HEAD OF AGREEMENT STRUCTURE

Lilibeth González Grisales Group: 212032_11 21-April-2024

Head of agreement structure

License options Definition: A license option is a provision within an agreement that gives the licensee the right, but not the obligation, to negotiate and potentially obtain a full license to use the licensor's intellectual property (IP) in the future. The option is usually granted upon signing the agreement. For example: Imagine Acme Pharmaceuticals, a pharmaceutical company, has developed a revolutionary new drug to treat a rare and debilitating disease. Beta Biosciences’, another pharmaceutical company, is interested in potentially licensing the drug for marketing and distribution. However, Beta Biosciences’ wants to conduct more research and evaluate data from the drug's clinical trials before committing to a full licensing agreement. License option: To address Beta Biosciences’ concerns, Acme Pharmaceuticals may offer them a licensing option. This option would give Beta Biosciences’ the exclusive right to negotiate a full license for the drug within a specified time frame, typically 6 to 12 months. During this option period, Beta Biosciences’ would have access to the drug's clinical trial data and could conduct its own research to evaluate its potential.

Group 3

Option term on license

Definition: The license option term is an integral part of the license option. Defines the time the licensee has to conduct due diligence, evaluate the technology, and decide whether to proceed with a full licensing agreement. This deadline is crucial for both parties:

• For the licensee: Provides sufficient time to evaluate the potential value and viability of the intellectual property for its business objectives.
• For the licensor: it allows you to maintain control over the intellectual property while giving the licensee a fair opportunity to evaluate it.

For example: Consider the scenario mentioned above, the option term could be set at 6 to 12 months. During this period, Beta Biosciences’ would have 6 months to thoroughly review the drug's clinical trial data, conduct its own research, and evaluate its market potential. This option term serves as a clear timeline for both parties, ensuring that Beta Biosciences’ has sufficient time to make an informed decision while Acme Pharmaceuticals retains control over the intellectual property until a full license is negotiated.

+ info

Right of first refusal

For example: Acme Pharmaceuticals may offer Beta Biosciences a license option with an additional clause that includes the right of first refusal (ROFR). This clause would establish that: If, during the 6 to 12 month option period, Acme Pharmaceuticals receives a genuine (good faith) offer from another pharmaceutical company interested in licensing the drug, Acme Pharmaceuticals must first offer the same license to Beta Biosciences. And Beta Biosciences would then have a defined period (for example, 30 days) to decide whether to: Accept the offer: If Beta Biosciences is ready to move forward, it can accept the offer and negotiate the final license agreement with Acme Pharmaceuticals. Reject the offer: If Beta Biosciences is still evaluating the drug or is not ready for a full license, you can reject the offer. If Beta Biosciences accepts the offer, Acme terminates the license agreement with them and if Beta Biosciences rejects, Acme Pharmaceuticals can continue negotiations with the other interested party.

Definition: Contractual clause that gives the licensee the first opportunity to acquire a license if the licensor receives a bona fide (good faith) offer from another party. Therefore: • The right of first refusal gives the licensee priority in negotiating a license if someone else shows interest. • The second party's offer must be comparable in terms (such as price and conditions) to the offer presented to the licensee with the right of first refusal. • The licensee has a defined time frame (usually a short period, such as 30 days) to decide whether to accept the offer and obtain the license or reject it, allowing the licensor to proceed with the second part.

Scope of license

Definition: The scope of a license agreement meticulously defines the scope of the rights granted to the licensee to use the licensor's intellectual property (IP). Basically, it clarifies what the licensee can and cannot do with the licensed intellectual property. A well-defined scope minimizes the risk of misunderstandings and disputes between parties.

Key aspects of the license scope include: Exclusivity: Refers to the degree of control that the licensee has over the licensed intellectual property within a defined territory and term. There are three main types: • Exclusive license: The licensee has the exclusive right to use the intellectual property for the agreed applications within the specified territory and term. No one else, including the licensor, may use the intellectual property for these purposes. • Sole license: The licensee is the only one to whom a license is granted, but the licensor retains the right to use the intellectual property itself. • Non-exclusive license: The licensor may grant licenses to use the same intellectual property to parties other than the initial licensee. For example: Continuing with the proposed example, the Scope of License is like a detailed set of rules that describe what Beta Biosciences can and cannot do with the drug during this option period. It is like a contract between Acme Pharmaceuticals and Beta Biosciences, ensuring that both parties understand their rights and obligations.

