Contents

Acknowledgments

 

Disclaimer

 

1. Introduction

 

2. Issues to Consider when Negotiating a Consulting Agreement

A. Define What You Want in the Contract

B. The Contract Is a Legal Agreement-Make Sure It Is Right

1. Read the Contract

2. The Words Mean What They Say

3. If Something Is Unclear, It Might Be Wrong-or Wrongly Interpreted Later

4. Legalisms

5. If It Is Not in the Contract, You Might Not Get It

C. Do Not Assume You Have to Sign a Contract as Is

D. Protect All Intellectual Property

E. Review University Policies

1. Time Commitment

2. Disclosure of Laboratory Results

3. Use of University Resources

4. Involvement of Postdoctoral Researchers and Students

5. Conduct of Research

6. “Significant Financial Interest”

7. Employment by Company

8. Multiple Relationships with Company

9. Use of Name or University Letterhead

10. Consulting during a Sabbatical

 

3. What Constitutes Consulting?

A. Service on an Advisory Board

B. Conduct of Research

C. Meetings with investors

D. Serving as a Company Director or Officer

E. Advising Venture Capital Funds

F. “Expert Network” and Hedge Fund Consulting

G. Expert Witness Services-Litigation

H. Company Seminars, Speeches, Symposia-CDAs

I. A Note about CDAs Linked to Consulting Agreements

J. A Final Word Concerning Chapter 3

 

4. Scope of Services

 

5. Cash Compensation

A. Retainer

B. Consulting Fee

C. Travel Time

D. Expenses

E. Taxes on Retainers and Consulting Fees

F. Deferral of Compensation Income through Retirement Savings

 

6. Shares, Stock Options, and Taxes

A. Shares and Options Generally

B. Vesting

C. Acceleration Events

D. Antidilution Rights

E. Registration Rights

F. Some Thoughts about Taxes

1. Introduction: Caveats 47

2. Overview

3. Tax Risks

4. Ordinary Income (Loss) versus Capital Gain (Loss)

5. Section 83(b) Election for Restricted Stock

6. Gifts and Estate Planning

G. Fair Market Value

H. Royalty Interest

I. Interest in a VC Firm

J. Liquidation Preferences and Participating and Nonparticipating Preferred Stock

K. Conclusion

 

7. Confidentiality Obligations

A. Confidential Information in Your Possession

B. Company Confidential Information

1. Obligation to Keep Confidential

2. Definition of Confidential Information

3. Exceptions to the Definition of Confidential Information

4. Access to Your Manuscripts

 

8. IP Rights

A. Ownership Rights

B. “No Infringement” Covenant

C. “Works for Hire” and “Moral Rights”

D. Power of Attorney

E. List of Existing Inventions

 

9. Noncompetition

 

10. Time Commitment

 

11. Term and Termination

 

12. Multiple Relationships with One Company

 

13. Start-Up Issues

 

14. Other Clauses

A. Indemnity

B. Governing Law; Legal Remedies

C. Use of Consultant’s Name

D. Consulting for Affiliated Companies; Assignment

E. Survival

F. Independent Contractors

G. Representations and Warranties-Your Guarantees

 

15. Use of Consulting Entity

 

16. Conclusion

 

Attachment A: Basic Consulting Agreement

Glossary

Notes

Index

  “Consulting agreements between academic scientists and corporations not only protect discoveries and intellectual property, but also deal with risks related to securities laws, such as insider trading. Giving advice requires an in depth understanding of these issues and the different cultures of academicians versus corporate lawyers. Edward Klees and Robert Horvitz have applied the same degree of rigor that characterizes the best academic research to understanding the principles and subtleties of these agreements. They provide a clear description of critical issues that are understood by surprisingly few, e.g., liquidation preferences and participation rights of preferred stock. This section alone makes Connecting with Companies worthwhile reading for any academic scientist with an interest in the corporate world.”
      —Ansbert K. Gadicke, Managing Director, MPM Capital

  “This is the book I wish had been available when I started my first company. I learned an enormous amount from it.”
      —Roger Tsien, University of California at San Diego, Nobel Laureate in Chemistry, 2008

  “I loved this book and all potential consultants in the biomedical field will find it enlightening. I highly recommend it.”
      —Katherine Ku, Director of the Office of Technology Licensing, Stanford University

  “In this valuable guide, the authors provide a crisp introduction to key issues in academic-industry interactions, making it a must-read for any academic contemplating entry into a consulting agreement.”
      —Marc Tessier-Lavigne, President, The Rockefeller University