The secrets of successful corporate collaboration
With innovation increasingly important to corporate success, the question of how businesses bring disruptive new products and services to market is critical.
The calculation is often framed as a choice between buy and build, but the rising complexity of markets, technologies and business models means it is more important than ever for companies to collaborate effectively with their suppliers, their customers - and even their competitors.
R&D collaborations – as opposed to joint ventures which involve a standalone legal entity – raise a host of legal challenges, nowhere more complex and potentially transformational than at the intersection of intellectual property and tax. Here we share our insights on the key legal issues to consider when structuring R&D agreements - drawn from our work across pharma, tech, manufacturing and beyond - to reveal the secrets of successful collaboration deals.
Key issues in collaboration agreements
- Structure of the collaboration and its corporate form (eg separate legal entity vs contractual relationship).
- Tax provisions. These set out the parties’ mutual understanding of the tax treatment of the arrangement, which is often complex and heavily influenced by the way intellectual property is licensed and the way the R&D work itself is paid for. We have seen tax authorities around the world paying increasingly close attention to withholding tax charges in the context of IP licensing, and given that the way these arrangements are structured is subjective and heavily influenced by the jurisdictions involved, tax issues are a critical consideration when negotiating collaboration agreements.
- Antitrust. In Europe, R&D collaborations are likely to attract increasing antitrust scrutiny from the European Commission. In 2021, the Commission, for the first time, based a cartel prohibition decision – and fine – on an alleged collusion relating to technical development rather than price fixing or market and customer allocation (the typical triggers). These novel assessment concepts, as well as a lack of clear and established case law, add significant uncertainty for businesses contemplating R&D collaborations.
- IP matters, including the contribution of specific background IP such as patents or copyrights by each partner to ensure they can adequately carry out the R&D work, and allocation of ownership of the results of the joint R&D (foreground IP), its exploitation and administration (including prosecution, enforcement and defence of IP rights).
- Financial terms, including in relation to the funding of the R&D-work as well as the commercialisation phase, which includes manufacturing and distribution of income generated by the use of the foreground IP (ie royalties and sale of goods developed or manufactured with foreground IP).
David Beutel Partner
Dr. Theresa Ehlen Partner
Düsseldorf, Frankfurt am Main
Dr. Uta Itzen Partner
Kristen O. Riemenschneider Partner
Giles Pratt Partner
Richard Bird Partner
Dr. Lutz Riede Partner
Dr. Philipp Lehmann Counsel
Niklas Andree Associate
Miriam Benmoussa Associate