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How to draft quality agreement for a pharmaceutical company

April 3, 2022 — Leave a comment

First published on Ipleaders

Introduction

A contract in any industry or for any business is one of the most essential components, and carrying on a business or any kind of collaboration without a contract can be a nightmare for all parties involved. When parties enter into a contract, all their obligations and other clauses of the contract become binding upon each of the parties, and in case of a breach of any of the clauses, the one committing the breach becomes liable. So, contracts make the parties accountable to each other, hence, the quality of work gets better.

As we are living in this age of pandemic, there has been a rise in the consumption and production of drugs. From hoarding and black-marketing of medicines, the courts directing the concerned authorities to increase the production to the incredible growth in stock prices of pharmaceutical companies, within a single year we have seen and experienced so much. In this article, we will be focusing on quality agreements, as the name suggests, these agreements are extensively used for quality assurance of the drugs in the pharmaceutical industries. 

What is a quality agreement?

The quality agreement isn’t similar to any other agreement, rather these agreements have come under scrutiny from the concerned authorities worldwide, especially in India, as third party drug manufacturing hasn’t been defined under the Drugs and Cosmetics Rules, hence the liability of the third party involved in such agreements was a big question. 

Quality agreements are entered into by two or more people for the purpose of manufacturing, supply, and service while maintaining the quality of drugs and not compromising on them. These agreements are made primarily to comply with the quality of the drugs that are to be manufactured and also to comply with the regulations imposed by the government and/or to comply with the statutory obligations or as per the concerned authorities. 

One of the reasons why parties enter into such agreements is to expand their reach in the global market, to survive in the age of globalisation, businesses outsource contractors for manufacturing drugs at cost-efficient prices. India is one of the examples, where foreign pharmaceutical companies land up in the search of cheap labour and resources. Generally, the quality assurance department headed by the quality risk manager, along with the legal department of the pharma company and the contractor/vendor (manufacturer, laboratory, etc), collaborate together while drafting a quality agreement.

The scenario in India : before and after the 2020 amendment

In India before the 2020 amendment of the Drugs and Cosmetics Rules (“DCR”), drug marketers/distributors were not legally recognised which created huge confusion whether these quality agreements were legally enforceable or illegal in India or not, as the earlier rules didn’t have any provisions relating to the liability of the third party involved in such arrangements.

After the amendment to the DCR, contract manufacturing of drugs especially in India has become more transparent and there is more accountability of the parties involved in such agreements. From now on, both the drug manufacturer as well as the drug marketer or the distributor is now liable under the Indian laws. Hence, these agreements must be made with proper assistance and cooperation from all the parties in order to comply with all the required regulations as well as to provide the customers with the best possible product.

Why do parties enter into such agreements?

Quality agreements are stand-alone agreements, and they shouldn’t be read like an addendum or an attachment of the main agreement. This is because of the format and the language used while drafting these agreements. Regarding the question as to why parties enter into such agreements, while having the main agreement, then why do the parties need another/separate agreement, while these questions are normally asked by thousands of contract drafters. Now this question doesn’t have a single answer, however, the answers or the opinions are convincing. 

Now as we know that these agreements’ main purpose is to make sure that the quality of the product is as per the recognised standards and are not compromised for the sake of making profits, as these agreements deal with drugs, and drugs are essential goods/commodities in a person’s life. While manufacturing them, or testing them at laboratories, one has to keep in mind that they are doing a public service, although the only way to encourage these industries is by giving incentives, and in order to promote such development in these areas, it can only be done if these industries are not restricted by the authorities and are given reasonable freedom to make profits. The United States of America is the right example, as it doesn’t have any regulations regarding drug pricing, hence, the prices of drugs are way too high, as compared to the Indian drug’s prices, as India has a regulation regarding drug pricing.

Therefore, we can understand that the pharma companies go under huge pressure because of the government intervention or the laws laid down, the compliance issues and different approvals that these companies have to undergo in order to manufacture and as well as while releasing these drugs into the market. 

Things to keep in mind while drafting a quality agreement 

While drafting a quality agreement, the parties have to keep few things in mind:

1. Scope and purpose clause

This is the most important clause in the entire agreement, as it states the entire scope of work and purpose or the intent of the parties for which they have agreed to enter upon this agreement. This clause needs to be drafted properly keeping in mind the target and the final goal for which the parties have joined or collaborated. In case this clause hasn’t been drafted precisely or the parties haven’t drafted the clause as per their verbal agreement, then such situations can lead to major differences between the parties further creating disputes/conflicts between the involved parties. It is very important to customise the clause as per the mutual understanding of the parties so that future conflicts can be easily minimised.

