Legal Forms of Collaboration TABLE of CONTENTS
Total Page：16
File Type：pdf, Size：1020Kb
EUREKA THE TOOLBOX
Legal Forms of Collaboration TABLE OF CONTENTS
FOREWORD...... 4
INTRODUCTION...... 5
Legal Forms of Collaboration...... 5
A word of warning...... 6
LIST OF GENERAL DEFINITIONS...... 7
Cooperation agreement...... 7
Legal forms of collaboration...... 7
R&D agreement...... 7
Consortium agreement...... 7
Joint venture agreement...... 7
Results ('foreground information')...... 7
Background information...... 7
Intellectual property rights (IPRs)...... 7
Know-how...... 7
TYPOLOGY OF EUREKA PROJECTS AND LEGAL FORMS...... 8
FIRST STEP:...... 8
Situate your project within the proposed typology of projects...... 8
Joint research and development...... 8
Concerted research and development...... 8
Joint exploitation of results...... 8
Combined exploitation...... 8
Contract research...... 8
SECOND STEP:...... 9
Verify whether your proposed project falls within the EUREKA context or not and if certain legal forms of cooperation are eligible for public funding...... 9
THIRD STEP:...... 9
Identify the relevant legal aspects for your particular case...... 9
FOURTH STEP:...... 9
Go through the following checkpoints to ascertain which main types of legal forms are available in your case ...... 9 CASE I:...... 9
Concerted research and separate exploitation...... 9
CASE II:...... 10
Joint research and separate exploitation...... 10
CASE Ill:...... 11
Concerted research and joint exploitation...... 11
CASE IV:...... 12
Joint research and joint exploitation...... 12
CASE V:...... 13
Concerted research and combined exploitation...... 13
CASE VI:...... 13
Contract research and separate or combined exploitation...... 13
Definitions...... 14
QUESTIONS AND ANSWERS...... 15
A. EUREKA and legal forms of cooperation...... 15
B. The choice between a purely contractual form of cooperation, an informal grouping or an institutional solution...... 17
C. Legal forms of cooperation and IPRs...... 18
D. Legal forms of cooperation and concerted research: strategic alliance...... 21
E. Legal forms of cooperation and concerted research: the case for a consortium...... 21
F. Legal forms of cooperation: the case for the EEIG...... 22
G. Legal forms of cooperation and combined exploitation...... 22
H. Legal forms of cooperation and joint exploitation...... 23
I. Visibility of all partners...... 25
J. Financial squeeze...... 26
COMPARATIVE TABLE OF LEGAL FOMS OF COOPERATION...... 27
A- Purely contractual...... 27
B. Grouping or consortium...... 27
C. Institutional cooperation...... 28 FOREWORD This booklet is intended as a guide to a number of elements concerning the legal aspects of a cooperation in the framework of a each partner will have in the exploitation of the EUREKA project. results. A variety of legal forms of collaboration Experience has shown that the absence of a is presented and systematically analysed so legal guarantee concerning the cooperation is that project partners can decide for themselves one of the major causes of project failure. The how to be covered by the most secure and quality of a project is inevitably determined by appropriate contract. appropriate cooperation management where An appropriate legal form is a guarantee for due attention has been given to legal issues. a quality project. In this view this booklet tries This booklet does not claim to set out line of to play a role in the improvement of project conduct in order to obtain quality projects, but quality. it tries to warn potential project partners of We hope that the reader will find possible risks of the legal aspect if the appropriate information in this booklet and we cooperation is not sufficiently taken into wish potential partners great success in the consideration, or if the form of cooperation that drawing up of their legal form of collaboration. has been set up is not the appropriate one in Guillaume DEDEURWAERDER this specific situation. Chairman of the National The booklet for legal forms of collaboration Project Coordinators' Group covers the different legal forms of structured Belgian EUREKA collaboration applied by most members of Office EUREKA. It inter alia sets out, for the potential partners, several possibilities to set up an appropriate legal structure taking into account the share INTRODUCTION The objectives of EUREKA are to raise, Legal Forms of Collaboration through closer cooperation among It would be impossible to analyse in a enterprises and research institutes in the field single document the technological, legal and of advanced technologies, the productivity financial aspects. This is why the scope of this and competitiveness of European enterprises booklet is limited to only one of the important and national economies on the world market. and sensitive issues for the successful In order to achieve this objective, EUREKA implementation of a project. has to encourage and facilitate increased The object of this booklet is to provide a industrial, technological and scientific number of elements on the legal aspects of a cooperation on projects directed at cooperation in the framework of a EUREKA developing products, processes and services project. Experience has shown that the which are based on advanced technologies absence of an adequate legal framework for and which have worldwide market potential. the cooperation is one of the major causes of These objectives show that EUREKA has a project failure. The quality of a project is genuine economic mission, this being to inevitably determined by appropriate improve the competitiveness of European cooperation management where due atten- enterprises. EUREKA helps Europe to play a tion has been given to legal issues. major role on the global economic scene. This booklet does not claim to set out a In order to achieve a proper level of line of conduct in order to obtain quality competitiveness, it is essential to set up projects, but it shows the opportunities for projects with a high technological value that, collaboration offered by different legal forms at the same time, are appropriately covered of collaboration and it tries to warn potential from the legal and financial point of view. project partners of possible risks if the legal Without projects there would be no EUREKA aspect of the cooperation is not sufficiently and without high quality projects EUREKA taken into consideration, or if the form of would not be able to play the role it was cooperation that has been set up is not the assigned. This is why it is vital to set up high most appropriate one in their specific quality projects, free of technological, legal or situation. financial risks. By definition, a EUREKA project is an R&D project with a commercial, hence economic objective. As such, two phases can be distinguished in a EUREKA project: the research and development phase and the exploitation phase (commercialisation). If a EUREKA project has to be looked at from every angle (preparation, development, implementation), both phases have to be and a certain number of questions considered separately, as well as in parallel. encountered in typical cases. The booklet The legal information concerning the tries to answer these questions in a didactic research and development phase is mostly manner, in order to encourage participants to covered in the booklet 'Checklist for the find and use the most appropriate legal Preparation and the Execution of a EUREKA structure for a given situation. Project'. The Checklist provides information To allow potential partners to have access on the general framework concerning the to the most comprehensive information, the cooperation between the partners in a booklet describes the various legal forms of EUREKA project but only partially covers the collaboration applied in most EUREKA appropriate legal structures that have to be member countries. added to the general framework. This booklet Enterprises from EUREKA member on Legal Forms of Collaboration covers countries will therefore find in this booklet the essentially these legal structures which cover basic information necessary to determine the second phase, the exploitation phase. which legal form of collaboration is the most EUREKA projects can only play a role in suitable in their situation from the the productivity and the competitiveness of perspective of legal security. enterprises if these projects extend into the A word of warning exploitation phase. If the R&D phase is the This guide tries to conform to the bottom- way to enter the EUREKA framework, the up principle enshrined in the Hanover exploitation phase justifies cooperation in a Declaration. The participants in a EUREKA EUREKA project. The exploitation phase can project will themselves decide wharf form the be analysed as the most important phase in a collaboration will take, taking into account EUREKA project in the perspective of the role the characteristics of the project. It will be up of EUREKA in the worldwide market the to the partners to determine ways of competitiveness and the productivity of managing the project and ensuring ad- EUREKA. As stated above, a EUREKA project ministrative support. The partners have has a commercial objective. In order to play complete freedom to define, finance and its economic role, EUREKA projects should manage their project. The booklet is written result in successful exploitation. In order to with this perspective in mind. It merely plan and manage this phase effectively, it is suggests the partners implement a legal form obviously necessary to pay due attention to of collaboration that matches their situation the legal aspects when setting up the project. and offers guidance to the partners who are As such, this informative booklet covers free to accept or ignore it. It can only add to the different legal forms of structured cross- the quality of the decision making process. border collaboration. It inter alia sets out, for It is not the aim of this booklet to act the potential partners, several possibilities to as a substitute the assistance of a legal set up an appropriate legal structure as advisor to whom EUREKA partners regards the share each partner will have in should have resort when negotiating a the exploitation of the results. legal form of collaboration. The informa- The methodology used consists in the tion contained in this booklet is necessarily drawing up of a typology of EUREKA projects only indicative and intends to offer a synoptic be an important factor in choosing a overview rather than a detailed analysis of particular form of cooperation. the laws in each EUREKA country. The booklet has deliberately omitted public funding and tax issues that may
