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IP Toolkit for Collaboration
Submission no. 8: CSIRO
Richard Aarons
23 May 2014
1.
Question 1
1.1
Introduction
We understand that the toolkit is intended to assist parties to reach agreement on the terms of
collaborative activities. To reach agreement, the proposed parties to the arrangement will
necessarily need to participate in a negotiation. We consider that for the toolkit to be useful, it
must promote effective negotiation.
1
We consider that the process of “principled negotiation”1 is a useful and practical model for
negotiation. Principled negotiation provides an alternative to so-called positional bargaining,
where parties successively take, then give up, a sequence of positions. A key aspect of principled
negotiation is to adopt an approach that seeks to identify each party’s underlying interests, and to
then develop options that meet those interests.
In a negotiation, it is the underlying interests of the parties that inform and drive the positions
they take. Often, parties’ stated positions are in conflict. However, if a negotiation process
focuses on the parties’ underlying interests, then there are often many more positions than those
originally proffered that can potentially meet the parties’ interests, and also there are often many
shared interests that can be identified.
Viewed in this light, there is a risk that in a simple model term sheet the various options to be
selected might unwittingly encourage the parties to prematurely adopt positions on particular
issues before a more thorough and informative analysis has been carried out. In particular, it is
well known that many parties tend to take initial positions in relation to IP ownership that can
rapidly become entrenched and which can bypass analysis of the parties’ real interests in the
various IP rights that are bundled up in IP ownership.
We consider that the toolkit should acknowledge that the process of setting appropriate terms in
a term sheet needs to be informed by an underlying analysis of the parties’ interests and
expectations, and encourage exploration of underlying core concepts prior to setting terms. In
particular, key aspects of the research and development, IP and commercial strategies should be
explored prior to working on a term sheet. Accordingly, the toolkit could usefully contain material
which guides this process.
An example of such material is an “IP needs analysis process” as described in the Australian
Government Intellectual Property Manual, although it would need to be adapted for the purposes
of the IP toolkit.
We consider that important factors for parties to consider and discuss include: What is the
purpose of the proposed collaboration? What is it intended to achieve: scientifically/technically,
commercially? For what purpose is IP intended to be generated? What is the intended pathway
1
As described in “Getting to yes” – Negotiating an agreement without giving in”, R Fisher and W Ury, based on methods developed in the Harvard
Negotiating Project.
for using or commercialising the IP? What processes should govern IP protection and other IP
management decision making?
Further, we consider that the toolkit should acknowledge that the process of setting terms is
generally iterative, rather than linear. That is, although analysis of the purpose of the
collaboration must feed into consideration of possible R&D, IP and commercial strategies
(informed by each parties interests), which feeds into discussion of the terms for a term sheet;
consideration of these issues generally also feeds back into further discussion of purpose and
strategy, which leads to revising the terms etc.
We consider two approaches that encourage analysis of the key underlying issues as discussed
above, that could be presented in the toolkit. Firstly, we consider an approach based on using a
checklist to guide discussion on a range of issues relevant to research collaborations, to assist the
parties to identify and articulate their interests, which can then guide agreement structuring.
Secondly, we consider an approach based on using a small number of model template
agreements. We consider that each approach could be useful in different circumstances or could
be useful to different parts of the target audience at different times.
1.2
Checklist approach
In the checklist approach, one category of items on the list comes from “unpacking” the key rights
and issues that are bundled up in IP ownership – we refer to these as “IP component rights” for
convenience. Another category of items on the list could relate to processes or procedures for
managing the exercise of these IP component rights. A further category of items on the list could
relate to sharing costs and benefits, and to administrative arrangements for managing these
issues.
A key principle in negotiating collaboration terms is that many if not most issues can be, at least in
principle, contractually regulated, independent of ownership (ie. regulated by a contractually
agreed procedure). In particular, if parties have the knowledge, and have invested the necessary
time, to explore their respective interests in relation to the IP component rights, then they should
be able to identify areas where their interests are aligned, and areas where their interests may
diverge.
For example, it is possible to develop contractual processes for taking decisions, or allocating
rights, in the following areas: (a) IP management, such as decisions relating to filing and
prosecuting IP applications (through contractually agreed procedures); (b) IP exploitation rights
(through contractual licences and licence options); (c) IP enforcement and defence; and similarly
for other IP component rights.
In the context of a negotiation, it can be particularly valuable to identify where interests might
diverge. Attention can be focused in such areas to agree in advance on a fair and reasonable
approach or process for addressing each party’s interest in particular circumstances. Such
contractual processes can be effective to avoid conflict and disruption to the collaboration in
the event the envisaged scenario actually arises. For example, in relation to IP management
issues, such processes can relate to making decisions concerning the scope and timing of IP
filings, country selection, amendment (particularly in response to adverse examination
reports), proposed abandonments, etc.
