| There are some key issues to look out for when | | | | of the alliance agreement. |
| drafting a Strategic Alliance Agreement. The most | | | | The alliance agreement should also provide a |
| important provision to include, in my opinion, is a "No | | | | mechanism for dealing internally with disputes between |
| Partnership" provision. A strategic alliance is different in | | | | the parties. This provision may set-up a board, |
| purpose and form than a partnership, and the | | | | composed of members from both parties, responsible |
| agreement should expressly reflect the intentions of | | | | for hearing and resolving disputes. Due to concerns of |
| the parties not to form a partnership. The legal status | | | | both time pressure and wanting to maintain internal |
| of a "partnership" involves a whole series of rights and | | | | harmony, partners to an alliance will likely not want to |
| obligations that neither party to a strategic alliance | | | | send matters of internal dispute to an outside arbiter. |
| would like to assume. Therefore, a "No Partnership" | | | | Thus, the agreement should provide a mechanism for |
| provision must be included and must clearly stress that | | | | dealing with problems or disputes internally. |
| the parties do not intend to create a partnership in this | | | | The sharing of risks and rewards is central to a |
| agreement. | | | | strategic alliance. This issue is generally the most |
| A second key area to deal with is a provision | | | | fiercely negotiated item in any alliance agreement. |
| addressing confidential information. Parties to a | | | | Profit sharing in proportion to each party's ownership |
| strategic alliance will inevitably share proprietary and | | | | interest in the alliance is often used. This does align the |
| confidential information to realize the purpose and | | | | interests of all parties because each seeks to |
| goals of the arrangement. Thus, the agreement must | | | | maximize profit. Losses can be shared in the same |
| include a "Mutual Nondisclosure" provision that defines | | | | manner or limited to the extent of capital contribution. |
| "Confidential Information" and expressly states the | | | | Great care must be taken in defining how net profits |
| respective parties' rights and obligations in respect to | | | | will be calculated. |
| this confidential information. Most likely, each party will | | | | In conclusion, when negotiating strategic alliance |
| want a promise from the other that they will not | | | | agreements, a "no partnership" provision must be |
| disclose confidential or proprietary information to third | | | | prominently included, and the issues of confidentiality of |
| parties. | | | | information, party contributions, and allocation of risks |
| In addition, the agreement should address the | | | | and rewards generally require substantial negotiation. If |
| contributions of each party. In other words: What will | | | | the parties approach that negotiation creatively and |
| each party be bringing to the agreement? Capital | | | | work cooperatively to consider a variety of options, |
| contributions of cash, intellectual property (patents, | | | | provisions can be negotiated that provide acceptable |
| trademarks, copyrights), technology transfers or | | | | protection to all parties and support a common |
| licenses, distribution network, market access, personnel | | | | strategy. |
| and other transfers of resources are key components | | | | |