Pfizer , a large research-based pharmaceutical company, enters into a contract with a start-up biotechnology company called HealthPro and promises:
1. To grant HealthPro the exclusive rights to use Pfizer's Technology A for the life of its patent. The license gives HealthPro the exclusive right to market, distribute, and manufacture Drug B as developed using Technology A.
2. To assign four full-time equivalent employees to perform research and development services for HealthPro in a specially designated Pfizer lab facility. The primary objective of these services is to receive regulatory approval to market and distribute Drug B using Technology A.
HealthPro is required to use Pfizer's lab to perform the research and development services necessary to develop Drug B using Technology A, because the know how and expertise related to Technology A are proprietary to Pfizer and not available elsewhere.
Required:
Determine which parts of this contract are separate performance obligations. Explain your reasoning for each obligation.