to: martin kern european institute of innovation and...

To: Martin Kern

Interim EIT Director

European Institute of Innovation and Technology – EIT

Infopark, Building E, Neumann Janos 1

Hungary - 1117 Budapest

Date: 31 August 2015

Subject: common review of the new FPA draft (dated 16.07.2015) by all KICs

Dear Mr. Kern,

Following the communication by the EIT of the new draft of the FPA, the SGA and ancillary documents,

the different KICs have carried out their own analysis and internal consultations and have put in

common their feedback and concerns. This results in the 5 KICs having commonly identified the 3 main

critical issues that need to be solved in the draft FPA and ancillary documents. These issues reflect the

joint KICs’ and their partners’ major concerns, which are not per se related to the H2020 rules

themselves, but rather to the current way these H2020 rules are translated into the EIT/KIC context.

Aside from these major common concerns, each KIC has identified additional ones to be addressed, as

listed in the annexes attached to this letter.

These major common issues as well as the additional ones from each KIC need to be solved by the EIT

and the EU Commission (as the new FPA is largely influenced by the H2020 rules of the Commission) by

adapting the current package, in order for the KICs to get and provide the level of comfort requested by

their members and partners that would condition the signature of the new framework.

The three main and common major concerns are the following:

1) Joint and several liability of KIC Partners:

Several clauses of the FPA provide for a joint and several liability between KIC Partners and KIC LE. KIC

Partners and KIC LE are held jointly and severally liable also for the technical implementation of any and

all tasks of the ‘specific action’, i.e. the Business Plan in the KIC context, even those a KIC Partner did not

subscribe to.

KIC Partners may have to fill in the gaps for a task in an action that was not fulfilled by a KIC Partner,

even if they did not subscribe to such an action at all, and are only exempted from such obligation if the

EIT exempts them thereof. Therefore KIC Partners and KIC LE may be held liable for facts that they

cannot control (see in this context a.o art. 2.2, 4.1, 12.1 and 47.1).

By making each KIC Partner a ‘party’ to the FPA and SGA, through an ‘Accession Form’ signed directly by

the KIC Partner with the EIT, by assimilating the KIC LE to a ‘KIC Partner’ (cf. preamble: Unless otherwise

specified, references to ‘KIC Partner’ or ‘KIC Partners’ include the KIC LE’), the FPA expands the joint and

several liability between the KIC LE and the KIC Partners for the implementation of the action in its

broadest sense to the whole partnership .

By not defining clearly what is meant by ‘specific action’, ‘specific grant’ and ‘Specific Agreement’,

sometimes in singular but often in plural, the scope of the individual obligations of KIC Partners and KIC

LE is not as crystal clear as it should be (‘unclear taxonomy’).

At maximum, such joint responsibility for technical implementation should be limited to the specific and

separate activities (individual technical KAVAs) to which the KIC LE (as the case may be) and the KIC

Partners individually expressly participate in.

The financial liability in case of recovery (of undue funding) is said to be limited to the ‘own debt’ of the

KIC Partner (cf. art. 50.1) and the meaning of ‘own debt’ can only be implicitly inferred through

‘decorticating’ lengthy and complex calculation clauses (art. 50.1.2 and 50.1.3.). We would need at

minimum that the explanatory note regarding liability be further developed (i.e. examples developed in

a clearer way and until the end of the reasoning) and fully self-explanatory for the EIT and the EU

Commission to convince our KIC Partners that they will not have to pay back more than the portion of

the funding they have unduly received.

Regarding liability for damages caused to the EIT by the KIC Partners, an explanatory note should state

clearly that the KIC LE and each KIC Partner cannot be held liable for the damage caused by the other

KIC Partners (the text of art. 52.2.1 and its articulation with art. 52.2.2 are not crystal clear).

It is therefore essential to, at minimum, limit the joint liability for KIC LE and each KIC Partner to the

specific activity in which they participate, pre-define the parameters for the EIT derogation of art.

47.1, and clarify the absence of joint liability in case of damage caused to the EIT.

2) IPR

With respect to the handling of IPR as proposed in the current FPA, there are two major issues.

First of all the straightforward application of the H2020 IPR provisions to the KIC Business Plans as a

whole leads to burdensome requirements on the KIC LE and its Partners due to the fact that provisions

have to be taken across the board even in cases where individual Partners are not involved in the action

(i.e. same specific KAVA). The root cause here again is the direct mapping of the H2020 rules and related

agreement templates to the specific EIT set-up, where the H2020 provisions have been written for the

organization and set-up of specific and individual R&D projects. This does not fit the yearly business

plan/portfolio approach retained in the KIC’s structure.

The ‘unclear taxonomy’ (mentioned under point 1) leads as well to unworkable obligations in the IP

field, as it would be impossible for KIC Partners to individually identify background IP and communicate

the access limitations to such IP to their future other KIC Partners (cf. art. 30.1, 31.2) before the start of

the yearly SGA. Only would they be able to do so before the start of the individual specific activity

(KAVA) in which they expressly participate.

Second, the one-size fits all approach of the H2020 provisions does not fit the diversity of the KIC

activities spanning, research, education, and business activities focused on innovation, and

entrepreneurship. For that reason the EIT had a derogation under the previous FPA which gave the KICs

the autonomy for the partnership to deal with IPR aspects through the KIC IP Policy.

It is therefore highly desirable to have the EIT asking for a derogation and handle IPR in the same way

as under the old FPA. Next to that the ‘taxonomy issue’ needs to be addressed in order to make the

IPR rules compliant with the EIT set-up.

3) Structure of the agreement:

The EIT via its regulation is set-up as an EU body that implements its mission through a collection of

autonomous KICs that are organized around KIC legal entities. The current FPA supports this set-up. The

embedding of the EIT in H2020 requires a mapping of the H2020 project structure onto the EIT set-up

with EIT, KIC LE, and partners. This means that the legal construction of the partnership as existing today

is the construction that should govern the KICs and their partners tomorrow, i.e. the KIC LE of each KIC is

the prime point of contact for the EIT and the prime point of contact for its members/partners, creating

a three-layer construction.

