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Managing your patent assets
YNBDI-02996; No. of pages: 7; 4C: Neurobiology of Disease xxx (2013) xxx–xxx
Contents lists available at ScienceDirect
Neurobiology of Disease journal homepage: www.elsevier.com/locate/ynbdi
Review
Managing your patent assets Mary Catherine Di Nunzio MC DINUNZIO PLLC, USA
a r t i c l e
i n f o
Article history: Received 3 June 2013 Revised 24 June 2013 Accepted 26 June 2013 Available online xxxx
a b s t r a c t This article includes tips to manage your patent assets effectively and efficiently. I have provided “real world” examples in the form of case studies to support my advice. My goal is to arm you with sufficient knowledge so as to enable you to devise a patent strategy that suits your company's business and scientific needs. © 2013 Elsevier Inc. All rights reserved.
Keywords: Intellectual property Patents Patent protection Patent assets
Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . Tip 1: Patent practitioner as board member . . . . . . . . . . Tip 2: Create a legal framework. . . . . . . . . . . . . . . . Employment agreements and consultancy agreements . . . Invention disclosure forms. . . . . . . . . . . . . . . . Assignments . . . . . . . . . . . . . . . . . . . . . . Publication policy. . . . . . . . . . . . . . . . . . . . Tip 3: Conduct an IP landscape search . . . . . . . . . . . . . Tip 4: Determine if your technology can be protected by a patent Product claims . . . . . . . . . . . . . . . . . . . . . Method of use claims . . . . . . . . . . . . . . . . . . Manufacturing claims . . . . . . . . . . . . . . . . . . Research tools . . . . . . . . . . . . . . . . . . . . . Tip 5: Consider the geographic scope of patent protection . . . . Tip 6: You must partner to succeed . . . . . . . . . . . . . . Create your public profile . . . . . . . . . . . . . . . . Be prudent but don't be paranoid . . . . . . . . . . . . Don't reinvent the wheel . . . . . . . . . . . . . . . . Create a negotiation chart . . . . . . . . . . . . . . . . Aim to create a “win-win” dead . . . . . . . . . . . . . Conclusion . . . . . . . . . . . . . . . . . . . . . . . . .
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Introduction If you are reading this journal and, specifically this article, you are either interested in commercialising your current technology, or you are E-mail address: [email protected]. Available online on ScienceDirect (www.sciencedirect.com).
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optimistic that – given your scientific acumen – it is just a matter of time until you have an invention worth commercialising. Given my 6000 word limit, I will not be able to share with you all the knowledge I have garnered during my twenty plus years as a patent practitioner in the pharmaceutical and biotechnology arts. However, my hope is that after reading this article you will be able to manage your patent assets effectively and efficiently and so maximise the opportunities that
0969-9961/$ – see front matter © 2013 Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.nbd.2013.06.015
Please cite this article as: Di Nunzio, M.C., Managing your patent assets, Neurobiol. Dis. (2013), http://dx.doi.org/10.1016/j.nbd.2013.06.015
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await you. And, while I cannot advise you on every situation you will encounter, my hope is to arm you with enough knowledge to enable you to ask the right questions when it comes to patents. I have provided “real world” examples in the form of case studies and have hidden party names and identifying details in order to protect the naïve, the ignorant and the ill-advised. Generally speaking, patents yield value for companies, especially small companies that are trying to distinguish themselves in the marketplace. As with all business decisions, however, there are advantages and disadvantages associated with preparing, filing, maintaining and enforcing patents. Most legal rights allow the holder of the right to do something. For example, the right of freedom of speech allows one to speak freely and does not allow one to prevent others from speaking freely. By contrast, a patent provides a negative right in that it allows the patent owner to prevent a third party from practising the claimed invention; a patent does not permit the patent-holder to affirmatively practise the claimed invention. By way of example, let's assume that Company A has been granted a patent for a suitcase and Company B has been granted a patent for a suitcase with wheels. Company B cannot practise its invention because each suitcase it sells will infringe the broader patent protection of Company A. However, Company A is also restricted in that Company A cannot sell a suitcase with wheels or it will infringe Company's B patent. Nevertheless, both patents are valuable assets in that they can serve as the basis for a licensing agreement or collaboration — a concept that I will discuss in greater detail later in this article. I believe that any advice regarding patents is incomplete without a common understanding of the costs associated with the patent process. It becomes apparent early on that preparing, filing and maintaining patents are not for the weak of heart or for the poor of pocket. A former colleague of mine said that patent law is the sport of kings since you need an ample treasure chest to play the game well. The minimal costs associated with filing an initial patent application as a priority document would be at least ten thousand Euros. These costs would cover the time associated with working with the inventors to draft a base patent application comprising no more than fifty pages. In the biotech industry a fifty- page patent application would in fact be relatively brief, but I believe it is the best example to discuss here, since it would be relatively easy to prepare and would not incur additional filing fees from patent offices. It is safe to assume that a small company would not have an in-house patent attorney and therefore would rely on a third-party patent firm to prepare, file and maintain its patents. I have listed the average costs incurred over the twenty-year patent term in Box 1. My goal in discussing money earlier is to stress the importance of viewing a patent as a business decision. Few executives would sign a long-term lease or hire a new employee without carefully considering the costs associated with that action. However, it never ceases to amaze me that companies will pay to file a priority application and a PCT application without considering that, until these “placeholder” applications are filed in the national and regional stage of the member countries and regions, they will never mature into a patent. Most small companies do not have the financial resources or the quality and diversity of work required to hire their own experienced patent practitioner. Accordingly, these companies rely on patent firms to prepare, file and maintain their patent estate. In theory, this is reasonable, since you are paying for a service that you need but cannot afford to perform in-house. However, you should never lose sight of the fact that there is an inherent conflict of interest that exists between these parties. As the consumer and bank-roller of these services you need to consistently question whether the patent firm's services are necessary and justified and to analyse how the services you are obtaining match up to your business goals. A company would not hire a contract research organisation to perform an unnecessary or scientifically irrelevant experiment — their in-house scientists would recognise the futility of this service. Yet if you have no experienced patent practitioners on
Box 1 Preparing and filing the priority application Preparing and filing the PCT international application Filing of national and regional stage applicationsa,b Prosecuting the applications before each of the Patent Officesc Validation fees and translations costs for Europed Annuities for years 1 to 20e Total costs over the 20 year patent term
€ 10,000 € 6000 € 32,000 € 30,000 € 41,000 € 200,000 € 319,000
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US, EP, Japan, China, Hong Kong, Canada, Australia, India and Brazil. Government filing fees, attorney/agent fees and translations. c Prosecution is the term used to describe the interaction between the applicants for a patent (via their legal representatives) and the various Patent Offices. d Validation in all EP member states. e Every country and region charges annuities during the 20 year patent term. The United States charges annuities only after the patent application issues as a patent and the total cost of the annuities is approximately € 4180 payable in 3 installments. In contrast the European Patent Office charges a yearly annuity while the patent application is pending and then yearly annuities are charged by each of the countries in which the European Patent is validated. The amount of the annuity varies by country. For example, assuming a patent application is pending before the European Patent Office for 10 years and then issues, the yearly annuity in Germany for year 11 is € 485. The yearly annuity in Germany increases each year with the yearly annuity due in Year 15 costing € 1070 and the yearly annuity in year 20 costing € 1950. Accordingly, the annuity fees due only in Germany for a 10 year period are currently € 11,850. Annuities over the lifetime of a Japanese patent are about € 8000. b
your staff, you cannot effectively assess and question the advice the outside patent attorneys are providing. I am by no means implying that a patent attorney would give you improper advice in order to increase his fees; I am merely warning that an outside party can never have the business knowledge and long-term vision required to accurately craft your patent strategy. Expecting such professionals to have such intimate knowledge from the outside looking in would be the equivalent of hiring an external CEO whom you pay by the hour and consult with intermittently. Tip 1: Patent practitioner as board member This is why my first recommendation is that you reserve a seat on your company board for an experienced patent practitioner. This person will periodically review the company's patent strategy and patent estate and insure that these two components are working together. Every life science company's board includes individuals with extensive business and scientific experience. However, with the vast majority of these companies' value residing in their patent estate, I believe that an experienced patent practitioner should also be part of this advisory group. It is less important for a larger company to have an experienced patent practitioner on its board because it has senior employees with the requisite level of knowledge. Tip 2: Create a legal framework There are several key “tools” that a company must have. These “tools” are paper documents which are used to ensure that all employees and consultants safeguard the company's intellectual property, memorialise inventions as they occur, establish ownership of such inventions and provide principles regarding how and when inventions will be publically disclosed. Employment agreements and consultancy agreements Every employment agreement and consultancy agreement must include provisions safeguarding the company's intellectual property.
