We know. It's hard enough satisfying your own shareholders, let alone trying to satisfy someone else's. The thought of trying to get another enterprise to work with you on a long term development project involving multiple IP rights can be daunting.
But however difficult collaborations are, sometimes you can't afford to ignore the opportunities they present. We can't give collaborations and collaboration licensing an exhaustive treatment in this post, but we thought we'd put pen to paper and give you a summary of some selected issues that need to be considered when putting together collaboration deals.
1. Will the collaboration actually involve a grant of IP from all parties? If not, look at whether the deal should in fact be expressed as a collaboration. One party might be providing services, or producing/distributing products predicated on technology owned by another party. If that's the case, a one-direction license might be most appropriate.
2. What will the allocation of IP ownership rights look like:
- before the deal?
- during the term of the collaboration license?
- after the collaboration license has expired or is terminated?
3. How will infringements of the collaboration IP be handled? There are a number of concerns that might affect you here. For example, if there is a right of sublicense to both parties for the collaboration IP, you'll want to make sure there are some hefty provisions preventing the non-litigant collaborator from licensing the technology to the infringer. In some jurisdictions such as the US, there are common law principles that require a licensor to be joined as a party to any litigation. In some cases, it isn't possible to contract out of these principles. If you have agreed on jointly-owned IP, be very careful to stipulate who will do what when one party wishes to enforce.
4. Will the collaboration involve a research and development period to extend, combine or reshape the technology? If so, be very careful to set parameters for the decision-making process. All parties may need a voice during this stage, and it's not uncommon for joint management committees to be set up to tackle this part of the game. It's important to ensure that deadlocks can be dealt with smoothly and efficiently.
5. Will the development period be followed by an option to opt out by either party? This is one of the techniques that can be used to resolve deadlocks. In effect, an active party that is not interested in proceeding can become a passive party with a smaller royalty share.
6. Will funding from the parties be required before royalties commence, and if yes, how will it be allocated? This is particularly relevant if the development work is going to be costly - it is important to have an expense and revenue balancing provision to address the process of claiming costs.
7. Will the outcome produce collaboration products? Who will produce them, and on what basis? Will production or manufacturing rights be restricted? Give some thought as to whether the production and sale of products might affect the scope of the license. Will the license include the products in its grant description?
8. How will the royalty base be constituted?
9. Will the licensed IP include patents, know-how, show-how and trade marks? If so, consider how this combination might affect the term of the agreement and perhaps the royalty structure over time. If the IP only consists of patents, the term of the agreement will have to conform to the shelf-life of the patent in jurisdictions like the US. If other forms of IP are included, they should attract distinct and separate royalty streams. In theory, trade marks should increase in value over time, which may result in numerous alterations to the royalty structure over the term.
10. Will the collaboration deal breach anti-competition or antitrust regulations? This is a significant concern in many jurisdictions. Ensure that you have considered the effect of these regulations before proceeding too far with collaboration negotiations.
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