Assume that Pfizer, a large research based pharmaceutical company, enters into a contract with a start up biotechnology company called HealthPro and promises to 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 Assign four full time equivalent employees to perform research and development services for HealthPro in a specifically designated Pfizer lab facility The primary objectives 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 is propriety to Pfizer and not available anywhere else Required What parts of this contract are separate performance obligations Explain your reasoning for each obligation Is my response accurate for the scenario above In a contract of sale, performance obligation refers to the promise made by the seller to supply goods and services to the customer, when the goods and services are distinctly identified In this case, Pfizer enters into a contract with HealthPro to provide exclusive rights to use Pfizer's Technology A for the life of the patent through a license and to market, distribute and manufacture Drug B using Technology A The said, license provided by Pfizer is not a performance obligation, as it cannot be identified distinctly and separately HealthPro could be benefited with research and development services of Pfizer, but not from the license separately The license obligates Pfizer that the research and development services and proprietary expertise should be valuable Therefore, performance obligation in this particular case on the part of Pfizer would be to provide license in combination with research and development services to Pfizer and treat them as a single performance obligation

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Posted on Jun 23, 2024

Assume that Pfizer, a large research-based pharmaceutical company, enters into a contract with a start-up biotechnology company called HealthPro and promises to: Grant HealthPro the

Assume that Pfizer, a large research-based pharmaceutical company, enters into a contract with a start-up biotechnology company called HealthPro and promises to:

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.
Assign four full-time equivalent employees to perform research and development services for HealthPro in a specifically designated Pfizer lab facility.The primary objectives 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 is propriety to Pfizer and not available anywhere else.

Required:

What parts of this contract are separate performance obligations?
Explain your reasoning for each obligation.

Is my response accurate for the scenario above?

In a contract of sale, performance obligation refers to the promise made by the seller to supply goods and services to the customer, when the goods and services are distinctly identified. In this case, Pfizer enters into a contract with HealthPro to provide exclusive rights to use Pfizer's "Technology A" for the life of the patent through a license and to market, distribute and manufacture "Drug B" using "Technology A". The said, license provided by Pfizer is not a performance obligation, as it cannot be identified distinctly and separately. HealthPro could be benefited with research and development services of Pfizer, but not from the license separately. The license obligates Pfizer that the research and development services and proprietary expertise should be valuable. Therefore, performance obligation in this particular case on the part of Pfizer would be to provide license in combination with research and development services to Pfizer and treat them as a single performance obligation.