Common Terms in Non-Federal Sponsored Research Agreements

When an award is received, there will normally be terms and conditions or rules that govern how the funding can be used, such as the period of performance, approved scope of work, obligated amount, payment terms, reporting requirements, and contact information.

With federal grants, terms and conditions are set by Uniform Guidance, the sponsor agency, and the research program. Federal grants are typically non-negotiable and in fact do not require acceptance via a “wet” signature. Acceptance of a federal award begins when the recipient (e.g. the University) begins to incur expense activity and draw down on the award. PIs should not commence work on the award until they’ve received official notification of award from the University. To learn more about terms and conditions on federal awards, please see our Understanding Terms and Conditions web page. 

With non-federal awards, such as funding received from private foundations, non-profits or for-profit entities, the terms and conditions can vary.

So, what is negotiable in a non-federal agreement? There are certain clauses that Office of Sponsored Programs (OSP) staff members pay particular attention to when reviewing an agreement in order to best protect the interests and freedoms of the PI and the institution. Some examples are:

Intellectual Property (IP)

• What is IP? In general, IP is a creative work, or “product of the mind.” IP includes, but is not limited to, a creative work for which one has rights and may apply later for a patent, copyright, trademark, etc. Research and development agreements with industry, for example, provide for an opportunity to negotiate IP ownership between the two parties. The parties can agree to several options. It’s standard in academia that newly created IP (foreground IP) by the University, under a sponsored research agreement, be solely owned by the University. IP created by the sponsor is solely owned by the sponsor. Jointly created IP is jointly owned by both parties.
• IP is often the major point of negotiation between universities and private sponsors and takes the most time to negotiate. Universities bring valuable resources (faculty expertise, facilities, equipment) to the engagement, while industry sponsors often want exclusive rights to any IP created under an activity that they are sponsoring and later, paying to file for patent and/or to commercialize. Ideally, any solution should ultimately be favorable to both parties’ interests.
• It is important to note that contracts under a “work-for-hire” relationship carry different expectations regarding IP. In a work-for-hire relationship, the funder specifies how the work is to be done, often using their methodology and materials, and as such, typically claims title to any IP created by the contractor.

Publication Rights

• What are Publication Rights? This is a term or condition that governs the publication or dissemination of data/information generated under the agreement. As an institution of higher education, it is important to retain the right to disseminate, publish, and share knowledge. Universities typically allow sponsors a “review and comment” period to allow for the request and removal of proprietary and/or confidential information, or time to file for patent prior to publication.

Use of Names

• What is “Use of Names”? “Use of Names” is a clause that defines when the parties can use the other party’s name or trademark in advertising or publicity. Like Publication Rights, a sponsor may request that the University seek the sponsor’s approval before using their name, etc. in any instances (advertising, press release, or publicity).

Termination

• What is Termination? Typically, research agreements include a process for terminating an agreement. “Termination for Convenience” is when an agreement is terminated due to non-performance reasons, such as lack of funding or lack of time to continue work. In contrast, “Termination for Default” signifies that an agreement can be terminated because of performance deficiencies or an agreement violation. Because of the nature of sponsored research, i.e. “unpredictability,” universities veer away from agreeing to a “termination for default.” Moreover, it is important to include language that provides either party the option to initiate termination upon 30-60 days written notice, with the caveat that any non-cancellable financial commitments be reimbursed up to the date of termination.

Governing Law and Jurisdiction

• What are Governing Law and Jurisdiction? Governing Law determines which laws are applicable to the agreement, i.e. which country or which state. Jurisdiction defines the specific courts or location that will be used to resolve disputes arising from the agreement. In general, when working with sponsors outside of the University’s state jurisdiction, including foreign sponsors, it may be necessary to negotiate governing law and jurisdiction language. Public/state universities may not be able to accept another governing jurisdiction. Oftentimes, the parties agree to be silent on jurisdiction in these situations.

Indemnification

• What is Indemnification? Indemnification refers to the compensation given from one party to another party for fees or damages incurred in the event of a breach or lawsuit. Montclair State University is subject to the New Jersey Tort Claims Act. Claims against Montclair State University are referred to the State Attorney General’s Office. It’s important to negotiate language around indemnification to protect the University. Often, OSP will coordinate with University Counsel on terms surrounding indemnification or limitation of liability.

Warranty

• What is Warranty? In general, it’s a guarantee of the quality, performance, and specifications of goods or services produced by the scope of work. Research, however, is unpredictable, and contractually, is typically conducted on a best efforts basis under a sponsored research agreement. A work-for-hire contract, again, comes with a different set of expectations and might include a warranty provision grounded in commonly accepted professional standards of practice in the field.

The above terms and conditions are just some of the numerous terms and conditions that may be included in a non-federal sponsored research agreement. Although the scope of work is created and conducted by the PI/PD, agreements are established between the sponsor and the University. Under a standard non-federal sponsored research agreement, the University’s authorized signatory has the legal authority to bind the University, and the University is ultimately responsible for carrying out the terms and conditions under the agreement. PI’s/PD’s should reach out to OSP as soon as they engage with a non-federal sponsor, or if they are considering a university/industry-sponsored research collaboration, or are unsure if the relationship would steer more towards “work for hire.” OSP has extensive experience in negotiating these types of agreements, and may additionally meet and consult with numerous parties, to include the sponsor, the PI, the Office of Research Compliance, the Provost’s Office, and University Counsel. As always, OSP is available to answer any questions you may have when considering a sponsored research activity.

By: Samantha Tassillo and Catherine Bruno