Anti-competitive Use of IPRs

As has been discussed in Chap. 4, the employer owns the inventions made by its employees. The interviewees explained that the academic therefore informs the university or the exploitation company respectively about a potential invention. The academics would be motivated to do so, since they might get generous returns from licensing in addition to their salary, since exploited IPRs created impact and since it was regarded as prestigious to have a patent on one’s curriculum vitae. Patent searches and market evaluation would then be conducted to see if the innovation is exploitable. The registration and licensing or sale is often conducted by an exploitation company or an external agent, but the universities (and academics) received revenues. If the potential market is considered large enough a spin-off might be created which, as a head of department mentioned, was often the academics’ preferred choice. The university and the academic would hold equity in the spin-off and sometimes venture capital firms would be taken on-board diluting the equity shares. The latter would sometimes be complicated, according to an interviewee working in the area of commercialisation, due to the value of the company being difficult to estimate. He also mentioned that there are preferred investors whereby the equity split is known in advance.

According to this interviewee, there are a variety of special conditions universities might impose when exploiting IPRs. Generally, unlike private companies who might hold back a patent in order not to dilute their market, universities would have to ensure that patented innovations are being used. In this respect it would also occasionally be discussed whether certain innovations (e.g. cancer therapeutics) should be ‘open source’. However, considering the expense required to bring initial results to a marketable product (e.g. through clinical trials), commercialisation would mostly be the best route because companies would not be willing to make these investments if ‘other companies can just come in and take the market from them’. It would therefore always be necessary to consider the best way to achieve the desired impact from an IPR. Unlike private sector companies, universities would also only give limited warranties on licenses (i.e. ownership and that no other commercial arrangements in relation to that IPR are known, but no guarantee that nobody else’s IPRs are infringed), as any further warranties would require more market research than a university can reasonably conduct. Furthermore, sublicense partners need to be disclosed with universities retaining the right to object to inappropriate partners (e.g. the tobacco industry or military applications in certain countries). Since university research is often not complete when the IPR is created, partners could also benefit from IPR improvements for reasonable commercial terms, in particular as universities would not be free to exploit improvements with another party anyway. Finally, as it is often beneficial for partners, especially for small and medium sized enterprises (SMEs), to use a university’s name when exploiting an IPR, universities would require knowledge about and, if applicable, object to the usage of their name.

With regards to externally funded research, some interviewees mentioned that charities would increasingly oblige universities to exploit in their funding conditions in order for the research to get ‘out there’. External funders (charities and, especially, the private sector) would also increasingly require royalties. In private sector collaborations, who acquires ownership of IPRs would be contractually agreed. Since private sector companies might sometimes be better placed ‘to take it through to the marketplace’, the company might patent and thence provide the university with an academic license and royalty returns. Alternatively, if a higher rate is paid, the company might own the patent. Such routes could be desirable for the universities because the company would then take over the high costs associated with patenting. In other situations, where the research is mainly publicly funded, the university patents and provides the company with an option right and, if applicable, a license for reasonable commercial rates. In both cases, the universities would require the IPR to be exploited to its full potential and if a partner does not commit to this, the partner might only acquire the right in particular fields or the university might ‘take back rights in particular fields [...] [to] exploit the IP with other interested parties’. In determining which route to go, the stage of the innovation might also play a role, since certain results are at a stage too early to be interesting for private sector partners. One interviewee additionally mentioned that universities needed to retain the right to publish, either independently or with the funder, and therefore needed to be cautious about restrictions to this (delays or complete denial) in prior negotiations.

If internally managed, knowledge transfer in the form of IPR exploitation has to be regarded as a non-economic activity according to the Research Framework if the profits are reinvested into the primary activities of the universities. This means the rules around direct exploitation efforts by universities will mostly not create competition law concerns. IPR exploitation could be classified as economic if venture capital firms have co-invested or, it is argued here,[1] if the IPRs arise from economic research or if the transfer is exclusive. If IPR exploitation is of an economic nature, special conditions or favourable prices granted to certain undertakings, be it to make innovation accessible, could be regarded as state aid if it does not pass the private investor test. However, the possibility of exemption according to Articles 107, 106(2) TFEU or secondary legislation remains. Contractual conditions, such as the limitation of sublicensing, could equally be regarded as anticompetitive if economically unjustified and thrust upon undertakings by a collusion of HEIs or a dominant HEI. Notwithstanding any potential exemptions, an economically unjustified contract condition could potentially be identified in the requirement to exploit to the full potential of the IPR. In order for IPR transfer in collaborations not to be regarded as state aid universities, according to para 28 of the Research Framework, would have to demand compensation equivalent to market prices[2] for any rights the partner obtains unless they just reflect the work packages the partner has delivered or unless all the costs for the research have been taken over by the partner entirely. If the partner has not paid the entire costs of the research collaboration, but contributed beyond its own costs, such contributions can be deducted from the market price.

  • [1] See Sect. 5.3.2 above and Chap. 3 Sects. and above.
  • [2] Compensation is equivalent to market prices if the price has been established through an opensales procedure or through expert evaluation or through arm length negotiation or, if right of firstrefusal exists, the possibility to get other offers which have to be matched is existent.
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