Sometimes, you have an idea or an innovation that needs further development before it can be packaged as a market-ready product or service. Or you may already have an innovation with obvious applications, but outside your company’s core business sector.

Alternatively, researchers at a university may have come up with a patentable process but need external help commercialising this knowledge.

A collaboration is often the solution. This allows groups with complementary competences to come together in a synergistic way to create something that might otherwise not be possible.

Collaborations are often desirable (even essential) if a product or service is going to be developed sufficiently that it can be launched on the market and start earning revenue. Even if you could develop the idea yourself, a collaboration may help you get your innovation to market faster and as the basis of a more finished, better product or service.

Collaborations can also broaden horizons and increase the opportunities available, allowing your company to identify and reach completely new markets, or to launch different products into your existing market.

Collaborations can involve more than two partners. Also, many government grants encourage or even require collaboration – for example, Innovate UK’s collaboration grants – while some are only available if one of the parties is an academic institution (e.g. grants from research councils) or an overseas business (e.g. the Horizon 2020 program).

Probably the biggest issue with collaborating, particularly with another technical partner, is around ownership and access to IP.

Let’s imagine a case where one party has certain skills and expertise relating to sensors, and a second party has skills and expertise around image and data analysis systems and software. Both have existing IP - this is known as each party's "Background IP".

But what happens if the two companies come together to create a smart detection system, which would be new IP (known as "Foreground IP")?

Which party will be exploiting the new IP, and how? Who owns the new IP? What rights do each party have to the other’s IP both during the collaboration and afterwards (will all rights to the other party's Background IP disappear when the collaboration is finished)?

Also, what if, during the course of the project, one party develops potentially valuable IP that isn’t directly related to the objective of the project but ends up getting used in the project (so called "Sideground IP") - does the other party have any rights to that?

All of these issues need to be discussed in advance, and a solid collaboration agreement that takes various contingencies and outcomes into account must be drawn up.

First thing for a collaboration agreement to cover is what relevant IP each party in the collaboration already has and proposes to bring to the table – the Background IP.

It's important that each of the companies involved in the collaboration retain ownership of their background IP going forwards.

If this isn’t set out clearly in the agreement, one party could claim ownership of or rights over the other’s background IP. This should absolutely be avoided as it can result in the loss of ownership of essential IP

However, it may be that any innovation developed by the collaboration is unusable without some of all of the relevant background IP from the other party. In that case, the agreement should cover licensing of the relevant IP both during the collaboration and afterwards.

Next, we need to consider Foreground IP. This is the IP created as a result of the collaboration (either by a single party or jointly by more than one collaborator).

For example, company A and B have collaborated and created something new and novel, resulting in foreground IP being created. Arguments about who owns this foreground IP can often be complex. This issue should be dealt with in advance in the collaboration agreement.

In many collaborations, only one party will actually want to exploit the resulting foreground IP. If this is the case, then it may make sense for this party to be assigned ownership of the foreground IP, and for them to pay the other collaborators for their contribution to the IP’s development.

Joint ownership of IP that results from a collaboration should normally be avoided as it creates legal complications and can make it difficult to enforce IP rights.

Then there is the Sideground IP. This is IP that one party creates outside the collaboration but while the collaboration is on-going.

Sometimes this IP is relevant to and would benefit the ongoing collaboration. However, if the company which develops the sideground IP then uses it in the collaborative project, there is a risk that the other party could argue that it is part of the foreground IP.

In such a case, the company creating this sideground IP could lose full control of it, and be forced to allow the other party access to or rights over it.

None of the parties want to undervalue their Background IP or the new Foreground IP to be created from the collaboration.

It’s really important to not only identify and define Background IP before the project starts, but also to value it – this can be useful as a marker of value at the outset of any collaboration, which can be referred back to later in the project.

With grant funding where collaboration is required, IP valuation may also be useful to show how the grant intervention has increased value.

Collaborations are in general beneficial and allow new IP to be created and new opportunities to be exploited. However, they are not without their issues, some of which we’ve discussed above (who brings what IP to the party; what is it worth; who owns it); some of the other issues you might face include the following:

• Different mindsets (e.g. academics are often motivated to publish for purpose of research rankings – they may rush into publishing too early, which could derail an application for patent protection.
• Some grant applications will require detailed explanation of a new technology; Non-disclosure agreements will need to be signed.
• Multinationals may be unwilling to sign NDAs or may try to drive exploitation of the IP generated to ensure exclusive rights (that may be limiting for other collaborators).
• Due diligence needs to be conducted on potential partners and pick them wisely – are they the best partner to engage with? Are they in too close a sector or too competitive?
• International law differences – best to agree what law is used in a collaboration to avoid confusion. This is particularly important when collaborating with international partners, and especially if the chosen jurisdiction is not the UK.

For more on this topic visit Inngot - Adding value to your intellectual property

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