1106006 Informal Interpretation

Date:
Rule:
801.2
Staff:
Michael Verne
Response/Comments:

– We think the "retained" manufacturing right do not compromise the exclusivity of the license. You should file before the licensing agreement is entered into. 06/29/2011 – Neither licensor “retaining” the right to limited manufacture during the preclinical testing period nor for the purpose of R&D for the life of the license would compromise the license’s exclusivity. The parties should file prior to entering into the licensing agreement

Question

From:

(Redacted)

Sent:

Wednesday, June 29, 2011 10:42 AM

To:

Verne, B. Michael

Subject:HSR Questions - Collaboration and License Agreement

Dear Mike,

Iwould appreciate your views as to the reportability under HSR of the followingCollaboration and License Agreement for the development of pharmaceuticals:

  • The Licensee will receive an exclusive license under licensed technology to develop, have developed, make, have made, use, offer for sale, sell, have sold, import, export, commercialize and otherwise exploit Products, subject to other terms and conditions in the agreement, including those summarized in #2 below.
  • The Licensor shall be responsible for conducting certain activities to develop the Products, including preclinical development and manufacture for preclinical testing. Licensee, however, will be solely responsible for commercialization of the Products (subject to a co-promote agreement in a specific field of use).
  • Upon completion of Licensor's development of the initial manufacturing process, Licensor will transfer to Licensee the manufacturing process, information, documentation and materials to establish manufacturing in Licensee's or its designee's facilities.
  • Inlight of ABA Premerger Notification Practice Manual (4th ed.) Interp. 27, andthe PNO's informal interpretations, including
    http://www.ftc.gov/opinions/0212016.pdf,
    http://www.ftc.gov/opinions/0803005.pdf,
    http://www.ftc.gov/bc/hsr/informal/opinions/0702018.pdf,http://www.ftc,gov/bc/hsr/informal/opinions/0912004.pdf,
    and the more recent May 27, 2011 informal interpretation pasted below,which has been shared with me, we seek your view as to whether the PNO wouldview the retained rights as compromising the exclusivity of the license, suchthat it would be considered non-exclusive and therefore non-reportable, or ifit would be considered exclusive and therefore reportable under HSR if the"size-of-person" and "size-of-transaction" tests are met.

    Wefurther seek your view as to whether the PNO might view the license as becomingan "asset" at some point during the life of the agreement, whichcould require the parties to value the license and potentially have to fileunder HSR at some future date, and if so, at what point would the license haveto be valued to determine if a filing is required, taking into account theinformal interpretations at http://www.ftc.gov/bc/hsr/informal/opinions/0612014.pdfand http://www.ftc.gov/bc/hsr/informal/opinions/1006004.pdf,and the more recent informal interpretation below.

    Wouldthe PNO advice be different if the Licensor retained the right to make and useProducts solely for the purpose of conducting further research and development,for the life of the license?

    From: Verne, B. Michael
    Sent: Friday, May 27, 20116:21 AM
    To: [redacted]
    Cc: [redacted]
    Subject: RE: HSR questions

    Wethink the "retained" manufacturing right do not compromise theexclusivity of the license. You should file before the licensing agreement isentered into.

    From: [redacted]
    Sent: Thursday, May 26, 20118:08 PM
    To: Verne,B. Michael
    Cc:[redacted]
    Subject: HSR questions

    Mike,

    Canyou share your views on the below scenario?

    Wewould like to determine whether a license, with the provisions described below,constitutes an asset" for HSR purposes upon execution of the LicensingAgreement or only at a later point:

  • The Licensee receives an exclusive right to make, use and sell the Product, subject to the limitation set forth in 2 below.
  • The Licensor retains the right to make (or have made) the Product to the extent necessary for it to satisfy its obligations under the development agreement as well as to manufacture Product at the request of Licensee during the commercialization period if the Licensee requests.
  • The Licensee can, at any time, require the Licensor to transfer the manufacturing technology to the Licensee or its designee.
  • Althoughthe Licensor's right or obligation to manufacture product is described as a"retained" right in the agreement, Licensee ultimately controlswhether Licensor will in fact manufacture the licensed product because it hasthe unfettered right to demand the transfer of the manufacturing technology toit or a designee at will. Accordingly, it is our view that the license shouldbe treated as exclusive for HSR purposes upon execution of the licensingagreement.

    Inthe event that you conclude that the license is not exclusive for HSR purposesupon execution of the licensing agreement, does it become an "asset"at the time that Licensee requires that Licensor transfer the manufacturingrights and related IP to it or a third party? If this is not the case, underwhat circumstances would these licensing rights become sufficiently exclusivethat they would constitute the acquisition at that time of an"asset"?

    About Informal Interpretations

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