CHANG TSI
Insights
Recently, the IP Commercial & Corporate Team of ChangTsi provided legal support to a renowned Swiss biopharmaceutical company in its technology cooperation and material transfer agreement (MTA) with a Chinese university. MTAs serve as a critical mechanism for knowledge transfer between universities/research institutions and biopharmaceutical companies, significantly impacting further business collaboration, product development, and IP commercialization. Below are some common issues related to MTAs inbetween that may be of interest to relevant companies:
Due to internal policies or regulations, Chinese universities or research institutions, as material providers, often utilize a standard template agreement that predefines the usage of materials, intellectual property, and other relevant issues. For instance, universities typically impose restrictions on the commercial use of materials and their progeny, unmodified derivatives, and modifications (such as requiring written permission from the university) while retaining all rights related to these materials. Further, MTAs are usually subject to multiple internal review processes, which can restrict the extent to which specific clauses may be revised. As material recipients, companies may anticipate the negotiation boundaries of the template agreement in advance and strategically prioritize key clauses to optimize their negotiation approach.
Intellectual property ownership and commercialization clauses are of crucial concern for both parties. Usually, parties would agree that existing/background intellectual property remains owned by each party. If a collaborative research plan is well-defined, it may be necessary to further clarify the scope of existing intellectual property.
Regarding new research outcomes and foreground intellectual property obtained using the transferred materials, the parties can agree on sole or joint ownership. If the recipient is to solely own such intellectual property, they can agree to grant a license back to the provider, allowing the provider to use the intellectual property for non-commercial purposes free of charge. For joint ownership, Article 14 of the Patent Law of PRC states, “Where there is an agreement on the exercise of the rights between the co-owners of the patent application right or patent right, such agreement shall prevail. If there is no agreement, any co-owner may independently exploit or license others to exploit the patent in a common manner; the licensing fees shall be distributed among the co-owners.” Given the legal preference for autonomy of will and pre-agreements, if there is a development plan, it is advisable for the recipient to pre-arrange the implementation and distribution of licensing fees for jointly-owned patents with the university.
Applicable law and dispute resolution clauses are common concerns for foreign companies as well.
Firstly, the Civil Procedure Law of PRC specifies three types of civil cases under the mandatory exclusive jurisdiction of Chinese courts, including disputes concerning the validity of intellectual property granted within the territory of the PRC. Although MTAs typically do not fall under exclusive jurisdiction, specific clause agreements related to patent validity disputes may fall within this scope.
Secondly, universities often utilize template agreements that select Chinese law as the applicable law and designate the local court for dispute resolution. In such cases, the negotiation space is often limited. However, if exclusive jurisdiction issues are not involved, the recipient can consider retaining Chinese law as the applicable law while negotiating with the university to designate an arbitration institution in a neutral third-party city or region for dispute resolution. This arrangement offers better confidentiality and flexibility compared to litigation, stronger cross-jurisdiction enforceability, and provides a relatively neutral dispute resolution environment for both parties.
MTAs are typically the starting point for collaborative research and development. A well-crafted MTA can not only facilitate the flow and transfer of knowledge and technology cooperation, but also effectively protect the intellectual property for both the company and the university. For specific clause agreements or cross-jurisdictional differences, it is recommended that companies consult professional attorneys to ensure smooth cooperation.