2. Definitions and interpretation clause 

In this clause, the terms which have been used multiple times or the terms that convey more and have a wider ambit as per the agreement. Such terms can be mentioned under this clause so that the parties can easily interpret and understand such terms more comprehensively, therefore minimising confusion and conflicts regarding the interpretation of such terms and clauses.

3. Roles and responsibilities clause

In this clause, parties should mention their roles and responsibilities as per the agreement. It is very essential that parties elaborately mention each of their roles as well as their responsibilities to contribute and fulfill the purpose and scope of the work as per the mutual agreement between the parties. In case if this clause is taken for granted and vaguely drafted, it can result in differences between the parties, and ruin the relationship of the parties by creating conflict between them. To prevent such disputes relating to the role or responsibility of any of the party, this clause should be drafted keeping in mind all the formal discussions, facts stated by each of the party, promises/covenants by each of the party, purpose, and scope of the agreement

4. Resolution of disagreements clause

Now it can’t be denied that if parties are entering into an agreement, though the parties know that they have to cooperate with each other and fulfill all their roles, responsibilities and further comply with all the clauses and the laws, it obvious that during the term of the agreement, there will be a time that parties won’t agree with each other and such disagreements can be regarding the quality of the drugs, while auditing or inspecting, etc. During such disagreements, parties will have to resolve and come to a conclusion else the purpose of the agreement would get defeated and to prevent such events, it is mandatory to include a clause stating a mechanism or process or steps to resolve such disagreements and differences between the parties.

5. Assignment clause 

In this clause, parties have to mention that neither of the parties shall have the right to transfer or assign their roles, responsibilities, and promises/covenants to any other third party, as it would defeat the present agreement’s purpose. 

6. Term and termination clause

Under this clause, the parties shall mention the term of the agreement, and whether the same agreement can get revised or extended during or before the expiry of the term. Further parties can include or make a separate clause regarding the termination of the agreement, whether the agreement can or cannot be terminated unilaterally, and under which circumstances, the parties will have the power to terminate the agreement, etc.

Parties can include other clauses too as per their preference and can customise the entire agreement as per their mutual understanding. As there isn’t any proper formatting of a quality agreement, but certain clauses are a must, and the most important thing that the parties should always keep in mind, whether they are drafting a quality agreement or any other type of agreement, the parties should draft the agreement in such a way that there isn’t any space which would lead to communication barriers or restrict communication between the parties, as communication is the major factor that would lead to a success story or a major failure!

Conclusion

By now you might have an idea about what a quality agreement is, why parties refer to such agreements, and the important or the basic clauses that are to be included while drafting one. Now one more important thing that shouldn’t be ignored while researching or drafting or assisting someone in drafting a quality agreement is that these agreements should be drafted keeping mind the parties that are involved, other factors such as the scope of the work, the control under the agreement, as to who has the major control in the agreement, the ways or modes of communication, the importance of inspection and auditing with the respect to the materials used, basically the entire agreement shouldn’t be an online template or a previously used template, rather it should be a customised agreement catering the needs of the parties because resolving conflicts can get expensive at times.

All you need to know about a broadcasting agreement

March 31, 2022 — Leave a comment

First published on Ipleaders

Introduction 

Broadcasting is a process wherein an art, a performance, or an event that has either been recorded or which is currently being recorded gets telecasted to a large and wide audience worldwide through TV signals, radio signals or through the Internet.

We are living in a digital world, where everything has been digitalised, in fact one of the major reasons is Covid-19, the entire world has completely shifted to virtual zone either for work-related purposes or for entertainment purpose.

Have you ever wondered, when you watch a live event, let’s say a Live Cricket match or Live Wrestling, even though you haven’t purchased the tickets for the event, but you’re still able to watch the same event at your comfort in your pyjamas, and still the Sports and Entertainment Industry manages to earn in Millions and sometimes in Billions! But how? Is broadcasting that expensive and easy money-making for these Industries?

In this article, we will discuss everything related to a broadcasting contract in great detail.

What is a broadcasting agreement?

