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Collaborating for digital solutions

July 25, 2022
by Healthcare World

Vincent Buscemi, Partner and head of Independent Health and Social Care for Bevan Brittan LLP, outlines the key legal and commercial issues behind collaborations

As healthcare innovation moves on apace, it can be hard to keep up with technology. Smaller companies that have to raise investment may find their product or app out of date by the time they can scale it. Other businesses may find their ideas superseded before they can commercialise them simply due to the pace of the market they operate in. 

For these reasons many companies are coming round to the idea that partnering is the way forward. By presenting their technology alongside complementary ideas or by sitting on other platforms, it could be easier to win business as a consortium rather than as a lone supplier. 

However, there are other aspects to consider when collaborating or contracting for digital health solutions. These divide broadly into soft (relationships) and hard (legal and commercial) issues to consider. Even if the parties are well known to each other within the sector, the ground rules have to be clear for the partnership to function successfully, particularly if the consortium plans to expand. 

Soft issues 

The first area to consider is whether the parties have a history of working together or whether they have worked on similar projects. Clearly, a shared vision is key, identifying the goal and the reasons behind the collaboration. Analysing what distinguishes the collaboration’s offering from others in the market, along with the USP and value proposition, and an understanding of the route to market and roll-out are just the first steps. 

Reputational issues, such as conflicts of interest between the parties and due diligence, are also part of the initial journey. It’s also vital to see if the risk appetite is aligned and to consider how the organisational structure will fit together. Once these issues are addressed, then the parties should deal with individual or organisational sovereignty, governance and regulatory responsibilities. Added to these considerations are the availability of time and resources (human and capital) to invest in the collaboration, whether the participants have senior level buy in and if the staff are on board. It’s also important to clarify who will own the project and how much the parties are investing in it. 

Next, priorities need to be set. The partners should agree what is within the scope of the collaboration, along with the timescales and whether these are realistic and deliverable. Finally, they should agree the project or business plan. 

Hard issues 

The legal and commercial issues for the parties cover the actual day to day running of the business or project – the scope and purpose of the collaboration and what each party will contribute, such as data, funding, know how, staff, contacts, sales opportunities and more. It identifies the territory and jurisdiction of the work, where the solutions will be provided and whether there are local procurement rules or a system that needs to be followed. 

Decisions will be reached as form follows function and they should consider whether the collaboration will be a commercial or corporate joint venture or special purpose vehicle. Equally as important are the issues around data – who is providing data; who will own or have the right to use the data that is collected or generated by the collaboration or project and how will that data be protected? 

IP issues come into play. The parties should examine the background IP and decide what is needed for the collaboration and what the licence arrangements should be. They will also look at the foreground IP (rights created under or by the collaboration) to decide who owns this (sole versus joint ownership) and how can it be used. 

Equally, new IP should be considered in the light of development, insights, know-how and advancement. Who will own the discoveries achieved through the collaboration? Within this scope falls the arrangement around licences, (exclusivity and royalties, ownership versus commercialisation / exploitation). Finally, third party IP rights also have to be recognised in the overview. 

Once the new partnership is up and running, the day to day issues come into play. Agreement should be reached around supply chain management, input and output KPIs, shared risk and reward which include performance obligations, timelines and deliverables. 

They should also look at how the collaboration exclusivity will operate and if there will be restraints or restrictions on the parties such as sub-contracting and assignment. Alongside, there are competition law considerations that include restrictive agreements and practices, and dominant position issues. 

Governance and decision-making arrangements form a vital part of the agreement between the parties. They should consider whether to implement a joint committee or a partnership board, including compliance and controls  and project management (meeting arrangements, membership, agendas, minutes, voting) arrangements. 

Financial arrangements such as payment mechanisms, funding and the ability to vary things should the collaboration evolve or if the services or service model is refined also need to be considered. There will also need to be discussions around sharing risks and rewards, as well as liabilities and insurance. 

Finally, the parties need to consider the term of the collaboration, as well as termination and the effect of termination – the exit arrangements. They should examine what happens to IP rights, data use, exclusivity and restrictive covenants to create a seamless finale if they decide to part ways. 

The legal side to a new collaboration may appear daunting, but it covers all eventualities and protects each member in the new venture. This reassurance goes a long way towards giving each partner the confidence to embrace the possibilities that such a collaboration may bring on a much larger scale than if they were to go it alone. 

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