That the members of the consortium have an exploitation plan is crucial to model consortium agreements B and C. That sort of plan is a prerequisite of funding from the Technology Strategy Board.
Model consortium agreements A and D, where the parties have no exploitation plan, are less likely to promote innovation, particularly model consortium agreement D where no rights to exploit are granted. These examples of consortium agreements have been included in the Lambert toolkit because not every research consortium, particularly those that carrying out research that is far from market, will actually have an exploitation strategy and some consortium members may wish not to use model consortium agreement A on the basis that it gives the parties rights to exploit another party’s IP at a time (at the beginning of the research project) when no one is sure what may result from that research.
2. Charitable purposes and tax
Where any party is a charity it should ensure that its research activities come within its primary charitable purposes and where any party enjoys any exemption from corporation tax, it should check with HM Revenue and Customs that its research activities will not result in the loss of that exemption.
The full corporate names of the parties should appear at the beginning of the agreement.
Although a company may change its name and the address of its registered office, a company formed in England, Wales or Scotland never changes its registered number. Therefore, it’s advisable to identify the company by its registration number. (Universities do not have registration numbers.)
4.1 Academic party
For the purposes of illustration we have assumed that there are two universities involved in the project, but the agreement may be amended to allow for more universities or public research organisations.
4.2 Academic publication
As a charity, the university’s objectives will include the dissemination of learning or knowledge for public benefit. In addition, it’s important to the career prospects of many academic researchers that they publish articles and participate at conferences. Therefore, the university and its academics will nearly always wish to publish information about the project. All of the 5 research collaboration agreements apart from agreement 5 (contract research) allow for this.
4.3 This agreement
It is important that changes to the agreement are properly recorded in writing and signed on behalf of each party in order to avoid any misunderstandings about each party’s commitments. A copy of the document recording the change should be kept with the original signed copy of the Agreement.
It is likely that each party will make available for use in the project, information, software or materials that already exist or that are developed independently of the project. Clause 5.2 provides for each of the parties allowing its background to be used for the purposes of the project but not for any other purpose, although negotiations may result in background being used, where necessary, to exploit the results. The second alternative set of wording in clause 5.2 of agreements A, B and C (but not agreement D) provides a licence for the use of specific background to the extent necessary for the commercialisation of the results. That licence may be royalty free or may be in return for payment as set out in the payment plan.
4.5 Specified and specific background
Although it may not be necessary or possible to identify all of the background at the start of the project, if the success of the project depends on one or more of the parties making certain background available, this needs to be identified and described in schedule 2.
Note that unless identified background is included in schedule 2, as one of the items that a party is obliged to provide under clause 2.2 that party is not obliged to provide any background. That will not prevent it providing background if it wishes to do so.
Where a party is prepared to license the use of its background where that is necessary to allow the commercialisation of the results, that background should be identified. (See the definition of specified background in consortium agreements A, B and C.)
4.6 Sensitive background
If any of the background is sensitive or for some other reason should not be disclosed beyond the researchers working on the project, this should be identified either before, or at the time, the background is made available. While academic researchers may want to publish background as part of their academic publication of the results, it may be important that the background of another party remains confidential. It is important that this issue is resolved at the outset. Please refer to the notes on confidential information and academic publication.
4.7 Business day
If either party is not in England, consider whether to change England in this definition. For instance, public holidays in Scotland are different.
4.8 Commercial party
For the purposes of illustration we have assumed that there are two commercial parties involved in the Project, but the agreement may be amended to allow for more commercial parties.
4.9 Confidential information
Some parties may take the view that all of their background is commercially sensitive and must be kept confidential. If that is the case, the words in square brackets should be deleted. Alternatively, if the intention is that only background that is identified as being confidential is to be treated as such, the words in square brackets should be included. Whether or not those words are included, any information or material that is to be kept confidential should be marked ‘Confidential’. An example of a confidentiality notice may be found in the useful resources section or the supporting detailed guide.
4.10 Exclusive period
You will need this definition if the party or parties responsible for exploiting the Results have an exclusive licence that is limited in time.
4.11 Exploitation strategy
(consortium agreements B and C only)
Consortium agreements B and C have been drafted on the basis that the parties will have agreed an exploitation strategy. That strategy should be set out in schedule 5. Key to deciding that strategy will be a consideration of which party or parties will exploit which of the results of the project in which territories and in which fields. In order to encourage innovation the party who is best placed to exploit certain of the Results should do so, provided the other parties receive an adequate return on their investment (financial and other) in the project.
For the purposes of illustration, consortium agreement C has been drafted on the basis that one of the universities (AAA) is best placed to exploit the ABC Results and one of the commercial parties (XXX) is best placed to exploit the XYZ results.