The set-up proposed for the new FPA of having each KIC Partner a ‘party’ to the FPA and SGA, through

an ‘Accession Form’ signed directly by the KIC Partner with the EIT, is in direct conflict with the the EIT

set-up with KICs organized around KIC legal entities. Next to that it introduces duplications via doubling

signing of FPA and SGA as well as it amplifies the issues of liabilities and IP as has been described above.

Further the new FPA set-up, where partner individually sign up to the FPA, leads to fundamental

ambiguities when it comes to termination of the FPA as a whole (art. 6.1), role and participation of the

KIC LE (art. 6.2, 56.2.1, art. 61.1 and 61.2), and rights of amending the FPA ( 61.1 and 61.2). These

powers shall be unambiguously left exclusively to the KIC as a whole, organized in its KIC LE via its

Statutes and By-laws and/or possible other KIC documents).

It is therefore essential that the FPA restores the three-layer construction of today, i.e. the KIC LE is

the sole party to the FPA and ensures, via its corporate governance and Internal Agreements,

compliance to the FPA rules by its KIC Partners. The changes in that sense should be done in the FPA,

SGA and by eliminating the Accession Form (to be replaced by the Internal Agreement signed between

the KIC LE and each KIC Partner, in a similar set up as today). The previous FPA draft version submitted

by the EIT and the Commission was not creating these issues with the same magnitude.

Besides those three showstoppers identified and agreed by the five KICs, we attach the additional issues

that a KIC has assessed internally, in separate annexes.

We trust that this common approach and explanation will clarify further the agreement of the KICs to

have the H2020 rules implemented into their framework, yet in a way that does not create major

changes to the EIT-KIC LE-KIC Partners structure nor unclarities relating to the responsibility and liability

of KIC LE and the KIC Partners.

We are of course fully available for addressing these issues in a meeting (or call) between the EIT, the EU

Commission and the 5 KICs.

Kind regards

Willem Jonker Bertrand van Ee Diego Pavía Ursula Redeker Jens Gutzmer

EIT Digital Climate KIC KIC InnoEnergy EIT Health EIT Raw Materials

CEO CEO Ceo CEO CEO

cc. Adam Tyson, Daniel Craig

Annex 1

KIC InnoEnergy SE additional issues

1. IP clauses: the possibility offered in the IP clauses to ‘agree otherwise’ shall be left exclusively

with KIC SE in all clauses where such derogation is offered. KIC SE should be left with the power

to define with its partners a harmonized IP policy that will be applied consistently, in line with its

own governance model.

2. In line with our comments on the ‘joint and several liability’ in the letter, the suspension of

payment by the EIT, as a sanction for one single KIC Partner’s misbehavior, shall not affect the

funding of “all” KIC Partners (as mentioned now in art. 54.1).

3. Lack of transition measures: The IP clauses and the Governance requirements create a new

framework that cannot be implemented or ready from Day 1. With respect to IP clauses, it

should only be applicable for new specific actions, i.e. started after the entry into force of the

new FPA, and not to specific actions already ongoing (under the current FPA) at the time the

new FPA enters into force. The reason is that we cannot legally revise unilaterally valid

agreements nor renegotiate all our ongoing agreements.

4. In art. 2.2, the costs of KIC complementary activities shall be (…) incurred after the designation

date of the framework partnership. The reference to ‘framework partnership’ is now an unclear

concept; it should say, like before, ‘the KIC’; framework partnership refers to this new FPA and

not to the current one. Severe consequence of this unclarity: it will no longer be possible to

identify KCA going back to 2010.

5. Please clarify upfront what the ‘reimbursement rate’ (cf. art 10.3 and subsequent) mean. We

would need to be sure that the way such rate is set up does not lead to the EIT applying the

initial ratio between the BP yearly estimation and the share of the EIT funding in this total yearly

BP to the actual KIC reporting.

6. In the SGA, art.17, the possibility to provide a second (or more) pre-financing should be re-

introduced. Eliminating this possibility is renders the KICs’ offer in the landscape of EU funding

far less attractive. In the H2020 approach, the single pre-financing represents a higher

percentage (around 70%) than the one granted by the EIT to the KICs so far, and is calculated on

a total multiple year budget whereas for the KICs it is calculated on a yearly budget.

7. The deadline of 90 days to collect all Accession Forms of all the KIC partners is by experience too

short (large number of partners to contact and follow up – KIC IE has more than 250 partners!).

This deadline should be doubled.

Annex 2

EIT Digital additional issues

According to the FPA, all KIC Partners are to accede to the FPA. This is in direct conflict with EIT Digital’s chosen and approved governance structure, in accordance with which the FPA is to be entered into between the KIC LE and the EIT.

The FPA imposes many general obligations on all KIC Partners and the KIC LE jointly regarding the operations of the KIC and execution of all KIC activities, including projects, which results in joint and several liability for both the KIC Partners and the KIC LE, if such obligations are not performed by one or more of these entities.

o Non-limitative examples of such obligations: Arts. 4.1, 2.2, 12.1 and 47.1 first and second

subparagraphs of the FPA, as well as the model Specific Agreement (SA) (that all KIC Partners

need to sign).

o Every Specific Agreement has to be signed by all KIC Partners together with the KIC LE (so not

only the KIC Partners involved in a “specific action”).

To be able to control their liability/responsibility as set out in (1) and (2) above, KIC Partners would need control points over the operations of the KIC and its projects, such as veto rights in the decision-making process of the KIC, so as to manage their liability. This structure and the measures to manage liability would be in full conflict with the governance structure of EIT Digital.

The requirement of entering into Internal Agreement(s), which would cover for the governance and operations of the KIC, is in conflict with the governance structure of EIT Digital. EIT Digital’s governance structure is not based on contracts, but on membership relations to central and regional KIC legal entities (i.e., the CLCs/nodes), and agreements between these central and regional KIC legal entities (as currently stated in the AoA and Bylaws of the KIC LE). Such Internal Agreement may result in de facto two governance structures which is totally unnecessary, and will create material additional costs, complexity and potential conflicts between these two structures.

