Mediation in R & D – A Healthcare Industry Case Study Leuven, November 13, 2009 Dr. Claus-Joerg Ruetsch, Head Legal Diagnostics F. Hoffmann-La Roche Ltd

Mediation in R & D – A Healthcare Industry Case Study Table of Contents Individual Aspects 3 Trends 4 Characteristics1 Case Study2

Mediation in R & D – A Healthcare Industry Case Study Characteristics Innovative Healthcare Companies need numerous license agreements and collaborations in order to achieve/maintain a full product pipeline. Key to such license or collaboration agreements and thus subjects of later disagreements and disputes are the scope the rights the field(s) the specifications the opportunity of one party to compete or exploit similar rights or improvements C.-J. Ruetsch – Leuven, Nov. 13, Immunological Testing Blood Glucose Testing

Mediation in R & D – A Healthcare Industry Case Study Characteristics In my area of work parties will typically go through an evaluation and development before launch of product and either continued manufacture or exploitation (marketing and sales). Regulatory requirements make swift changes difficult. Always long-term relationships Mostly of strategic importance, e. g. Tamiflu ® Often of financial significance, e. g. blockbuster Complex multi-stage obligations of contract parties Clinical Chemistry Testing C.-J. Ruetsch – Leuven, Nov. 13, 20094

Mediation in R & D – A Healthcare Industry Case Study Case Study In 2001 Roche and company X had entered into a co-development and supply agreement to develop an ISE Device for X’s instrument. The product development yielded 6 prototypes and about 80 production instruments in 2002 and 2003, but X was not satisfied. Dispute over specifications arose and after many discussions the parties still had an insufficient development result. The unhappy contractual partner X sued Roche in a district court in Massachusetts. Facts C.-J. Ruetsch – Leuven, Nov. 13, 20095

Mediation in R & D – A Healthcare Industry Case Study Case Study Faced with the choice between a lengthy trial (estimated costs 1.5 mio. USD) or mediation Roche took the initiative to propose mediation. The other side agreed to try mediation. Roche began preparations. These covered the contract history, financials, options, technology and opening briefs. The mediation on the day was shuttle mediation where the mediator moved back and forth between the parties. It took almost 13 hours to come to a solution. A payment to X was agreed and the dispute resolved. Resolution C.-J. Ruetsch – Leuven, Nov. 13, 20096

Mediation in R & D – A Healthcare Industry Case Study Case Study Thorough preparation:  fact finding on overall relationship  fact finding on technical matters  legal and financial risk analysis  define goals Role of Mediator Clear mandate for team at mediation Availability of back-up support Key Factors for Success in Mediation C.-J. Ruetsch – Leuven, Nov. 13, 20097

Mediation in R & D – A Healthcare Industry Case Study Individual Aspects As shown in the case study collaborations, developments or marketing efforts are long-term relationships. Had the parties mediated their development difficulties earlier, the development might have gone on and the parties would most likely have continued with one another.  In this situation any negotiated solution is better than a one-time decision by an impartial third party, however good the technical knowledge is.  If the negotiated solution turns out to be lacking in some way, the parties are already used to mediate a (new) solution. Long-term Relationship C.-J. Ruetsch – Leuven, Nov. 13, 20098

Mediation in R & D – A Healthcare Industry Case Study Individual Aspects  Litigations can take years when one of the parties exercises its rights to due process, i.e. a commercial fight through 3 instances can take 4 – 6 years.  Disputes over R & D exploitation/existence of license rights cannot linger on 4 – 6 years.  Mediation offers as expedited a solution as the parties require and a high degree of flexibility.  If the parties are sceptical about chances of successful resolution they can agree mediation on one central question or mediation for a very limited time (with possibility to then find thereafter a solution without the mediator). Time Considerations The case study shows that time considerations led the parties to choose mediation. C.-J. Ruetsch – Leuven, Nov. 13, 20099

Mediation in R & D – A Healthcare Industry Case Study Individual Aspects  Mediation can cut out most of the pre-trial costs.  Mediation conducted at hourly rates (e.g. EUCON EUR 180 – 420/hour, JAMS USD 400/hour) takes away the need to disclose/ calculate the value of a product or technology.  In litigation on the other hand, Healthcare Companies need to stipulate the value of their product technology. Cost Consideration The case study also shows that cost considerations led to mediation. C.-J. Ruetsch – Leuven, Nov. 13,

Mediation in R & D – A Healthcare Industry Case Study Trends Mediation is to date conducted as part of a litigation, not on its own. Realization that there is no one best solution. Willingness to experiment with mediation is increasing. Interest / Knowledge about mediation grows in the industry. This allows mixed approaches to dispute resolution, e.g. expert determination and short mediation and negotiations. C.-J. Ruetsch – Leuven, Nov. 13,

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