checklist patent know how edward sang ell how to series 2004

8/14/2019 Checklist Patent Know How Edward Sang Ell How to Series 2004

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Patent / Know-How License Check List

BOSTON | FORT LAUDERDALE | HARTFORD | NEW YORK | PROVIDENCE | SHORT HILLS, NJ | STAMFORD | WEST PALM BEACH | WILMINGTON | LONDON

www.EdwardsAngell.com

Payment of Royalties When obligation to pay accrues When royalties are payable Currency royalties are to be paid in Where royalties are payable Interest on overdue amounts

Duties of Licensee Meet milestones Exploit patent rights Disclose improvements

Records and Reports Progress reports on milestones

Periodic reports itemizing basis for royaltycalculation or other payment

Records of accounts available forinspection

Infringement Claims arising from acts of Licensee Claims arising from acts of Third Parties Notice Litigation Recoveries

Improvements of Licensor Included/Not included?

Who will file patent applications? Who will pay costs? Assigned to Licensee? Jointly owned? (potentially very problematic)

Improvements of Licensee Included/Not included? Who will file patent applications? Who will pay costs? Assigned to Licensor? Jointly owned? (potentially very problematic)

Joint Improvements Included/Not included? Who will file patent applications? Who will pay costs? Assigned to Licensor? Assigned to Licensee? Jointly owned? (potentially very problematic)

Indemnification By Licensor By Licensee Insurance

Confidential Information Of Licensee Of Licensor Developed under agreement

Arbitration

Marking and Labeling

Term and Termination Effective date Expiration date Option to cancel prior to normal

expiration

Irrevocable Mutual consent Material breach Bankruptcy of Licensee

Force Majeure

Assignment of Agreement andLicense

Favored Nation Clause

Notices and Addresses

Integration

Language(For agreement with foreign languagelicensee)

Law Applicable

Headings

Schedules Included with Agreement Patent List Patent Applications Description or copies of related

documents Accounting Procedures for determining

sales, net sales, sale value of stock, orother property.

The hiring of a lawyer is an important decision that shouldnot be based solely upon advertisements. Before yodecide,ask us to send you free written information about ouqualifications and experience.

If you would like further information, contact anattorney with Edwards & Angell's TechnologyTransactions Group at 617-439-4444 or visit ouwebsite at www. EdwardsAngell.com.

Agreements take shape around the particular deal and the variety of terms and conditions is limited only by theimagination of the negotiators. Still, many terms will be common to most patent/know-how license agreements.A checklist of typical terms follows:

The Parties Names; Addresses; and States of

Incorporation Licensed Subsidiaries/Affiliates

Rights Owned Reservation of Rights by Licensor Licensor/Licensee (for cross license) Patents Applications Inventions Know-how

Definitions Licensed Product(s) and Licensed

Method(s) Territory Sales Net Sales Value Patent Rights Know-How Improvement(s) Licensee Licensor Subsidiary/Affiliate Technical Personnel Other

Grant Clause Exclusive or non-exclusive Right to make, to have made, to use,

to have used, to sell, have sold, to lease,have leased

Right to sublicense Government rights

Consideration Mutual Promises Payments Time-shifted payments Settlement/Dismissal of Litigation Cross Licenses Other

Royalties Initial payments Percent of net or gross sales Fee per unit made, sold or used Sliding scale Lump sum Minimum royalty Maximum royalty Reduction in royalty

- stacking- compulsory license

Royalty free

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Protecting and Enhancing the Respective IP Rights ofBig Pharma and Biotech Collaborators