There is no exploitation strategy in consortium agreement A because the scenario envisaged there is that all of the parties will have the right to exploit all of the Results if they wish to do so, and there are no funding conditions that require either an exploitation strategy or a commitment to exploit.
4.12 Freedom of Information
Simply stating in the agreement that background is to be kept confidential and/or marking it as confidential will not guarantee that will be kept confidential. As from 1 January 2005, members of the public have had the ‘right to know’ under the Freedom of Information Act 2000 (FOIA). This means that universities will be obliged to disclose information on request unless:
- the information was provided by another person to the university in confidence and its disclosure would mean that the university would be in breach of confidence and could be sued by the person whose information id disclosed (that is that the disclosure would be an actionable breach of confidence on the part of the university)
- the information is a trade secret
- the disclosure would harm the commercial interests of the university or another person
Even if information is a trade secret or commercially sensitive when it was disclosed to the university, this may have changed in the interim and, whenever a request is made under the FOIA, universities have to decide whether the information falls within one of the exemptions under the Act at the time the request is made. In practice that will often mean that the universities will need to consult the person who made the information available before deciding whether or not they have to comply with the request.
More information on the FOIA can be found on the Information Commissioner’s website.
4.13 External funding
All of the consortium agreements are suitable for use where there is no external funding if references to that funding, the funder, the funding terms and the monitoring officer are stripped out. For that reason those references appear in square brackets throughout the consortium agreements.
4.14 State aids
If any funding is provided from the public purse, eg any government department, the Ministry of Defence, a Research Council, a Higher Education Funding Council, JISC, a Regional Development Agency, or the European Commission, there will be conditions attached to that funding and there may be state aid issues that affect the ownership and exploitation of IP.
Any aid granted by a Member State of the European Union or through state resources in any form, and which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, in so far as it affects trade between member states of the European Union, is incompatible with the common market. As a result of this, public organisations that fund R&D may impose terms designed to ensure that there is no distortion of competition. It is important to look at the state aid implications, especially if services are being provided or IP is being licensed at less than market price; the recipient of unlawful State Aid may have to repay it.
4.15 Funding conditions
Equally, where funding is provided by any third party, such as a charity, there are likely to be conditions attached to that funding.
It is important that the terms of the agreement do not conflict with any terms imposed by the provider of the funding. The party receiving the funding (often, but not always, a university) should check that the terms of the funding and the terms of the agreement are consistent. The agreements may not be suitable for your purposes if the funding agreement or conditions impose conflicting terms.
Consortium agreements B and C have been prepared with the requirements of Technology Strategy Board’s Collaborative R&D programme (formerly the DTI’s Technology programme) in mind. That programme requires the parties to have an agreed exploitation strategy and to undertake to exploit the results of the project. If you want to use either of those agreements in different circumstances, you should amend the words in square brackets in the ‘background’ and in the definition of external funding and the funding terms.
Consortium agreements A and D are appropriate where the parties have no exploitation strategy (although they should try to agree one) and may be useful, for instance, where the project is funded by a regional development agency (but you should check the terms of the external funding before using it).
Some (but not all) funding bodies will insist that the party receiving the funding ensures that its collaborators comply with those terms.
4.16 Good data management practices
It is important that people can rely on the integrity of the research data and that adequate records are kept, not only for the purposes of filing patents but also to be able to demonstrate who created the results for the purposes of establishing the ownership of other IP.
4.17 Group company
One or more of the commercial parties may be part of a group of companies and its R&D may be carried out across various companies in the group. Therefore group companies are granted rights in clause 5.2 in relation to the use of background for the purposes of the project.
4.18 Intellectual Property
The ownership and exploitation of IP is one of the most difficult issues and the parties should try to resolve it early when negotiating the terms of the Agreements. An explanation of the different types of IP is available.
4.19 Key personnel
The definition of key personnel in the consortium agreements should give the names of any people whose involvement is important to the success of the project. Where most of the work is being done by one party, for example, a university, the key personnel may all be university researchers, but where a commercial party is making a substantial ‘human’ contribution to the research activities, some key personnel may be provided by that commercial party. The significance of the key personnel is that if one of them leaves and is not replaced, the agreement may be terminated under clause 10.2.
4.20 The lead exploitation party
This the party chosen by the members of consortium agreement B to be best placed to exploit the results of the project. It may or may not be the same as the lead party that is responsible for the research project.
4.21 The lead party
The lead party acts as the ‘banker’ for the project, submitting claims to the funding body. The lead party is also the contact with the funding body. The lead party and the lead exploitation party in consortium agreement B will often be different organisations because their roles are different. The lead party appoints the project manager.
