Foolproof collaboration in high value manufacturing

Within the high cost, specialist skill set environment that high value manufacturers operate, the decision to work in collaboration with one or more parties on a commercial project is often a wise one, Rob Bryan, Partner at BPE Solicitors explains.

Rob Bryan, partner at BPE Solicitors LLP.
Robert Bryan, partner at BPE Solicitors LLP.

To ensure that collaboration doesn’t degenerate into confrontation, a collaboration agreement will need to be put in place to record what each party has agreed to bring to the collaboration.

Below, are several key matters an organisation should consider when entering such an arrangement.

To manage all parties’ expectations, the agreement must address in sufficient detail:

  • the scope of the collaboration – whether it will be for the purpose of research only, or for research and development, or for research development and exploitation
  • the aims
  • objectives and methodology of the project
  • the parties’ responsibilities
  • the parties’contributions in terms of materials; machinery; services; labour, and funds
  • how the project will be managed

The parties should consider whether they are bringing any of their own intellectual property to the agreement and the extent to which this will be made available to the other party/parties for the purposes of the project.

Who will own or be able to exploit any intellectual property created in any results generated by the project? Where the parties will be disclosing commercially sensitive information, for example through publication of results, the agreement must contain a confidentiality clause tailored to protect that information; either indefinitely or for a definite period after the project has ended.

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It’s not always possible to prevent problems from arising under an agreement.

While there may be a temptation to draft a confidentiality clause treating all information disclosed as confidential, this is likely to be unenforceable so should be avoided.

The parties may include specific warranties, for example that their work during the project will be of a satisfactory quality. The nature of the project will determine what, if any warranties should be provided, and the parties should take great care to ensure they can provide the level of assurance offered by any warranties given.

With the best will in the world, it is not always possible to prevent problems from arising under an agreement. Occasionally, these will result in loss or damage to one of the parties or even a third party to whom that party is liable.

To address this problem, the parties will often decide to include an indemnity clause in the agreement, whereby they agree to indemnify each other for a loss suffered by them or that caused to a third party.

If this route is chosen, it is prudent to consider applying a cap to limit liability for any direct loss, or to exclude liability altogether for any indirect loss.

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The key to minimising the scope for dispute is open communication at the outset.

An ability to terminate the agreement early is often valuable. Ensure the termination clause is drafted to reflect the project and the nature of the collaboration.

If multiple projects are to be performed under one agreement, the parties may wish to allow themselves the flexibility to terminate a single project rather than the whole agreement, allowing other projects under the agreement to continue.

As with all relationships, the key to minimising the scope for dispute is open communication at the outset of collaboration discussions. Prepare a list of non-negotiables and ensure they are properly reflected in the collaboration agreement.