In the fast-paced and highly competitive world of life sciences, intellectual property management is a critical component of deal making. Whether the deal making consists of a licensing agreement, a commitment to a research collaboration, or a merger or acquisition, intellectual property is a significant asset, and effective IP management will have a significant impact on the outcome of the deal. In this blog post, we explore best practices for IP management in life science deal making.
What is Intellectual Property?
Intellectual Property (IP) are the ideas, concepts, and analytics that generate life sciences’ products, devices, and therapeutic and diagnostic applications. For legal protection, these intangibles may be codified and registered as patents, trademarks, copyrights, and trade secrets.
Why Intellectual Property is Important in Life Science Deal Making.
In the life sciences industry, innovation and discovery are key drivers of success. Companies invest significant resources in research and development to create new products, technologies, and therapies that can improve patient outcomes and generate revenue. In the course of development, they generate intellectual property - the concepts that make those products possible. Protecting and managing IP is essential to ensure that companies can monetize their innovations and maintain a competitive advantage.
In the context of deal making, IP management is particularly important in licensing agreements, research collaborations, and mergers and acquisitions:
- In licensing agreements companies may grant or receive licenses to use IP owned by another company
- In research collaborations companies may share proprietary information and work together to develop new technologies or therapies
- In mergers and acquisitions companies may acquire or divest IP assets as part of the transaction
In each of these scenarios, effective IP management protects the value of the IP assets and ensures that the deal is successful.
Key Considerations for IP Management in Life Science Deal Making.
1. IP Due Diligence
IP due diligence is essential in life sciences deal making to ensure that each party has a clear and detailed understanding of each other’s assets and liabilities, including IP assets. Due diligence typically involves a deep-dive review of a company’s financial performance, debt, assets and liabilities, partner and vendor agreements, court filings and records, personnel profiles of senior executives and directors, employee data and policies - and Intellectual Property. The review process will provide a detailed evaluation of the startup’s valuation – as well as any potential red flags.
Specific to IP, due diligence may involve reviewing existing IP agreements, evaluating the strength and scope of the IP protection, and conducting a freedom-to-operate analysis to ensure that the IP assets do not infringe on third-party patents. Companies should also consider potential risks and uncertainties associated with the IP assets, such as pending litigation or potential infringement claims, and develop strategies to mitigate these risks.
2. IP Ownership and Control
Companies engaged in dealmaking should have a clearly defined understanding of who owns the IP assets involved in the deal and how they will be controlled. Each party needs to review any existing IP agreements and update as necessary. The parties should then engage in a due diligence review of each other’s IP agreements and negotiate new joint agreements as appropriate or agree to maintain control over their own IP assets.
3. IP Valuation
Another key consideration in IP management is valuation. Companies should have a clear understanding of the value of the IP assets, how they will be monetized, and the potential impact of the deal on their own IP portfolio. This valuation analysis will include determining any potential revenue streams from royalty or licensing agreements and more broadly, assessing the primacy of each company’s IP assets on the proposed deal. The flipside of the evaluation process is risk: Whether IP assets expose potential infringement or invalidation, and what steps will be necessary to mitigate these risks.
4. IP Integration
In the context of mergers and acquisitions, IP integration is an important consideration to ensure that the acquired IP assets can be efficiently and effectively integrated into the acquiring company's portfolio. Companies should evaluate the acquired IP assets to determine their strategic value, and develop strategies to integrate these assets into their existing IP portfolio. This may involve developing new IP agreements, transferring ownership or control of the acquired IP assets, and developing strategies to protect the value of the integrated IP portfolio.
5. IP Protection
IP protection is critical to ensuring that companies can monetize their innovations and maintain a competitive advantage. Companies should have a clear understanding of the scope and strength of their IP protection, including patents, trademarks, copyrights, and trade secrets. They should also develop strategies to protect their IP assets from infringement or misappropriation, such as monitoring the market for potential infringement, enforcing their IP rights through litigation or other means, and maintaining confidentiality agreements with employees and third-party partners.
6. IP Agreement Negotiation
Once the due diligence process is complete, both parties will have a clear understanding of the current value of IP assets and how these assets will be integrated into the newly merged or partnering organization. An IP agreement will spell out terms: scope and duration of the agreement, royalty rates, and exclusivity. The agreement should also have indemnification safeguards to answer any risks of infringement or invalidation.
7. IP Portfolio Management
Effective IP portfolio management is critical in life science deal making to ensure that companies can effectively monetize their IP assets and maintain a competitive advantage. Companies should develop a clear understanding of their own IP portfolio and the value of their IP assets and develop strategies to protect and monetize these assets. This may involve developing licensing or royalty agreements, enforcing IP rights through litigation or other means, and maintaining confidentiality agreements with employees and third-party partners.
8. Protect IP Assets with Enterprise-grade Security
The best protection for a company’s IP assets is to maintain bank-grade security throughout the deal making process:
- To protect confidential company financial records included in due diligence
- To protect IP assets and other proprietary information from hackers
- To prevent any leaks to competitors
- To abide by federal and industry regulations
Hackers are a significant threat to a company’s IP assets. Life sciences are a favorite target for cybercriminals. A hack of even a single document can lead to malware and potentially costly ransom demands.
ShareVault Provides Best-in-class Security.
The best security solution for life science deal making is to use a virtual data room (VDR), an online platform where a company can store and share confidential documents, including IP licenses and all the financial records that are subject to review in due diligence.
The number one VDR for life sciences is ShareVault. ShareVault has been selected by the Biotechnology Innovation Organization (BIO) and 40 other life science industry trade associations for their Business Solutions Program.
ShareVault’s security features include:
- Strict controls over access to the VDR and its documents.
- Protected documents are AES-256 bit encrypted and can only be opened with an active ShareVault connection.
- Each participant’s access is subject to a permissioning system that defines usage, e.g., the right to view, print, save, or copy a document. Rights can be limited with an expiration date/time and documents can be remotely “shredded” even for files that have already been downloaded.
- Once authorized, participants can access documents in the VDR from any browser or device, at any time, from anywhere. ShareVault protects confidentiality even for participants in remote locations.
- At the appropriate time, a company can provide access to a would-be IP partner or buyer as part of the deal making process.
Life sciences companies choose ShareVault not only for its security, but also for built in software that makes the process of organizing and sharing files easy. ShareVault software tools and features include drag-and-drop uploads, a powerful full-text search engine, inter-document hyperlinking, and an organizing template called the Due Diligence Checklist.
Conclusion
Effective IP management is critical in life science deal making, where innovation and discovery are key drivers of success. Companies must have a clear understanding of their own IP assets and the value of these assets, as well as the potential risks and uncertainties associated with the IP assets involved in the transaction. By taking a strategic approach to IP management, companies can protect the value of their IP assets and ensure the success of their deal making efforts.