Alliance Agreements

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					  Alliance Agreements

      Business Alliance
Mahidol University International
           Boilerplate Articles
• In any alliance contract, legal counsel for both
  sides draft mutually acceptable provisions
  intended to deal with commonly encountered
  contractual rights and obligations of the
• Ex. Dispute resolution, choice of law
  provision, indemnification for patent
• Important for planning and negotiating teams
    Detailed Objectives and Detailed
           Resource Elements
• Alliance- Consumer Marketing Company-
  Engineering Firm: Toothbrush
• Launch date, price – Objectives (Ours/Theirs)
• Who will supply the engineering/ marketing
  resources; how much
• Must get initial agreement on thee broad
  objectives and resource contributions and
  then develop detailed positions on the above
      Detailed Positions on Relevant
• What are the milestones in design, manufacture and
  launch of the new 10$ toothbrush
• What consumer tests will trigger a commitment to full
  scale manufacture?
• What evaluation criteria are important?
• What engineers, marketers will each firm commit to
  the project?
• What are the engineering and marketing budgets?
• Cooperative process given each side may have limited
  knowledge in the others field
             Financial Pie-Split
• Addresses the way in which financial rewards
  and risks are allocated between the parties
• Rule based or Transactional based:
  – Rule based- agree on rules for the financial model
    lasting for the length of the alliance or some other
    agreed upon time 4% royalty paid to engineering
    company for development of toothbrush
  – Transactional Model- agreement that certain
    aspects of the financial terms will be subjected to
    negotiated revisions at specified times.
  Intellectual Property Element (1)
• The use and protection of IP is poorly understood
  by many managers.
• Define the types of IP relevant to the alliance
  (patents, proprietary technological know-how,
  trademarks and copyrights) – any information or
  knowledge that enables one firm to distinguish
  itself from competitors can be regarded as IP Ex/
  customer lists, knowledge of customer
  preference and willingness to pay, methods used
  by a consumer marketing company to evaluate
  market attractiveness
   The Six Dimensions of Intellectual
              Property (2)
• Background and Foreground- when IP was
  – Background- preexisting technology brought into
    alliance by one of the parties
  – Foreground- IP developed during the alliance
• Inside/Outside- Will the IP be used inside or
  outside the Boundaries of the alliance
• During/After – Will the IP be used during
  and/or after the term of the alliance
             Other IP Issues(3)
• Disclosure: extent to which IP property of one
  partner needs to be revealed to the other partner
• Confidentiality: the conditions under which the
  partners may reveal specific IP to third parties: 3rd
  party to provide technical support
• Embedded: a situation in which one firm
  becomes so polluted with the other’s IP that it
  cannot help but use it: IP is both leaky and sticky-
  need o understand where embedding will lead to
 Working Process and Governance
• Must negotiate how partners will work together
• Examples: organization of interpartner
  committees and working groups, how partners
  will share information, creation of top executive
  steering committees
• Also details methods of how partners will
  communicate, monitor progress, and deal with
  daily concerns
• Deeper Level: specifies which partner will make
  each type of decision (consensual or one partner
 Term and Termination Element(1)
• In general alliances do not last forever
  therefore need to draft the circumstances and
  impact of termination
• Spell out termination terms based on reason
  for alliance termination
  – Ex One partner not performed adequately vs.
    objectives of the alliance were completed and
    partners want to proceed independently
    Termination Issues Addressed
• Shall alliance have a fixed term, or go on forever until
  one partner decides to terminate it.
• Under what circumstances should a partner have the
  right to withdraw – no reason? Or should there be an
  objective criteria such as a failure to meet a milestone
• Shall the alliance assets that remain after termination
  (Foreground IP) depend on which partner withdraws or
  no-fault divorce
• Wind down activities- especially important if continuity
  of supply to customers or follow up service