European Commission DG COMP State aid registry 1049 Brussels. vorab per Mülheim an der Ruhr,

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1 TechnologieAllianz e.v. c/o PROvendis GmbH Eppinghofer Str Mülheim/Ruhr European Commission DG COMP State aid registry 1049 Brussels vorab per Mülheim an der Ruhr, HT 618 Research, Development and Innovation State aid Framework - Response to Consultation paper Dear Sirs, A working group within the TechnologieAllianz drafted this response to the Research, Development and Innovation State aid Framework. The TechnologieAllianz unites patent marketing agencies and technology transfer agencies in a single network a nationwide association representing over 200 scientific institutes. TechnologieAllianz provides enterprises with access to the entire range of innovative research results from German universities and nonuniversity research institutions. Contact details Name Organisation represented Location (country) address: Alfred Schillert TechnologieAllianz Germany as@provendis.info SECTION A: GENERAL QUESTIONS ON R&D&I POLICY AT LARGE SECTION B: GENERAL QUESTIONS ON R&D&I STATE AID SECTION C: R&D&I- FRAMEWORK C.1. General questions on the R&D&I-Framework TechnologieAllianz e.v. Geschäftsstelle Laure Wolkers c/o PROvendis GmbH Eppinghofer Str Mülheim an der Ruhr T +49 (0) F +49 (0) laure.wolkers@technologieallianz.de Vorstand Alfred Schillert (Vorstandsvorsitzender) Peer Biskup Dr. Klaus Kobek Dr. Lieselotte Riegger Dr. Peter Stumpf Vereinsregister: Amtsgericht München Nummer VR Steuernummer 120/5704/1514

2 Seite 2/8 C.2. Notion of aid in the context of the R&D&I-Framework Questions aiming at public authorities: Questions aiming at both public authorities and other interested parties: 31. Do you consider appropriate the current guidance and criteria applicable to collaboration between research organisations and undertakings, as regards the aspects relating to: indirect aid to undertakings through collaboration with publicly funded research organisations; the provisions applying to contract research by public research organisations on behalf of undertakings. the terms on which research organisations and undertakings collaborate, for example in respect of the terms for transferring intellectual property? If not, what would be in your view the most appropriate elements to take into consideration in this regard? Do you consider that there are other areas where the current guidance and criteria that are applicable to collaboration between research organisations and undertakings should be improved? The guidance and criteria applicable to collaboration between research organizations and undertakings lead to questions that cannot be answered out of the R&D&I Framework itself. More guidance would be helpful on the following questions: Research on behalf of Undertakings - Is the value of the expected IP calculated in the market price of the service, or the full costs or the reasonable margin or neither of them? Market prices for services include costs for all aspects of the research service including the transfer of the results. The results are an addition to the services done and have an own value. Employee invention remuneration for the result has to be paid to the inventors. The value of the result and the employee invention remuneration are factors when calculating the market price. Since the full costs plus reasonable margin should be equivalent to the market price, these factors should be calculated either in the full costs or the reasonable margin. If the margin is understood as proceeds, the better option to calculate the value of the results and the employee invention remuneration are the full costs.

3 Seite 3/8 - Is contract research when less than market price or full cost is charged being considered in line with the Framework if a market price is paid for the IPR to the results? (1) gives the option for collaborative research without state aid if the participating undertaking bears the full cost of the project (3) gives the option, in case no full costs are paid for collaborative research, to pay market prices for the results in order to avoid state aid. Since the differentiation between contract research and collaborative research is difficult and most projects are neither pure examples of either of them, it would be helpful to offer these three options also to contract research projects Collaboration of undertakings and research organisations - What has to be done to participate in the design of the project, contribute to its implementation ( 3.2.2)? Undertakings start with the following practice: They fear, that contract research becomes considerably more expensive if it is done on full cost plus margin basis. In addition they fear that research organisations especially universities are not able to reliably calculate full costs for services. Therefore they change their practice. Before the R&D&I Framework as many projects as possible between undertakings and research organisations universities were considered to be contract research. Now some undertakings try to define all relations to be collaborations. This is based on the assumption that in almost all research projects to some extend both partners participate in the design of the project. Discussions between the researches take place, specifications are exchanged, results are discussed, etc.. This is thought to be enough in order to have a collaboration according to the Framework. In this collaborative projects prices for services less than market prices can be charged, if market prices are paid for the resulting IP. Favourably undertakings want to pay the same low price for services that they have always paid. It would be helpful to give more detailed definitions of contract research and collaboration of undertaking. In addition it would be helpful to define what happens when aspects of both contract research and collaborations are fulfilled in the same project. If all three options of exist for both, the differentiation would not be of high importance.

