Digitalisation is to the fore in all sectors, and the life sciences sector is of course no exception. Life sciences products are often found combined with, for example, software and other IT products and services. A life sciences company may have an idea of a product it wants to digitalise and the path to achieve such digitalisation can be established through different means and strategies. Some life sciences companies may consider paying for such development for example by recruiting software developers, hiring IT consultants for the duration of the development process, or by ordering services from IT companies. The problems companies may face in connection with “hiring” of services include 1) price, 2) the reduction in scope for risk-taking and speculative development/ideas (as compared to being the sole risk-taking party), 3) the lack of knowledge as to exactly what to order (not all innovations are finalised in the statement of work/order) and 4) the difficulty in finding the right expertise. Life sciences companies may therefore seek to identify other strategies to mitigate costs and risk, while also allowing more scope for developing new products and services. Against that background, cross-collaborations between life sciences companies and IT companies have in many cases become a necessity in order to develop such new medical products and services. By teaming up with, for example, IT companies, the parties can share the costs, risks and development. As the life sciences companies expand their products and services into new types of digital technologies and innovations, they may even want to explore their opportunities for broadening their intellectual property (“IP”) portfolio into the IT sector as well. However, IT companies are in general as interested as the life sciences companies in retaining the valuable IP in the life sciences technology race. Because of the major interests in the valuable IP developed through cross-collaborations, complex IP strategies and agreements are increasingly in demand and may, in some projects, be the only way to seal the deal when it comes to developing new products and services in this lucrative sector.
Two examples on how to approach ownership allocation principles for IP developed in complex cross-collaborations are described below. The first is ownership allocation through project fields and the second is ownership based on development input.
Strategy 1 - Ownership allocation through project fields
This IP strategy allocates IP developed within a project, by identifying each party’s project field. IP falling within a party’s field area will be the property of that party, irrespective of whether it is jointly developed or solely developed by the other party.
For example, if a medtech company collaborates with a software company, the medtech company would be the owner of the IP developed concerning the medical technology, whereas the software company would be the owner of the IP developed for the software related thereto. By this allocation, each party benefits from retaining and increasing their position within their sector and industry.
The benefit of this strategy is that it provides a simple model for allocating ownership of IP within the respective field area of each party. Moreover, it also offers the benefit of encouraging a more collaborative approach between the parties, as the parties typically become more willing to openly share their technological challenges and plans when any jointly created improvements and feedback provided by the other party automatically come into the possession of the party’s field area. For example, if the medtech company is struggling to find the right values for a medical product, and the software company comes up with a new patentable solution, the medical company would own the patent. For companies interested in strengthening their position in their field area, this strategy is a good starting point.
On the other hand, the strategy may hinder the collaborative approach, especially the willingness to provide feedback on the other party’s technology, since a party may seek to keep its ideas relating to the other party’s field area outside the scope of the project to retain IP ownership. Another potential downside to consider is that this principle will in general prevent a party from broadening its IP portfolio into their partners’ sector and industry.
Strategy 2 - Ownership allocation through development input
The second strategy option in allocating IP ownership in projects is the model of allocating IP based on which party developed such IP. According to this principle, IP solely developed by a party within a project will be owned by that party, irrespective of whether it falls within the other party’s field area.
For example, if a pharmaceutical company develops a smart patentable software solution, the pharmaceutical company would own such IP, despite falling within the field area of the software company. In this allocation, each party will be able to strengthen its position within their partner’s sector and industry.
The advantage of this strategy is that it allows the developing party to benefit from its efforts. The strategy also allows a party to share feedback more openly (since the receiving party will not automatically gain ownership of such feedback falling within its field area).
One aspect to consider when planning to apply this strategy is that ownership based on development input will put make extra demands of the way-of-working in a project. This applies especially to documentation requirements relating to “who developed what”, since that will be a deciding factor in the allocation of ownership. In particular in projects where the parties develop IP jointly, it may be a challenge to distinguish each party’s development input, since it may be a joint effort. Jointly developed IP will also require a detailed allocation mechanism in order for this strategy to work in practice.
One risk that should be carefully analysed and evaluated is that a party may own IP within the other party’s core field area. This may therefore hinder the collaborative approach and encourage the parties to use more “black-box” developments to protect their core field areas from contamination by the other party’s IP. For example, a medtech company may refrain from openly sharing its challenges with an IT company partner in view of the risk that the partner may come up with a solution and thereby own the IP. This may reduce the willingness of a party to openly share its technological challenges and plans, in that solutions or improvements to such challenges risk becoming owned by the other party.
How to choose?
First of all, it is important to keep in mind that the above-mentioned principles are summarised on a high level and that many additional parameters also have to be taken into consideration when evaluating and selecting the appropriate principle. In some projects, it may even be that a hybrid approach is the appropriate way forward and the only way to seal the deal. Whatever strategy is chosen, the strategy adopted will in various ways affect the parties’ collaborative approach and way-of-working. Against that background, it should be kept in mind at all times that a principle for securing ownership could render the collaboration impossible if the way-of-working is too restrictive.
To conclude on the preferred strategy and conditions for accepting such strategy (for example, agreement on licensing options), it is recommended that companies perform diligent analysis and examination of (a) which field areas may be affected, (b) the detailed plans for the joint development and (c) where they foresee that valuable IP will be developed. One example of a useful method for visualising the pros and cons with the respective strategies is to base modelling of IP on hypothetical technology development examples to illustrate the potential outcomes and effect on each parties’ existing IP and anticipated newly developed IP.
Both strategies have benefits and risks that may impact several aspects of each party’s products and services. Both strategies will also affect the parties’ approach to collaboration and require special way-of-working principles. Whatever approach is used, licences may also be required in order for the non-owning party to secure the deal. When considering what the license should include, the parties will typically consider whether the licence should be, for example, royalty-free or fully paid up, perpetual or revocable, sub-licensable or not sub-licensable, global or restricted to certain territory/territories, transferrable or non-transferrable, exclusive or non-exclusive, and for any use or for limited use.
To conclude, deciding on how IP ownership should be allocated is not always straightforward, especially when it comes to more complex developments where both parties work collaboratively to jointly develop products and services and both parties have a strong interest in the IP. The absence of a “one-size-fits-all” solution requires dedicated teams of expertise. Setterwalls intellectual property team and life sciences team are happy to assist you in finding the appropriate IP strategy tailored for your life sciences cross-collaboration.