IP terms and conditions are clouded in a dense veil of (legal) uncertainty – e.g., there are constant references to an SA that, on its placeholder for IP terms and conditions, simply states “not applicable”. On top of this problematic reference, in some cases, references are made to the Internal Agreement, where further terms and conditions can or must be agreed to. It’s simply not clear to the reader where shall the IP terms and conditions be regulated at.

Moreover, according to the current draft FPA, further IP terms and conditions can be agreed to in the Internal Agreement. That however causes the issue that deviating IP terms for a specific project, needs to be agreed between all KIC Partners, also with those partners that are not participating in

that project and that such a specific deviation may apply to all project, whereas it is only necessary for a specific project. This is totally impractical and it should be left to KIC partners to specific projects to agree on the IP terms they need for their specific project in their consortium agreement (within the boundaries of the FPA).

Importing IP rules from H2020 to the FPA framework does not fully fit the scope of the KIC, since H2020 rules are focusing on IP generation in very specific, individual R&D projects, and the scope of the KIC’s activities is much broader than H2020 projects, since it also includes educational, test-bedding and business development activities, while H2020 does not.

Imposing the same restrictive IP rules of H2020 to the framework of EIT Digital, whereas the EIT provides for much less overall funding (25%) than H2020 does (70-100%), will drive away KIC Partners from the KIC.

The aforesaid issues are a result of EIT applying concepts to the organization and setup of a KIC that originally have been written for the organization and setup of specific, individual R&D projects in the framework of H2020. These rules do not fit on setting up an organization like a KIC with different objectives, scope and activities than specific, individual R&D projects. This approach is also in full conflict with specific parts of EIT Digital’s governance structure.

The discussions between representatives of EIT Digital, the EIT, the European Commission and the other two already existing KICs (Climate KIC and KIC InnoEnergy) held in Brussels on the 20th April 2015, as reflected in the minutes of that meeting and in the explanatory note on liability issues in the FPA, do not address the concerns expressed above, because: Regarding the liability concerns, these minutes only address the point of joint and several liability for technical implementation and financial liability regarding (specific grants to) projects. As set out above, our main concern is not related to that part. That part relating to projects is indeed the same as the arrangements in H2020. Our main concerns are related to liability for operations of the KIC as such, and interference with EIT Digital’s governance structure.

Finally, many conditions, such as confidentiality obligations, liability of EIT towards KIC Partners, KIC LE and third parties, to name a few examples, are unreasonably and unnecessarily restrictive and stringent.

According to 2.2 of the FPA, there shall be Specific Agreements to be concluded with the KIC Partners in addition to the fact that they shall become partners to the FPA (at least according to EIT’s approach (which is rejected). Such approach will only result in confusion as it would hardly be to differentiated which term might apply to what scenario or activity. the original idea of EIT was to create a straight and more effective instrument to support innovative activities than the regular EC-funding under the regular framework programs. The administrative and legal structure as established/intended by EIT has twisted the original idea to its contrary.

The underlying table is more specific and maps the above concerns to the specific articles.

Description of

the issue

Problematic wording Why is it an issue? Where can it

be found in

the FPA?

Consequences

Definition of

“KIC Partners”

“(…) and the other

Knowledge and

Innovation Community

('KIC') Partners listed in

Annex 2, if they have

signed their ‘Accession

Form’ (see Annex 4 and

Article 62):

Unless otherwise

specified, references to

‘KIC Partner’ or ‘KIC

Partners’ include the

KIC LE.”

It includes both KIC

LE and KIC Partners

Usage of “KIC

Partners” throughout

the FPA causes, in

many instances, the

problem of Joint and

Several Liability

(“JSL”), as can be

seen below.

First page,

preamble

Indiscriminate

use of this

definition,

without

differentiating

KIC LE from KIC

Partners, leads

in many

instances to the

problem of JSL.

Definition of

“specific

action”

“The EIT may award

'specific grants' for the

KIC added value

activities to be

implemented under the

framework partnership

('specific actions').”

Specific action

means, in other

words, the Business

Plan (including all

tasks – KAVAs and

KCAs) that the

Annual Grant

Agreement will pay

for. This leads in

many instances to

the problem of JSL.

Article 2.2, first

subparagraph

Use of this

definition leads

to JSL of KIC LE

and KIC Partners

for the whole of

the Business

Plan (including

those KAVAs and

KCAs that a

given KIC

Partner does not

subscribe for).

Joint and

Several Liability

(“JSL”) of KIC LE

and KIC

Partners

towards the EIT

for the “specific

action” – i.e.,

Business Plan

“By entering into the

Specific Agreement, the

KIC Partners accept the

specific grant and agree

to implement the

specific action under

their own responsibility

and in accordance with

the Framework

JSL of KIC Partners

and KIC LE for the

whole of the

Business Plan means

that KIC Partners and

KIC LE are liable not

only for the tasks

that they have

subscribed to and

Article 2.2,

fifth

subparagraph

KIC Partner can

be held liable by

EIT for non-

performance of

the whole or

parts of the

Business Plan

that it never

subscribed to,

Description of

the issue


be found in

the FPA?

Consequences

Partnership Agreement

and this Specific

Agreement, with all the

obligations and

conditions they set

out.”

have received or will

receive grant money

to implement under

the Business Plan,

but also for tasks of

the Business Plan

that they neither

have subscribed to,

nor have they/will

they receive grant

money for, and that

they cannot in any

way exercise control

onto, so as to

mitigate any liability

risks.

nor did it ever

received grant

money for, and

also cannot

exercise any

control onto, so

as to mitigate

exposure to

liability risks.

JSL of KIC LE

and KIC

Partners

towards the EIT

for properly

implementing

the framework

partnership

“The KIC Partners must

respect the objectives

of the framework

partnership and

implement it as

described in Annex I

and endeavour to

achieve those

objectives also in the

specific actions.

