UTEN Workshop Negotiation of R&D...

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UTEN WorkshopNegotiation of R&D contractstraining session – University of Porto

Porto, December 2011

Dr. Lorenz KaiserDivision Director Legal Affairs and Contracts Fraunhofer Headquarter

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Dr. Lorenz Kaiser 20111214 Uten, Portugal 2

Fraunhofer profile in 2011

60 Institutes at 40 locations

17 000 employees

about € 1.7 billionresearch budget

7 Alliances Information and Communication Technology Life Sciences Materials and Components Microelectronics Production Surface Technology and Photonics

Defense and Security

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Dr. Lorenz Kaiser 20111214 Uten, Portugal

Food should be delicious, healthy and sustainably produced.

Researchers are working on new methods to use as many parts of plants as possible for nutrition. In the future, vegetable ingredients could replace animal raw materials. Lupin seeds, for instance, can be used to produce low-fat, exquisite sausage products.

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Eating low-fat, thanks to lupin proteins

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Wounds have to be regularly checked, to make sure any complications in the healing process are detected at an early stage.

A new material will make it possible to check wounds without changing the dressing: If an infection arises, the material changes its color.

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Dressing indicates infections

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Flexible yet rigid like a human bone, and immediately capable of bearing loads: A new kind of implant, made of titanium foam, resembles the inside of a bone in terms of its structural configuration.

Not only does this make it less stiff than conventional massive implants. It also promotes ingrowth into surrounding bones.

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Titanium foams replace injured bones

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Many of the world's remote areas with water shortages also have three things in abundance: Sun, wind and sea

How renewable energies can be harnessed more effectively in the future to transform salty seawater and brackish water into drinking water is the subject of a current study issued by an EU initiative dubbed »ProDes«. © Fraunhofer ISE

Solar ray converts sea into drinking water

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Non disclosure agreements

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Know-how protection in the Preparation Phase

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Naive trust in the confidentiality obligation of the partner

Missing factual control mechanisms of own Know-how

Unprotected exchange of Know- how in the preparation phase

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The use of non disclosure agreements for damage compensation in case of breach of confidentiality??

Most Legal Systems do not compensate the real loss in case of breach of confidentiality.

Disadvantage in competition cannot be figured out

No legislation about this question available (at least not in Germany)

Consequence

Find additional effective technical protection of your IPesp. protect electronic data against espionage

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Essential measures for know-how protection

Legal: Confidentiality Agreements with satisfactory rules

Check rules of labour contracts about confidentiality clauses,also "for the time after"

IP - Professionals for Contract-Negotiations

Check, observe and complete patent portefolio

Technical:

Control electronic data, seperate internal server recommendedwith reduced access to sensitive data

Remove Mobiles and Memory Sticks out of the meetings

Install a person responsible for Know-how protection

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JOSEPH VON FRAUNHOFER-AWARD 2009

Coining by blast with explosive agents to create holographic structures in steel as protection against counterfeiting expensive metal spare parts of machines and automobile parts.

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Forms of non disclosure agreements

NDA

Identification of confidential information

Consequences in case of breach of confidentiality

UnilateralObligation

Bi- and MultilateralMutual Obligation

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Non disclosure agreement

Content

Definition of Confidential Information/Materials/Samples Broad Definition (common) Listing in Attachment (exception) Marking as Confidential (US)

Right to use and Return of Papers/Materials/SamplesNo confidentiality time limits publicly known/free accessable Exception Clauses

No commitment about ownership of IPLiquidated Damages

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Contracts for the performance of R&D projects

contract research (vertical)

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Success and failure close togetherThe different applications of service-robots

WindowcleaningEntertainment / Info / Guidance

Inspection of chemical facilities

Maintenance and Inspection

Floorcleaning

Hospital Guarding Manufacturing

Housekeeping

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© pi4_workerbot

A robot with finger-tip sensitivity

Two arms, three cameras, finger-tip sensitivity and a variety of facial expressions – these are the distinguishing features of the pi4-workerbot. Similar in size to a human being, it can be employed at any modern workstation in an industrial manufacturing environment.