4.22 The payment plan
In return for having the right to exploit the results (whether by virtue of its ownership of the IP or under a licence) the lead exploitation party (consortium agreement B) and AAA university and XXX (consortium agreement C) will make payments to the other parties in accordance with the payment plan. The agreements leave the amounts and nature of those payments open for the parties to negotiate.
It is envisaged that when negotiating the payment plan, the parties will take into account the contribution that each party has made to the project, on the basis that the greater a party’s contribution (financially or otherwise), the greater should be its return from the exploitation of the results.
Consortium agreement A provides for each party having a royalty free, non-exclusive licence to exploit the results, but if the parties agree that any party should pay any of the others in return for having the right to exploit, a payment plan and clause 4.11 should be included in consortium agreement A and the words ‘fully paid-up, royalty free’ should be deleted from clause 5.9 of consortium agreement A.
4.23 The project
One of the most important parts of the agreement is the description of the project in schedule 2. That schedule and clause 2.2 determine what is to be done and the resources that are to be provided; the nature of the IP created will flow from the description of the project and its outputs or results. It is the cornerstone of the agreement and it is important that the researchers give serious thought to the contents of schedule 2 so that it is complete and accurate.
The success of the project may depend on the participants having all necessary regulatory and ethical licences and consents; and the successful exploitation of the results may depend on proper records being kept. Therefore each party is obliged to obtain any such licences that may be necessary to allow it to make its contribution to the project and each party is required to keep proper records and comply with good data management practices. The need for licences and consents should be considered when the project plan is prepared for schedule 2 and whenever that plan is updated.
4.24 The project manager
The lead party will appoint the project manager. Some funders may insist on having the right to approve that appointment.
4.25 The results
Consortium agreement C envisages that one party will be interested in exploiting some of the results and another party will be interested in exploiting other results. For ease of reference these have been referred to, respectively, as the ABC and XYZ results, but you should given them more relevant names, and by way of illustration it has been assumed that one university and one commercial party will be responsible for exploitation.
Although the 3 consortium agreements do not, in the given the scenarios, contain specific restrictions to certain fields or territories, when deciding which results are to be exploited by whom you might consider allocating exploitation rights among the members of the consortium by reference to fields and/or territories. In effect that will be the result of defining the ABC and the XYZ results for the purposes of model consortium agreement C.
The exploitation strategy will be key to how the rights to exploit the results are divided among the parties, and those best placed to exploit should have the rights to do so.
In defining the fields and territories care should be taken to make sure that there is no unintentional overlap where different parties are to exploit in different fields/territories.
4.26 R&D tax credits
The definition of the project will also be important in determining what work constitutes research and development for the purposes of the sponsor claiming R&D tax credits. Sponsors should consult their accountants about the possibility of claiming R&D tax credits.
4.27 Specified background
You should delete this definition if the parties are willing to license the other parties to exploit all their background under clause 5.2 or if the parties are not willing to license the other parties to exploit any of their background.
4.28 The steering committee
Each party should be represented on this committee and some funders may wish to be represented on it. Its terms of reference will depend on the nature and complexity of the project.
Ideally there should be no conflicts or inconsistencies between the consortium agreement and the funding conditions but, just in case something has been overlooked, the funding conditions are to take precedence so that members of the Consortium are not in breach of the terms on which the external funding is provided.
5. The project
5.1 Beginning work before the agreement is signed
If work on the project has already begun before the agreement is signed and dated, it is important to make the agreement apply retrospectively to work already done.
The project plan will set out what each party is to do/contribute but, where there is external funding it is equally important that the parties comply with the funding terms.
5.3 Ability to carry out the project
The purpose of clause 2.2.6 is to ensure that each party either has or will, at the appropriate time, obtain any consents and approvals (for instance regulatory and ethical) that may be necessary for it to carry out its responsibilities under the project. This is unrelated to the warranty on Intellectual Property Rights in clause 8.1.
5.4 No guarantees
Clause 2.3 makes it clear that the success of the project is not guaranteed; that is in the nature of a research project.
In clause 2.6 the parties should agree how frequently reports are to be submitted. The frequency of reports will depend on the nature of the project and the requirements of any funding body.
6. Project management
Because of there are more than two parties the consortium agreements contain simple project management provisions under which there is a project manager and a steering committee on which each party has a representative. The funding body may want or insist on having a representative on that committee.
It may be difficult to obtain a quorum for meeting of the steering committee if all representatives need to be present, and you may consider a quorum being 3 out of 4 members of the consortium or representatives of 75% of the members, but to ensure the smooth running of the project, sufficient notice of meetings should be given to allow a representative of each party to attend. You should also decide whether the chair will have a casting vote.
