Abolition of the so-called "Professor Privilege" in Italy: new guidelines on contracts between research institutions and financing parties
Published on 11th Oct 2023
Law no. 102 of 24 July 2023, containing Amendments to the Industrial Property Code (pursuant to Legislative Decree no. 30 of 10 February 2005) has overhauled art. 65 governing the ownership of industrial property rights in inventions produced by researchers of "Universities, including legally recognised non-state universities, public research organisations and Institutes for Research, Hospitalisation and Scientific Care (IRCCS)" ("Institutions"), now providing that the ownership of the invention be vested in such Institutions, thus abolishing the so-called "Professor Privilege", according to which any right (not only moral but also property) deriving from the invention belongs to the researchers alone and not to the organisation to which they belong.
By decree dated 26 September 2023, the Ministry of Enterprise and Made in Italy adopted Guidelines identifying the principles and specific criteria for the regulation of contractual relations in cases of commissioned research activities between research facilities and the entities funding the research ("Guidelines")
With the Guidelines, the Ministry seeks to guide the parties, while respecting their contractual freedom, in the negotiation of research contracts, attempting to balance the interests of the Institution, which is generally to have visibility and to demonstrate the ability to generate industrial property, and that of the financing party, to exploit the results of the commissioned research activity.
Types of research contract
According to the intensity of the commissioned research, the Guidelines identify three types of contract:
- Service contracts;
- Development contracts;
- Innovative research contracts.
Contracts for services are understood by the Guidelines as those contracts in the context of which the financing party asks the Institution to perform a standard activity, with the use of established and routine technological skills or capacities. In such contracts, the lender's role as a customer vis-à-vis the supplier (Institution) of the requested services is usually emphasised.
In the context of this type of contract, the expected results are usually scientific data and reports. Any result that qualifies for patent protection is therefore, in these cases, an exception.
Contracts for development activities are, on the other hand, understood by the Guidelines as those contracts with a scope of applied research on projects for the optimisation or selection of products/processes or applications already being developed by the same financing party, which normally has its own prior knowledge and is sometimes already protected by forms of industrial property rights.
In these cases a result that qualifies for patent protection is possible and may be related to the financer's pre-existing innovation or represent an autonomous finding.
Innovative research contracts
Contracts concerning innovative research activities are, on the other hand, understood by the Guidelines as those contracts concerning projects with a marked propensity to innovation (such as, research of a new product, a new technical solution or a new use of a product and/or application of the financing entity). In such cases, the contribution in terms of innovation by the Institution is particularly relevant and the result of a new industrial finding is a probable and expected outcome of the commissioned research activities.
Necessary elements of the research contract
After analysing the different types of research contracts, the Guidelines indicate the elements that must necessarily be present in research contracts and the aspects to be taken into account in their negotiation, without prejudice to the freedom of negotiation between the parties.
Research contracts must necessarily include:
- an indication of the parties;
- a clear statement of the purpose of the collaboration;
- the definition of the key words or expressions used in the contract;
- a clear and detailed indication of the subject matter and nature of the collaboration;
- the terms and conditions applied to prior knowledge of the parties (so-called background);
- the terms and conditions applied to the knowledge expected from the commissioned research (so-called foreground);
- the means of dissemination of the results;
- the indication of the persons responsible for each party for the implementation of the collaboration / profile of the persons currently or potentially involved in the research activities;
- the definition of the economic aspects (ex-ante quantification of the funding, definition of possible bonuses and fees, methods of payment and timing, etc.);
- the definition of the ownership of the results;
- the rules regarding confidentiality and the obligations and manner of communication of the results of the research activity;
- the rules regarding scientific publications;
- the term of the contract;
- the provisions on withdrawal and termination (specifying the manner of termination in case of dispute, competent court and applicable law).
The Guidelines also provide the following recommendations:
- people involved in the research: it is necessary to precisely identify the profiles of those currently or potentially involved in the research activities. This aspect is also relevant for the determination of ownership and invention bonuses.
- nature of the service in relation to the possibility to obtain industrial property rights: it is necessary to define precisely the nature of the service and its object. Depending on the type of service, the contribution expected from each party to carry out the research activities must be precisely stated, as well as the result expected from the financing party and the Institution.
- confidentiality: the confidentiality clause must ensure that prior knowledge (so-called background) and research achievements (so-called foreground) remain 'trade secrets'.
- the terms and conditions applied to prior knowledge of the parties (so-called background): the contract must specify that the collaboration between the parties, save any intention to the contrary, will not give rise to any ownership or co-ownership of the background. If, however, as a result of the completion of the research activities, the expected knowledge technically depends on a background belonging to the Institution, it is recommended that the research contract set out the conditions of access to this background on the part of the funding body, e.g. via a licence.
- the terms and conditions applied to the knowledge expected from the commissioned research (so-called foreground): taking into account the parties' respective interests, the Guidelines foresee different and alternative scenarios regarding the ownership of the economic exploitation rights in the foreground as follows:
- the co-ownership of results by the Institution and the financing party. In this case, the contract must specify who is responsible for filing the patent application and bearing the related costs. It will also be advisable to regulate the exploitation of the industrial property, with particular attention to the manner of transfer of the results of the research activity in favour of the financing party and this also, in the case of co-ownership, to avoid co-ownership of the rights deriving from the patent or potential disputes in the management of the patented inventions for an indefinite period.
- exclusive ownership by the Institution. This usually occurs when the invention is fully the result of the work of the researcher or research group within the Institution and the Institution has an advantage in terms of the visibility of its research activities. In this type of contract, provisions can also be included for the transfer of ownership in the economic exploitation rights to the financing party.
- exclusive ownership by the financing party. This is usually provided in service contracts. In this case it is opportune that the parties disciple the Institution's right to use data deriving from the service for the purpose of further research or for teaching, without any such rights compromising the protection of the result of the commissioned research activity.
- transfer of industrial property: this takes place through the assignment of patent applications that the Institution (alone or in co-ownership with the financing party) may file or of patents already granted. When the Institution's background and foreground contribution is significant and the innovation cannot be considered as a mere extension of the parties' background knowledge, an assignment of the results or an exclusive licence could be envisaged in favour of the financing entity. In this case, the Institution will receive a fixed amount or a fee in proportion to its contribution.
- dissemination of the results of the research: in this case too, the Guidelines attempt to balance the different needs of the parties: those of the financing party, in a greater degree of confidentiality of the results, and those of the Institution, in the greater dissemination thereof. Therefore, the contracts must provide clauses regulating the possibility for the Institution to produce scientific publications, foreseeing, for example, the prior written authorisation by the financing entity and that any possible refusal by it be grounded. The parties may also consider whether to include silence-consent mechanisms in the contract. In the event of authorisation, a mention of the financing body as promoter and funder of the research initiative may also be envisaged. If, on the other hand, the request/need for publication derives from a requirement of the financing party, the contract can provide that the funder undertakes to expressly cite the name of the collaborating Institution.
The adoption of the Guidelines completes the reform of industrial property implemented by Law 102 of 24 July 2023, and is important because the Guidelines, even though they are without prejudice to free negotiation between the parties, will influence future negotiations of research contracts between Institutions and the funding bodies, thereby formalising a contractual practice that is already present within Institutions.