CONTENTS
- 1. Global R&D | Types of International Joint Research Initiatives
- 2. Global R&D | Points to Note When Drafting a Contract
- - Points to Note When Drafting a Contract
- 3. Global R&D | Principles of Ownership and Allocation of Results
- - Attribution of Rights in Results
- - Assignment of Rights in Joint Research and Development Results
- 4. Global R&D | Considerations for Working the Results
- 5. Global R&D | Composition and Payment of Research and Development Funds
- - Research and Development Fund Items and Supporting Evidence
- 6. Global R&D | National Security and Technology Protection Security Management
- - Principal Security Management Matters
- 7. Global R&D | Sanctions in International Joint Research
- - Sanctions for Misconduct
- - Prior Legal Advice Is Essential
1. Global R&D | Types of International Joint Research Initiatives
Global R&D (Global Research & Development) means more than cross-border collaboration in research and development.
In Korea, the Global R&D Special Committee under the Presidential Advisory Council on Science and Technology acts as the control tower, setting the core policies that help companies secure technological competitiveness and that strengthen the nation's science and technology capabilities.
As overseas expansion and research collaboration by domestic companies and research institutions through Global R&D have become routine, however, the related legal risks have grown to a level that can no longer be overlooked.
Global R&D ties directly into a range of legal matters, including collaboration between domestic and overseas research institutions, the transfer and shared use of technology, the distribution and management of research outcomes, and the ownership of intellectual property rights.
When joint research through Global R&D involves participation in national R&D projects in particular, parties should stay alert to a number of practical concerns and legal issues.
[Types of Global R&D Initiatives]
- General type : a common form of joint research in which a domestic research and development institution engages an overseas institution to carry out the research
- Joint-institution type : an overseas institution participates as the lead or as a joint research and development institution to carry out a research and development project together with a domestic research and development institution
- Separate-project type : the domestic institution and the overseas institution are linked in research content, yet they form separate projects and carry them out independently, including the use of research and development funds
2. Global R&D | Points to Note When Drafting a Contract
Once the research and development task and the participating institution have been selected for a national R&D project that involves global R&D, an agreement must be reached before the task can move forward.
Agreement : concluded between the head of the central administrative agency and the research and development institution, addressing the common matters that govern how the research and development task proceeds
Contract : where consultation among research and development institutions calls for it, a contract sets out the parties' intentions, clarifies responsibility, and gives rise to legal effect should a dispute or problem arise
A contract may record matters such as the use of international joint research and development funds, the scope of the task, ownership of the results, and obligations like compensation for loss, and it should generally cover the following.
• The purpose, scope, and period of the research and development
• Ownership of rights in the results and how they may be used
• Allocation and method of use of research funds
• Conditions for researcher exchange and the bearing of personnel costs
• Conditions for technology transfer and whether approval for overseas export is required
• Compensation for loss and liability
• Conditions for terminating the contract, the governing law, and jurisdiction over disputes
Points to Note When Drafting a Contract
A global R&D contract should lay out solutions ahead of time for situations in which consultation stalls because of differences in language and culture between the parties.
You should also clarify the transaction terms by gaining a clear understanding of the laws and systems, policies, taxation, and trade practices of the other party's country.
The research period and research amount, submission of the research report, ownership of intellectual property rights, confidentiality clauses, and export and import prohibition clauses can all become important issues, so the contract should be drafted with care, and an English-language contract generally calls for expert advice.
It is also advisable to negotiate the remaining terms only after the parties have agreed on the principal terms of the contract.
3. Global R&D | Principles of Ownership and Allocation of Results
Tangible and intangible results produced through the course and outcome of global R&D, such as products, facilities and equipment, and intellectual property rights, must follow the principles that govern ownership and allocation.
As a general rule, research and development results are originally acquired by the researcher, and the institution commonly succeeds to and owns those results under employee invention regulations, an agreement, or a similar basis.
Where several research and development institutions have jointly created the results, the ownership ratio is set according to their respective contributions.
That assessment takes into account input resources such as research and development funds, personnel, facilities, equipment, and information.
Attribution of Rights in Results
The results of international joint research are often works created jointly by domestic and overseas research institutions, so questions about the attribution of patents, copyrights, and similar rights come up frequently.
For that reason, the parties should consult on attribution of the results in advance.
Because research results carried out with national contributions belong to the government or the performing institution under domestic law, prior approval and supporting documentation are needed before joint ownership with an overseas institution can be recognized.
Where a foreign institution transfers the relevant results to a third country or commercializes them on its own, the contract clauses should be drafted to secure the right to collect technology fees or to share revenue under domestic law.
Assignment of Rights in Joint Research and Development Results
As a general rule, a co-owner who sells its share in research and development results obtained through global R&D to a third party must obtain the consent of the other co-owners.
When a share is sold to a third party, it is advisable to grant a right of first refusal to the other co-owners or to a joint research and development institution that is not a co-owner.