Please cite this article as: Di Nunzio, M.C., Managing your patent assets, Neurobiol. Dis. (2013), http://dx.doi.org/10.1016/j.nbd.2013.06.015
M.C. Di Nunzio / Neurobiology of Disease xxx (2013) xxx–xxx
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These provisions would confirm that all inventions are owned by the company and that an individual will not disclose any confidential information without the company's prior approval.
parties – including future partners and licensees – of any ownership claims surrounding the patent. Smaller companies tend to be less diligent in recording such assignments, which I find perplexing.
Invention disclosure forms
• Case in point While working at a law firm in New York City, I was tasked with reviewing the patent estate of a small biotech company that a venture fund was considering purchasing. The first thing I noted was that none of the assignments were recorded, so without further investigation it would have appeared that the company had no ownership rights to the patents and that the patents were still owned by the inventors themselves. I later discovered that the reason why the assignments had not been recorded was because they had never been executed. Until the patent ownership was perfected, the venture fund would not close the deal. Each inventor eventually assigned their rights to the company and the ownership was perfected. This transaction proceeded with great speed, since the three inventors were also the sole owners of the biotech company, but if, say, there had been a fourth inventor who was not going to benefit financially from the sale of the company, he/she might have been motivated to stall the transaction by refusing to assign the patent without additional compensation. This inventor's actions would not be warranted if the inventor had an affirmative duty to assign the patents to the company by virtue of an existing employment agreement. However, when a buyer is knocking at the door, most companies would rather close the deal quickly, even if that means spending more money in the process. For this reason alone, it is imperative that companies require inventors to execute assignments contemporaneously with the patent filings.
The invention disclosure form (1) provides a brief summary of the invention, (2) lists the individuals who were involved in bringing the invention to fruition, and (3) includes notebook references and links to databases where supporting documentation can be found. A separate form should be made for each invention. These forms should be made contemporaneously and maintained in a safe place. These forms are crucial in scientific collaborations since they document the scientific contribution of each of the parties. • Case in point Some time ago I was advising a small biotech company that was in a research collaboration with a large pharmaceutical company. The employees of the small biotech believed that they were the sole inventors of the resulting patent. Unfortunately, the employees of the small biotech were lax in record-keeping and did not accurately document their scientific input. In contrast, one of the employees of the large pharmaceutical company took detailed notes during every meeting. Unfortunately, for the small biotech, he subsequently took credit for all of the scientific ideas that were presented during the meeting, irrespective of his actual contribution. The resulting dispute became a matter of “he said” versus “she said” and the small biotech had no evidence to support its case. This situation would have been avoided had the inventors at the small biotech company prepared invention disclosure forms before disclosing any of its ideas to the other company. Even if the scientist from the large company had behaved in the same manner, his claims would have been refuted when the small biotech company showed that the ideas were memorialised in a document that existed prior to the meeting between the companies. Assignments Patent ownership differs dramatically from the ownership of real property and establishing ownership of patent rights is pivotal to securing downstream funding. Patent ownership rights differ from the ownership of other property rights in that each owner of the patent is entitled to enforce and practise the full scope of the patent. By way of contrast, if two people jointly own a house, the owners must agree to whom they are going to sell the house. Each party does not own the entire right to sell the property. However, co-owners of a patent may each sell their rights to the patent, independent of the other owner's wishes. Ownership of a patent resides with the inventor(s) of the patent unless a legal obligation exists to assign the patent to a third party. As discussed above, in order to insure that all inventions that occur in the workplace are owned by the company, it is recommended that all employees execute employment agreements on their first day of work. It is common in joint research agreements that any resulting inventions are coowned between the parties because it is assumed that both parties will contribute to the research process. The rule of thumb is that if a company funds research it should ensure that any patents predicated on that research are owned by the company. An assignment should be recorded for each patent application when the application is filed. The assignment informs third parties of the true owner of the patent application and must be executed by each of the inventors of the patent application. Companies then record the assignment of the patent from the inventor(s) to the company in those jurisdictions in which patent protection is being sought. While an assignment need not always be recorded to be legally enforceable, the recordation of the assignment informs third
Publication policy It is also recommended that the company have a publication policy in place and that all relevant parties be advised of the policy. A publication policy does not forbid publication, it merely governs the timing of any resulting publications. A typical policy would require that all proposed publications, speeches and posters be presented to management and/or patent counsel at least thirty days prior to submission. This time window allows the company to compare the content of the proposed publication with the company's existing patent filings and determine if any new patent applications should be filed prior to the publication. The safest course of action is always to file a patent application covering the invention prior to a public disclosure of the invention. I would go one step further and recommend that a patent application be filed prior to any disclosure of the invention, even if the disclosure is made pursuant to a confidentiality agreement. Tip 3: Conduct an IP landscape search Few people invent the wheel. Nearly every invention is an improvement over an existing technology. Accordingly, in order for a company to ascertain the value of its technology, it is imperative that the company compare its technology to existing options. The first step in this assessment is to conduct a landscape search. A landscape search is conducted by reviewing publications, published patent applications and granted patents. The goal of the landscape search is to set the search parameters as broad as possible so that you can ascertain the level of scientific knowledge that exists thus far and then compare the differences between your proposed invention and the base level of knowledge. You need to characterise the “differences” between your technology and the existing technology so that you can assess the value and patentability of any such differences. There are patent law firms that will conduct these searches for you but I do not believe that it is necessary to use an outside vendor. Most companies are intimately aware of their competitors and of
Please cite this article as: Di Nunzio, M.C., Managing your patent assets, Neurobiol. Dis. (2013), http://dx.doi.org/10.1016/j.nbd.2013.06.015
