A lot of people have contacted our Helpline with concerns surrounding the modalities of exploitation of research results in Horizon Europe – more specifically, about indirect exploitation activities carried out by means of IP agreements with third parties. So we decided to focus this month's IP post on this topic.
As many Horizon participants will know, exploiting project results is one of the main obligations imposed upon grant beneficiaries. In Horizon Europe, this obligation is laid down in Annex 5 to the model grant agreement (MGA), where exploitation is defined as the “use of results in further research and innovation activities other than those covered by the action concerned, including among other things, commercial exploitation such as developing, creating, manufacturing and marketing a product or process, creating and providing a service, or in standardisation activities”.
Accordingly, beneficiaries having received EU funding have to use their best efforts to exploit the results that they have generated during the project; this for four years following the end of the grant. If no exploitation activity has taken place during the first year, the beneficiary concerned will have the obligation to resort to the Horizon Results Platform to find third parties that would be interested in exploiting the results.
The Commission makes it clear that exploitation activities may be carried out directly or indirectly “by another entity, in particular through transfer or licensing”. It is therefore interesting to remember that you do not have to exploit your results yourself – especially in cases where your institution or company does not have exploitation capacity, it is entirely possible to conclude transfers (also called IP assignments) or licences and let someone else exploit the results for you.
Remember however that while allowed and even encouraged, resorting to transfers or licensing is regulated in the grant agreement (see once again Annex 5 to the MGA, section on transfers and licensing). It is therefore necessary to know the rules surrounding licensing and transfers and plan your exploitation steps accordingly. We have summarised them below.
This is the easiest scenario. As a project beneficiary, you are free at all times to grant non-exclusive licences to results that you solely own, to third parties, regardless of where they are located. Since the licence is non-exclusive, it will in principle not clash with your access rights obligations under the GA and will therefore not be problematic from this point of view.
You do not need to inform your partners or seek the EC’s authorisation before granting non-exclusive licences to third parties.
The MGA makes it clear that licences can be granted, “including on an exclusive basis”, as long as this does not affect compliance with your obligations under the grant.
Here, the issue is – you may have guessed it – the fact that the exclusive nature of the licence may clash with access rights. For example, you cannot decide to grant an exclusive licence for the Austrian market to a third party based in Austria, if you have an Austrian partner in the consortium and this partner needs access to the same results. Here, the licensing deal would end up depriving your Austrian partner of its access rights – which means that you would in turn end up in breach of your contractual obligations.
For this reason, the MGA states that exclusive licences may be granted only if all the other beneficiaries concerned have waived their access rights. Practically, this means that you should obtain those waivers before signing your exclusive licensing deal.
An additional requirement may apply if you are planning to grant the exclusive licence to a third party established in a non-EU country non-associated with Horizon Europe (e.g. the US, Japan, Australia…). You can find the list of associated countries published by the EC here. In such cases and provided that the call conditions state so, you will have to inform the EC (or other funding agency) beforehand – this is usually something to be done via notification to your Project Officer. The idea behind this obligation is to protect the EU’s competitive and strategic interests by allowing the EC to object to key EU-funded technologies “fleeing” abroad, instead of being used in the EU.
In practice, you will have to notify the EC before the intended exclusive licence is signed and:
- identify the specific results concerned
- describe in detail the licensee and the planned or potential exploitation of the results, and
- include a reasoned assessment of the likely impact of the licence on EU interests, in particular regarding competitiveness as well as consistency with ethical principles and security considerations.
On this basis, the EC will then have 60 days to object to the grant of the exclusive licence.
Note that if you already know that one or several exclusive licences will have to be granted to the same entity (for example: the US-based exploitation vehicle in your corporate group), it is possible to formally ask the EC to waive its right to object regarding exclusive licensing to a specifically-identified third party. In other words, keep in mind that you may anticipate and manage this issue early on, rather than wait until the conclusion of the licence before you notify the EC (which could cause unnecessary delays in exploitation).
To sum up, before granting any exclusive licence, always:
- Clear access rights over the relevant results beforehand – by requesting waivers from all concerned partners;
- Inform the EC, if the exclusive licensee is based in a non-EU country non-associated to Horizon and that the call conditions state so.
Transfers of ownership
Just like licences, transfers of ownership are explicitly allowed by the MGA. And, just like for exclusive licences, the EC makes it clear that resorting to transfers should not affect your obligations under the grant.
Here, three sets of rules will apply: rules on informing the rest of the partners, rules on transferring result-related obligations to the new owner, and possible rules regarding transfers made to entities based outside of the EU.
The first thing you will have to do before you transfer your results to a third party is to inform your partners. This has to be done at least 45 days before the transfer takes place, and your partners will have 30 days to object if they consider that the transfer would adversely affect their access rights (unless you have stated a different timeframe in your CA). This step is necessary to allow your partners to know who to turn to in order to request access rights once the transfer has been formalised; the idea is to make sure that your right to transfer your own results is balanced against your partners’ own rights, and thus to ensure that project implementation and exploitation activities will not be hindered by your choices. Note that you can avoid this notification/objection procedure by including a list of the third parties you will transfer your results to in attachment to your CA – this way, upon signing the CA, your partners will be informed about future transfers to these specifically-identified entities and you will save some time.
The second rule you have to follow when transferring your results to third parties relates to your result-related obligations under the GA: what happens to your obligations to protect, exploit, disseminate the results and to grant access rights over them, if you are not going to own them anymore? Here, the GA imposes that you transfer these obligations to the new owner, with obligation to pass them on in any subsequent transfer. This way, each subsequent new owner will have to take over your obligations under the grant: exploit the results, acknowledge EU funding, give access rights… Do not forget to inform the transferee early enough of these obligations (as they could be seen as an extra burden) and to include the necessary clauses in the assignment agreement.
Finally, an additional requirement may apply if you are planning to transfer the results to a third party established in a non-EU country non-associated with Horizon Europe. This is the exact same requirement as the one described above for exclusive licences: here again, if the call conditions state so, it will be necessary to inform the EC or funding entity about the intended transfer and to include a reasoned assessment of its impact upon EU interests; the EC will then have 60 days to object to the transfer. Once again, remember that it is possible to notify this to the EC in advance (for specifically-identified transferees) in order to obtain a waiver and thus simplify further transfers to this specific entity.
To sum up, before transferring your results to a third party, always:
- Inform your partners 45 days beforehand
- Inform the future owner of your obligation to transfer all result-related obligations, and formalise this in the assignment agreement
- Inform the EC, if the transferee is based in a non-EU country non-associated to Horizon and that the call conditions state so.
Including those steps in your exploitation strategy will help you save time and potential disputes, which will in turn help you tackle the exploitation stage more efficiently.
Finally, do not forget to check our Guide to IP and Contracts for more information about licensing and assignment agreements.
We hope the above tips will be useful to you and wish you the best in your EU projects!
- Publication date
- 28 January 2022