Its purpose is to help keep European production competitive.

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General FhG IP-strategie for contract-research foreground

FhG

ownership, unlimited exclusive right of use of FhG Foreground IP

Client

loses Foreground IP

FhG Client

keeps Foreground IP

non-exclusive/optional exclusive rights on FhG Foreground limited to the defined field of use

Exception

The exception applies to individual cases, in the event, that multiple exploition is not realistic (low exploitation potential, low exploitation power), FhI's portfolio serves as an indicator

Rule

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The »Rights-to-the-Results-Problem« of contract research

field of application exklusive

option for another fields of application

other fields of applicaton to be negotiated

field of application for third paty (comeptitor!)

other field of application non exclusive

field of application exclusive for a limited time period

Property

Patents a.o.

Know-how

Rights to the Results

usual industry position: overall property of IP in contract research

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R&D - results: contracted to client - foreground

Know-howCopyrights

non - exclusive

royalty - free license

for the field of application

on which the R&D contractis based

exclusive license

for the field of application

on which the R&D contractis based

Know-hownon – exclusive

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R&D results: contracted to client - foreground

Inventions/Patents

or

non - exclusive

royalty - free licensefor the purpose of application on which the R&D contract is basedinventors fee (+)costs for registration, maintenance and defence -partial reimbursement - (+)

exclusive

royalty - bearing licensefor the purpose of application on which the R&D contract is based

FhG retains non - exclusive right of use for R&D purposes

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royalty - bearingnecessary for exploitation

of the client

non - exclusive

R&D - Background - a crucial pint in any kind of cooperation

Background IPTake Care of your Background

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Functions of IP in a research organization depending on the form of cooperation

IP as asset for securing a position in technology

IP as patent manifesting market power

IP as aquisition instrument for business

IP as defending instrument against competitors

IP as basis for licence revenues

IP as incentive and motivation of staff

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Warranty in R&D projects

Defect of titleFree and clear of any third party rights

Defect of qualityBenefits offered in R&D

State of the art

Definition of defect in R&D

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R&D contract - legal background for warranty remedies

Contract for workand services

(Contrato de empreitada)

Contract for service

(Contrato de prestacao de servicio)

obligation to reach a result; guarantee for

success

Obligation to provide services;

performance, no guarantee for success

Product, Prototype

Applied Research Basic Research

Service

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The enforcement problem in R&D contracts

Client: guarantee for no conflicting rights in the commercialisation phase

R&D Performer: No guarantee, but hold harmless against third party claims

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Contractual solutions to remedy infringement of third party rights

IndemnitySolution

SearchSolution

TechnicalSolution

LicensingSolution

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Cooperation Contract

between science and industry(horizontal)

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Fleeces as »skeleton« for artificial tissues

Cartilages, sinews, bloodvessels may be produces in laboratories soon.

The respective cells will be breeded on a cavernous skeleton i.e. on fleeces.

A new software helps to characterize and optimize these fleeces

© Fraunhofer IWMRuptured fiber after a pull out test in a Microtest machine

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Safely anchored at sea

Different layers of the seabed reflect sound waves in a specific way.

Researchers are harnessing the benefits of this fact to efficiently track down suitable offshore sites for wind energy plants.

They use pressurized cannons, which emit acoustic signals that are recorded by underwater microphones.

