Research and development agreements are of considerable economic importance in Europe, not only for the companies involved. Research and development include various types of cooperation, ranging from paid research and joint research and development activities within the meaning of a cooperation to the establishment of joint ventures by the involved parties. Such agreements are not only concluded horizontally between companies on the same economic level of the distribution or production chain, but may also be concluded vertically, for example with a supplier. Often, several companies as well as non-commercial research facilities such as universities are involved in research and development projects. Thus, when drafting R & D agreements, keeping the parties and their positions in mind is recommended.
The purpose of the R & D Exemption Regulation is to promote research competition – which is deemed desirable – and the innovations stemming from it, and only restrict agreements on research where it is inevitable.
For this purpose, the R & D Exemption Regulation provides a body of rules which allow the parties to an R & D agreement to handle the restrictions under antitrust law.
4.2 Important provisions – Checklist
Usually, research and development settings are characterized by two parties with different know-how and patents wanting to develop a new product together. For example, one of the companies has a development idea, the implementation of which requires involving a second company, and the first company intends to be the sole party entitled after the conclusion of the joint research and development project, if possible.
In such settings, questions that usually need to be taken into account are: Which company contributes which industrial property rights to the joint project? How should accompanying know-how be treated? Which party is to obtain the rights in the results of the cooperation?
Hence, when drafting research and development agreements, the following aspects are particularly significant:
The ownership of existing rights and rights arising from the joint project:
• First, the parties should clarify who is the proprietor of the rights contributed to the project.
• Additionally, the agreement must include rules on the ownership of the rights which will arise in the context of the research and development project. Here, laying down detailed rules is recommended.
Provisions on rights of use of existing rights and rights arising from the joint project:
• Rights to use already existing rights are to be granted to the involved parties to the extent to which this is necessary for carrying out the joint project.
• With respect to rights which arise from the cooperation, the condition for exemption stipulated in Art. 3(2) R & D Exemption Regulation is to be observed as well. All parties need to be granted access to the results, including the rights which arose from the joint project (potential know-how included). This may also mean that licenses which must not be restricted to a mere use for further research and development have to be granted for such rights. If royalties are agreed upon, they must not be so high that, in fact, they prevent access to the results.
Exploitation of the results:
The parties may jointly exploit the results of their joint project, but they do not have to do so. First, it has to be considered in the context of the exploitation that it does not only cover the manufacture or distribution of the contractual items, or the application of the contractual technology, but also the assignment of intellectual property rights, or the grant of licenses for them, or the transfer of know-how which is required for the manufacture or application. Against this background, the following rules need to be observed in particular.
• If the parties have not agreed on a joint exploitation of the results, the parties have to grant each other access to their know-how to the extent to which this is required for the purpose of exploitation. This also is a condition for exemption pursuant to Art. 3(3) R & D Exemption Regulation.
• If joint exploitation is agreed upon, it may only relate to IP rights or know-how resulting from the joint project which are inevitable for exploitation. This is another condition for exemption pursuant to Art. 3(4) R & D Exemption Regulation.
The following aspects also need to be considered when drafting a research and development agreement:
• The parties should agree on the operational steps of the cooperation. Stipulating major intermediate steps, or intermediate goals, in the agreement is recommended as it helps avoid disputes about these steps, or goals, between the parties later on.
• The same holds true for the duration of the joint project. Including a timeline in the agreement is recommended as well as it provides the cooperation project with a time frame during which the parties (are to) carry out various steps. Usually, the time frame is determined when the intermediate steps/goals are determined.
• The agreement must not include any provision which constitutes a core restriction within the meaning of Art. 5 R & D Exemption Regulation (such as a contractual agreement by which selling prices of the contractual items are determined). Provisions which are not exempted according to Art. 6 R & D Exemption Provision are to be avoided, too.
4.3 Duration of exemption
The duration of the exemption depends on whether or not the parties to the agreement are competitors.
• If the parties are not competitors, the duration of the exemption is 7 years as of the beginning of the exploitation pursuant to Art. 4(1) R & D Exemption Regulation. The beginning of the exploitation is defined as the date on which a contractual item or contractual service is first put into circulation. In this context, a specific contractual determination is recommended; in this way, reconstructing the date of the beginning of the exploitation is possible later.
Even when the 7 years have expired, the agreements continue to be exempted if the common market share of the parties does not exceed 25 %.
• If the parties are competitors, the duration of the exemption also is 7 years as of the beginning of the exploitation, but subject to the condition that the common market share of the parties did not exceed 25 % at the date of the conclusion of the agreement.
So, when drafting agreements relating to industrial property rights, keeping antitrust law in mind is recommended. Even in settings in which the applicability of provisions under antitrust law is not obvious, these provisions may still have considerable consequences.