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“Oh, I Wish I Had Known that Before I Signed!“

This is the first in an occasional series discussing issues and provisions standard in many types of contracts between healthcare professionals and various entities (this entry: Exclusivity of Services/Noncompete clauses)

Has this ever happened to you? A company wants you to advise it in a field of your expertise. For this discussion, let’s say that such field is atrial fibrillation. You receive an agreement and your company contact says, “this is our standard consulting agreement template, so when you sign it, we can begin sending you our exciting new product development data for your evaluation and input.” As an expert in all types of cardiac arrhythmias, you anticipate that your services will assist the company in developing a treatment for the ultimate benefit of your patients. You sign the agreement without thoroughly reading and understanding its terms, and return it to your company contact. Big mistake!

“Uh oh, what have I done!” Not long afterwards, you receive a substantial grant opportunity to study bradycardia arrhythmia at your institution. The grant will fund your salary and research budget for an entire year. You mention this grant to your company contact…and you are notified that you may not participate in the grant. Time to worry.

What you have done is missed the agreement term that defined your services too broadly to encompass all forms of arrhythmia (not just atrial fibrillation). In addition, the agreement contained an exclusivity clause that prevents you from providing consulting or any other services to any entity (whether profit or nonprofit) without the prior express approval of the company. Even though you are only advising the company in the field of atrial fibrillation, the exclusivity clause was broad enough to encompass bradycardia arrhythmia, as well.

The Offending Clause. An exclusivity clause limits the types of services that you may perform for others—and may even cause issues for you with your institution duties. Typically, they are coupled with a noncompete clause that states you may not compete (performing services within the exclusive field to any other entity or person) within some specified territory and time period. Any violation of these clauses can result in legal injunctions against such competing services, as well as damages for breach of contract. In addition to legal fees and expenses, enforcement of these clauses can cost a consultant a substantial amount of money and considerable time.

“Is this avoidable?” What is really sad about our example above is that it is so easily avoided. In reading your proposed contract, any wording that states your services or advice to the company is “exclusive,” “on an exclusive basis,” or similar language that restricts your advice to the company should raise a red flag. Similarly, any mention of a clause stating that you may not consult for, be employed by, or otherwise advise another entity without the express approval of the company should cause you to seek knowledgeable legal advice. Your institution may offer to review your agreement; however, any such reviews may be solely to protect the institution and not consider the potential adverse effect on you personally.

“So, what can I do, other than hire a lawyer?” You must read your agreement carefully and point out your concern(s) to the company contact and request the company remove the objectionable language (or at least limit its scope in a way that you—now informed about the consequences of such clauses—believe will have little or no consequences for you). Beware, however, that these clauses can be hidden in sections without clear headings, or otherwise not clearly identify the intent and effect of their terms. It takes some experience in dealing with these clauses to nullify their negative effect. Bottom Line: When dealing with agreements in fields within which you practice or research, it is always safest and in your best interests to seek experienced legal counsel. The expense you incur to your lawyer before a mistake is so much less than you will pay attempting to fix it after the mistake is made.

Good luck in your consulting ventures and until our next post (indemnification provisions), be well!

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