1. To determine the respective IP rights in a Collaboration, look to thepurpose of the Collaboration1.1. Leverage contributions and resources of each party to create new value1.2. Provide each party with appropriate resources after collaboration to ac-

complish its business goals beyond collaboration

2. Typical Non-Financial Contributions to a Collaboration2.1. Pharma

2.1.1. Technology2.1.2. Expertise2.1.3. Ability and resources to effectively leverage technology (e.g., de-

velopment, manufacturing, regulatory and sales expertise)2.2. Biotech

2.2.1. Technology (often cutting edge)2.2.2. Expertise2.2.3. Patent portfolio2.2.4. Specialized talent2.2.5. Sizzle

3. Typical Non-Financial Goals of Collaboration3.1. Pharma

3.1.1. Access to patents or know-how3.1.2. Obtain rights in broad field3.1.3. Access to technology3.1.4. Flexibility to exploit collaboration IP to research, develop and mar-

ket products3.2. Biotech

3.2.1. Freedom to conduct and grow business beyond collaboration3.2.2. Retain rights in a broad field3.2.3. Leverage expertise of Pharma to develop in-house expertise3.2.4. Access to global distribution and marketing3.2.5. Marque name to raise profile

4. What technology does Pharma look to access?4.1. Know-How (existing/ ongoing)4.2. Materials4.3. Equipment4.4. Compounds and biological materials4.5. Information, data and methodologies4.6. Patents4.7. Copyrights4.8. Trademarks

5. What IP protection does Pharma look for?5.1. License or other rights5.2. Exclusive rights in a Field5.3. Licensee will want to control patent prosecution and enforcement to the

extent that they affect field5.4. May lead to requirement to exercise diligence to exploit technology5.5. Non-exclusive rights5.6. Freedom to operate5.7. Co-exclusive vs. sole license5.8. Sharing licensed rights with one other competitor/ with licensor5.9. Background technology developed outside of collaboration versus

foreground inventions

6. To protect the IP, you need to examine intended use of technology6.1. Research Tool

6.1.1. License likely to be non-exclusive6.1.2. Issues typically limited to those associated with research phase only6.1.3. Compensation not likely tied to specific product

6.2. Target6.2.1. Technology necessary for discovery or development of a product6.2.2. Agreement needs more extensive definition of technology6.2.3. Agreement needs to address particular uses of technology6.2.4. Breadth of target definition (e.g., antigen versus antibody)

6.3. Compound6.3.1. More closely associated with a product6.3.2. Field definition6.3.3. More likely to need to address development and post-clinical/

marketing issues

7. IP Rights may be different at Different Stages7.1. At Research Stage, look at:

7.1.1. Who is funding the research?7.1.2. Who is performing the research?7.1.3. How is collaboration structured joint collaboration or hands-off?7.1.4. Is there joint and sole inventorship?7.1.5. Are there pre-existing restrictions on use?7.1.6. Are these improvements to pre-existing technology?

7.2. At Development Stage (pre-IND - NDA filing), look at:7.2.1. Who controls IND?7.2.2. Who is performing the clinical trials?7.2.3. Who controls and/or has access to the data?7.2.4. Who controls interactions with the FDA, other regulatory agencie

during clinical trials?7.2.5. Who will be manufacturing clinical materials?

7.3. At Post-development Stage (approval, marketing and sale), look at:7.3.1. How are we structuring sale e.g., co-marketing, co-promotion

rights?7.3.2. Who owns NDA/ controls interaction with the FDA?7.3.3. Right of cross-reference to NDA?7.3.4. Who is responsible for post-approval studies?7.3.5. Who will be manufacturing?7.3.6. Trademarks?7.3.7. Patent marking7.3.8. Patent term extension?7.3.9. Orange Book listing?

8. Source of Capital may determine IP rights8.1. Money issues may determine structure of collaboration independently from

IP rights8.2. Sharing of profits8.3. Sharing of costs8.4. Straight milestones8.5. Royalties

9. Need to protect Patents, Confidential Know-How and Trade Secrets9.1. Make provision for diligent and timely disclosure of inventions9.2. Obligation to disclose should be limited to scope of collaboration

and license9.3. Limitation on use of trade secrets9.4. Agreement must include confidentiality clause maintaining confidentialit

of know-how9.5. If exclusively licensed, Licensor must maintain confidentiality of license

know-how9.6. Licensee should be aware of who has access to potential information and

require appropriate security measures.9.7. Maintaining security of biological materials and biological data is essentia9.8. If exclusively licensed, licensee should consider seeking to assure physica

