Öffentliche Gelder für F&E Tebo, Empa-Haus St-Gallen, FP7 – 7th EU Framework Programme for Research and Technological Development: Focus on Small and Medium-sized Enterprises SMEs Cédric Höllmüller  National Contact Point SME Euresearch Head Office   phone ERAcademy EPF Lausanne, Session 4: Legal and financial aspects in FP7 Rolf Klappert  Euresearch regional office Neuchâtel c/o Université de Neuchâtel, Fbg du Lac 5a, CP3213, 2001 Neuchâtel   tél  fax

© Euresearch  Rolf Klappert   EPFL ERAcademy  2  Legal aspects of FP7  Grant Agreement  Consortium Agreement  Intellectual property rights  Financial aspects of FP7  Direct, indirect and full costs  Eligible and ineligible costs  EC contribution  Making a budget  Additional material for management structure Table of contents

© Euresearch  Rolf Klappert   EPFL ERAcademy  3 Begin with the end in mind! What is the end for your proposal? the Evaluation What is the end for your project? the Exploitation/dissemination of project results an Audit of your accounting by the commission A basic principle for life and projects

© Euresearch  Rolf Klappert   EPFL ERAcademy  4 Legal aspects of FP7

© Euresearch  Rolf Klappert   EPFL ERAcademy  5 You find all relevant legal documents on   The good news:  You don’t need to read them  If interested, the "EC rules for Participation" condense everything on 18 pages  FP7 - Legal basis

© Euresearch  Rolf Klappert   EPFL ERAcademy  6 Grant Agreement (GA)  Core text of the GA, about 6 pages; special clauses possible  Who? What? When? How much?  Annex I = Description of work = DOW = Technical annex = TA  Annex II = General conditions  Annex III = specific ‘funding schemes’ conditions  Important for Marie Curie actions An understanding of the basics will help the proposal writing:   A company having no experience in European research should understand the rules before going ahead!  liability  intellectual property rights FP7 – Legal documents for implementation /1

© Euresearch  Rolf Klappert   EPFL ERAcademy  7 The consortium agreement (CA)  Is almost always mandatory  Deals with the implementation of the project  Responsibilities and liability  Management (governance) structure and procedures  Financial provisions  Publication rights and procedures  Intellectual property rights / exploitation  Pre-existing knowledge = Background  The GA prevails the CA  Should be signed before the GA  You need a lawyer for the CA, at least the 1 st time; or at least an experienced colleague  As for GAs, there are model contracts   but they are not from the Commission FP7 – Legal documents for implementation /2

© Euresearch  Rolf Klappert   EPFL ERAcademy  8 IPR Read the Guide to Intellectual property rules for FP7 projects to become an expert ftp://ftp.cordis.europa.eu/pub/fp7/docs/ipr_en.pdf

© Euresearch  Rolf Klappert   EPFL ERAcademy  9 Intellectual property rights (IPR) /1 What is intellectual property (IP) ?  It is the creation of your intellect and as such does not materialise; you can’t touch it (only the result of it)  Patents, brands, designs, copyright ©  only the © exists automatically, all others must be registered  To be acknowledged as IP, it must be absolutely novel !!!  Creates a conflict with academia’s needs to publish  Trade secrets

© Euresearch  Rolf Klappert   EPFL ERAcademy  10 Intellectual property rights (IPR) /2 Why is IP important  in quite some cases, IP is worth much more than material assets of a company (start-ups)  brands, patents  IPR give you, limited in space and time, exclusivity on your IP  Commercial exploitation of project results very often depend on formal protection of IP to make worth the risk of investing in it  Therefore we should deal with IPR already at the proposal stage Comment  IPR are negative rights  they do not allow you to do anything  they allow you to forbid to somebody else to do something

© Euresearch  Rolf Klappert   EPFL ERAcademy  11 IPR – some definitions Definitions (properly defined in the GA)  Foreground means the ‘results’ of the project  Background means the ‘knowledge’ (IP) existing prior to the project  How do you prove this?

