Recently, the Shanghai International Arbitration Center (SHIAC) made a ruling on a new drug development license-in transaction dispute with significant industry benchmark value. Han Kun Law Offices successfully represented the licensee in defending against the licensor's request for contract termination, preserving our client's commercial interests.
The case involves the understanding and application of typical terms and legal issues in license-in/license-out transactions within the biopharmaceutical industry. It also serves as an example of domestic arbitration institutions handling cases in English and managing cases using international arbitration models, which is highly representative. The case was led by Han Kun's Life Sciences team Aaron GU and Dispute Resolution team ZHAO Yuxian, who jointly represented the cross-departmental team, showcasing the firm's integrated management and cross-departmental cooperation capabilities.
Case Overview
The case involves a cross-border licensing collaboration for an innovative drug: the foreign party, as the new drug rights holder, exclusively granted the R&D and commercialization rights in Greater China to the Chinese party. According to the agreement, the Chinese party was required to make "Commercially Reasonable Efforts" to obtain IND approval and continue R&D. During the R&D process, the drug exhibited contradictory results in human and animal experiments, leading both parties to urgently adjust the indications and R&D strategy.
Subsequently, the foreign party demanded the termination of the contract, citing the Chinese party's failure to make "Commercially Reasonable Efforts" to obtain IND approval and lack of continued R&D work. The foreign party initiated arbitration at SHIAC, seeking to terminate the license agreement.
The Han Kun team formulated systematic defenses on issues including standard for "Commercially Reasonable Efforts," the scope of R&D work, the conditions for exercising the right to terminate the contract, and whether there existed a contractual deadlock preventing further cooperation, through a three-pronged argument system of "scientific discovery—commercial decision-making—legal obligation," successfully persuading the arbitral tribunal to adopt a "dynamic performance" evaluation standard and establishing a paradigm for fulfilling due diligence obligations in the case of unforeseen scientific discoveries.
Significance of the Case
From a business transaction perspective: In recent years, the number of cross-border license-in/license-out transactions has been increasing, and this case covers the understanding and application of typical terms and related legal issues in such transactions, offering valuable reference for negotiations, contract performance, and dispute resolution in similar transactions.
From a dispute resolution perspective
Capability of Domestic Arbitration Institutions: The case demonstrates the ability of domestic arbitration institutions like SHIAC to conduct hearings in English and manage cases using internationally accepted arbitration practices, highlighting the adaptability and flexibility of arbitration in domestic institutions.
Han Kun's Integrated Case Management Capabilities: The firm's Life Sciences and Dispute Resolution teams collaborated closely, working with the client's scientific team to analyze the drug's mechanism and R&D pathway. The successful result was achieved through a three-pronged defense strategy of "scientific rationality + commercial feasibility + legal compliance," creating an effective representation model for resolving similar disputes. This also showcases the firm's deep talent pool in different fields as well as the firm's integrated case management capability across different departments.
Client Testimonial
"Han Kun's Life Sciences and Dispute Resolution teams, with their exceptional expertise in their respective fields and diligent work ethic, successfully safeguarded the company's legitimate rights and interests. Their impressive cross-departmental collaboration during case preparation was particularly noteworthy, and the outstanding oral advocacy of Han Kun's lawyers further contributed to a satisfactory outcome in the case."