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R & D - collaborative research between science and industry

Research Insitute

i.e. FhG

IndustrialPartner University

Cooperation based on division of labour and exchange of information/results

Most difficult question:

User rights

for commercialisation

non-exclusive ?

royalties (for research)

state aid topic !!!!

art. 3 of Framework

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Rights of Use in collaborative (and funded) research

Foreground Background

For the duration of the project

• non-exclusive rights

• royalty free

Beyond it, especially for commercial exploitation of the results

PRO‘s Position

•non-exclusive rights

• against royalties

Industry Position

Exclusive right

Royalty free

Where required for the exploitation of the results

• non- exclusive rights

• against royalties

Where required for the execution of the project

• non-exclusive rights

• free or against royalties

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Block exemptions with relevance for R&D contracts(Art. 101 of the treaty on the functioning of the EU)

Block-exemption for vertical agreements

Block exception for r&d agreements

Technology transfer block exemption

2010

2011 consultation

2004

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Preconditions for exemptions of the R&D block exemption

Joint R&D - Art. 2 Nr. 111. Conditions for exemption of R&D cooperation

Joint R&D and joint (Art. 1a,b) or separate commercializationArt. 1 (1) c)

Market share threshold not exceeded Art. 4 - (Joint market shares of competitors may not exceed 25 % of the relevant market)

(Exemption for non-competitors for the duration of R&D project) No breach of black clauses (Art. 5 und 6) In case of separate commercialization access to the results for all partners. The

use for universities can be limited for research purposes

2. Noticability of restraint of competition

Art. 101 (1) of the treaty on the functioning of the European Union

3. Exception to antitrust? Art. 101

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EU Antitrust Law - R&D block exemption

Art. 5 Hardcore Restrictions Restricition of freedom to carry out r&d in a unconnected field or (after competion of

the project) in a related field

Limitation of output or sales (except by setting of production or sales targets

Fixing of prices

Restrictions of territory for passive sells

Requirement to make any sales to territory which is not supplied or where a specialization of one partner is denied

Requirement of making problems for resellers

Art. 6 Excluded Restrictions Prohibition of Challenge of IP after the completion of project

Requirement to not grant licenses unless one of the parties exploits in the internal market

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Non Disclosure Agreement

Please check the following Non Disclosure Agreement and assess whether the grey highlighted clauses are

Standard Clauses ? Useful Clauses ? Dangerous Clauses ?

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft zur Förderung der angewandten Forschung e.V.Version 2002/II

Fraunhofer-Gesellschaft pursues exclusively and directly non-profit objectives, conducting contractual research in the field of applied research and breaking new ground in doing so. The following General Terms and Conditions reflect the nature of these objectives.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft1. Scope of application

1.1 The following General Terms and Conditions shall apply to all research and development projects contracted to Fraunhofer-Gesellschaft. Divergent, contrary, or additional terms requested by the client shall not form part of the contract without the prior written consent of Fraunhofer-Gesellschaft. Where the following General Terms and Conditions do not provide any other regulation of the matter, the provisions of service contract law (Arts 611 et seq. German Civil Code) shall apply to all research and development contracts.

1.2 Where the following General Terms and Conditions provide the barring or limitation of damage liability of Fraunhofer-Gesellschaft, its legal representatives or agents, such barring or limitation shall not apply to liability for damages from injury to life, body, or health.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft2. Object of the contract, period of performance

2.1 The research and development project shall comprise the work defined in the offer of Fraunhofer-Gesellschaft.

2.2 Where the offer or the research and development contract includes a period of performance or deadlines, these shall only be deemed to be binding after express acknowledgement by Fraunhofer-Gesellschaft. Should Fraunhofer-Gesellschaft recognise that the binding period of performance or the binding deadline cannot be met then it shall notify the client of the reasons for delay and shall agree on an appropriate adjustment with the client.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft3. Fee

3.1 The fee shall be a fixed price. Notwithstanding this, the contracting parties may agree that the fee will be charged according to cost, where applicable with a maximum cost limit. VAT shall be added to the fee in each case, if applicable.