control over all biological materials

10. Improvements to defined technology10.1. Defining each partys technology10.2. Who owns jointly applicable technology

10.2.1. Can be resolved through licensing, but remains potential issue otermination

10.2.2. Joint ownership is difficult to manage and therefore needs to becarefully handled

11. Pitfalls of Joint Ownership11.1. Collaboration may lead to joint inventorship under patent laws or join

ownership under agreement11.1.1. Temptation in the name of fairness, ownership of any patent

becomes joint.11.1.2. Problem While this seems reasonable it can lead to significan

issues11.2. Pitfall One Joint Owner cannot grant an exclusive license11.3. Pitfall Two - Joint Owner cannot properly prosecute infringers11.4. Pitfall Three In a collaboration, jointly-owned improvements threate

ability to operate exclusively

12. Third-party rights12.1. In-licenses from third parties12.2. Licensee needs to understand licenses granted by licensor to third partie

or restrictions on principal license to licensor being sublicensed


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Intellectual Property Basics


Patenting Process Typical Case:

A) Invention is conceivedB) Invention is reduced to practiceC) Conception and reduction to practice must be documentedD) Notebooks and Reports must be generated regularly and

documentation independently witnessedE) Complete an Invention Disclosure FormF) Patentability search is conductedG) Patent counsel writes patent application and submits

to the US Patent & Trademark OfficeH) Application receives serial number and awaits

publication and examinationI) Publication of Application occurs 18 months after filingJ) Patent Examiner reviews Application and searches prior artK) Examiner issues two office actions

L) Applicant replies to any rejectionsM) Patent issues 2 to 3 years after filingN) Issued term is 20 years from filing dateO) If finally rejected- appeal to the board of appeals or court

Patent Infringement and Avoidance:A) Focus is on the Patent Claims

i) Claims must particularly point out and distinctly claimthe invention

ii) Like a deed that describes real estate, patent claimsdefine the practical invention

B) Literal Infringementi) Occurs if the accused product literally meets every element

of a patent claimC) Infringement by Equivalentsi) Occurs if the difference between claim elements and the

accused patent elements are not substantially differentii) Occurs if the accused product does substantially the

same thing, in substantially the same way, and achievessubstantially the same results, there may be equivalence

iii ) Prosecution history of the patent may affect infringe-ment by equivalents

Designing Around Patents:A) Legitimate Use of Patent SystemB) Avoid Infringement

i) Avoid an element required by claimsii) Use substantially different elementiii) Use product shown in prior artiv) Use product having element disclaimed in patent

disclosure or prosecution


Patents

Definition:A) Grant by Federal Government (Act 1 8, US Constitution)B) To the original and first inventorC) To exclude others from making, using, selling, offering toC) sell or importing the claimed inventionD) For a limited period of time

Requirements for Patent Protection:A) Novelty

i) Claimed invention must be newii) Not invented by someone else who had not

abandoned itiii) Not published, publicly known by others before the

invention for more than one year before application

filing date in the U.S. (All other countries: ABSOLUTENOVELTY must file patent application before publicdisclosure or offering for sale)

B) Non-Obviousnessi) If any difference, there is a chanceii) Look for Examiner to combine teachings of different

references but must suggest an obvious combinationiii) Evidence of Non Obviousness

- Unexpected results- Solve long standing problem- Adopted by the Industry- Commercial success- Copying by others

C) Patent Disclosure

i) Must describe the invention, show what informationthe inventor possessedii) Must enable those skilled in the art to make and use

the inventioniii) Must not hide the best mode of practicing the

inventionD) Utility

i) Invention must have a distinct practical useii) No requirement to be better than prior approachiii) Alternative Approach is enough

TrademarksCopyrights

Patents

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TrademarksDefinition:A) Word, slogan, design or symbol which is used to identify and

distinguish the source of goods or servicesB) Examples:

Kodak (brand film)Coca Cola (bottle shape)Teflon (brand polytetrafluoroethylene)

C) Marks which cannot be registered- Language which means or suggests the product- Mark which is primarily a surname- Mark which is merely descriptive- Mark which is geographically misdescriptive

