What’s in a Consortium Agreement?

A consortium agreement is a formal legal framework between two or more entities that outlines each entity’s rights and responsibilities to achieve a specific goal. The agreement sets the parameters of the consortium’s purpose and operations, while also establishing governing procedures for decision making, use of assets, distribution of profits, confidentiality obligations , and resolving disputes.
Consortium agreements are commonly used in joint ventures between two or more parties who may be commercial enterprises or other forms of entities, such as universities and research institutions. One prominent example of this form of consortium agreement is the ERC Consortium Agreement. Many country-specific/ERC national law-compliant variants exist for this form of consortium agreement.

Key Features of a Consortium Agreement

Consortium agreements typically include the members’ respective responsibilities, budget, intellectual property ownership, liability, confidentiality obligations, deliverables and periods of performance. One of the most critical and often contentious aspects of a consortium agreement is, understandably, the distribution of IP rights. In particular, the parties have to address the ownership, protection, publication and licensing of any foreground IP, or IP that is specifically developed during the consortium. This cross-cutting, rather than discrete, topic also cuts across many of the key aspects of a good consortium agreement. For example, the time within which foreground IP must be identified, protected and enforced, may impact the members’ publication schedules and rights.
As the members have entered into a consortium agreement, each party will not have to negotiate separately with the sponsors in order to develop its budget, and to secure funding for its efforts. Members should be aware upfront of their expected contributions to the project, so that they can assess their individual business needs and capabilities. The overall budget for the project will also outline the financial expectations of the members. In addition, each member should understand their responsibilities under the consortium agreement, and have the ability to perform them. For example, if (for some reason) a member needs the capability to file a patent application in a jurisdiction, it should practice or be aware of that requirement before the project award, and be able to demonstrate such capabilities to the sponsors.

Advantages of Utilizing a Consortium Agreement

Party(ies) can share resources – key personnel, assets, facilities – as well as results – analysis, standards, models, products – in furtherance of the consistent and cohesive delivery of a service or output. Parties can mitigate risk by, for example, jointly purchasing insurance, taking out collective warranties for services or products, insuring intellectual property rights, protecting individual contributions to the consortium agreement (for example, through assignment back to individual parties). If a party ceases to participate in a consortium agreement, the remaining participants can make alternative arrangements for their activities, such as obtaining additional external funding, relocating to another facility, or acquiring alternative partner support. Consortium agreements can be used to demonstrate good governance, both at the level of individual party(ies), and at the level of the consortium. Adopting a governance framework establishes the consortium as a well-managed and responsible vehicle for a strategically planned social or economic outcome. The terms of a consortium agreement provide a comprehensive framework for the respective roles of all parties. Well-organised and mature consortiums work tirelessly to agree terms across a range of collaborative activities. Their efforts translate into the ultimate success of the collaboration and extension of the term of the consortium agreement.

Most Frequent Issues and Tips for Resolving Them

Despite our best efforts at planning and negotiating an agreement, there will almost always be challenges to address during the lifecycle of a consortium. Common challenges include: (a) lack of communication between consortium members; (b) loss of a member due to funding withdrawal or non-performance; (c) disagreements among members; (d) use of confidential or proprietary information by the wrong partner; (e) publication disputes; and (f) disputes involving inventions i.e., inventorship, ownership, patentability, and commercialization.
One common approach to helping resolve disputes is to include a dispute resolution mechanism in the consortium agreement. Commonly used dispute resolution mechanisms include arbitration or mediation. Other approaches include the use of an executive committee comprised of representatives from non-withdrawing consortium members that resolves issues by consensus, or use of a specific committee to address a specific issue. Regardless of the approach selected, regular meetings (in person or by phone) of the consortium or relevant committees can be a good tool to identify issues early and discuss and develop strategies to address them.

