The proposed PACTE law, which is currently being debated within the French Parliament and was approved by the Assemblée Nationale on 9 October 2018, aims to facilitate the collaboration between public research and private companies in France.

Why a new law?

The current legal framework for collaboration between public research and private sector companies stems from the French law on research and innovation dated 12 July 1999 (named Loi Allègre after a former French Minister of Education).

Pursuant to the rules set by articles L. 531-1 to L. 531-14 of the French Research Code, researchers from the public sector may, under certain conditions, either:

  • create or participate in the creation of a company; or
  • contribute as a scientific expert to, or invest in, an existing company; or
  • be part of the management of an existing company.

However, these rules have not achieved the expected results.

Figures published by the French government reveal that since 2000:

  • Only 231 researchers from the public sector were authorized to create a private company (out of 258 applications);
  • Only 1144 researchers from the public sector were allowed to contribute as scientific experts to an existing private company (out of 1255 applications), and
  • Only 51 researchers from the public sector were authorized to be part of the management of a private company (out of 58 applications).

Therefore, each year only 0.01% approximately of researchers from the public sector actually join or apply to join the private sector.

Moreover, only 0.8% of the researchers recruited by private companies are coming from the public sector.

Although these figures do not fully reflect the transfer of technology between public research and private companies, which is often implemented through license agreements, these results fail to reach the government’s expectations.

In order to address this, the PACTE law modifies the French Research Code in order to promote collaboration between public research and the private sector, in particular by simplifying the authorization process for the researcher and improving the researcher’s involvement in the private company (while of course respecting the appropriate ethics rules and avoiding conflicts of interest).

What will change regarding the creation of a private company?

With the proposed PACTE law, the authorization provided to a researcher from the public sector to create, or to participate in, the creation of a private company will no longer be granted by a deontology committee, but by the public research institution to which the researcher belongs.

According to the authors of the proposed PACTE law, involvement of the researcher’s public research institution should, on the one hand, simplify the authorization process for the researcher and, on the other hand, allow the public research institution to maintain control of its human resources and be more responsible within the collaboration mechanism.

In addition, a researcher from the public sector creating or participating in the creation of a private company would, under the current legislation, cease any activity within their public research institution (with the exception of teaching activities). Under the contemplated rules, they would be able to, for a limited period of time, keep their functions and activities within the public research institution, allowing them to be fully involved both in research work within the laboratory and in the development of the company.

What will change regarding contribution as a scientific expert to an existing company?

The current legal framework provides that contribution as a scientific expert to an existing company shall be compatible with "the full exercise by the civil servant of their public employment." The case law of the deontology committee therefore sets a limit to the time a civil servant may allocate to their contribution as scientific expert to an existing company; a civil servant cannot spend more than 20% of their working time on scientific contribution to a private company.

Under the proposed PACTE law, the public research institution, researcher and company can negotiate and set the amount of time the researcher may allocate to scientific contribution to the company. When collaboration with the company is not compatible with full-time activity within the public research institution, the researcher can be granted a temporary assignment to the company.

What will change regarding the share ownership of a private company?

Regarding both collaboration mechanisms described above, the current legal framework provides that in the event that an authorization is terminated or is not renewed (and the researcher is, as the case may be, reintegrated within the public research institution), the researcher shall waive any share ownership in the company they created or participated in the creation of, or in the company to which they contributed as a scientific expert, unless otherwise expressly authorized (within the limit of 49% of the share capital).

Under the proposed PACTE law, the researcher may retain their share ownership of the company without any express authorization (but still within the limit of 49% of the share capital).

Perspective

The proposed PACTE law does not completely revolutionize the collaboration between public research and the private sector, and there are aspects which could be improved – for example, the limited period of time during which a researcher from the public sector is allowed to participate in a private company, which may prove insufficient in some industries. However, the proposed law has the potential to make a positive impact on existing practices.