Research and Development (R&D) Agreements play a key role in enabling organisations to pool expertise and resources to develop new products or processes.
Agreements of this nature are commonly used between commercial entities and academic institutions, and play a key role in establishing the funding models under which research takes place.
With British Science Week approaching, our Commercial Solicitors outline some of the common negotiation points encountered in R&D Agreements, and how best to prepare businesses entering into such agreements for the potential commercialisation of the results of the collaboration.
Project scope and responsibilities
Before entering into an R&D Agreement, it is essential for the parties involved to clearly define the intended objective and scope of the arrangement, and to agree on relevant operational aspects and the allocation of responsibility, to prevent issues further down the line.
Producing an initial heads of terms document before drafting the first draft of the full form R&D Agreement can be useful for the parties, allowing them to reach an initial shared understanding of their responsibilities, which can save time during the negotiation of the full form agreement.
The heads of terms document may allow the parties to reach ‘in principle’ agreement on matters such as:
- the purpose of the collaboration and desired outcomes;
- the contributions of each party (in terms of finance, intellectual property, personnel, equipment etc);
- project management roles including any possible deliverables or timelines; and
- detail on each party’s intentions in relation to newly generated intellectual property.
Intellectual Property
Development of new intellectual property is a fundamental aspect of any R&D Agreement, and careful consideration should be given to the treatment of both background and foreground intellectual property, as discussed below.
Background IP
Background IP refers to the intellectual property a party owns and brings to a collaboration.
Background IP for each contributing party should be clearly and comprehensively defined, to ensure that ownership is clear and that no unintended rights arise in relation to IP not intended for use under the agreement.
Commonly, Background IP is licensed by the owner to the other party (or parties) for the purposes of the collaboration, with the agreement detailing the permitted scope of use and any restrictions.
The R&D agreement should be drafted to ensure that restrictions on use apply to third parties involved in the research, particularly subcontractors or academic collaborators.
Foreground IP
The parties must decide who will benefit from ownership of new intellectual property developed through the R&D project, and what rights each contributing party will have.
This will depend on the commercial and academic purposes of the parties in entering into the project, as well as each party’s respective bargaining position.
Once a decision has been made as to who will own Foreground IP, consideration should also be given to how the non-owning parties can use and commercialise it.
This can also be constructed through the grant of a licence – for example, the model might be as follows:
- each party will retain ownership of its Background IP and grant a licence over relevant Background IP for purposes of the project
- Foreground IP developed under the Agreement will be owned by the party that created it
- A mechanism exists to track respective contributions to the development of Foreground IP in order to enable ownership to be properly allocated
- The owner of Foreground IP grants a licence to the other parties, authorising use for the agreed permitted purposes
Licence Terms
In relation to Background IP, the party licensing its use should ensure it has the necessary ownership rights to grant the relevant licence, whether through sole ownership or a sub-licensable right.
Where a party is sub-licensing third-party rights in IP, care should be taken to ensure that they are not contractually obliged to license any improvements back to their owner, since that might have a bearing on the agreed treatment of Foreground IP under the R&D Agreement.
In any event, the licence in respect of Background IP should be granted only for permitted use in respect of the specific research and development project, and it should be restricted from being used for any other purposes, including exploitation for concurrent research projects.
During the R&D phase of the project, it is unlikely that any party will require royalties for the use of its Background IP, given the collaborative nature of the relationship.
When considering Foreground IP, licence terms will differ, taking into account each party’s desire to commercialise, and/or publicise, the results of the project, and some key considerations to be addressed are:
- Whether the licence is granted on an exclusive or non-exclusive basis;
- To what extent is the licensee restricted in its scope of commercialisation
- Are there any territorial restrictions or a limit on the duration of the licence
- Are there any payment obligations attached with usage and commercialisation
- What rights exist in respect of the publication of findings, and academic use of Background and Foreground IP
Confidentiality
Prior to entering into an R&D Agreement the parties will typically need to enter into a confidentiality agreement ensuring information disclosed during the pre-contract stages of the process remains protected.
Confidentiality obligations should then be reflected where an agreement is entered into, ensuring the research process and results remain confidential to the parties.
It is important to ensure suitable confidentiality provisions are included to protect valuable business information, trade secrets, and intellectual property, and to enable effective commercialisation.
Commercially sensitive information may well be shared between parties to the project.
While treating this information with confidentiality will be standard practice in the case of two commercial entities, the interests of academic institutions in ensuring that they are able to publish the results of the research make it important for collaborating commercial parties to take care over what they share, and the specific terms of the confidentiality provisions that apply
Commercial entities entering into R&D arrangements with academic institutions may wish to protect themselves by including provisions that allow oversight of material related to the R&D prior to publication, and this may be a point of negotiation.
Term and Termination
There are a range of points to consider regarding the provisions on the expiry or termination of an R&D Agreement.
Whether termination occurs due to agreement between the parties, expiry of the term, or breaches of the agreement, the R&D Agreement should address the return or deletion of the other party's confidential and proprietary information, settlement of payment obligations, and the treatment of any unfinished research or development.
Some provisions will need to survive the termination or expiry of the Agreement, including the parties' confidentiality obligations and the licence terms in respect of intellectual property.
A commercial party contributing to a project for the purpose of benefiting commercially from the results should consider the termination rights they offer, since allowing the other party(ies) the right to terminate before any significant commercially viable results have been generated, despite the investment of resources by the commercial party, is not a favourable position to offer.
R&D Agreements are powerful tools for innovation, but require careful consideration when drafting.
Clearly identifying intellectual property contributions, defining the scope of the project and permitted use of newly generated intellectual property, and preparing early through a heads of terms document will help parties approach potential negotiations.
Contact Our Commercial Lawyers
For expert advice on navigating the complexities of R&D Agreements and protecting your organisation’s commercial interests, contact our Commercial team.
0161 941 4000
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Josh Durkin
Trainee Solicitor
Josh joined Myerson as a Trainee Solicitor in September 2025. Prior to joining the firm, Josh obtained his law degree from the University of Sheffield, then completed his LPC LLM at the University of Law in Manchester in 2024, achieving a Distinction.
About Josh Durkin