Overview
There can be a clash of cultures when academic scientists negotiate consulting agreements with biotechnology or pharmaceutical companies. Scientists, accustomed to the collegial atmosphere of the laboratory and sometimes disdainful of legal paperwork, might be less than diligent in reading the fine print. On the other hand, a company--motivated to protect discoveries and trade secrets--might write provisions that are favorable to its interests, leaving it to the scientist to raise objections or offer a counterproposal. The scientist, meanwhile, might believe that it would be impolite or antagonistic to raise questions about a company’s agreement.
This book offers an essential guide for academic scientists and physicians who are considering consulting work in the field of biomedicine. In it, the authors--an attorney and a Nobel Laureate in Medicine, both with extensive experience reviewing and negotiating consulting agreements--outline key issues to consider before signing a consulting agreement. These issues range from the obvious--intellectual property, confidentiality, and fees--to those that might not spring immediately to mind, including indemnity, different classes of stock, and the relevance of insider trading and securities laws.
About the Authors
Edward Klees is General Counsel at the University of Virginia Investment Management Company and was formerly Associate General Counsel of the Howard Hughes Medical Institute.
H. Robert Horvitz, 2002 Nobel Laureate in Physiology or Medicine, is Professor in the Department of Biology and a member of the McGovern Institute for Brain Research and of the Koch Institute for Integrative Cancer Research at MIT and an Investigator at the Howard Hughes Medical Institute.
Table of Contents
- Biomedical Consulting Agreements
- Biomedical Consulting Agreements
- A Guide for Academics
- Edward Klees and H. Robert Horvitz
- The MIT Press
- Cambridge, Massachusetts
- London, England
- ©
- 2012
- Edward Klees and H. Robert Horvitz
- All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher.
- MIT Press books may be purchased at special quantity discounts for business or sales promotional use. For information, please email special_sales@mitpress.mit.edu or write to Special Sales Department, The MIT Press, 55 Hayward Street, Cambridge, MA 02142.
- This book was set in Syntax and Times Roman by Toppan Best-set Premedia Limited, Hong Kong. Printed and bound in the United States of America.
- Library of Congress Cataloging-in-Publication Data
- Klees, Edward, 1959–
- Biomedical consulting agreements : a guide for academics / Edward Klees and H. Robert Horvitz.
- p. cm.
- Includes bibliographical references and index.
- ISBN 978-0-262-51793-5 (pbk. : alk; paper)
- 1. Medicine—Research—law and legislation—United States. 2. Medical consultants—Legal status, laws, etc.—United States. 3. Consulting contracts—United States. 4. Universities and colleges—United States.—Faculty—Handbooks, manuals, etc. I. Horvitz, H. Robert. II. Title.
- KF3821.K54 2012
- 344.7303′1172–dc23
- 2012013234
- 10 9 8 7 6 5 4 3 2 1
- E.K. dedicates this book to Susan, Jessica, and Rachel.
- H.R.H. dedicates this book to the memory of his father Oscar Horvitz, to his mother Mary Horvitz, and to Martha, Alex, Joe, and Chris.
- Contents
- Acknowledgments xi
- Disclaimer xiii
- 1 Introduction 1
- 2 Issues to Consider when Negotiating a Consulting Agreement 7
- A. Define What You Want in the Contract 8
- B. The Contract Is a Legal Agreement—Make Sure It Is Right 8
- 1. Read the Contract 8
- 2. The Words Mean What They Say 9
- 3. If Something Is Unclear, It Might Be Wrong—or Wrongly Interpreted Later 10
- 4. Legalisms 11
- 5. If It Is Not in the Contract, You Might Not Get It 11
- C. Do Not Assume You Have to Sign a Contract as Is 12
- D. Protect All Intellectual Property 12
- E. Review University Policies 13
- 1. Time Commitment 14
- 2. Disclosure of Laboratory Results 14
- 3. Use of University Resources 14
- 4. Involvement of Postdoctoral Researchers and Students 14
- 5. Conduct of Research 14
- 6. “Significant Financial Interest” 15
- 7. Employment by Company 15
- 8. Multiple Relationships with Company 15
- 9. Use of Name or University Letterhead 15
- 10. Consulting during a Sabbatical 16
- 3 What Constitutes Consulting? 17
- A. Service on an Advisory Board 18
- B. Conduct of Research 18
- C. Meetings with Investors 19
- D. Serving as a Company Director or Officer 20
- E. Advising Venture Capital Funds 21
- F. “Expert Network” and Hedge Fund Consulting 22
- G. Expert Witness Services—Litigation 23
- H. Company Seminars, Speeches, Symposia—CDAs 24
- I. A Note about CDAs Linked to Consulting Agreements 26
- J. A Final Word Concerning Chapter 3 27
