Industry focus: Strategies for maximising IP returns from R&D collaborations in energy and resources – Part 1

22 June 2020

The energy and resources sector is heavily dependent on technology, from new product lines, heavy equipment and autonomous systems, to safety, environmental modelling and more. Due to the competitive and industry benefits of innovation and tax incentives for R&D, the sector invests heavily across a spectrum of programs.

Governments also recognise the importance of energy and resources R&D to the Australian economy, pouring funds into industry growth centres, collaborative research centres and other grants. Just last month, the Commonwealth Department of Industry, Science, Energy and Resources released a Technology Investment Roadmap Discussion Paper, indicating its long-term commitment to R&D in low emissions technologies.

Maximising the outputs of that R&D – the technologies, data and intellectual property that are created or developed – is crucial to ensuring that benefits equal or exceed the costs. This series presents a range of strategies to help make the most of your investment when undertaking a collaborative R&D effort.

Beware of grant funding requirements and tax rules

Government funding is an attractive option for leveraging investment in R&D, especially in energy and resources, with advances in both being recognised as cornerstones of Australia’s current and future prosperity.

The Government’s expectations in return for grant funding vary considerably depending on the program. While generally speaking Australian government agencies will not demand rights to the substantive IP developed through a funded R&D program, any or all of the following may be required:

  • Rights to disseminate reports on outcomes of research, which should be carefully managed to avoid including any party’s pre-existing confidential information, IP contributed by parties or any potentially valuable results;
  • A seat for a representative of the funding body on the governing or steering committee for the program, which can serve to limit the flexibility of the program and create disclosure risks;
  • Milestones to be met prior to provision of further funding instalments, a real risk in a context where a project may not proceed at an expected rate or yield expected outcomes, and any number of obstacles may arise from poor weather conditions to loss of personnel to delay progress;
  • Repayment of funding or termination rights if milestones or other key performance indicators are not met;
  • Co-contributions which must be maintained at a certain level proportionate to funding, exposing projects to falling over if key industry partners withdraw; and
  • Audits and inspections at parties’ own cost.

In general terms, Australian governments often expect projects to demonstrate value to the community, for example through open access publication of results, availability of developed IP and preference for domestic over foreign entities benefiting from results. These can in certain circumstances limit the extent to which you may be able to obtain exclusive rights to developed IP, and should be clarified up front.

It is often worthwhile obtaining advice from R&D accounting specialists on structuring projects and payments to ensure you can access any applicable tax benefits, including the R&D tax incentive and deductible gift eligibility. The rules for these concessions and their interactions with your financial structures can be complex, but the benefits can be substantial. With certain funding programs offered on a loan, rather than grant, basis, you should also carefully analyse the implications of repayment requirements.

It is also worth remembering that government parties are subject to freedom of information legislation. While confidentiality exemptions may apply, and you should ensure you have rights to participate in assessing any potential FOI disclosures, this will ultimately be within the control of the government agency.  Any foreign government funding or involvement is also likely to come with requirements to comply with that country’s policy and regulation.

In the next part of this series, we consider practical strategies to prevent unauthorised disclosure of confidential information and avoid loss of valuable business assets.

HWL Ebsworth’s intellectual property team has extensive experience assisting clients to maximise the value of their R&D investments. Please contact us to learn more.

This article was written by Luke Dale, Partner and Nikki Macor Heath, Senior Associate.

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