3.2 Fraunhofer-Gesellschaft shall immediately notify the client if it foresees that the result intended by the research and development contract cannot be achieved at the agreed fee. Fraunhofer-Gesellschaft shall simultaneously propose an adjustment of the fee to the client. Should this be necessary for reasons which were neither foreseeable when the contract was concluded nor the responsibility of Fraunhofer-Gesellschaft and if no other agreement is reached with the client, then the adjustment proposed by Fraunhofer-Gesellschaft shall be binding.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft4. Payments

4.1 Payments shall be due according to the agreed payment schedule. In the absence of a payment schedule, the due date shall be the date stated in the invoice. Payments shall be made without a cash discount and with an indication of the invoice number and the performing Fraunhofer-Institute to the account designated by Fraunhofer-Gesellschaft.

4.2 Setoff against claims of Fraunhofer-Gesellschaft shall only be allowed if the counterclaim is uncontested or if it is the subject of a final court decision.

4.3 The client may only exercise a right of retention if its counterclaim is based on the same contractual relationship.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft5. Result of Research and Development, Rights of Use

5.1 The research and development result shall be made available to the client after completion of the project in accordance with the offer.

5.2 The client shall be granted a non-exclusive, royalty-free right of use for the purpose of application on which the contract is based to inventions generated during the performance of the project as well as to industrial property rights filed by and granted to Fraunhofer-Gesellschaft for these inventions. The client shall reimburse Fraunhofer-Gesellschaft an appropriate part of the costs for registration, maintenance and defence of the industrial property rights to be agreed upon between the contracting parties and shall pay, in case of use of the inventions, a comprehensive employee inventors fee, the amount of which shall be agreed in each individual case.

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5.3 Upon request and in lieu of the right according to Section 5.2, the client shall be granted an exclusive, royalty bearing right of use for the purpose of application on which the contract is based to inventions generated during the performance of the project as well as to industrial property rights filed by and granted to Fraunhofer-Gesellschaft for these inventions. The request shall be made in writing addressed to Fraunhofer-Gesellschaft, at the latest three months after the client's notification of the invention. Fraunhofer-Gesellschaft shall insofar retain a non-exclusive, royalty-free right of use for purposes of research and development.

5.4 The client shall be granted a non-exclusive, royalty-free right of use for the purpose of application on which the contract is based to copyright protected works, databases, and know-how created during the performance of the project. The granting of an exclusive right of use for the purpose of application on which the contract is based shall require a separate agreement.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft5.5 Inventions jointly achieved by the contracting parties during the

performance of the project (joint inventions) may be used and licensed by each contracting party without any financial compensation. The contracting parties shall each bear a to be agreed portion of the costs for registration, maintenance and defence of the industrial property rights in question. In the case of copyright protected works jointly created during the performance of the contract (joint authorship) Section 5.5, sentence 1 shall apply correspondingly.

5.6 If during the performance of the contract already existing industrial property rights or copyrights of Fraunhofer-Gesellschaft are used which are required for the client's commercialisation of the result of the research and development project, then the client shall be granted a non-exclusive, royalty-bearing right of use under a separate agreement unless other obligations entered into by Fraunhofer-Gesellschaft preclude this.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft6. Third party property rights

6.1 Fraunhofer-Gesellschaft shall immediately notify the client of any third party industrial property rights of which it becomes aware during the performance of the contract and which could preclude the client’s use agreed pursuant to Section 5. The contracting parties shall decide in joint consultation how such industrial property rights shall be taken into consideration in the further performance of the project.

6.2 In the case of infringement of third party industrial property rights Fraunhofer-Gesellschaft shall be liable under the provisions of Sections 7.2 and 8.4, sentence 1 if it has violated its obligation to notify the client. Notwithstanding the liability under Section 8, the client shall have no further claims against Fraunhofer-Gesellschaft.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft7. Liability

7.1 Fraunhofer-Gesellschaft shall be responsible for applying scientific care and for complying with accepted scientific standards but not for actually achieving the research and development goal.