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academic institutions that are conducting similar research programmes and, at a minimum, could focus the landscape search on these entities. Tip 4: Determine if your technology can be protected by a patent After you have determined how your technology differs from the existing technology you must consider whether those differences are patentable. To be patentable, an invention must be both novel and not an obvious variation of the prior art. Determining whether an invention is non-obvious can be a difficult undertaking, since the “rules” for making this determination differ slightly from jurisdiction to jurisdiction. However, it is easy to conclude if something is novel, for to be “novel” the invention needs to be new. Once you have concluded that an invention is patentable, you must then consider whether the invention can be protected via the patent system. Life science companies typically attempt to develop products or services along several primary avenues: therapeutics, diagnostics and platform technologies (e.g., research techniques or drug development techniques). Some of these avenues are more amenable to patent protection than others. Patents can be lengthy and complicated documents, but the most important section of the patent is the claims. The claims are easy to identify in the patent because the final section of every granted patent concludes with a listing of the claims. A claim in a patent provides the elements that must be present in order for the patent owner to have a claim of infringement against a third party. In other words, it sets the boundaries of the patent protection that will be conferred, just as the deed to a plot of land sets the boundaries of the landowner's title. Product claims Technological improvements in the life sciences tend to fall into four general categories: products, methods of treatment, processes of manufacture and research tools. It goes without saying that if the company is developing a product, the company must secure patent protection on that product, otherwise all the company's research and development efforts would be free for the taking by third parties. Product patents are typically easier to enforce than other types of patents because it is easy to identify the third party selling the infringing product. A pharmaceutical product can be adequately protected by a single patent to the active pharmaceutical ingredient. This is because the active pharmaceutical ingredient is the essential element in the product and any product lacking the active pharmaceutical ingredient would not be valuable to the consumer. This is a key distinction between pharmaceutical products and other consumer goods. Method of use claims A patent directed to a method of use would recite the use of compound X to treat disease Y. These patents also tend to be easy to enforce because the product insert for a pharmaceutical product will list the indications for which the product can be used. Accordingly, a company should always pursue claims to the medical use(s) of a compound. The only exception to this rule would be if a company invents a “new use” for an “old compound”. These types of claim are often referred to as “second medicinal use claims”. Some countries such as India and Argentina deem second medical use claims not patentable. Obviously, a company should not waste its time or money filing such claims in these jurisdictions. Even if patent protection is allowed – which it is in most countries – these claims can be difficult to obtain and difficult to enforce. Let us consider aspirin, for example. Decades ago it was discovered that taking an aspirin a day could lower a patient's risk of having a stroke. This was an amazing invention, but a patent covering this breakthrough was not pursued. Why? The reason is two-fold. First, a claim to this new use would be impossible to obtain: individuals had been taking
aspirin for decades prior to this invention and it is reasonable to assume that some patients took an aspirin a day. Patent law would conclude that the new use was inherent in the prior method of treatment. The patient does not have to appreciate the medical benefit that a product is providing. Unbeknownst to him, a patient who had a headache a day might have prevented himself from suffering a stroke. Assuming that patent protection could be obtained for the new use, it would be impossible to prove infringement. People take aspirin daily for a multitude of ailments — headache, fever, sore muscles; how would the patent owner prove in court that an individual took the aspirin for stroke prevention – the claimed use – versus any other of the permitted uses? The company could have prevented its competitors from listing this new use on the product leaflets that accompany aspirin, but there would still be the threat of “off-label” use by consumers. Manufacturing claims Patent protection may also be obtained for the process of manufacturing the active pharmaceutical ingredient, but further evaluation is necessary to determine if such protection is valuable. In order for a process patent to be valuable, the patent owner must be able to prove that the infringer used the patented process – as opposed to another chemical process – to make the compound. Accordingly, a patented process which left a “chemical fingerprint” in the end product would be easier to enforce, since a chemical analysis of the end product would prove whether the product had been made using the patented process. A process may be patentable – novel and not obvious – and, even economically beneficial, but, because the resulting patent would be difficult to enforce, it may be better to maintain the process as a trade secret. Alternatively, you could publish certain (but not all) aspects of the process with the goal of preventing a third party from patenting the process in the future. However, publishing the process makes it free to use, so if you were hoping to secure a business advantage by performing the process on behalf of third parties you would want to publish sufficient information to generate interest in your process, but not enough information to enable third parties to perform the process. This balance could easily be obtained by publishing certain aspects of the invention on your website. You could be very vague about the underlying science, but wax poetic about the benefits the process provides — low cost, high yield, low environmental impact, etc. • Case in point The burden of proving patent infringement falls on the patent owner when enforcing a process patent. In other words, the patentee must prove that the third party is using the patented process. Years ago I reviewed a process which involved the fine-tuning of temperature variables in a widely used commercial process. While the process increased the product yields dramatically, it would have been extremely difficult to detect infringement of the new process because the base process was widely used and the end products of the infringing and non-infringing processes were identical. It was decided to maintain the new process as a trade secret and consider performing it for third parties on a fee-for-service basis. Research tools The fourth category I will discuss is research tools. A research tool is any product or process that will never be supplied directly to consumers, but which will be used to discover the end consumer product. Common research tools include receptors, assays, screening methods, peptides, in vivo animal models, and processes that mimic biological mechanisms of action. By and large, research tools are patentable; however, the scope of the patent protection obtained and the issues surrounding enforcement of these patents often make their end value questionable. In the late 1980s and throughout the 1990s, if a company isolated a receptor it could obtain a US patent that covered the isolated
Please cite this article as: Di Nunzio, M.C., Managing your patent assets, Neurobiol. Dis. (2013), http://dx.doi.org/10.1016/j.nbd.2013.06.015
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receptor and any receptor that exhibited a certain percentage of homology to that receptor. In essence, these claims were broad enough to cover both the initial receptor that was cloned and all species orthologs of that receptor. However, in 2000, the US Patent and Trademark Office issued guidelines that restricted the scope of these types of patent. The US Patent Office stated that only the specific species that was cloned could be patented and it limited the scope of the resulting patent claims to that very receptor. This reduced the value of these patents, since there were a plethora of non-infringing activities that would be allowed. For example, a third party would not infringe a patent claim covering the human dopamine D2 receptor by using a species ortholog of the receptor. Another problem plaguing research tool patents is that research can be conducted anywhere and it is not economically feasible for a company to obtain patent protection in every country of the world. For example, when biotech companies were obtaining US patents on receptors and screening methods, contract research organisations that provided screening services were established in jurisdictions where patent protection either did not exist or was not enforced. Investigators wishing to obtain screening data for a particular compound would merely send the compound outside the United States for analysis. The majority of inventions originating in university laboratories and small biotechnology companies may be characterised as “research tools” since these discoveries do not cover a specific product or method of treatment, but may further scientific progress in a certain field. Before you decide to patent these types of invention, I think you should carefully assess the scope of the patent you will be granted and whether or not you will be able to enforce the patent. • Case in