You should also consider what sort of decision steering committee has power to take (for inclusion in the terms of reference). If the steering committee can take important decisions, members of the consortium may want to insist on each party being represented at each meeting. The committee should not have the power take decisions that may have the effect of changing the terms of the agreement without the proper authority of each member of the consortium. The terms of reference for the committee should be set out in schedule 4.
The Technology Strategy Board requires quarterly meetings to have a representative of all members of the consortium.
The parties should agree who should chair the steering committee and insert his name in clause 3.3. The role of the chair may be crucial if s/he is to have a casting vote under clause 3.6.
The parties should also agree the frequency of, and venue for, meetings and insert the details in clause 3.4.
In clause 3.5 the parties should agree how frequently reports are to be submitted. The frequency of reports will depend on the nature of the Project and the requirements of any funding body.
Note that any decision that reallocates the funding will need to be unanimous amongst the parties and that most funding bodies will need to be consulted, and possibly their consent will need to be obtained, before there is any reallocation of the external funding.
Some funding bodies (such as the regional development agencies) may have detailed requirements for audit and evaluation, and clause 3.5 of the consortium agreements may need to be amended to reflect those requirements.
If there is no external funding, the words in square brackets should be removed from clauses 3.7.1, 3.7.2, 3.7.3 and 3.7.5.
7. Financial contribution, external funding and financial management
7.1 External funding
The project plan in Schedule 1 should set out how any external funding is to be divided among the parties.
7.2 Financial contribution
It is envisaged that some or all of the parties will make a financial contribution to the project. If a party’s contribution is solely in kind (for instance human resources or background) that party’s contribution for the purposes of schedule 1 will be zero.
7.3 Hardship clause
In projects where the any financial contribution is not based on the costs incurred, the parties may agree to include a hardship clause in schedule 1, providing for the commercial parties meeting (or at least considering meeting) any unanticipated increases in the University overheads, such as National Insurance contributions.
In clause 4.2 ‘similar tax’ is intended to refer to the equivalent of VAT in other countries, or any tax that might replace VAT in the UK.
The provision of research services by an ‘eligible body’ to another ‘eligible body’ is exempt from VAT. ‘Eligible body’ is a term defined in the Value Added Tax Act 1994. Typically universities and government departments (including executive agencies) are eligible bodies but a university subsidiary company, set up to carry on commercial activities, is not. A sponsor or ‘partner’ in the industrial sector will not be an eligible body.
The result is that, under all the agreements, where one party is providing services to another, it should charge the recipient of the services VAT at the standard rate and deliver a VAT invoice.
That is not necessarily the case in relation to any external funding received; depending on the status of the funder, that may be exempt from VAT. You should contact your local VAT office if in doubt.
7.5 Interest on late payments
Clause 4.3 allows interest to be calculated by reference to LIBOR or the Late Payment of Debts (Interest) Act. The Late Payment of Commercial Debts Act allows interest to be charged at a rate that is about 8% over Bank of England base rate. You should choose which you wish to use. Another possibility is calculating interest by reference to the base rate of any high street bank.
7.6 Conflicts with funding conditions
Before entering into any Agreement you should check the terms of any external funding and any conflicts should be resolved by amending the terms of the agreement or, perhaps, by deciding not to use one of the model agreements.
Clause 4.4 may need to be amended to reflect the requirements of the funding conditions.
7.7 Financial arrangements
It is envisaged that one of the terms of reference of the steering committee will be to oversee the financial arrangements, but more precise terms should appear in the terms of reference in schedule 4. Any funding conditions may include terms about the financial arrangements. You should decide how often financial accounts are to be submitted by the project manager to the steering committee and complete clause 4.9 accordingly.
7.8 Claims for external funding
The agreements envisage that the project manager will submit claims to the funding body. In order to allow him to do so the parties will have to provide him with any information and certificates required by the funding body. Some funding bodies may require the right to audit and evaluate the project and the co-operation of all the parties will be necessary if the funding conditions are to be met.
It is likely that the lead party will have given undertakings to the funding body and will be responsible to the Funding Body for repaying the external funding if there has been any overpayment or if the funding body has the right to claw-back any of the external funding. Each of the other parties therefore indemnifies the lead party against any repayments the lead party may make on behalf of that other party.
7.10 Inspection of accounts and records
Any party has the right to appoint an accountant to examine the accounts and records of the project (Clause 4.10) and any party that is to be paid may inspect the accounts and records of the party making the payment (clause 4.11). You might wish to consider insisting that the accountant is bound by a confidentiality agreement.
7.11 Payment of financial contribution
The payment plan in Schedule 5 should set out when any party is to make payment(s) of its financial contribution to another party (and how much those payments will be).
8. Use and exploitation of IP
8.1 The university’s return
When a university owns the IP in any of the results licenses or assigns them under any of the consortium agreements, as a charity, the university is obliged to seek a fair return. That return may take various forms - a one-off payment, royalties or a share of revenue.
