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If You’re Not Watching Your Licensees, Someone’s Losing—Probably You

Let’s cut to the chase: if you license your IP and aren’t enforcing data integrity for royalty calculations, you might as well be leaving cash in a petri dish and walking away.

In life sciences, diagnostics, and biotech, licensing isn’t just a business model—it is the business. Especially for small and mid-sized companies with 20 staff, a world-changing idea, and a bank account hanging on one cheque at a time.

As someone who’s spent years advising on IP protection, fraud, and insider threat strategies across research, life sciences, and tech, I’ve seen what happens when compliance becomes a handshake instead of a system.

Spoiler: it’s not pretty. Especially when your royalty stream turns into a trickle, and your investors start asking awkward questions.

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Manual Reporting? Welcome to Fraud City

Here’s the dirty little secret of licensing in life sciences: most of the reporting isn’t automated.

Unlike software, where telemetry and keys enforce usage limits, biotech licensing often relies on spreadsheets, self-reports, and vague declarations of test counts or unit sales. It’s the business equivalent of trusting your teenager to “fill out the fuel log.”

When there’s money on the line, some licensees will game the system. Not all—but enough that you need to plan for it. Underreporting, omitted tests, unauthorized sublicensing, accident or intentional… it happens.

Now, to be clear: while there’s strong evidence that the pharmaceutical industry loses billions each year to IP theft, the scale of licensing fraud alone is harder to pin down. Licensing fraud is widely recognised in legal and business literature as a major risk – I’ve seen it myself – but precise loss values are rarely made public due to confidentiality and settlement agreements.

So while we can confidently say the combined losses from IP theft and licensing fraud are likely in the billions, the actual breakdown remains opaque. In short: there’s a lot of smoke, even if no one’s tallied the exact fire.

Case Study: Royalty Pharma v. Boehringer Ingelheim

Still think this is just a theoretical risk? Let’s take a look at Royalty Pharma Collection Trust v. Boehringer Ingelheim GmbH—a real-world licensing dispute with millions on the line.

In this 2021 case before the English High Court, Royalty Pharma claimed that Boehringer had underpaid royalties by around €23 million under a license agreement for diabetes treatments containing linagliptin. The dispute turned on whether Boehringer owed royalties on all global sales of products manufactured in Germany—even when those products were sold in countries where the patent wasn’t in force.

The court sided with Royalty Pharma. It held that, under the amended contract terms, Boehringer was indeed required to pay royalties on all linagliptin products made in Germany—regardless of where they ended up. Why? Because that’s what the contract (arguably) said.

The case is a masterclass in why precision matters. It also shows how royalty disputes aren’t just abstract risks—they’re costly, complex, and reputationally messy. Unfortunately, they can also wreck relationships with your clients in what is often a limited market of buyers and sellers, so these matters need to be dealt with properly. And if a €23 million shortfall can happen between industry heavyweights, imagine the exposure for an SMB with less legal firepower and tighter margins.

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Why This Matters to Your Bottom Line

Licensing fraud and underreporting don’t just shave a few points off your revenue—they hit everything that matters:

• R&D suffers: If you’re not collecting full royalties, you’re funding your innovation with Monopoly money. Sooner or later, it will dry up.
• Valuation drops: Investors value predictable revenue. Fraud kills predictability. Disputes deter investors and raise questions about your business model and management team.
• Operations stall: Underreporting can hide scaling problems or field-of-use breaches that sabotage your roadmap.

And in a sector staring down a $200+ billion patent cliff by 2030 (Gowling WLG, 2025), you can’t afford to guess where your money’s going.

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The Simple Fix: Trust, But Verify

Here’s the good news: you don’t need to become a forensics lab to fix this. But you do need a few essentials baked into your licensing strategy:

1. Mandate system-generated reports. Ask for data from a LIMS or equivalent operational system. Don’t accept “manual summaries”—it’s like accepting a selfie as proof of tax compliance.
2. Build audit rights into licensing contracts. Spell out your right to inspect source data, not just reports. And include clauses that shift audit costs to the licensee if they’ve been underpaying.
3. Cross-check with public data. Use regulatory submissions, sales disclosures, or even market intelligence platforms to sanity check what you’re being told.
4. Include escalating remedies. Think late fees, interest, even the right to revoke exclusivity if terms are breached. It’s not petty—it’s protection.
5. Consider whether you want to be the bad guy. Sometimes it makes since to hire someone else to do licensing compliance on your behalf. That means they can ask the touqh questions, and allow you to sweep in to smooth over any misunderstanding with plausible deniability.
6. Use plain language contracts. If you need a lawyer to understand your royalty clause, you’re doing it wrong. Make the terms so clear even a VC can’t misunderstand them.

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This Isn’t Legal Stuff—It’s Strategy

Still thinking licensing compliance is just something legal looks after?

Let me put it differently: enforcing licensing terms directly impacts strategy, cash flow, market positioning, and investor readiness.

A well-managed license with strong auditability and clean data boosts confidence, accelerates commercialisation, and supports IPO or acquisition discussions. A sloppy license? That’s a due diligence landmine.

In fact, one of my early jobs was licensing compliance for a biotech that sold services. I remember pouring over compliance filings for hours, validating whether they were likely reasonable and then preparing the invoice. Years later, we developed this Compliance Continuum for a review of Australia’s Medicare system to describe this (Philip, 2023):

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Call to Action: What You Need to Do Now

If you’re a licensor—especially an SMB in research, diagnostics, or biotech—here’s what I want you to do this week:

1. Review your license agreements. Are you requiring system-generated reports? If not, it’s time to fix that.
2. Talk to your licensees. Don’t assume malice—but don’t assume accuracy, either. Ask what systems they use to track usage and reporting.
3. Get your legal team (or external counsel) on board. If contracts are vague or weak, start drafting updates that include audit rights, remedy clauses, and clear data obligations.
4. Think like an investor. Would you back a company that couldn’t verify half its revenue? No? Then don’t run yours that way.

Because in life sciences, your trade secrets and licensing revenue are your business. And when you’ve only got one shot at commercialisation—you better be sure someone’s not quietly stealing it.

Building a media monitoring capability 101

References

• Curwell, P. (2021). Building a media monitoring capability 101
• Gibson Dunn (2025). “Life Sciences 2025 Outlook Brochure“, Gibson Dunn.
• Gowling WLG (2025). “Licensing Partnerships in the Life Sciences“, Gowling WLG.
• National Crime Prevention Council (2025). “IP Theft: Trends and Statistics“, NCPC.
• Philip (2023). Independent Review of Medicare Integrity and Compliance, Final Report for Minister of Health and Ageing, Australia.
• Royalty Pharma Collection Trust v. Boehringer Ingelheim GmbH (2021). [2021] EWHC 2690 (Pat), High Court of Justice (UK).
• US Chamber of Commerce (2025). “GIPC IP Index 2025“, Global Innovation Policy Center.
• U.S. Trade Representative (2025). “Special 301 Report“, Office of the U.S. Trade Representative.
• ZIPDo (2025). “Intellectual Property Theft Statistics“, ZIPDo.

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