© Euresearch  Rolf Klappert   EPFL ERAcademy  12 Questions to ask and answers to give Who owns the IP?  Background: the party owning the Background before the project  Foreground: the party generating the Foreground (Annex II.26.1) What if more than one party jointly generated the Foreground?  These parties shall mutually agree on the procedures in a written Joint Ownership Agreement (Annex II.26.2)  If there is no agreement, there is a default regime (Annex II.26.2) IP ownership

© Euresearch  Rolf Klappert   EPFL ERAcademy  13 You can’t manage the IP in contradiction to the GA (AnnexII.26ff)  Have also a look into DESCA Think about results in terms of Impact  Reports for policy making  Products or technologies for business making  To exploit IP it should in general be protected IP protection (Annex II.28)  GA, Annex II says: Foreground capable of industrial or commercial application shall be protected by its owner  Protection costs are eligible for funding (other costs)  About €6’000 for an initial patent filing IP Management /1

© Euresearch  Rolf Klappert   EPFL ERAcademy  14 Mandatory Access Rights Access rights to background Access rights to foreground Timing (to request access rights) For implementing the project Yes, if needed to carry out work under the project Until the end of the project Royalty-free, unless otherwise agreed before the accession to the GA Royalty free For use purpose (exploitation and further research) Yes, if a participant needs them for using its own foreground Until 1 year (unless otherwise agreed) after the end of the project or the termination of the participant concerned Either royalty-free, or on fair and reasonable conditions to be agreed ftp://ftp.cordis.europa.eu/pub/fp7/docs/ipr_en.pdf

© Euresearch  Rolf Klappert   EPFL ERAcademy  15 IPR Management, successful example The overall objective of the proposed project XYZ is to create, protect and exploit potentially valuable intellectual property rights. Strong co-operation between partners in the field of R&D requires good arrangements on Intellectual Property Rights (IPR). Each partner owns his IPR and will be responsible for protection of his intellectual property via patents or registered designs. The handling of joint ownership of IP arising from work within the project will be delineated in detail in the consortium agreement. Partners will be asked to identify new intellectual property generated during the course of the project and steps will be taken to protect such IP via patents or registered designs. Ownership and shares in IP will be determined by the consortium agreement. However, as the work planned is expected to lead to marketable product(s), during the third year of the project all the members of the consortium will sign a confidential exploitation agreement that will reflect the individual rights of each partner on the project outcomes.  blablabla  There is a bit more substance IP Management – an example

© Euresearch  Rolf Klappert   EPFL ERAcademy  16 Knowledge management, successful example (same as before) Knowledge management will endeavour through a number of well defined processes to manage the generation, capture, distribution and exploitation of all knowledge arising from the activities of the partners. It will be the responsibility of the work package leaders to ensure that all knowledge generated is identified and catalogued for the consortium. Furthermore the work package leaders will present this continuously updated catalogue to the General Assembly. By using the project web portal the flow of knowledge is designed to minimize the time and resources which partners must allocate to keeping abreast of technological and market developments. The partnership provides significant support in delivering up to date information regarding emerging technologies and applications as well as technology watch activities on an international level. Knowledge management and, more specifically, IPR related opportunities, will be on the agenda of each GA meeting in order to proactively ensure the involvement of each partner. Furthermore the project management software used is supposed to help to put IPR and knowledge management policies into practice. Knowledge Management – an example

© Euresearch  Rolf Klappert   EPFL ERAcademy  17 Knowledge management, management section The Project Manager will be responsible for tracking and disseminating the knowledge produced throughout the duration of the project. The Work Package and Task Leaders will be responsible for communicating the knowledge produced from their respective Work Packages / Tasks to the Project Manager. The Project Manager will create a Knowledge repository as part of the Online Collaborative Environment, where all knowledge products as well as critical supportive knowledge material will be stored in an organised and easily accessible manner. Knowledge management, Impact section The Project Manager will be responsible for knowledge management within the project. Reports will be sent around to all partners and discussion of technical issues will be organized at the regular Management Board (MB) or General Assembly (GA) meetings. A division will be made between open source knowledge and knowledge that can be patented. 14 points, best of “class” Knowledge Management – another example

