What are the legal implications to safeguard competition between partners of joint venture in the United States for a foreign fund?

I represent a Chinese fund considering what would be our first joint venture for investment a biotech company. Part of our U.S. investment strategy is to bring back the experience we gain in the United States to similar biotech investments and ventures in China. We are wary of the joint partner becoming competition in the future. How can we prevent that?

  • Robert J. Ivanhoe

    Greenberg Traurig, LLP
    February 09, 2018

    I am not completely clear on your question. If you are asking if you can prevent a US joint venture partner from stopping you from taking an intellectual property you gain through the venture and using it in other companies or locations, I think this would be unlikely given how the IP is protected and how it would be covered in the agreement. For other types of biotech investments unrelated to the IP but that you came upon based on your experience with your partner in the US, these restrictions would typically be part of the negotiation of the JV agreement. It would not be unusual for an investor such as yourself, as well as for your partner, to have a provision in the JV agreement that allows each to pursue other investments that do not use the JV's IP or something directly competitive, so you would each be free to pursue other biotech ventures or ideas independently outside of your venture if such a provision is contained in the JV agreement.

  • Eric Ching

    Ching & Seto, APC
    January 16, 2018

    Typically, non-disclosure agreements and non-compete agreements are used to limit this risk. Other possibilities include patent, trademark, or copyright any items you want to protect. There is no 100% way of preventing competition as this is the foundation of capitalism.

  • Steve Niu

    Triangle Accounting Group, Inc, USA
    January 01, 2018

    The key elements in safeguarding future competition between partners of JV are the Joint Venture agreement (or some people call "partnership agreement"), and the non-compete agreement. These are the most effective when used in a Joint Venture, and it works very well.

  • Sheri Chromow

    SPC Advisors, LLC
    January 02, 2018

    I have spent a great deal of time negotiating one aspect of non-compete provisions during the last year, specifically describing limitations on what a venturer can do upon leaving the venture. These typically restrict the former venturer from hiring or soliciting employees of the venture and from opening competing businesses usually within a pre-agreed upon geographic area. That doesn't sound like what you are trying to achieve. Without further information, I can't determine whether the technology in this question is patented, trademarked or otherwise proprietary to the biotech company. If that is the case, you will want to carefully think about what you need and how that impacts the business of the biotech company. It may be possible for you to license technology or work out a sharing arrangement. It is important to have a clear game plan in advance. I would be pleased to assist you in that quest.