Industry-Sponsored Research Week
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Master the details to effectively manage industry-sponsored research negotiations

By David Schwartz
Published: January 9th, 2018

Negotiating the contracts that underpin industry-sponsored research agreements isn’t getting any easier, no matter how widespread or common those agreements are becoming. And it’s not likely to, either, because each SRA is unique and requires a very nuanced legal document behind it.

Responding to the contracting challenges inherent in university-industry partnerships, the Columbia, SC-based University-Industry Demonstration Project has just announced a once-a month series of hour-long Contracting Connection webinars. Each focuses on a single contracting or engagement issue, starting in January with a look at visiting scholars from private industry — because each issue requires that much focus.

“The reason it takes skilled practitioners to negotiate industry-sponsored research agreements is each project associated with the agreement is unique,” says Anthony M. Boccanfuso, PhD, UIDP president. “Master agreements [can] provide a general structure, but each project has a task order and these contain clauses and conditions based on the unique nature of that project.”

For example, he adds, “some projects have a high likelihood of commercialization, while others have a very small chance,” and contracting language generally bends toward either scenario. Likewise, “some projects require industry-created background intellectual property, while others have university BIP or government funding as a basis.” Again, the impact on contracts is significant and can have a cascading effect on virtually every section of an agreement.

At the same time, each negotiation requires an understanding of the big picture — and “how an agreed-upon project can impact other matters,” he adds. In particular, for example, tax laws can make some negotiations tougher, Boccanfuso notes, because “they set limits on how much industry-directed research can be performed in campus buildings constructed with tax-exempt bonds.”

Another case that requires a wider view is a start-up that has spun out from the university and has limited financial resources, which of course “should be treated differently than a large multi-national that is based overseas and has no track record of working with that school,” he says.

The need for a big picture focus is so important that Boccanfuso says the biggest mistake schools make in contract negotiations is “people doing the negotiating who may not know or recognize how any project fits into the bigger picture and how best to treat that negotiation.” He adds: “At universities, contracting is often delegated to a central authority, usually found in the Office of Research. But enlightened negotiators will work with the faculty researchers, the departments, the colleges and others — including the school’s IP office — to ensure a timely and successful outcome.”

A lot of the difficult work in negotiations will center on one topic, because it’s at or near the top of every list of the toughest parts of a sponsored research contract to negotiate: intellectual property.

“The toughest negotiation points tend to come down to IP rights on background and especially foreground IP,” says Daniel Juliano, PhD, associate director of technology licensing at Montana State University’s Bozeman-based TechLink. “Companies understandably want to be confident they will have freedom to operate, and will sometimes ask for a non-exclusive royalty-free license to BIP and/or FIP.” While their motivation is understandable, it “presents some difficulties for the university,” he adds.

One aspect of a university’s reluctance relates to how the contract will be viewed by the researchers who worked so hard to develop the technology. “Are we harming the inventors of the BIP by ‘giving away’ their IP to secure new research dollars?” Juliano poses. And similarly with FIP, “are the investigators comfortable that the sponsor will have a [non-exclusive royalty-free license]?”

Another set of issues that can complicate negotiation “are tax law considerations involving Unrelated Business Income Tax and the financing of university buildings using tax-exempt bonds,” he notes. IP is such a challenging part of SRAs, in fact, that at the University of Colorado-Boulder, “we brought our IP attorneys to the same floor as the contacting officers, so everybody’s working more concurrently,” says Gary L. Henry, director of contracts at the school’s Office of Contracts & Grants. “We’re not throwing it over the fence. The daily dialog is beneficial.” In fact, it’s helped the school develop strategies for ironing out common IP tangles.

A detailed article on contracting challenges in industry-sponsored research appears in the December issue of Industry-Sponsored Research Management. To subscribe and access the full article, and gain access to the publication’s entire archive of detailed articles on attracting and managing corporate partnerships, CLICK HERE.

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