Concept and definition of third-party funded research
Third-party funded research refers to research activities that are not exclusively financed by institutional core funding, but are significantly supported by financial resources from third parties. These third-party funds often come from private companies, foundations, public institutions, or funding organizations. Typical forms of third-party funded research include contract research, collaborative projects, or publicly funded research programs.
The distinction from core-funded research lies in the purpose and source of funds: While the core funding is intended to cover the general costs of research and teaching, third-party funds enable the implementation of specific, additionally conceived research projects.
Legal framework of third-party funded research
Legal framework in Germany
The conduct of third-party funded research takes place within a comprehensive legal framework, which is determined in particular by higher education law, copyright law, contract law, and relevant budgetary laws. Universities, research institutions, and their members are required to comply with the respective legal regulations.
University law regulations
The Higher Education Framework Act (HRG) and the higher education laws of the federal states regulate the general conditions for research and teaching at public universities. These include, among other things, provisions regarding the acceptance and use of third-party funds. According to § 41 para. 3 HRG, the acceptance of third-party funds requires the approval of the university management, provided it concerns university lecturers or other university members.
Budgetary and procurement law
Third-party funded projects at public universities are subject to budgetary regulations. In particular, proper accounting and use of funds must be ensured. Procurement law also applies, such as when procuring services or goods in connection with the research project.
Contractual aspects
The contractual structuring of third-party funded projects is usually done through individual third-party funding agreements. Key regulatory topics include:
- Subject matter and objectives of the project
- Duration and financing
- Work and results obligations
- Provisions regarding rights to research results (e.g., patents, know-how, copyrights)
- Publication rights and confidentiality
- Liability, insurance and withdrawal
In collaborative projects, special importance lies in the provisions concerning the transfer and use of rights to research results. Both antitrust law and data protection regulations must be observed in this context.
Copyright and patent law
Third-party funded research regularly generates works protected by copyright (e.g., scientific publications) or patentable inventions. According to the Employee Inventions Act (ArbEG), inventions arising within the scope of official research duties generally belong to the institution. The regulation of rights and their transfer to the third-party funding provider is a central element of the third-party funding agreement.
Copyrights initially remain with the natural persons (authors), but may be transferred for use to the institution or to third parties under transfer agreements. Particular attention must be paid to the principle of academic freedom under Article 5(3) of the German Basic Law, especially with regard to publication freedom.
Tax law aspects
By accepting third-party funds and providing research services, VAT obligations may arise. Research services within the scope of third-party funded research are subject to VAT under certain conditions. The classification is determined by §§ 1, 2, 4 of the Value Added Tax Act and the status of the institution.
Labor law particularities
For staff employed in third-party funded projects, specific labor law regulations apply. Fixed-term employment contracts are typical, the duration of which is linked to the project period (§ 2 para. 2 Act on Fixed-Term Contracts in Science – WissZeitVG). The financing of personnel from third-party funds requires contractual clarity regarding responsibilities, remuneration, and social security contributions.
Particularities of third-party funding law in an international context
International third-party funded research projects, such as those within the framework of EU programs (e.g., Horizon Europe), are subject to additional legal requirements, such as the EU state aid rules, the General Data Protection Regulation (GDPR), export control regulations, and international treaty obligations. Coordinating multiple legal systems (e.g., in consortia) requires detailed contractual agreements and legal review.
Transparency, compliance, and good scientific practice
Transparency obligations and disclosure
Research institutions are required, as part of accountability and transparency, to disclose the origin and scope of third-party funds. This applies both to internal controls and to informing the public. Relevant regulations can be found, for example, in the DFG’s guidelines for ensuring good scientific practice and in the respective compliance guidelines of the institutions.
Incompatibilities and conflicts of interest
To safeguard the integrity of scientific work, conflicts of interest must be avoided. Therefore, numerous guidelines and legal regulations provide for measures to disclose and deal with such conflicts, especially when members of the institution participate in third-party funded projects.
Publication obligation and confidentiality agreements
A key issue in the context of third-party funded research is the compatibility of publication freedom and any confidentiality requirements imposed by the third-party sponsor. A balance must always be struck in the interest of the fundamental right to academic freedom. Restrictions on publication freedom are only permissible in exceptional cases and require a contractual basis that complies with the law.
In the case of contract research for private companies, a publication embargo period is often stipulated to safeguard intellectual property rights.
Control, supervision, and sanctions
The legal control and supervision of the use of third-party funds is regularly the responsibility of the competent audit authorities as well as the internal and external audits of the universities. In the event of violations of legal requirements, repayments, freezing of third-party funds, or disciplinary measures may be imposed.
Summary
Third-party funded research is a central part of academic activity and is subject in Germany to a complex legal framework. The most important areas of law include higher education law, budgetary law, contracts, tax law, intellectual property law, and labor law. Particular attention must be paid to safeguarding academic freedom, transparency in handling third-party funds, and compliance with legal and institutional requirements. The legal structuring of third-party funded research therefore requires careful consideration of all relevant regulations and prudent contractual arrangements.
Frequently Asked Questions
What legal requirements apply when concluding third-party funding agreements?
Third-party funding contracts are subject to a variety of legal requirements, which in particular regulate the contract partners, funding conditions, durations, and the exploitation of results. In the legal context, it should be noted that, depending on the type of research institution (e.g., university, non-university research institution, or private company), specific regulations under public budget law, procurement law, or private contract law may apply. For public institutions, for example, the requirements of state higher education law, budgetary law, and principles on the use of funds are strictly binding. Compliance with current procurement regulations (especially for funded research involving several sponsors) must also be ensured. When concluding contracts, certain rights and obligations regarding intellectual property, publication freedom, as well as data protection and possible export controls are statutorily defined and must be adequately set out contractually. Internal company guidelines (e.g., compliance, ethical standards) and higher education law requirements must also be observed. External legal advice is generally provided in cooperation with the respective legal departments or contract offices of the institution.
