February 29, 2024
The Marker/Start Israel
By Laura P. Masurovsky; Jeffrey M. Jacobstein; Lauren J. Robinson
Nimble emerging innovators often seek corporate partners who can provide the resources needed to bring products to market and, increasingly, many companies are utilizing Artificial Intelligence to speed the development process in these collaborations.[1] Joint ventures can be critical for innovative health tech companies to fund new R&D and pursue intellectual property protection for those investments. As such, it is important to understand the common pitfalls and discuss licensing and joint venture agreement strategy early in the development of the technology.
Before even getting to the nuanced questions raised by Artificial Intelligence in a collaboration, innovative companies must consider the basic challenges of partnering in the health tech space. When partnering up in a joint venture, companies should understand precisely what rights the agreement confers and for how long. Most license agreements identify covered patents, rights to associated know-how, trade secrets and pending patent applications. But any ambiguity in the terms defining the scope of rights transferred can come back to haunt a license partner. The situation is even more complicated when rights are conferred to future patent applications and IP developed under the joint venture. Who is able to—and responsible for—pursuing IP and defending IP in future litigation with third parties in different venues? Could a government “march in” on a patented invention? Who owns the IP, what type of licenses are being granted, and what happens if there are future changes in company ownership for any partners or licensees? Investing the time to carefully think through the preferred resolutions for these types of issues ahead of time can save on headaches down the road.
Because U.S. patents may be jointly owned, and each co-owner may practice or license the patent without needing permission from the other co-owners, it is important to address the development of new innovations in the joint venture agreement or licensee—or else disputes may arise as to who owns IP rights. Joint venture partners should also agree on how to handle future events like changes in company or subsidiary ownerships and on procedures for identifying and protecting trade secrets and other confidential information.
When joint ventures are formed to pursue commercialization in different markets, it is important to understand what restrictions are in place to ensure a product is commercialized only in the specified geography, whether the product could be imported into other territories, and who is responsible for any additional developmental expenses required by local regulatory agencies. To avoid disputes over these issues, a license agreement should state whether it extends to everything covered by the licensed patents and IP or only to certain technologies and products and identify the licensed geographic territory and any restrictions thereon.
Many companies in the life science spaces are considering whether to expand the use of Artificial Intelligence or Machine Learning to enhance a treatment modality or speed the rate of clinical development. But some companies may lack internal expertise in these fields, prompting them to look for external partners. When a life sciences company that lacks expertise in software and computer system development enters into a research agreement or partnership with other industry partners for purposes of employing an emerging technology like AI or ML, it is critical to fashion contracts that clearly define IP ownership and the ownership rights of the data, AI system and underlying coding, AI implementation know-how, and AI-created inventions in relation to the collaboration can help reduce disputes and foster partnership. Tensions may exist between the specific use of the AI technology for a particular healthcare company’s research and the ability of the AI sponsor to use that data set to train and enhance the AI tool more generally to offer to other third parties. Carefully addressing the boundaries of how data may be used in and outside the collaboration is essential. Nondisclosure agreements are also a critical aspect of any joint venture, especially if trade secret protection is contemplated.
Joint ventures have enormous potential to allow innovator life sciences companies to bring more new products and therapies to market. Carefully considering IP strategy as early as possible, ideally before a project starts, can give companies a competitive edge by protecting their innovations and avoiding any potential disputes from frustrating business goals.
[1] https://www.pwc.com/us/en/industries/health-industries/library/pharma-life-sciences-deals-outlook.html; https://www.forbes.com/sites/forbestechcouncil/2024/02/14/a-new-era-of-drug-discovery-with-biology-driven-ai/?sh=2b0312a97fc0
Originally printed in TheMarker on February 29, 2024. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm’s clients
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