The complexities of territorial licensing

Companies in the biotech and pharmaceutical industry are well known for developing and implementing innovative deal structures in order to realise the maximum value from their assets and to get products to market. One of those innovative deal structures is geographical licensing. While apparently simple on the face of it, the devil is in the detail.

Geographical licensing is the practice where the owner of the rights to a product grants to a licensee the exclusive right to develop and/or commercialise the product in a specific country or territory only. The licensor may grant a separate licence to several different licensees, each in a distinct country or territory. The licensor may, or may not, reserve for itself the right to develop and commercialise the product in a particular country or territory.

The complexities of this deal structure arise from the fact that there needs to be a degree of either centralised control or decentralised co-ordination in relation to a number of matters — particularly regulatory compliance and intellectual property management. Such centralised control or decentralised co-ordination needs to be acceptable to all parties involved, not all of whom may be known or identified at the time of entering into the first licence. Clearly, the complexities increase as the number of licensees increases. The deal may be further complicated if, prior to commercialisation, the licensor works with one or more of the licensees to undertake development work to get the product to market…

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