Saturday, May 08, 2010

Contracts: The Good, The Bad, and The Ugly

What does RM need to know before entering into negotiations with a potential sponsor?

RM has to plan and prepare a solid agenda based on the requirements of the research at hand to establish whether a contract is indeed practical or possible. Contingency, concessions equitable distribution and perhaps restrictions and constraints such as those present in Guide to Contract Negotiation & Preparation of Contracts at ANU will need to be well planned for in advance and written in stone and otherwise memorized to make sure no boundaries are exceeded.

It appears fairly standard that University IP should never be surrendered in Australia. At the same time this appears as a standard not applied to many generic drug manufacturers in the sale of their products to poorer nations where there have been many cases of international legislation which require corporations provision their IP to assist in making medicine more affordable for those who can least afford it to the entire sector. Unrestricted licensing to the funding partner might also be difficult to regulate in many foreign markets if the sponsor is an international corporation they might perhaps be making billions off the university licensed IP abroad while the university itself sees no further profits without a bold contingency on future earnings in place.

At the same time universities may see increasing ethical and legal challenge in when or if their IP rules may be restricting global development. So far I have not read of any one challenging university IP rules but heterodox economist Chang Ha-Choon takes on the entire neo-liberal market approach in Kicking Away the Ladder: Development Strategy in Historical Perspective. (2002)

Minimizing University exposure to unrecoverable liabilities also appears to be an important consideration as ANU relates that larger multi-party negotiations will increase the risk of unforeseeable liabilities claims or challenges. Yet, is there not some form of research risk insurance or force majeure clause for small ventures provided by the Australian Government similar to export nonpayment insurance which reduces exposure to small businesses with 90% risk coverage? It appears to work for the exporters wouldn't it work to encourage more small multiparty research consortia?

It seems universities seek to ensure the research project can actually be completed in the time and with the assets required in the contract. This would imply that failure to do so will extract late delivery and penalty as potentially with export shipments.

While these terms appear fixed positions most businesses might see them as potentially limiting shared interests and the RM would need to include a central university legal team to review the final document, screen all agreed terms, vet departmental endorsements, investigate commercial forecasts, ensure term sheets are in agreement with contract terms, perform final sign off on any boiler plate contract, present final draft to research director, pass to research department chair, witness signing and provide copies by and to all principals, provision signed copy to Chancellery for final signature, forward copies of the contract to department, Chancellery and legal team and and assign to filing cabinet for as long as a couple of decades or university dictates decree. No bureaucracy there?

As product lifecycles are increasingly short in most competitive commercial sectors any delay could reduce the possible profits of the research itself. While the university legal team may provide final content review and lead negotiator the more the involved RM can confirm through understanding and moderating the negotiation process the easier it may be.

The RM could enroll in some form of course work to gain greater competency in the legal aspects of sponsored research management contracts. Additionally the RM could employ tactical training in real negotiations, arbitration and conflict management.

Experience is often not the only or best solution to improving skills in contract negotiation. In fact, as my Notre Dame Certificate taught me in 2007 crucial human weaknesses such as cognitive biases, emotions and irrationality, partisan assumptions,and selective information filtering all often reinforce zero sum positions rather than provide opportunities for shared interests. Good RMs seek the creation of value or shared gains through collaboration, but with lack of negotiation training might be encouraged to practice judgmental overconfidence in one's own skill set only reinforcing innate human aversions to loss or risk as well as the perpetuation of reactive devaluation. No manager really wants to hear they lack negotiation skills or the ability to frame good questions to gather the best information possible contributing to their decisions. But having lived outside the western world for more than a decade I often fear it's aversion to risk is it's biggest disadvantage. This would apply to the interests of collaborative research rather than isolated enclaves in terms of positions on multiparty contracts.

What should RM be aware of concerning existing funding contracts when planning for new funding cycles and applications?

As an apocryphal, in the worst case scenario conflicts of interest or IP sharing would be found post contract signing as a class mate indicated and this would imply a lack of due diligence in which case in common law it would be potentially challenging for the university to recoup any losses of IP protection, patent or copyright. Conflicts between current and future contracts need to be anticipated and I am certain the best RMs out there are as popular for their smooth negotiation skills as they are for their competent juggling of BATNAS (best alternative to negotiated agreement) and their knowledge of university IP reservation points, restrictions and constraints. An RM's past performance in managing contracts will implicate future responsibilities.

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