Invaluable assets born from research and development…When you look at a timeline of technological advancement over the last thousand years, the chart seems to trundle along at a low ebb until a couple of hundred years ago, when the line comes to life and races almost vertically off the page. In our own lifetimes innovations have totally transformed the world around us and the pace of technological change continues unabated, from the computational capacity of the world’s most advanced supercomputers to the space race to Mars.
Within this environment, intellectual property rights (IPR) stand as the bedrock for securing the invaluable assets born from research and development. The stakes are particularly high when we venture into the realm of complex innovation projects – endeavours that are not merely an extension of existing technologies but a radical rethinking of what is possible.
These projects often exist in an indistinct state, transitioning from abstract ideas to concrete products or services. It is precisely during this ‘innovation phase’ that the intricacies of IPR become both a lifeline and a labyrinth.
Project Life Cycle. Navigating this complex maze requires a nuanced understanding of a project’s life cycle, which can broadly be categorised into two pivotal phases: 1) the early stage or concept stage and 2) the subsequent production stage. Each of these stages presents its own unique set of challenges and opportunities in terms of IPR. Grasping the inherent subtleties within them is not just beneficial but essential for the successful commercialisation and safeguarding of groundbreaking innovations.
Clarity of Project Scope. However, it’s worth pausing to consider another crucial aspect that often gets overshadowed by the legalities of IPR – project scoping and delivery. Particularly in sectors like defence, where the stakes are astronomically high, complex R&D and early-stage projects often lack a clear scope, often, for understandable reasons. However, this lack of clarity often leads to three interconnected challenges: misunderstandings over technical specifications, unanticipated time delays and unexpected cost overruns.
In summary, this article does not just aim to guide you through the unique aspects of IPR for early-stage complex projects but to equip you with the insights and tools you need to emerge successfully on the other side, with your intellectual assets intact and your innovation ready for the world stage. Note there are many other aspects of intellectual property that would normally be covered for established products, rather than early-stage ones, but these have not been included in this article.
Concept, Innovation and Early-Stage Projects
Navigating the intellectual property landscape for concept, innovation, and early-stage projects requires a nuanced approach that goes beyond traditional IPR frameworks. These ventures often grapple with a unique set of challenges, from the fluidity of the intellectual assets involved to the complexities surrounding their ownership and commercial exploitation.
The sensitivity of the information at hand, the inherent risks of unproven technologies and the need for clearly defined performance metrics, further complicate the picture. Additionally, when academia and commercial enterprise intersect with these projects, a new dimension of complexity emerges, necessitating a tailored approach to knowledge dissemination.
From our previous involvement in many early-stage projects and concepts, we explored a number of areas from which we identified a key set of principles. These have helped to successfully guide stakeholders involved in these pioneering initiatives.
- Scope of IP: The IP at this early stage is often not yet fully developed. Therefore, the IPR agreement often needs to cover not only existing IP but also IP that will be developed during the project. This is known as ‘foreground IP’. In contrast, a typical IPR agreement often deals with existing, or ‘background’, IP.
- Ownership of New IP: These projects often result in new IP. The agreement should clearly state who will own this new IP. It might be the party that created it, or it could be shared among the parties, depending on their respective contributions.
- Licensing Rights: In an R&D or early-stage project, there may be more extensive licensing provisions because the commercial application of the IP is still being explored. For instance, there might be provisions for sub-licensing, or for rights to revert to the licensor if the licensee doesn’t meet certain development or commercial milestones.
- Confidentiality: Given the early and potentially sensitive stage of the IP, confidentiality clauses are usually more extensive in R&D and early-stage IPR agreements. These clauses protect the disclosure and/or use of proprietary information.
- Risk and Liability: These projects typically carry more risk because the technology or concept is likely not proven yet. The agreement would usually include detailed clauses about the allocation of risk, warranties and indemnities.
- Milestones and Performance Obligations: The IPR for early-stage projects often includes specific milestones or performance obligations. These can be tied to further payments, changes in the scope of the licence or other commercial arrangements.
- Termination Clauses: Given the higher risk and the potential for a project to not proceed as planned, termination clauses are also usually more extensive in an R&D or early-stage IPR agreement.
- Publication Rights: In an R&D context, especially when universities or other research institutions are involved, the IPR agreement will usually need to address publication rights for the researchers involved.
Multi-Party Involvement of IP When Developing Early Concepts
When dealing with projects under the purview of multiple stakeholders, each keen to protect their own interests, the intellectual property considerations take on additional layers of complexity. These can span from the need for a meticulous definition of ‘foreground information’ to the legal frameworks that govern third-party involvement.
