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Negotiating IP Ownership in Research Agreements #1


Who will own the IP arising from:

  1. collaborations and joint ventures

  2. sponsored research

  3. contract research

  4. other contracting relationships


can be a controversial point in a negotiation.

It can be so controversial that sometimes parties intimate that they will walk away from the deal unless the ownership of IP is resolved in their favour. Sometimes it can be so controversial that they do walk away.


Perception that research monies are purchase monies

The controversy sometimes arises because of the perception that research funds paid under a collaboration agreement or a sponsored research agreement are the purchase price for the IP that arises from the research. If this is the perception, a party’s insistence on ownership of the IP is understandable.

But of course research monies are not the purchase monies for IP – they are the monies that fund the carrying out of research. Normally, they only partially fund the carrying out of that research, which is why to classify research funds as purchase monies is inaccurate.


Perception that ownership is needed to commercialise and that a license is inadequate

It can also arise because of the perception that IP needs to be owned to be commercialised, and that a license is inadequate to do so.

Pharmaceutical companies, amongst the largest companies in the world, will invariably license technology in, and on the comfort and security of that license, will spend up to half a billion dollars to take a drug candidate through its clinical, regulatory and market approval stages. These most sophisticated technology multinationals always being satisfied with a license and not insisting on ownership demonstrates that the perception that ownership of IP is required and that a license is inadequate, is a flawed perception.


The wrong negotiation approach #1 – to negotiate

The most common approach when negotiating this issue is to do just that – negotiate.

The first problem with that approach is that it is a negotiation that you either win – you will own the IP, or you will lose – the other party will own the IP. There is no middle ground. Whoever the loser is they will feel harshly treated, and that is not how you want your collaboration partner or research partner to feel. You can hardly get the best out of them if they feel harshly done by. This feeling of being harshly done by can lead to the reluctant performance of contractual obligations, or to the under-performance of obligations. The “winner” on the IP ownership issue might therefore turn out to be the “loser” in the long run.

The second problem with that approach is that the need for research monies sometimes results in the ownership of IP being conceded – a concession that again may make a party feel that it is being harshly done by, with the same result – reluctant performance or under-performance.

The third problem with that approach is that it stresses the relationship between the parties – a relationship that both parties really do not want to stress, but instead want to nurture and develop.


The wrong negotiation approach #2 – joint ownership

To avoid the issue, joint ownership between the parties might be considered. On the surface it appears to treat the parties equally and fairly.

But in fact, joint ownership laws around the world treat the parties unequally. One of the parties may be disadvantaged, or both parties may be disadvantaged.

For example:

  1. there are two joint owners

  2. one joint owner does not have the capability to manufacture and market products (it may be a university, research institute, start-up company or small SME)

  3. the other joint owner does have capability to manufacture and sell products (it may be a large SME or a multi-national corporation). 


The law (in Australia, New Zealand, Singapore, Hong Kong, Malaysia, and almost all other countries) allows each joint owner to exploit the IP that it jointly owns, with no need for a license, and without any royalty or other financial obligation to the other joint owner. The joint owner without commercialisation capability gets none of the benefits of ownership, and the owner with commercialisation capability effectively gets all the benefits of ownership.

Another example:

  1. there are two joint owners

  2. one of them wants to appoint a licensee, or to engage a manufacturer (which is a licensee) or a distributor (which is also a licensee). 


The law (in Australia, New Zealand, Singapore, Hong Kong, Malaysia, and almost all other countries, except USA and Canada) is that a joint owner cannot grant a license without the other joint owner’s consent. Consent can be given, or refused, or given subject to any conditions, including unpredictable or unreasonable conditions. The law on joint ownership does not require consent not to be unreasonably withheld.

Joint ownership will often give rise to more problems, instead of providing a solution. See a previous issue of IP Bits Joint Ownership of Patents Does Not Result in Joint Benefits.


The right negotiation approach – address the perception

Insistence on ownership usually arises because of the incorrect perception that research monies are the purchase price of the IP that arises from the research, or the flawed perception that ownership is required for commercialisation and that a license is inadequate.

When dealing with the ownership of IP, the best approach is therefore to address these perceptions.

The timing and manner of how this is done is critical.

If the perception problem is addressed after the “formal” negotiation starts, that is too late. All efforts to address the perception will be perceived to be part of the negotiation.

The time to address the perception is before the negotiation starts.

You seek to influence the other party’s perception – you don’t seek to negotiate the issue.

The “sweetheart phase” when the parties are considering and evaluating each other, the technology, and the opportunity, is the optimal time to influence these perceptions.

This is not done around a negotiation table. It is done instead around a dinner table, or otherwise in casual conversation.

Some examples of how you might consider influencing the other party:

  1. Casually describe some of the other licenses that you have granted. They are already public knowledge, so you can talk about them without needing to disclose any confidential information. Identify the multinational licensee by name. Mention (perhaps in broad terms) the extent of the financial investment the licensee has made or will make in further R&D, travelling any regulatory path, investing in marketing, etc. Describe the wonderful partnership that the license implements. Don’t just describe one license. Describe several. 

  2. Describe some of the regrettable experiences you have had with joint ownership. Describe an occasion when a joint owner declined consent to a license to a manufacturer or distributor. Or, how a joint owner sought to impose conditions on the granting of consent, including insistence on the sharing of financial benefits in a manner that was disproportionate and inequitable. 


The prospective licensee that you will later be negotiating with will listen and absorb these experiences that you share. This will influence the prospective licensee’s perceptions, and in turn, influence the negotiation, and in turn, the negotiation’s outcome. 

When this is done well, controversies on the ownership of IP can be avoided altogether – the issue simply does not arise – what you propose about ownership (and accompanying rights) is accepted. This happens on a minority of occasions. On the majority of occasions the issue won’t be avoided, but you will start the negotiation of this issue with advantage, and a greater likelihood of prevailing.

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