The Legal Quick Guide For Your Biotech Startup

How can missteps be avoided by building on the legal help


What Is Biotechnology Law?

Biotechnology Law is the broad name for the area of law practice that encompasses biotechnology. A biotech-specialized lawyer is ready to help a Biotech Startup with several aspects of its business.


As Biotechnology faces a strong regulatory environment, Startups need specialized help of attorneys in order to ensure that every single step in the business evolution of the company is indeed on the right path. Also, Biotechnology is one of the strongest industries of the moment, and this demands the adoption of a set of safeguards and preventative measures to guard against competitors.


In short, from company incorporation to commercial agreements or Intellectual Property rights necessary protection, a Biotech Startup will need specialized legal guidance.


Why Do Biotech Startups Need A Lawyer?


For every entrepreneur, establishing a business venture as a legal entity is the first step. Yes, we are talking about incorporation.


There is a lot of do-it-yourself information available for a low price or even for free on the internet, but you cannot rely that you’ll find the one you exactly need to incorporate your Startup. When we talk about starting a business, we are talking about a company that will constantly need strong financial injections, more than once, and investors will lay down the conditions to which these financing shall be subject.


A standard form, standard articles of association or bylaws, or even the investors articles of association or bylaws’ proposals can be a dangerous thing. A Startup could be harming itself by using these forms. Hiring an attorney ensures the right incorporation and articles of association that not only fits the Startups’ needs but allows for safer and more transparent funding rounds and funding agreements.


But a Biotech Startup will not only have incorporation issues, it will need legal guidance vis-à-vis the regulations stemming from public administration and national or EU regulatory bodies, commercial agreements with providers and clients, exploitation of IP rights like patents, trademarks or know-how, or protection of its trade secrets, compliance and social responsibility, and enforcement and breach of contracts, etc.


Besides, a Biotech Startup may also take part or consider applying for national or Community research grants and fellowships to scientists, which on many occasions, constitute a large part of their budget, allowing them to spend it on R&D activities. However, specific controls, like financial audits, are established to efficiently deal with financial, accounting and expenditure documentation issues.



Then, Which Is The First Step?


The first step is the idea, obviously. An entrepreneur must have a concept for its Biotechnology venture, and he or she must want to make the business a reality and move it forward. Well, there is the need of a brand. The idea must be accompanied by a name that identifies the company and gives it a clear path forward into the future.


Most of the times Startups start without a registered trademark because they prefer to concentrate their limited resources in other, “most important” matters. This is understandably, but a bit risky. Of course, we recommend to register the trademark first, but in case this is not a feasible option, at least it must have checked the availability of the brand by doing – or hiring a lawyer to do it, a legal research and analysis on it.


Finding a brand can be a difficult task, sometimes the name is available but the domain name is not, sometime the name is already registered as a trademark, other times is all about the symbol.


An attorney can be really helpful here to explain when a name can eventually be used as a brand even if the domain name is already taken, or easily find if the name is available for registration, or even fight against an illegally occupied domain name in cybersquatting cases.


When the entrepreneur has found the brand, then is time for the incorporation.


Is Incorporation A Critical Point For A Biotech Startup?


Formally incorporating and setting up a legal structure is a critical point for every single business venture. Based on the form chosen, it will allow for the issuance of stock to potential investors and new members, and as the same time reduces the exposure to liabilities and protects personal assets.


When incorporating a business, the attorney files the company’s articles of incorporation and bylaws. Another important decision is the business structure, and even if in Spain there is the classic distinction among private limited company and public limited company, other EU countries offer a diversity of corporate structures, which can be more flexible, functional and fiscally advantageous. An attorney will handle all of these points, and is prepared to advice where tax laws are more favorable to incorporate in, acting within the law, or what specific legal form is more suitable to the entrepreneur interests.


Concerning the funding needs, the entrepreneur will need articles of association and founders’ agreement (many biotech companies are formed by more than one founder). A corporate attorney will give advice on what type of stock to be issued (founder ‘stock, preferred shares, common shares, restricted stock, voting shares, non-voting shares, etc.), and on how to divide allotted shares between funders.


Also, the attorney will advise on safer exit strategies, from acquisition, M&A to IPO, etc., that protects funders’ interests and not only investors.


Likewise, an attorney will advise about the board’s duties, like Duty of Care and Duty of Loyalty. Within the Biotech Startups we can find a special board, the Scientific Advisory Board (SAB).


Concerning the protection of IP Rights, of the trade secrets and intangible assets of the company, it is necessary to set from the very beginning in the Articles of Incorporation and Bylaws, adequate measures for their development and safeguarding.


Is not a legally constituted board, and its members do not have fiduciary responsibilities, that’s why is really important to draw a thorough SAB agreement, which contains member duties, type of compensation, a confidentiality or non-disclosure agreement, and specifications about IP matters relating to publications and inventions.


There Are Some Precautions To Take Inside The Startup?


Yes, of course. There are some typical agreements that cover founders and employees in order to protect IP assets mainly, including trade secrets.


Like Confidentiality and Non-Disclosure Agreements (NDA), Invention Assignment Agreements, and Non-Compete Agreements.


These are agreements in relation to which the lawyer has to be really meticulous when drafting them.


What Happen When A Startup Is Incorporated And Ready To Operate?


During the early stages of a Biotechnology Startup one of the most valuable assets it has is the IP rights, so the entrepreneur or Startup has to be sure that it is managed, and protected, well enough. An attorney who specializes in IP law (mainly patent and trade secrets) should be considered one of the most critical collaborators of the organization, even when is not actually an employee.


The contracts that the Startup enters into must be drafted and/or checked by its lawyer. Likewise, particular attention must be paid by the Startup to compliance with any grant agreement that it is planning to sign, since in the event of an audit it shall justify the correct performance of the research activities financed, and the adequate account of expenses incurred.


Also, the Startup’ lawyer will provide guidance on issues related to raising capital, will ensure that the company is complying with securities laws, and is protecting its most important assets. Its assistance will be necessary for managing the legal aspects of acquiring funding or for handling private placements.


How can we help you at Gowper?


We offer everything that we have been talking about. Gowper isn’t just specialized in helping entrepreneurs and Startups, but we have expertise in Biotech law.  


We offer legal help in every stage a business may find itself, whether it be in an initial stage or a growth and consolidation one. We can assist from the very beginning with the concept development and brand matters, help incorporating the company, and getting everything ready for future funding rounds by adapting articles of association, help with the funding search and management of the investment agreements, and provide protection to the Startup’ assets, by drafting the contracts or checking them, registering patents or trademarks, shielding trade secrets, etc. We can also be of assistance in the event of contradictory proceedings – or even judicial proceedings – concerning funds for which a recovery process has been launched.


We are all aware of what entails to be a Biotech Startup on the ground. Gowper is a Startup too -– we have experienced first-hand the challenges faced by enterprises today.