Shared Funding Narrative

The proposed IPR condition for shared-funded contracts (as included within the CDE website in the Shared-funded contract template) is broken down into 5 Parts: Definitions, Ownership, Exploitation, MOD's Principal User Rights and Miscellaneous.

Part I supports defined terms used in the remaining four Parts.

Part II makes it clear that notwithstanding the extent of MOD funding made available under the contract, the IPR generated by the enterprise (“Contractor”) belongs to the enterprise concerned. This is an important consideration for technology growth and its subsequent exploitation in the defence marketplace. MOD will always assume that, unless exceptional factors apply, the enterprise (or its licensee) is best placed to further develop the technology towards maturity and undertake exploitation for the ultimate benefit of both parties.

Part III contains provisions designed to further promote this exploitation by the enterprise concerned or its licensee. The enterprise is required to develop plans for exploitation and periodically expose them to MOD, so that MOD can assist in reviewing them and potentially suggest new or MODified routes to market. Where exploitation through licensing is preferred by the enterprise, provisions have been included to enable the enterprise to establish the most advantageous arrangements. MOD is an important owner of IPR in science and technology in its own right, and if any of this IPR is needed to aide exploitation of the results of the contract, this can made available to the enterprise for this purpose (through licensing).

In return for its own substantial investment in the performance of the contract, the MOD requires certain rights of its own in the results, and these are dealt with in Part IV. In order to balance the needs of enterprises to protect their investment, and of MOD to promote that investment and encourage innovation in and defence exploitation of the outcome, those rights are subdivided into two different types. These are the rights MOD is to enjoy automatically, called “Constrained Rights”, and those wider rights, called “Enhanced Rights”, which are only available to MOD on its further payment of a “Conversion Fee” to the enterprise over and above MOD’s contribution to the contract price. Constrained Rights are for the most part available in all forms in which the results are delivered by the enterprise, including those forms which the enterprise might wish to deliver which describe the background IPR of the enterprise on which the contract is based. However, “Enhanced Rights” are only available to the MOD in a form of contract deliverable referred to as a “Primary Information Deliverable”, describing the actual results of contract and only any additional, incidental background IPR of the enterprise necessary to make the delivered report of the results clear and cohesive.

Within “Constrained Rights” is set out that minimum set of rights which the MOD might reasonably require in the course of its normal defence business without harming the commercial interests of the enterprise. These include the right to use the results of the contract for internal MOD purposes, and for drawing up and issuing specifications of its requirements including information that will assist ultimately in the integration of the technology into UK defence equipment or other capability. More limited rights are granted to create and publish abstracts of the work, inform foreign government to promote international collaboration as a possible exploitation route, and use external contractors to support assessment of the technology.

“Enhanced Rights” are as the term suggests much more extensive, and address the rights the MOD might have expected to acquire had it fully funded the work from the outset. Payment of the Conversion Fee entitles MOD to use the Primary Information Deliverables in contracts with others and in international collaborative arrangement with foreign governments, although this does not extend to use for purposes outside defence, civil defence, security and intelligence and even these purposes may be subject to further restriction by prior agreement with the enterprise. This entitlement extends to innovative results made subject to patent or registered design protection by the enterprise. Special restrictions on the exercise of MOD’s Enhanced Rights apply in situations where the enterprise possesses the only capability in the UK for exploiting the results of the contract.

However, it is important to recognise that the MOD does not normally seek Enhanced Rights when the original enterprise is able and willing to do the follow-on work itself on fair and reasonable terms.

The “Conversion Fee” paid cannot be agreed in advance because its size depends on several factors, but its maximum does require prior agreement before the contract can be placed. In order to provide the enterprise with a reasonable return on its investment, this maximum can be greater than the investment made by the enterprise in the contract itself. Factors affecting the amount to be paid include the period of time which has elapsed after the end of the contract before MOD wishes to acquire “Enhanced Rights”, and in what proportion of the total results those rights are actually required. MOD would normally only consider acquiring “Enhanced Rights” where it perceives a clear need for further technology development work along the path towards ultimate defence exploitation and yet the enterprise or its licensee is unable or unwilling to perform such work for MOD on fair and reasonable terms.

If the fee is paid, MOD recognises there may still be some important background IPR that has to be accessed before another contractor can use the results of the contract on MOD’s behalf. Part IV of the conditions therefore also requires the enterprise to grant MOD’s nominated contractor a licence in that background so that such use can take place.

Part V contains a series of miscellaneous provisions some of which are nevertheless important for the purpose of the condition. These include obligations placed on the enterprise to properly mark information deliverables so helping guard against misuse, to retain full records of work done under the contract for a certain period and make them available on request where they have not already been delivered, to provide technical assistance where needed to facilitate use of the results by MOD or others, to supply an abstract of the results to MOD for publication, and to publish the results beyond those described in the abstract only when MOD consent has first been obtained. They also contain obligations on the MOD to preserve the confidentiality of information supplied by the enterprise.