Moreover, the sensitive nature of these projects, especially in areas such as pharmaceuticals, defence, complex AI solutions and so forth, amplifies the importance of confidentiality and security protocols. The financial aspects, such as the cost implications of outright IP ownership versus licensing agreements, further complicate the landscape.
Below we have identified core aspects of these intricate stakeholder-related issues and provided high-level guidelines for navigating the unique challenges presented in such high-stakes, multi-stakeholder environments.
- Foreground Information: It will be important for you to clearly define what constitutes foreground information in the context of your early concepts. This could encompass a range of outputs including research data, software, patents, prototypes and so forth. A clear definition will help you avoid any potential misunderstandings or disputes down the line.
- Third-Party Involvement: Organisations often want related or third-party entities to be able to have the right to use and modify this foreground information. Therefore, it is important to clarify the terms under which third parties may be involved and consider any potential implications, such as sub-licensing rights, or additional IP, that may be generated by a third party.
- Confidentiality and Security: Some industry sectors are more sensitive than others – defence, pharmaceuticals, intelligence services and so forth. For these and others, the incorporation of robust confidentiality and security measures to protect the foreground information is of vital importance. This could involve specific obligations for any contractors, as well as safeguards for any third parties involved.
- Dispute Resolution: Relationships established for the development of these early-stage concepts are often based on collaboration and trust. When misunderstandings occur and they are likely to at some point in your journey, it’s important to have a clear process for dispute resolution. This is particularly relevant if there are multiple third parties involved.
- The Cost of ‘Owning’ IP. It is equally important to consider the degree to which suppliers/contractors contribute portions of their existing IP (often referred to as ‘background IP’) in order to participate in the creation of new IP (termed ‘foreground IP’). If you are entering into a new early concept project but you anticipate that you wish to ‘own’ the new IP outright, this can usually be facilitated. Note that the costs of doing that will often include a very significant premium, as suppliers/contractors that have brought their existing IP to the project, will need to consider any future development projects they are involved in because they will be unable to use any of the new IP to which they have contributed on your projects.
- Alternative to IPR ‘Ownership’: a comprehensive licensing agreement. Our experience of dealing with many ownership disputes in these complex IPR projects is that we find, on balance, it is usually more fruitful for all involved for the party best positioned to maximise the leverage of the IP to have ownership. If a party to the IP is not in a position to maximise its leverage, there is a question as to the value of that party having exclusive ownership and paying a very significant premium to do so. A viable alternative is often a comprehensive licensing agreement. This would involve you obtaining a wide-ranging licence that grants extensive rights to use and modify the IP without requiring ownership. A well-structured licence for you along these lines could potentially include:
- Exclusive rights: You can often negotiate the exclusive right to use the IP, which would limit the suppliers’ ability to grant licences to other parties without your express (but reasonable) approval. This could be valuable if you wish to retain control over who has access to the IP.
- Sub-licensing rights: You could have the right to grant sub-licences to third parties.
- Improvements and modifications: The licence could stipulate the right for you to make improvements or modifications to the IP and to own (or have a further wide-ranging licence) any resulting IP from these enhancements.
- Durability: The licence could be structured to last indefinitely, ensuring you have access to the IP for as long as it is needed.
- Higher value, lower cost. Such an arrangement could be more appealing to suppliers and contractors, as they would retain ownership of their IP and could potentially license it to other parties in the future. It would usually also be less costly for you than purchasing the IP outright.
This is just one alternative and the specifics of any licensing agreement would depend on the unique circumstances and negotiations between you and your suppliers/contractors and the nature of the project. It is important to ensure the terms of the licence are clear, especially around sub-licensing and improvements, to fully protect everyone’s interests.
Evidence-based observations
Our experience in this area extends beyond that of advisors on IPR. We act as ‘expert witnesses’ across various jurisdictions, including the English, Irish, Scottish, European, and US-based courts, specialising in resolving highly technical disputes between contractors, strategic suppliers and their clients.
Our expertise in this domain is not just theoretical but empirically validated having optimised nearly 600 such relationships, providing independent assurance and advice on everything from IP on early-stage project concepts, through to requirements articulation and market engagement to supplier management and governance.
Our evidence-based observations on IP are informed by the intersection of our technical and contractual expertise, which provides a unique vantage point. It enables us to offer not just isolated advice on IPR but a holistic strategy for successful early concept project delivery.
In a landscape fraught with complexities and uncertainties, our guidance aims to serve as a compass, helping you navigate not just the legal intricacies of IPR but the operational challenges of bringing a complex, early-stage project to fruition – on time and within budget.
