How Early-Stage Life Sciences Companies Can Avoid Potential Legal Missteps Through These Five Key Commercial Agreements
September 14, 2022
In the early days of a life science company, there can be confusion and a number of landmines where legal missteps may happen. As part of our 2022 Startup & Accelerate Webinar Series, we look at five key commercial agreements that startup and early-stage life science companies should consider implementing to help protect and assist in the strategic growth of business.
- Confidential Disclosure Agreement (CDA): Confidentiality agreements are standard and an expected part of most negotiated deals and should be introduced as early as possible in the process and prior to disclosure of any confidential information. Notably, any protection of trade secrets under state law could be lost, or deemed waived, if they are not disclosed without a written agreement. The strategy for the structure of the confidentiality agreement, which can be unilateral or mutual, depends on whether one is primarily disclosing or receiving confidential agreement.
- Material Transfer Agreement (MTA): An MTA is for the purposes of documenting the transfer of materials (e.g., biological or chemical) from one party to another; and it addresses right and obligations with respect to the use of the transferred materials. Terms of the agreement will include provisions addressing ownership of IP arising from the use of the transferred materials. MTAs are typically short and concise and should not be used as a substitute for a collaboration or license agreement.
- With an MTA, there are a number of important considerations, including the definitions of material; restrictions on the recipient’s use of the material; the provider’s rights to inventions and research results that arise from the use of the transferred materials for the activities described in the MTA; confidentiality; the provider’s access or restriction on reports and publications; and a warranty disclaimer and indemnification.
- Consulting Agreement: It typically governs the relationship between the company and a non-employee, such as consultants, advisors, and occasionally founders as well as vendors, and covers the scope of services to be performed on behalf of the company. It is particularly important to avoid misclassifying an employee as a consultant as this could expose the company to liability. The agreement will include provisions addressing ownership of IP generated by the consultant, in addition to other obligations. The consulting agreement provides coverage for gaps in the CDA in connection with IP provisions, diligence obligations, and regulatory and compliance terms.
- Evaluation/Feasibility Agreement: This agreement serves to test out technologies for compatibility in potential collaborations, and often involve the transfer of materials, sometimes from both parties. It can function as a “toe in the door” that can validate the technology and remove the barriers to a broader research collaboration, while locking up a particular opportunity through an exclusive option or negotiation rights.
- Master Services Agreement: An omnibus agreement that is intended to create a framework of terms and conditions for current projects and govern future projects that can be added over the life of an MSA. It can cover a broad range of services, including research, clinical and preclinical development, distribution, and supply, among others, and will address general responsibilities of the parties, project management, IP, payment terms, and dispute resolution.