Practical Suggestions for SMEs Working with Academic Institutions in the R&D Space

by James Casey

James Casey

Small and medium-sized enterprises (SMEs) need every edge they can muster to fund their growth. This article addresses several ways SMEs can approach academic institutions for funding.

The research and development (R&D) funding climate in the United States can be challenging. Federal R&D appropriations for the next fiscal year are still under development and the current U.S. President has made comments about significant reductions in some agency budgets. State, foundation and non-governmental organization (NGO) grant giving is also in a state of flux, largely because of the federal situation. In past years, a decline in federal funding for research has generally led universities to increase applications to foundations and private companies.

Funding in the international space also remains in a state of flux, although the European Union Horizon 2020 Program ( has made progress in opening opportunities to U.S. universities. It has also sought to streamline the administrative processes for grant submissions and contract negotiations. While contract negotiations between an SME and a U.S. university may be contentious in some cases, extra patience is required when building collaborations, writing grants or negotiating contracts with non-U.S. partners.

The above context means that SMEs must expand their portfolios of research and grant funding by increasing collaborations. Here are some practical suggestions for SMEs working with academic institutions in the R&D space, internationally and domestically, to be more successful in gathering funding for their growth, whether the SME is the prime or the sub contractor.

Mission and Communication. SMEs have different missions than universities. SMEs want to survive and grow in their share of the economy, while universities want to create and disseminate knowledge. While their missions may differ, SMEs and universities collaborate daily on short-term and long-term projects. Short-term projects have their place, but for long-term growth, long-term collaborations are necessary.

University faculty wish to write and disseminate papers, and, increasingly, want to become entrepreneurs through the licensing of intellectual property and the creation of startups. IP and startups are fertile ground for collaboration and the creation of additional knowledge and wealth. When parties are looking to collaborate, they must be clear to each other as to what their goals are in pursuing this partnership. It is also critical to discuss early on any background IP (intellectual property previously created) that will be brought into any potential partnership (thus creating foreground IP during the project, one hopes). This requirement for necessary and honest communication in the beginning is more critical in the international space, where culture, language and time zone issues make international collaboration even more challenging.

For more information on the core elements of international research collaboration, see the following workshop report, of which I served as co-chair, available for free PDF download from the National Academies Press.

Scope of Work. In developing a project with a university, the SME should craft a very specific scope of work on the programmatic side that is matched with a precisely drafted budget. This is especially true if your company and your university partner are applying for SBIR or STTR funding from federal agencies.

Agreements. In negotiating research-related agreements with universities (teaming agreements, IP agreements, subcontracts, material transfer agreements, etc.), it is important to realize that there are certain contractual provisions that require care and attention. This cluster includes intellectual property, choice of law (very critical if you are working with a public university), liability and indemnification, arbitration (critical also for public universities), insurance, and export controls (if applicable). These contract clauses also require additional attention at the international level, because many foreign universities or partners do not have similar provisions. The U.S. export control regime is certainly “foreign” to many non-U.S. universities! As with any international contract or grant, patience on the U.S. side is required.

In conclusion, there are many opportunities for SMEs to partner with universities, whether in the United States or abroad. The best way to succeed with such partnerships is to have the following: 1) clear communication between the SME and university, including the critical discussion of what each party wants to achieve through the partnership, and whether any background IP or confidential/proprietary information will be brought to the collaboration; 2) a well-written scope of work and matching budget that reflects the solid understanding(s) of the parties; and 3) work on the specific agreements with recognition that troublesome contract clauses may delay or scuttle a potential collaboration. In the end, more work accomplished up front is infinitely preferable to cleaning up problems on the back end, and so proceed carefully and accordingly.

James Casey is an attorney at Casey Consulting LLC and Member of Global Chamber®

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