clawed back.
For example, use of the grant money will be restricted to the agreed project only and the parties will at the very least be required to use reasonable endeavours to exploit the project results; commercial exploitation may be restricted to a defined territory, at least for an initial period; the grant may require that collaborators be limited to parties from a list of defined countries; it may even require that the grantor has ownership rights over intellectual property generated or a right to royalties if revenue is generated by exploiting it; or, funding may have to be matched with equivalent contributions from other sources.
The terms of the grant therefore merit careful consideration. If complying with them is likely to make it too difficult for the parties to achieve what they want, other options should be considered.
Research collaboration agreement
Most such grants require that the parties enter into a research collaboration agreement containing terms acceptable to the grantor. Even if this is not the case, or if no grant funding is being used, formalising the collaboration with a written agreement is obviously a good idea. If they have signed such a contract, it should be clear what each party’s obligations are and what its rights and remedies are if any of the other parties fails to meet its obligations. There is far less scope for a misunderstanding or a dispute if one can refer to a written document in order to confirm who is required to do what under the project and what happens if any given circumstance arises.
The research collaboration agreement should deal with the following:-
Exactly who the contracting parties are, including name, address and legal status;
- The scope of the project and what each party’s role will be – if any project phases must be completed by set dates, these should be included;
- A non-disclosure obligation requiring each party to keep confidential any sensitive information disclosed to it by any of the other parties;
- What existing or ‘background’ intellectual property each party is applying to the project – if a party needs a licence to use another party’s background intellectual property in order to perform its own role under the collaboration, it should be clear that that licence is restricted to use under the project only;
- How intellectual property generated will be owned and used (this is dealt with in more detail in the next section);
- Whether any party may use subcontractors – if so, they should also be tied in by confidentiality and restrictions on use of intellectual property in the same way that the main collaborators are;
- What will happen if any party drops out of the project, if a new one is admitted or if the requisite funding is no longer available;
- What will happen if a party sells its business or undergoes a change of control – for, example, if a party is acquired by a competitor, it needs to be considered whether it is still desirable to have it as part of the collaboration or not;
- And, what contractual breaches merit a party being expelled from the collaboration – these may include failing to perform its role under the project in a timely or competent fashion, disclosing another party’s confidential information, becoming insolvent or using another party’s intellectual property beyond the scope permitted by the agreement.
Legal advisors need to ensure that the agreement is clearly drafted and legally compliant. It will also have to be consistent with the terms of any grant offer letter and not contravene any applicable competition or anti-trust provisions. For example, collaborations in the European Union must comply with the European Commission’s 2010 Block Exemption Regulation covering research and development agreements.
Negotiating a research collaboration agreement can be a lengthy process, particularly if it involves numerous parties with differing concerns and agendas who all have to sign off on it.
Ownership and use of foreground intellectual property
The purpose of a research collaboration is to generate intellectual property which can be used in the exploitation of useful and profitable products and processes. Consequently, how this resulting or ‘foreground’ intellectual property will be used, who will exploit it and how any exploitation revenue will be shared out will be the most crucial issues to agree on. In deciding them, the parties should bear in mind the following:-
- Although the most acceptable solution may be for all the collaborators to own the foreground intellectual property jointly, joint ownership of intellectual property can give rise to problems.
If the co-owners have equal exploitation rights, they could end up competing with each other. Moreover, they will have to agree on how to share the responsibility of applying for and maintaining patent rights and defending those rights against infringement. In some jurisdictions a co-owner of intellectual property cannot grant licences to it or take action against infringers without the cooperation of the other co-owner(s).
- An easier solution may be for each party to own the intellectual property it generated under the project or in a defined field.
In the example of the drug and drug delivery device companies above, the drug company could own improvements to the drug and the device company could own improvements to the device, for example.
- A company may need access to another party’s foreground and background intellectual property in order to exploit its own, meaning an appropriate royalty would have to be negotiated.
- The parties should carry out freedom to operate searches in order to confirm that background intellectual property can be applied to the project envisaged and to any future commercialisation.
If it can’t, the efficacy of the foreground intellectual property could be drastically undermined.
- If the foreground intellectual property has been generated by an academic party and is to be exploited by a commercial one, the academic party may also want the right to publish the project results.
In such circumstances the commercial party will want to ensure that no confidential information is included in the publication and that, if necessary, publication is delayed until patent applications have been filed.
What happens with foreground intellectual property need not be agreed right at the beginning of the project but, if it is successful, agreement will definitely have to be reached at a point soon after.
Parties need to be realistic with their expectations of the financial return from the collaboration. Commercialisation may be a long way off and, when it comes, the revenue may not be as significant as had been hoped. Even if the technology is successful, if it ends up being just one facet of a bundled product or process, any royalty due may have to be split between a number of licensors and the collaborators’ share could be eroded significantly as a result.
Some practical considerations
Any given research collaboration may fail for scientific or technical reasons, the intellectual property generated may be blocked by existing rights or commercialisation may ultimately fail due to market considerations.
However, failure can also result from personal or organisational factors. This risk can be limited by bearing in mind the following:-
- If setting up the project is fraught with difficulty because another party is obstructive or acts in bad faith, or because there are significant personality clashes, matters are unlikely to improve once the project is under way. In such circumstances serious thought should be given to whether or not to enter into the collaboration.
- To achieve what it wants from the collaboration more easily, each party should secure a champion in each of the other parties, but there need to be contingency plans in place should any such champion leave.
- In negotiating the research collaboration agreement, each party should think of all the possible eventualities and accommodate them. Even then, something may happen that no one will have thought of, in which case whether the problem can be surmounted or not will depend significantly on the quality of the relationship between the collaborators.
- It is advisable to set up a project steering committee to oversee conduct of the project, allocate funding, identify intellectual property generated and regularly report back to the parties. As well as making project management more efficient, this makes it easier to identify and address any problems early on, rather than leaving them to fester until they develop into insurmountable obstacles or full-blown disputes.
The above summary gives general pointers and is not specific to any particular technology, grant funding scheme or commercial arena. However, it illustrates that anyone considering a research collaboration is well-advised to conduct extensive due diligence in these areas and in connection with their prospective collaborators.