LIST OF GENERAL DEFINITIONS Cooperation agreement Consortium agreement is the formal and binding legal document is the contractual document which signed by the participants specifying their governs the relationship between two or respective rights and duties in the framework more participants who agree to work together of the project. For a detailed checklist of to achieve specified objectives, where their points to discuss during the negotiation of a cooperation is based on an informal grouping cooperation agreement, reference is made to or undertaking having no separate legal the booklet 'Checklist for the Preparation and character. Execution of a EUREKA Project'. Joint venture agreement Legal forms of collaboration is the contractual document establishing are the different types of collaborative struc- the cooperation agreement where the co- tures between the participants as defined in operation is going to be structured as a joint the cooperation agreement from the legal enterprise with a separate legal entity during perspective, being purely contractual, and/or after the EUREKA R&D phase. informal grouping or institutionalised. This Results ('foreground booklet also provides more information on information') the available legal forms in different EUREKA means any kind of technological countries. information whether protected as know-how (See also R&D agreement, consortium or subject to intellectual property rights agreement, joint venture agreement.) generated by the participants and sub- R&D agreement contractors within the framework of the is the most straightforward specific form of project results sometimes referred to as arrangement for carrying out research and foreground as is the case in the EUREKA development collaboration. The parties will booklet 'Guidelines for the Protection of be associated as independent contractors Technological Information' as well as in the under the terms of the contract and capable model contract used for projects within the of governing both their ongoing relationship ESPRIT-programme. Foreground is to be and its contractual termination. distinguished from background information. Background information the abbreviation IPR is used throughout this booklet. means any kind of information whether protected as know-how or subject to Know-how intellectual property rights other than Means technological information, data, or foreground and that is owned or controlled by knowledge resulting from experience and a participant in the project and is vital for skills which are applicable in practice as either the R&D project or the exploitation of defined in the EUREKA booklet ‘Guidelines for the results. the Protection of Technological Information’. Intellectual property rights Know-how may be protected under the law as trade secrets or other forms of confidential (IPRs) information depending on its nature, the also called industrial property rights, are applicable legislation and contractual any exclusive title granted under any arrangements (e.g. secrecy agreements) applicable legal provision to the maker, between participants or with third parties. In owner or author of an invention, distinctive order to be protectable, know-how must be sign or creation such as patents, utility valuable and not freely obtainable from other models, trade marks, industrial designs, sources in a laxful way. copyright. See the EUREKA booklet 'Guidelines for the Protection of Technological Information' for further information on the different types of IPRs. For practical reasons TYPOLOGY OF EUREKA PROJECTS AND LEGAL FORMS CASE I: FIRST STEP: Concerted research and separate exploitation CASE II: Situate your project Joint research and separate exploitation within the proposed CASE III: Concerted research and joint exploitation typology of projects CASE IV: Before reading further about legal forms of Joint research and joint exploitation cooperation an assessment should first be CASE V: made to ascertain into which type of EUREKA Concerted research and combined exploitation project your situation fails. CASE VI: Contract research and separate exploitation Joint research and development is defined as work (i) carried out by a joint research team, (ii) jointly entrusted to a third party or (iii) allocated between the participants by way of specialisation and achieved within there is generally no need to establish common the framework of a programme defining the structures for the production or field and objectives of the work. commercialisation of the results. The Joint research is to be distinguished from relationship between the parties can be based concerted research. on a particular contractual arrangement based on sub-contracting or a silent grouping. Concerted research and Combined exploitation is to be distinguished from joint or separate exploitation. development is defined as the situation where the Contract research cooperation between participants in the R&D is an unilateral arrangement whereby the (sub-) project mainly consists of an exchange of contractor performs research work for the complementary information and results in account of the principal who normally becomes order to avoid duplication from parallel/double the sole owner of the results in exchange for a research activities while participants have and financial consideration. maintain their independent R&D capacities. Concerted research is to be distinguished from joint research and development.
Joint exploitation of results is defined as any kind of further use of the SECOND STEP: results of an R&D project (i) through joint licensing to third parties or (ii) direct Verify whether your commercial exploitation in common by the participants (iii) with or without joint selling of proposed project falls end-products in the market. In cases where within the EUREKA participants wish to continue their joint efforts into the exploitation phase in one way or an- context or not and if other i.e. beyond the EUREKA phase, they will certain legal forms of probably have to structure their cooperation agreement as a real joint venture agreement. cooperation are eligible Joint exploitation is to be distinguished from separate or combined exploitation. for public funding
Combined exploitation CASES I to V is a situation where the results obtained by When an informal or formal grouping is a participant cannot be exploited established between the participants check independently by such a participant or whether you stilt qualify for public funding. exploited without integrating products or CASE VI processes from one or more other participants. When the project is limited to a purely sub- This situation differs from Joint exploitation as contracting arrangement, your project will probably not qualify for EUREKA status. situation and go trough the different EUREKA criteria require not only that all the checkpoints. participants benefit from the project and need Summary: to have sufficient technical financial and 1. Normally EUREKA is about concerted managerial resources and competence to run research. the project, but that there must also be a real 2. If your projects involves contract research or market potential of the project results for all joint research you should verify in advance if the participants to exploit. This is rather this complies with national funding exceptional in acontract research situation requirements. where one party subcontracts the research 3. The exploitation of projects results is only work to another party not in a position to indirectly a matter of EUREKA as one of the independently exploit the results. EUREKA requirements is the need of a However, the sub-contracting of research market potential for the exploitation of the work within a real collaborative setting is not results by the participants. excluded as long as the project is not limited to contract research – check with your NPC. FOURTH STEP: THIRD STEP: Go through the following Identify the relevant legal checkpoints to ascertain aspects for your particular which main types of legal case forms are available in your case
CASE I:
Type of Form of Ownershi Exploitati Concerted research and Cooperat p of on Research ion Results separate exploitation Contract Purely Transfer Separate CHECKPOINT I.1: Are or will the participants Research Contractu Exploitatio al n be fully capable of exploiting the results in an Concerted Informal Partition Combined independent way? Research Grouping Exploitatio n □ yes - see next CHECKPOINT □ no – CASES III, IV or V Joint Institution Common Joint Research al Ownership Exploitatio n CHECKPOINT I.2: Are the participants willing
You are now in a position to examine what kind to join forces to exploit the results? of legal form of collaboration is the most □ yes - go to CASES III, IV or V suitable for your project. Refer to the case you □ no - go to next CHECKPOINT have identified as being the closest to your CHECKPOINT I.3: Do the participants maintain an independent research capacity in the field of the project? be royalty bearing □ yes - go to next CHECKPOINT □ no - go to CASE II or IV CHECKPOINT I.8: Is there a fair balance CHECKPOINT I.4: Do the participants entrust between the expected benefits retained from the entire research work to one of them or to a the exploitation of the results and the third party (e.g. a research institution)? contribution made by each participant to the □ to one of the partners - go to CASE VI project? □ to a research institution - go to CASE II □ yes - go to next CHECKPOINT □ no - go to next CHECKPOINT □ no - ensure that the participant contributing CHECKPOINT 1.5: Are the participants more background to the project than the executing the project within the framework of a others is properly remunerated through a long term understanding between them on royalty bearing licence or other form of their technology programmes and research compensation in order to restore the results in order to bridge an important balance technological gap with competitors or market CHECKPOINT I.9: Will it be possible for the leaders or to achieve a major technological participants to clearly allocate the ownership of breakthrough? the results and the IPR between them so that □ no - go to next CHECKPOINT no part of the results remains undivided or in □ yes - participants should structure their co-ownership? cooperation as a strategic alliance - see □ yes - go to next CHECKPOINT questions 17 to 20 □ no - the problem of co-ownership or CHECKPOINT I.6: Do all parties have undivided ownership of results may cause unrestricted and equal access to the results of major problems - participants should try to the project whether they are sole owner, co- divide the IPR between them on a territorial owner or non-owner to be able to be in a basis or split up these rights in another position to exploit the results without taking way; reciprocal licences should be granted the other participants into account? to allow exploitation by ail participants - if it □ yes - go to next CHECKPOINT is not possible to divide the IPRs, □ no - verify whether any restrictions are participants are to verify if they are allowed necessary and compatible with competition to freely use the undivided or co-owned legislation - see QUESTIONS 14 and 15. IPRs for exploitation - if the law does not CHECKPOINT I.7: Do all the participants provide for a clear or acceptable solution, require access to the background of another the participants should make the necessary participant to be able to exploit the results arrangements in their cooperation independently? agreement. □ yes - go to next CHECKPOINT CHECKPOINT I.10: Is the project to be carried □ no - separate licensing agreements should out by several participants (more than two) or be made to ensure that all parties benefit is it necessary to be able to jointly operate with from the project. In cases where research third parties (e.g. banks, research institution, institutions are participating by contributing government)? valuable background, such licensing may □ yes - it is probably advisable to structure your project as a research consortium - see QUESTIONS 21 to 23 exemption can be obtained □ no - an R&D agreement between the □ different - go to next CHECKPOINT participants will be the most suitable legal CHECKPOINT II.5: Do all the participants form - see QUESTIONS 8 require access to the background of another participant to be able to exploit the results CASE II: independently? □ yes - go to next CHECKPOINT Joint research and separate □ no - provide for the necessary licensing ar- exploitation rangements CHECKPOINT II.1: Are the participants able CHECKPOINT II.6: Is there a fair balance and willing to exploit the results between the expected benefits retained from independently? the exploitation of the results and the □ yes - go to next CHECKPOINT contribution made by each participant to the □ no - go to CASES III, IV or V project? □ yes - go to next CHECKPOINT CHECKPOINT II.2: Do the participants □ no - ensure that a fair balance between maintain an independent research capacity in benefits and contributions is achieved e.g. the field of the project? through a royalty bearing licence for □ no - verify whether it is compatible with background contributed to the project or applicable competition laws -see QUESTION other compensations 15 and go to the next CHECKPOINT CHECKPOINT II.7: As it is unlikely for the □ yes - go to CASES I, III, V or VI ownership of the results to be allocated entirely CHECKPOINT lI.3: Do all parties have to the participants, verify whether it is possible unrestricted and equal access to the results of to divide the IPRs between the