Collaboration Agreement - Project Specific

What is a Collaboration Agreement?

A collaboration agreement is an agreement between two legal entities setting out the terms and conditions of a collaboration or cooperation in relation to a specific purpose or project. The agreement may also be referred to as a collaboration contract, a co-operation agreement, a contractual joint venture or a co-operation contract.

When should you use a Collaboration Agreement?

A collaboration agreement should be used by any company contemplating a collaboration or cooperation with another company. This form of collaboration is purely contractual and the parties will not have any statutory responsibility for the liabilities and obligations beyond what is included in the agreement. This is distinctly different to an equity joint venture collaboration where the parties become shareholders (and appoint directors) of an entity and thus fiduciary duties may exist. Therefore, it is particularly important that the terms of the collaboration be spelt out clearly in the agreement to avoid any misunderstandings and potential disputes.

There are a number of commercial reasons for going ahead with this form of contractual joint venture instead of establishing a separate entity. The parties may wish to retain control over their assets, business and employees, limit administrative tasks and/or proceed with a less permanent arrangement. 

As the parties have a common commercial goal, the parties should agree in advance the purpose and scope of the collaboration, each party’s obligations, deliverables and/or contributions, split of profits, ownership of IP etc.

Why is a Collaboration Agreement important and why should you use it?

Before starting a collaboration with another business, both parties should be in agreement as to the purpose and scope of the collaboration. It is also important that each party understands the expectations of the other party. A written collaboration agreement allows both parties to enter into a collaboration or co-operation effort with full visibility of the mutual obligations as well as each party’s specific obligations and deliverables. This will save both parties a lot of frustration and avoid any imbalance in the collaboration. 

A well drafted collaboration agreement will also help you avoid costly and time consuming legal disputes that may arise in connection with the collaboration. For example, a collaboration may result in the creation of valuable intellectual property rights and it is important to establish ownership beforehand to avoid any future disputes. A collaboration agreement will let you regulate the ownership of any such intellectual property rights, before it becomes an issue between the parties.

This agreement should be used where the purpose of the collaboration is in relation to a specific project. You can also use this agreement to enter into a profit sharing arrangement with another party. 

What are the common pitfalls of a Collaboration Agreement?

The most common pitfall of a collaboration agreement is the failure to properly define the scope of the collaboration and the obligations of each party. Whilst it may be tempting to dive in head first into an exciting business opportunity or venture with another company, it is strongly recommended that both parties thoroughly discuss, and set out in writing, a collaboration agreement which sets out the expectations of each party. A thorough approach to defining the obligations and revenue split of the parties is key to achieving a well drafted collaboration agreement, as such obligations and revenue split constitute the most central and important parts of the agreement.

Another common pitfall is the failure to regulate ownership of intellectual property rights. As mentioned above, a collaboration may result in the creation of valuable intellectual property rights, and it is therefore important that the parties agree beforehand the ownership of such rights.

It is not uncommon for the parties to “forget” to deal with termination and post-termination mechanisms.