Association-Sponsored Research: Minimizing Your Legal Risks

For many associations, research is a critical function. Whether it is industrial, safety, environmental, medical, or other forms of research, and whether it is to benefit your members, your industry or profession, or the general public, the research that your association conducts, sponsors or otherwise supports serves many valuable purposes. At the same time, however, association-sponsored research does not come without legal risk – occasionally significant risk. But like most forms of potential association liability, the risk often can be managed and minimized.

The three most common forms of liability risk associated with association research are antitrust, tort and intellectual property infringement liability.

Antitrust. Associations frequently sponsor or administer joint research projects in which many companies cooperate to share the costs and benefits of research efforts. Sometimes the research is conducted by an independent third party retained by the association, while other times participating companies conduct research cooperatively at their own facilities and agree to share the results. Occasionally, the association itself maintains research facilities in which it conducts research for the benefit of the industry. The basic idea of joint research is legally sound. However, companies often compete on the basis of research and development, thus, joint research can raise antitrust concerns if its purpose or effect is anticompetitive.

The following guidelines will assist associations in ensuring that their joint research efforts avoid antitrust scrutiny and challenge:

• The greater the necessity for joint research, the more easily it can be defended.
• Research ventures by companies in noncompeting industries pose far less antitrust concern than those by direct competitors.
• Research conducted by nondominant companies in an industry raises less antitrust concern than joint research conducted by dominant or all companies in the industry.
• Exchanges of basic (not applied) research results will be less likely to raise antitrust questions than attempts to jointly develop new products or services.
• Patent pooling and cross-licensing will be illegal if it results in price fixing, market allocation, or a group boycott or concerted refusal to deal.
• Participating companies should not be restricted in conducting individual research efforts exclusive of the joint research.
• The results of joint research efforts should be made available on a nondiscriminatory basis to all competitors in the industry, irrespective of whether they are members of the association (although nonmembers may be charged more for the results in certain circumstances).

Two other items of note:

• The U.S. Department of Justice's Antitrust Division has issued an extensive and valuable guide to antitrust and research joint ventures.
• The National Cooperative Research Act of 1984 – designed to increase the international competitiveness of U.S. companies – defines specific joint research activities that may be undertaken by U.S. companies and associations which will benefit from the Act's substantial safe harbor protections from antitrust challenge if particular procedures are followed.

Tort Liability. On behalf of their members, associations frequently sponsor or facilitate scientific research into the health effects or other safety characteristics of industry products and of the chemicals and other materials used to make products. In so doing, great care must be taken to provide no basis for allegations that industry-sponsored research is negligent, misleading or a sham. Claims by product liability and toxic tort plaintiffs' lawyers have proliferated in challenges to the credibility of research conducted under the aegis of trade associations in cases involving blood products, chemicals, medical devices, and tobacco, among others. To reduce the tort liability risk, industry-sponsored research should be conducted by scientists of great repute, subjected to peer review, updated and kept current as necessary, and conducted under rules that require publication or other public dissemination regardless of outcome. In addition, use disclaimers and caveats as appropriate to identify the limitations of research results, adopt and adhere to a document retention and destruction program, and review the association's insurance coverage to ensure sufficient coverage for claims of this nature.

Intellectual Property. In the research context, it is critically important both to secure the intellectual property (copyright, trademark, patent, and trade secret) rights of the association sponsoring the research and to avoid infringing the intellectual property rights of others. Regarding the former, where the association retains an outside party to conduct research (as is typically the case), that party may own some or all of the intellectual property in the research results unless a written agreement exists transferring such rights to the association. Moreover, the contract should impose confidentiality, noncompetition and other restrictions on the outside party's future use of the research. Also, consider entering into written agreements between the association and the research participants (if any), providing a sufficiently broad assignment or license of the contributed information (and possibly imposing other appropriate restrictions). Regarding the latter, it is important to ensure that the research does not violate any copyright, patent or trade secret rights of third parties. Due diligence and obtaining written representations and warranties from those contributing to and conducting the research are effective tools for minimizing liability risk in this regard.

Following the above guidelines and recommendations – while no guarantee of liability protection – will go a long way toward ensuring the long-term viability of association-sponsored research initiatives.

For more information, contact the author at jtenenbaum@TenenbaumLegal.com.