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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Judgment Case 5–6
Performance obligation; licensing
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.
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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