participants the project whether they are sole owner, co- along a territorial or other division? owner or non-owner so they are in a position to □ yes - an R&D agreement may be sufficient exploit the results without taking the other to structure your cooperation; but the participants into account? setting up of a joint licensing company may □ yes - go to next CHECKPOINT be useful - see QUESTION 10 □ no - verify whether any restrictions are □ no-go to next CHECKPOINT necessary and if so, whether they are CHECKPOINT II.8 : Is the project to be carried compatible with applicable competition out by more than two participants, to be jointly legislation - see QUESTIONS 17 and 15 entrusted to a third party (research institution) CHECKPOINT II.4: Are the results exploited in or is it necessary to be able to jointly operate the same or different applications by the with third parties (e.g. banks, government)? participants? □ yes - the setting up of a consortium, □ the same - the participants will be research association is highly advisable - competitors when exploiting the results; see QUESTIONS 21 to 23 - check with your anticompetitive restrictions at exploitation National Project Coordinator if this is level are likely to be contrary to acceptable for funding requirements competition legislation -verify with □ no - the setting up of a joint licensing competition authorities whether an company may be useful - see QUESTION 10 concerted research clearly be allocated between the participants and made available CASE Ill: for joint exploitation? □ yes - go to next CHECKPOINT Concerted research and joint □ no - the problem of undivided co-ownership exploitation appears as CASE I in CHECKPOINT I.9 - if CHECKPOINT III.1: Are the participants in a IPRs cannot be divided between the position to independently exploit the results? participants on a territorial or other basis, it □ yes - verify whether Joint exploitation is is advisable for the participants to verify compatible with applicable competition whether the applicable law provides for a legislation - see QUESTION 27 - if the clear and acceptable solution; if not, the answer is yes, go to the next CHECKPOINT; necessary arrangements should be made in if the answer is no, change to CASE I or V the cooperation agreement so that joint □ no - go to next CHECKPOINT exploitation is possible i.e. through CHECKPOINT III.2: Do the parties maintain an transferor licensing of the results to the independent research capacity in the project exploitation joint venture or joint venture field? company - see QUESTION 11 □ yes - go to next CHECKPOINT CHECKPOINT III.6: Is it possible to make a fair □ no - change to CASE IV valuation of the foreground and background CHECKPOINT III.3: Are the participants information owned and controlled by the executing the project within the framework of a participants? long term understanding between them on □ yes - the ownership or right to use their technology programmes and research foreground and/or the background results in order to bridge an important information can be contributed to a joint technological gap with competitors or market venture company - see QUESTION 11 in leaders or to achieve a major technological exchange for a share in the capital and/or breakthrough? the profits or sold to the Joint venture □ yes - participants should structure their company cooperation as a strategic alliance - see □ no - it is advisable to retain ownership of QUESTIONS 17 to 20 the results and licence the required IPRs to □ no - go to next CHECKPOINT the joint venture company until the full CHECKPOINT III.4: Are the participants free to economic potential of the results can be use the results for applications outside the assessed scope of joint exploitation? CHECKPOINT III.7: Is there a fair balance between the expected benefits retained from the exploitation of the results and the □ no - verify whether this is compatible with contribution made by each participant to the applicable competition legislation - project? questions 14 and 15 □ yes - go to next CHECKPOINT □ yes - go to next CHECKPOINT □ no - consider balancing contributions and CHECKPOINT III.5: Can the ownership of the benefits of the participants in the joint results and the IPRs emanating from the venture company by additional royalty bearing licences on background or other ownership of this background information forms of compensation until its full economic potential can be assessed - go to next CHECKPOINT CASE IV: □ yes - it is advisable to set up a joint venture company at the outset of the project and Joint research and joint contribute the background information to exploitation the joint venture company at its full value CHECKPOINT IV.1: Are the participants in a CHECKPOINT IV.6: Can the ownership of the position to independently exploit the results-in results and the IPRs emanating from the joint competition with each other? research be clearly allocated between the □ yes - verify whether and to what extent it is participants before making them available for possible to have the results jointly joint exploitation? exploited without infringing applicable □ yes - go to next CHECKPOINT competition legislation - see QUESTION 27 □ no - if it is not possible to set up the joint if the answer is no, consider changing to venture company at the outset of the CASE II project, it is advisable to pool resources □ no - go to next CHECKPOINT within a consortium or other informal CHECKPOINT IV.2: Do the participants grouping and have the results and resulting maintain an independent research capacity in IPRs owned in common through this entity; the field of the project? the consortium will afterwards transfer its □ yes - change to CASE III assets to the newly created joint venture □ no - verify whether this is compatible with company - see QUESTION 11 applicable competition legislation and go to CHECKPOINT IV.7: Is there a fair balance next CHECKPOINT between the expected future benefits retained CHECKPOINT IV.3: Do the participants want by the participants through joint exploitation to continue to exist as separate legal entities? and their respective contributions to the □ no - a merger between the participants or project? their affiliates is a possibility such as the □ yes - a joint venture company should be set acquisition by one participant of the other up before starting to exploit the results - □ yes - go to next CHECKPOINT see QUESTION 27 CHECKPOINT IV.4: Are the participants free to □ no - before setting up the joint venture use the results for applications outside the company the balance between the scope of joint exploitation? participants should be restored through □ no - verify whether this is compatible with separate royalty bearing licences of applicable competition legislation - see background or other forms of compensation questions 14 and 15 - see QUESTION 11 □ yes - go to next CHECKPOINT CHECKPOINT IV.5: Is it possible to make a fair CASE V: valuation of the background information to be Concerted research and contributed by each participant? □ no - the participant contributing important combined exploitation background information should retain the CHECKPOINT V.1: Is there at least one participant who is unable to fully exploit the whether the law allows free use of results without the cooperation of other undivided or co-owned IPRs for the participants? exploitation - if the law is unclear or □ yes-go to next CHECKPOINT unsatisfactory on this point, the par- □ no - change to CASE ticipants should make the necessary CHECKPOINT V.2: Do the participants arrangements in their cooperation maintain an independent research capacity in agreement the project field? CHECKPOINT V.6: Is this project to be carried □ yes - go to next CHECKPOINT out by several participants, over a longer □ no - change to CASE IV period of time for successive projects or is it CHECKPOINT V.3: Are the participants necessary to be able to jointly operate with executing the project within the framework of a third parties (e.g. banks, research institution, long term understanding between them on governments)? their technology programmes and research □ no - an R&D agreement between the results in order to bridge an important participants will be the most suitable form technological gap with competitors or market for the research phase; another commercial leaders or to achieve a major technological arrangement will be required for the breakthrough? combined exploitation phase - see □ no - go to next CHECKPOINT QUESTION 25 □ yes - participants should set up their □ yes - it is advisable to structure the concerted research project within the research project within a research framework of a strategic alliance-see consortium - see QUESTIONS 21 to 23 QUESTIONS 17 to 19 CHECKPOINT V.4: Will all participants have CASE VI: unrestricted and equal access to the results of the project whether they are a sole owner, co- Contract research and separate owner or non-owner to be able to exploit the or combined exploitation RESULTS without taking the other participants CHECKPOINT VI.1: Is only one party executing into account? the research project on behalf of another party □ yes - go to next CHECKPOINT that is going to exploit the results □ no - verify whether any restrictions are independently? necessary and compatible with competition □ yes - you are probably no longer within the legislation - see QUESTIONS 14 and 15 scope of EUREKA - Check with your NPC CHECKPOINT V.5: Will the participants be (National Project Coordinator) able to clearly allocate the ownership of results □ no - go to next and the IPRs between them so that no part of CHECKPOINTCHECKPOINT VI.2: Will all the results remains undivided or co-owned? parties have a share in the exploitation of the □ yes - go to next CHECKPOINT results? □ no - if it is not possible to divide the IPRs □ yes - change to CASE I or V between the participants by field of use or □ no - you are probably no longer qualified to otherwise the participants should verify receive funding within the EUREKA context - Check with your NPC Joint licensing company A joint licensing company is a special Definitions purpose vehicle or legal entity created Consortium specifically for the management and indirect exploitation of results i.e. through exclusive or In business circles the word consortium is non-exclusive licensing of foreground used for different forms of cooperation between information which is co-owned by two or more undertakings. For the purpose of this brochure undertakings. It is sometimes recommended to a consortium is an informal grouping of set up a joint licensing company in a specific undertakings regulated by the law but not country because of a tax-friendly treatment of considered as a legal entity separate from its royalties -see QUESTION 10. members. Normally a consortium will be formed for one or more projects or for a limited Joint venture company period of time - see QUESTIONS 21 to 23. A joint venture company is the most Strategic alliance intensive form of collaboration from a legal point of view as it involves the setting up of a Normally a strategic alliance is formed joint subsidiary company by two or more between two or more undertakings who want to undertakings for the purpose of carrying out carry out a large or long term concerted joint research and/or joint exploitation of the research programme but without giving up foreground information - see QUESTIONS 26 their independence in respect of their R&D and 27. capacity. It can take different legal forms, from an informal grouping to a Joint stock Merger or acquisition corporation - see QUESTIONS 17 to 20. This form of collaboration leads to the disap- Research association pearance of one or more legal entities through the creation of a new or the absorption of one This form of cooperation involves a large entity by another. The research entity and/or number of undertakings or even an entire exploitation capacities of two or more industry with a view to creating a centralised undertakings are physically or operationally research institute to which the members jointly integrated. entrust their common research projects. Generally speaking this takes the form of a European Economic Interest Group non-profit making association or a foundation. (EEIG) It has a long term perspective but cannot be The EEIG is a European form of business used for exploitation purposes as it cannot organisation which is available in all countries distribute its pro-fits to its members - see of the European Union and the European QUESTION 23. Economic Area and is aimed at facilitating The research association can, however, cooperation between undertakings established manage the IPRs emanating from the projects in different EU or EEA countries. It has full legal on behalf of its members and grant licences to capacity and is formed by contract between its third parties. All members will have access to members and registered officially-see the background and foreground information QUESTION 24. developed by the research association. Summary
