UK: FP7 – IP Tricks And Traps

Last Updated: 20 March 2008
Article by Catherine Rohll

The seventh framework programme (FP7) runs from 2007 until 2013 and will provide funding of more than 50 billion for research and development across Europe. With so much money at stake, few can afford to ignore it as a possible source of research funding. However, the funding comes with strings attached and the grant conditions, particularly those relating to IP, do not suit everyone, as Catherine Rohll, a solicitor in Manches LLP Technology & Media Department, explains. A number of calls for proposals under the co-operation programme of FP7 have now closed and initial funding decisions have been made. Those involved in successful projects, particularly the co-ordinator or lead participant in each project, will now be enmeshed in the painful process of negotiating the contracts required as a condition of the grant.

Veterans of earlier framework programmes will be familiar with this process, but it is important for newcomers to understand that there are two key contracts for each project that is funded:

  1. the grant agreement between the Commission and the participants to the consortium which sets out the terms on which funding will be provided; and
  2. the consortium agreement between the parties to the consortium which details how the participants will manage certain aspects of the project.

The consortium agreement supplements the grant agreement, but if there is any conflict between the two, it is the grant agreement that prevails. Some of the most hotly contested clauses in the consortium agreement are inevitably those dealing with the ownership of and access to IP. This article suggests some points to consider when contemplating and negotiating the IP clauses of your FP7 consortium agreement and also points out some key differences between the FP7 and FP6 regimes.

Is Your Project Suitable For Funding Through FP7?

There is no getting away from the fact that if you take part in a framework programme, you have to be prepared to grant to the other participants certain rights to your IP. Such rights will be to background IP which is relevant to the project, and to any IP that you create in the course of conducting the project. The rights that you have to grant can be limited (see below), but not totally avoided. Therefore, if the project requires use of potentially very valuable background IP with real possibilities for commercial exploitation in the near future, FP7 may not be the best source of funding for the project.

Have You Got The Right Collaborators?

One piece of good news is that it seems that under FP7 the Commission will not be actively encouraging such large consortia as it was under FP6. This means that you can ease the process of negotiating the consortium agreement by keeping the number of participants to a minimum and including only those that are essential for the scientific aims of the project. Obviously, you should avoid including your direct competitors if you don't want to be obliged to provide them with access to your background IP!

What Is Background?

Under FP7, background may include all information and rights held by a participant prior to the start of the project. Unlike FP6, the definition does not include "sideground" ie information and rights acquired in parallel with the project, as this was thought to create uncertainty and, in practice, was rarely needed.

Access Rights To Background

Each participant must be prepared to grant to each of the others the following rights under its background:

  1. a royalty-free right for the purpose of implementing the project; and
  2. a right which may be royalty free or on fair and reasonable terms (as agreed by the parties) to the extent necessary to enable a participant to use its own foreground.

In both cases, access to background need only be granted if the other participants actually require that background to implement the project or to use their own foreground. Background that has no relevance to the project is therefore not included. In addition the grant agreement for FP7 (unlike FP6) states that such access rights need only be granted to the extent that a party is entitled to grant them. Concerns about pre-existing third party rights over background are therefore taken care of.

Should You Positively Or Negatively Define Background?

Under FP7 it is possible to define positively or negatively the background that will be made available by each of the participants. In other words, the participants can decide that:

  1. only background specifically listed is made available to the others (the positive list approach); or
  2. all of the background of each participant should be available to the others unless it is specifically excluded (the negative list approach).

When taking the negative list approach, it is worth remembering that rights are only granted to background which is "needed" and then only to the extent that the granting party is able to grant them. There is therefore no need to exclude extensive lists of background that is unlikely to be relevant in any case. The negative approach therefore provides access to all relevant background without involving the participants in the time-consuming exercise of preparing long lists of the background to be excluded. In addition, under FP7 any background that is to be excluded does not have to be identified before the consortium agreement is signed, which means that the parties are free to make adjustments, if need be, during the course of the project.

Although the negative approach is very flexible, some participants (particularly commercial entities) may feel more comfortable including a positive list of their background so that it is very clear which background is available and there is no question of access to broader rights being granted inadvertently. The downside of this is clearly the effort involved and the fact that something that is required may be left out by mistake. The participants need to be wary of the background rights being defined too narrowly and may need to rethink the scope of the project or the members of the consortium if rights which are needed for the project are being withheld.

What Is Foreground?

