How to tackle research agreements with industry partners

There is an understanding and agreement among scholars, higher education institutions and industry on the importance and benefits for universities and industry to engage in collaborative research.

The industry-university collaboration (IUC) helps to improve the research outputs of universities (such as postgraduate students, publications and conference proceedings), generates funding for postgraduate research projects (including bursaries for students, sponsoring of conferences), offers opportunities for students to conduct applied research on a specific industry problem, to fund the building of prototypes for proof of concept as part of experimental research and to obtain access to expensive industry-standard software or industry data.

The benefits of IUC for industry include, among others, access to innovative ideas (and sometimes ‘blue sky’ research), solutions for specific problems, sharing of knowledge and research findings between academics and industry partners, and access to expertise in a multidimensional environment via consultation or advisory projects.

Balancing the needs and expectations of both industry and universities should be considered to unlock these benefits.

Contract negotiations

Although IUC holds several benefits for universities and industry, it does face a few challenges. One of the main barriers is contract negotiations and, specifically, intellectual property (IP) transactions which can lead to counterproductive IUC.

In our recent study, we offered proposals from both a university and industry perspective to overcome these barriers. We believe this is a step in the right direction.

A novel Framework Research Agreement (FRA) as a contractual instrument supporting conducive IUC was developed and pioneered by the industry partner and concluded with several South African universities.

Investing time and expertise to negotiate a transparent FRA that is based on fair contracting as well as costing and pricing principles, is highly recommended to address the challenges associated with contract negotiations (including intellectual property, or IP, negotiations) and where the intention of both the industry partner and a university is that of a long-term research collaboration with several projects.

A Framework Research Agreement will set out different options for IP ownership and other considerations, such as the treatment of confidential information, publications, and so on.

Negotiations for an FRA may take substantially longer than those for separate research projects, as all possible scenarios and risks must be carefully considered within the relevant legislative framework, research strategies and policies of both parties.

On the other hand, negotiation of separate research agreements for each specific project can also be challenging, as there are no pre-agreed principles between the parties.

Within this context, and within the experience of both industry and universities, formalising an FRA to govern long-term relationships indeed contributes to a more effective IUC framework.

To verify and validate our study, we interviewed representatives of two other multinational companies with experience in IUC. Stellenbosch University introduced the FRA to these companies based on the principles reported in the mentioned study.

Representatives of company A (a South African multinational company in the high-technology mining industry) mentioned that the company typically works only with research-intensive universities, and that the FRA has streamlined their contracting processes substantially.

“From our perspective, it definitely streamlines it a lot, from what I do to initiate a project it is really simple … and to get the executive to sign off … and motivate. With vendors and universities with which we don’t have an FRA in place, it is far more cumbersome,” they said.

Representatives of Company B (a European Union multinational company in the high-technology automobile design and manufacturing industry) indicated that the FRA is an “extremely effective instrument and we could also apply it to other universities with some tweaks here and there. But we have basically used the same structure there.”

A Framework Research Agreement benefits both parties if the university is transparent about the negotiation of IP ownership and pricing-principles applied as is evident from our interviews.

People we spoke to in Company B said that “…. There’s a clear difference in terms of maturity of the universities to be prepared to work with industries” and the way that the IP transactions and aspects regarding publications are negotiated.”

Those in Company A emphasised the importance of transparent costing and pricing principles by stating that “… It’s definitely helpful because ... we are daily being pushed from a cost perspective so will be happy to motivate to our executives if it makes sense and if the value is there or if it’s reasonable. But it becomes very difficult to defend the number if you’re unsure of where it comes from.”

Principles can be widely applied

It is clear from our research that the novel FRA can benefit both industry and universities in South Africa and abroad. As professionals in research contracts management, we often have to guide our potential industry partners in how to structure a fair and transparent contract.

Based on our knowledge of the South African legislative framework applicable to the industry-university collaboration, we believe the principles discussed in our study can be widely applied by any industry partner that would potentially want to collaborate with universities in South Africa (and abroad) as we explain the challenges as well as the importance of the structure and inclusion of options (also around IP) in the agreement.

However, we want to emphasise again that the FRA concept as a contracting instrument should be used for the correct purpose, notably where the intention is to build a long-term relationship and to work on multiple projects over many years.

Our study provides valuable knowledge for any industry partner that regularly outsources research projects to universities.

Key considerations for FRAs are the implementation of an IP strategy and formulation of desired contractual principles by the industry partner prior to contract negotiations. Once these are in place, the industry partner will be able to fulfil a more proactive role during such negotiations with universities.

This will further lead to the development of best practices by industry partners (for example, innovative contractual and fair remuneration principles), which will undoubtedly be beneficial to industry-university collaboration over the longer term.

Cornelia Malherbe is the director of research contracts in the division for research development at Stellenbosch University (SU). Johan Nel works at the legal, intellectual property and compliance services at SASOL. Corne Schutte is a professor in the department of industrial engineering at SU. This article is based, in part, on their academic paper ‘Research contract relationship between a large industry partner and South African universities’ published recently in the South African Journal of Science.