Contract Research Concerted Research Joint Research Case IV Case I Case II Separate Probably not within 1. R&D Agreement 1. Research the scope of EUREKA 2. Association Exploitation Grouping/Consortium 2. 3. Joint Licensing Cy Grouping/Consortium 3. R&D Agreement 4. Joint Licensing Cy 5. EEIG Idem Case IV Case V idem Case II Combined 1. R&D Agreement Exploitation 2. Strategic Alliance + Supply Agreement 3. Grouping/Consortium + Supply Agreement 4. Joint Licensing
Case III Case IV Joint Exploitation 1. Strategic Alliance 1. Joint Venture Cy 2. R&D Agreement or 2. Grouping/Consortium Grouping/Consortium Joint Venture Cy Joint Venture Cy 3. Joint Venture Cy 3. Merger or Acquisition (For more details on these different legal forms of collaboration, see QUESTIONS AND ANSWERS.)
QUESTIONS AND ANSWERS A. EUREKA and legal forms Intent attached to the 18 point format2 application form, no specific documentation of cooperation or standard form, is required or imposed as proof of the final cooperation agreement between the partners making the application. 1. Does EUREKA require the partners to According to the 'bottom-up approach' of enter into any specific form of EUREKA, the partners are responsible for cooperation agreement between them making the necessary legal arrangements before obtaining EUREKA status? between themselves. As situations vary Apart from the co-signature1 or Letter of considerably between projects, it is virtually impossible to propose a standard form
1 The co-signature is the joint declaration of intention (the so called Letter of Intent because of its non-binding 2 Is the EUREKA application form through which general character) attached to the 18 point format by which the information on the project and the partners will participants commit themselves to cooperate in the beentered in EUREKA database and disseminated to the execution of the project. public, without disclosure of confidentialities. cooperation agreement. NPC can provide you with useful information The co-signature is the joint declaration of or refer you to an expert if you do not already intention (the so-called Letter of Intent have one. because of its non-binding character) In addition, EUREKA has therefore attached to the 18 point format by which the published several booklets providing participants commit themselves to cooperate information on the basic issues to be resolved in the execution of the project as described in in a cooperation agreement, such as the the 18 point format. 'Checklist for the Preparation and the The 18 point format is the EUREKA Execution of a EUREKA Project' and application form through which general 'Guidelines for the Protection of Technological information on the project and the partners Information'. will be entered in the EUREKA database and disseminated to the public, without disclosure 3. Does EUREKA recognise liberty of the of confidentialities partners in a project to structure their 2. What kind of assistance is available to cooperation according to the form they help project partners draft an deem the most appropriate? appropriate final cooperation agreement As has been said before, the pragmatic or and why is this so important? 'bottom-up approach' allows the partners to It is entirely in the interest and for the structure their cooperation according to benefit of the partners to have a detailed and whatever legal arrangements they deem legally binding arrangement made between appropriate. them providing the necessary safeguards against undesired imbalances between the 4. What considerations would prevent respective contributions and benefits of the EUREKA partners from choosing the partners or imbalances in decision making, most appropriate legal form of visibility, etc. cooperation? In the absence of an appropriate and National funding requirements may limit professionally negotiated and drafted the choice of a legal form of cooperation cooperation agreement, your project may be during the EUREKA phase for reasons of in danger as together with the lack of protecting and promoting the national adequate funding this is generally one of the economy. Funding applications are to be major causes of failure. Therefore if you want made at a national level so that national your project to be sound you should ensure authorities competent to decide on the public that you have the best possible cooperation funding of a EUREKA project are in a position agreement before starting to work together. to .require that this funding be used by and Practical experience has proved that for the benefit of their national enterprises. without professional assistance by qualified They will be reluctant to fund a project legal experts a EUREKA cooperation carried out by a joint legal entity not agreement cannot be drafted properly i.e. established in their territory. because transnational cooperation will touch In other words the legal form of upon different legal systems. cooperation chosen by the partners should Apart from your own legal experts, your not exclude a partner applying for public funding in his own country, to have an during the research phase. identifiable share in the research work and They do, however, make use of an the exploitation of the results. institutionalized form In general purely contractual forms of cooperation, an informal grouping between 6. Do most enterprises cooperate as a the partners will not preclude public funding. legal entity in the EUREKA phase? The use of a separate legal entity such as Most partners do not set up a separate a joint licensing company or a joint venture legal entity such as a company or partnership company during the EUREKA phase can cause to structure their cooperation during the problems. In cases where a separate legal research phase. entity is used to carry out the research They do, however, make use of an project, you should first check with your NPC institutionalized form of cooperation such as if and how your arrangement can be tailored an economic interest group of coordinate in such a way that national funding their work within a concerted or joint research requirements be met. project. This shows that a purely contractual 5. Is EUREKA concerned with the choice approach such as an R&D agreement will not of a legal form for cooperation between always be the appropriate collaborative the partners in the post EUREKA phase? structure for the project to be successful and Partners are entirely free to provide for for the partners to enjoy the necessary legal the most appropriate legal form of protection against imbalances between them, cooperation after the EUREKA phase. For this especially in the industrialization phase. reason it is recommended in cases where partners will have to work together for the B. The choice between a exploitation of the results to provide in advance for the setting up of a Joint venture purely contractual form of company or other legal entity in the original cooperation, an informal cooperation or consortium agreement, even if this legal entity only comes into existence at grouping or an institutional the end of the project. The joint venture company will either be set up at the end of solution. the EUREKA phase or an existing informal grouping, such as a consortium used during 7. What other considerations are likely the EUREKA phase, may be transformed into to influence the choice of a particular another legal entity at the end of the EUREKA form of cooperation? phase. (See COMPARATIVE TABLE OF LEGAL - Tax considerations: there may be a need FORMS OF COOPERATION, part B.) to set up a legal entity to enjoy tax-friendly It is essential to have addressed in the measures stimulating innovation; certain original cooperation agreement the question legal entities are tax transparent and others of the legal form to be used in case a joint or are not. combined exploitation takes place. company - Legal liability: certain legal forms will or partnership to structure their cooperation enable partners to benefit from limited on behalf of the partners, instead of liability while other forms imply joint and arranging everything between themselves in varying degrees of liability between the advance in the R&D agreement. partners. - Intellectual property protection: there - Number of partners: where more than two may also be a reason to have a joint legal partners are involved, a purely contractual entity for those partners who do not have the solution will be difficult to work out and its means or experience to handle an IPR negotiation will be time consuming while at portfolio for themselves; the need to continue the same time different legal forms provide to share the costs for protection, the clearly worked out solutions which can be administrative burden and decision making, adopted by the parties after making slight legal procedures in an international setting is alterations. certainly an incentive for SMEs to continue - Conflict resolution: in some legal systems, cooperation beyond the research phase. the choice of an institutional form of - Management structure: finally a profit- cooperation has an advantage since centre approach as for other joint venture particular procedures to solve shareholder situations requiring sufficient management disputes are organised by law. independence and motivation is frequently a - Protection against free riders: in general good reason to prefer an institutional form of the more institutional forms of cooperation cooperation. provide more legal security against free riding by one of the partners: in a purely 8. When is a purely contractual contractual solution, partners should ensure arrangement the best solution to start they make suitable arrangements in this your project with? respect which will not always be easy, If the project appears to be very complex particularly if more than two partners are or the partners are not yet sufficiently involved. acquainted with each other, a step-up - Extent and duration of the project: in approach will allow the partners to explore general the longer the duration of the project, the project and get to know each other before the greater the need for an institutionalised embarking on a more demanding structure. setting; the same applies if the cooperation is For this low commitment approach an R&D for successive projects, very important agreement is the best step-in form of programmes and where cooperation is to cooperation. At a later stage it can be extend beyond the research phase into the transformed into another legal form such as a exploitation of the results, consortium where partners climb the - Intensity of cooperation: the more 'commitment ladder' - see the EUREKA intensely partners cooperate in the research booklet 'Cross-Border Innovation: phase, the more problematic it will be to Managing Cooperative Ventures in Industrial allocate ownership of results and IPRs R&D' (pages 15-17). between them, and the more advisable it will therefore be to have an informal grouping or separate legal entity to coordinate their efforts, own the results and manage the IPRs C. Legal forms of of technology for subsequent developments or applications may be easier to organise as cooperation and IPRs there is an ongoing spirit of cooperation required from the shareholders.
