Assume that Pfizer, a large research-based pharmaceutical company, enters into a contract with a start-up biotechnology company called HealthPro and promises to:1. Grant HealthPro the exclusive rights to use Pfizer’s Technology A for the life of its patent. The license givesHealthPro the exclusive right to market, distribute, and manufacture Drug B as developed using Technology A.Pfizer views the patent as functional intellectual property.2. Assign four full-time equivalent employees to perform research and development services for HealthProin a specially designated Pfizer lab facility. The primary objective of these services is to receive regulatoryapproval to market and distribute Drug B using Technology A.HealthPro is required to use Pfizer’s lab to perform the research and development services necessary todevelop Drug B using Technology A, because the expertise related to Technology A is proprietary to Pfizer andnot available elsewhere.Required:What parts of this contract are separate performance obligations? Explain your reasoning for each obligation.
Assume that Pfizer, a large research-based pharmaceutical company, enters into a contract with a start-up biotechnology company called HealthPro and promises to:
1. Grant HealthPro the exclusive rights to use Pfizer’s Technology A for the life of its patent. The license gives
HealthPro the exclusive right to market, distribute, and manufacture Drug B as developed using Technology A.
Pfizer views the patent as functional intellectual property.
2. Assign four full-time equivalent employees to perform research and development services for HealthPro
in a specially designated Pfizer lab facility. The primary objective of these services is to receive regulatory
approval to market and distribute Drug B using Technology A.
HealthPro is required to use Pfizer’s lab to perform the research and development services necessary to
develop Drug B using Technology A, because the expertise related to Technology A is proprietary to Pfizer and
not available elsewhere.
Required:
What parts of this contract are separate performance obligations? Explain your reasoning for each obligation.
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