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The First Deal Small Contract Terms with Big Consequences

The First Deal Small Contract Terms with Big Consequences. Lila Hope, Ph.D., J.D. Partner, Cooley LLP. What is a Contract? .

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The First Deal Small Contract Terms with Big Consequences

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  1. The First DealSmall Contract Terms with Big Consequences Lila Hope, Ph.D., J.D. Partner, Cooley LLP

  2. What is a Contract? An agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit (known as consideration). - lawdictionary.com. Simplified.

  3. Examples of Contracts • Social contract • NIH grant • Invention assignment agreement

  4. Typical Contractual Relationships of a Biotech Company Research license and product in-licenses Research collaborations; Sponsored research Corporate partnering (product collaborations) Employment and consulting agreements; CDAs; MTAs; services agreements Manufacturing agreements Clinical trial agreements Distribution agreements

  5. How to Think about a Contract? • What does it enable? • What does it obligate? • What does it prevent?

  6. How to Think about a Contract? • What does it enable? • Product license • Technology license • Option; Right of first negotiation • Technology and material transfer • What does it obligate? • What does it prevent?

  7. Example of a Product License • Licensor hereby grants Licensee an exclusive license, [with the right to grant sublicenses,] under the Licensed Patents and Licensed Know-How to research, develop, make, have made, use, sell, offer for sale, import and export Licensed Products in the Licensed Field in the Licensed Territory.

  8. Example of a Research License • Licensor hereby grants Licensee an [exclusive], [non-transferrable], [non-sublicenseable] license, under the Licensed Patents and Licensed Know-How to [conduct certain activities]. • Often combined with a commercial license to make, use and sell products resulting from such activities.

  9. Option vs. ROFN • Who is in the driver’s seat? • Duration • Consideration

  10. Right to Prosecute and Enforce Patents • Right to prosecute patents • First right • Back-up right • Right to enforce patents

  11. How to Think about a Contract? • What does it enable? • What does it obligate? • Diligence • Payments • What does it prevent?

  12. Diligence Obligations • Commercially reasonable efforts vs. best efforts • Diligence timelines • Delays beyond reasonable control • Alternatives such as maintenance fee and minimum spending obligation • Consequence of breach • Termination • Loss of exclusivity • Loss of Territory • Pay to extend

  13. Payments • Upfront license fee • Patent fees (who prosecutes?) • Milestone payments (whose activity?) • Royalty payments (which products?) • Sublicense revenue

  14. What is Included in Sublicense Revenue, and what is not? • Upfront payment • Payment for equity • R&D support • Manufacturing and other service fees • Milestone payments • Royalties • Allocation to technology • Sublicense vs. sale of assets

  15. How to Think about a Contract? • What does it enable? • What does it obligate? • What does it prevent? • Negative covenants • Exclusivity obligations

  16. Thinking about Exclusivity • Target exclusivity • Pathway exclusivity • Indication exclusivity • Scaffold-based exclusivity • Assay-based exclusivity • Period of exclusivity • Does exclusivity transfer? – Consider affiliates, collaborators and acquirors

  17. Thank You Lila Hope, Ph.D., J.D. Partner, Cooley LLP (650) 843-5735 LHOPE@COOLEY.COM

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