8.2 Re-assignment of IP/time limited licence
Model consortium agreements B and C contain an assignment of IP in the results to the party or parties responsible for exploiting those results. The other parties should consider whether they want to include a clause that re-assigns the IP if any targets for on-going payments or exploitation are not met or if the party responsible for exploitation fails to exploit. For an example see clause 10.8 of consortium agreements B and C. The re-assignment provision may not be effective if the party owning the IP has gone into liquidation.
If there is any concern about the solvency of any party to whom any IP is to be assigned, the parties may prefer to grant a licence that can be terminated on breach or insolvency. Clauses 10.1 and 10.8 in model consortium agreements B and C (clause 10.9 in consortium agreement A) achieve this.
Another approach that you might consider is to time limit the rights of the party exploiting the IP, allowing it exclusivity for a number of years, and at the end of that period, all the parties having non-exclusive rights to exploit the IP. An example of this sort of wording is in clause 5.4 and 5.10 of consortium agreement B. (If you chose this option you will need to insert the duration of the exclusive period on the definition of the exclusive period in clause 1 of consortium agreement B.)
The lead exploitation party will want a sufficiently long period of exclusivity to justify its investment in exploiting the IP. If the lead exploitation party’s rights are not to be limited in time you should delete all references in the Agreement to the exclusive period.
At the end of the exclusive period all parties have the right to use the results for any purpose (clause 5.10 in consortium agreement B). The model agreements envisage that those rights will be royalty-free but, depending on the circumstances, the parties may decide that there should be some revenue sharing arrangements.
In consortium agreements B and C, the party responsible for exploiting the results undertakes to take reasonable action against infringers of the IP in the results, to the extent that is necessary to allow it to meet its obligations to exploit the results. This may be expensive and the parties should give some thought as to whether there are sufficient resources to enable the party tasked with exploitation to meet this obligation.
Clause 5.1 clarifies that the agreements are concerned only with the ownership and right to exploit the IP in the outputs or results of the project; the ownership and exploitation of other IP rights are not affected.
Under the first set of wording in clause 5.2 of consortium agreements A, B, and C, if any party provides any background, the other parties may not exploit it commercially or use it for any purpose except the project. However, it may be necessary to exploit some or all of the background in order to be able to exploit the results. In that case the parties may wish to consider the second set of wording in clause 5.2 of consortium agreements A, B, and C and extending the licence of cackground so that it can be used where necessary for the exploitation of the results. The licence of the cackground may be royalty free or it may be granted in return for payments set out in the payment plan.
In some cases, the parties may wish to grant exploitation rights to some of the background, but not all of it. In that case the licence to exploit the background in clause 5.2 should refer to ‘the specified background’ and not the background generally.
Unless a party designates any of its background as confidential, it may be used it in connection with the academic publication of the results. (Please see the note on Academic Publication).
8.4 Level playing field
Under consortium agreement A, each party owns the intellectual property rights in the results it creates and takes a licence of the results generated by other parties so that each party is free to exploit all of the results. That licence may be granted on a royalty free basis, or may be granted in return for payments set out in the payment plan. Depending on the circumstances, you should delete one or other of the sets of words in square brackets in clause 5.9 of consortium agreement A.
In consortium agreement A each of the parties has a non-exclusive licence to use the results for any purpose. This would include use for the purpose of the project, but use for the purposes of the project and more general use have been treated separately (in clauses 5.2 and 5.9 respectively) because the parties may decide that there should be payment in return for the general licence (which will include the right to exploit) and the right to grant sub-licences is restricted to group members where the licence is for the purposes of carrying out the project, whereas the more general licence allows unfettered sublicensing in order to promote greater use of the results.
8.5 Factors influencing exploitation rights
The decision as to which party owns the IP in the results and/or has the right to exploit them will depend on a number of factors including: the parties’ respective contributions in terms of intellectual effort, background, money, materials, facilities and human resources, their ability to exploit the results, any conditions imposed in relation to any external funding, and a company’s need to claim R&D tax credits (for which the IP in the results needs to vest in the company, either alone or with another person) and a company’s need to own assets against which it may be able to raise investment. Please refer to the decision guide when deciding which of the 5 research collaboration agreements to use.
8.6 Subcontractors and students
Where any student or sub-contractor works on the project, the university or the party engaging the sub-contractor should ensure that it has acquired any rights in the IP that the student or sub-contractor acquires by virtue of his involvement in the project. Those rights will not automatically belong to the party that engages the sub-contractor.
8.7 Assignment of IP
Where a party is to own the IP in any results that it has not created, that IP needs to be transferred or assigned to that party. Clause 5.4 of consortium agreements B and C contains that assignment.