How to Create a Sample Consortium Agreement

Taking into consideration the above challenges here is a guide on how to draft a sample consortium agreement so that it is mirror image to current best practice and provides both contracting parties with the protection, clarity and guidance they are looking for when entering into a consortium:
Preamble and Recitals
A preamble sets the stage for what the agreement is about and provides some key definitions. The recitals give the context, details of the parties and the background to the agreement. You can see that both of these aspects have been covered in this synergy agreement in the example above.
Agreements section
This will always be the largest part of the agreement where all of key terms and clauses will be located. These sections will be dependent on the type of partnership the consortium agreement is for. Provided below are suggested clauses and sections that a consortium agreement of any type should contain for a basic agreement.
The Agreement

• Background
• Agreement
• 1 Form of Agreement
• 2 Relationship
• 3 Confidentiality
• Responsibilities
• 1 Coordinator – details of the tasks assigned to the coordinator
• 2 Participants – details of what participants are to do
• Financial matters
• Confidentiality
• 1 General principles – provide further explanation
• 2 Obligations of confidentiality – details of the parties obligations
• 3 Exclusions from confidentiality obligations
• 4 Returns of confidential information
• Reserve rights
• Miscellaneous
• Governing law
• Jurisdiction

Schedule 1 – Implementation Plan – details of the tasks to be completed by each party
Schedule 2 – Budget sections 1-7 should be included for all consortium agreements. They should be amended as appropriate for new contract periods. Trusts/providers should have appropriate financial controls in place for every contract to ensure the efficient use of public money. The financial aspect of the genre will not be as important for private sector companies. Therefore , the formality of a detailed budget plan may not be necessary.
Section 2
Finance and audit (relates to Schedule 2)
Section 3
Governance and management arrangements (relates to Schedule 1)
Note: if your consortium includes organisations outside the UK, the following sections may be necessary:
Section 4
Intellectual Property Rights
Section 5
Amendments and changes
Section 6
Dispute resolution
Section 7
Copyright/ownership of materials produced
Section 8
Termination
The last three sections are useful for any consortium agreement for both public and private sector companies therefore, include them to guarantee that everyone is aware of the potential for the consortium to come to an end and the basis upon which this can happen, the likely possibility of amendments and changes and finally, who owns the materials produced by the consortium.

Legal Aspects of Consortium Agreements

Beyond the simple statement of purpose or funding interest at the beginning of a consortium agreement (or lack thereof), parties to a consortium agreement should consider how certain statutory and regulatory requirements can be incorporated into the agreement in order to minimize risk. Two key areas of concern are jurisdictional issues and compliance requirements. Consortium agreements can give rise to certain jurisdictional and liability concerns. For example, if the agreement is not properly structured for foreign nationals and the project in question involves both private and public sector entities, the agreement may be given the wrong label and held up to the wrong set legal obligations. The other main concern in structuring the consortium agreement is whether risk of liability, or compliance with particular statutory and regulatory requirements, can be shifted to another party through the agreement. Some statutes are particular about the legal relationships permitted by those statutes, such as the Farm Bill, which permits entities to work together on public-sector research, and the Bayh-Dole act, which limits the use of government-funded inventions to specific individuals. Even though agreement provisions are not always treated as a contract enforceable by legal action, when compliance issues come to a head they may be enforceable by direct actions in a court of law or indirect regulation by federal agencies.

Sample and Ready-Made Forms for Drafting a Consortium Agreement

Anumber of sources are available online for sample consortium agreements. The following are suggestions for some useful online sites:
• National Institute of Health (NIH) Sample Agreements
• National Aeronautics and Space Administration (NASA) Sample Agreements
• National Science Foundation (NSF) Sample Agreements
• University of California, Berkeley Sample Agreements
Such government sample agreements, however, cannot appropriately be utilized without significant revision. The government sample agreements are typically limited to a given field, such as environmental or life sciences, whereas the particular project may be outside the proposed field. Such government sample agreements also focus on a limited number of elements that may not be applicable to every project. Also, the government sample agreements often cannot be used without confidential information that would normally be dealt with under a separate confidentiality agreement that would reference the terms of the consortium agreement.
In addition to the government forms , a number of universities and research institutions have made their consortium agreements available on their websites. Examples include the Georgia Institute of Technology, Harvard University, Northwestern University, Rice University, University of California, Berkeley (UC Berkeley), University of California, Davis (UC Davis), and the University of Washington.
A template consortium agreement is available on the Kaye Scholer website. The Kaye Scholer template agreement was first developed in 1980 and has been used and refined over the years. The Kaye Scholer agreement effectively combines many of the key elements of other sample agreements, while avoiding the redundancy of multiple agreements. If the Kaye Scholer agreement is used as a foundation document, it is still advisable to seek counsel concerning particular elements of the consortium agreement.