The KIC partners must

maintain relations of

mutual co-operation

and regular and

transparent exchanges

of information with the

EIT on:

- the implementation

and follow-up of the

Strategic Agenda, the

Business Plans and the

JSL of KIC Partners

and KIC LE for proper

implementation of

the framework

partnership means

that all KIC Partners

and the KIC LE may

be held liable by the

EIT for the failure to

implement the

framework

partnership that one

or a few KIC Partners

or the KIC LE may

incur in. All KIC

Partners and the KIC

LE will be held liable

for facts that they

may not be able to

control.

Article 4.1 KIC Partner (and

all other KIC

Partners) can be

held liable by EIT

for non-

performance of

obligations by

other KIC

Partners or the

KIC LE, a fact

which KIC

Partner cannot

control.

Description of

the issue


be found in

the FPA?

Consequences

specific grants and

- other matters of

common interest

related to the

Framework Partnership

Agreement.

The KIC Partners must

implement the

framework partnership

in compliance with

Articles 39, 40, 41, 42,

44, 45, 52 — mutatis

mutandis.”

E.g., if a KIC Partner

fails to comply with

its obligations to aim

for gender equality

(Art. 39). KIC Partner,

all other KIC Partners

and KIC LE can be

held liable by the EIT

for non-performance

of such KIC Partner of

this obligation.

Requirement

for KIC LE and

KIC Partners to

enter into

Internal

Agreements


have internal

arrangements regarding

their operation and co-

ordination to ensure

that the framework

partnership and the

specific actions are

implemented properly.

These internal

arrangements must be

set out in a written

'Internal Agreement'

between the KIC LE and

other KIC Partners,

which may cover:

- internal organization of the framework partnership, notably governance arrangements reflecting the

KIC Partners and KIC

LE are obliged to

enter into these

Internal Agreements,

when this is actually

completely not

necessary, given that

EIT Digital has put in

place an

International Not-for-

Profit Association

under Belgian Law

(with Articles of

Association and

Bylaws) to cover for

the contents that the

Internal Agreements

envisage to cover for.

Article 4.2 Forcing KIC

Partner, all other

KIC Partners and

the KIC LE to

enter into

Internal

Agreements,

when the

subject matter

of such Internal

Agreements is

already covered

somewhere else

(AoA and Bylaws

of the

Association), is a

waste of

resources, time

and money.

Description of

the issue


be found in

the FPA?

Consequences

knowledge triangle of higher education, research and innovation and openness to new Partners if they add value to the framework partnership, and the principles of good governance as established by the EIT;

- distribution of EIT funding;

- additional rules on rights and obligations related to background and results (including whether access rights remain or not, if a KIC Partner is in breach of its obligations) (see Subsection 3 of Chapter 3);

- settlement of internal disputes;

- liability, indemnification and confidentiality arrangements between the

Description of

the issue


be found in

the FPA?

Consequences

KIC Partners.”

JSL of KIC

Partners and

KIC LE for

implementing

the “specific

actions” in

Annex 1 to the

Specific

Agreements, in

compliance

with the FPA,

the Specific

Agreements

and EU,

international

and national

law


implement the specific

actions as described in

Annex 1 to the Specific

Agreements and in

compliance with the

provisions of the


Agreement and the

Specific Agreements

and all legal obligations

applicable under EU,

international and

national law.”

JSL of KIC Partners

and KIC LE for the

“specific actions” –

i.e., the Business Plan

and all its KAVAs and

KCAs – means that


LE are liable for

implementing the

whole of the

Business Plan and

any and all parts of it

jointly. This means

liability for activities

that KIC Partners

and/or the KIC LE

may not have

subscribed/received

funding for.

Moreover, a failure

by a KIC Partner or

the KIC LE to

implement a task

under the Business

Plan in compliance

with all legal

obligations

applicable under EU,

international and/or

national law – even if

without any fault –

can trigger JSL for

any and all KIC

Partners and the KIC

LE.


all other KIC

Partners) may

be held liable for

facts it did not

cause, cannot

control and/or

prevent, and is

thus exposed to

liability risks that

it cannot

mitigate.

Description of

the issue


be found in

the FPA?

Consequences

Affiliates of KIC

Partners may

only implement

tasks if listed in

Annex 5 to the

FPA

“The affiliated entities

and third parties with a

legal link to a partner

(‘linked third parties’)

listed in Annex 5 may

implement action tasks

attributed to them in

Annex 1 to a Specific

Agreement.”

Only allowing listed

Affiliates of KIC

Partners to perform

work under the FPA

is ignorant of the fact

that a firm’s Affiliates

is a notion that is

dynamic in nature,

and not static. It

includes an

enormous and

unjustified

administrative

burden to the KIC

Partners, who will

need to assess,

within their large

groups of companies,

which companies will

perform work.

Moreover, any

change in the list of

Affiliates – due to,

e.g., a merger or

acquisition, or a

divestment – will

lead to an

amendment of the

FPA to update Annex

5, which is

impractical and

wasteful.

Article 19, first

subparagraph

KIC Partner will

have to list all its

Affiliates that

will expectedly

undertake work

under the FPA

for a period of 7

years (FPA’s

duration), and

on top of that,

will have to

draft, negotiate

and conclude an

amendment of

Annex 5 every

time that, due to

M&A and/or

divestment(s),

an entity

becomes or

ceases to be an

Affiliate.

Unnecessary

bureaucracy,

which

enormously

increases the

administrative

burden for KIC

Partner and KIC

Partners.

IP Policy, once

established by

KIC, is

apparently of

“The IP Policy shall

comply with the

principles of fairness,

non-discrimination and

In two instances it is

mentioned that the

IP Policy shall have to

be implemented; it’s

Article 29a.2,

second and

third

subparagraphs

KIC Partner to

have to come to

agreement, with

all KIC Partners

Description of

the issue


be found in

the FPA?

