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