Foreground covers the results, information, knowledge and materials generated in the project and all intellectual property rights arising from it. The grant agreement provides that foreground will be owned by the participant that creates it. If foreground is created jointly, it will be owned jointly and the participants are required to enter into a further agreement regarding the terms of that joint ownership. However, in a departure from FP6, the grant agreement sets out default provisions that will apply to joint ownership until that agreement is put in place. These enable each of the joint owners to license the jointly owned IP nonexclusively (with no right to sub-license) provided that they give prior notice to the other joint owners and provide them with fair and reasonable compensation.

The grant agreement requires that the participants grant to each other equivalent rights over the foreground that they create as for background ie a royalty-free right for the purpose of implementing the project and, to the extent required for a participant to use its own foreground, a licence that may be either royalty-free or granted on fair and reasonable terms as may be agreed by the parties. Unlike FP6, there is no time limit for agreeing the terms for use of foreground and so the parties can wait until it is clear what foreground has emerged and how it might be exploited before deciding the terms on which it should be licensed.

Should You Grant Broader Access Rights?

The grant agreement sets out the minimum rights that the participants must grant to each other, but some consortia decide to grant broader rights. For example, there is no general requirement to grant to another participant the right to use foreground arising from the Project for further research if it is not "needed" by them to enable them to use their own foreground. However, some consortia choose to allow each of the participants to use the background and/or foreground of all participants for further non-commercial research.

Another common extension of the access rights is to allow sub-licensing. The grant agreement does not include the right to sub-license (even to affiliates of consortium members) without the consent of the owner of the relevant foreground or background. The reason for this is that in a large consortium the ability for each participant to sub-license to its affiliates could significantly increase the number of entities entitled to a licence and include many who have had little or no involvement with the project. This causes uncertainty for the owner of the relevant foreground or background who may quickly lose track of all those entitled to use its IP! On the other hand preventing access to affiliates may, in some cases, deny a participant the chance to exploit its rights. For example, a university or other academic institution is unlikely to exploit its IP directly but may license it to a third party in return for royalties or other benefits and sub-licensing of access rights should not be unreasonably withheld in these circumstances.

The author's view is that is wise not to overcomplicate matters in the consortium agreement. It is always possible to grant further rights to one or more participants later on if it becomes appropriate to do so. It is also worth remembering that there is no need to treat all participants the same and the solution may be that some participants can sub-license and others cannot. In addition, while certain access rights to participants must be granted royalty free, this does not apply to the right to sub-license and so participants may agree to extend the right to affiliates (or other third parties) in return for royalties.

How Should Access Rights Be Granted?

Under the grant agreement, access rights are not granted automatically and must be requested by the participants in writing. In most cases, access rights are granted in the consortium agreement, which takes away the need for a further request and grant of rights, but this need not be the case.

There is a tendency to assume that each participant should grant and be granted the same access rights. This approach can lead to difficulties, as some parties may be more reluctant than others to grant rights, particularly over their background. One solution is not to expand to any great extent in the consortium agreement on the rights set out in the grant agreement, but to provide a mechanism under which particular participants can request further access rights from each other as appropriate. The specific access rights and any related conditions can then be set out in a separate agreement between the relevant participants. While this inevitably leads to an increase in the number of agreements, it does mean that they can be tailored to suit the needs of the relevant participants, which may be preferable to a "one size fits all" approach.

Can Exclusive Rights Be Granted To A Participant Or Third Party?

In a welcome change from FP6, it is now possible for participants to waive their access rights to foreground or background owned by another participant to enable that participant to grant an exclusive licence. In addition, the period for which access rights can be requested under FP7 has been reduced from a minimum of two years after the end of the project to a minimum of one year after the end of the project. Exclusive licences can therefore be granted after the end of this period even if no waivers have been obtained.

Commission guidance recommends that participants do not enter into wholesale waivers of their access rights, but rather agree to waive their rights on a case-by-case basis and only to the extent required to enable another participant to grant an exclusive licence. The inability to grant an exclusive licence over foreground was seen as a barrier to some companies taking part in previous framework programmes. It will be interesting to see how often such waivers of rights are requested under FP7.

Conclusion

Negotiating the IP provisions of a consortium agreement is never easy, especially when a large number of parties are involved and they include both academic and commercial players. However, in FP7, there is some good news in that the model grant agreement is more flexible in its approach than in previous framework programmes. There is also a fair amount of official help and guidance to try to ease the process as well as regional help provided through the Regional Development Agencies (and other agencies).

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.

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