9. What are the risks involved in 11. How to restore the balance between adopting a purely contractual solution contributions and benefits for a for (PR ownership and protection? disadvantaged partner? In a purely contractual solution the Normally a partner will have a share in the ownership and protection of your iPRs may be benefits of the exploitation of the results in at risk if you are unable to effectively prevent proportion with its contribution in money, background information from leaking into technology, labour, etc. foreground information, to allocate exactly Initially, it may be difficult to evaluate the and completely the ownership of the results background information at a fair value to to the partners generating them and to divide determine the share in the benefits of a the IPRs between the partners along lines partner contributing important background which are compatible with competition rules. information to the project. Such a partner The joint ownership of a patent or may there-fore at a later stage be undivided ownership of know-how is a major disadvantaged. risk to be avoided if the taw does not provide If a purely contractual solution is adopted, a clear and acceptable solution. Conflict of partners will have to restore the balances at a laws may complicate the issue even further if later stage through an additional royalty IPRs are subject to different legal regimes. bearing licence on background information or In this brochure it is not our task to address another form of compensation in favour of all the problems related to co-ownership or the disadvantaged partner. The other partner, undivided ownership in an R&D agreement. however, may be reluctant to reconsider the These problems may be avoided if the arrangements made in the original R&D results are owned and protected through a agreement. consortium or a common legal entity set up Where a grouping or an institutional form by the partners such as a Joint licensing of cooperation is adopted, the partner company. contributing background information to a joint venture company should be careful not to 10. What are the advantages of setting- give away its background information before up a joint licensing company? its full economic potential becomes clear. - Possible favourable tax treatment of Where a consortium is set up during the royalties depending on the place of research phase a partner should contribute registration. the use rather than the ownership of his - Continued sharing of costs, administrative background information. In such a case the burden, etc. related to IPR protection. consortium should be transformed into - Legal security against free-riding as both another legal entity to be used for joint partners depend on licences granted by exploitation or joint licensing as it is better to their commonly controlled entity; transfer contribute the background information directly to the legal entity than to have the elements are subject to consent; granting a consortium transfer it to the new legal entity. licence to a third party/the identity of the If the consortium transfers the background licensee, the extent of the licensee's rights information it obtained from the and privileges, the sharing of royalties, etc. disadvantaged partner to the new legal entity When a consensual regime is adopted, at its full value, such a partner will be even partners should set out their arrangement in more disadvantaged by this transfer as the a detailed co-ownership convention that is to other partner will have a more than equitable go beyond the duration of the cooperation share in the added value. agreement, as normally the validity period of a joint patent will exceed the duration of the 12. Is a partner who is a joint owner of cooperation agreement. foreground information allowed to disclose or licence out such foreground 13. Is a partner who is the sole owner of information without the approval of the foreground information entitled to other partners? disclose or license out such foreground The answer to this question depends on information to third parties without the the contractual arrangements made between approval of the other partners? the partners. If no contractual solution is Normally the cooperation agreement will provided for, different solutions are applicable prevent the sole owner from doing so during depending on the legal systems to which this the project phase as it is the aim of a matter is subject. This may lead to complex cooperation to give the partners privileged issues involving legal conflict in a access to the foreground information. When transnational cooperation where several legal the project is finished, solely owned systems are involved. foreground information can be disclosed and However, the laws governing the co- non-exclusively licensed under appropriate ownership of patents or undivided ownership confidentiality undertakings unless partners of know-how are not mandatory and thus are to work exclusively together for joint subject to negotiation between the partners. exploitation purposes. As previously stated, First of all, partners will have to decide such restrictions must not be in conflict with whether to adopt a liberal regime without the applicable competition rules. controls on the independent exploitation by each party or whether a consensual regime is 14. Which restrictions on the use of preferred. background or foreground information In cases where the liberal regime is during the research phase are chosen, there is no consent, no accounting compatible with European competition and no sharing of revenues required when law? disclosing or licensinq jointly owned The competition authorities of the foreground information. Normally granting European Commission have always taken a exclusive licenses will be submitted to the co- mild attitude towards agreements relating to owners for their consent. the joint execution of research work or to the If a consensual regime is preferred, the joint development of the results of research. partners will have to determine which In line with this position the Commission has issued two 'block exemptions' laying please check with your legal advisor. down that certain categories of R&D The following restrictions, imposed during Agreements do not restrict European the research phase on one or more of the competition and are therefore allowed. parties involved, are covered by the R&D These categories are: block exemption and/or the transfer - joint research and development technology exemption and therefore deemed agreements including the joint exploitation to be compatible with European competition of results, and including research and legislation: development joint ventures extending to - bans on performing, independently or joint distribution or selling (the R&D Block with third parties, R&D (and in fields Exemption); related or connected to the research work - certain categories of technology transfer under the EUREKA project); agreements (more especially licensing - bans on using know-how from other agreements) (the Technology Transfer parties for purposes other than the Block Exemption). research work under the EUREKA project; Agreements falling under the scope of - obligations to communicate what is these block exemptions will be considered necessary for the research. non-restrictive of competition if they do not contain certain provisions that are explicitly 15. Which restrictions on the use of forbidden. The Commission has also included background or foreground information in these block exemptions restrictive contract during the research phase are provisions that are expressly allowed. incompatible with European competition All research and development agreements law? and licensing agreements not falling within Please read the introductory comments the scope of one of the mentioned block under QUESTION 14 first. exemptions remain subject to general It has long been the opinion of the European law prohibiting any lawfulness of European Commission that R&D agreements his agreement, an individual exemption which restrict the R&D activity of the partners should be required from the European themselves or the utilisation of the results of Commission, which could be a longlasting, the joint work, or which exclude the granting heavy and expensive procedure. For more of licences to third parties may be considered details, consult your legal advisor. as agreements restrictive of competition. In addition, it should be mentioned that The Commission required in its R&D block there are some market share conditions exemption regulation that .as conditions for (ceilings not to be exceeded) for the R&D the R&D block exemption -to apply to the block exemption to apply, R&D agreements joint R&D agreements, all R&D partners must between partners which do not fulfil such have access to the results of the work (the market share conditions however may be foreground), and, in cases where the granted an individual exemption by the agreement is limited to joint R&D not Commission. extending to joint exploitation, each party On the question of whether these block must remain free to independently exploit the exemptions will apply to your agreement, results of knowledge (the background) necessary for such exploitation. Clauses at better conditions where the foreground limiting these rights are incompatible with information is acquired through the competition legislation. contribution of the other partners. On the question of whether these block In cases of co-ownership, the same applies exemptions will apply to your agreement, as with respect of disclosure and licensing please check with your legal advisor. (see QUESTION 12). If a liberal regime is More specifically, the R&D block adopted, partners will normally require the exemption and/or the technology transfer assignee to be subject to their approval and block exemption will not apply to the will agree to become a party to the joint following restrictive contractual clauses ownership convention or accept any res- relating to the research phase, which will triction imposed on the original co-owner. therefore be deemed to be incompatible with European competition law: D. Legal forms of - bans on performing, independently or with third parties, research work (and therefore cooperation and concerted on using background for such a purpose) in research: strategic alliance fields which are not connected to the research work under the EUREKA project;
- bans on competing with the partner or 17. When is it important to set up with third parties in respect of R&D, strategic alliances in a concerted production and distribution of competing research approach? products. Strategic alliances become more and more It should be noted that the two mentioned important in industries with increasing costs block exemptions contain many provisions of product development and the relating to the use of background and concentration of distribution channels and foreground information during the technology leadership in the hands of a few exploitation phase which, when included in major players. They involve a greater joint R&D agreements, will be deemed commitment from the partners than in an incompatible with and therefore forbidden by R&D agreement with respect to development, European competition law. For details, you marketing and distribution. should consult your legal advisor.
