License Agreement

A pharmaceutical and bio technology license agreement is a strategic partnership in which a company transfers (License-out) or acquires (License-in) rights such as new drug candidate substances, technologies, and patents that it holds, in order to make new drug development and commercialization more efficient.

In this process, it is important to manage legal and technical risks, such as patent litigation, technology transfer, and trade secret protection, in advance.

The agreement is made across the entire process, from the early stage of substance discovery through clinical trials to commercialization, and consists of an upfront payment, milestones, royalties, and the like.

It is also a complex agreement that requires preliminary procedures such as technology valuation, due diligence, and a non-disclosure agreement to be carried out beforehand.

The core of a pharmaceutical and bio license agreement is the design of the payment structure.

It generally consists of the following items, and each item has a significant effect on the company's cash flow and the allocation of risk.

The upfront payment is an amount that symbolically secures the value of the technology at the time the agreement is concluded, while milestones are paid depending on the success of each development stage and thereby share the development risk.

Royalties are set as a certain percentage of net sales after the product launch, and the definition of net sales and the deduction items should be made clear in order to prevent disputes.

∴ For international agreements, clauses that take into account exchange rate fluctuations and the choice of currency are also indispensable.

In a license agreement, clearly defining the scope of rights is the starting point for maximizing the value of the technology and preventing disputes.

The Field of Use should be limited to a specific disease or therapeutic area, and the Territory should be set to determine in which countries use is permitted.

In addition, whether a Sublicense is allowed should be made clear, and the royalty allocation and conditions should be set out in detail.

The contract term and termination conditions play an important role in the stability of a long-term partnership.

The following items should be clearly set out, which helps clarify the allocation of responsibilities and rights upon termination and can prevent unexpected disputes.

From the licensee 's perspective, the licensee requires a warranty that the introduced technology does not infringe a third party's patents.

The licensee limits the scope of the warranty to what is “known” and manages liability through an indemnification clause.

The parties should also clearly define the ownership of improvement inventions, which can prevent disputes over the ownership of technological advances and new inventions made during the license term.

A license agreement is not merely a transfer of technology but presupposes ongoing cooperation.

To this end, the parties may establish a Joint Steering Committee (JSC) to transparently share and resolve the progress of research and development, the achievement of milestones, and any issues that arise.

Such a systematic cooperation structure is a key element in building a long-term relationship of trust and in the success of the contract.

All trade secrets and data arising during the contract process and the transfer of technology must be thoroughly protected.

The parties should enter into a confidentiality agreement and specify the following compliance measures in the contract.

This allows the technology and data to be protected securely and can minimize the risk of legal disputes.

Disputes related to a license agreement may include patent infringement litigation, breach of contract, and royalty payment issues.

The contract should clearly set out the governing jurisdiction, the arbitration or litigation procedures, and the scope of damages applicable in the event of such disputes, so that future risks can be minimized.

Before concluding the contract, the parties should investigate the technology and the stakeholders to clearly set the purpose and strategy of the contract.

Practical Point

Once the preliminary investigation is complete, the process moves to the stage of negotiating the specific terms of the contract.

At this point, the main terms (such as the upfront payment, milestones, royalties, and scope of rights) are negotiated to align the expectations and risks of both sides.

Practical Point

Once negotiations are complete, the contract is drafted on that basis.

The contract should be drafted based on the agreed content and concluded after internal and external review.

Practical Point

After the contract is concluded, the parties should manage whether the actual transfer of technology and the cooperation process proceed as planned.

Practical Point

The firm's Medical, Bio, and Healthcare Group provides professional legal services across the pharmaceutical and biotechnology industries.

The main areas of service are as follows.

▶ Pharmaceutical and biotechnology technology license agreements (In/Out-Licensing)

▶ Representation in patent litigation related to the protection of patents and intellectual property rights and to infringement

▶ Technology transfer and joint research and development agreements

▶ Trade secret protection and dispute response

▶ Advisory on contract negotiation and structuring

On this basis, we protect the value of technology and intellectual property rights and provide a systematic strategy from the conclusion of the contract through to the response when a dispute arises.

If you are experiencing difficulties with a pharmaceutical or biotechnology technology license agreement, or a related dispute has arisen, please feel free to request assistance from a 🔗medical attorney at any time.