Some forms of IP, such as copyright, can be assigned in advance or prospectively assigned, i.e. before the IP is created, but that is not always the case. The IP is assigned in advance where the law allows that, and where IP cannot be assigned in advance there is an agreement to assign it later, once it has come into existence.
The obligation in clause 5.5 is to notify any patentable results promptly, and the clause leaves the notification of other results until the time of the next report. This is to reduce the administrative burden but, depending on the nature of the Project, the parties may wish to consider amending the clause so that all results are to be notified promptly.
Because in consortium agreements B and C the IP has been assigned or licensed to one or more parties on an exclusive basis, there is a licence back to the other members of the consortium to use the IP for the project.
8.8 Joint ownership of IP
Clause 5.4 of consortium agreement A provides for joint ownership, but only where it is not possible to distinguish between the parties’ contribution to any Result. The joint owners may take steps to protect the jointly owned IP. If one of them does not want to take those steps, the other joint owner(s) may take them and the owner not wishing to protect the IP must provide reasonable assistance.
Clause 5.7 of consortium agreement A allows all joint owners to deal with and exploit the jointly owned IP without accounting to the other owner(s) for any money made.
Please note that the members of the Lambert Inner Working Group do not recommend joint ownership of IP.
8.9 Negotiations for licence to exploit/assignment of IP (consortium agreement D only)
Consortium agreement D allows any party to approach another during the project period and for a limited time afterwards with a view to negotiating the terms of an assignment or licence of IP. If an approach is made, there is a negotiation period during which the potential grantor will not negotiate with another party. You should be aware that an agreement to negotiate does not mean that the potential grantor will grant a licence or an assignment of IP and that there is a risk that the negotiations will come to nothing.
9. Academic publication
For reasons explained above in the context of the definition of academic publication, there is an obvious tension between industry’s wish to protect its information and materials and academia’s wish to publish, and it may be necessary for the parties to discuss how a proposed publication may be amended in order to accommodate the academics’ desire to publish while retaining protection for sensitive information and materials. This issue should be addressed as early as possible in the negotiations.
The period during which academic publication may be delayed will vary according to the circumstances and the nature of the information; it may be as little as one month or as much as 12 months (anywhere in between or possibly more than 12 months).
10.1 Confidentiality of results
The agreements treat the results as the confidential information of the party to whom they belong, except in consortium agreement A where none of the results is confidential information - all parties may exploit them, although the mechanism for giving a “confidentiality notice” under clause 6 is included to allow an owner the opportunity to apply for patent protection.
10.2 Time limits
It’s common for people to want to limit the time during which information is to be kept confidential, and clause 6.1 allows for that. The danger of doing this is that the information may still be commercially sensitive, or should be kept confidential for some other reason, after the end of the period of confidentiality. The parties should consider whether information is to be kept confidential indefinitely. If it is, the words in square brackets in clause 6.1 should be omitted.
As the party tasked with exploiting the results in consortium agreements B and C will either own the IP in the results or have an exclusive licence, it will not be breaching any other party’s rights of confidence when it exploits the results.
10.3 Freedom of Information
Under the Freedom of Information Act 2000 (FOIA) the public has a right of access to recorded information held by public authorities. In effect this means that universities are obliged to disclose information to anyone who asks for that information unless the information comes within one of the exemptions to the Act.
For the purposes of research collaborations, the most likely exemptions are:
- the disclosure of the information would be a breach of confidence in relation to which the university could be sued
- the information is a trade secret or its disclosure would prejudice someone’s commercial interests and the public interest in withholding the information outweighs the public interest in disclosing it
If a university is requested to provide information under the Act, it is likely to need to consult with the other parties to determine whether either of the above exemptions applies. For example, even if information has been supplied by the sponsor in confidence initially, if the information has since come into the public domain, it will no longer come within the first exemption. The university may not, however, be aware of that unless it consults with the other parties.
Clause 6.2.5 allows the universities to make any disclosure required by law. That means that the exemption mentioned in a) above will not apply; the other parties will have no right to sue the university for any disclosure made under the Act. Although that helps the university to comply with the FOIA, and to avoid the risk that the university may be sued for breach of confidence, some parties may find that approach unacceptable so far as its sensitive information is concerned, and it will make them less willing to provide information to a university. Therefore an exception for disclosures under the FOIA has been added.
11. Limitation of liability
The alternative wordings for clause 8.1 take very different approaches. In the first version of the clause there is a limited warranty against the infringement of third party rights. The second set of wording makes it clear that no warranty is given in this respect. This is something that the parties will have to negotiate. Even where a warranty is given, the warranty is qualified and appropriate searches should be made by the party wishing to exploit any patentable invention.