4 Seite 4/8 - Do the full costs in (1) also include a reasonable margin as in (2)? Since the situation in (1) and (2) is very similar a different handling of the two cases is not understood. - Can flat rates for IP be equivalent to the market price for the IP? In practice many research projects contain clauses with flat rates for results. It might be differentiated between protectable and non protectable results or between a flat rate for each invention or for all inventions. The calculation of the flat rate for each invention is based on the assumption that some inventions are worthless and some are valuable. The flat rate shall even out the risks and benefits. However the sum of the flat rates normally is relatively low. It goes down as low as 800 per invention. The undertakings argue that they always pay that amount for every single or all IP resulting from research projects with research organisations especially universities or they pay the same amount for internal inventions to the inventor. Therefore this is the price the undertaking is willing to pay for each invention resulting from the project. And this is supposed to be the market price. Negotiating the flat rate principal or the amount very often does not lead to any other result than that the undertaking does not conduct the research project with the research organisation. It is difficult for a flat rate to be the individual market price for a result. However practice sees a need for flat rates under the condition that the flat rate has a certain height, it is only the exception for certain projects and an opening clause is established. - Is an opening clause mandatory for to the assumption that no state aid is involved? This is especially interesting and necessary if flat rates are agreed upon for results or the market price is already fixed when concluding the research agreement. - Do intellectual property rights in option (3) include non protectable results? Most research contracts differentiate between patentable results and other results. Very often non patentable results are transferred to a company without extra costs. However non patentable results can be much more valuable than patented results.

5 Seite 5/8 The R&D&I Framework in (2) makes a difference between results which do not give rise to IPR and any intellectual property rights. Art (3) only refers to intellectual property rights. It seems that option (3) is fulfilled, if the protectable results are transferred on market conditions no matter what happens to the non protectable results. If this is the interpretation the equivalence between option (2) and option (3) is missing. A definition of IPR would be helpful. A possible definition can be found in Art. 1.1 (g) TT Regulation, according to which IPR are industrial property rights, know-how, copyright and neighbouring rights. - When are the market conditions evaluated? Different times are possible for the evaluation of the market conditions: At the signature of the collaboration contract/ At the beginning of research work/ When the result is generated/ At the end of the research project/ When result is transferred/ At market access. Footnote 29 indicates that the market price is met if research organisation negotiates...at the moment when the contract is concluded. The most effective way to interpret this is to consider the contract to be the contract for the transferral of the results and not the research contract. When the research contract is negotiated, the parties should agree on one of the three options in Nr. (1) (3). In case option (3) is chosen, parties should agree on the market price for the research result when the research result is transferred. At this time, the result exists and the value of the result can be evaluated more effectively. - Is full cost plus reasonable margin include patenting costs the minimum requirement for market price? There is no state aid passed to the undertaking in case of research on behalf of undertakings if the research organisation provides its service at full costs plus reasonable margin. The undertaking carries the risk of failure. When collaborating the undertaking does not take the risk of failure and under option (3) and has to pay the market price for the results in order to avoid state aid. If the minimum requirement for the market price is not the full costs plus a reasonable margin including patenting costs, an undertaking would pay a lot less in case of a collaboration compared to contract research without even taking the risk of failure especially if

