Published on BioQuest Innovations Inc. (http://www.bioquestinnovations.com)

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Emerging Biotech Company Issues:

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Intellectual Property (“IP”) & Patents:

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Emerging Biotech Company Issues

Intellectual Property ("IP") and Patents

Licensing and Strategic Alliances

What is a license?
A license is a contract with an external party giving it the right to make, use, sell, and/or export your intellectual property. Licenses can be exclusive or non-exclusive, and rights can extend to one, some, or all applications or fields of the technology.

What are the pros and cons of licensing?
There are many potential benefits of licensing, including licensing income, continued development and/or commercialization of the technology or product with no capital investment requirements, market access with no capital investment, feedback on the value of the licensed intellectual property, payback of development costs, as well as the benefits of business partnerships established and/or strengthened as result of the license arrangement.

However, licensing requires a range of demanding activities, including strategic planning, targeting of potential opportunities, due diligence, preparation of supporting material, contact with potential partners, negotiation and management of deals both pre and post-completion. Failure by the licensor to conduct these activities with adequate proficiency can have disastrous results. For example, if a biotech company licenses a third party to use a technology or product candidate, and it fails to carry out sufficient due diligence before giving the required warranties, the biotech company could end up having to repay its license fees in damages for breach of a warranty claim.

Is a detailed term sheet necessary to complete a license or strategic alliance?
A term sheet will ensure a common understanding of the key aspects of the transaction by all parties in the early stages of the deal, which will help prevent it from falling apart at a later, more costly stage. Term sheets may include a limited period of exclusive negotiation, but typically, they should otherwise be non-binding.

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