Intellectual property in H2020: The research and innovation currency

Intellectual property might accumulate value for business and further research and innovation activities. Research and innovation projects usually require valuable background resources for its implementation. In the knowledge-based economy, Intellectual property is becoming one of the most valuable resources for research and innovation activities.

Valorization of intellectual property

Just like any tangible asset such as machinery and buildings, intellectual property can be exploited through commercial operations, such as, selling, licensing and even as a financial collateral. However, the value of the intellectual property will depend on a resourceful IP protection strategy as well as on the enforcement all the intellectual property rights.

From a commercial point of view, intellectual property rights might be a decision factor for investors, stock market brokers and financial advisors in order to invest in tech/knowledge-based start-ups as business angels in return for a share of the company’s equity or in strategic partnerships between to companies to bring technological products to the market through joint venture agreements. A consolidated portfolio of intellectual property rights and the corresponding monitoring and enforcement strategy will provide confidence to the parties of the aforementioned fiduciary relationships.

The same approach also applies to public funding on research and innovation projects. In fact, “The European Union has set itself the target of investing 3 % of GDP in research and innovation by 2020, across the public and private sectors combined”. However, during the proposal stage partners are required “to demonstrate the high scientific and technological quality of your project (i.e. show how innovative it is), and outline the anticipated impact particularly in terms of the potential for commercial and industrial exploitation of project results. Which refers to the inclusion in the proposal of a “Draft Plan for the Dissemination and Exploitation of Project Results” that comprises a preliminary IP management strategy.

The preliminary IP management strategy, among other aspects, shall describe the partners’ intellectual property inputs (e.g. intellectual property rights such as patents, utility models, or licenses for further research) that will be required for the proper implementation of the project tasks, taking into consideration the state-of-the-art solutions and the corresponding IP landscape in order to avoid/reduce the likelihood of infringing intellectual property rights of third parties.

Possessing the required intellectual property is an essential requirement to be admitted in a project consortium. Thus, partners should negotiate access to the valuable intellectual property during the proposal stage. Moreover, Consortium Agreement is a requirement for the signature of the Grant Agreement. Which may suggest the negotiation of access rights to background contribution and project results (e.g. intellectual property) for the implementation of specific tasks in the project as well as for exploitation purposes after the project ends.

Exploitation of intellectual property in H2020

The expected results of the project should reflect the high scientific and technological quality the project. Such results might be valuable intellectual property which is expected to be exploited during and post project in order to generate the expected impact and objectives of the funding programs (e.g. the generation of wealth and competitiveness throughout the creation of new jobs for the commercialization of project results).

Particularly, clause 28.1 of the Grant Agreement (a non-negotiable agreement), establishes the obligation to exploit project results in the following terms:

Each beneficiary must — up to four years after the period set out in Article 3 — take measures aiming to ensure ‘exploitation’ of its results (either directly or indirectly, in particular through transfer or licensing) by:

(a) using them in further research activities (outside the action); (b) developing, creating or marketing a product or process; (c) creating and providing a service, or (d) using them in standardization activities.

It is easy to recognize the interest of the EC for commercialization of project results from the text of clause 28.1. This is clearly an incentive to researchers and SMEs involved in the in H2020 projects to explore all the possible business opportunities where they could expand their operations. Furthermore, the EC has developed other funding initiatives such as the SME instrument, to support entrepreneurs in crossing the gap between the laboratory and the market as well as to create entirely new markets or revolutionize existing ones. For this reason, we focus in the development of disruptive IP-based business models with our project partners in research and innovation projects aiming the valorization of intellectual property.

Further research and standardization activities do not exclude the obligation to protect the exploitable project results. In fact, such activities will benefit from the transparency resulting from the implementation of the corresponding IP protection strategy.

An effective and well-defined IP protection strategy as well as its correct implementation during and post project, is the best way to secure the value of research and innovation results and engage potential investors and stakeholders. For instance. Let’s imagine that in a research and innovation project funded by the EC, partner “A” has been working together with partner “B” in the co-development of an industrial cleaning formulation. Partner “A” is an SME but partner “B” is a research center. In this case, the IP protection strategy will refer to the following aspects:

  • a negotiation of an ownership agreement between both partners considering the different objectives and exploitation interests of both co-developers (e.g. Partner “B” transfers its exploitation rights to partner “A” in exchange for royalties)
  • evaluation of the protectable subject matter and a state-of-the-art examination (prior-art search)
  • analysis of the cost for IP management and enforcement in the validation of the business model for the corresponding exploitation plan concerning the cleaning formulation.
  • Application for the corresponding intellectual property rights in connection to the results of prior-art search (e.g. patent and trademark).
  • Negotiation and drafting of licensing agreement for the market roll-out of the cleaning formulation in those countries where that cannot be reached by SME.

It is important to considered that the main exploitation partner will be responsible for the enforcement of the intellectual property rights. The enforcement of IP rights ensures exclusivity and for better exploitation of projects results. In short, the exploitation partners should try to keep exploitable results out of the public domain in order to preserve their value that eventually will attract potential investors and buyers.

The intellectual property currency

The potential applications of the blockchain technology will contribute to the simplification of the commercial transactions concerning intellectual property. According to the World Intellectual Property Organization (WIPO)Potential use cases include: evidence of creatorship and provenance authentication, registering and clearing IP rights; controlling and tracking the distribution of (un)registered IP; providing evidence of genuine and/or first use in trade and/or commerce; digital rights management (e.g., online music sites); establishing and enforcing IP agreements, licenses or exclusive distribution networks through smart contracts; and transmitting payments in real-time to IP owners”. In consequence, intellectual property rights will have a more significant role in the knowledge-based economy relying on the advancement of the blockchain applications and the corresponding adaptation of its regulatory framework concerning the intellectual property.

According to the ICC,

“IP’s function as an ‘intellectual currency’—a mechanism for valuing and trading otherwise intangible inventions, works and brands—gives firms many more possibilities to realize value from their innovations”.

Therefore, we could say that intellectual property rights are becoming a new sort of currency that captures the value of inventions and innovations in the knowledge-based economy.

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Luis Rodrigues

Luis Rodrigues

IP consultant