point Isolating and characterising the histamine family of receptors was an enormous achievement and yielded substantial scientific gains. However, these discoveries were not ideally suited for patent protection. Why? The answer is two-fold: patentability and enforceability. First, the granted claims of such patents were ultimately restricted by the US Patent and Trademark Office to the exact sequence of the receptor. If one isolated the human H2 receptor, the resulting patent would be limited to this exact species. A competitor that used the H2 mouse receptor for its research would not infringe the patent. However, the high homology among receptor species strongly suggests that, for example, the mouse receptor may yield a similar result scientifically. Secondly, unlike end consumer products where a company can predict in which markets it wants to sell its goods, research can be performed anywhere; a company wanting to use a research tool patent would merely conduct its research in a country where patent protection either was not sought or could never be obtained. This is why in the 1990s most screening companies were located outside the United States. As discussed earlier in connection with process patents, obtaining patents on research tools can – and often does – raise the scientific profile of a company or research organisation. Many of the companies that were unable to enforce their receptor patents used these patents to fuel commercial interest in their companies, thereby enabling the companies to secure collaborations and licensing deals. As we will discuss shortly, partnering is key in the life science industry and patents can be used as a means to attract partners. Tip 5: Consider the geographic scope of patent protection Patents are granted and enforced on a country-by-country basis. The typical filing scheme for a patent is to first file a priority application in the country in which the invention originated and then, at the oneyear anniversary of the filing date of the priority application, to file a Patent Cooperation Treaty patent application (PCT patent application). A PCT patent application is merely a placeholder and can never result
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in a granted patent. Thirty (30) months after the filing date of the priority application the patent owner must decide in which countries and/or regions it wishes to secure patent protection. As of February 1, 2013, there are 146 member states of the Patent Cooperation Treaty. Accordingly, at the thirty-month date, the patent owner could choose to pursue patent protection in all or none of these countries. The cost of pursuing patent protection varies from country to country. In addition, some countries – for example, China, Japan and Brazil – require that the patent application be translated into the local language. This is the point in the patent lifecycle when the costs are high. Therefore, it is imperative to consider in which countries patent protection should be sought. One should consider both i) the likelihood of obtaining a granted patent covering the invention and ii) the likelihood of eventually enforcing that patent in the local court system, bearing in mind that patent laws and patent practices do tend to change over time. As discussed above, one should not file a second medicinal use patent in India or Argentina, since their local patent laws currently prohibit the patenting of such an invention. One should also consider the business case behind the invention. It would not be necessary to obtain patent protection for an invention covering a new anti-malarial drug in the United States or Europe, since there is no market in those geographies for this type of drug. However, one would want to secure patent protection in India and other parts of Asia. Tip 6: You must partner to succeed The path to success for almost all life sciences companies is via partnership arrangements. Large pharmaceutical companies partner with (or acquire) small companies in order to gain scientific expertise or products, while smaller companies partner with larger companies in order to obtain scientific expertise or the money needed to advance their development candidates through the clinical trial process. As a small company, it's more than likely your primary asset will be your scientific expertise. Create your public profile I recommend that companies always have their corporate and patent documents in perfect order. Before the advent of the Internet and the free and abundant information that flows from it, if a company wanted to investigate another company it had to invest considerable time and effort in the process. Previously, the file history for a US patent was only available after the patent application issued as a patent – this correlates to an average of five years after the patent application was filed – and only by requesting the official file history from the United States Patent and Trademark Office. In contrast, today the file history of a patent application is freely and readily available after the patent application publishes– eighteen months after the earliest priority date. By using the “Public Pair” portal of the United States Patent and Trademark Office (USPTO) (www.uspto.gov) a third party can review the correspondence between the USPTO and the owner of a patent application and obtain information regarding the assignment history. It is now commonplace for companies thinking of partnering, licensing or acquiring another company to complete a base level of due diligence on the third-party company without the third party's knowledge or assistance in the process. The annual JP Morgan Healthcare conference, held in San Francisco every January, features presentations from hundreds of companies, both public and private. Business development groups from large companies, investor groups and venture funds attend this event. Suffice it to say that most of the companies attending this conference have done their due diligence before ever arriving in San Francisco and have identified key companies that they wish to investigate further. For this reason, I recommend that all companies have their patent portfolio in perfect order at all times. It would be a shame to miss an opportunity without even knowing you were being considered.
Please cite this article as: Di Nunzio, M.C., Managing your patent assets, Neurobiol. Dis. (2013), http://dx.doi.org/10.1016/j.nbd.2013.06.015
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The financial information available regarding privately-held companies is substantially less than the information available for publicallyheld companies. However, one can still piece together a “story” about a privately-held company using public information. For example, most privately-held companies have a website which lists the names of the company's executives, the company's area of scientific expertise, and provides details regarding recent partnerships or licensing agreements. This information may be used to search the websites of various patent offices in order to cobble together some basic patent information about the company. One could also cross-check the partnering and licensing information against the websites and public documents of the other party to the transaction. For example if a privately-held company states on its website that it has entered into a research collaboration with a publically-held company, additional information regarding that transaction may be available on the website of the publically-held company or in the financial filings of the publically-held company via the website of the U.S. Securities and Exchange Commission (www.sec. gov). All of the information above could be obtained free of charge and unbeknownst to the “target” company. • Case in point I worked on a transaction in which a pharmaceutical company was considering acquiring either a specific product of a small privatelyheld biotech company or the biotech company itself. Considerable information was gathered and analysed by the pharmaceutical company using public databases. Online searches were conducted at the United States Patent Office (www.uspto.gov) and the European Patent Office (www.epo.org) to assess the patent rights surrounding the product. Online searches were also conducted at the U.S. Food and Drug Administration (www.fda.gov) and the European Medicines Agency (www. ema.europa.eu) in order to assess the data exclusivity of the product. Limited financial information was available given that the company was privately held. However, the market share of the product was estimated based on the information available. The pharmaceutical company concluded that the product would be subject to generic competition as soon as the data protection expired and therefore decided not to pursue the deal further. It is interesting to note, though, how much information could be obtained and what conclusions could be drawn without even engaging with the target company.