18. What is the difference between a strategic alliance and a joint venture 16. Is the sole owner or co-owner of situation? background or foreground information Normally strategic alliances will not allowed to assign his rights to a third involve the setting up of a new legal entity. At party without the consent of the other most, one partner may be invited to make an partners? equity investment into the other partner's With respect to sole ownership, the capital but the partners will maintain a large assignment should at least be subject to a degree of independence. A strategic alliance right of first refusal by the other partners at will normally involve a series of interrelated the conditions offered by a third party or even contracts including R&D agreements, Original E. Legal forms of Equipment Manufacturing (OEM), cross- licensing, supply, distribution or franchising cooperation and concerted agreement, etc. research: the case for a
19. What are the conditions for consortium success when adopting a strategic alliance approach? 21. What is the difference between an The partners must be ready to engage in a R&D agreement and a consortium? high commitment situation: the losses due to A consortium is an association or grouping an early withdrawal by one partner must be of enterprises that is normally set up when prohibitive. The agreement should be partners are willing to share the costs and negotiated or approved by top management. profits resulting from the project. There must be ample time to set up the In general, an R&D agreement implies no cooperation and negotiate all relevant sharing of losses or profits as each party will agreements: there must be no absolute time only bear its own costs and keep the benefits constraints and the time horizon of the of its own efforts while allowing limited project must be longer term. access by the other partner to the results of There is an absolute need to have a its efforts. compatible, if not the same, corporate In an R&D agreement joint risk taking is culture. avoided while in a consortium the parties aim Finally, the partners to a strategic alliance to achieve a profit to be shared in accordance must make complementary contributions to with their respective contributions. avoid the risk of free riding where they are In other words, if partners want to share actual or potential competitors. costs, pool assets, spread costs of a research project in order to share the results and the 20. What are the drawbacks of a benefits thereof, the use of a consortium strategic alliance? should be considered. - Transaction costs in the negotiation of a In general, in most legal systems the number of complex arrangements are high. liability of the partners in a consortium - There is a risk for the weaker party to lose towards third parties is joint and several. its economic independence. Third parties may precisely for this reason - Failure of a project or a partner will lead to require the setting up of a consortium important losses as the assets invested will between the partners before granting a be high. contract, a subsidy or funding (contractor, In other words, before forming a strategic bank, government institution). alliance the stake must be sufficiently high to Setting up a consortium therefore adds make the risk worthwhile. credit-worthiness to the project and the partners as compared with a purely contractual situation. Where more than two partners are involved drafting a simple contract may be licensing vehicle. difficult due to the need to plan for a As is generally the case in a consortium, withdrawal of a party. In a consortium it is the members are jointly and severally liable easier to continue the project without having for the obligations of the EEIG. to make a new contract between the The goal of an EEIG is not to share profits remaining partners as solutions are generally in the financial sense but to develop and provided by the applicable legislation. facilitate profit making activities by the partners, coordinate their work and 22. What is the difference between a undertake some auxiliary activities. consortium and a research association? An EEIG is an appropriate legal form of A research association is generally used cooperation in the absence of joint where joint research and separate exploitation, when limited liability is not exploitation cover more than one project and mandatory and there is a likelihood that for a large number of companies or even a partners may change overtime by whole industry. Normally the research withdrawals or new entries, in other words, association will be set up as a separate legal when flexible membership is necessary and a entity and be of a permanent nature. The Bel- non-profit making association is not gian international scientific association can compatible with the commercial character of be used for this purpose or another form of the cooperation. nonprofit making association or foundation. G. Legal forms of F. Legal forms of cooperation and combined cooperation: the case for exploitation the EEIG
24. Is it necessary to set up a separate 23. Is the European economic interest legal entity where combined group (EEIG) a form of cooperation that exploitation takes place? can be used for EUREKA projects? Integrating the products or processes The EEIG has already been used to developed by one partner into the products or structure cooperation between partners in a processes of another partner will in general EUREKA project. The applicable legislation not require the setting up of a separate legal normally excludes real joint exploitation entity. through an EEIG. The activities of an EEIG However it is essential that the partners must be strictly ancillary to the activities of define the terms and conditions of their the partners. combined exploitation at the outset of the The difference with a consortium is that an project as completely as possible in the form EEIG is a legal entity separate from that of of a commercial contract being a supply the partners. However it is not a taxable agreement, a through-put agreement, a entity. It is therefore less interesting as a joint transfer of technology or assistance contract, a stand-by manufacturing licence, and management structures ruling the joint specialisation undertaking, etc. venture company. Partners should The determination of the price during the determine which kind of majority is development phase will be the most difficult required for policy issues and whether all issue. Probably partners will only succeed in partners will equally participate in the determining the relevant parameters. decision making process or not. At the daily If in addition to combined exploitation the management level the independence of cooperation extends to the distribution of the management should be determined as well end-products, the situation is likely to be as the question as to who will appoint the considered as a strategic alliance (see management. QUESTIONS 16 to 19). One should remember that equal solutions or unanimity always bear the risk of deadlocks. An uneven solution with H. Legal forms of guarantees for the financially weaker party is cooperation and joint possible. The weaker party should know whether it can be forced to participate in exploitation future funding rounds or not and if it is in a position to be squeezed out from the entity if
25. What are the main issues involved in it is unable to fulfil its financial obligations or setting up a joint venture company or follow the other partners when more money partnership for joint exploitation? is needed (see QUESTION 31 and 32). - The first issue will be the initial It is good practice that partners work out capitalisation of the new entity and the in advance a solution whereby an unexpected need for future funding. The contributions unbalance of contributions is restored of the partners must be clearly defined and through a shift in the benefits of the partners. their valuation must be determined if it is a Logically a partner unable to provide contribution not in cash (e.g. background or additional funding will either see its share in foreground information). The shares of the the benefits reduced or bought out by its partners in the new entity depend on this partners. valuation which may be a difficult issue. It Another issue to be determined is the can prevent the parties from setting up the nature of the shares held by the partners: entity before the project is completed. common stock, preferred stock, options or - Anti-dilution protection is important when warrants, capital shares or profit shares, the value of the company is unclear and voting shares or non-voting shares, should be future financing rounds could devaluate considered as workable alternatives. original shareholding when future shares - Deadlocks are the next main issue. Legal are sold/issued at a lower price. Such practice has developed a whole set of protection may either by conferred by law techniques to solve anticipated deadlock or by contract depending on the corporate situations such as the 'swing man', 'buy-out form and applicable company laws. options', 'cooling-off periods', 'bidding - Another important issue is the governing process', etc. They are useful but not always simple to apply in practice in a situation where parties no longer want to IPRs for the results, to preserve the continue cooperation. confidentiality of any know-how from a - Finally the possibility or not for a partner partner or jointly developed and/or to assist to assign its interest in the new entity is a in the protection of IPRs; difficult issue that should be addressed. A - restrictions as to the manufacture of premature withdrawal could cause the products resulting from the research to one failure of the whole project. Therefore a or more technical fields of use; restriction on such transfer of interest by a - obligation on licensee to use the partner during an initial period is general licensor's trademark; practice: either the approval of the other - ban for the licensee on sublicensing or partner is required or such a partner has a assignment of his licence (for exploitation preemption right to buy the shares at a low of results owned by a partner); price. - obligation to grant non-exclusive licences 26. Which restrictions are compatible for the exploitation of the improvements of with European competition legislation in or new applications to the licensed results; cases of joint exploitation? - minimum quality obligations regarding Please read the introductory comments production and manufacturing; under QUESTIONS 14 and 15 first. - obligation to pay royalties until the licence The following restrictions where there is a expires or until the regular expiry of the joint exploitation imposed on one or more of patents (if results are patented); the parties involved, are covered by the R&D - rights for the licensor to terminate block exemption and/or the technology exclusivity and to stop licensing transfer