7.2 The liability of Fraunhofer-Gesellschaft, its legal representatives and agents in the case of violation of obligations and tort shall be limited to intent and gross negligence. Only in case of violation of essential contractual obligations (cardinal obligations) Fraunhofer-Gesellschaft, its legal representatives and agents shall also be liable in case of slight negligence. In any case, liability shall be limited to the foreseeable, contractually typical damages.

7.3 Should Fraunhofer-Gesellschaft neither fulfil the performance as agreed upon nor do so at the time due nor in the manner agreed upon, then the client may only demand compensation in lieu of performance if the client has unsuccessfully set an appropriate deadline for the performance by Fraunhofer-Gesellschaft including the

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statement that it would otherwise reject acceptance of the performance after the passing of that deadline.

8. Special conditions for delivery and work performance within the research and development project

8.1 Where Fraunhofer-Gesellschaft on the basis of an express commitment owes performance or delivery of work results corresponding to the accepted state-of-the-art as the result of research and development then in the case of defects the relevant provisions for sales contracts (Kaufrecht) and contracts for work and services (Werkvertragsrecht) shall only be applicable subject to the following Sections.

8.2 Should the result of the research and development work generated by Fraunhofer-Gesellschaft prove to be defective, then Fraunhofer-Gesellschaft shall first be given the opportunity to supplementary performance - depending on the nature of the result of the research and development, the defect and other circumstances also repeatedly -either by means of remedying the defect or substitute delivery.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft8.3 Should Fraunhofer-Gesellschaft reject supplementary performance or if

supplementary performance cannot be achieved or the client cannot reasonably be expected to accept supplementary performance, then the client may either terminate the contract or demand reduction of the fee owed (reduction) or damages. The right to termination may be exercised only in case of a serious defect. Such right lapses if the client does not declare the termination of the contract within 14 days after receiving notification of rejection or failure of supplementary performance or at the latest 14 days after the date at which it is recognised that the client cannot reasonably be expected to accept supplementary performance. Fraunhofer-Gesellschaft shall pay damages only under the further conditions of Section 7.2 and, if Fraunhofer-Gesellschaft has rejected supplementary performance, Section 7.3 shall apply also.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft8.4 In the case of an infringement of third party intellectual property rights

Fraunhofer-Gesellschaft shall only be liable if such rights apply in the Federal Republic of Germany, if the client uses the research and development result in a manner consistent with the contract, if a court decision based on infringement by the client of third party intellectual property rights is rendered against the client, and if the client has immediately notified Fraunhofer-Gesellschaft in writing of the claims asserted by such third party. Supplementary performance under Section 8.2 will be carried out by Fraunhofer-Gesellschaft by either obtaining a contractual authorisation for the client's use or by modifying the result of the research and development that the relevant third party intellectual property rights are no longer infringed.

8.5 The client shall immediately examine the research and development result supplied by Fraunhofer-Gesellschaft and report any defects found without undue delay. Fraunhofer-Gesellschaft only warrants for recognisable defects if it has been notified thereof within a period of 14 days from the date of delivery.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft8.6 Claims due to defects shall be statute-barred in accordance with the

provisions of Section 9.

9. Statutes of limitation

9.1 The claims of the client for breach of duty and tort shall be statute-barred within 12 months. This shall not apply where legislation prescribes longer periods of time in Arts 438, para 1, no 2, 479, para 1 (regress claim) and 634a, para 1, no 2, alt 1 (construction defects) German Civil Code or Fraunhofer-Gesellschaft is liable due to intent or gross negligence.

9.2 Should acceptance of the research and development result be agreed upon, the statute of limitations on claims due to defects pursuant to Section 9.1 shall commence upon acceptance, otherwise upon delivery.

9.3 Negotiations between the contracting parties over claims or over circumstances giving rise to claims shall suspend the statutes of limitation. The suspensive effect shall end if one of the contracting parties has not complied within four weeks with the request of the other contracting party to continue negotiations.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft10. Retention of title

10.1 The client shall only be granted ownership to the result of the research and development as well as to the right of use according to Sections 5.2, 5.3, 5.4, and 5.6 after full payment of the agreed fee. Ownership and rights of use held by Fraunhofer-Gesellschaft may neither be mortgaged nor transferred as security.