- Mark which, when applied to the goods or services, is soclose to an existing mark as to cause a likelihood ofconfusion as to source

Process for Acquiring:i) Common law trademark rights start when you start using a

mark to identify your goods or services. Can be registered inindividual States where in use

ii) Federal Registration requires use in interstate or foreigncommerce, or intent to use in interstate or foreign commerce

iii) Look for earlier (superior) rightsiv) Trademark search services choose a number of acceptable

marks, then conduct a preliminary search, then a full searchon the ultimate candidates

v) Can oppose or cancel competitors marksvi) Litigation for injunction and damages

Trademark Infringement:i) Infringement is the use of a mark which is so similar to a prior

or registered mark that the use is likely to cause confusion,cause mistake or deceive

ii) Usually proven by survey evidenceiii) Counterfeit goods are intentionally marked to deceive

CopyrightsDefinition:A) Exclusive federal legal right to exclude others form reproduc-

ing, adapting, distributing to the public, perform in public ordisplay in public a literary, musical or artistic work

B) Protects the means of expression of the work, not the ideaexpressed

Requirements:i) Requires original and somewhat creative work of authorshipii) Original work must be fixed in a tangible form of Expressioniii) Titles, names, short phrases, slogans are not protectable by

copyright

iv) Can be derivative work need permission from any copyrightholder of original work

v) Claimed by author or worker for hirevi) Federal Registration required before federal litigationvii) Registration lasts for the life of the author plus 50 years

(75/100 for works made for hire)viii) Copyright Notice: 2000 David G. Conlin

Not absolutely necessary, but desirable Should be placed at the beginning of the work

Process of Acquiring Registration:i) Complete and/or publish a workii) File an application with the U.S. Copyright Officeiii) Easy, inexpensive and quick

Copyright Infringement:i) Substantial copying of a copyrighted workii) Proof usually involves showing:

Substantial similarity between the accused product and thecopyrighted work, and access to the copyrighted work

ANATOMY OF A PATENT

A patent has several sections and may seem more complicated and con-voluted than it really is unless you understand how a patent is struc-tured. A brief description of the sections found in a typical U.S. LettersPatent follows.

A patent includes a specification and claims. The specification is that partof a patent which precedes the claims. The specification usually includes:an Abstract, Drawings (optional), Background of the Invention section,Summary of the Invention section, Description of the drawings section(optional), Detailed Description of the Invention section, Examples (op-

tional), and Claims.The Background section typically describes, e.g., what others have donein the field, and what problems have not been solved by this prior work,to provide a setting for the invention claimed in the patent. The Sum-mary of the Invention section of the patent should give a broad over-view of the invention and, thus, provide a structure for understandingthe Detailed Description and the Claim sections of the patent.

ABSTRACT

The abstract of the invention is found of the first page of the patent andcontains a very brief description of the invention.

DRAWINGS

Drawings are optional but are often present.

BACKGROUND OF THE INVENTION

This section describes the state of the art in the particular technical areato which the patent relates and what problems remain to be solved ordisadvantages accompany the prior art solutions.

SUMMARY OF THE INVENTION

The summary of the invention describes the invention overall, e.g., thepurpose of the invention, problems solved, advantages offered, and soforth.

DETAILED DESCRIPTION OF THE INVENTIONThis section describes in detail what the invention is and how it is madeand used. Examples showing how the invention works in a particularapplication may or may not be present.

CLAIMS

The patent ends in claims. The claims define the invention which thepatent owner holds as his or her exclusive property for the duration ofthe patent and has the right to exclude others from making, using, andselling. The claims of a patent are analogous to the boundaries set forthin a real estate deed, both specify the scope of ownership in a piece ofproperty, one intellectual property and the other real property.

Guide. Advise. Protect.

The hiring of a lawyer is an important decision that should not be based solely upon advertise-ments. Before you decide, ask us to send you free written information about our qualificationsand experience.

If you would like further information contact an attorney with Edwards & Angells

Intellectual Property Group at 617.439.4444 or visit our website atwww. EdwardsAngell.com.