+ info

Key aspects of the license scope include: Exclusivity: Beta Biosciences is the only company that can negotiate a full license for the drug during the option period. Access to data: Beta Biosciences may review data from the drug's clinical trials to evaluate its effectiveness and safety. Research Rights: Beta Biosciences may conduct its own research using the drug and clinical trial data. Confidentiality: Beta Biosciences must keep all information about the drug and its trials confidential. Transition to a full license: If Beta Biosciences decides to move forward with a full license, the scope of the license would describe the terms of that agreement. A well-defined License Scope is crucial for both parties: • For Acme Pharmaceuticals: Protects your intellectual property and ensures that Beta Biosciences only uses the drug for research purposes during the option period. • For Beta Biosciences: Provides them with the information and rights necessary to make an informed decision about whether to obtain a full license.

Exclusivity

Definition: Refers to the degree of control a licensee has over the licensed intellectual property (IP) within a defined time period and geographic region. It does not necessarily mean that the licensee obtains all rights to the intellectual property. Exclusivity can be granted more granularly by specifying limitations in three key areas: Application (field of use): When intellectual property has multiple potential uses, the licensor may define the specific application(s) granted to the licensee. This could be: • A specific product: The licensee has exclusive rights to use the intellectual property of a particular product (for example, a medicine for a specific disease). • A specific process: The licensee has exclusive rights to use the intellectual property for a specific manufacturing process used to create a particular product. Territory: The license may be restricted to a specific country or geographic region where the licensee has exclusive rights. This could be: • Single country: The licensee has exclusive rights to use the intellectual property only within the borders of that country. • A specific region: The licensee has exclusive rights within a defined region (e.g. Europe, North America).

Duration: The period during which exclusivity applies can be structured in several ways: • Patent Term: Aligned with the expiration of related patents (typically 20 years from filing). • Limited duration for early stage technology: For new technology with uncertainties, the agreement may have a shorter term (e.g. 1 year) with possible renegotiation aftermarket testing. • Performance-based exclusivity: A shorter initial term is granted with an option to extend based on the licensee's performance (e.g., meeting sales targets). • Temporary exclusivity: The licensee has exclusive rights for a certain period, after which the licensor can take over the application and territory or appoint another licensee. • Conditional exclusivity: Exclusivity is granted for a specific application and territory, but reverts to non-exclusive if the licensee fails to meet certain conditions (for example, royalties or minimum sales). For example: Beta Biosciences is granted exclusive rights to negotiate a full license for Acme Pharmaceuticals' breakthrough new drug for the treatment of the rare disease within the territory of the United States for a period of 12 months beginning the date of this license option agreement.

Application (field of use) The exclusive rights granted to Beta Biosciences under this agreement shall be limited to the use of the licensed intellectual property for the development, manufacture and commercialization of the licensed product for the treatment of [disease name] only. Beta Biosciences will not use the licensed intellectual property for any other purpose without the prior written consent of Acme Pharmaceuticals. Territory The exclusive rights granted to Beta Biosciences under this agreement shall be limited to the territory of the United States of America. Beta Biosciences will not market the Licensed Product in any other country or territory without the prior written consent of Acme Pharmaceuticals. Duration The exclusive rights granted to Beta Biosciences under this agreement will begin on the date of this agreement and will expire 12 months later. If Beta Biosciences exercises its option to negotiate a full license within the 12-month option period, the exclusive rights granted under this agreement will continue until termination of the full license agreement.

Explanation of why is important the Head of Agreement document in a technology negotiation?

The Head of Agreement document is a crucial document in any technology negotiation for several reasons: 1. Establish a shared understanding: The HOA outlines the key terms of the potential agreement in a clear and concise manner. This helps both parties understand each other's expectations and minimizes the risk of misunderstandings later in the negotiation process. 2. Save time and resources: By identifying potential deal-breakers early on, the HOA helps avoid wasting time and resources on detailed negotiations if the fundamentals don't match. It allows both parties to focus their efforts on working out the details once they have agreed on the basic principles. 3. Demonstrate good faith and commitment: Formalizing the initial agreement into a Homeowners Association demonstrates genuine interest and commitment on the part of both parties to move forward with the negotiation. 4. Create a framework for future negotiations: The HOA serves as a roadmap for the negotiation process, outlining key areas that need to be addressed in the final agreement. 5. Non-binding but sets expectations: Unlike a formal contract, the HOA is not legally binding. However, it sets expectations and creates a good faith effort to move toward a final agreement based on the terms outlined. In retrospect, the Agreement Manager serves as a bridge between initial discussions and a final legally binding contract. It streamlines the negotiation process, promotes clarity, and increases the chances of a successful outcome for all parties involved.

+ info

¡Thank you!