Consequences

mandatory

compliance to,

instead of non-

mandatory

guidelines (as is

the current case

with EIT Digital)

proportionality. The EIT

shall monitor the

implementation of the

KIC's specific IP policy.

The KIC shall establish

an IP Board to develop,

monitor, implement

and evaluate the IP

Policy. The IP Board

shall adopt its Rules of

Procedure.”

implementation

being the task of the

IP Board, subject to

the monitoring of the

EIT. The IP Policy will,

thus, be of

mandatory

compliance by KIC

Partners in projects.

This, added to the

fact that KIC Partners

already have to

comply with the

FPA’s IP terms and

conditions – which

are highly restrictive

and stringent –

means that KIC

Partners have

practically no

freedom to

determine the IP

terms and conditions

applicable for

projects being

undertaken in the

framework of the

KIC.

and the KIC LE,

on a mandatory

IP Policy in the

framework of

the KIC that will

apply in addition

to the already

stringent and

restrictive rules

on IP set forth

by the FPA. KIC

Partner to have

very few to

absolutely no

freedom to

arrange IP terms

and conditions

that are suitable

for its needs and

the projects it

participates in.

Obligation to

grant open

access to

research data

may be

imposed by EIT

on Specific

Agreements

“The Specific

Agreements may

provide for additional

dissemination

obligations concerning

open access to research

data (see Article 18

SGA).”

A problematic of

H2020 is imported to

the framework of the

EIT Digital. Open

access to research

data, if imposed as

an obligation that KIC

Partners must

comply with as part

of a Specific

Article 35.3 If imposed by a

Specific

Agreement, KIC

Partner has no

choice but to

grant open

access to its

research data to

any third party,

thereby being

Description of

the issue


be found in

the FPA?

Consequences

Agreement, may

mean that we expose

our research data to

the outside world.

That can result in

exposure to Privacy

compliance risks and

risks of leaking out

trade secret-

protected material to

the outside world.

exposed to

Privacy

compliance risks

(if such data

includes

personal data)

and/or to

exposing

sensitive data

that may be

protected by

trade secrets.

Obligation of

Confidentiality

set forth at the

FPA level, with

apparently no

freedom to

contractually

agree on

different terms

and conditions

at Project

Agreements’

level

“During


specific actions and for

four years after the

period set out in Article

3 of the Specific

Agreement, the parties

must keep confidential

any data, documents or

other material (in any

form) that is identified

as confidential at the

time it is disclosed

(‘confidential

information’).

If a KIC Partner

requests, the EIT may

agree to keep such

information

confidential for an

additional period

beyond the initial four

years.

If information has been

identified as

confidential only orally,

Confidentiality

obligation is set at a

too high-level. Terms

and conditions of

confidentiality are

apparently fixed at

the FPA level and KIC

Partners do not seem

to enjoy freedom to

come to agree on

different, better

terms on a Project

level. A one-size-fits-

all approach is taken

by the EIT in the FPA

that does not take

into account the

Project specifics.

E.g., only information

marked as

“Confidential” shall

be deemed to be

Confidential

Information. Term of

confidentiality is set


other KIC

Partners) have

no freedom to

tailor

confidentiality

terms and

conditions to

their specific

needs and

interests as

dictated by the

information they

share and the

Projects they

undertake.

Description of

the issue


be found in

the FPA?

Consequences

it will be considered to

be confidential only if

this is confirmed in

writing within 15 days

of the oral disclosure.”

at 4 years after the

period of the Specific

Agreement; whereas

parties may need a

longer or shorter

period, or even a

perpetual period of

confidentiality,

should trade secrets

be disclosed.

JSL of KIC

Partners and

KIC LE for

implementing

the “specific

actions” in

Annex 1 to

Specific

Agreements

and complying

to the FPA and

the Specific

Agreements

“The KIC Partners have

full responsibility for

implementing the

specific actions as

described in Annex 1 to

the Specific Agreements

and complying with the


Agreement and the

Specific Agreements.”

Looks pretty much

like the JSL issues of

Arts. 2.2 and 12.1,

but yet in a slightly

different

formulation. The

problems identified

in those provisions

are the same we

identify here. KIC

Partners and KIC LE

may all be held liable

for the non-

performance of the

whole of and/or any

of the Business Plan’s

tasks, which they

may not have

subscribed to. KIC

Partners and KIC LE

may be held liable for

facts that they

cannot control.

Article 47.1,

first

subparagraph

Our comments

for Arts. 2.2 and

12.1 are valid

here too.

Generally, KIC

Partner (and all

other KIC

Partners) may

be held liable for

facts it did not

cause, cannot

control and/or

prevent, and is

thus exposed to

liability risks that

it cannot

mitigate.

JSL of KIC

Partners and

KIC LE for

“The KIC Partners are

jointly and severally

liable for the technical

This JSL comes on top

of all other JSL issues.


Article 47.1,

second

subparagraph

Our comments

for Arts. 2.2,

12.1 and 47.1

Description of

the issue


be found in

the FPA?

Consequences

technical

implementation

of the “specific

actions” in

Annex 1 to the

Specific

Agreements


specific actions as

described in Annex 1 to

the Specific

Agreements. If a KIC

Partner fails to

implement its part of

the action, the other

KIC Partners become

responsible for

implementing this part

(without being entitled

to any additional EIT

funding for doing so),

unless the EIT expressly

relieves them of this

obligation.”

LE are held jointly

and severally liable

also for the technical

implementation of

any and all tasks of

the Business Plan,

even those for which

a KIC Partner did not

subscribe to. KIC

Partners may even

have to fill in the

gaps for a task in an

action that was not

fulfilled by a KIC

Partner, even if they

did not subscribe to

such an action at all,

and are only

exempted from such

obligation if the EIT

exempts them

thereof.

first

subparagraph

are also valid

herein.

On top of that,

KIC Partner may

be held liable for

non-

performance of

the technical

implementation

of tasks for

actions which it

did not even

subscribed to.

