Pharmaceutical licensing agreements are two-party contracts between a drug company and a pharmaceutical laboratory, or lab inventor. The laboratory develops and patents drugs, and grants a license in the product to the drug company. The drug company markets the products and all drug-related technology for commercial use.
Common pharmaceutical licensing agreements define the patent rights of the lab inventor as patents, patent applications and certificates of invention. Rights in the drug product and/or technology also include patent substitutions, extensions, renewals or continuations. The lab inventor owns, controls and has the right to grant licenses and sublicenses to the drug company.
Confidential information within a pharmaceutical licensing agreement refers to company trade secrets to include proprietary information related to products, technology and materials. Standard pharmaceutical licensing agreements assign a limit to the number of days each party has to submit a written disclosure referencing the confidential information.
Royalties and Sublicense Fees
The drug company must pay the lab inventor one royalty for the commercial use of drugs, technology and other products under the pharmaceutical licensing agreement. Parties to the contract calculate royalties based on a percentage of net sales of drugs under patent. The lab inventor also charges a percentage of the royalty and all sublicense fees the drug company receives as a result of commercial use.