Alliance Agreements Business Alliance Mahidol University International College

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 partners Ex. Dispute resolution, choice of law provision, indemnification for patent infringement 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 elements

Detailed Positions on Relevant Elements 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 developed – 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: 3 rd 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 conflict

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 responsible),

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