EIT may

rightfully and

legally request

KIC Partner to

execute specific

performance of

a task in an

action KIC

Partner has no

connection to

nor participation

in, within the

Business Plan,

thereby forcing

KIC Partner to

allocate

resources to

complete

activities it did

not subscribe to,

nor has any

interest in, and

may not even

Description of

the issue


be found in

the FPA?

Consequences

have the

capabilities in-

house to fulfill

such task/action.

Requirement

for KIC LE and

KIC Partners to

enter into

Internal

Agreements


have an Internal

Agreement with

internal arrangements

regarding their

operation and co-

ordination to ensure

that the specific actions

are implemented

properly (see Article

4).”

Essentially the same

issue as with Article

4.2. We refer to our

comments to the

issue with Art. 4.2.

Article 47.3 Our comments

for Art. 4.2 are

also valid herein.

KIC Partner’s

Financial

Responsibility

only limited in

case of

recovery

procedures, not

in damages in

contract or in

tort

“Each KIC partner's

financial responsibility

in case of recovery is

limited to its own debt

including undue

amounts paid by the EIT

for costs declared by its

linked third parties,

except for the amount

retained for the

Guarantee Fund (see

Article 17 SGA).”

KIC Partners’

financial

responsibility only

capped as regards

recovery procedures.

Cap does not apply

for all other KIC

Partners’ liabilities

under the FPA –

hence, it does not

apply for damages

for contractual

breach or for tort.

Article 50.1,

second

subparagraph

KIC Partner’

liability only

capped in case

of recovery

procedures. KIC

Partner’ liability

is unlimited in

terms of

damages for

contractual

breach and/or

tort.

Illegal exclusion

of liability by

the EIT, in

respect of

damages to

third parties

“The EIT cannot be held

liable for any damage

caused to the KIC

Partners or to third

parties as a

consequence of

implementing the

A party cannot validly

and legally exclude

its liability for

damages caused by

itself to third parties

to an agreement.

Article 52.1 Exclusion of

liability by the

EIT towards

damages caused

to third parties is

illegal.

Description of

the issue


be found in

the FPA?

Consequences


Agreement or a Specific

Agreement, including

for gross negligence.

The EIT cannot be held


caused by any of the

KIC Partners or third

parties involved in a

specific action, as a

consequence on

implementing the


Agreement and Specific

Agreement.”

Exclusion of

liability by EIT

in respect of

damages to KIC

Partners and

KIC LE is unfair

and

unreasonable

“The EIT cannot be held


caused to the KIC

Partners or to third

parties as a

consequence of

implementing the



Agreement, including

for gross negligence.

The EIT cannot be held


caused by any of the

KIC Partners or third

parties involved in a

specific action, as a

consequence on

implementing the


Agreement and Specific

Agreement.”

If agreed by KIC

Partners and KIC LE,

EIT can validly

exclude its liability

for damages caused

to the former.

However, the

fairness and

reasonability of this

provision is highly

questionable, at the

least.

Article 52.1 If KIC Partner

incurs damages

caused by the

EIT in

implementing

the FPA and/or

the Specific

Agreements, it

cannot claim

such damages

towards the EIT.

Description of

the issue


be found in

the FPA?

Consequences

JSL of the KIC

Partners and

KIC LE towards

the EIT for

damages

incurred by the

EIT as a result

of the

implementation

of a specific

action, or as a

result of the

non-

implementation

of a specific

action in

compliance

with the FPA or

a Specific

Agreement

“Except in case of force

majeure (see Article

57), the KIC Partners

must compensate the

EIT for any damage the

EIT sustains as a result

of the implementation

of a specific action or

because a specific

action was not

implemented in full

compliance with the



Agreement.

Each KIC Partner is

responsible for paying

the damages claimed

from it.”

“The amount the EIT

can claim from a KIC

Partner will correspond

to the damage caused

by that KIC partner.”

“If the EIT does not

receive any

observations or decides

to claim damages

despite the

observations it has

received, it will formally

notify confirmation of

the claim for damages

and a debit note,

EIT can claim

damages sustained

by it from any and all

KIC Partners and the

KIC LE for the

implementation of

specific actions or for

the non-

implementation of

such actions in

compliance with FPA

and Specific

Agreements.

Although the FPA

states in Art. 52.2.2

that the EIT can only

claim from a given

KIC Partner the

amounts of damages

caused by such a KIC

Partner, the fact

remains that the EIT

can still:

(a) claim towards any KIC Partner any amount of damages, due to the JSL provisions;

(b) has full discretion to “ignore” the observations

Articles 52.2.1,

52.2.2 and

52.2.3

Our comments

for Arts. 2.2,

12.1 and 47.1

first and second

subparagraphs

are also valid

herein.

Moreover, KIC

Partner may be

held liable of

paying damages

incurred by the

EIT for

implementation

of an action, or

for non-

implementation

of an action in

compliance with

the FPA and

Specific

Agreements,

even if it did not

cause or

contribute to

cause such

damages; and

this despite

observations of

its innocence as

may be made by

KIC Partner to

the EIT under

Art. 52.2.3.

Description of

the issue


be found in

the FPA?

Consequences

specifying the amount

to be recovered, the

terms and the date for

payment.

If payment is not made

by the date specified in

the debit note, the EIT

may recover the

amount:

(a) by offsetting it —

without the KIC

partner’s consent —

against any amounts

owed to the KIC Partner

concerned by the EIT.

In exceptional

circumstances, to

safeguard its financial

interests, the EIT may

offset before the

payment date in the

debit note;

(b) by taking legal

action (see Article 63).”

of an innocent KIC Partner – e.g., the observations of a KIC Partner stating that such KIC Partner did not cause or contribute to cause such damages – and force the said KIC Partner to pay for such damages nonetheless.

This is all enabled by

the combination of

Articles 52.2.1, 52.2.2

and 52.2.3.