have already established to move the deal forward. The first step in securing a partnership deal is to agree on the key terms. These key terms always include financial obligations, but usually also include intellectual property provisions, ownership rights and the desired outcome of the business arrangement. These key terms are usually set forth in a term sheet and discussed with the other party. After these key terms have been agreed upon, the next step is to memorialise the negotiations in a contract. Many small companies agree to prepare the initial contract because they believe that they can control the underlying business deal by controlling the contract. In my opinion, this is a huge waste of time and resources. Most small companies will not have a lawyer on staff and therefore will have to pay a law firm to draft the contract. Upwards of 80% of any contract is standard “boilerplate” material. Accordingly, I recommend that you rely on the other party to generate the contract and that you merely provide comments and changes to the document. This allows you to get the most value for your money because your lawyer's attention is now focused on the key terms of the deal. Create a negotiation chart In order to proceed quickly and efficiently during the contract negotiations, I recommend that you create a negotiation chart. The negotiation chart will include the following categories; Must-Haves, Nice to Haves and Not Necessaries. By deciding upfront on the deal terms that you cannot forgo, you will be able to quickly assess whether a negotiation is worth continuing or whether the resulting deal will never provide value to your company. Completing the remainder of the negotiation chart will allow you to proceed quickly through the negotiations, since you will not waste time discussing terms that are not relevant to the business case. Aim to create a “win-win” dead Ultimately, your goal should be to obtain a “win-win” deal for both parties. If either party feels that they have been taken advantage of during the negotiation process they will be less committed to the deal's success. Partnership agreements tend to span years and it is important for both companies to feel committed to the deal, so that the deal can maintain the momentum it needs to yield a successful result.
Be prudent but don't be paranoid Conclusion By and large theft of confidential information is relatively rare. That being said, I would recommend that initially you only share nonconfidential information with potential partners. The reason for this is that you will probably have initial partnership talks with many companies and only a few of these talks will mature beyond the first meeting. It is easier for you to manage these talks by limiting your disclosure to only non-confidential information. It is interesting to note that many large pharmaceutical companies will ask you to limit the initial meeting to non-confidential information so as to protect them of being accused of misappropriating your information at a later date. If the parties wish to continue the discussions it will be necessary for you to share confidential information. Today this information is primarily shared between the parties via on-line data sites. Data sharing sites are ideal since it is easy to track exactly what information was shared and who had access to such information. In the event that you do not use a data-sharing site, you will need to stamp as confidential each piece of paper that you share with the other side and to keep a detailed log of exactly what information was shared. Don't reinvent the wheel The chances are that the company with which you will end up partnering is a company that has partnered with someone else previously. Accordingly, I recommend that you rely on the systems they
I hope that I have succeeded in educating you on the essentials of the patent process and the pitfalls to which novices are prey. The costs of preparing, filing, maintaining and enforcing patents are high. This is why it is imperative to treat your patent estate as you would any other business asset. You should consistently evaluate the patents in your portfolio and make informed decisions about the role that each patent plays in your organisation. If a specific patent is no longer relevant to your business you should either abandon the patent to save money or try to out-license the patent to a third party in order to recover your costs. It is the quality, not the quantity, of the patents that is important. It is far more valuable to have a limited number of patents that further your company's business strategy than to have numerous patents and patent applications that are not on point. In the infancy of the biotech industry, biotech investors were somewhat naïve in the sense that they would often assign a higher monetary value to companies that had a large patent estate. I observed this myself when working for a small boutique law firm in New York City. Our biotech clients would want us to notify them as soon as a patent issued so that they could issue a press release noting that their patent estate had increased, albeit by just one patent. There was no mention in the press release regarding the invention that was the subject of the patent application or the scope of the issued claims
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covering the invention. The sole premise of the patent release was that the company's patent estate had increased by one. The base level of knowledge regarding intellectual property has increased exponentially in the last 20 years. Investors are no longer valuing companies based solely on the number of patents in the company's
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portfolio. While companies still issue press releases surrounding the issuance of a patent, today the press release would stress the value of the patent to the company's business plan and how the company is planning to use this asset to its strategic advantage. The days of quantity over quality have passed.
Please cite this article as: Di Nunzio, M.C., Managing your patent assets, Neurobiol. Dis. (2013), http://dx.doi.org/10.1016/j.nbd.2013.06.015
Contents lists available at ScienceDirect
Neurobiology of Disease journal homepage: www.elsevier.com/locate/ynbdi
Review
Managing your patent assets Mary Catherine Di Nunzio MC DINUNZIO PLLC, USA
a r t i c l e
i n f o
Article history: Received 3 June 2013 Revised 24 June 2013 Accepted 26 June 2013 Available online xxxx
a b s t r a c t This article includes tips to manage your patent assets effectively and efficiently. I have provided “real world” examples in the form of case studies to support my advice. My goal is to arm you with sufficient knowledge so as to enable you to devise a patent strategy that suits your company's business and scientific needs. © 2013 Elsevier Inc. All rights reserved.
Keywords: Intellectual property Patents Patent protection Patent assets
Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . Tip 1: Patent practitioner as board member . . . . . . . . . . Tip 2: Create a legal framework. . . . . . . . . . . . . . . . Employment agreements and consultancy agreements . . . Invention disclosure forms. . . . . . . . . . . . . . . . Assignments . . . . . . . . . . . . . . . . . . . . . . Publication policy. . . . . . . . . . . . . . . . . . . . Tip 3: Conduct an IP landscape search . . . . . . . . . . . . . Tip 4: Determine if your technology can be protected by a patent Product claims . . . . . . . . . . . . . . . . . . . . . Method of use claims . . . . . . . . . . . . . . . . . . Manufacturing claims . . . . . . . . . . . . . . . . . . Research tools . . . . . . . . . . . . . . . . . . . . . Tip 5: Consider the geographic scope of patent protection . . . . Tip 6: You must partner to succeed . . . . . . . . . . . . . . Create your public profile . . . . . . . . . . . . . . . . Be prudent but don't be paranoid . . . . . . . . . . . . Don't reinvent the wheel . . . . . . . . . . . . . . . . Create a negotiation chart . . . . . . . . . . . . . . . . Aim to create a “win-win” dead . . . . . . . . . . . . . Conclusion . . . . . . . . . . . . . . . . . . . . . . . . .
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Introduction If you are reading this journal and, specifically this article, you are either interested in commercialising your current technology, or you are E-mail address: [email protected]. Available online on ScienceDirect (www.sciencedirect.com).
