What Is A Research And Development Agreement?

In any competitive business environment, one of the most crucial investments you can make is in your Research & Development. If you wish to remain relevant and maintain a competitive edge, it’s worth exploring new ways to enhance existing products and create new ones. 

One of the most common methods businesses use for this development and exciting stage of growth is through collaboration with others. This is always a beneficial strategy so you can gain from the diversity of ideas and areas of expertise in your relevant industry. 

However, such an arrangement also calls for an Agreement that ensures clarity from the beginning. For instance, you might want to consider the following:

• What is our overall goal?
• How can I ensure these goals are met?
• How can I protect my IP?
• How can I ensure that the outcome is of high quality?

These are all matters that should be addressed in a Research And Development Agreement. 

What Is It?

If your business is collaborating with others to develop new ideas and technologies, you may want a formal Research & Development Agreement in place.

This should outline the relationship you have with your cooperation partners and should generally cover some of the following matters:

• Division of work
• Distribution of costs
• Distribution, ownership or assignment of intellectual property 
• Any required background knowledge
• Milestones for the project
• Liability

Simply put, the Agreement should define the roles and responsibilities of you and your collaborators. It should establish relevant deadlines, standards, and ownership rights. For example, if you’re creating a new product, who will officially own it? 

Intellectual Property

If you’re working with another business or party and they are creating a form of IP as part of your project, it’s crucial that you consider how you will ensure that property officially belongs to you. 

Generally, there are 2 ways to do this:

1. IP Assignment Deed
2. IP clause in a contract

An IP Assignment Deed is a separate agreement that transfers full ownership of the IP to you. However, if you already have a Research & Development Agreement in place, it makes more sense to simply include an IP Clause in that contract. 

This clause should require the party you’re collaborating with to agree to transfer all ownership of the IP they create to your business, ensuring you own it. Without this kind of clause or agreement, the IP resulting from your project may not be yours, and the parties you collaborated with might be able to distribute and share it as they wish, which is the last thing you want. 

We’ve written more about assigning IP here. 

How Is It Enforced?

When you think of other agreements like employment contracts or a service agreement, you’ll know that these types of contracts are regulated. For example, the Consumer Guarantees Act and the Fair Trading Act in New Zealand are enforced by the Commerce Commission. 

However, a Research And Development Agreement is not regulated. This means you have some flexibility when it comes to negotiating the terms of the agreement, such as dispute resolution and what happens if there is an issue or disagreement with the arrangement you have in place. 

When Would I Need A Research And Development Agreement?

Typically, when a business undertakes a project for research and development, they would opt for a Research And Development Agreement so the arrangement is documented and all parties understand their roles. 

Since it’s not regulated, it’s wise to speak to a lawyer about the kinds of terms you want to include, to ensure the dispute resolution process is as straightforward and stress-free as possible. 

How Do I Terminate A Research & Development Agreement?

There are several ways you can terminate a Research And Development Agreement, and this also depends on what you include in your contract. Some of the options are:

• Expiration as set out in the agreement itself
• Dissolution
• Nullification
• Mutual consent 

As mentioned earlier, these agreements aren’t regulated, so you can be quite flexible in determining what can and can’t be done. 

Example Let’s say you’re a business that provides an online payment service. You want to innovate by creating an app that allows customers to pay for items in instalments online. To achieve this, you partner with a company called TechNGo to enhance your existing service and benefit from their expertise in software development.  Thus, the Agreement should cover some of the following points – What tasks will they be required to perform? How will these tasks be distributed between TechNGo and your business? What process will be followed if the tasks aren’t completed? Who will own the IP? If there’s an issue with the service or app, who is liable? What process will be followed if one of the parties breaches a term of the Agreement (dispute resolution)? Will TechNGo be reimbursed for any relevant costs during the project?

Need Help?

If you’re ready to have a Research & Development Agreement drafted for your business, Sprintlaw has friendly and experienced lawyers that can assist you with the legal processes involved!

If you would like a consultation on your options moving forward, you can reach us at 0800 002 184 or [email protected] for a free, no-obligations chat.

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