Joint ownership in medtech: be careful when collaborating

Ed Wright, partner and intellectual property specialist at law firm, Shakespeare Martineau, discusses the steps medtech players should consider when embarking on new collaborations. 

Collaboration is a mainstay of the healthcare and life sciences industries. Businesses working in the development of new equipment, drugs, processes and software tend to work in highly specialised fields, so, when looking to innovate, it often makes sense for one party to engage with another.

By collaborating they can utilise their facilities, resources, specialist knowledge and current IP, rather than unnecessarily starting from scratch or reinventing something already produced by a third party. However, this can be complicated from a legal perspective, so how can medtech innovators ensure they have the right agreements in place to collaborate successfully?

Joint ownership agreements between parties are not uncommon in the medtech space, particularly when it comes to the development of new software and applications, often for use with other devices. These agreements can be utilised to great effect, as long as they are thoroughly detailed and considered from all angles.

Without any agreement whatsoever, collaborations can be dangerous to business continuity. Failing to put a clearly defined contract in place means it is difficult to manage each party’s expectations. This can lead to them pulling away from the collaboration because of a perceived lack of input from the other party, or because they find themselves unhappy with the progression or direction of the project. These sorts of expectations should be written into the fine detail of any joint ownership agreement from the beginning.

If a joint venture without a contract does break down, this can lead to a great deal of time wasted in unravelling the collaboration and a huge financial cost, potentially devaluing both parties’ businesses. One party who entered the project with their own IP and licensed its usage to the other party could even end up losing exclusivity over the IP, leaving them worse off than they were when entering the process.

The first port of call when drafting a joint ownership agreement is to establish, through thorough and confidential negotiations and disclosures, whether there is a definite case for collaboration. There could be any number of reasons which suggest that this is a viable approach; from one party having all the ideas yet no resource to bring them to life, to a project reaching a plateau in the creative stages and collaboration acting as an opportunity to get things moving again.

It may be necessary to get a ‘heads of terms’ agreement in place before beginning to draft the agreement in earnest. This would see key components and conditions of the deal itemised, so that everything can be addressed ahead of time and both parties can be reassured of their choice.

If there is clear consensus that the collaboration should go ahead, then the next stage should be to determine exactly what each party would be bringing to the table. This includes clarifications regarding the specific working responsibilities of each party, the facilities they will offer up for use and what existing IP assets they are willing to license to the other party for use in said project.

It’s of vital importance that existing IP is highlighted clearly and assessed for its future commercial value and development potential, as well as exactly how it is expected to be utilised in this collaboration. Other considerations include the extent of any licences being granted between parties and which party will file any new patents as and when this becomes necessary.

The final stage of initial negotiations will include working out what licensing will need to be granted and how ownership of newly-developed IP will work. Full joint ownership is possible, but this is rarely the best course of action. This would mean that consent would need to be given should one of the collaborators wish to license the technology or product to a third party or utilise it for additional, undocumented purposes, creating an unnecessary level of complication and seriously stifling innovation and ingenuity.

Instead, the most common arrangement will see the party whose initial IP was most utilised own the new product or system, while the other party will receive a highly beneficial licence without having to pay any royalties, for example.

Even if the new IP has been truly born out of collaboration, it is still best to designate a single owner. This could be achieved by looking at the development process and determining where the innovation came from; whichever party is deemed to have brought this about will likely be best placed to own the IP.

In anticipation that a dispute should arise over ownership, alternative dispute resolution mechanisms should also be included within the initial agreements. These could include such a provision that an independent mediating body should be brought on to try to resolve matters, if one party believes to have been unfairly treated in the collaboration process.

If the joint working takes place on an international scale, with a party based in the UK collaborating with one in, for instance, the EU or the USA, further provisions will need to be included in the initial agreement, and additional details surrounding the working relationship negotiated. Looking at the collaboration from a purely contractual perspective won’t be enough - it will also have to be examined at a practical level.

The lack of proximity between the two parties is perhaps the biggest challenge and they will therefore have to decide how and to what extent they will work together. Will the two parties physically meet to complete the project? How will they share documents and data? Which laws will govern the arrangement, that of the physical location where the work takes place or of the intended marketplace? The answers to these questions can all decisively change how the agreements are drawn up. For instance, while the English legal system predicates that all contracts be exhaustive, other European states have these matters written into their constitutions, meaning that any contracts are only above and beyond what is already designated in law.

If both parties are intending to physically work on the project and decide that proximity is necessary for this to happen, they might decide to set up another joint company, so as to let everything happen under one roof.

Collaboration in the healthcare and life sciences sectors can be hugely beneficial, but it is vital not to rush into anything without the appropriate ownership agreements in place. By drafting an exhaustive and detailed document, outlining where both parties currently stand and how this might change in future, medtech companies can ensure that innovation is allowed to go unstifled.