6 November 2002

Areas of Potential Disputes:

the Venture Capital Perspective

Francesco De Rubertis, PhDGeneral Partner, Index Ventures

WIPO Conference on Dispute Resolution in International Science and Technology Collaboration, Geneva April 25-

26, 2005

6 November 2002

Index Ventures

Among European largest Venture Capital firms (ca. 1bUSD under-management)

Geneva and London location

Only Institutional Money

6 November 2002

Framing the Start Up scene

Actors within start up companies

Founding scientists (publications) Concerned Universities (IP-income) Entrepreneur (glory and

money) Venture backers (money and

glory)

6 November 2002

Unique situation of start up companies

At very early stage, for the first years of life of the Company, the Venture Capitalists exerts a control position in the Company, both because of contractual agreements and because of the dependence of the Company’s survival on their investments

6 November 2002

Assets of start up companies

IP-related transactions and agreements Licenses Employment contracts

IP positions Patent applications Trademarks

6 November 2002

Due Diligence ahead of investment

Total cost ca. 75-100k EUR

60-70% of total cost is legal bill (ca. 40-70k EUR) IP deals, transfers Assignment of IP rights and co-ownership issues Enforceability of IP, novelty Freedom to Operate Applicable law (R&D or HQ location, IP depot…)

6 November 2002

Risk-mitigating approaches

Move Top-COs to other countries

Ownership vs licensing IPR, when possible

Integrated IP and product analysis

Relevance of third party claims IP interference on likely future product Business-driven focus on key claims

Due diligence with lawyers from multiple jurisdictions

6 November 2002

Standard Terms (general)

Veto power on major decisions

Joint decision power with the other major stakeholders

Representation and Warranties

Indemnification clauses

6 November 2002

The role of arbitration and mediation

Start up environment killed by uncertainty

More than direct financial cost is “opportunity cost” on the upside that can impair Start up growth

Speed of decision correlates with survival