Uncertainty as

to when can KIC

Partners and/or

KIC LE suspend

implementation

of an action

“The KIC Partners may

suspend

implementation of a

specific action or any

part of it, if exceptional

circumstances — in

particular force majeure

(see Article 57) — make

implementation

impossible or

excessively difficult.”

The question here is

to know when can a

KIC Partner suspend

implementation of an

action. Is it only in

cases of force

majeure? Or are

there other

exceptional

circumstances in

which KIC

Partners/KIC LE may

Article 55.1.1 Uncertainty for

KIC Partner and

other KIC

Partners and/or

KIC LE on which

circumstances

can any of these

parties suspend

implementation

of an action.

Description of

the issue


be found in

the FPA?

Consequences

suspend

implementation of an

action? How to read

“in particular” in this

provision? Is it

limitative or merely

indicative?

Definition of

Force Majeure

“‘Force majeure’ means

any situation or event

that:

- prevents either party

from fulfilling their

obligations under the

Agreement,

- was unforeseeable,

exceptional situation

and beyond the parties’

control,

- was not due to error

or negligence on their

part (or on the part of

third parties involved in

the action), and

- proves to be inevitable

in spite of exercising all

due diligence.

The following cannot be

invoked as force

majeure:

- any default of a

service, defect in

equipment or material

or delays in making

them available, unless

they stem directly from

There is absolutely

no reason not to

consider the

following cases a

force majeure event:

- any default of a

service, defect in

equipment or

material or delays in

making them

available, unless they

stem directly from a

relevant case of force

majeure,

- labor disputes or

strikes, or

- financial difficulties.

If these three kinds

of events are

unforeseeable, are

exceptional, are

outside of parties’

control, was not due

to an error or

negligence on their

part, and proves

Article 57 KIC Partner

cannot suspend

implementation

of an action –

and will thus be

in contractual

breach towards

the EIT – in case

it suffers any or

all of the three

force majeure

events described

in the middle

column of this

row, even if

these events are

unforeseeable,

exceptional, are

outside of KIC

Partner’ control,

was not due to

an error or

negligence of

KIC Partner, and

prove inevitable

in spite of KIC

Partner having

exercised all due

diligence.

Description of

the issue


be found in

the FPA?

Consequences

a relevant case of force

majeure,

- labor disputes or

strikes, or

- financial difficulties.”

inevitable in spite of

exercising all due

diligence, there is

absolutely no reason

why these should not

also be considered

force majeure

events.

IP ISSUES

Period for

requesting

access rights

“31.3: Request for

access may be made —

unless agreed

otherwise —up to one

year after the period

set out in Article 3 of

the Specific

Agreement.”

one year is a barely

acceptable period

Article 31.3 We require a

longer period

when discussing

Internal

Agreements

Access Rights to

background to

other partners

of other actions

The Specific

Agreements may

provide for access rights

to background for other

KIC partners for other

specific actions (under

the framework

partnership) (see Article

18 SGA)

First of all, it is

absolutely unclear

from the FPA what is

meant here exactly,

i.e. what are the

other actions.

Considering that EIT

comprises projects

close to market,

where background is

normally very

valuable, opening the

access to further

partners not in the

same action is not

preferable.

Article 31.4 the discussion is

referred to the

Internal

Agreements; we

are strongly

against such

provision.

Affiliates Unless otherwise

agreed in the

consortium agreement,

access to background

must also be given to

KIC Partner is a

corporation

comprising

thousands of

affiliates worldwide,

Article 31.5 access rights to

all affiliates as if

they were the

party they are

affiliated to,

Description of

the issue


be found in

the FPA?

Consequences

affiliated entities

established in an EU

Member State or

‘associated country’, if

this is needed to exploit

the results generated

by the KIC partners to

which they are affiliated

including the

distribution entities

in most states,

therefore any

limitation to access

rights of affiliates is a

deal breaker

without any

need for

requests or

consent to and

from the

Background or

Results owner, is

the only

acceptable

wording for KIC

Partner in the

Internal

Agreement.

Affiliates Unless agreed

otherwise (see above,

Article 31.1), the

affiliated entity

concerned must make

the request directly to

the KIC partner that

holds the background

See previous item See previous

item

See previous

item

Joint

Ownership

Unless otherwise

agreed in the joint

ownership agreement,

each joint owner may

grant non-exclusive

licences to third parties

to exploit jointly-owned

results (without any

right to sub-license), if

the other joint owners

are given:

(a) at least 45 days

advance notice and

(b) fair and reasonable

compensation.

This is a major issue

as we do not accept

such kind of

obligations like prior

notification and

compensation to the

other joint owner in

case of license to a

third party per se

(only compensation

on the net income is

acceptable).

Moreover, it is not

explicitly mentioned

whether direct use is

free or not.

Article 32.2 Default

provision not

acceptable; KIC

Partner requires

to agree on

different terms

in the Internal

Agreement

Description of

the issue


be found in

the FPA?

Consequences

Open access to

research data

The Specific

Agreements may

provide for additional

dissemination

obligations concerning

open access to research

data (see Article 18

SGA).

Unclear provision;

article 18 SGA is void.

Some more information

from H2020:

Article 43 H2020 rules

of participation:

With regard to the

dissemination of

research data, the grant

agreement may, in the

context of the open

access to and the

preservation of

research data, lay down

terms and conditions

under which open

access to such results

shall be provided, in

particular in ERC

frontier research and

FET (Future and

Emerging Technologies)

research or in other

appropriate areas, and

Unclear provision Article 35.3 Article needs to

be clarified,

otherwise not

acceptable for

KIC Partner

Description of

the issue


be found in

the FPA?

Consequences

taking into

consideration the

legitimate interests of

the participants and any

constraints pertaining

to data protection rules,

security rules or

intellectual property

rights. In such cases,

the work programme or

work plan shall indicate

if the dissemination of

research data through

open access is required.