5/12BOSTON | FORT LAUDERDALE | HARTFORD | NEW YORK | PROVIDENCE | SHORT HILLS, NJ | STAMFORD | WEST PALM BEACH | WILMINGTON | LONDON


E-files International Application

with USPTO

USPTO - Madrid Protocol Unit (MPU)

a. Reviews International Application (IA) for compliance withminimum filing requirements

b. Certifies IA is the same as basic U.S. application/registration

c. E-files IA with WIPO

d. 2-month deadline from filing date of IA for USPTO to certify andfile IA with WIPO

Folio 3

U.S. Trademark Owner Seeking InternationalProtection Under Madrid Protocol

WIPO

Reviews International Application for Compliancewith International Filing Requirements

Notice to USPTO of Informalities a. Issues International Registration

b. Sends Request for Extension Protection(REP) to Designated Countries

USPTO

a. Informs Applicant

b. 3 Months to Correct Informalities

c. Response period runs from the time setforth in the notice from WIPO.

Designated Country

12 or 18 - month examination period to

refuse REP on all grounds.

NO YES


6/12

The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide,ask us to send you free written information about our qualifications and experience.

If you would like further information, contact an attorney with Edwards & Angell's Intellectual Property

Practice Group at 617-439-4444 or visit our Web site at www. EdwardsAngell.com.

Foreign Trademark Owner Seeking ProtectionIn The United States


File International Application with Office of Origin

Office of Origin(Same Function as USPTO - Madrid Protocol Unit)

WIPO(Same As Front)

NO YES

Notice to Office of Origin of Informalities a. Issues International Registration

b. E-Files Request for ExtensionProtection (REP) to USPTO

Informs Applicant

APPROVEDFOR PUBLICATION

Ex Parte Appealor Abandonment

All Grounds for OppositionMust Be Raised Within

120 Days of thePublication Date

NOOPPOSITION

USPTOSubstantive Examination18 month examination periodto refuse REP on all grounds

YESOPPOSITION

Grant of ExtensionProtection Only onPrincipal Register

NO


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Trademark Selection and Registration Process



Appropriate use Maintaining Policing

Goods or Services Identified

Prepare and fileFederal trademark application

Prosecution of application inU.S. Patent & Trademark Office

Possible opposition

Registration

Approved for publication___________

Publication for opposition

Select Potential Marks___________

Carry out clearance searches and select mark(s)to be registered; register Domain name(s)

Folio 4


8/12


If you would like further information, contact an attorney with Edwards & Angell's Intellectual Property

Practice Group at 617-439-4444 or visit our Web site at www. EdwardsAngell.com.


International Classification System

001 Chemicals used in industry, science, photography,agriculture, horticulture and forestry.

002 Paints, varnishes, lacquers.

003 Cleaning preparations, cosmetics, dentrifices.

004 Industrial oils, lubricants, fuels, candles.

005 Pharmaceuticals, medical plasters, materials for dressing,fungicides, herbicides.

006 Common metal and their alloys, metal building materials,small items of metal hardware.

007 Machines, machine tools, agricultural implements.

008 Hand tools; cutlery; side arms.

009 Scientific, electrical, computer equipment and apparatus.

010 Surgical, medical, dental and veterinary apparatus andinstruments, artificial limbs, eyes, and teeth.

011 Lighting, heating, refrigerating, cooking, ventilatingapparatus and equipment.

012 Vehicles by land, air, or water.

013 Firearms, explosives.

014 Precious metals and their alloys, jewelry.

015 Musical Instruments.016 Paper goods, printed matter, photographs, artists materials,

paint brushes.

