For the seventh consecutive year, the Global Innovation Index (GII) 2017 has ranked Switzerland the world’s most innovative country. In 2016, China entered and became the first middle-income economy among the top 25 most innovative countries in the world. From 2016 to 2017, China rose three positions to 22.
China has been steadily improving its innovation in traditional industries, but also in sophisticated high-tech fields such as life science, automation and the digital industry. For innovative Chinese companies striving for new business, Switzerland can be an ideal place to develop and enhance creative ideas and products. And many of Switzerland’s innovative entrepreneurs are looking for Chinese business partners who want to transform their innovation to market-ready products.
This article provides an insight into the research and development (R&D) collaboration environment in Switzerland and the specifics of the related Swiss law.
Collaboration of universities
Swiss technical universities are at the forefront of fundamental research, and they serve as incubators for innovative start-up entrepreneurship. A perfect example of this is the Swiss federal university of technology and science (ETH) which has generated more than 350 start-ups in the past 20 years.
The technical universities are generally open to various forms of R&D collaboration, such as:
- Research collaboration. An industrial partner supports a research project through funding. The parties typically expect the generation of new intellectual property rights, and therefore, agree, for instance, on an option to negotiate a licence, an exclusive licence or even the assignment of the developed new intellectual property rights;
- Contract research. An industrial partner uses existing knowledge of the technical university to conduct research in a certain area. The generation of new intellectual property is usually not expected; and
- Licensing arrangements. The technical universities license the usage of their intellectual property to an industrial partner.
Collaboration of enterprises
The success of Swiss private enterprises is very much driven by R&D. The large multinational companies in Switzerland take over the bulk of Switzerland’s R&D in terms of expenditure. In addition, most Swiss small and medium-sized enterprises (SMEs) have incorporated R&D as an integral part of their business. Swiss companies are very aware of the potential of joint efforts in R&D, and so are prepared for, and very much accustomed to, R&D collaboration.
Collaboration in R&D with Swiss enterprises may range from a mere exchange of ideas to establishing a common joint venture company funded by two or more parties, which will conduct fundamental research in a specific field.
Each R&D collaboration is unique. Accordingly, the agreement between the collaboration partners is individually drafted. In the beginning, the parties are usually very optimistic and exchange ideas openly and freely. Since the results in R&D collaboration may range from ending up with nothing more than many expenses to developing an innovative product that can be successfully exploited, it is important that the parties agree at an early stage on how to proceed with the collaboration in the event of an ultimate breakthrough, but also failure or unexpected situations. In any case, before the parties start exchanging information – even at a very early stage when assessing a potential collaboration partner – the parties are advised to sign a confidentiality agreement.
The collaboration partners may either establish a joint venture company in the form of a limited liability company or a corporation, or merely join common means and efforts in order to pursue a common goal and establish a simple partnership under Swiss law. Where the R&D collaboration partners contribute joint means and efforts, but do not share a common goal, Swiss law qualifies such R&D collaboration as a “pseudo” collaboration. This is the case if a company mandates a technical university to conduct R&D within a specified scope against payment of a fee. This type of collaboration is usually qualified as a simple mandate or service contract.
The purpose of the R&D collaboration agreement is to manage the parties’ expectations, contributions and responsibilities, as well as rights and obligations. Since Swiss law provides default rules for many situations in which the parties have not reached agreement, the parties may focus on agreeing on the important elements of the R&D collaboration. It is also advisable to already reach agreement on how to terminate the collaboration, the law applicable to the agreement and how to resolve disputes.
Special attention must be paid to the question of ownership of the results of the joint R&D, and how the parties will exploit those results. Joint ownership of the new intellectual property seems at first glance to be an adequate solution but it must, for instance, be considered that under Swiss law, if more than one person owns a patent or patent application, licensing such patent or patent application requires the consent of all co-owners. Hence, alternatively, the parties may agree on allocating the ownership of the results to only one partner, who in return would grant the other partner an exclusive, royalty-free and sub-licensable licence.
R&D collaborations under Swiss law can be set up to be very flexible. Swiss technical universities and enterprises are very accustomed to collaborating in R&D and open-minded towards entering into R&D collaborations, also with foreign business partners. Since Switzerland is the world’s leading incubator for innovation, teaming up with Swiss partners can be an ideal opportunity for Chinese enterprises to boost their international and domestic businesses.
Stefan Kohler is a partner at VISCHER. He can be contacted by phone at +41 58 211 34 19 or by email at [email protected]
Lukas Zuest is a counsel at VISCHER. He can be contacted by phone at +41 58 211 34 35 or by email at [email protected]