block exemption and therefore improvements when .the licensee starts, deemed to be compatible with European within the European Union, research and competition legislation: development, production of distribution of - obligation to communicate background competing products; information necessary for exploitation; - right for the licensor to terminate the - ban on using know-how from another licensing agreement if the licensee contests party for purposes other than exploitation; the secret nature of the licensed know-how -territorial restrictions (exclusivity) or challenges the validity of licensed regarding manufacture, distribution, active patents. sales and passive sales (with in some cases Please check with your legal advisor limited permitted terms of exclusivity); whether these exemptions will apply to the - royalty share obligation to compensate for provisions and clauses of your agreement. an unequal contribution to the research or an unequal exploitation of its results; 27. How to choose between different - obligation to purchase the products available forms of cooperation where resulting from the research exclusively joint exploitation takes place? from the partners and/or to supply other Some relevant considerations are: partners with minimum quantities of such - the question of limited, unlimited or mixed products; liability of the partners; - obligations to obtain and maintain in force - whether the new entity is tax transparent or not; as in general the partners will not operate - the level of transaction costs such as together with third parties. If they feel the capital requirements, tax and accounting need to operate together with third parties obligations, legal fees, etc.; they will adopt another legal form such as a - the degree of flexibility in balancing the consortium or an institutional form of respective rights and duties of the partners cooperation. Apart from identifying the legal and their respective contributions and form, partners will generally have to choose a sharing in the benefits; common business name for their consortium - the existence of efficient conflict or joint venture company in which the names resolution procedures; of the partners can or should be identified. In - the possibility to use a particular form for some company forms such as the general exploitation purposes; partnership the name of at least one partner - the level of legal security and the should be referred to. On the other hand, the available statutory defence against free name of the silent partner in a silent riding by a partner; partnership (or a limited partnership) should - the visibility of the partners; not be used in the name of the partnership. - the possibility for all partners to have an Normally the choice of a business name is equal or equitable share in decision free to the extent it can be distinguished making. sufficiently from already existing business In the next chapter (COMPARATIVE TABLE names to avoid confusion. The same applies OF LEGAL FORMS OF COOPERATION) you will with regard to family names and trademarks. find information to assist you in choosing the Before adopting a particular business name it most appropriate vehicle for your joint is advisable to have a name search done by venture company. As this information is your legal advisor, in some countries there is presented in a fashion that allows comparison a registration requirement for business between a number of EUREKA countries, names and the search is undertaken by an some 'legal shopping' together with your official body (e.g. in Denmark) where the partners becomes possible. However you decision is made to establish a limited liability should be aware of the risk that the choice of company. some form or another in one particular Sometimes there is a requirement for the country might prevent the partners in another activity of the company to be referred to in country from obtaining public funds for the the name. project. (For more information on the above- mentioned corporate forms see next chapter I. Visibility of all partners - COMPARATIVE TABLE OF LEGAL FORMS OF COOPERATION.) 29. Is it possible for all the partners to 28. Is it possible to have the name of all have an equal share in the partners identified in the common governance/management structures i.e. business name? Do all partners participate equally in the With respect to a purely contractual decision making? solution there is no common business name In a purely contractual solution this is entirely a matter for contractual agreement another party unless a power of attorney is depending on the negotiating power of the granted by such a party. The party acting on parties. Normally the strongest partner will behalf of another party must refer explicitly want to be the lead or coordinating partner. to this power and to the party on whose In a consortium or partnership form of co- behalf it is acting, to be able to legally operation ordinarily all partners will represent such a party. participate equally in the decision making but In a general partnership or consortium all it is possible for the stronger party to require partners are in principle entitled to act on a deviation from this rule through contractual behalf of the other partners unless one or arrangement e.g. by introducing weighted more managing partners are appointed. In a voting. limited partnership and silent partnership the In a limited or silent partnership, the silent partner is not allowed to act with third limited or silent partner generally takes no parties, only the managing partner can act part in decision making because to do so on behalf of the partnership. would in most countries result in loss of the In the limited liability company forms the privilege of limited liability. parties cannot act directly but only through In limited liability company forms, the rule their representatives in the legal bodies (e.g. is to allocate decision making power in board of directors, general meeting, proportion with each partners' contribution in management committee). the capital of the company. In other words In the EEIG or a foundation only the majority rule will grant full power to the manager can represent the members. strongest partner unless this is mitigated by (For more information on the above- the law or by minority protection rules in the mentioned corporate forms see next chapter articles of association or shareholders - COMPARATIVE TABLE OF LEGAL FORMS OF agreement. COOPERATION.) In an EEIG, decisions are made by unanimity of all the partners unless J. Financial squeeze contractual provisions provide for a majority rule or weighted voting which will frequently be the case if a large number of partners is 31. What are the sanctions against a involved. party failing to fund its ordinary (For more information on the above- contribution in an R&D project? mentioned corporate forms see next chapter Where there is a contractual form of - COMPARATIVE TABLE OF LEGAL FORMS OF cooperation the sanctions are those normally COOPERATION.) applied for breach of contract such as termination and dissolution of the contract 30. Who will represent the partners with with a claim for damages to the non- third parties? defaulting party. It is highly advisable either In an R&D agreement or other type of to provide for specific sanctions in the con- purely contractual arrangement the parties tract or exclude the use of certain sanctions will only represent themselves and are deemed undesirable. generally not empowered to act on behalf of If parties have decided to form a consortium or a form of partnership between them, non-payment by a party of its initial 32. Can a party be forced out of the contribution is considered as a breach of project if it cannot provide for additional contract. The defaulting partner may be funding required to achieve the project? forced to pay its outstanding contribution or If the party has not committed itself to may be excluded from the consortium or such additional funding in one way or partnership which can continue with other another, it cannot be forced out of the partners depending on the provisions made project if the contract does not contain a in the agreement. provision to this effect. The other parties will, With respect to limited liability company however, have the possibility to terminate forms the mandatory or statutory fixed initial the project if they are not willing to shoulder contribution is to be subscribed as a the financial burden and it turns out that it is precondition for the establishment of the financially impossible to attain the planned company itself. If a partner is unwilling to objectives. fund its original contribution to the capital of The possibility to have an unwilling party the company, the funding may be claimed forced out must thus be provided for in the and collected as a due debt, this will be contract or the articles of association. Such considered as a material breach of contract an important step should be made subject to and the other parties will be entitled to a special majority decision where more than receive compensatory damages. two parties are involved. As long as the mandatory funding Where the unwilling party has committed requirements under the applicable company itself to a next-round funding a forced sale of law are fulfilled, another solution which can its part or shares is regularly used but this is be agreed on between the partners is that not always the best solution. where one party is by force majeure unable Partners can provide for an alternative to pay its initial contribution in full, the solution such as damages to be paid or a cooperation is nevertheless continued but proportional dilution or reduction of the the defaulting party's benefits are reduced rights and benefits of the defaulting party in proportionally to the value of its contribution order to restore the balance between with an option to restore the original balance contribution and benefits. In addition some if the defaulting party makes an additional legal systems will provide for court interven- contribution at a later stage. tion to prevent abuse of a majority position. Should a member fail to make his normal In an EEIG the defaulting party can be contribution in an EEIG, he may be excluded expelled but will remain liable to pay its subject to a claim by the other members for share in the losses of the grouping if the unpaid contribution, unless the expenses exceed the available financial alternative solution, as stated above, is means. adopted. In limited liability company forms the (For more information on the above- party not participating in a capital increase mentioned corporate forms see next chapter funded by the other parties will in any case - COMPARATIVE TABLE OF LEGAL FORMS OF see its rights with respect to voting and COOPERATION.) benefits diluted. (For more information on the above- mentioned corporate forms see next chapter - COMPARATIVE TABLE OF LEGAL FORMS OF COOPERATION.)