One advantage of the checklist approach is that instead of parties immediately taking a position
on IP ownership, a broader range of rights and interests can be discussed, which then enables
ownership to be considered in an appropriate context.
1.3
Model agreement templates
In the approach based on a small number of model agreements, each model agreement would
presumably be based on different “pre-negotiated” positions that reflect a different balance of
rights, obligations, benefits, contributions and risks. In the 2013 review of the Lambert toolkit2, it
was reported that the Lambert model agreements were not often used in unmodified form, but
were more often used as reference resources for addressing particular issues or, through
modification, as a starting point for developing individually tailored collaboration agreements.
Given that any model agreement necessarily represents a “pre-negotiated” position, that position
will involve particular decisions on the appropriate balance between rights, obligations, benefits,
contributions and risks. In particular that position will involve decisions in relation to the tradeoffs and dependencies between different provisions in the agreement.
Given that the Lambert model agreements would appear to be used as a reference resource and
as a basis for producing more tailored agreements, that suggests to us that the IP Australia toolkit
could usefully include the following components in relation to any model agreements:
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1.4
The toolkit could provide guidance notes that explain the thinking involved in reaching the
particular trade-offs and dependencies involved in establishing the position set out in each
model agreement.
In addition to (or perhaps instead of) model agreements, the toolkit could include model
provisions that treat a particular issue in different ways, so that the parties could use the
provisions as a resource for more readily constructing their own more tailored
agreements.
Further observations
We consider that guidance materials in the toolkit could usefully set out a number of tips, tricks
and traps to guide inexperienced users.
We also agree with recommendation 2 (reproduced below) of ACIP’s final report entitled
“Collaborations between the Public and Private Sectors: The Role of Intellectual Property”,
September 2012. In particular, we consider that a broad range of educational materials should
ideally be made available to researchers and corporations to assist them to negotiate, structure
and undertake collaborative research projects.
2
“Collaborative Research between Business and Universities: The Lambert Toolkit 8 Years On”, published by The Intellectual Property Office (UK),
8th May 2013.
Recommendation 2: Encourage the development and promotion of educational resources to assist
PFROs, industry and researchers to form and conduct collaborations. Resources should be easily
identifiable and accessible to all stakeholders, particularly PFROs and SMEs, and be supported by
relevant training. Considerations should include:
•
assessing available resources, tools and programs and how they may be best promoted and
deployed. Particular focus should be on modules that can assist with:
- aligning interests with expectations
- expediting the negotiation of collaboration agreements
- understanding the commercial/legal provisions in collaboration agreements
•
a set of starting principles/questions to help partners focus, communicate and develop a good
understanding of the objectives of their collaboration
•
term sheet-like smart forms setting out all issues that need to be included in negotiations and
possible options to deal with them
•
a module on valuation models of early stage technologies and IP
•
providing PFROs with access to expert patent analytics services, related business intelligence
tools and training. a module focusing on background IP (contributed to a collaboration) and
project IP(arising in collaborations), including the proper identification and management of
both
•
a module on valuation models of early stage technologies and IP
•
providing PFROs with access to expert patent analytics services, related business intelligence
tools and training.
The valuation of IP is complex and, as such, the IP toolkit should only hope to provide some
conceptual guidance. Such guidance may include use of the concept of the technology readiness
level index, and some rules of thumb regarding the costs to progress a technology through the
phases of research, development and commercialisation.
Reference could also be usefully provided to the accounting standards for intangible assets and
how an intangible asset, such as an early stage technology, is not recognised as an intangible asset
(and having a value) unless there are proven financial and technical resources to progress the
technology to market.
The use of this framework may provide a general understanding of the high risks involved in
developing early stage technology and also assist to providing realistic targets for collaboration.
(eg. progress from TRL 4 to TRL 6).
2
Question 2
2.1
Introduction
We consider that the proposed model term sheet is too simplistic in its present form. We
consider that the options provided against a number of subject headings are too narrow. Further
detail is provided below.
Additionally, we consider that a number of other important subject headings could usefully be
included in the model term sheet, as follows:
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Project/collaboration objectives
Project plan
Project governance, management and reporting
Subcontracting
Dispute resolution
Termination
In general, the section “explanation of terms” combines both a definition of the term, and an
explanation of how it is usually treated. We consider that it would aid clarity if these two
explanations were clearly distinguished, ie. clearly identify the definition of the term as such, and
separate the explanation of the how the subject matter of that term is typically treated.
