Connecting with Companies
A Guide to Consulting Agreements for Biomedical Scientists
Contents
Acknowedgments, xi
Disclaimer, xiii
1 Introduction, 1
2 Issues to Consider When Negotiating a Consulting Agreement, 9
A. Define What You Want in the Contract, 10
B. The Contract Is a Legal Agreement—Make Sure It Is Right, 11
1. Read the Contract, 11
2. The Words Mean What They Say, 11
3. If Something Is Unclear, It Might Be Wrong—or Wrongly Interpreted Later, 12
4. Legalisms, 13
5. If It Is Not in the Contract, You Might Not Get It, 14
C. Do Not Assume You Have to Sign a Contract as Is, 14
D. Protect All Intellectual Property, 15
E. Review University Policies, 16
1. Time Commitment, 16
2. Disclosure of Laboratory Results, 17
3. Use of University Resources, 17
4. Involvement of Postdoctoral Researchers and Students, 17
5. Conduct of Research, 17
6. “Significant Financial Interest,” 17
7. Employment by Company, 18
8. Multiple Relationships with Company, 18
9. Use of Name or University Letterhead, 18
10. Consulting during a Sabbatical, 19
3 What Constitutes Consulting?, 21
A. Service on an Advisory Board, 22
B. Conduct of Research, 22
C. Meetings with Investors, 23
D. Serving as a Company Director or Officer, 24
E. Advising Venture Capital Funds, 26
F. “Expert Network” and Hedge Fund Consulting, 26
G. Expert Witness Services—Litigation, 28
H. Company Seminars, Speeches, Symposia—CDAs, 29
I. A Note about CDAs Linked to Consulting Agreements, 31
J. A Final Word Concerning Chapter 3, 32
4 Scope of Services, 33
5 Cash Compensation, 37
A. Retainer, 37
B. Consulting Fee, 38
C. Travel Time, 39
D. Expenses, 39
E. Taxes on Retainers and Consulting Fees, 40
F. Deferral of Compensation Income through Retirement Savings, 41
6 Shares, Stock Options, and Taxes, 43
A. Shares and Options Generally, 43
B. Vesting, 51
C. Acceleration Events, 51
D. Antidilution Rights, 54
E. Registration Rights, 55
F. Some Thoughts about Taxes, 56
1. Introduction: Caveats, 56
2. Overview, 57
3. Tax Risks, 60
4. Ordinary Income (Loss) versus Capital Gain (Loss), 61
5. Section 83(b) Election for Restricted Stock, 62
6. Gifts and Estate Planning, 68
G. Fair Market Value, 68
H. Royalty Interest, 68
I. Interest in a VC Firm, 69
J. Liquidation Preferences and Participating and Nonparticipating Preferred Stock, 69
K. Conclusion, 74
7 Confidentiality Obligations, 75
A. Confidential Information in Your Possession, 75
B. Company Confidential Information, 77
1. Obligation to Keep Confidential, 77
2. Definition of Confidential Information, 79
3. Exceptions to the Definition of Confidential Information, 81
4. Access to Your Manuscripts, 82
8 IP Rights, 85
A. Ownership Rights, 86
B. “No Infringement” Covenant, 88
C. “Works for Hire” and “Moral Rights,” 89
D. Power of Attorney, 90
E. List of Existing Inventions, 91
9 Noncompetition, 93
10 Time Commitment, 95
11 Term and Termination, 97
12 Multiple Relationships with One Company, 99
13 Start-Up Issues, 101
14 Other Clauses, 103
A. Indemnity, 103
B. Governing Law; Legal Remedies, 107
C. Use of Consultant’s Name, 109
D. Consulting for Affiliated Companies; Assignment, 110
E. Survival, 113
F. Independent Contractors, 113
G. Representations and Warranties—Your Guarantees, 114
15 Use of Consulting Entity, 117
16 Conclusion, 119
Attachment A: Basic Consulting Agreement, 121
Glossary, 127
Notes, 131
Index, 137