© Euresearch  Rolf Klappert   EPFL ERAcademy  18  Show that you understand the importance of IP  Mention if you have experience in IP protection  IPR shall be handled in the mutual interest of all parties; details will be laid down in writing in the CA (which will be based on the Desca)  All parties shall give access to the consortium to their relevant Background if needed  Background to be explicitly defined if possible already in the proposal  free for project implementation, fair and reasonable conditions for exploitation to be negotiated in good faith  Encourage creation and protection of IP  Coordinated and supervised by the relevant consortium body in regular meetings (schedule?)  Access rights to Foreground shall be granted to allow a maximum impact on commercialisation of Foreground  Conditions shall be negotiated in good faith between the concerned parties in mutual agreement  In case of joint ownership, these agreements shall make sure that Academic partners shall be compensated reasonably according to their contribution IP Management- some hints

© Euresearch  Rolf Klappert   EPFL ERAcademy  19 Financial aspects of FP7 Read the Guide to Financial Issues to become and expert ftp://ftp.cordis.europa.eu/pub/fp7/docs/financialguide_en.pdf Annex II.14ff

© Euresearch  Rolf Klappert   EPFL ERAcademy  20 There are direct and indirect costs  Direct costs are directly necessary to do something  raw materials, operator, machine etc.  Indirect costs are indirectly necessary to do something  heating, director, secretary, concierge  indirect costs are also called OVERHEAD There are also full costs  Full costs are the sum of direct and indirect costs  Direct costs: €100.-  Indirect costs: 60%  Full costs: € €60.- = €160.-  Note, that in this example, the Overhead is distributed to each € spent (ok for flat rate overheads)  If actual Overhead costs are used, it is quite common to distribute the Overhead on personnel costs only  Direct costs: €100.- (€60 for personnel; €40 for other costs)  Indirect costs: 100% (still in total €60)  Full costs: € €60.- = €160.- Direct, indirect and full costs

© Euresearch  Rolf Klappert   EPFL ERAcademy  21 There are eligible and non eligible costs  Eligible costs  Direct costs –Personnel (new: including permanent staff for universities) –Consumables & durable equipment (with depreciation) –Travel and subsistence –Subcontracting –etc.  Indirect costs / Overhead  Non eligible costs  Identifiable indirect taxes; e.g. VAT, etc  Exchange losses (do not be too optimistic on the exchange rate)  Excessive or reckless expenditure  Are the expenses necessary for the project?  etc. To be eligible, costs must be:  Have a look at Annex II.14 and in the Guide to financial issues  There is also a slide at the very end Eligible and ineligible costs

© Euresearch  Rolf Klappert   EPFL ERAcademy  22 Before I forget  Certificate on financial statements (CFS = audit certificates) each time the cumulative cost claims to the Commission are equal or higher than €375’000.  Such certificates will be charged under management activities and subcontracting  Receipts, Annex II.19  Are resources made available by third parties to the project or income of the project  In some cases, receipts will be deducted from the EU funding  They are not the money you get from the Commission  In most of the cases, there are no receipts Miscellaneous

© Euresearch  Rolf Klappert   EPFL ERAcademy  23 Collaborative projects Maximum reimbursement rates of eligible full costs R&D and innovation activities Demonstration activities Other activities (training, dissemination, management, etc.) Large companies and other organisations 50% (75% for security) SME Universities Non profit PB R&D organisations What can you get?

© Euresearch  Rolf Klappert   EPFL ERAcademy  24 What OVERHEAD can you get? Collaborative projects All20% or actual costs SME60% or actual costs Universities / non profit PB R&D organisations 60% or actual costs Collaborative projects Maximum overhead rates (indirect costs);

© Euresearch  Rolf Klappert   EPFL ERAcademy  25 Let’s make a budget /1 Activities Cost types RTDDEMMGTOtherTotal Personnel costs Subcontracting Other direct costs Indirect costs Total Budget Requested EC contribution Total receipts Minimum budget information, Form A3.1 To get the figures right, why not use:

© Euresearch  Rolf Klappert   EPFL ERAcademy  26 Activities (Annex II.16)  RTD (research and technological development activities)  75 or 50% maximum funding  DEM (demonstration activities) / Just do it  50% maximum funding  MGT (Management activities)  100% maximum funding  overall legal and financial management; not RTD management  Other Activities  100% maximum funding  networking, IP protection, dissemination, training, etc. Activity types

© Euresearch  Rolf Klappert   EPFL ERAcademy  27 The cases  Cooperation project of three years  €/CHF exchange rate: 1.5 (to be used with care)  Two Scenarios  University with 60% Overhead flat rate  Large company with actual Overhead of 120%, distributed only on personnel costs Let’s make a budget /2