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optimistic that – given your scientific acumen – it is just a matter of time until you have an invention worth commercialising. Given my 6000 word limit, I will not be able to share with you all the knowledge I have garnered during my twenty plus years as a patent practitioner in the pharmaceutical and biotechnology arts. However, my hope is that after reading this article you will be able to manage your patent assets effectively and efficiently and so maximise the opportunities that
0969-9961/$ – see front matter © 2013 Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.nbd.2013.06.015
Please cite this article as: Di Nunzio, M.C., Managing your patent assets, Neurobiol. Dis. (2013), http://dx.doi.org/10.1016/j.nbd.2013.06.015
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await you. And, while I cannot advise you on every situation you will encounter, my hope is to arm you with enough knowledge to enable you to ask the right questions when it comes to patents. I have provided “real world” examples in the form of case studies and have hidden party names and identifying details in order to protect the naïve, the ignorant and the ill-advised. Generally speaking, patents yield value for companies, especially small companies that are trying to distinguish themselves in the marketplace. As with all business decisions, however, there are advantages and disadvantages associated with preparing, filing, maintaining and enforcing patents. Most legal rights allow the holder of the right to do something. For example, the right of freedom of speech allows one to speak freely and does not allow one to prevent others from speaking freely. By contrast, a patent provides a negative right in that it allows the patent owner to prevent a third party from practising the claimed invention; a patent does not permit the patent-holder to affirmatively practise the claimed invention. By way of example, let's assume that Company A has been granted a patent for a suitcase and Company B has been granted a patent for a suitcase with wheels. Company B cannot practise its invention because each suitcase it sells will infringe the broader patent protection of Company A. However, Company A is also restricted in that Company A cannot sell a suitcase with wheels or it will infringe Company's B patent. Nevertheless, both patents are valuable assets in that they can serve as the basis for a licensing agreement or collaboration — a concept that I will discuss in greater detail later in this article. I believe that any advice regarding patents is incomplete without a common understanding of the costs associated with the patent process. It becomes apparent early on that preparing, filing and maintaining patents are not for the weak of heart or for the poor of pocket. A former colleague of mine said that patent law is the sport of kings since you need an ample treasure chest to play the game well. The minimal costs associated with filing an initial patent application as a priority document would be at least ten thousand Euros. These costs would cover the time associated with working with the inventors to draft a base patent application comprising no more than fifty pages. In the biotech industry a fifty- page patent application would in fact be relatively brief, but I believe it is the best example to discuss here, since it would be relatively easy to prepare and would not incur additional filing fees from patent offices. It is safe to assume that a small company would not have an in-house patent attorney and therefore would rely on a third-party patent firm to prepare, file and maintain its patents. I have listed the average costs incurred over the twenty-year patent term in Box 1. My goal in discussing money earlier is to stress the importance of viewing a patent as a business decision. Few executives would sign a long-term lease or hire a new employee without carefully considering the costs associated with that action. However, it never ceases to amaze me that companies will pay to file a priority application and a PCT application without considering that, until these “placeholder” applications are filed in the national and regional stage of the member countries and regions, they will never mature into a patent. Most small companies do not have the financial resources or the quality and diversity of work required to hire their own experienced patent practitioner. Accordingly, these companies rely on patent firms to prepare, file and maintain their patent estate. In theory, this is reasonable, since you are paying for a service that you need but cannot afford to perform in-house. However, you should never lose sight of the fact that there is an inherent conflict of interest that exists between these parties. As the consumer and bank-roller of these services you need to consistently question whether the patent firm's services are necessary and justified and to analyse how the services you are obtaining match up to your business goals. A company would not hire a contract research organisation to perform an unnecessary or scientifically irrelevant experiment — their in-house scientists would recognise the futility of this service. Yet if you have no experienced patent practitioners on
Box 1 Preparing and filing the priority application Preparing and filing the PCT international application Filing of national and regional stage applicationsa,b Prosecuting the applications before each of the Patent Officesc Validation fees and translations costs for Europed Annuities for years 1 to 20e Total costs over the 20 year patent term
€ 10,000 € 6000 € 32,000 € 30,000 € 41,000 € 200,000 € 319,000
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US, EP, Japan, China, Hong Kong, Canada, Australia, India and Brazil. Government filing fees, attorney/agent fees and translations. c Prosecution is the term used to describe the interaction between the applicants for a patent (via their legal representatives) and the various Patent Offices. d Validation in all EP member states. e Every country and region charges annuities during the 20 year patent term. The United States charges annuities only after the patent application issues as a patent and the total cost of the annuities is approximately € 4180 payable in 3 installments. In contrast the European Patent Office charges a yearly annuity while the patent application is pending and then yearly annuities are charged by each of the countries in which the European Patent is validated. The amount of the annuity varies by country. For example, assuming a patent application is pending before the European Patent Office for 10 years and then issues, the yearly annuity in Germany for year 11 is € 485. The yearly annuity in Germany increases each year with the yearly annuity due in Year 15 costing € 1070 and the yearly annuity in year 20 costing € 1950. Accordingly, the annuity fees due only in Germany for a 10 year period are currently € 11,850. Annuities over the lifetime of a Japanese patent are about € 8000. b
your staff, you cannot effectively assess and question the advice the outside patent attorneys are providing. I am by no means implying that a patent attorney would give you improper advice in order to increase his fees; I am merely warning that an outside party can never have the business knowledge and long-term vision required to accurately craft your patent strategy. Expecting such professionals to have such intimate knowledge from the outside looking in would be the equivalent of hiring an external CEO whom you pay by the hour and consult with intermittently. Tip 1: Patent practitioner as board member This is why my first recommendation is that you reserve a seat on your company board for an experienced patent practitioner. This person will periodically review the company's patent strategy and patent estate and insure that these two components are working together. Every life science company's board includes individuals with extensive business and scientific experience. However, with the vast majority of these companies' value residing in their patent estate, I believe that an experienced patent practitioner should also be part of this advisory group. It is less important for a larger company to have an experienced patent practitioner on its board because it has senior employees with the requisite level of knowledge. Tip 2: Create a legal framework There are several key “tools” that a company must have. These “tools” are paper documents which are used to ensure that all employees and consultants safeguard the company's intellectual property, memorialise inventions as they occur, establish ownership of such inventions and provide principles regarding how and when inventions will be publically disclosed. Employment agreements and consultancy agreements Every employment agreement and consultancy agreement must include provisions safeguarding the company's intellectual property.
Please cite this article as: Di Nunzio, M.C., Managing your patent assets, Neurobiol. Dis. (2013), http://dx.doi.org/10.1016/j.nbd.2013.06.015
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These provisions would confirm that all inventions are owned by the company and that an individual will not disclose any confidential information without the company's prior approval.
parties – including future partners and licensees – of any ownership claims surrounding the patent. Smaller companies tend to be less diligent in recording such assignments, which I find perplexing.
