Joint Development Agreements in Mediation

Joint Development Agreements (“JDAs”) outline how two or more people or companies will work together to develop a product or a manufacturing process for a product.  JDAs can go by many names, including service agreements, manufacturing agreements, and consulting agreements.  Whatever they are called, these agreements often give rise to difficult disputes based on expectations that are not set out in the contract or are open to interpretation, or changes in circumstances that make the original agreement unhelpful.

Technology Development Risks and Changing Circumstances

When working with new technology, there is always a risk that the technology will not translate well from an idea to a marketable product.  Manufacturing processes that work beautifully in a small lab might not scale easily to commercial quantities.  More rigorous testing as the product gets closer to market might identify previously unappreciated risks.  In some cases, new obstacles or outright failures might be recognized only after years of effort and many millions of dollars invested.  The root cause of a failure might be ambiguous.

Using KPIs and SLAs to Define Performance Expectations 

When working with an external partner to develop a new product or process, or to transfer an existing process between facilities, it can be helpful to agree to shared performance expectations (sometimes called “key performance indicators” or “KPIs”).  Some agreements use “service level agreements” or “SLAs” instead of or in addition to KPIs.  If both measures are used, KPIs might focus on outcomes (e.g., number of tests completed each week, how long a service provider has to finalize a summary report after testing is completed) while SLAs might focus on inputs (e.g., hours of work to be provided each month, minimum qualifications of key service provider employees).  KPIs or SLAs can be contract requirements or can be non-binding guides used to monitor progress and identify potential problems.

Addressing Concerns Early in the Development Process

Addressing concerns as early as possible can help avoid much bigger problems later.  There are generally more opportunities to fix a problem earlier in the development and commercialization process.  Questionable data at lab scale may take some time and money to resolve, but it usually requires much less time and money than trying to re-work a custom commercial manufacturing line or supply chain in a rush just before product launch.  Regulatory approvals or coordination with other partners (distributors, retailers, co-marketers) can also be more challenging the closer a product is to launch, adding cost and complexity to late changes in the product or manufacturing logistics.

When the Parties Disagree About How to Adapt 

When concerns are identified, the parties might have discussions about how to adapt.  Even in early, collaborative discussions, there could be disagreements over who should be responsible for new or modified work plans, including who should bear the costs.  These kinds of disagreements are not often litigated or arbitrated early in the development process.  Early adversarial processes would be expensive, distracting, and likely to break down the working relationship.  If the problem is that informed assumptions made when the JDA was negotiated have turned out to be wrong, there might be no legal claim to litigate or arbitrate.  The parties can feel stuck, knowing they could be off-track but without a shared plan for how to adapt.

Mediation as a Dispute Prevention

For complex or expensive development projects, a formal dispute prevention process might be helpful.  For smaller projects, or where issues have come up without a formal dispute prevention process in place, mediation can be used to reach resolution on issues ranging from how to coordinate activities and information sharing to who should bear unexpected costs or how to minimize losses due to delays or changes in plans.  If the parties can mutually agree on how to address those issues, mediation is unnecessary.  However, if problem-solving is being delayed because the parties cannot agree on how to manage changes to the original JDA, mediation can be a cost- and time-effective tool to get the project back on a more productive path.

Choosing a Mediator for Early JDA Intervention   

This kind of mediation is different from the mediation of a court case.  By the time a lawsuit is filed, the parties are generally focused on legal claims and who will bear financial losses, not how to make a product commercially viable.  You might want a different kind of mediator for this early intervention work, possibly someone with a transactional or technical background and experience crafting and revising JDAs or related work plans.  Before retaining a mediator, consider asking specifically about the mediator’s experience with these kinds of modifications to existing business arrangements.