A broadcasting agreement is an agreement entered by two or more parties for the telecast/broadcast of the specified event as mentioned in the agreement to reach maximum or a wide audience through different modes of telecast either through live streaming, through TV signals, subscription-based broadcast, and/or via internet signals, or radio signals.

A broadcasting agreement is entered between the event’s host or the content creator or the producer of the event (“Creator”) with the broadcasting agency(s) (“Broadcaster”). The Broadcaster has to telecast the event on the platform(s) as mutually agreed by the Creator and the Broadcaster (“Parties”). The Creator of the event grants a license to the Broadcaster to either have the exclusive rights relating to the broadcasting of the event or non-exclusive rights, as per the said agreement. 

The term “broadcast” has been defined under Section 2(dd) of the Copyright Act, 1957 as, communication to the public either via wired or wireless medium and also includes re-broadcast.

In a broadcasting agreement, the Content Creator/the performer or the producer is the sole owner of the rights relating to the Intellectual Property, as it is the Creator’s original work, hence it is his property, moreover a broadcasting agreement doesn’t mean to transfer the ownership of the Intellectual Property from the Content Creator to the Broadcaster. It merely gives the Broadcaster the license to distribute the said content/performance/event with the public at large through its network.

Importance of such agreements

To understand the concept of a broadcasting agreement, we need to first clarify two basic prerequisites, i.e., Why are these agreements/contracts made? And secondly, why broadcasting is important for this day and age?

As we know, through agreements, parties are bound by rights and duties as mutually agreed by them. To fulfil any purpose, an agreement gives the said purpose legal importance and makes it enforceable at the court of law, if in case an event of default occurs. To secure and protect oneself from fraud, it is very important to enter into an agreement before accepting any commercial or non-commercial deal.

Coming to the second part, as to why broadcasting is an important service is because it is considered to be a public service, and public service is for the greater good, which is considered to be a moral obligation of both the State as well as of an individual, or associations/corporates, etc. Most importantly, through the broadcasting services huge amount of income is generated within the economy as through broadcasting an event, the scope of viewership and audience gets enlarged, which is good for both the sport, the players as well as for the nation as a whole as it gives recognition to both the nation as well as the players get recognized for their efforts. 

A huge amount of income is generated through broadcasting, lets take few examples, the FIFA World Cup, ICC World Cup, IPL, WWE, UFC, Davis Cup, The U.S Open, etc are some of the sports wherein the broadcasting rights are sold in Millions of Dollars. If we take examples of Movies or TV series instead of sports, in 2015 Netflix acquired the streaming rights of Friends for $100M.

Now if parties are willing to spend a hefty amount of money for acquiring streaming or broadcasting rights, it will be prudent enough to secure the said transaction by entering into an agreement. Hence, the broadcasting agreement is not only a vital part of the transaction but it binds the concerned parties together and makes them legally bound to all the obligations mentioned as per the agreement.

Important clauses and provisions of the agreement

In a broadcasting agreement, few operative clauses are mandatory to be drafted and they are-

  1. Purpose clause- A purpose clause is drafted to mention the purpose behind the said agreement. The parties have to rightfully mention the exact purpose of the agreement, and the purpose shall not be illegal, otherwise the entire agreement would become void.
  2. License clause- In this clause, it is to be mentioned that the Creator/Producer or the owner is granting a license to the broadcaster to stream/telecast either live or recorded session of the event on its network(s) and platform(s). Whether the agreement is an exclusive broadcasting agreement or not, shall also be mentioned here. Everything relating to the broadcasting license shall be mentioned in this clause. 
  3. Habendum clause- In this clause, all the rights relating to the property (Intellectual property, in this case) shall be mentioned, if in future there is any confusion relating to the title and ownership of the Intellectual property, then this clause can be a life-saver.
  4. Representations and Warranties- In this clause, both the parties shall state the fact and shall comply with the such represented fact individually, so that in case if anything happens contrary to the said and accepted facts, then the parties shall be responsible individually. 
  5. Rights and Obligations clause- In this clause, all the rights and obligations of both parties shall be mentioned clearly.
  6. Dispute resolution clause- This clause is very crucial, and needs to be drafted with clarity, as this clause will determine how the parties shall deal with the future disputes that might happen between them. Parties can mention, “Parties hereby mutually agree that all the disputes arising out of this agreement shall be referred to arbitration”, something like this can be mentioned, also if the parties are referring to arbitration as the mode, then the seat, venue, governing law, number of arbitrators, whether opted for ad-hoc or institutional arbitration, these shall be mentioned and covered in the clause.
  7. Tenure clause- In this clause, the tenure of the entire agreement shall be correctly mentioned, so that no future conflict or dispute arises concerning the tenure of the agreement.
  8. Force Majeure clause- In case of any unforeseeable circumstance, if any of the parties or party is unable to fulfil its contractual obligation, then such defaults or event of defaults shall not lead to termination of the agreement.
  9. Promotions and Sponsorships clause- In this clause, the parties shall mention, whether any sponsors for the event and the ways of promotions of the event, shall be mentioned clearly.
  10. Event of Default clause- In this clause, all the events that lead to default of the obligations as promised by the parties as per the agreement shall be mentioned. At last, such events shall directly lead to the termination of the agreement.
  11. Termination clause- In this clause, the modes and ways of termination of the agreement shall be mentioned, and anything apart from the modes or ways of termination mentioned in the agreement shall not be considered as termination. All the event of default shall directly result in termination of the agreement, hence the “Event of default clause” shall go hand in hand with this clause.
  12. Payment and Fees clause- In this clause, the modes of payment and the entire fees charged or to be paid by the broadcaster to the Producer shall be mentioned. 