It is also advisable to provide for a tag-along right that lets another co-owner require its own share to be sold at the same time.
Where There Is No Provision Under U.S. Patent Law
Korean patent law requires the consent of the other co-owners for the sale of a share in a co-owned patent to a third party, but U.S. patent law contains no provision on that point.
For this reason, it is important to spell out the contract terms with the differences in IP assignment systems among countries in mind.
4. Global R&D | Considerations for Working the Results
To work research and development results obtained through global R&D, including their use, assignment, lease, and export, the parties must consider the form of ownership of the results, who works them, and when the working takes place.
In the case of sole research and development, the owner may work the results freely, and the parties must agree separately on how profits are later distributed.
Where the results are commercialized jointly, the parties need to consult on the overall use of the results, including the later distribution of profits, the monitoring system, and the grant of a paid license to the representative business operator.
5. Global R&D | Composition and Payment of Research and Development Funds
Global R&D research and development funds consist of government-supported funds, institution-borne funds, and funds supported by other institutions, organizations, or individuals.
Where national support applies, the following methods of payment are available.
Lump-sum payment | The properly used research and development funds are paid once their settlement is complete |
Installment payment | -Government support funds are paid after the use of the research and development funds is confirmed on a quarterly or annual basis, with performance taken into account -Only part of the research and development funds is paid at the start of the research, and the remaining funds are paid once settlement is complete |
For global R&D based on a national R&D project, the parties should refer to the following currency standards.
Research and Development Fund Items and Supporting Evidence
[Types of Research and Development Funds]
- Personnel costs
- Research facility and equipment costs (purchase, installation, lease, operation, maintenance, and the like)
- Research material costs (purchase, management, fabrication, and the like)
- Commissioned research and development costs
- Research activity costs (meetings, business trips, software use, laboratory operation, and the like)
- Other indirect costs
Supporting evidence for the use of research and development funds, such as credit card sales slips, account transfer receipts, cash payment receipts, copies of checks, and tax invoices issued in the host country, must also be prepared clearly.
- The settlement report is prepared in English and Korean
- Cash payment receipt : the required items, such as the date and time of payment, the reason for payment, and the amount paid, are entered without omission
- Receipt : the required items, such as the amount paid, the date of payment, and the items transacted, are entered without omission
6. Global R&D | National Security and Technology Protection Security Management
When working with foreign institutions, a security management system should be in place to prevent the leakage of strategic items, sensitive technologies, and key personnel.
Global R&D calls for security measures to be set up before the work begins, and the principal security obligations are as follows.
- Submission of a security plan (a separate form is provided)
- Access control and the installation of security devices in the research space
- Security training for foreign researchers
- Management of the export of materials and encryption of electronic communications
- Prior reporting and approval for presentations made abroad
Where the technology amounts to a strategic item in particular, an export license from the Ministry of Trade, Industry and Energy or a strategic item classification must be obtained in advance.
Principal Security Management Matters
7. Global R&D | Sanctions in International Joint Research
As with general national R&D projects, global R&D may also lead to designation as an institution that has performed in bad faith and to sanctions where grounds arise such as ▲failure to carry out the plan, ▲false reporting, or ▲unauthorized transfer of results.
If a foreign institution abandons the task midway or transfers the results without authorization, the domestic managing institution bears responsibility for it.
Sanctions for Misconduct
It is also a ground for sanctions where the course and outcome of a research and development task fall extremely short.
When grounds for sanctions arise, the Board of Audit and Inspection, an investigative agency, or the Anti-Corruption and Civil Rights Commission investigates and confirms those grounds and imposes a disposition accordingly.
Research institutions, research directors, researchers, and others may be barred from participating in national R&D projects for up to 10 years, and a sanctions surcharge of up to five times the research and development funds paid may be imposed.
Research and development funds already paid are also subject to recovery measures.
Prior Legal Advice Is Essential
To carry out a global R&D project successfully, the managing institution should address in the contract the clauses on spreading joint liability with the foreign institution, the security mechanisms, and the preparation of a confidentiality agreement.
A prior review of the contract through legal advice is also advisable.
Because contracts with foreign institutions are governed by different legal systems, a response can be delayed once a dispute arises, so the governing law, the court of jurisdiction, and consent to conciliation and arbitration procedures should be set out clearly.
Global R&D is a way to broaden a global network, but it also carries the risk of legal disputes.
A sound approach generally calls for preventing problems in advance through legal review before signing, building a results and security management system into operations, documenting matters in case of a dispute, performing the research faithfully, and making clear where responsibility lies.
To that end, it is advisable to seek advice in advance from professionals well versed in international law.
The firm can respond promptly to clients' matters because attorneys focused on international law, foreign attorneys advising on U.S. law (United States), attorneys who hold a U.S. certified public accountant qualification, accountants, tax accountants, patent attorneys, and other specialists in particular fields form a task force.
If you need ongoing legal advice and a review of practical procedures before launching a global R&D project, we are glad to provide legal consultation at any time.
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