Collaboration in innovation

Businesses in the Aerospace & Defence supply chain know all too well that they must continue to invest in developing new technologies if they are to stay competitive.

A particular R&D project may be beyond the capabilities of a single business acting on its own, either because it does not have the available cash to fund the investment or because it lacks the technical expertise to carry out the project. For one or both of these reasons, businesses will consider collaborating with other businesses, or with academic institutions, in order to continue to innovate and develop new technologies. A recent KPMG report commissioned by ADS, suggested that UK businesses should consider collaborating with overseas companies in order to benefit from the developing aerospace markets.

There are various different terms for business-to-business collaboration such as joint ventures, partnerships, R&D agreements, joint development agreements, alliances, R&D collaboration agreements and joint ventures but many of the fundamental issues involved with these structures are the same.In this briefing note, we will highlight some of the key legal issues involved in collaborating with other businesses, with a particular focus on technology.

Intellectual Property

While the principal emphasis may be on the R&D necessary in order to be able to commercialise the results of the R&D, the legal agreement should clarify the ownership and exploitation of the results of the R&D by the participating parties. Collaboration gives rise to important legal issues relating to the ownership and exploitation of intellectual property rights resulting from the collaboration (including the exploitation of pre-existing rights necessary to enjoy the benefit of the newly developed rights). The most important forms of intellectual property involved are patents and know-how, but copyright and design right may also be relevant.

IP – Ownership or Licence to use?

In negotiating the intellectual property aspects of R&D collaborations there is no hard and fast answer, neither set of claims to ownership will be "correct" or justified, and many of the concerns of both parties might be catered for by licensing on an exclusive basis, as opposed to ownership. As with much of any collaboration, an appreciation of the other party’s expectations and motivation can make a difference to the negotiator’s position and to the drafting of the R&D agreement. Whatever the answer to the ownership debate, it is imperative that ownership issues are dealt with in advance. If not, problems are bound to arise as soon as valuable benefits emerge from the lab.

Be alive to competition law issues!

And no collaboration can be structured without some consideration of competition law. Partners in an R&D collaboration will want to ensure that they get a fair share of the results of the collaboration, so the agreement may contain certain provisions which restrict competition. In addition, such co-operation arrangements are often between businesses of a similar level of production in the same industry and with large turnovers. R&D agreements may fall within the block exemption for collaborative R&D agreements and the EU Commission has also issued complementary guidelines for horizontal co-operation agreements including R&D and commercialisation. Most R&D agreements are unlikely to fall within the scope of competition law, but expert advice will always be needed in this challenging area.


The commercial parties to a collaboration will also place significant importance on confidentiality. The parties will want to clearly set out the confidentiality obligations relating to technical information that each party contributes to the collaboration, as well as dealing with the confidential information generated during the collaboration. In relation to the latter, where the collaboration does not result in the creation of intellectual property,it will be vital for the parties to agree how, when and for what purpose the results of the collaboration may be used.

Management and Decision Making

Where the type of collaboration follows a formal legal structure (such as a joint venture or partnership) the way in which the collaboration will be managed and the ways in which decisions will be made should be agreed up front. A joint venture or partnership may well appoint its own management team who will have autonomy from their parent company founders. If each contributor is to have an equal say, what should happen in the event that none of the parties can agree, commonly referred to as ‘deadlock’?


How the collaboration is to be financed/resourced should be clarified and the parties should also consider the back up plan – what should happen if further funds are required?Are there milestones at which point the parties should reflect and decide whether to proceed to the next stage?

Risk and Revenue Sharing

Where the collaboration does not have a formal legal structure such as a joint venture or partnership, the parties will need to agree the sharing of risk and revenue. Who is responsible for which costs and liabilities and how is revenue shared? How is pricing agreed?

As can be seen from the above, there are significant issues involved in collaborating with other parties and it is worthwhile tackling these head-on, before the collaboration starts, in appropriate legal documents. Taking this approach prepares the way and reduces the risk of legal issues arising during or after the collaboration.

Thrings' Defence & Aerospace team are able to provide specialist advise on all types of collaboration and our team includes several specialist technology lawyers with many years experience in negotiating the intellectual property aspects of R&D collaborations. Please do get in touch directly with a member of the team if you wish to discuss any of the issues raised in this briefing note.

Next month: Collaborate or consolidate?

A recent KPMG report commissioned by ADS advised that "Without investment in innovation, the UK risks losing its competitive positioning to other markets in the long run". The report suggests that SMEs in the supply chain would need to consolidate in order to "increase strategic focus and generate additional economies of scale". The idea being that this would free up cash which could be spent on R&D. In next month’s briefing note, we look at some of the legal issues involved in mergers and aquisitions.

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Kerrie Hunt
0117 930 9564
07816 270475
David Patterson
01793 412514
Mike Tomlin
(+44) 117 930 9590
(+44) 7879 405988
Kate Westbrook
01793 412501
07899 715048