Managing Risk Can Help Keep Biotechnology Companies in the Lab and Out of the Courtroom
WARREN, NJ, June 23, 2005 – Biotechnology companies, even those in the early stages of development, are vulnerable to myriad liability
lawsuits. Recognizing these vulnerabilities and building the appropriate risk-management awareness and internal protocols
allows key management and scientific staff to remain focused on science rather than on defending themselves in court, according
to a life sciences underwriter with the Chubb Group of Insurance Companies.
“The current legal environment is leaving many biotechnology firms vulnerable to lawsuits,” said Frank Goudsmit, a Life Sciences
Underwriting Manager at Chubb. “Biotech firms need to be aware of their exposure to product liability, intellectual property
liability and directors and officer's liability litigation.”
Goudsmit chaired a panel discussion on strategies to mitigate costly litigation in the life sciences industry at the Biotechnology Industry Organization’s (BIO’s) annual conference Tuesday in Philadelphia. The panel discussed risks associated with federal regulations, clinical
trials, former employees and methods to help manage these risks.
Biotech firms should be cognizant of the exposures that can arise out of their electronic documents, Goudsmit said. “E-mails
are fully discoverable and, when taken out of context, can threaten a defendant’s credibility. Biotechnology companies need
to be mindful of and monitor the content of e-mails.”
Biotechnology companies should also make sure they follow patent rules carefully to ensure that patents remain valid and enforceable,
Goudsmit said. Biotechnology companies should be careful not to breach non-disclosure agreements that were signed by new hires,
and take steps to protect proprietary information should an employee leave for a competing company.
Goudsmit also emphasized the importance of regulatory compliance. The life sciences industry is heavily regulated by government
agencies, such as the Food and Drug Administration, the Patent and Trademark Office and the Federal Trade Commission. Regulatory
compliance is obviously a matter of good business practice, he said. Moreover, failure to comply with federal regulations
could negatively impact a company’s credibility in a suit. “If a company has a history of noncompliance with FDA regulations,
it may have lost its case before it even begins,” Goudsmit said.
Former employees often become very credible witnesses for plaintiffs in law suits against biotechnology companies. To mitigate
this, biotechnology companies should have in place policies and protocols that encourage all employees to report improper
or illegal behavior to an ombudsman or other “safe haven promptly and without retribution,” Goudsmit said. In this manner,
biotechnology companies are much more likely to become aware of problems long before a former employee can become an effective
“whistleblower” in litigation.
Finally, biotechnology companies should have in place formalized process controls. Company records and documentation, in addition
to being good business practice, also can prove helpful in defending against lawsuits.
Speakers on Goudsmit’s panel, “Litigation Minefields,” included: Michael Larson, intellectual property liability attorney,
Parsons Behle & Latimer; Daniel Standish, directors & officers attorney, Wiley Rein & Fielding; and Pete Swayze, product liability
attorney, Segal, McCambridge, Singer & Mahoney.
The member insurers of the Chubb Group of Insurance Companies form a multi-billion dollar organization providing property
and casualty insurance for personal and commercial customers worldwide through 8,000 independent agents and brokers. Chubb’s
global network includes branches and affiliates in North America, Europe, Latin America, Asia and Australia. Chubb’s property
and casualty insurance programs for the life science industry are endorsed by BIO.
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