Toolkit-Funding life sciences companies

Patent rights in corporate transactions:

Joint ventures

This is one of four articles addressing the general patent issues arising for each of four key activities in which a company may be involved during its lifetime: merger and acquisition; joint venture; flotation; and/or divestment. It is relevant to UK private companies under English law, including the private company subsidiaries of quoted public companies. It is not concerned with quoted companies, where quite different considerations apply.

Circumstances may arise in which two companies wish to pursue the same project, but need the patented technology and know-how of both in order to make this possible. In projects in which the companies envisage that they will need to work together long-term, and there is considerable complexity in the assets that need to be shared, the best option may be to form a joint venture. A joint venture is typically approached by forming a new joint venture company into which the patented technology and other assets that are needed are licensed or transferred. The joint venture company can then use the technology to run the project.

Joint ventures raise a number of questions about how the pooled assets are to be owned (are they licensed in or assigned?), how they are to be used, and the continued rights, if any, of the joint venture parties to use those rights. Patents are also a particular issue for life science joint ventures, because the entire point of a joint venture project is likely to be the creation and development of a new product, which is likely to be the subject matter of one or more patent applications. Who will own the rights to new patents arising from the joint venture project, and what will be the terms upon which it can be exploited? Of equal importance will be establishing what the parties are restricted from doing with the newly created technology.

An issue of particular sensitivity that must be agreed between the joint venture parties is what happens to patented technology and other intellectual property when the joint venture comes to an end. Whilst this may be straight-forward in respect of the assets originally contributed by the parties, the rights to new technology developed may be matters of difficult negotiation.

All of the above matters must be dealt with in the joint venture agreement.

These transactions are typically highly complex and expert assistance is required in each case. The following is merely intended to outline the principles involved.

Colin McCall

Colin is a senior counsel in the IP/IT group.

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