COMPARATIVE TABLE OF LEGAL FOMS OF COOPERATION A- Purely contractual an institutional form of cooperation for the exploitation phase (CASE Ill). 1 & 2. R&D agreement and other contracts B. Grouping or consortium Definition: 3 & 4. Informal grouping and is a contract for the development or subsequent utilisation of new techniques, temporary grouping whether of manufacture, production or Definition: utilisation. is a grouping of undertakings without legal Comparison: personality and partners may be Jointly and - Belgium, Denmark, Finland, Germany, severally liable; a temporary grouping is used Greece, Hungary, Ireland, Italy, Luxembourg, to achieve a particular objective or a number Netherlands, Portugal, Russia, Spain, United of well defined transactions, Kingdom. Comparison: Strong points: - Belgium and Luxembourg: flexible, cheap and generally applicable. maatschap/association de fait; tijdelijke, Weak points: vereniging/association temporaire; limited protection and difficult to use for - Denmark : joint venture / konsortium exploitation phase. - Germany : Gesellschaft bürgerlichen Cases: Rechts; - Ireland: partnership, there is a maximum of the purely contractual solution may not be 20 members, if the number of members suitable in cases of joint research or joint exceeds 20, incorporation becomes exploitation. Therefore a purely contractual mandatory arrangement is recommended where there is - Italy ; associazione temporanea di imprese; no common objective that justifies the setting - The Netherlands: general partnership; up of an informal grouping or a joint venture - Portugal: external consortium agreement: company not in the research and not in the there are two forms of consortia, the internal exploitation phase (CASE I). and the external consortium. The internal The purely contractual solution may consortium may resemble the silent grouping moreover be adopted as a first step during (only in cases in which one member acts with the research phase only and transformed into third parties); - France: société en participation - Russia: associations and unions - Italy: associazione in partecipazione - Spain: contrato de colaboración or union - Netherlands: limited partnership temporal de empresas; - Portugal: associação em participacao - United Kingdom: general partnership or - Spain: cuenta en participacion. limited partnership. Strong points and weak points: Strong points: see under point 4. The transaction costs are low and flexibility is Cases: generally high. during the research phase the silent grouping Weak points: can be used where the contribution of one the limited security against free riders, the party is to be integrated physically into the joint and several liability of the members, the project and the facilities of the lead partner absence of easy conflict settlement and the (joint research : CASE II and IV). During the lack of continuity from R&D to exploitation. exploitation phase the silent grouping can be Cases: used if one contributing partner is not in a the informal or temporary grouping can be position to exploit the results, In return for his used during the research phase (CASE I, II, contribution in the project the 'silent' partner III and V). Where Joint Exploitation is the will participate in the profits emanating from objective of the partners, they will have to the exploitation (CASE V: combined incorporate an institutional form of exploitation). cooperation (see below under C). The informal or temporary grouping will then be transformed into a joint venture company at C. Institutional cooperation the end of the project (CASE III). 6. Public Limited Liability Company 5. Silent grouping Definition: Definition: company limited by shares is a so-called is an association having a general and a silent capital company used as a vehicle for large partner. The general partner acts on his own capital intensive forms of collaboration. The behalf and the joint interest of the partners is company has legal personality and the in principle not revealed to the outside world. liability of shareholders is limited to their This association has no legal personality and, contribution in cash or in kind (such as in principle, only the general partner is liable background information or existing patents). for the obligations of the association. Shares can be freely transferable or restricted Comparison: to a certain extent.
- Belgium and Luxembourg: association en Comparison: participation/ vereniging in deelneming; - Belgium and Luxembourg: société - Germany: stiile Geselischaft; anonyrrie/naamloze vennootschap - Greece: afanis etairia; - Denmark: aktieselskab - Denmark: stiile selskab - Germany: Aktiengesellschaft - Greece: anonymos etairia Haftung - Finland: osakeyhtiö - Greece: etairia periorismenis efthinis - France: société anonyme - Hungary: limited liability company- Ireland: - Hungary: company limited by shares private limited company. The private limited - Ireland: public limited company company is a form in between the corporation - Italy: società per azioni and the private company: the private limited - The Netherlands: naamloze vennootschap company has no restriction on transfer of - Portugal: sociedade anonima shares, but cannot go on the stock market - Russia: open joint stock company - Italy: societa a responsabilità limitata - Spain: sociedad anonima. - Luxembourg: société àresponsabilité Strong points: limitée this type of company is the most suited for - The Netherlands: besloten vennootschap the R&D cooperation where the partners want - Portugal: sociedade por quotas continuity from R&D to exploitation; there - Russia: closed joint stock company may be legal security against a free rider, - Spain: sociedad limitada continuity from R&D to exploitation is - United Kingdom: private limited company. possible, and the settlement of conflicts is Strong/weak points: relatively easy. same characteristics as the corporation but Weak points: the costs for incorporation are lower. The the transaction costs are high and the shares are not always freely transferable and flexibility is rather limited (some exceptions). the other associates often have a right of Cases: preemption. suitable to set up a joint licensing company Cases: (CASE lI) or a joint venture company (CASE Ill suitable for joint licensing (CASE II) and joint and IV). venture company (CASE III and IV).
7. Private Limited Liability 8. Cooperative Company Company Definition: Definition: is a company limited by shares with a variable capital. It is a mixed type of is a personal or closed company limited by company with elements of both the personal shares with a separate legal personality and company and the capita! company. It has a limited liability for the shareholders. The separate legal personality and can have transfer of shares is limited. limited liability Comparison: Comparison: - Belgium: société de personnes a - Belgium and Luxembourg: société responsabilité limitée/besloten vennootschap coopérative/ met beperkte aansprakelijkheid cooperatieve vennootschap - Denmark: anpartsselskab - Finland: osuuskunta - France: société à responsabilité limitée; - France: société coopérative - Germany: Gesellschaft mit beschränkter - Germany: Eingetragene Genossenschaft - Portugal: sociedade em nome cotectivo - Hungary: co-operative - Russia: full comradeship - Italy: societa cooperativa - Spain: sociedad colectiva - The Netherlands: cooperatie - United Kingdom: unlimited company. - Portugal: cooperatives Strong points: - Russia: production cooperative lower incorporation costs, no capita! - Spain: sociedad cooperativa. requirements. Strong points: Weak points: lower costs of incorporation, high legal legal protection against free riders is limited: protection except in the Hungarian as in most cases there is unlimited, joint and cooperative where responsibility is unlimited, several liability of the partners, it is less joint and several. suited for exploitation. Weak points: Cases: less suited for exploitation due to a possibly is generally not suitable for a joint weaker capital structure. exploitation but may be recommended as a Cases: joint licensing vehicle (CASE II). more suitable for Joint licensing company (CASE II). Sometimes interesting for joint 10. Limited Partnership venture company (CASE III and IV). Definition: is a personal undertaking having legal personality whereby one or more unlimited or 9. General Partnership general partners cooperative with one or Definition: more partners having limited their liability to their contribution to the partnership. is the basic legal form for two or more partners conducting business under a com- Comparison: mon name where parties have not provided - Belgium and Luxembourg: for a specific vehicle. The partners are jointly commanditaire vennootschap / société en and severally liable for the liabilities of the commandite partnership that enjoys a separate legal - Denmark: kommanditselskab personality. - Finland: kommandiittiyhtiö Comparison: - France: société en commandité - Germany: Kommandit-gesellschaft - Belgium and Luxembourg: vennootschap - Greece: eterorrythmos etairia onder firma/société en nom collectif - Hungary: deposit partnership - Denmark: Interessentskab, - Italy: societa in comanditalla semplice and - Finland: avoin yhtiö societa in accomandlta per azioni (shares and - France: société en nonn collectif a minimum capital exist in the latter - Germany: offene Handelsgesellschaft company) the silent partners are entitled to - Greece: omorrythmos etairia participate in the activity - Ireland: unlimited company - The Netherlands: limited partnership - Italy: societa in nome collettivo - Portugal: sociedade em comandita 12. Association or foundation - Russia: limited liability company Definition: - Spain; sociedad comanditaria simple / is a legal entity with a non profit making sociedad comanditaria por acciones. finality on research and development to Strong points: which a founder destines a capital and which low costs of incorporation and high flexibility. is governed by a Board of Directors. Weak Points: Comparison: Less legal protection since the working - Belgium: association international sans but partner generally has unlimited liability and lucratif/intemationale vereniging zonder the settlement of disputes is difficult. winstoogmerk Cases: - Finland: säätiö May not be suitable for joint exploitation - Germany: Stiftung except under special circumstances. Can be - Luxemburg: association sans but lucratif or used for joint licesing (CASE II). fondation - Portugal: fundação 11. EEIG - Russia: foundation - Spain: fundación. Definition: is a form of enterprise that can be used to Strong points: facilitate and develop cross-frontier R&D can be flexible. cooperation in the EU between companies, Weak points: institutions and/or individuals. An EEIG is a necessity for registration and approval, need so-called legal entity with full legal capacity. for contracts which covers all aspects of Comparison: liability, legal protection, non profit purpose. Belgium and Luxembourg; Denmark, France, Cases: Germany, Greece, Ireland, Italy, The can be used to set up a research association Netherlands, Portugal, Spain, United (CASE II). Kingdom. Strong points: the costs of incorporation are generally low and the management structure is flexible.
Weak points: the partners are jointly liable and the exploitation is difficult. Cases: can be used for joint or concerted research to form a research association (CASE II) or a strategic alliance (CASE 111 and V).