Agreements to negotiate in good faith can create issues for the unwary. The potential traps of such an agreement appear in the Court of Chancery’s Sept. 22 decision inPharmAthene Inc. v. SIGA Technologies Inc.
ThePharmAthene case arose from a dispute between two companies over the development of a smallpox drug. Defendant SIGA Technologies Inc. was developing the drug, but ran into financial difficulties. Plaintiff PharmAthene Inc. and SIGA discussed collaborating to develop the drug. Because the parties had previously engaged in unsuccessful merger negotiations and SIGA felt PharmAthene backed out of a merger because of cold feet, SIGA insisted on working out a licensing agreement before engaging in more merger discussions.
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