In the startup phase, many drug development and medical device companies are focused on R&D, capital raising, and scientific and regulatory milestones. With limited or no revenue, preserving cash and extending runway are critical. IP planning should establish clear ownership of the company’s technology through agreements with founders, employees, contractors, universities, and research partners while avoiding complex international structures before the business model and commercialization plan are clearer.

At this stage, the key is to meet operational needs without unnecessarily restricting the ability to implement future plans. A startup may not yet know which product candidate, patent, platform technology, or other IP will ultimately drive value. Companies should therefore consider the extent to which the IP portfolio should be evaluated and structured holistically rather than on an asset-by-asset or product-by-product basis, while retaining the ability to adapt as development priorities and commercialization plans evolve.  

Startups may also benefit from:

• Tax credits 

• Grants 

• Subsidies 

• Other incentives that impose conditions or constraints relating to ownership, location of activities, employment, investment, or retention periods.  

The terms of those incentives should be assessed before changing the IP or operating structure to maintain optionality without jeopardizing anticipated benefits. 

As companies move toward commercialization, IP planning becomes more consequential. Foreign subsidiaries, licensing arrangements, collaborations, and expansion into key markets become more common, and management must focus on:

• Where future profits will arise 

• Where they should be reported 

• Whether the IP structure supports commercialization and exit objectives 

Late startup and early growth often provide the best window to evaluate restructurings because management has better visibility into markets, financing needs, and exit scenarios, while the value of the IP may not yet have appreciated significantly.  

Depending on the footprint, planning may include:

• Moving IP to a long-term commercialization hub 

• Centralizing ownership 

• Implementing cost-sharing or co-development arrangements 

• Converting service arrangements into intercompany licenses  

Any structure should align ownership with the entities that perform, control, or fund the activities that create and exploit the IP.

For example, a company in the growth stage may acquire a platform technology, patent portfolio, or product candidate directly or indirectly through a target company. The company should assess:  

• Where the acquired IP should be owned 

• Which entities will conduct or control further development and commercialization 

• Whether licensing, cost-sharing, or service arrangements are needed to align income with substance  

Many companies also undertake internal or sell-side diligence to identify and address potential issues in anticipation of future funding or an exit, particularly issues that could adversely affect future valuation or transaction viability. 

With commercialization, a company’s objectives often shift to managing its global effective tax rate (ETR), transfer pricing exposure, and other tax risks. Mature companies often have significant revenue, established international operations, and greater scrutiny from investors, auditors, and tax authorities. As commercial, manufacturing, R&D, regulatory, and executive functions spread across jurisdictions, companies should confirm that:  

• IP-related profits are reported where the relevant functions and risks reside 

• Optionality for divestitures, spin-offs, acquisitions, joint ventures, and licensing transactions is maintained 

For example, a mature company may find that a legacy IP structure no longer matches where value-driving activities occur after manufacturing shifts, regional leadership expands, non-U.S. R&D grows, or acquired product rights are integrated. The company may need to:

• Refresh transfer pricing 

• Update intercompany agreements 

• Realign ownership or economic rights 

Prepare for a transaction in a way that reduces execution risk and tax leakage