6 Seite 6/8 the result is evaluated when transferred and therefore already exists. - Does any contribution of the participating undertakings to the costs of the research organisation shall be deducted from such compensation mean financial contribution of the research organisation? In practice undertakings start to deduct any kind of contribution including personnel and material contributions they give to the research organisation during the course of the research project. In addition they deduct their own internal expenses they had during the course of the research project. The German translation of (3) is Finanzielle Beiträge. Therefore it should be possible to interpret contribution as financial contributions only. The contributions should be deducted from the costs of the research organisation and should not include internal costs for the implementation of the undertaking. The research results of the research organisation is the result of research conducted by this organisation. Costs for other research work done by the undertaking are costs without relation to the results of the research organisation. - What has to be done by the research organisation when it negotiates in order to obtain the maximum benefit (Fn. 29)? It is understood that the prerequisite for not passing indirect state aid to an undertaking is an open bidding, the documentation of the negotiation and an independent market evaluation. If the independent market evaluation leads to a value of the research result of 1 Million Euros and despite of long and intensive negotiation the undertaking is not willing to pay more than Euros for the result (because they never pay more than that), Fn. 29 would be fulfilled. However there is a large difference between the independently calculated value and the negotiated value. It is difficult to believe that this is the correct interpretation since this would lead to the consequence that the undertaking can determine the market price. The independent market evaluation would be meaningless. The research organisation does not have the possibility to commercialize the result to a higher bidder. Guidance on the minimum requirements of the negotiations, as well as the open bidding and the independent market evaluations would be helpful.

7 Seite 7/8 Other areas - Is the Framework also applicable for the exploitation of research results which are not the results of a contract research or a collaboration? In contract research the undertaking pays for the service and takes the risks of failure. In a collaboration the undertaking either pays for the service or has an own input. The results generated by research organisations outside of contract research or collaborations are made without any contribution of the undertaking and without any risk of failure in the research phase. Therefore (3) should also be applicable for independent research results generated by research organisations outside of contract or collaborative research. 32. What is in your view the most effective method to establish the market price of services or intellectual-property rights that are performed/generated by publicly funded research organisations? Which method does your Member State/your organisation apply? The most effective method to establish the market price for existing intellectual-property rights are cash flow oriented methods like Discounted Cash Flow (DCF), Net Present Value (NPV), Risk Adjusted Net Present Value or Decision Trees. For these methods many legal, technical or economical influencing factors have to be known or calculated. If the result does not yet exist, most of these factors are not available or the assumptions made for these factors lead to a very high uncertainty. In addition these methods are very time consuming and expensive. They are not practicably applied in high amounts of research contracts, taking into consideration that many of these research projects do not lead to marketable results. If the market price shall be evaluated when negotiating of the research contract, market oriented methods like licensing benchmarking are the preferred method. However the cost oriented methods like the Sunk Costs method should be the minimum requirement and lead to the minimum market price for intellectual property. 33. Are there any other aspects referring to the notion of aid that are in need of further clarification? If yes, please indicate them and justify your answer. C.3. Definitions provided by the R&D&I-Framework C.4. Scope of the R&D&I-Framework C.5. Specific State aid objectives covered by the R&D&I-Framework C.6. Compatibility criteria of the R&D&I-Framework

8 Seite 8/8 C.7. Reporting and monitoring obligations under the R&D&I-Framework SECTION D: GENERAL BLOCK EXEMPTION REGULATION (GBER): R&D&I MEASURES SECTION E: MISCELLANEA We would be happy if the Commission services contact us for further details on the information submitted, if required. Yours sincerely Alfred Schillert Geschäftsführer PROvendis GmbH Vorstandsvorsitzender TechnologieAllianz Peer Biskup Geschäftsführer Bayrische Patentallianz GmbH Vorstand TechnologieAllianz Representing the working group drafting this response.