Archive for September, 2005

Effective Licensing Compliance Programs: How often do they really exist?

Written by on Thursday, September 29th, 2005

David Marston and Eric Stein of PricewaterhouseCoopers LLP presented yesterday, September 28, 2005, at the event “Designing and Implementing an Effective License Compliance Program,” sponsored by the Silicon Valley Chapter of the Licensing Executives Society (“LES”), and provided some alarming insights into problems that exist with the enforcement of royalty terms in licensing agreements.

According to Marston and Stein, many companies have no one in charge of the royalty compliance process. Instead, it is common for compliance oversight to get pushed to the legal or accounting departments, which have other duties that get higher priority than royalty enforcement. As a result, Marston and Stein often find that no one is really monitoring the royalty payment process at all.

To enact an effective compliance program, Marston and Stein recommended that companies first establish a separate compliance group within the company whose only job is to monitor the royalty collection process, and that this group should conduct a handful of audits each year as a matter of course on some of the agreements. They also recommended sending out a general letter to all customers before commencing an audit program just to advise customers that the company was enacting a better compliance program and that they might receive an audit letter in the next few months. By taking these intial steps, they advised, customers will be reassured that they are not being singled out. Several months after the receipt of the general letter, Marston and Stein say that companies should then send out their first audit letters to select licensee customers. Interestingly enough, the speakers indicated that receipt of a general letter alone will often prompt companies to go back and take a look at old agreements and even to make a restatement of the royalties, particularly if the licensor company initiating the process has offered forgiveness of late charges for a period of time after receipt of the general letter. In the end, Marston and Stein suggested that this process can produce millions of dollars in unpaid royalties that were just slipping through the cracks.

As a lawyer who has drafted numerous royalty clauses, I was really taken back to hear how these royalty clauses were operating in practice. Clearly, it was a bit of a reality check on my practice and the gaps that can exist between what I draft and how it is enforced. Also, the presentation really brought to light how companies that are strapped for cash should look to an effective compliance program to finance some of the operating expenses necessary to run the company.

We should all ask ourselves what our companies or, in the case of outside service providers, what our clients are doing right now in the licensing compliance area. If licensing compliance efforts are generally as ineffective as Marston and Stein believe them to be, then we may be horrified to discover that our companies or our clients’ companies are losing millions of dollars each year in uncollected royalties.


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Insights on Modern Biotech Dealmaking

Written by on Sunday, September 25th, 2005

At the San Francisco Business Times event that was held this past Friday in San Francisco, CA, “The Art of the Deal: Dealmakers who are reshaping Bay Area Biotechnology,” panelists Mark McDade, CEO of Protein Design Labs, George Scangos, CEO of Exelixis, Joe McCracken, Vice President of Development at Genentech, and Nick Simon, Managing Director of Clarus Ventures shared their insights on modern biotech dealmaking.

The speakers indicated that as the industry matures, deals are becoming increasingly complex, so the parties no longer look to get mere cash from the party across the table, but instead are looking to secure valuable partnerships and to tap into new resources and compatible goals. In addition, the speakers indicated that modern dealmaking is heavily influenced by the prevalence of underlying relationships in the industry, since the biotech indusry is a relatively small world where many of the players have a previous history of working with other players at prior companies.

Another trend in modern dealmaking is that biotech companies are increasingly looking to do deals with large biotech companies, instead of limiting deals to just large pharmaceutical companies, since they perceive the big biotech world to have a better understanding of the issues facing smaller biotech companies. Also, there is more of a perception that the biotech company can better preserve its independence and continue to pursue its long-term goals by entering into deals with large biotech companies, as opposed to a deal with a large pharmaceutical company.

The presentation struck a chord with the audience by conveying just how complex modern dealmaking has become, and for the service providers in the audience, it conveyed the importance of understanding everything that the parties will be bringing to the table, including the parties’ underlying relationships and their long-term goals for the company. We as service providers need to listen to our clients and push the deals forward that best advance their plans for the company, and to recognize when underlying issues are affecting the negotiations.


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Biotechnology Law 2005

Written by on Friday, September 16th, 2005

The event Biotechnology Law 2005 will be held November 15, 2005 at the PLI California Center in San Francisco, CA. The event will address the latest developments in patents, as well as advice on structuring biotech startups, the proper valuation of biotech and pharma inventions, tax implications for biotech deals, and critical ethical issues in biotechnology today.


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California Healthcare Policy Forum

Written by on Friday, September 16th, 2005

California’s Healthcare Policy Forum, sponsored by the California Healthcare Institute, will be held November 17-18, 2005 in San Francisco, and will bring together executives from biomedical device and pharmaceutical companies, leaders from academic research institutions in California, and state policymakers to discuss public policy challenges facing the bioscience community’s work and needs.


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Law Seminars International Conference: Running the Race With Biotechnology

Written by on Friday, September 16th, 2005

The Second Annual Law Seminars International Conference: Running the Race With Biotechnology will take place on November 17-18, 2005 at the Hilton Torrey Pines in La Jolla, California, and will provide an overview of current legal issues in the biotech industry.


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Checkered Past and Promising Future of Antibody Therapeutics

Written by on Friday, September 16th, 2005

The event The Checkered Past and Promising Future of Antibody Therapeutics will be held at on Wednesday, November 16, 2005 at 6:00 p.m. in the Clarion Hotel, 401 East Millbrae Avenue, Millbrae, California. C. Geoff Davis, Ph.D., Senior Vice President of Research at Abgenix will speak, examining the technological breakthroughs that have elevated monoclonal antibodies to the forefront of biologics.


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Biotechnology Law 2005

Written by on Friday, September 16th, 2005

The event Biotechnology Law 2005 will be held November 15, 2005 at the PLI California Center in San Francisco, CA. The event will address the latest developments in patents, as well as advice on structuring biotech startups, the proper valuation of biotech and pharma inventions, tax implications for biotech deals, and critical ethical issues in biotechnology today.


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U.S.- India Synergy in Life Sciences

Written by on Friday, September 16th, 2005

The event U.S.-India Synergy in Life Sciences will be held on Saturday, November 12th from 7:30 a.m. to 6:00 p.m. at the Clarion Hotel, 401 E. Millbrae Avenue, Millbrae, CA 94030. The one day symposium will address cost and value arbitrage in the therapeutics and diagnostics areas related to reseach and development, manufacturing, clinical development, and market opportunities.


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The BayBio Pantheon Awards

Written by on Friday, September 16th, 2005

The BayBio Pantheon Awards will be presented on November 10, 2006 at 6:30 at Herbst Pavilion at Fort Mason Center, San Francisco, CA. The awards ceremony will recognize excellence in the local biotech community.


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Biotech Investing Conference

Written by on Friday, September 16th, 2005

The Biotech Investing Conference will take place on November 2-3, 2005 at the Westin San Francisco Airport at 1 Bayshore Highway, Millbrae, CA 94030, and will address such issues as investing opportunities in the current biotech market, opportunities in biotech deal flow, and new models for funding R & D/university spinouts.


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