IPR and Royalty Policies in Norwegian Defence Procurements
As global defence markets evolve and become more interconnected, understanding the regulatory environment of target countries becomes crucial. This is also true in Norway, where the management of intellectual property rights (IPR) and royalties in defence procurements has received increased attention in recent years. This article offers an overview of the essential guidelines and practices surrounding IP rights and royalty policies within the Norwegian defence sector.
The primary framework guiding the management of Intellectual Property Rights (IPR) and royalties within Norwegian defence procurements is detailed in a guideline titled "Overarching Policy for the Defence Sector's Management of Intellectual Property Rights and Royalties," adopted by the Norwegian Ministry of Defence on September 2, 2022. This pivotal policy is further integrated and elaborated in Chapter 24 of the Defence Sector Procurement Regulations (Anskaffelsesregelverk for forsvarssektoren - ARF), ensuring comprehensive governance and clarity in the sector's dealings with IPR and royalties.
The Background of the Policy
The longstanding triangular cooperation between the defence sector, the research community, and the defence industry has consistently resulted in high-quality deliveries of materials, services, and systems to the Norwegian Armed Forces. This collaboration has not only advanced Norwegian industrial companies, making them competitive internationally but also reinforced Norway’s contribution to capability development within NATO and supported a globally competitive defence industry.
Clarity and awareness around IP ownership and license rights are essential for both the sector and suppliers. This extends to the proper management and regulation of IPR in contracts, which is vital for maintaining predictability, goodwill, and efficiency in collaborations between the defence sector and the industry. The policy aims to guide sector agencies in appropriately leveraging both the sector’s and partners' IP in such contract negotiations for the benefit of the defence forces, the industry, and society at large.
The Default Rule of Non-Exclusive Licenses
A principal rule in defence procurement is that suppliers retain ownership of any IP created under a contract (foreground information), while the defence sector enters into non-exclusive licensing agreements. This arrangement ensures that the defence sector secures necessary usage rights without exclusive control over the IP, providing an economically favourable and needs-based solution. Exceptions may occur where exclusive rights or ownership transfer to the defence sector appears more economically favourable or necessary due to significant security considerations.
Foreground information can be crucial for future updates, maintenance, or re-acquisition in case a supplier ceases operations. The sector must retain the right to use such crucial information for potential future procurements and subsequent tender competitions, ensuring business secrets and sensitive information remain protected and available. Agreements must be explicit and not grant the defence sector the right to share such rights/information to third parties unless specifically agreed upon.
Royalty
As a general rule, royalties should not exceed 5% of the sales price of a product or components when the defence sector has funded development or procurement. The regulation is practiced such that royalty claims are generally waived once the sector's contribution is reimbursed. Specific contracts will determine when royalty payments cease.
Regarding IP developed by the defence sector itself, licensing agreements with the industry should reflect the requirements necessary for the sector to operate as a single market player, following state aid regulations. The defence sector is generally treated as one entity, meaning royalties are not demanded multiple times by different agencies. Royalty management for IP licensed to the industry is handled by the Norwegian Defence Research Establishment (FFI), while the Norwegian Defence Materiel Agency (FMA) manages royalty claims for developments financed through its investment procurements. Overall, royalty demands should not exceed 5% for the same product.
No royalty demands are generally made in research and development contracts if the defence sector's contribution does not exceed 5 million Norwegian Kroner, regardless of the financial source. Waiving royalty demands may be considered for small and medium-sized enterprises in the early stages of a development cycle or other relevant circumstances, with approval granted by the Ministry of Defence.
Concluding remarks
Navigating intellectual property rights and royalties within the Norwegian defence sector requires understanding the policies and regulations, such as the "Overarching Policy for the Defence Sector's Management of Intellectual Property Rights and Royalties" and the ARF guidelines. This knowledge is crucial for defence contractors entering or expanding in the Norwegian market, ensuring compliance and facilitating smoother negotiations.
The emphasis on non-exclusive licensing supports collaborative innovation and the shared use of advancements, aligning with Norway’s strategy to foster innovation while maintaining security. Adhering to these regulations is key for defence suppliers aiming to enhance their competitive edge and contribute to the sector's capability and resilience. Staying informed and adaptable to these guidelines is essential for success in Norway’s defence market.