017 Rubber materials, plastics for use in manufacturing,insulation materials.

GOODS

018 Leather goods, traveling bags.

019 Building materials not made of metal.

020 Furniture, mirrors, picture frames.

021 Household or kitchen utensils and containers combs andbrushes; sponges, glassware, porcelain and earthenware.

022 Ropes, string, nets, tents, awnings, tarpaulins, sails, sacksand bags.

023 Yarns and threads.

024 Textiles, fabrics, beds and table covers.

025 Clothing, footwear, headgear.026 Lace and embroidery, ribbons, and braid; buttons, hooks

and eyes, pins and needles;

027 Carpets, rugs, mats and matting, linoleum floor coverings.

028 Games, toys and playthings, gymnastic and sporting goods.

029 Meat, fish, poultry and game, dairy products andprocessed foods.

030 Coffee, tea, cocoa, sugar, rice, tapioca, sago, artificialcoffee, and other staple goods.

031 Agricultural, horticultural and forestry products and grains,live animals, fresh fruits and vegetables.

032 Beers, mineral and aerated waters and othernonalcoholic drinks.

033 Wine, liquor and other alcoholic beverages.

034 Tobacco products and matches.

The following is a partial listing of the goods and services listed in each International Class. For a complete listing ineach class, please refer to 37 C.F.R. 6.1.

035 Advertising, business management and administration.

036 Insurance, financial, investment and real estate.

037 Construction; repair, installation services.

038 Telecommunications.

039 Transport, storage, and travel arrangement services.

040 Manufacturing and treatment of materials.

041 Education, training, entertainment, sporting and culturalactivities.

042 Computer, scientific, technical, research and legal services.

043 Restaurant and hotel services.

044 Medical and veterinary services, beauty care services, andagriculture, horticulture and forestry services.

045 Personal and social services.

SERVICES


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Financing the Life Science Company



Financing the early stage life sciences company can be difficulteven for seasoned veterans. Here are some sample issues toconsider:

1. Founder Financing

1.1. Accounting for Founder Money Debt or Equity Debt risks subordination by later investors. Equity risks the imposition of vesting by later investors. Valuation issues for contribution of IPR and other property. Easier to attract outside financing if company, not founder,

owns IPR. Structuring shares to minimize taxation.

1.2. Agreement Among Founders Control of company. Right of first refusal on shares. Estate planning.

Voting trusts and proxies. Tag along and drag along rights for liquidity. Registration rights for liquidity. Active Founders vs. passive Founders. Anticipate issues that will arise later in VC financed deal.

2. Government Financing

2.1. Pros No equity dilution. Funding decisions are usually based on technology and not on other

factors. Often, easier to obtain than venture money.

2.2. Cons

Auditing requirements. Government retains rights to intellectual property. Politics need to be considered. Restrictions on ability to do business, e.g., manufacturing.

2.3. Some Types of U.S. Government Funding SBIR ATP NIH

3. Corporate Financing

3.1. Different Motivation Than Venture Capital Funds Looking to access technology and resources, so motivation is

strategic, not financial. The investment is a spyglass for a potential acquisition. Financing corporation may be looking to support complementary

technologies.

3.2. Common Deal Issues License. Equity. Royalties. Milestones. Collaboration. Ownership of IPR. Co-marketing/co-promotion. Supply. Right of refusal to buy the company.

3.3. Pros Corporate investor may be less focused than a VC on achieving

liquidity. May appreciate scientist-run company.

Looking for the research sizzle. Typically financing corporation looks for a non-controlling equity

interest (less than 20%). Additional support may be possible, eg, shared resources. Cache/credibility from being associated with well-known

corporate investor. Creates an independent validation of technology for venture

investors.

3.4. Cons Corporate investor may not want a liquidity event. Can restrict marketability of IP and product development. There may be short-term pressure on milestones. Subject to whims of internal politics, i.e. who is your champion? Presence of large corporate investor can make other companies

wary of doing business with you.

4. Angel Financing

Can sometimes be hard to find Terms of investment can range from simple terms to VC like terms Be aware of the Active Angel vs. the Passive Angel

5. Venture Financing

5.1. Six Things VCs Look for - Good management. Large and expanding market. Good technology and barriers to entry. Understanding of the Golden Rule.

The Liquidity Event.Repeat- Good management.

5.2. What you Should Look for in a VC Experience in the industry. A partner to provide guidance. Contacts. Financial ability to grow the company through finance multiple

rounds of finance. Other partners and relationship with those other partners.

5.3. Terms of VC Investment Valuation. ROI-protection devices, eg, liquidation preference, antidilution

clauses.