Any law governing the agreement?

A broadcasting agreement shall be governed by multiple laws depending on the place of operation of the said agreement. The laws that shall be governing a broadcasting agreement are-

  1. Intellectual Property law
  2. Contract law
  3. Arbitration
  4. Antitrust/Competition law

Implications of not getting into an agreement

If the parties have no written agreement/contract stating that they have successfully entered into a broadcasting agreement, then the same shall not be enforceable as well as it might get very tough to prove whether there was any agreement between the parties or not. In such situations, where parties act negligently and where the consideration is of hefty sum, there is always a high chance of fraud. To secure oneself and the agreement, it is imperative to have a record of the same in a written format, with the signatures of both parties.

An important thing to be noted down here is that, when parties agree to enter into an agreement, the reason why the lawyers or the contract draftsmen drafts a dispute resolution clause, is because although initially at the time of the agreement, the parties mutually agree to each other’s terms but are unable anticipate any future dispute, and a dispute is something which can never be eliminated, the difference of opinions, etc can’t be foreseen, hence, it is important to have a dispute clause, to protect the rights of about the parties, but if there is no written agreement, the complainant shall have to prove at first that there was an agreement between the parties and when the court of law is satisfied with the fact that there was an agreement, then only the court shall consider the latter allegations.

Hence, having a written agreement is a win-win situation to protect the rights of the parties against any mishap or fraud.

Case laws relating to broadcasting agreements

  1.  Neo Sports Broadcast Pvt Ltd v. New Sanjay Cable Network & Ors-

In this matter, the plaintiff entered into a broadcasting agreement with BCCI. Since BCCI granted a license to the plaintiff to broadcast test cricket matches between India and other countries, the plaintiff found out that the defendants without any authorization or license from the owner or the plaintiff were transmitting and making available the channel to their clients and the Hon’ble Delhi High Court held that, unauthorized transmission of the TV channel to a selected clientele also leads to commercial use of broadcast and leads to making available the content to the public. Hence, violates the broadcasting rights or broadcast reproduction rights of the plaintiff.

  1.  Star Sports India Private Limited vs. Prasar Bharati and Ors-

The Hon’ble Supreme Court of India held in this judgement, that the broadcasting rights of all the sports event that are of national importance must be shared with Prasar Bharti, free of all commercial interest. So, that the entire country can witness the importance of the game, and get inspired by the same, the core element of this judgement was public interest, and where the court is satisfied with the fact, that an issue is directly proportional to the public interest, then the court shall always favour and pass an order or judgement protecting the public interest at large. Hence, in this case, even though the broadcaster entered into a broadcasting agreement, still his rights weren’t protected, since, it was a matter of the public at large.

Conclusion 

By now, you must have understood the entire concept of a broadcasting agreement, and why parties do enter into such agreements; its importance and the implications, if there is no such agreement between the concerned parties. The basic idea behind an agreement is to mention everything at once during the initial phase of negotiations or at the time of drafting. When parties enter into an agreement, then they mutually agree to all the terms and conditions of the said agreement. It is the best way to secure a deal and transaction, especially if the transaction involves huge amount of money.