Your role is not to manage Xxxxx’s day-to-day operations, but to exercise oversight to ensure the company’s long-term viability and compliance with its obligations. The Delaware Supreme Court’s In re Caremark International Inc. Derivative Litigation (1996) decision established that directors have a duty to ensure the company has adequate systems in place to monitor and address critical risks. Failure to do so—a breach of the duty of oversight—can expose directors to personal liability if risks materialize and harm the company or its shareholders. For a life sciences leader like Xxxxx, one of the most significant risks lies in the erosion of its intellectual property (IP) foundation, which underpins its market dominance and innovation pipeline. A clear patent strategy is not merely an operational tool; it is a cornerstone of the company’s risk management framework, and it falls within your purview to ensure that such a framework exists and functions effectively.

Xxxxx’s success in biologics and biosimilars relies heavily on its ability to protect its innovations from competitors, secure freedom to operate, and maintain a pipeline that justifies its substantial R&D investments. Without a coherent patent strategy, the company risks losing its competitive edge to generic entrants, facing costly litigation, or failing to capitalize on emerging therapeutic areas—all of which could materially impact shareholder value. While you are not expected to design this strategy, under Caremark, you are obligated to confirm that management has implemented systems to identify, monitor, and mitigate these IP-related risks. This includes verifying that Xxxxx’s patent portfolio aligns with its long-term business objectives and that processes exist to escalate significant IP issues to the board’s attention.

The complexity of the life sciences patent landscape—spanning biologics, gene therapies, and precision medicine—heightens the need for board-level awareness. Recent trends, such as increased scrutiny of patent evergreening, challenges under the America Invents Act, and evolving global IP standards, underscore that a passive approach to oversight is insufficient. Directors must be equipped with tools and information tailored to their role—such as regular briefings on patent portfolio health, competitive IP benchmarking, and litigation risks—so they can ask the right questions of management and fulfill their duty of good faith monitoring.

Your fiduciary duty under Caremark is a practical mandate to protect Xxxxx from foreseeable harm. Courts have consistently held that directors can be liable if they fail to act when “red flags” emerge or if they lack systems to detect such flags in the first place. A lapse in patent strategy—whether through expiring key patents, inadequate protection for new innovations, or unanticipated competitor challenges—could constitute such a red flag, with consequences ranging from lost revenue to reputational damage. By advocating for systems that provide the board with clear visibility into Xxxxx’s patent strategy, you safeguard the company and discharge your duty with the diligence that shareholders and the law expect.

Consider whether the board currently receives sufficient, director-focused insights into Xxxxx’s patent strategy—not operational minutiae, but strategic overviews designed to support your oversight role. If not, engaging with your fellow directors and management to ensure such systems are in place may be a prudent step. Your leadership in this area could set a tone of proactive governance that strengthens Xxxxx’s position as an industry leader while aligning with your legal and ethical responsibilities.