Invention disclosure forms
• Case in point While working at a law firm in New York City, I was tasked with reviewing the patent estate of a small biotech company that a venture fund was considering purchasing. The first thing I noted was that none of the assignments were recorded, so without further investigation it would have appeared that the company had no ownership rights to the patents and that the patents were still owned by the inventors themselves. I later discovered that the reason why the assignments had not been recorded was because they had never been executed. Until the patent ownership was perfected, the venture fund would not close the deal. Each inventor eventually assigned their rights to the company and the ownership was perfected. This transaction proceeded with great speed, since the three inventors were also the sole owners of the biotech company, but if, say, there had been a fourth inventor who was not going to benefit financially from the sale of the company, he/she might have been motivated to stall the transaction by refusing to assign the patent without additional compensation. This inventor's actions would not be warranted if the inventor had an affirmative duty to assign the patents to the company by virtue of an existing employment agreement. However, when a buyer is knocking at the door, most companies would rather close the deal quickly, even if that means spending more money in the process. For this reason alone, it is imperative that companies require inventors to execute assignments contemporaneously with the patent filings.
The invention disclosure form (1) provides a brief summary of the invention, (2) lists the individuals who were involved in bringing the invention to fruition, and (3) includes notebook references and links to databases where supporting documentation can be found. A separate form should be made for each invention. These forms should be made contemporaneously and maintained in a safe place. These forms are crucial in scientific collaborations since they document the scientific contribution of each of the parties. • Case in point Some time ago I was advising a small biotech company that was in a research collaboration with a large pharmaceutical company. The employees of the small biotech believed that they were the sole inventors of the resulting patent. Unfortunately, the employees of the small biotech were lax in record-keeping and did not accurately document their scientific input. In contrast, one of the employees of the large pharmaceutical company took detailed notes during every meeting. Unfortunately, for the small biotech, he subsequently took credit for all of the scientific ideas that were presented during the meeting, irrespective of his actual contribution. The resulting dispute became a matter of “he said” versus “she said” and the small biotech had no evidence to support its case. This situation would have been avoided had the inventors at the small biotech company prepared invention disclosure forms before disclosing any of its ideas to the other company. Even if the scientist from the large company had behaved in the same manner, his claims would have been refuted when the small biotech company showed that the ideas were memorialised in a document that existed prior to the meeting between the companies. Assignments Patent ownership differs dramatically from the ownership of real property and establishing ownership of patent rights is pivotal to securing downstream funding. Patent ownership rights differ from the ownership of other property rights in that each owner of the patent is entitled to enforce and practise the full scope of the patent. By way of contrast, if two people jointly own a house, the owners must agree to whom they are going to sell the house. Each party does not own the entire right to sell the property. However, co-owners of a patent may each sell their rights to the patent, independent of the other owner's wishes. Ownership of a patent resides with the inventor(s) of the patent unless a legal obligation exists to assign the patent to a third party. As discussed above, in order to insure that all inventions that occur in the workplace are owned by the company, it is recommended that all employees execute employment agreements on their first day of work. It is common in joint research agreements that any resulting inventions are coowned between the parties because it is assumed that both parties will contribute to the research process. The rule of thumb is that if a company funds research it should ensure that any patents predicated on that research are owned by the company. An assignment should be recorded for each patent application when the application is filed. The assignment informs third parties of the true owner of the patent application and must be executed by each of the inventors of the patent application. Companies then record the assignment of the patent from the inventor(s) to the company in those jurisdictions in which patent protection is being sought. While an assignment need not always be recorded to be legally enforceable, the recordation of the assignment informs third
Publication policy It is also recommended that the company have a publication policy in place and that all relevant parties be advised of the policy. A publication policy does not forbid publication, it merely governs the timing of any resulting publications. A typical policy would require that all proposed publications, speeches and posters be presented to management and/or patent counsel at least thirty days prior to submission. This time window allows the company to compare the content of the proposed publication with the company's existing patent filings and determine if any new patent applications should be filed prior to the publication. The safest course of action is always to file a patent application covering the invention prior to a public disclosure of the invention. I would go one step further and recommend that a patent application be filed prior to any disclosure of the invention, even if the disclosure is made pursuant to a confidentiality agreement. Tip 3: Conduct an IP landscape search Few people invent the wheel. Nearly every invention is an improvement over an existing technology. Accordingly, in order for a company to ascertain the value of its technology, it is imperative that the company compare its technology to existing options. The first step in this assessment is to conduct a landscape search. A landscape search is conducted by reviewing publications, published patent applications and granted patents. The goal of the landscape search is to set the search parameters as broad as possible so that you can ascertain the level of scientific knowledge that exists thus far and then compare the differences between your proposed invention and the base level of knowledge. You need to characterise the “differences” between your technology and the existing technology so that you can assess the value and patentability of any such differences. There are patent law firms that will conduct these searches for you but I do not believe that it is necessary to use an outside vendor. Most companies are intimately aware of their competitors and of
Please cite this article as: Di Nunzio, M.C., Managing your patent assets, Neurobiol. Dis. (2013), http://dx.doi.org/10.1016/j.nbd.2013.06.015
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academic institutions that are conducting similar research programmes and, at a minimum, could focus the landscape search on these entities. Tip 4: Determine if your technology can be protected by a patent After you have determined how your technology differs from the existing technology you must consider whether those differences are patentable. To be patentable, an invention must be both novel and not an obvious variation of the prior art. Determining whether an invention is non-obvious can be a difficult undertaking, since the “rules” for making this determination differ slightly from jurisdiction to jurisdiction. However, it is easy to conclude if something is novel, for to be “novel” the invention needs to be new. Once you have concluded that an invention is patentable, you must then consider whether the invention can be protected via the patent system. Life science companies typically attempt to develop products or services along several primary avenues: therapeutics, diagnostics and platform technologies (e.g., research techniques or drug development techniques). Some of these avenues are more amenable to patent protection than others. Patents can be lengthy and complicated documents, but the most important section of the patent is the claims. The claims are easy to identify in the patent because the final section of every granted patent concludes with a listing of the claims. A claim in a patent provides the elements that must be present in order for the patent owner to have a claim of infringement against a third party. In other words, it sets the boundaries of the patent protection that will be conferred, just as the deed to a plot of land sets the boundaries of the landowner's title. Product claims Technological improvements in the life sciences tend to fall into four general categories: products, methods of treatment, processes of manufacture and research tools. It goes without saying that if the company is developing a product, the company must secure patent protection on that product, otherwise all the company's research and development efforts would be free for the taking by third parties. Product patents are typically easier to enforce than other types of patents because it is easy to identify the third party selling the infringing product. A pharmaceutical product can be adequately protected by a single patent to the active pharmaceutical ingredient. This is because the active pharmaceutical ingredient is the essential element in the product and any product lacking the active pharmaceutical ingredient would not be valuable to the consumer. This is a key distinction between pharmaceutical products and other consumer goods. Method of use claims A patent directed to a method of use would recite the use of compound X to treat disease Y. These patents also tend to be easy to enforce because the product insert for a pharmaceutical product will list the indications for which the product can be used. Accordingly, a company should always pursue claims to the medical use(s) of a compound. The only exception to this rule would be if a company invents a “new use” for an “old compound”. These types of claim are often referred to as “second medicinal use claims”. Some countries such as India and Argentina deem second medical use claims not patentable. Obviously, a company should not waste its time or money filing such claims in these jurisdictions. Even if patent protection is allowed – which it is in most countries – these claims can be difficult to obtain and difficult to enforce. Let us consider aspirin, for example. Decades ago it was discovered that taking an aspirin a day could lower a patient's risk of having a stroke. This was an amazing invention, but a patent covering this breakthrough was not pursued. Why? The reason is two-fold. First, a claim to this new use would be impossible to obtain: individuals had been taking