Article 29.3 grant

agreement

[OPTION for actions

participating in the

open Research Data

Pilot: Regarding the

digital research data

generated in the action

(‘data’), the

beneficiaries must:

(a) deposit in a research

data repository and

take measures to make

it possible for third

parties to access, mine,

exploit, reproduce and

disseminate — free of

charge for any user —

the following:

(i) the data, including

associated metadata,

needed to validate the

results presented in

Description of

the issue


be found in

the FPA?

Consequences

scientific publications as

soon as possible;

(ii) other data, including

associated metadata, as

specified and within the

deadlines laid down in

the ‘data management

plan’ (see Annex 1);

(b) provide information

— via the repository —

about tools and

instruments at the

disposal of the

beneficiaries and

necessary for validating

the results (and —

where possible —

provide the tools and

instruments

themselves).

This does not change

the obligation to

protect results in Article

27, the confidentiality

obligations in Article 36,

the security obligations

in Article 37 or the

obligations to protect

personal data in Article

39, all of which still

apply.

As an exception, the

beneficiaries do not

have to ensure open

access to specific parts

of their research data if

the achievement of the

action's main objective,

Description of

the issue


be found in

the FPA?

Consequences

as described in Annex 1,

would be jeopardised

by making those

specific parts of the

research data openly

accessible. In this case,

the data management

plan must contain the

reasons for not giving

access

Transfer of

Results

Unless agreed

otherwise (in writing)

for specifically-

identified third parties

or unless impossible

under applicable laws

on mergers and

acquisitions, a KIC

partner that intends to

transfer ownership of

results must give at

least 45 days advance

notice (or less if agreed

in writing) to the other

KIC partners that still

have (or still may

request) access rights to

the results. This

notification must

include sufficient

information on the new

owner to enable any

KIC partner concerned

to assess the effects on

its access rights.

It is an issue when

the assignment is

made to an affiliate:

we do not accept any

such limitations

mostly because of

the administrative

burden they carry.

Article 36.1 This is a deal-

breaker for KIC

Partner, unless

otherwise

agreed in the

Internal

Agreement

Sideground Background’ means any

data, know-how or

information held by any

KIC partner — whatever

Sideground is not

included in the

definition, hence

according to the FPA

Article 30.1 Ideally,

Sideground

should be taken

into account in

Description of

the issue


be found in

the FPA?

Consequences

its form or nature

(tangible or intangible),

including any rights

such as intellectual

property rights — that:

(a) is held by the KIC

partners before they

entered into the

Specific Agreement

concerned and

(b) is needed to

implement the specific

action or exploit the

results.

there are no

obligations to grant

any access rights to

sideground

the Internal

Agreement

Annex 3

KIC Health additional issues

1. The term “Specific Agreement” is unclear. There is a relevant uncertainty of what a “Specific

Agreement” is meant to be. However, in our opinion, the terms “Specific Agreement”, “Specific Grant

Agreement” and “SGA” are used as a synonym. This results from the use of the abbreviation “SGA” in

Article 2.2 FPA and the reference being made to Annex 3 of the FPA (Model Specific Agreement).

2. We see a potential liability of KIC partners on the following issues: (i) Operational and technical

liability; (ii) Financial liability; (iii) General liability according to the FPA; (iv) Internal Agreements; and, (v)

Other.

3. By jointly acceding the FPA, KIC Partners become liable for tasks of the Business Plan that they have

not subscribed to. They have to take operational and financial responsibility for defaulting partners. This

is not typical for the legal setup of an association and is generally in conflict with the corporate

governance setup of the requirements of German law concerning the legal form of an association.

Therefore the EIT should waive the concept of joint and several liability in the FPA.

4. We would consider it as not acceptable, if all other KIC Partner would be jointly and severally liable for

the Implementation of the FPA by other Partners. We ask the EIT to clarify and to adjust in a legally

acceptable manner Art. 4.1 in order to make clear that the KIC Partners are not jointly and severally

liable for the Implementation of the FPA by other Partners. The risk remains that other provisions of the

FPA could lead to a not joint and several liability of the KIC Partners. Any language that could lead

indirectly or implicitly to a jointly and severally liability should be deleted.

5. The same applies to any other provision of the FPA that could lead indirectly or implicitly to a joint

and several liability (e.g. Article 2.2 FPA 5th subparagraph, Article 12.1 FPA, Article 47.1 FPA, Article 52.2

FPA).

6. Each KIC Partner has individual financial responsibility: in case of recovery, liability is limited to its own

debt (Article 50.1 FPA). Each partner is responsible for paying any financial penalties imposed on it

(Article 51.1 FPA), and for paying the damages claimed from it (Article 52 FPA).

7. The language of the FPA is not clear, the term “assume the rights and obligations under the

agreements” may have the meaning that the KIC Partners are jointly and severally liability for all rights

and obligations of EIT Health under the FPA and the “Specific Agreements” or SGA. On the other hand,

the rights and duties of the KIC Partners are expressively mentioned in the draft of the “Model Specific

Agreement”. Our understanding is hence that each KIC Partner assumes the rights and obligations as

stipulated for it. It is necessary to clarify this regulation in a legally acceptable manner.

8. We consider the Internal Agreement not as reasonable particularly considering that the Corporate

Governance structure of EIT Health is stipulated in the AoAs and Bylaws.

9. The IP regulations in the FPA and SGA are unclear and partly not acceptable, definitely so if not

explicitly restricted to the specific action in which a KIC partner participates.

Annex 4

EIT Raw Materials additional issues

Eligibility of Large Research Infrastructure (LRI) costs: Eligibility of LRI costs must be included in

the FPA as it is included in H2020. See Article 5 of the SGA or, more specifically - 5.2 "SPECIFIC

CONDITIONS FOR COSTS TO BE ELIGIBLE". The clause from the H2020 model GA "D.4

CAPITALISED AND OPERATING COSTS OF ‘LARGE RESEARCH INFRASTRUCTURE" is not included.

As stipulated in previous discussions on this matter with the EIT, we believe that this clause

needs to be adjusted to adhere to H2020 policy.

to: martin kern european institute of innovation and...

Documents