© Euresearch  Rolf Klappert   EPFL ERAcademy  28 The expenses  Personnel costs (including employers social charges)  Annual gross salary: CHF100’000.-  Including employer’s social charges of about 21%: CHF121’000.-  Cost of 1 person month (PM): CHF10’  1 FTE RTD, 0.3 FTE DEM; 0.2 FTE for MGT for the whole duration  Subcontracting  Has to be announced in the proposal  No overheads can be charged on subcontracted work  CHF55’500 in RTD  CHF2’000 in MGT for all necessary Audit certificates  Other direct costs (either RTD or Other activities)  Travel and subsistence  1 person at 3 conferences and 3 project meetings at CHF1’350.- each  Consumables: CHF15’000 per year  Durable equipment of CHF50’000.-  Depreciated in 5 years; bought at the beginning of the second year, 50% usage for your project  Two filings of patents at CHF9’000 each  You have an external advisory board of 5 people  There is one meeting which costs CHF1’500 per person (RTD) The costs types

© Euresearch  Rolf Klappert   EPFL ERAcademy  29 The cases UNIVERSITYRTDDEMMGTOTHTotal Personnel costs /€242' ' ' ' Subcontracting /€37' ' ' Other direct costs /€47' ' ' Indirect costs /€173' ' ' ' ' Total budget /€499' ' ' ' ' Requested EC contribuiton /€374' ' ' ' ' Total receipts /€ 0.00 LARGE INDUSRTYRTDDEMMGTOTHTotal Personnel costs /€242' ' ' ' Subcontracting /€37' ' ' Other direct costs /€47' ' ' Indirect costs /€290' ' ' ' Total budget /€616' ' ' ' ' Requested EC contribuiton /€308' ' ' ' ' Total receipts /€ 0.00

© Euresearch  Rolf Klappert   EPFL ERAcademy  30 NatureP1P2P3P4P5P6P7Total% Personnel230'558287'974105'638147'878106'655127'517124'9001'131' % Overheads150'034209'19066'383101'62767'59379'51078'540752' % Travel7'0005'000 12'0006'0005'0006'00046'0002.3% Audits % Consumables0003' % Equipment0001' % Other direct costs12'50019'25005' '2501.9% Subcontracting02' % Total400'092523'414177'021271'005180'248212'027209'4401'973' % %20.3%26.5%9.0%13.7%9.1%10.7%10.6%100.0% To keep the evaluators happy Explain any major cost item

© Euresearch  Rolf Klappert   EPFL ERAcademy  31 Begin with the end in mind! and Thank you!

© Euresearch  Rolf Klappert   EPFL ERAcademy  32 Governance structure Project management structure  You need to show that you can manage the project  The Governance structure adjusts to the type and size of the project  You can do as you please but it must be feasible and reasonable  the evaluators know (generally)  It might be wise to use the Management structure of the CA you intend to use  DESAC proposes a structure for large and small projects

© Euresearch  Rolf Klappert   EPFL ERAcademy  33 The actors  Commission  Coordinator  Some sort of steering committee or management board  A general assembly (= steering committee for a small project)  The work package leaders  The task leaders  An exploitation and /or dissemination manager  External advisory board (don’t forget them in the budget)  Etc. Consortium bodies

© Euresearch  Rolf Klappert   EPFL ERAcademy  34 The actions  manage and monitor (how and how often) the project  make meetings (how often and who?)  make decisions (how?)  resolve conflicts (how?)  deal with legal and financial issues  IPR and knowledge management  deal with the evolution of the project  edit a handbook  etc. Management activities

© Euresearch  Rolf Klappert   EPFL ERAcademy  35 You need something like that reflecting your management structure Governance structure

© Euresearch  Rolf Klappert   EPFL ERAcademy  36 To be eligible, costs must be:  Necessary for the project; consistent with the principles of economy, efficiency and effectiveness  Actual  Incurred by the beneficiary  Incurred during the project (exception final reports)  In accordance with the usual accounting and management principles and practices of the beneficiary  Recorded in the accounting system (including justification)  Indicated in the estimated overall budget  however, the consortium has some autonomy if work is delivered as promised Eligible costs