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When Term Sheets Become Legally Binding

Insight into SIGA Technologies, Inc. v. Pharmathene, Inc. and its Impact on University IP Licensing
Format: On-Demand Video, DVD, or PDF Transcript
Originally presented: December 05, 2013

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University TTOs and licensing professionals beware: A “non-binding” term sheet can be anything but…

If you haven’t paid much attention to the Delaware Supreme Court  decision in SIGA Technologies v. PharmAthene, Inc., No. 314, 2012 2013 Del. LEXIS 265, 1-2 (Del. May 24, 2013), it’s time to get familiar with the frightening case – BEFORE you sign your next term sheet.

Here’s the background story: SIGA Technologies, Inc. developed the smallpox antiviral drug Arestvyr™ (ST-246) and needed more funding to continue the project. The company reached out to a competitor in the space, Pharmathene, for the money. The parties decided to do structure the deal through a license agreement, and they agreed to the particulars in a non-binding term sheet. Then, some months later, it was decided Pharmathene would acquire SIGA.  The merger agreement stated that if the merger fell through, the Parties agreed to negotiate in good faith a license in accordance with the term sheet they had previously agreed upon.

However, before the merger closed, SIGA received a large grant to further develop ST-246 and no longer wanted to be acquired by Pharmathene. This led the parties back to the negotiating table — but SIGA proposed much higher economic terms than the ones in the original term sheet, and the parties reached an impasse.

Then, things got ugly. Really, really ugly…

Pharmathene sued SIGA in Delaware trial court for failure to negotiate in good faith in accordance with the original “non-binding” agreement. And won. 

So how does this decision affect your TTO? Take a look at your current “non-binding” agreements. Are you sure that the same situation won’t repeat itself in your own organization? We’ve created a critical briefing that will analyze the court’s decision, teach you how to draft your agreements to protect your university, and give you insight into the negotiations and terms that paved the way for the lawsuit – and the decision. 

When Term Sheets Become Legally Binding:
Insight into SIGA Technologies, Inc. v. Pharmathene, Inc. 
and its Impact on University IP Licensing

Here’s a brief look at the agenda:

  • How incorporating a non-binding term sheet into a future agreement can create an unexpected obligation
  • Specific disclaimer language you must include
  • Walking the fine line of “good faith” and “bad faith”
  • How the SIGA decision will resonate country-wide
  • What changes you should going forward make when drafting:
    • Options
    • Letter agreements
    • MOUs
    • Term sheets

Your program leader

Emily Williams is a licensing associate at Johns Hopkins University Technology Transfer Office focusing on the physical sciences portfolio.  She has previous experience in tech transfer in both company and university settings, as well as a strong legal background.
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