Also we consider that the discussion of IP ownership structures and treatment of IP should be
topics in their own right, rather than being discussed only in relation to particular definitions. In
particular, there are likely to be many situations where the particular IP definitions and the
structures they imply are not appropriate, so such a separation would avoid this problem.
2.2
Background IP
The basic definition as IP developed prior to or outside of the agreement is fine.
It could be useful to also state that collaboration agreements typically expressly identify the BIP
that is intended from the outset to be used in the project, and typically provide a governance
process for introducing other BIP during the course of the project that was not intended at the
project planning stage to be used in the project. (Such other BIP could be pre-existing IP that the
parties agree should be used in the project, or IP developed outside the project after contract
execution, which it is subsequently agreed should be used in the project.) Careful management of
Background IP is very important for research organisations that need to use Background IP in
multiple projects or applications.
The explanation of Background IP as currently drafted describes typical ownership and licence
terms for the purpose of the collaboration: “Each party generally retains ownership of its own
background IP. However, parties generally grant each other a royalty-free, non-exclusive license
to use their background IP solely for the purpose of carrying out the collaboration.” We agree
with this description of the typical arrangements. However, we consider that it would also be
useful to make a statement regarding the need to address access to Background IP that may be
required to use Foreground IP, so that inexperienced users are not misled into thinking that
ownership and licensing for conducting the collaboration project itself represents the full set of
issues regarding background IP.
The explanation of Background IP as currently drafted treats third party IP as if it is merely an
instance of a party’s Background IP. We recommend that third party IP should be defined and
treated separately, since different considerations often apply, in particular due to the fact that a
party typically owns and controls its BIP whereas this is not the case for third party IP. In
particular, different warranties would typically apply, and different considerations typically apply
with respect to obtaining future commercial licences to third party IP. Although the special case
where third party IP is being sub-licensed by a party could in principle be treated either as the
party’s BIP or as Third Party IP, we do not consider this circumstance detracts from the
recommendation to distinguish the two types of IP.
2.3
Foreground IP
The basic explanation of Foreground IP as IP developed under the agreement is generally fine.
However, depending on the details of the collaboration and the nature of Background IP that the
parties contribute, there may be a need to have more than one category of Foreground IP (which
would need to be separately defined in addition to or instead of just “Foreground IP”), and/or
suitable definitions of fields for exclusive or non-exclusive licences. Whether the agreement
needs to include one or more operative definitions of IP developed under the agreement, and/or
field definitions, depends on a range of factors, and in particular on the ownership and licensing
structures being considered.
Inventions, and IP rights protecting such inventions, can be very broad and can have application in
areas well outside the field of the research project. Where a PFRO has significant capability in an
area (possibly built up over a significant period of time or with significant prior investment in
other projects), there is potential for broadly applicable IP to be developed in the research
project. It is often inappropriate for a PFRO’s clients or collaborators to own or control all IP
arising from a research project (such as could occur if a client or collaborator owns Foreground IP
as presently defined), because such rights would be significantly disproportionate to the client’s
or collaborator’s contributions.
Broad IP rights that are applicable beyond the field of the research project can arise in a number
of ways, and the potential scenarios need to be carefully considered as part of setting the
definitions of categories of IP to be addressed by the agreement (such as Foreground IP).
Example scenarios where broadly applicable IP rights may be developed:
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Broad IP can result from the inherent nature of the science involved. For example, if a
research project is directed to developing an improved material for a particular
application, it is possible or even likely that insights into the fundamental characteristics
of the material could lead to an improved class of materials or to a generic material
having broad application.
Broad IP can result from expansion or other change to the project scope. There are a
number of potential solutions for this circumstance including: (a) having an ownership
and licensing structure that appropriately accommodates this occurrence (eg. where the
PFRO owns the IP and the client or collaborator has an appropriate field-limited licence);
or (b) having mechanisms in place to address how IP will be treated that arises from
changes in project scope that have not been authorised under the agreement.
We consider that the discussion of ownership and licensing of Foreground IP presented in the
proposed toolkit is not particularly helpful because the appropriateness of the terms presented is
very dependent on a range of other factors (in fact it is inseparable from considering the overall
balance of rights, obligations, benefits, contributions and risks).
We consider that the stated position on ownership based on the party best able to develop or
commercialise IP is too simplistic without further discussion. For example, CSIRO’s IP position
statement includes the following principle: “Ownership and control of IP should generally
vest with the party best placed to manage the intellectual property across the full scope of
the technology and its potential utilisation.” This principle acknowledges that considerations
may differ when a technology has multiple possible applications (a “platform technology”) in
comparison to the case where a technology has one application.
