Office for Sponsored Research

1. Office for Sponsored Research We promote, facilitate and enhance research

2. Industry Contract Negotiations for Engineering and the Physical and Biomedical Sciences OSR Brownbag Presentation Norris University Center May 13, 2009 David E. Kaplan Brian Mitchell Warshawsky Office for Sponsored Research

3. Agenda • Provide an overview of University contract principles • Highlight concerns raised by Industry contracts • Share solutions

4. INTRODUCTIONS Brian Mitchell Warshawsky Senior Contracting Officer David E. Kaplan Senior Contract & Grant Officer Both have legal training and years of experience in drafting, reviewing, and negotiating all types of industry agreements

5. Department Misconceptions • Contracts, Gifts, and Grants, are all the same • The project begins when the PI is informed by the sponsor – “Congratulations, you’re getting the money” • It’s impolite to win an award, and then want to negotiate the terms • It’s proper to sign a blank contract • There are no formal proposal submission processes for Industry

6. Mission: Why we work with Industry

7. Proposal Overview Same procedures apply … • OSR-1 • Cover Letter • Scope of Work • Budget (with non-federal F&A rate) • … and draft agreement

8. Beware… …Hidden Restrictions

9. Why a contract is not a gift or a grant. • A contract is a legally binding agreement, negotiated at arm’s length, usually with the benefit of review as to legal form by representatives with legal training, and executed by authorized officials of the parties • Has binding terms and conditions including SOW, price, term, deliverables, IP rights, etc. • While a gift is unrestricted, and a grant has certain governing conditions (as in NGA), contract is binding and enforceable in a court of competent jurisdiction until it expires or is terminated (or beyond) • Industrial sponsors typically use their boilerplate agreements and NU marks them up (“redlining”) • Sponsor agreements are usually drafted by their in-house or outside counsel and can run dozens of pages • The more complicated the draft agreement the longer the process • Where possible we use NU’s standard research agreement

10. Clauses of Concern • Confidentiality • Ownership of IP • Indemnity • Restrictions - Access - Publications • Industry vs. Federal Flow through • Warranties/Reperformance of the work at our expense • Stop Work Order • Other Clauses

11. Industry Misconceptions • “We Paid for it, we own it” • PI’s have authority to contractually bind the university • “Acme State University signed our agreement without changes so NU should too” • We can give the PI a gift and still own all the IP • Overhead rates can be determined by PI’s • All research results must be confidential in perpetuity to protect us from competitors • The PI and the company have reached agreement—why is OSR “holding up the process”?

12. Confidentiality • Research results are not confidential • Sponsor must designate and identify confidential information in writing • Contract must include exceptions to confidentiality • Confidentiality must have limited survival; for instance, 3 years from disclosure or end of agreement

13. Ownership of IP • Ownership follows inventorship in accordance with US patent law • We can give sponsor time-limited exclusive option to elect royalty-bearing license and then negotiate terms of that license • Royalty rates cannot be determined in advance but will be negotiated in good faith • Sponsor to pay patenting costs • We cannot assign ownership of inventions to sponsor

14. Indemnity • Sponsor should indemnify NU for Sponsor’s use of research data • Each party to assume risks of personal injury and property damage stemming from its own fault (negligent acts and omissions) • If NU indemnifies Sponsor, then indemnity should be mutual and tied to fault of indemnifying party • We should not be issuing blanket indemnity to an industrial sponsor

15. Restrictions? • Foreign national restrictions are not acceptable • Publication is the essence of academic research • We must have right to publish to fulfill our mission, and to meet policy and legal requirements • Sponsor may review planned publication or presentation 30 days in advance for review and comment, and to identify confidential material • Up to 60 additional days to permit filing of a patent application

16. Industry vs. Federal Flow Through • If industry is funding with its own money then it can draft its own terms (subject to applicable laws and to negotiation by NU) • Industry must flow down mandatory rights and obligations from federal prime agreements • Most federal clauses are FAR and DFARS • http://farsite.hill.af.mil/ • http://farsite.hill.af.mil/VFDFARA.HTM

17. Warranties/Reperformance/Stop Work Order • NU is not a commercial entity and does not make commercial warranties • Company terms often include an array of warranties • Companies make warranties as commercial inducements but they are inappropriate for us • Re-performance is an unfunded obligation and should be stricken • Stop work order should be reduced from 90 days to 30 days

18. Special Cases • Federal Flow-through • Purchase Orders •  Export Control • UBIT / Work For Hire

19. What should I do if contacted by Industry? • If the subject is a potential contract, please contact one of the CGO’s or the GCO handling your department • Licensing and other tech transfer matters (other than sponsored research) are handled by TTP • http://www.northwestern.edu/ttp/ • Gifts are handled by OCR • http://development.northwestern.edu/corporate/

20. Links • OSR Website: http://www.research.northwestern.edu/osr/ • Industry Guide: http://www.research.northwestern.edu/osr/industry.html • Patent and Invention Policy: http://www.northwestern.edu/ttp/html_policies/patentpol_post1999.html

21. Questions? David E. Kaplan Office for Sponsored Research 847/467-1145 d-kaplan4@northwestern.edu Brian Mitchell Warshawsky Office for Sponsored Research 847/467-3283 Bwar@northwestern.edu