Who is liable in the event of damage if errors occur as part of a third-party funded project?
Liability for damages arising in connection with third-party funded research is usually explicitly regulated in the third-party funding agreement. Generally, liability of the research institution or the project leaders can arise if contractual or legal obligations are breached culpably. In the case of public institutions, liability is usually limited to intent and gross negligence, while simple negligence is often excluded. In business-related third-party research, contracts often provide for further compensation claims by the client. It must also be assessed whether and to what extent insurance coverage (e.g., general liability, product liability) exists for cases of damage. For projects with multiple cooperation partners, contractual arrangements should be made regarding the allocation of liability, claims for compensation, as well as shared fault. Public clients may also require proof of insurance or provision of collateral for projects with larger volumes. For damages to third parties, general principles of civil liability (e.g., § 823 German Civil Code) apply, as well as specific provisions of the Product Liability Act or Environmental Damage Act.
How are intellectual property rights (IPR) and exploitation rights regulated in third-party funded projects?
The regulation of rights to research results is a central element of third-party funding agreements and is often the subject of intensive contract negotiations. In general, there are options for the transfer, joint use, or exclusive use of acquired intellectual property rights (e.g., patents, copyrights, know-how). For publicly funded research, the Employee Inventions Act is particularly relevant, regulating the institution’s claims to inventions reported by staff, as well as higher education regulations on exploitation. In joint projects, joint ownership or allocation based on the origin of the invention is often agreed upon. Contractual arrangements must also precisely allocate rights and obligations with respect to background IP as well as rights to later developments (foreground IP). Restrictions exist if public funding is tied to the requirement to provide results for broad scientific use (“Open Access”). Where results are commercially exploited, fees and profit-sharing arrangements can be established for institutions as well as for the researchers involved.
What data protection requirements apply to third-party funded research projects?
The handling of personal and sensitive research data is subject to strict data protection requirements. In Germany and the EU, the General Data Protection Regulation (GDPR) is decisive. As early as the planning phase of a third-party funded project, a data protection impact assessment must be conducted if there is a high risk to the rights and freedoms of data subjects. The contract with the third-party funder must specify whether the funder is to be classified as a controller, processor, or joint controller within the meaning of the GDPR. Contractual measures must be in place for data security, storage, transfer, and erasure (Art. 32, 35 GDPR). In addition, there are informational and disclosure obligations to data subjects, as well as strict requirements for consent or other legal bases (e.g., § 27 BDSG for scientific research). For projects with international partners, rules regarding the transfer of personal data to non-EU countries may also need to be observed. Finally, institutional or internal data protection concepts must be strictly followed and the relevant data protection officers involved.
Are there legal requirements for the publication and dissemination of research results in third-party funded research?
From a legal perspective, both funding and copyright requirements must be observed when deciding whether to publish results. For publicly funded projects, there may be an obligation to publish, especially if there is a legitimate interest by the general public, as the funder, in open dissemination of new scientific knowledge. In Germany, many funding bodies (e.g., DFG, BMBF) explicitly require prompt and adequate publication of results, often in accordance with open access principles. However, contract research may specifically stipulate that research results are to be kept confidential and may only be published with the sponsor’s consent. At the same time, certain copyright exceptions for scientific publications, such as the secondary publication right (§ 38 Copyright Act), must be considered. The duty to protect trade and business secrets of the sponsor or participating companies may restrict or delay publication. For international projects, export controls and embargo regulations must also be observed if sensitive technologies or findings are involved.
What rights of co-determination and reporting obligations exist towards one’s own institution?
Researchers are required to notify the relevant management of the institution (e.g., rectorate, dean’s office, institute management) before commencing third-party funded research projects. This serves, among other purposes, to monitor compliance with budgetary, ethical, and statutory requirements. In many federal states, there are specific notification obligations for universities pursuant to state higher education laws, according to which the acceptance of third-party funds requires approval. Staff representative bodies (e.g., staff council, equal opportunities officers) have co-determination rights concerning the employment of project personnel funded by third-party resources and their conditions of employment. In addition, internal review bodies (e.g., ethics committee, data protection officers) must be involved where special risks are present. Projects must also be subjected to a documented review of ethical and legal risks (particularly in the case of animal experiments, research involving personal data, or security-relevant research) before any contract may be signed. Non-compliance with these notification and co-determination obligations can have civil service and employment law consequences.
How are conflicts of interest legally addressed in third-party funded research?
There is an increased risk of conflicts of interest in third-party funded research, for example when researchers or management personnel have economic links to the third-party funder or pursue their own business activities in parallel. Legally, it is strictly required that potential conflicts of interest be disclosed and documented at an early stage. Higher education regulations and compliance guidelines require researchers to report and agree with their employer on any form of personal gain, such as from consulting or secondary employment. Public institutions typically have specific service regulations and secondary employment rules, non-compliance with which can result in disciplinary action, up to and including disciplinary measures. Participation in decision-making about third-party funded projects is prohibited in the event of a conflict of interest (exclusion from participation). Some third-party funders also explicitly require disclosure of entanglements and the researchers’ own financial interests as part of the contract to ensure transparency.
