Challenges arise any time two commercial entities seek to engage in a collaborative partnership. It is for that very reason that including an attorney team experienced in technology transactions, licensing, and intellectual property can prove critical.

The right attorney team guides their clients around pitfalls and toward success. Such guidance is particularly critical with life sciences and technology innovators, but also for those in other industries, such as developers of products or services involving big data, artificial intelligence and machine learning.

Experience teaches us that there are three key principles to keep in mind when building partnering or collaboration relationships.

1. Keep it Simple

There are numerous complications that can arise in a commercial relationship: conditions and contingencies; elaborate math; and subtle distinctions, particularly in IP provisions such as ownership allocation of new IP, rights of patent prosecution and maintenance, and responsibilities of patent litigation and invalidity defense. Complexity is not always a negative. It can allow for flexibility, reduce risk and sometimes even encourage a larger upfront commitment. It’s important to always ask whether the element of complexity that has been proposed actually adds value to the collaboration. If not, then simplify.

As an example, while the prevalent approach, royalties do not always need to be tied to net sales or some other variable. Flat fees sometimes fit the situation, can be simpler to draft and easier to administrate over the life of the deal.

2. Align Incentives

Commercial entities necessarily put themselves first, a self-interest often required by law. However, partners cannot allow their own self-interest pull them in different directions. This can be particularly challenging when partnering with a company that can later overlap in business or technology, or even become a competitor. Complications can range from negotiating the agreement through to day-to-day operations of the respective teams trying to work together without compromising their own advantages.

It is also challenging to collaborate when a mismatch exists in commitments or needs. Building a productive partnership is complicated, for example, when one party has an easy exit route. In addition, when one party is in desperate need and the other holds all the power, the latter can exert that leverage to negotiate outsized benefits that can seem unfair.

If the mismatch is simply too great, partnering may not be the best option for the disadvantaged party. Consider a simple “fee-for-service” or “exclusive vendor/supplier” arrangement, or even exploring whether the potential partner would be better suited in the role of investor or even acquirer. After all, we have seen many “partners” end up as “purchasers.”

3. More Than The Money

Partnering works well when each partner brings something to the table beyond money. When one party brings all the IP and effort and the other is simply paying, it’s important to think twice before making the partnership overly complex. An arrangement like this can often can be structured as a fee-for-service transaction that involves a simple consulting, manufacturing or purchase agreement. This can at least be a starting point. The parties can still promote the arrangement as a “partnership” or “collaboration.” In our experience, every successful commercial relationship involves these elements.

Conclusion

By keeping these considerations in mind, parties can save both time and transaction costs throughout the entire commercial relationship. This allows teams to focus on the collaboration’s goals. In the life sciences industry that is often life-changing or life-saving technologies made possible when great scientists come together in a mutually beneficial structure, making a difference from bench to bedside.