Monthly Archives: April 2011

Here comes the science bit …because you’re worth it!

On this bank holiday morning, your correspondent is reading Bad Science by Ben Goldacre (is there something else we should be doing?)

Enjoying it hugely, and wondering how I have managed to miss it in the 3 years since it was first published. Well-written, tackling serious subjects in an informative and entertaining way: what more could one ask? (If you want a more considered review, there is one from the British Medical Journal here.)

In discussing his theme, Goldacre uses examples that include one of this blogger’s pet hates – pseudo-scientific explanations in TV adverts for cosmetics – as well as a more serious area that we have advised institutional clients on – the MMR vaccine saga.

Another of Goldacre’s targets is the inability of most journalists to explain scientific issues in their articles, and their tendency to present opposing points of view on scientific subjects as if they have equal validity, when one might be complete tosh.

Although it is not part of his theme, Goldacre might have mentioned another of this blogger’s pet peeves: the tendency of journalists to treat patents, copyright and trade marks as synonyms, and to vary the term used for stylistic effect. In this context, what are we to make of the sentence on page 18 of Bad Science: “…you might also wonder whether the primary goal is something much more cynical and lucrative: to make common sense copyrightable, unique, patented and owned.” It is difficult to tell whether he has fallen into this linguistic trap in the quoted sentence, but he should have the benefit of the doubt when the argument is so strong. As chapter 2 demonstrates, some bad science is deployed as part of a commercial package that seeks to create property from common sense or thin air. The use of intellectual property to bolster that package is a separate issue, and one which might merit a book in its own right.

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Don’t sign the term sheet!

Parties sometimes sign a term sheet, or at least verbally agree its terms, before drafting and negotiating the (full) agreement. The term sheet summarises the main terms of the proposed agreement, and is usually stated to be non-binding.

This can be an efficient way of managing a transaction. Sometimes, though, the best advice may be to avoid making a commitment to the term sheet, even if it is stated to be non-binding.

During a recent conference call with a client and a lawyer representing another party to a proposed transaction, the lawyer not unreasonably justified terms in a draft agreement by referring back to the term sheet. “The parties agreed this point in the term sheet” was the refrain.

And yet… The term sheet was based on a template that the more experienced of the two parties had prepared. It was 13 pages long, and included many detailed terms of a legal nature that went beyond a “high level summary”. In our view the term sheet contained some one-sided provisions that favoured the other party. Perhaps most critically, our inexperienced client had not taken legal advice on the term sheet. From discussions with the client it was clear that he did not fully understand some of the “agreed” terms.

How sacrosanct should the term sheet’s provisions be in these circumstances? Should they be treated as a guide to points of commercial principle rather than as a set of detailed commandments?

This situation, or something like it, is something that we have come across many times before. In our view, term sheets work best when they have minimal legal language and focus on the key commercial terms. In most cases, it should be possible to state those terms in two or three pages of text. If you need a lawyer to translate the language, then it probably shouldn’t be in the term sheet. Alternatively, take full legal advice when negotiating the term sheet.

A quite separate issue is whether the term sheet may create legally binding obligations even if it is stated to be non-binding. An earlier posting on this blog, headed “Subject to Contract” discussed some recent English cases in this area. Where one or more of the parties is based in a civil-code jurisdiction (eg most of Continental Western Europe), an additional consideration is whether signing the term sheet may create obligations not to withdraw from subsequent negotiations, under a legal principle known as culpa in contrahendo.

This point is discussed by some of the European contributors to our loose-leaf work, Drafting Agreements in the Biotechnology and Pharmaceutical Industries (OUP, 2009 onwards). According to the Spanish contributor to that work, under Spanish law the principle may also require the parties to negotiate exclusively with one another. To try to address these issues, we often include in term sheets wording such as the following:

This term sheet is made under English law and is subject to the exclusive jurisdiction of the English courts. It is non-binding and does not create, evidence or imply any contract or other legal relationship between the parties. Either party may withdraw from the negotiations at any time without liability and the negotiations are being conducted on a non-exclusive basis.

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What’s so special about pharmaceutical transactions?

Discussing licensing and distribution arrangements for an over-the-counter pharmacy product with a potential client today, the conversation turned to the ways in which deals and deal structures in the pharmaceutical sector tend to differ from their equivalent in some other commercial sectors.

The main differences that this blogger identified were:

Regulatory – transactions must take account of the extensive regulation of the sector, covering widely diverse areas such as notification of adverse events, the use of Qualified Persons in manufacturing, the requirements for obtaining regulatory approval to market the product, etc.

