Town Meets Gown - Navigating the Sponsored Research Agreement
Private companies in the United States use sponsored research programs to accomplish various goals. Of course, the research produced by these programs can advance technology in a way that can improve the company’s products or market. But because it can be a challenge to turn research results into a competitive advantage, new technology is often not the only, or primary, goal. Companies also use sponsored research to accomplish ancillary goals such as access to talent (such as professors or graduate students who are not in a position to work for the company full time), access to the university’s equipment (such as expensive bio research machines, or advanced computing environments), access to data, software, or other university intellectual property (“IP”). However, an overarching goal is often recruiting. Companies compete for the best and brightest students when they graduate from school; sponsored research gives companies an early look at who is doing interesting work, and who may be a good candidate for recruitment. It gives companies the chance to try out new talent before bringing them on board permanently.
However, many companies that embark on sponsored research take a wrong turn at the outset of the project, because they do not understand that expectations and limitations of universities. This is especially true of technology companies, whose move to the sponsored research arena is relatively recent; biotech companies with long-standing ties to academia tend to understand the university’s expectations better.
These mismatched expectations may first be apparent as a matter of process rather than substance. Most universities engage in technology transactions through a centralized organization such as an office of technology licensing. Contracting is often done – at least at the initial stages – through non-attorney contracting officers. Universities generally insist on starting with their own forms of agreement, so attempts by the company to develop its own “standard” university agreement are often wasted. The initial volley of paper from a university will often be an unadulterated form with no customization. Once the company takes a first cut at adapting the form, turnaround on drafts may be very slow. But this is only process, and the substantive mismatches to come can be more significant.
Unlike private contractors – a company’s usual partner for development – universities are not focused primarily on making a profit from technology development. While it is true that universities profit from their technology licensing programs, that money-making activity is ancillary to their primary mission of advancing knowledge.
Universities in the United States are often not-for-profit entities, and are also often owned or funded by state governments. Not-for-profit status places certain limitations on an entity’s activities; universities’ tangible and intangible resources must be used in a way that benefits the public good. Therefore, while universities may license technology to companies, they must do so in a way that makes the technology available to the public. This can conflict with private expectations of confidentiality and exclusivity. As state actors, universities may be constrained by state constitutional or regulatory limitations on terms they can agree to in transactional documents.
Patents vs. Other Intellectual Property
Another challenge arises because universities have been slow to adapt to the changing IP and technology landscape. University license agreements and sponsored research agreements are often lacking in robust provisions for dealing with non-patent IP. Historically, universities have viewed the results of their research as forming the basis for patent applications. They operated in a traditional process of getting invention disclosures from their researchers, making the decision whether to fund patent prosecution, and licensing patents. But today, particularly in the IT field, the most valuable results from research may be software or other “soft IP.” University agreements may omit the topic entirely, or classify all of it as confidential information not available for use by the company.
Private companies, of course, want to ensure that they are not “tainted” by exposure to non-patent IP such as ideas, trade secrets, and know-how. Universities are not quite aligned with this requirement, but not quite opposed to it, either. University agreements often grant only limited rights for a company sponsor to use non-patent IP (such as a license only for non-commercial purposes) but simultaneously give the university carte blanche to publish it. The company may, therefore, find itself in the difficult position of being unable to use information that it paid to develop, but also unable to protect it from use by others. In other words, the sponsor is the worst situated among it and its competitors. Companies considering sponsored research should keep this mantra in mind: there are no trade secrets in academia. If the results of the research can’t be protected via patent or copyright, they likely won’t be protected at all.
Universities and private companies also have different notions about what is customary for joint development. Private actors tend to avoid joint ownership – particularly of patents – due to the difficulties it creates in enforcement. They prefer assignment and cross-licensing. Universities usually want all jointly developed IP to belong to the university, which will prosecute patents and give the company the option to negotiate for a license. The idea that a company paying for research would have to negotiate for a license to its own joint inventions can be a bitter pill to swallow. Many sponsors address this by trying, in practice, to avoid joint inventions as much as possible. Others successfully require the university to grant at least a non-exclusive license back to the sponsor of any joint inventions. More rarely, the parties retain joint ownership, and divvy up the prosecution and enforcement tasks.
Finally, the expectations regarding publicity may be very different for the two contracting sides. Private companies like to make press releases about deals and work with their business partners to generate publicity about their successes. Universities will categorically refuse for their name to be used in any ways, but will allow academics to publicize their work via traditional academic channels. The two sides can find common ground in practice, but don’t expect the kind of press announcement provision you would see in a private company deal.
Below is a list of the most common items of “mismatch” and how they are often resolved.
Although universities and private companies may start out with different expectations, understanding each other’s practices and requirements will help align the parties to come to agreement. If the differences seem substantial, it can help to re-scope the project to a manageable subject matter with fewer unknowns. As universities and private companies work together onmultiple projects, they can develop relationships of trust and understand each other’s positions better, to smooth the path to agreement. With some creativity and re-alignment of expectations, universities and private companies can plan and execute valuable projects, and foster collaborative and cutting-edge technology development and deployment.