Why won’t industry use standard research agreements?

Sir Richard Lambert

IP Draughts has been studying a report, commissioned by the UK Intellectual Property Office and published this week, that has the catchy title, Collaborative Research between Business and Universities: The Lambert Toolkit 8 Years On.

The report makes clear that a surprisingly large number of people have not heard of the Lambert toolkit, or the Lambert agreements, so a quick explanation is in order.

What are the Lambert agreements?

Some years ago, Sir Richard Lambert chaired a committee that negotiated some standard research agreements for use between UK universities and industry.  In fact, there were two committees:

• an inner committee consisting of 4 university representatives, 4 industry representatives (including Malcolm Skingle of GlaxoSmithKline), and a solicitor to do the drafting – Christine Reid; and
• an outer committee to oversee the process, which included IP Draughts.

The output of these committees – the toolkit – eventually comprised:

• a set of 5 alternative, standard research agreements (two-way agreements between a sponsoring company and a university), known as Lamberts 1 to 5;
• another set of 4 alternative, multi-party research collaboration agreements, known as Lamberts A to D;
• an online “decision tree” to help parties decide which of the alternatives was most suitable for their circumstances
• guidance notes; and
• a selection of other agreements that had not been formally negotiated by Lambert but were posted on the Lambert website as a useful resource

These materials are nowadays hosted on the UK Intellectual Property Office website here.

Would Sir prefer a number 4 haircut?

The alternative agreement versions mostly provide different IP terms, using the same underlying document.  For example Lambert 1 is very pro-university on IP issues, while Lambert 5 is the most favourable to the company on IP issues.  From the report, it seems that Lambert 4 has become the most popular version over time.

What does the report say?

The recently-published report reviews the extent to which the Lambert agreements are used in practice, and what people think about the agreements and other materials.

Despite a sinking feeling when he saw that the report ran to 100 pages, IP Draughts persevered and speed-read most of the document.  He found much of it surprisingly interesting.  It confirms what many practitioners in this field probably know already, on the question of how parties go about drafting and negotiating research contracts.

Bucket full of puppies…            (limited relevance to post)

Saying that is not to diminish its value.  Policy-makers in the IP and competition law fields are forever asking for “evidence-based research”, which is often quite difficult to find.  The assertions of IP lawyers, in the absence of such research, seem to be mistrusted as special pleading – usually quite wrongly, in IP Draughts’ view.  This report provides buckets-full of evidence-based research.  100 pages of it, to be precise.

Some points that caught IP Draughts’ attention included these:

• People who know about the Lambert agreements mostly find them useful.
• Very few people use them as a starting point in negotiations.  Instead, they offer them as a compromise proposal or offer a document that incorporates elements of Lambert.  This goes against the vision of the Inner Lambert Committee who wanted them to be used without changes on a take it or leave it basis.
• They are more popular in universities than in industry.  Some industry sectors (eg pharmaceuticals, ICT) are content to use them (as a compromise) but other sectors, including engineering, energy and defence, take a more aggressive stance on IP issues and don’t like the “middle of the road” approach of the Lambert agreements.
• The online decision guide isn’t used much
• The fact that the agreements are on a Government website adds to their credibility

All of this suggests to IP Draughts that people are not yet ready to move away from an approach in negotiations where you start off with a proposal that is better than you expect to achieve, and then compromise.  The Lambert vision was designed to remove that process and go for a more scientific approach.

IP Draughts’ personal view is that the Lambert agreements are not perfect, but for routine research agreements there may be a significant commercial advantage in using a standard document and avoiding an expensive and time-consuming negotiation process.  This is a more relaxed view than many lawyers seem to take.  Obviously in individual cases it may be important to go for a more tailor-made approach rather than use the off-the-shelf Lambert document.

Keep the term sheet simple. Pretty please…?

Term sheets come in many flavours, from simple vanilla, through ‘99‘ to tutti-frutti.  This blog has previously discussed some of the choices that the drafter or adviser faces, including:

• is it to be called a term sheet or a memorandum of understanding, heads of terms, heads of agreement or letter of intent?
• is it to be binding, non-binding or a hybrid (some provisions binding, and some not)?
• which law will apply, and in light of the laws of civil code countries is it necessary to state (a) that a party can withdraw from the negotiations at any time without liability, and (b) that the negotiations are being conducted on a non-exclusive basis?
• what happens if the term sheet is stated to be non-binding, but the parties proceed as if they had an agreement in place, and fail to enter into any more detailed agreement?

A further issue that IP Draughts is increasingly seeing is a mismatch in expectations between the parties when they draft and negotiate one of these preliminary documents.  Some clients take the view that they are commercial documents, and don’t need the input of lawyers, except perhaps where a clause is required to state that the document is not legally binding.

Other parties take a different approach.  IP Draughts has recently seen a document, called a Memorandum of Understanding, which the parties negotiated over many months, and which concerned a research collaboration.  It started off short and sweet, but by the time it had gone through rounds of drafting and negotiation, it ran to 23 pages and over 11,000 words.  One of the parties had clearly involved their IP lawyers, as the document contained complex IP ownership, option and licensing provisions.  These included 8 IP-related definitions that ran to nearly a page of text.  The other party had not involved lawyers and the negotiations had been led by a scientist, who involved commercial colleagues periodically.

The MOU was stated to be legally binding.  It was a frightening document.  It was the carcass of a full agreement, with some flesh on the bones, but with some parts missing or horribly misshapen.  Some terms had been considered in forensic, legal detail (at least by one of the parties).  Some other provisions had been considered by the commercial parties, but had not received proper legal scrutiny and had some conceptual flaws, so would need re-thinking and re-writing.  Yet other provisions were dealt with in a very cursory fashion, in the expectation that they would be dealt with more fully when a ‘proper’ agreement was drafted.

Faced with this document as a starting point for drafting a full agreement, what was the drafter to do?  It was extremely difficult to work out which terms were:

• ‘cast in stone’ and in final wording, which could not be changed
• largely agreed, but the wording could be changed if an error was found or drafting improvements were required
• agreed in outline, but the wording should not be treated as sacrosanct
• up for discussion, because they hadn’t been debated and either party might prefer a different approach

Using term sheets or MOUs in this way is ultimately an expensive and inefficient process, as it adds to legal costs when the full agreement is drafted and negotiated.  There are obvious commercial attractions in ‘buttoning down’ as many issues as possible as quickly as possible in negotiations.  But if this goes beyond agreeing points of commercial principle and descends into the fine detail of wording, it would be much better to move straight to negotiating the full agreement.

There seems to be a current fad for putting too much detail into the MOU.  In IP Draughts’ view, the trend should be resisted.

What do readers think?