Members of the consortium should consider the possible consequences if no due diligence is carried out and it later turns out that there is a patent that prevents the exploitation of the results. Some funders may insist that warranties are given to the effect that the results will not infringe third party IP rights.
The words in square brackets in clause 8.2 should be omitted of the second version of clause 8.1 is used.
The indemnity in clause 8.3 covers the beneficiaries of the indemnity against any claim that is brought against them as a result of the use of the Results or other materials provided by the indemnified party. The rationale for this is that the party undertaking the exploitation of the Results takes the commercial risks associated with its use of the IP.
The members of the consortium should consider whether if a member of the consortium knowingly infringes third party IP, it should indemnify the other members against the consequences. If the members of the consortium decide to adopt this suggestion the following should clause be added:
Each party (‘the Indemnifying Party’) will indemnify each of the other parties and keep them fully and effectively indemnified, against each and every claim made against them as a result of the Indemnifying Party’s knowing infringement of any third party’s IP, provided that any party claiming the benefit of this indemnity must:
- X.X.1 promptly notify the indemnifying party of details of the claim
- X.X.2 not make any admission in relation to the claim
- X.X.3 allow the indemnifying party to have the conduct of the defence or settlement of the claim
- X.X.4 give the indemnifying party all reasonable assistance (at the indemnifying party’s expense) in dealing with the claim
And a reference to this new clause should be added to the opening words of clause 8.4.
The indemnity is conditional on the person claiming the benefit of the indemnity letting the person giving the indemnity know about the claim quickly, not making any admission, allowing that person to deal with the claim, and helping that person in dealing with it (at that person’s expense). These conditions are imposed to make sure that the people taking the benefit of the indemnity do not make matters worse and potentially increase the amount of the claim.
The indemnity does not cover negligence or deliberate breach of the agreement, or a breach of confidence.
The parties should consider whether the party giving the indemnity should be required to have insurance to back up the indemnity. Larger organisations may self-insure, but where a party has limited financial resources, the indemnity may be worthless unless the party giving the indemnity has appropriate insurance.
11.3 Exclusion of liability for indirect loss
The object of clause 8.4 is to exclude liability for indirect loss, that is loss that the parties would not necessarily foresee as being the natural and direct result of a breach of contract or negligence; a loss that is suffered only because some special circumstance. Liability for loss of profits and revenue, and other some other types of loss (whether they are direct or indirect) is excluded altogether.
12. Cap on liability for direct loss
Clause 8.5 gives suggestions for the sort of cap on liability that might be included in the Agreement and the parties should choose between:
- the amount of the Financial Contribution made by the party that is liable
- the amount of the External Funding allocated to that party
- inserting a specific amount
In any case, before agreeing a limitation of liability clause, the parties should consider their insurance arrangements.
Some sorts of loss cannot be excluded by law, and the agreements take the line that it would be unfair to cap or exclude liability for loss that has been caused deliberately or as a result of a breach of confidence. This principle overrides the limitations and exclusions in other clauses.
Clause 8.6.3 states that the parties’ liability for breach of the funding conditions is not limited. This is because the consequences of a breach of those conditions will depend on the Funding Body and it is not something that the members of the Consortium can regulate among themselves.
12.1 Exclusion of implied terms and conditions (clause 8.7)
The law, such as the Supply of Good and Services Act, and sometimes the course of dealing between the parties, can mean that terms are implied into an agreement, even though they are not actually set out in the agreement. This clause excludes that sort of term. A typical example of an implied term is that the supplier will use reasonable skill and care or that goods will be fit for purpose. Only the express terms of the agreement apply to the project.
13. Force majeure (there are no notes for this clause)
Note that it is always possible to bring an agreement to an end by mutual consent if all parties agree, but the funder’s consent may be necessary for the termination of the Project.
Before committing to the project and entering into the agreement, the parties should consider that they have no unilateral right to withdraw except under clause 10.3. This is because the consequences of any party’s withdrawal are potentially very serious and may completely undermine the project. However, the parties may wish to consider whether they should have a right to withdraw if another of the parties is taken over by a competitor.
14.1 Breach or insolvency
If one party is insolvent or in breach of the agreement, the other parties, if they decide to do so unanimously, may treat that party as having withdrawn from the consortium; in other words they can terminate its involvement in the project. You should check the funding conditions to see whether the funding body’s agreement is necessary before any party is expelled from the project.
14.2 Withdrawal of a member of the consortium
Clause 10.3 allows any party to pull out of the consortium if any of the key personnel is unable or unwilling to be involved. The use of this clause should be considered carefully; the withdrawal of a party could jeopardise the Project as a whole and it may be preferable not to allow any party to withdraw without the agreement of the other parties. In practice, if a key academic researcher moves to another institution, it may be possible to novate the agreement with the new institution, but note that no new party may join the consortium unless all the parties agree in writing and the agreement of any funding body may be necessary.
