Contractual Protection

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Contractual Protection

  1. 1. The New Frontier: Contractual Protections for Cross-Border Strategic Alliances among CROs and Sponsors Alexander Woollcott Co-Chair, Global Sourcing & Procurement Practice Morris, Manning & Martin, LLP
  2. 2. THE FRONTIER Cross-Border CRO Alliances <ul><li>C-B Alliances offer significant potential value. </li></ul><ul><li>Exceptional value usually comes with risks. </li></ul><ul><li>Over time risks will abate but so will value. </li></ul><ul><li>First movers have advantage, but higher risk. Solution is to mitigate risk. </li></ul>
  3. 3. RISK MITIGATION IN CROSS-BORDER CRO ALLIANCES <ul><li>How do we maximize value while minimizing risks? </li></ul><ul><li>Law alone does not afford sufficient protection. </li></ul><ul><li>Contracts are the most powerful tool. </li></ul>RISK MITIGATION IN CROSS-BORDER CRO ALLIANCES
  4. 4. CONTRACTUAL LINKS SPONSOR Subcontractor to CRO 3 CRO 3 Non US CRO 2 US CRO 1 US CRO 4 Non US A Subcontractor to CRO 3
  5. 5. BASIC PREMISES OF CONTRACTUAL RISK ALLOCATION <ul><li>Contract should directly address risk allocation. </li></ul><ul><li>Risks should be germane to CRO activities. </li></ul><ul><li>Risk should be borne primarily by responsible party. </li></ul><ul><li>Some degree of shared risk is inherent to an alliance model. </li></ul>
  6. 6. RISK ALLOCATION PROVISIONS IN ALLIANCE CONTRACTS <ul><li>Clearly identify specific responsibilities of parties. </li></ul><ul><li>Expressly assign risk to responsible party. </li></ul><ul><li>Protect Alliance parties from risk they did not assume. </li></ul><ul><li>Specifically address what happens when risk turns into actual loss to the Alliance or one or more Alliance parties. </li></ul>
  7. 7. REPRESENTATIONS <ul><li>What are they? Factual assertions the Alliance can rely on. </li></ul><ul><li>Authority to enter into Alliance and perform responsibilities. </li></ul><ul><li>Authority to sign Alliance documents. </li></ul><ul><li>No conflicts with governance documents or other contracts. </li></ul><ul><li>Enforceability of provisions. </li></ul>
  8. 8. WARRANTIES <ul><li>What are they? Interesting hybrid between factual statement and promise. </li></ul><ul><li>Standard of professionalism. </li></ul><ul><li>Adhering to “good clinical practices” or “best practices.” </li></ul><ul><li>Meeting or exceeding Project performance metrics. </li></ul><ul><li>Non-infringement. </li></ul>
  9. 9. REMEDIES <ul><li>Indemnification – private contractual remedy </li></ul><ul><li>Claim for damages – lawsuit or claim </li></ul><ul><li>Stipulated damages – pre-set penalty </li></ul><ul><li>Termination – often the least desirable remedy </li></ul>
  10. 10. INDEMNIFICATION LIMITATIONS <ul><li>Threshold limitation. </li></ul><ul><li>Maximum liability limitation. </li></ul><ul><li>Insurance offset. </li></ul><ul><li>Contributory fault reduction. </li></ul><ul><li>Limitation on recovery for certain “losses.” </li></ul><ul><li>Procedural requirements. </li></ul>
  11. 11. DAMAGE LIMITATIONS <ul><li>Threshold amount or “basket” to prevent “nickel and diming.” </li></ul><ul><li>Maximum liability amount or “cap.” </li></ul><ul><li>Limit certain categories of damages: indirect, consequential, incidental, punitive damages. </li></ul><ul><li>Limitation inapplicable to certain types of wrongdoing and indemnification. </li></ul>
  12. 12. OTHER LIMITATIONS ON REMEDIES <ul><li>Cumulative or exclusive remedies? </li></ul><ul><li>Offsetting damages. </li></ul><ul><li>Limitations imposed by applicable law. </li></ul><ul><li>Chance to cure before termination. </li></ul>
  13. 13. PROTECTING IP AND TRADE SECRETS <ul><li>What really is “intellectual property?” </li></ul><ul><li>What are “trade secrets?” </li></ul><ul><li>How are IP and trade secrets even relevant in a cross-border CRO alliance? </li></ul><ul><li>Why is are IP and trade secrets at risk? </li></ul>
  14. 14. IP AND TRADE SECRET PROTECTION SOLUTIONS <ul><li>All Alliance members should be under mutual non-disclosure agreement (NDA). </li></ul><ul><li>Alliance charter should have robust IP provisions to reinforce NDAs. </li></ul><ul><li>Special case of IP owned by the Alliance itself. </li></ul>
  15. 15. CLOSING COMMENTS <ul><li>While cross-border strategic alliances among CROs offer significant commercial and financial rewards, risk must be managed carefully. </li></ul><ul><li>Each of the major constituents (e.g. the CROs, the Alliance itself, the Sponsor) should engage experienced international counsel to protect against the risk faced by that constituent. </li></ul><ul><li>The network of contracts governing the Alliance is the best vehicle for risk protection. Give it due attention. </li></ul>

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