10.2 In the event that the ownership of Fraunhofer-Gesellschaft to the result of the research and development lapses through combination, commingling, or processing it is already hereby agreed that the ownership to the combined object created in such a case shall, until full payment of the agreed fee, be proportionally assigned (invoiced value) to Fraunhofer-Gesellschaft.

10.3 In the event of onward sale of the result of the research and development, the client shall cede all rights in rem to onward sale to Fraunhofer-Gesellschaft until full payment of the agreed fee.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft11. Confidentiality

11.1 The contracting parties shall for the duration of the contract and for a period of five years after its termination not make accessible to third parties information of a technical or commercial nature disclosed to each other and declared to be confidential. This shall not apply to information known or generally accessible to the other contracting party or to the public, or information which becomes known or generally accessible to the public after disclosure without any involvement or fault on the part of the other contracting party, or correspond to information disclosed or made accessible to the other contracting party by an entitled third party, or independently developed by an employee of the other contracting party not in possession of the information disclosed.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft11.2 Third parties within the meaning of this provision shall not include

subcontractors of Fraunhofer-Gesellschaft if these have been entrusted with a part of the services by Fraunhofer-Gesellschaft within the context of the assignment and if they have been placed under an obligation of confidentiality.

12. Publication, advertising

12.1 The client shall be entitled to publish the result of the research and development including identification of the author or the Fraunhofer-Institute involved only after prior consultation of Fraunhofer-Gesellschaft. Such consultation shall take into consideration that, for instance, dissertations, master's theses or applications, and/or registrations of intellectual property rights are not impaired. For purposes of advertising, the client may only mention the name of Fraunhofer-Gesellschaft or of the Fraunhofer-Institute involved with their express consent.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft12.2 Publications by Fraunhofer-Gesellschaft relating to the purpose

of application on which the contract is based and for which the client has been granted an exclusive licence as specified in Section 5.3, shall only be made after consultation with the client in due time prior to publication.

13. Termination

13.1 Should no essential progress in work have been achieved within a significant period of performance then each contracting party shall be entitled to terminate the contract with one month notice to the end of a calendar month. However, termination is excluded within a six months period since the beginning of the contract. Except as provided in this Section 13, there shall be no further right of termination.

13.2 Each contracting party shall be entitled to terminate the contract with immediate effect for good cause.

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General Terms and Conditions for Research and Development contracted to Fraunhofer-Gesellschaft13.3 Upon termination Fraunhofer-Gesellschaft shall submit within four

weeks the result of the research and development achieved until expiry of the period of notice. The client shall be obliged to compensate Fraunhofer-Gesellschaft for costs incurred up to the expiry of the period of notice. Personnel costs shall be reimbursed as incurred up to the date of termination. In the event that the termination is due to a fault by one of the contracting parties, this shall not affect damage compensation claims.

14. Miscellaneous

14.1 Ancillary understandings, amendments and supplements hereto must be made in writing.

14.2 Place of performance for Fraunhofer-Gesellschaft shall be the place of business of the Fraunhofer-Institute involved. Place of performance for payments by the client shall be Munich.

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14.3 This contract shall be governed by and construed in accordance with the laws of the Federal Republic of Germany. The United Nations Convention on the International Sale of Goods (CISG) shall not apply.

14.4 Should one or more provisions of these General Terms and Conditions be or become fully or partially void then the validity of the remaining provisions shall remain unaffected. The same shall apply in the case of a gap in the provisions of these General Terms and Conditions.

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Cooperation Agreement on the U.K. Lambert model contract

Please check whether the grey highlighted clauses

Useful

Necessary

Legal or illegal

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Research collaboration & network Building for commercialization

2nd Uten WorkshopPorto 2010

Dr. Lorenz Kaiser

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