Note that the funding body will usually want to know if any of the key personnel are no longer to be involved in the project.
Some provisions of the agreement, especially confidentiality, intellectual property rights and limitations of liability should survive the end of the end of the project or termination of the Agreement. Clause 8.3 allows for this.
Note that if on-going payments are to be made, some of the payment terms may also need to survive the end of the project.
If a member of the consortium withdraws or is treated as withdrawing from the project:
- the other parties will try to re-allocate the work (clause 10.4)
- the withdrawing party may not recover any of its costs from any other party (clause 10.5)
- that party’s background may still be used for the project (clause 10.6)
- where that party has granted a licence to use its IP or has assigned rights in its IP, that licence and assignment remain in force (clause 10.7)
- licences granted to the withdrawing party will come to an end (clause 10.9)
- the arrangements about joint ownership of IP will not be affected (clause 10.8 of consortium agreement A only)
- if a party believes that it has been expelled (treated as withdrawn) from the project without due cause, its remedy is to challenge the other parties’ right to expel it under clause 10.1 and, consequently, their right to continue using its IP under this agreement.
14.3 New members of the consortium
A new member of the consortium may be brought in only with the agreement of all of the parties. The funding conditions may also reserve the right for the finding body to approve a new member.
If any party has cause to give a notice under the agreements, for instance to terminate, the procedure in clause 11.1 must be followed.
15.2 Assignment of agreement
If one party bows out of the project by assigning or transferring the agreement to a new party (clause 11.3), the original parties and the new party should consider whether to execute a novation agreement. This would typically release the party that is bowing out of the project from its undertakings (but preserve its obligations of confidentiality) and give the parties an opportunity to sort out any rights they need to use or exploit the IP of the party leaving the project.
15.3 Entire agreement
Clause 11.7 states that the agreement is the entire agreement between the parties. The parties should think carefully about whether that statement is correct. The effect of this clause is to remove the possibility that undertakings or understandings given or implied in any other document have any effect. That may not be appropriate if, for instance, the parties are relying on what is said in any proposal submitted for external funding. You may also want to include the funding terms if they impose conditions that apply to the relationship between the parties.
Clause 11.12 allows for escalation disputes within each organisation to help resolve disputes. That should not preclude any party taking action through the courts, where the matter is serious.
If the parties wish to maintain friendly relations, they might like to consider alternative dispute resolution (ADR) as an alternative to resolving disputes through the courts, but should bear in mind that they will have to pay any mediator. Further information and a brief explanation of what ADR means is available. Although the use of ADR is increasingly being encouraged to settle disputes before going to court, it may not be appropriate in all cases.
The number of copies of the consortium agreement to be prepared will depend on the number of parties. Each party should hold an original copy signed on behalf of all the members of the Consortium. The signed copies should be kept safely. If there is a dispute it may need to be produced in court.
The principal investigator and the sponsor’s supervisor are asked to acknowledge the terms of the research collaboration agreements as a check that the researchers are aware of its terms and that those terms reflect what they think they are doing. They are not parties to the agreement and are not liable to the other party is there is a breach of the agreement. You might consider adopting the same principles for the consortium agreement.
16.1 Schedule 1 (The financial contribution(s))
The ways in which the project may be funded by the parties are very varied and will need to be negotiated. This schedule should set out complete details of the financial contribution to be paid by each party, eg whether the financial contribution is a fixed price or, where it is on a costs basis, the types of expenditure that will be reimbursed, the maximum amount (if any) that will be paid, any milestones to be met and any conditions attaching to payment.
The parties may agree that the commercial parties agreements will cover increases in salary (or at least those in line with national pay awards), superannuation and NI contributions. In that case this schedule should reflect this.
16.2 Schedule 2 (The project/project plan)
This schedule should contain a full description of the project, clearly setting out what each party is to do (with a timetable if appropriate), and the human resources, facilities and equipment each party is to provide. The research collaboration agreements contain a list of the matters that might be covered in this schedule. It is not exhaustive and there may be additional issues that are important to the project.
16.3 Schedule 3
A copy of the funding terms should appear here.
16.4 Schedule 4
A copy of the terms of reference of the steering committee should be included here.
16.5 Schedule 5
This contains an example of good data management practices.
16.6 Schedule 6
The payment plan setting out the arrangements under which revenues will be shared or a success fee paid should be set out here.
16.7 Schedule 7 (Consortium agreements B and C only)
A copy of the terms of agreed exploitation strategy should be included here. The parties responsible for exploiting the IP undertake to use all reasonable endeavours to exploit in accordance with this strategy (clause 5.9).