Collaboration agreements can turn competitors into contractually-controlled allies. Whether the scope of the project spans from initial lab scale-up, formulation development and stability testing through to obtaining regulatory approval; or to the much more focused compilation and on-licensing of technical files for use in registration dossiers, a well-structured Collaboration Agreement should allow for a dynamic alliance, while protecting valuable product rights and market access.
It is vital that the collaboration agreement is entered into between the correct contracting parties – that is to say, between the entities that actually own (or have full rights to use and exploit) the relevant intellectual property. A good example of where this can become an issue is when partnering with a university spin-out: in most cases, the intellectual property will be owned by the university and not by the spin-out body. Carrying out some legal due diligence before an agreement is negotiated can save a lot of time.
Agreeing the Scope
Defining what the parties want to achieve is the backbone of any collaboration agreement. At the outset, it is worth considering whether the development plan is to be fluid in nature and pitched in terms of ‘reasonable endeavours’ to reach an end point or to be more rigid, with fixed key milestones, target timeframes, defined project phases and quality standards.
It is worth considering what should happen if the development plan is not adhered to: for instance, what should happen if regulatory approvals are not obtained or commercial launch deadlines are not met? Either party may wish to include a right to terminate the agreement if certain goals aren’t met.
Managing the Project
It is not uncommon for joint steering committees to be appointed to manage the project. The drawback with such decision making is that development can grind to a halt because of the need for unanimity or the lack of clarity as to who controls which elements. To avoid this, it is worth considering the right to a casting vote in certain circumstances.
Intellectual Property is of critical importance. The parties generally agree to bring together their existing know-how, intellectual property and technology (known as ‘background IP’) with a view to creating new know-how, IP or technology (‘foreground IP’). This is typically a complex area, but here some of the issues to bear in mind:
- Licensing background IP. In many cases, one party will need a full and ongoing licence from an IP-owning party to use and exploit the background IP for the project and also to make full use of foreground IP (which is usually dependent on background IP). It is essential to consider the nature of such a licence: should it be royalty bearing? exclusive? transferable? Should there be restrictions in terms of duration, territories and use?
- Ownership of foreground IP. Where parties are jointly responsible for creating foreground IP, the key question is: who owns it? Joint ownership is generally to be avoided. In practice, it is preferable that one party has outright ownership and grants a full and ongoing licence to the other party. The issue of ownership will invariably be dictated by the respective bargaining positions and the nature of the project.
Regulatory and Patents
Collaboration agreements should be clear about what happens, for example, in the case of an adverse event report, and in the allocation of responsibility and costs in respect of obtaining and maintaining regulatory approval. Similarly, there should be clear allocation of responsibility and costs in respect of filing and maintaining patents for new developments, and for the prosecution, settlement and enforcement of patent and other IP rights, and infringement claims.
Looking to the future
It is not unusual for a party to a collaboration agreement to be acquired or to be the subject of future inward investment during the lifetime of the agreement. The agreement should be structured in such a way that potential mergers and acquisitions can be explored. It is sensible to address ‘change of control’ issues and whether this will have a bearing on the project, particularly in the case where an acquirer or investor happens to be a competitor.
It is worth noting that anti-bribery provisions in collaboration agreements are becoming ever more complex. This reflects the multi-jurisdictional nature of such projects, where the more stringent anti-bribery regulations will generally prevail. A good example of this is where an Irish company enters into a collaborative venture with a UK counterpart: it is generally the case that the Irish company will have to comply with the standard anti-bribery provisions of the UK partner.
What should you do?
Having dealt with many collaboration agreements across a wide range of industries, we find that anticipating and dealing with these key terms appropriately in a formal agreement can be critical to the success of a project. We have experience in helping clients to identify their key issues and our advice would be to plan ahead, anticipate the ‘road-bumps’ and thrash out the difficult issues before you begin!