Universities are centres of research and education. However, changes to government funding attitudes has meant that they must also encourage a culture of commercialisation. As a result, universities must now juggle their commitments to students and staff as well as their duties to commercial partners. University collaborations are business deals and amongst other things, any successful business requires certainty on issues of intellectual property ownership.
A recent UK decision demonstrates some of the problems that can arise when parties in a university collaboration fail to ensure that the deal is properly reflected in an agreement. In summary, the university in this case was lucky. The court held that it owned the IP in work undertaken by a company even though on the face of the agreement the university appeared to not have ownership.
Facts
In Cyprotex Discovery Ltd v The University of Sheffield [2004] EWCA Civ 380 the University of Sheffield (Sheffield) was in the process of developing a computer program designed to simulate the effect of a combination of particular drugs in the body (the Simcyp project). Sheffield sought to develop the program for commercial purposes, but needed funding to retain a programmer to make the program widely usable and user friendly and to enable Sheffield to update the databases to support the new program. Various sponsors provided funds for the project in return for the right to evaluate the new program during its development and suggest alterations. Once Simcyp was commercialised, Sheffield agreed to grant each sponsor a non-exclusive, world-wide, irrevocable, royalty-free licence to use the Simcyp program, Sheffield’s background IPR, and any of Sheffield’s written materials about the program.
Cyprotex wanted access to the technology in the Simcyp project as it was developing a similar project itself. Unable to provide sponsorship funding, Cyprotex offered the services of one of its programmers, Dr Edwards, as ‘in kind’ sponsorship. This was not reflected in the agreement between Sheffield and Cyprotex, which referred to Cyprotex contributing £17,000, payable 'six months after signature'. Dr Edwards performed all software design and coding steps necessary to convert the algorithms and equations to a Java program which was compatible with the Microsoft Windows environment.
Relations between the two parties broke down, and Cyprotex claimed ownership of the work of Dr Edwards.
There was no dispute that Dr Edwards was the author of the program. At issue was who owned the copyright in the Java program and the Graphic User Interface. As Dr Edwards’ employer, Cyprotex claimed ownership. Sheffield sought to rely on the agreement, as well as discussions leading up to the agreement, to show that it was entitled to ownership.
Unfortunately, the poor construction of the 'not happily drafted' agreement meant that the issue of ownership could not be easily determined.
On the face of the agreement Sheffield had no rights to the work of Dr Edwards. However, the appeal court supported the judge’s finding that poor drafting and inconsistencies meant that strict construction of the agreement was not possible. Instead, it was held that the underlying factual basis and commercial purpose should be referred to.
The evidence was that both sides were aware that Dr Edwards would be the author of the programs under copyright principles, and negotiations had always proceeded on the basis that Sheffield would retain the IP rights necessary to commercialise the program through a third party. Although these negotiations could not be relied on because of a clause expressly stating that the agreement superseded all previous agreements, they did contribute to the underlying factual basis of the agreement.
A main point of confusion arose due to the distinction the agreement made between 'Resulting IP' which would belong to Sheffield, and 'Sponsor IP', the latter being IP made solely by employees of the sponsors and belonging to the sponsors. In an attempt to distinguish Dr Edwards’ work from 'Sponsor IP', the judge held that his work could not be separated from the program: it was the program, and was therefore not 'Sponsor IP' but rather 'Resulting IP'. The appeal court held that 'Sponsor IP' only described work relating to the program which was of a kind which all sponsors might undertake as part of their input.
The research agreement was construed accordingly. Most importantly, the £17,000 from Cyprotex was held to be ‘in kind’. Failure by Cyprotex to ensure that its different status and contribution was properly reflected in the agreement did not work in its favour.
Further, the appeal judges identified a separate agreement between Cyprotex and Sheffield. This agreement provided that Cyprotex, as the supplier of programmer services (and not as a sponsor), supplied Dr Edwards’ services. Dr Edwards was thus an agent of the university for the purposes of determining IP ownership.
A decisive factor seemed to be that without such interpretation, the consequences of following the agreement would be commercially unreal and without practical sense. In particular, if Cyprotex had ownership of the IP in Dr Edwards’ work, Sheffield would not be able to honour its obligations to the other sponsors, who had provided funds in expectation of licenses from Sheffield.
The appeal court upheld the primary judge’s declaration that Sheffield owned the IP in or over works created by Dr Edwards in relation to the Simcyp project.
Lessons learned
It would be unwise for any party to take this case as an indication that the courts will be willing to step outside the terms of an agreement. The case instead demonstrates the importance of getting the agreement right before commencing collaboration work, so that recourse to the courts is not necessary.
Particular issues parties should address include:
- who, under the law, will own the IP generated from the collaboration and who wants to own or use it. Cyprotex provides good examples of alternative ownership and licensing solutions but illustrates why these should have been better defined in the agreement
- why a party wants to own or use the IP. The agreement can then be checked to certify that these needs are reflected in the final allocation of IP rights
- how the university will ensure that the university is true to its primary role as an educational institution. Poor drafting of a collaboration agreement means that the right to disseminate knowledge gained through research and to continue research in an area of specialisation could be at risk.
Business is business
The Cyprotex decision reinforces the fact that research collaborations are first and foremost business deals, and so business, and not legal, principles should govern the approach taken by the parties.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
