The heads of the five innovation clusters in the European Institute of Innovation and Technology (EIT) have written a joint protest letter to the agency, citing “major concerns” over changes that the agency has proposed in the way they would operate.
The unusual letter, dated August 31 and obtained by Science|Business, identifies three main issues – which the executives call “showstoppers” – that need to be solved before signing a new seven-year contract known as a framework partnership agreement (FPA) between their clusters and the central EIT administration. The issues include introducing shared accountability among the five Knowledge and Innovation Communities (KICs), as well as reshaping their governance structures and fitting them with a common policy for intellectual-property rights management.
On Thursday afternoon, a spokeswoman for EIT, Magdalena Gryszko, issued the following statement on the letter: “We are happy to say that all issues raised during the discussions on the new seven-year Framework Partnership Agreement have been addressed. We are currently finalising the agreements.
"The EIT provides the first three Knowledge and Innovation Communities with a total of 15 year perspective which is crucial for strategic investment. With the signature of the new FPA we are fully aligned with Horizon 2020 provisions.”
The 32-page letter is signed by all five chief executives of the KICs – Willem Jonker, EIT Digital; Bertrand van Ee, Climate KIC; Diego Pavía, KIC InnoEnergy; Ursula Redeker, EIT Health; and Jens Gutzmer, EIT Raw Materials. It was addressed to EIT Interim Director Martin Kern.
The signatories said the new proposed framework contract, which sets out the general rights and obligations of each party under the EIT banner, contains problematic wording and would create “major changes” to the EIT-KIC structure, as well as ambiguity relating to the responsibility and liability of KIC legal entities and participating companies and universities.
According to the letter: “The original idea of EIT was to create a straight and more effective instrument to support innovative activities than the regular Commission funding under the regular framework [programmes]. The administrative and legal structure as established/intended by EIT has twisted the original idea to its contrary.”
Autonomous clusters
The EIT was launched in 2008 as an EU body to stimulate innovation in Europe, by providing partial funding to a set of autonomous KICs, that each are separate legal entities with their own stakeholders and sectoral focus.
KICs are large consortia of universities, companies and others that band together under the EIT tent to make high-tech discoveries, start new companies and sell money-spinning products, and train a generation of budding entrepreneurs. The EIT central office, in Budapest, currently co-funds five KICs – in information technologies, energy, life science, raw materials technologies and climate change – which each appoint a CEO to run its operation.
Each KIC has about around 30 core partners led by five or six ‘co-location centres’ – in essence, hubs for the lab work, teaching and marketing of innovations. Around a quarter of a KIC’s funding comes from the EU’s Horizon 2020 research and innovation programme; the rest is from other government or private funders.
Every year, the KICs and the EIT have to argue out their next annual budgets, and this year they are also negotiating new, multi-year ‘framework’ contracts. While the letter doesn’t directly mention it, budget worries have been a rising concern among all involved. The EIT was promised a big budget increase in 2014, but since then a new set of European Commissioners has pared back the funding.
“Unnecessarily restrictive”
The new proposed contract introduces “joint and several liability” clauses between the KIC legal entity and participating companies and universities, which are also known as KIC partners. Under these terms, KICs would be held jointly and severally liable for the technical implementation of any and all tasks of the KIC business plans, even those, the letter warns, a KIC partner did not subscribe to.
Today, each KIC partner has individual financial responsibility and liability is limited to its own debt. Each partner is responsible for paying any financial penalties imposed on it, and for paying the damages claimed from it. But under new terms, KIC partners may have to assume “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,” wrote EIT Health, in an annex to the main arguments presented by the five CEOs. EIT Health is coordinated by Roche Diagnostics GmbH and registered in Germany. Another note from Jonker’s EIT Digital KIC adds that the condition is “unreasonably and unnecessarily restrictive and stringent.”
New IP rules: “a dense veil of (legal) uncertainty”
A second objection of the KIC heads relates to changes to intellectual property rules, which the letter says threaten to remove the KICs’ autonomy.
The new FPA suggests the KICs – which until now have run autonomous IP policies – adopt one common IP policy. According to a note included by Jonker’s EIT Digital, “….[new IPR conditions] will drive away partners from the KIC”.
Currently, the EIT has an exemption, or “derogation” in EU-speak, from applying Horizon 2020’s IP rules in full, which the CEOs said is justified on grounds that a straightforward application of these rules to KIC business plans would lead to “burdensome requirements” on KICs and their 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.”
New IP terms and conditions come “clouded in a dense veil of (legal) uncertainty,” EIT Digital states. “The one-size fits all approach of the Horizon 2020 provisions does not fit the diversity of the KIC activities spanning, research, education, and business activities focused on innovation, and entrepreneurship."
Governance tweak: “totally unnecessary”
Within the legal structure of the EIT, the KIC is the main point of contact for partner organisations.
However, in the new set-up proposed by the FPA, all KIC partners will be required to sign an “accession form” with the EIT, which the letter says could give rise to “fundamental ambiguities”. This new arrangement “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,” a note from EIT Digital adds.
It is therefore essential, the writers urge, that the FPA restores the structure of today, where the KIC legal entity is the sole party to the FPA and ensures, via its own internal agreements, compliance to the FPA rules by its KIC partners.
The leaked letter is available here.
* This article was updated on Thursday, 17 September, at 14.45 to include the EIT's statement
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