Time to look again at FP7 funding?

With EUR 50 billion set aside for pan-European research funding in ten high tech sectors, Nick Plummer and Vicky Clark ask if UK companies should apply for funding under the EU’s FP7 initiative?

UK companies are traditionally under-represented as recipients of EU funding for research and development. FP7, the EU’s Seventh Framework Programme for Research and Technological Development, is the structure under which all EU research funding is provided.

This funding has historically been viewed cautiously by UK businesses, mainly due to the administrative burdens and restrictive terms, particularly in relation to intellectual property, which FP7 and its predecessors were perceived to impose. But with EUR 50 billion set aside for the seven year period from 2007 to 2013, and with the introduction of more business friendly terms, can UK companies continue to ignore this source of funding?

The core of FP7, representing two thirds of the overall budget, is the “Cooperation”programme. It fosters collaborative research across Europe and other partner countries by funding projects undertaken by trans-national consortia of industry and academia. Research may qualify for funding if it falls within one of the following ten areas:

• Health
• Food, agriculture and fisheries, and biotechnology
• Information and communication technologies
• Nanosciences, nanotechnologies, materials and new production technologies
• Transport (including aeronautics)
• Environment (including climate change)
• Energy
• Socio-economic sciences and the humanities
• Space
• Security.

The EU makes calls for specific types of research projects within work programmes in each of these ten areas. Applicants’ proposed research must address one of the defined projects for their grant application to be successful.

The Health Work Programme 2012 alone has an indicative budget of EUR 684 million.

Who can apply?

In summary, applicants must be consortia of commerce and academia based in different EU member states.

There needs to be at least three consortia members based in three different EU member states. Parties in associated countries outside the EU can take part in consortia, but they must be in addition to the minimum 3×3 requirement. Associated countries include EEA member countries, EU candidate states, Eastern European countries, Switzerland and Israel, together with many African, South American and Caribbean countries.

To keep the project manageable and to enhance prospects of success, it is usually recommended that there are between 3 and 5 consortia members and a recent trend has seen the Commission positively encouraging smaller consortia.

By way of example, in July 2011, Ark Therapeutics Group PLC announced that it was part of a four member consortium that has been awarded EURO 5.7 million for research into the use of cutting-edge gene therapy in repairing the coronary artery after a heart attack.The consortium comprises three SMEs including Ark (Finland), Magnus Inventions (UK) and QualiMed (Germany) together with the Yale-University College London Research Collaborative

How do you apply?

The Commission has sought to reduce the administrative burden associated with applications by establishing a two stage process. Applicants submit an initial summary of the project upon which the Commission decides whether a second, full application is required. Hence companies can avoid the burden of preparing a full application at the outset for a project which is unlikely to proceed.

Control of IP arising from the FP7 research project

Historically, the terms imposed by the Commission in relation to the ownership protection and exploitation of intellectual property relating to an EU funded project were unattractive to commercial entities. The headline message in terms of IP in FP7 is now that:

• The members have a good degree of freedom in relation to the ownership, protection and exploitation of IP arising from the project.
• If the members do not agree otherwise in writing, however, the default position will apply, which is unlikely to be suitable (see below).
• The Commission must receive reports on how and when the IP is being or is going to be protected and exploited- this should not affect the members’ ability to protect the IP by way of patents but if you want to keep your research top secret (including the fact it is taking place at all), this may not be the route for you.
• In certain circumstances, the Commission could object to the transfer or exclusive licensing of IP to parties which are not resident in FP7 countries. The right of objection only arises if the transfer or licence is inconsistent with ethical principles or security considerations. So far as the authors are aware, this right has not yet been invoked by the Commission.
• The consortium must use or ensure that the IP arising from the project is used. The results cannot be left on the shelf.

It should be noted that the default position for intellectual property, in the absence of contractual agreement to the contrary, is unlikely to be suitable for commercial members of a consortium. The default position would be as follows:

• Members own the background IP that they bring to the project, others can access it to carry out the project or to use the foreground IP that is developed in the project.
• Members own the foreground IP which they create themselves during the project and jointly own foreground IP they create jointly.
• Consortium members can access other members’ or joint foreground IP to carry out the project or to exploit their own foreground IP.
• Each member can licence out joint foreground IP on a non-exclusive basis (but not background IP of others or solely owned foreground IP of others).
• A fair and reasonable royalty is to be paid to the other members for some of the rights above (rate not specified).

So, express written agreements should always be executed by the consortium members to create conditions which are more conducive to commercial exploitation. The points to note are that:

• The members have a fair degree of freedom in the consortium agreement to contract out of the default position.
• One member (often the commercial entity) can own all of the foreground, and have the right to exploit it and the other parties’ relevant background.
• Exclusive licences and even transfer of the foreground are permitted (subject to the Commission’s veto right above).
• Members can agree between themselves how they will each be compensated for the above.

Conclusion

Whilst FP7 funding is still seen by many as being administratively complicated, the process has been somewhat simplified from the days of FP6 and companies taking part in consortia can now take steps to ensure that they benefit from valuable IP arising from the research project. The funds are available, so if there is a research project specified in one of the calls that is appropriate to you and your research collaborators, then FP7 may be worth another look.

Consortium members must focus early and agree in writing on how they are going to own, access, use and otherwise exploit the relevant background and foreground. Early legal advice is therefore essential.

It is hoped that the next funding programme, FP8 (2014-2020), will continue the improvement in terms of making the process more even more user-friendly.