Dividends. Decisional control issues eg, Board seats, restrictive covenants. Milestones for investment. Measures targeted at exits/liquidity - registration rights, tag along

and drag along. Information rights. Demand for experienced management. Employee agreements, restrictions, and incentives.

5.4. Liquidity Event Sale or merger Initial Public Offering

Folio 5


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Guidepost No. 1:Technology is only part of the puzzle.

If founders understand that good technology is never suffi-

cient by itself for business or financial success, they will be onthe road to establishing credibility in the eyes of investors.

Guidepost No. 2:Do your homework.

Prepare a business plan. No one will invest without it. Transfer

ownership of IPR to the company. Founders who retain owner-

ship will not be funded. Take care of IPR basics (eg, assign-

ments of invention, patent applications where appropriate, etc.).

Clean up the companys prior history when needed. Anticipatetax issues of founders so that they dont impede a financing.

Get experienced advisers.

Guidepost No. 3:Plan for and obtain experienced management

personnel.

Where specific management experience is lacking, the Scien-

tist turned CEO must quickly hire personnel who have done-

it-before credibility. Also, although an elaborate managementteam is not critical at the earliest stages, a plan for hiring that

team needs to be in place to present to the investors.

Increasingly, Scientists are leaving academia to run companies that exploit discoveries made by those sameScientists when they were in academia. When founding a new company, however, the Scientist-turned-CEO facesa new and unfamiliar environment. The pleasures of scientific research are often replaced by the executive tasks

of meeting the demands of boards, stockholders and the market. If the Scientist is to gain the confidence of futureinvestors, such as venture capitalists, he/she must demonstrate not only first rate technology, but an understand-ing of and capability for leading the company to a successful liquidity event (i.e., an initial public offering or asale). Here are some guideposts for managing and driving that process:

Guide. Advise. Protect.

The hiring of a lawyer is an important decision that should not be based solely upon advertise-ments. Before you decide, ask us to send you free written information about our qualificationsand experience.

If you would like further information, contact an attorney with Edwards &Angell's Technology Transactions Group at 617-439-4444 or visit ourwebsite at www. EdwardsAngell.com.

From Scientist, to CEO, to Funding: Guideposts for Success


Guidepost No. 4:Hit your targets. And, get deals done.

You will generate credibility if you not only hit and achieve

the goals and targets you have set, but also if you can dodeals with third parties. These will validate your technology

and also demonstrate that your team has management skills

Guidepost No. 5:Establish an Advisory Board.

Boost credibility through a well-chosen scientific or business

advisory board. However, the luminaries on your advisory boards

will do little to ignite the company if they sit on too many othe

advisory boards or do not practice in a field related to thecompanys business.

Guidepost No. 6:Know which battles to fight. Learn how VC deals are

negotiated and structured.

In seeking VC financing, you have to know how VC deals are

done and how VCs are motivated. For example, if you know

that VCs always need and obtain a particular contractua

right in their deals, then you know not to waste your and theitime by fighting a battle on such contractual rights.


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Manufacturing and Supply Agreements



Issue List1. Types of Supply Agreements

a. Requirements Contracts

b. Exclusive Supply Arrangementsc. Nonexclusive Supply Arrangements

2. Basic Issues in Supply Agreements from Buyer

a. Can supplier meet buyers needs

b. Pricing mechanism

i. Fixed Pricing for Initial Period

ii. Pricing Based on Cost Build Up Model

iii. Discounts based on Volume

iv. Goal is to reduce contract price over time and

increased quantity

v. Payment Terms

vi. Price changesc. Supply and sourcing of raw materials

i. Who supplies

1. Customer

2. Approved list of suppliers

ii. Quality concerns

iii. Storage standards

iv. Shelf Expiration

v. Maintenance of inventory

d. Place of Manufacture

i. Where (Us or non-US)

ii. Access rights for customer

e. Human resourcesi. Training

ii. Offices to be maintained

iii. Are their special skills that customer will need if there is a

termination so that supplier should waive employment

restrictions

f. Quality control

i. cGMP

ii. ISO 900X

iii. Q&A procedures

1. Who monitors?

2. Who supervises?

3. Inspections

a. Audit rights for customer

b. One per year

c. Increased frequency when issues arise

4. Certifications

5. Reports of all FDA, OSHA and other regulatory inspections

g. Performance Metrics

i. Need performance metrics in an exclusive supply agreement

ii. Measure items such as quality, timeliness, forecasting, etc.