Government purchasers – in many cases a Government body may be involved in purchasing decisions and/or the setting of the price of the drug.

Patents – the importance of having good patent protection, given how technically easy it often is to replicate a drug once it is on the market.

Trade marks – the importance of having good trade mark protection for the “brand”, and yet the difficulty of preventing parallel imports of the branded product from other countries, eg under EU laws on the free movement of goods.

Cost of goods – the fact that manufacture of the drug usually costs a trivial amount compared with the price of the product as sold. This (together with IP protection considerations) may affect decisions on whether to have manufacture done in a country such as China.

Distribution channels – the distribution of pharmaceutical products has some distinctive features, eg the mechanism of appointing a “pre-wholesaler” who sells on to a wholesaler. Also, in the UK, the importance of certain retail pharmacy customers such as Boots and, increasingly, the major supermarkets such as Sainsbury’s.

People – in our experience, many clients working in this sector favour a thorough, meticulous approach to contract drafting and negotiations. It is important to “get it right”. This approach can be contrasted with the sales-driven approach in some other technology sectors, where contract terms are sometimes not regarded as so important.

On reflection this is a rather diverse set of distinctive features. Have we missed any? Do you agree with the above list? Comments welcomed.

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Why do we need a UK IPO?

"Plan of Quality and Efficiency"

IP Draughts has been doing some holiday reading, studying the UKIPO’s recently-published Five Year Corporate Strategy for 2011-16.

Much of the document describes the multiple roles of the UKIPO and how it plans to fulfil these roles better, more cost-effectively, and with greater customer satisfaction.

IP Draughts would summarise the main roles of the UKIPO, in its present incarnation, as being:

1. an adviser to the UK Government on policy issues
2. a provider of examination, registry and technical information services
3. a help-desk service for SMEs and individual inventors, and
4. a Government education service on IP

The Strategy shows that careful thought has been given to the general approach that the UKIPO intends to take over the next 5 years, and how it will do a better job of responding to Government policy, dealing with cost constraints, motivating its staff and keeping its customers happy. Taken on its own terms, it is a thorough and polished work product.

Warning: elephant in the room

What it lacks, though, is any fundamental analysis of why we need a UKIPO. Some in the IP community take the view that it has become an anachronism, that well-informed large companies prefer to make their initial patent filings abroad (eg with the EPO), and that it is better to apply for a European trade mark in Alicante than a purely UK trade mark in Newport. As a result, so the argument goes, an increasing percentage of the UKIPO’s work has been dealing with small-scale UK inventors and businesses who are not well-informed enough to realise that their filing strategy is sub-optimal, and who are either self-filing or are relying on UK IP attorneys whose vested interest is to file locally. Advocates of this view would prefer to see the UKIPO relegated to being simply a branch office of the EPO and OHIM, facilitating European filings in the UK.

Whether or not one accepts this harsh view, it is only concerned with part of the UKIPO’s role, particularly item 2 above. Logically, the argument depends on abolishing national varieties of IP. As long as we have purely national IP (eg a UK patent not based on an EPC application), we need a national registry to deal with it.

There will always be a need for a Government policy unit dealing with IP issues (item 1 above) and applicants who do not use the services of an IP attorney will continue to need assistance from a help-desk service (item 3 above).

Don't do this hand gesture in Sardinia, Gromit!

In recent years, the UKIPO has increasingly focussed on the needs of SMEs and on general educational initiatives (item 4 above). IP Draughts thinks the UKIPO’s collaboration with the Wallace & Gromit people is an excellent way to introduce schoolchildren to IP. When it comes to educating the adult public (and in particular SMEs) about IP, we think the UKIPO’s performance is patchy and lacks an overall game-plan. It should cut back on awareness-raising initiatives with regional “representative bodies”, and stop being a kind of Citizens Advice Bureau for individual inventors. Instead, it should focus on developing structured, long-term training programmes. The EPO has a well-funded European Patent Academy. If the UK Government is serious about increasing awareness and understanding of IP issues, it should consider investing in an educational body that runs or facilitates courses (vocational, undergraduate and post-graduate) on IP subjects. We would call it the National IP Academy. It should be run with a degree of independence from the UKIPO, so that there is no embarrassment factor if it wants to do or say something that is not in line with current Government policy.

Final question: has UKIPO stalwart Jim Houlihan been moonlighting as a model in the photograph on page 17 of the Strategy? IP Draughts thinks the public has a right to know the answer to this question.

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