Question
From: (redacted)
Sent: Tuesday,March 28, 2006 10:19 AM
To: Verne,B. Michael
Subject: HSR Issue
Mike:
Ihave a question concerning the HSR implications of a pharmaceuticalco-development agreement. Under the terms of the draft agreement, the partiesto the agreement (two pharmaceutical companies) would license their currentintellectual property (know-how, patents) concerning a particularpharmaceutical-related technology to each other on a non-exclusive basis (thelicensor would continue to have full rights in the intellectual property). Asthe parties work together to develop compounds based on the licensed technologyand new technology that the parties will mutually develop, they will eachcontinue to have equal rights in the cross-licensed and the newly developedintellectual property.
Each of the parties will make independentdeterminations as to whether it wishes to participate in the development andmarketing of any new compound that may be developed through the co-developmentagreement. To the extent that one of the parties opts-out altogether from developing,manufacturing and marketing a new compound, then the other party will be deemedto have an exclusive license to all relevant intellectual property relating tothat new compound (including the intellectual property originally contributedby the other party as part of the co-development agreement) insofar as theintellectual property relates to the new compound. Also, if either partydeclines to market a new compound in a particular geographic region, then theother party will be deemed to have an exclusive license to the intellectualproperty to manufacture and commercialize the new compound in the geographicregion in which the other party has opted-out.
Itappears to me that the execution of the co-development agreement would not be apotentially reportable event under the HSR Act given that no exclusive rightsare being transferred at the time the agreement is signed. Please let me knowif you agree with my assessment.
The more difficultquestion is whether the parties might be required to make HSR filings in thefuture (assuming jurisdictional thresholds are met) should opt-out decisionsresult in one of the parties obtaining exclusive rights to develop, manufactureand market intellectual property (both i.p. of the other party licensed on anon-exclusive basis at the inception of the co-development agreement and i.psubsequently developed by the parties during the term of the co-developmentagreement that is relevant to the new compound) either throughout the world orin particular regions where the other party has declined the opportunity tomarket the new compound. I would appreciate your thoughts on this issue.
Pleaselet me know if you need any additional information. Thanks for your help.