We consider that an issue as important as the determination of appropriate IP ownership and
licensing structures should be addressed by the toolkit as a topic of discussion in its own right,
rather than being addressed as a subsidiary matter to the definition of Foreground IP.
2.4
Student activity
We consider that the discussion in relation to student activity could usefully be broadened to
include giving consideration to whether a collaboration agreement with the university is required,
either as a separate and additional collaboration agreement to the principal collaboration
agreement, or instead having one over-arching multi-party collaboration agreement. Although it
is clear that it is necessary to ensure that IP developed or contributed to by a student is suitably
addressed in a collaboration agreement, it is typically also important to ensure that IP
developments or contributions by a student’s university supervisor are addressed, which
generally require an agreement with the university.
2.5
Improvements and new discoveries
The discussion in relation to improvements appears to be limited to improvements developed
during commercialisation. There are a significant set of issues to consider in relation to
improvements to parties’ Background IP developed during the collaboration project itself. For
example a party may have made a significant investment in the development of Background IP
that it contributes to the project and may wish to have ownership/control of improvements to
that Background IP. However, it also needs to be acknowledged that the purpose of many
collaborations is to bring together complementary skills and BIP and it is therefore often likely
that Foreground IP will inherently involve an improvement to one or more parties’ BIP. Boundary
issues over how such IP is to be categorised, owned, managed and licensed should be discussed
upfront to ensure that each parties’ interests and expectations are addressed.
The question of how improvements, if they are to be addressed by the agreement, are to be
defined, is an important topic in itself. There are a variety of approaches, and the appropriate
approach will greatly depend on the circumstances of the case, including the nature of the
original technology, whether there are existing patent rights applied for or granted, and the
nature of the other arrangements between the parties relating to licensing rights, cost sharing
and benefit sharing.
We do not agree that rights to improvements are normally owned by the owner of the original IP.
This is too simplistic and in practice arrangements vary considerably depending on the particular
circumstances of the collaboration. Additionally, for collaborations which relate to early stage
technology, it may well be premature to set any substantive terms for commercialisation,
including how improvements are to be treated. In these cases default rights, or contractual
processes for enabling further use of the IP, may be included.
2.6
Performance milestones
We consider that the toolkit should direct parties to consider, in addition to performance
milestones themselves, what are the consequences for a failure to meet the milestones. The
appropriate consequences and related procedures will depend on whether the milestone relates
to the research project or to subsequent commercialisation activity and we recommend that the
toolkit suitably distinguish between these types of milestones. Both research milestones and
commercialisation milestones (if relevant) would typically relate to, respectively, a research
project plan and a commercialisation plan.
Milestone definitions must be drafted clearly and should be, as far as possible, objectively
measurable. Good drafting of milestone and project completion definitions can help reduce the
risks of disagreement or mismatching expectations arising during the course of the project.
Accordingly, guidelines on drafting milestone definitions would be a useful addition to the toolkit.
2.7
Confidentiality and publication
We consider that this section of the toolkit could usefully be expanded to describe practical
procedures in which IP management decision making procedures and publication approval
processes can be suitably synthesised.
2.8
Indemnification and warranties
We consider that this section is presently too simplistic. Risk allocation in the context of the
research project itself involves a different risk profile and different considerations to addressing
risk allocation in the context of commercialisation activity, and the guidelines should address
these different contexts.
We also consider that the guidelines could usefully distinguish between the types of IP warranties
that are appropriate to different categories of IP. For example, stronger warranties can be
expected in relation to confidential information and copyright, which are based on independent
creation, than in relation to patent rights or other monopoly rights where any warranties given, if
at all, need to be suitably knowledge qualified.
2.9
Licence agreement and option agreements
We consider that the discussion on these topics should be expanded to address the different
considerations that apply to different levels of technology development or TRL (technology
readiness level). For example, it may be inappropriate to allocate broad licensing rights, or to set
commercial terms, at a very early stage, before the technology is well developed or well
understood or before the commercial or market aspects of the technology are understood.
The discussion of options could be broadened to include related concepts that can be useful tools
in developing collaboration terms, such as options to negotiate (eg. an exclusive period within
which a licence negotiation can take place during which the technology cannot be transacted);
and rights of offer (a right to make an offer in relation to technology licensing that must be
considered in good faith before the technology is otherwise transacted).
CSIRO would be pleased to provide further input into the proposed IP toolkit for collaboration as we have
extensive experience in structuring and managing collaborations and IP resulting from collaborations.