iii. Use of committee to resolve issues in performance before

termination

h. Shipping

i. Special procedures

ii. Import/exportiii. Who pays freight, insurance and other costs

iv. Ship to customer?

v. Regulating quantities and delivery to reduce inventory

i. Insurance

i. Product liability

ii. General liability

iii. Certificate of Insurance naming additional insureds/loss

payees

j. Acceptance Testing and Rejection

i. Evaluation Team

ii. Notice of Rejection

iii. Dispute Resolution1. Independent Laboratory

2. Other?

k. Intellectual Property

i. Buyer seeks to own all intellectual property rights to be able

to terminate contract and/or seek alternative supplier

ii. Manufacturer seeks to retain ownership of IP to permit future

business

iii. Ownership or IP vs. Licensing

iv. Who owns improvements to underlying technology?

1. Process Technology

2. Product Improvements

v. Confidentiality Provisions

vi. Representation that supplier will not use any third part

intellectual property into the manufacturing process unless it

has a valid and continuing license to do so covering all aspect

of the supply terms.

l. Technical Data and Information

i. Maintained as secure

ii. Owned by Customer

iii. Customer seeks to have up to date version

1. Can escrow arrangements be stalled in disputes or in

bankruptcy

iv. Supplier seeks to maintain rights to data to protect its

competitive position

m. Product warranties

i. Recalls

1. notice

2. who handles?

3. who pays?

4. notice to regulators

ii. Inspection

1. Timing of Inspection

2. Keyed in to when warranty commences

iii. Warranty runs from drop ship or later date?

1. When can warranty be tested?

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If you would like further information, contact an attorney with Edwards & Angell's Technology

T ti G t 617 439 4444 i it W b it t Ed d A ll


Manufacturing and Supply Agreements (continued from front)

n. Problem resolution and escalation

o. Assignability

i. Can the agreement be assigned?

ii. Cover all forms of assignment including change of control

p. Rights of Termination and Effect of Termination

i. Is there a right to seek alternative source of supply without

terminating?

q. Competitors

i. Can Supplier manufacture for a competitor?

ii. Acquisition of Supplier by a competitor

r. Indemnity

i. Types

1. Patent Infringement

2. Product Recalls

3. Product Warranty

4. Breach of Contract

5. Product Liability

6. Personal and Property Injuryii. Consequential, Loss Profits, Incidental, Attorneys Fees

1. Include or exclude?

iii. Caps on liability

1. e.g., annual purchases

2. contract amount

3. insurance limit

iv. Time for making a claim

1. Make sure that the warranty runs into the period where

the product will be used

s. Hazardous Waste Disposal

t. Taxes and tariffs apportionment

u. Federal and state (and non US if applicable) registrationsv. Standard Boilerplate

3. Utilize forecasting mechanism to eliminate disputes, for example:

a. Estimates by buyer for coming year

i. Annual, quarterly and monthly?

ii. Binding or nonbinding

1. e.g., nonbinding quarterly and binding monthly

b. Binding purchase order forecasts made on predicted calendar

basis, no penalty on supplier for late delivery of amounts in excess

of forecast

c. Is there a provision for providing a percentage variation between

orders and the forecastd. Lead time provisions

i.How long is the lead time for orders?

ii.Can the buyer cancel if outside the lead time?

4. Special Pricing Provisions

a. In a development transaction, actual price for sale of product

cannot always be set up front.

b. Therefore, parties sometimes use a pricing formula

c. Attached formula contemplates a fully loaded manufacturing cost

plus a profits percentage

5. Change Control Procedures for changes in arrangements

a. New products

b. Improved products

c. Regulatory changes

d. Change of raw material supplier

6. Emergency and Loss Control Procedures (e.g., catastrophe, loss of

power and fire back up)

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