- 4 Scope of Services 29
- 5 Cash Compensation 31
- A. Retainer 31
- B. Consulting Fee 32
- C. Travel Time 33
- D. Expenses 33
- E. Taxes on Retainers and Consulting Fees 34
- F. Deferral of Compensation Income through Retirement Savings 34
- 6 Shares, Stock Options, and Taxes 35
- A. Shares and Options Generally 35
- B. Vesting 42
- C. Acceleration Events 43
- D. Antidilution Rights 45
- E. Registration Rights 46
- F. Some Thoughts about Taxes 47
- 1. Introduction: Caveats 47
- 2. Overview 47
- 3. Tax Risks 50
- 4. Ordinary Income (Loss) versus Capital Gain (Loss) 52
- 5. Section 83(b) Election for Restricted Stock 52
- 6. Gifts and Estate Planning 57
- G. Fair Market Value 58
- H. Royalty Interest 58
- I. Interest in a VC Firm 58
- J. Liquidation Preferences and Participating and Nonparticipating Preferred Stock 59
- K. Conclusion 62
- 7 Confidentiality Obligations 65
- A. Confidential Information in Your Possession 65
- B. Company Confidential Information 67
- 1. Obligation to Keep Confidential 67
- 2. Definition of Confidential Information 68
- 3. Exceptions to the Definition of Confidential Information 70
- 4. Access to Your Manuscripts 71
- 8 IP Rights 73
- A. Ownership Rights 74
- B. “No Infringement” Covenant 76
- C. “Works for Hire” and “Moral Rights” 76
- D. Power of Attorney 78
- E. List of Existing Inventions 78
- 9 Noncompetition 81
- 10 Time Commitment 83
- 11 Term and Termination 85
- 12 Multiple Relationships with One Company 87
- 13 Start-Up Issues 89
- 14 Other Clauses 91
- A. Indemnity 91
- B. Governing Law; Legal Remedies 94
- C. Use of Consultant’s Name 96
- D. Consulting for Affiliated Companies; Assignment 97
- E. Survival 99
- F. Independent Contractors 100
- G. Representations and Warranties—Your Guarantees 100
- 15 Use of Consulting Entity 103
- 16 Conclusion 105
- Attachment A: Basic Consulting Agreement 107
- Glossary 113
- Notes 117
- Index 121
Endorsements
"In this valuable guide, lawyer Edward Klees and Nobel-prizing winning researcher H. Robert Horvitz draw on their decades of experience with academic-industry interactions to provide a crisp introduction to key issues, including conflict of interest, confidentiality, intellectual property, and compensation. Written in clear and accessible prose, and with a very practical outlook, it is a must-read for any academic contemplating entering into a consulting arrangement."
Marc Tessier-Lavigne, President, The Rockefeller University
"Biomedical Consulting Agreements is the book I wish had been available when starting my first company. It concisely walks the consultant through all the important topics from elementary to advanced, with real-life examples of how the relationship can go well or awry. Even though I have been through more consultancies than I can quickly count, I learned an enormous amount from this book."
Roger Y. Tsien, Department of Chemistry and Biochemistry, University of California, San Diego; Nobel Laureate in Chemistry, 2008
"I loved this book and am sure that all potential consultants in the biomedical field will find it enlightening. The many examples sprinkled throughout give life to the legal concepts and will help researchers understand the ramifications of contract words and their actions. The book is jargon-free, and I highly recommend it for anyone who is interested in working as a consultant. Our office will definitely make several copies of this superb reference book available for our university researchers."
Katharine Ku, Director, Office of Technology Licensing, Stanford University
"Consulting agreements between academic scientists and corporations not only protect discoveries and intellectual property, but also deal with risks related to securities laws, such as insider trading. Giving advice requires an in depth understanding of these issues and the different cultures of academicians versus corporate lawyers. Edward Klees and Robert Horvitz have applied the same degree of rigor that characterizes the best academic research to understanding the principles and subtleties of these agreements. They provide a clear description of critical issues that are understood by surprisingly few, e.g., liquidation preferences and participation rights of preferred stock. This section alone makes Biomedical Consulting Agreements worthwhile reading for any academic scientist with an interest in the corporate world."
Ansbert K. Gadicke, Managing Director, MPM Capital
The book is exceptionally to the point—and useful. I’ve recommended it to our senior staff for themselves and for the faculty they deal with. Despite the title limiting it to “Biomedical”, I found it more widely applicable. The examples are all “biomedical”, but the rest is not limited.