Hahn Law Firm

Somewhat obscure, the Bureau of Economic Analysis (BEA) is the unit within the US Dept. of Commerce that collects and publishes statistics about the US economy, for example, the familiar gross US domestic product statistic. The BEA’s assigned duties include collecting data about foreign direct investment (FDI) in the US, as well as the converse, US direct investment in foreign countries.   One way the BEA obtains data about FDI is through reports (surveys) filed by US businesses which undergo events triggering the reporting requirement. Some of these reports are mandatory and penalties can result from failure to comply.  This blog addresses the mandatory report of new foreign direct investment in the US (known as the “BE-13 Survey”).

A little background.  The BEA created the BE-13 Survey in 1977 to evaluate the effect of FDI on the US economy. The International Investment and Trade in Services Survey Act gave the BEA authority to create the survey and collect the data. In 2009, budgetary constraints caused the BEA to suspend the BE-13 Survey. Now the BEA has reinstated the BE-13 Survey filing requirements by notice dated November 26, 2014.

Who must file the BE-13 Survey? 
The affected US company is responsible to file the BE-13 Survey.  A US company must file a BE-13 Survey anytime:

Beginning in 2015, drug manufacturers, repackagers, wholesale distributors and some dispensers will be required to provide certain “track and trace” information to trading partners in the supply chain with each change in ownership of a prescription drug product.

As its name suggests, the US Food and Drug Administration, or FDA, regulates drugs and foods. Drugs are subject to extensive review by the FDA. The applicant or “sponsor” must use data from scientific studies to convince the FDA that a drug is safe and effective to treat, cure, diagnose or prevent a disease or condition when used as directed. Drugs require pre-marketing approval by the FDA and cannot be legally marketed and sold in the US until the FDA has approved them.

Our last blog dealt with top tips for relationship-building with the internal client. We now turn to the substantive side and the practice tips we’ve gleaned from our years advising the client from the inside.

Creating and preserving relationships is a key to success in the role as trusted in-house legal advisor. From our years in-house we’ve gleaned the following tips to establishing an effective relationship with the internal client.

     Quality Agreements (QA's) are those legally binding documents that set out in considerable detail each party's responsibility for various activities in a regulated life sciences environment. Typically, QAs are left to last, once all the commercial agreements are signed, sealed and delivered. Once those commercial agreements are signed and celebrated, the parties may feel like they've completed their deal. They are ready to move away from negotiating, lawyers and exchanging red-lines. They are ready to actually do what they've promised each other they'd do in the commercial documents. They are ready to make products, profits and technology. So those highly technical (and perhaps tedious) QAs may seem superfluous. Not so.
     QAs are an essential part of a contractual relationship in the life sciences world. The FDA considers contractors an "extension of the manufacturer's own facility." Thus, both parties are responsible for ensuring that products are not adulterated or misbranded. With respect to contract manufacturing, both parties must work together to establish and maintain quality oversight of contracted operations and the materials produced under contract. This is where the QA comes in. Indeed, QA's are so essential that failure to have one can result a warning letter from the FDA. This is true even though there is no actual legal requirement to have a QA. Here's what the FDA had to say in one warning letter:

Confidential Disclosure Agreements, or "CDA"'s, have other names: NDA's, Confidentiality Agreements, Non-disclosure Agreements, Secrecy Agreements, etc. Regardless of the name, this type of agreement is ubiquitous in business relationships. The CDA is usually the first formality exchanged before a new relationship or project begins, and with good reason, too. The CDA sets the ground rules and expectations between the parties for the exchange of information and defines what happens to this information once it's exchanged. Setting these rules and expectations upfront facilitates open discussions and a sense of trust.
     The parties planning to discuss potential business arrangements are usually anxious to start those discussions as soon as possible. But in the excitement to start exchanging information, they shouldn't rush to sign a CDA without understanding what commitments they are making in the signed CDA and whether it fully protects them. While seemingly a simple document, the CDA should be read carefully and fully understood. Some of the things to consider before signing a CDA are:
     Is the CDA one-way or mutual? One way CDA's protect only one party's information. Mutual CDA's protect both parties' information. Sometimes there are several parties to a CDA. Which type of CDA is appropriate will depend on the circumstances. In any case, each party should consider whether it will be disclosing information it wishes to protect and, if so, make sure the CDA will protect its information.
     Is "Confidential Information" defined? The CDA should include a specific definition of what type of information is meant to be kept confidential and not misused. This definition may be very broad to cover all samples, business and technical information in whatever form. Or it may be very narrow to cover only a particular piece of information or subject. Should information developed by a recipient from information or samples received from the discloser also be "confidential information" and, if so, whose? The breadth and details of the appropriate definition depends on the circumstances. Sometimes a CDA defines confidential information as only that information that is marked as "confidential" (or some other similar word). 
     Must the confidential information be marked to be protected? There are good things and not so good things about an obligation to mark information as "confidential" for it to be protected under the CDA. The ultimate goal of a CDA is preventative: to prevent the wrongful disclosure or use of information. Although the CDA may provide a remedy to the party whose information is wrongfully disclosed or misused, that remedy doesn't usually make up for the fact that the information was disclosed or misused. For instance, it is hard to measure the damage caused by wrongful release of information. What truly was the full economic consequence of the release or misuse? So, if information is marked as "confidential" the recipient is constantly reminded of the confidentiality obligations, lest they forget. This is a good thing. On the other hand, if information must be marked "confidential" and one forgets to mark it, then it can be harsh that the information won't be protected by the CDA because of this lapse. 
     Does the CDA protect information disclosed by or received by affiliates? Often more than one related company will be a recipient or discloser of information under a CDA. For instance, an international company may have different affiliates in different countries who will receive or disclose information. If this is the case, then the CDA should expressly state that information so received or disclosed is covered by the CDA's provisions. 
     How are disclosures to third party agents and consultants handled? Sometimes a party to a CDA wants to share the other party's information with an outside consultant, agent or subcontractor. If the CDA allows this type of disclosure, it should include provisions requiring the consultant, agent or subcontractor to also sign an agreement having at least the same restrictions on non-use and non-disclosure as the CDA itself does. This agreement by the consultant, agent or subcontractor should be signed before they receive any of the information. 
     Does the CDA have a defined length or term? There are two parts to the term of a CDA. First, there is the period of time for exchange of information that is covered by the CDA. For example, the CDA may cover discussions over a year or two. Second, there is the period of time that the non-use and non-disclosure obligations of the CDA prevent the non-use or non-disclosure of the information. There are a variety of ways CDA's present these time periods. Sometimes the CDA has a fixed term so that all the information exchanged during the term is protected from non-use and non-disclosure for a period of time either (a) following the end of the term of the CDA or (b) following the date of disclosure. Trade secrets are valuable for as long as they are indeed secret. So, if trade secret information is going to be disclosed under a CDA, the term of non-use and non-disclosure of the trade secret information should last as long necessary to prevent the loss of the trade secret's value. 
     Does the CDA include non-competes? Sometimes clauses preventing the parties from competing with each other appear in a CDA. In most cases, at the CDA stage of a relationship, it is premature to include any prohibition against competition. For one thing, such clauses may not be enforceable according to the law governing the CDA so there is no real benefit to including them – giving rise to a false sense of "non-compete" security. Also, and very importantly, such clauses may raise antitrust concerns. Instead of having a non-competition clause, a better approach is to include provisions specifically addressing how information received can be used (or not used) by the recipient.
     Does the CDA assign inventions? CDA's may include provisions assigning inventions to one of the parties. If provisions like this appear in the CDA – and are agreeable to all the parties – they deserve careful review to be sure that the scope of the assignment is exactly what is agreeable and not more than that. For instance, if the recipient of information under a CDA makes inventions based on the information they received from the discloser, it might be appropriate to assign the invention to the discloser. But even so, what happens if the invention made combines technology already owned by the recipient with the information learned from the discloser? What if the recipient's information is the most important part of the invention and the discloser's information is a minor part? Because inventions may be very valuable, one should be wary of invention assignment provisions and thoroughly think through all the possible outcomes before agreeing to them.
     Does the CDA contain the usual exceptions to confidentiality? Most CDA's include a list of situations where information disclosed is no longer required to be kept confidential. These include cases where the information is or becomes known to the public, was already known to the recipient, was also received from another who didn't have to keep it confidential, is independently developed, etc. Also, a court or government agency may require information to be disclosed. In the case of a court or agency order, the recipient should notify the discloser so the discloser can take any steps it desires to protect the information. These important provisions should be included in the CDA.

Having a robust compliance program makes good business sense.  This blog article discusses one of many reasons for this:  A robust compliance program simplifies supply-side contract negotiations and follow-through contract administration.