aspirin for decades prior to this invention and it is reasonable to assume that some patients took an aspirin a day. Patent law would conclude that the new use was inherent in the prior method of treatment. The patient does not have to appreciate the medical benefit that a product is providing. Unbeknownst to him, a patient who had a headache a day might have prevented himself from suffering a stroke. Assuming that patent protection could be obtained for the new use, it would be impossible to prove infringement. People take aspirin daily for a multitude of ailments — headache, fever, sore muscles; how would the patent owner prove in court that an individual took the aspirin for stroke prevention – the claimed use – versus any other of the permitted uses? The company could have prevented its competitors from listing this new use on the product leaflets that accompany aspirin, but there would still be the threat of “off-label” use by consumers. Manufacturing claims Patent protection may also be obtained for the process of manufacturing the active pharmaceutical ingredient, but further evaluation is necessary to determine if such protection is valuable. In order for a process patent to be valuable, the patent owner must be able to prove that the infringer used the patented process – as opposed to another chemical process – to make the compound. Accordingly, a patented process which left a “chemical fingerprint” in the end product would be easier to enforce, since a chemical analysis of the end product would prove whether the product had been made using the patented process. A process may be patentable – novel and not obvious – and, even economically beneficial, but, because the resulting patent would be difficult to enforce, it may be better to maintain the process as a trade secret. Alternatively, you could publish certain (but not all) aspects of the process with the goal of preventing a third party from patenting the process in the future. However, publishing the process makes it free to use, so if you were hoping to secure a business advantage by performing the process on behalf of third parties you would want to publish sufficient information to generate interest in your process, but not enough information to enable third parties to perform the process. This balance could easily be obtained by publishing certain aspects of the invention on your website. You could be very vague about the underlying science, but wax poetic about the benefits the process provides — low cost, high yield, low environmental impact, etc. • Case in point The burden of proving patent infringement falls on the patent owner when enforcing a process patent. In other words, the patentee must prove that the third party is using the patented process. Years ago I reviewed a process which involved the fine-tuning of temperature variables in a widely used commercial process. While the process increased the product yields dramatically, it would have been extremely difficult to detect infringement of the new process because the base process was widely used and the end products of the infringing and non-infringing processes were identical. It was decided to maintain the new process as a trade secret and consider performing it for third parties on a fee-for-service basis. Research tools The fourth category I will discuss is research tools. A research tool is any product or process that will never be supplied directly to consumers, but which will be used to discover the end consumer product. Common research tools include receptors, assays, screening methods, peptides, in vivo animal models, and processes that mimic biological mechanisms of action. By and large, research tools are patentable; however, the scope of the patent protection obtained and the issues surrounding enforcement of these patents often make their end value questionable. In the late 1980s and throughout the 1990s, if a company isolated a receptor it could obtain a US patent that covered the isolated
Please cite this article as: Di Nunzio, M.C., Managing your patent assets, Neurobiol. Dis. (2013), http://dx.doi.org/10.1016/j.nbd.2013.06.015
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receptor and any receptor that exhibited a certain percentage of homology to that receptor. In essence, these claims were broad enough to cover both the initial receptor that was cloned and all species orthologs of that receptor. However, in 2000, the US Patent and Trademark Office issued guidelines that restricted the scope of these types of patent. The US Patent Office stated that only the specific species that was cloned could be patented and it limited the scope of the resulting patent claims to that very receptor. This reduced the value of these patents, since there were a plethora of non-infringing activities that would be allowed. For example, a third party would not infringe a patent claim covering the human dopamine D2 receptor by using a species ortholog of the receptor. Another problem plaguing research tool patents is that research can be conducted anywhere and it is not economically feasible for a company to obtain patent protection in every country of the world. For example, when biotech companies were obtaining US patents on receptors and screening methods, contract research organisations that provided screening services were established in jurisdictions where patent protection either did not exist or was not enforced. Investigators wishing to obtain screening data for a particular compound would merely send the compound outside the United States for analysis. The majority of inventions originating in university laboratories and small biotechnology companies may be characterised as “research tools” since these discoveries do not cover a specific product or method of treatment, but may further scientific progress in a certain field. Before you decide to patent these types of invention, I think you should carefully assess the scope of the patent you will be granted and whether or not you will be able to enforce the patent. • Case in point Isolating and characterising the histamine family of receptors was an enormous achievement and yielded substantial scientific gains. However, these discoveries were not ideally suited for patent protection. Why? The answer is two-fold: patentability and enforceability. First, the granted claims of such patents were ultimately restricted by the US Patent and Trademark Office to the exact sequence of the receptor. If one isolated the human H2 receptor, the resulting patent would be limited to this exact species. A competitor that used the H2 mouse receptor for its research would not infringe the patent. However, the high homology among receptor species strongly suggests that, for example, the mouse receptor may yield a similar result scientifically. Secondly, unlike end consumer products where a company can predict in which markets it wants to sell its goods, research can be performed anywhere; a company wanting to use a research tool patent would merely conduct its research in a country where patent protection either was not sought or could never be obtained. This is why in the 1990s most screening companies were located outside the United States. As discussed earlier in connection with process patents, obtaining patents on research tools can – and often does – raise the scientific profile of a company or research organisation. Many of the companies that were unable to enforce their receptor patents used these patents to fuel commercial interest in their companies, thereby enabling the companies to secure collaborations and licensing deals. As we will discuss shortly, partnering is key in the life science industry and patents can be used as a means to attract partners. Tip 5: Consider the geographic scope of patent protection Patents are granted and enforced on a country-by-country basis. The typical filing scheme for a patent is to first file a priority application in the country in which the invention originated and then, at the oneyear anniversary of the filing date of the priority application, to file a Patent Cooperation Treaty patent application (PCT patent application). A PCT patent application is merely a placeholder and can never result
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in a granted patent. Thirty (30) months after the filing date of the priority application the patent owner must decide in which countries and/or regions it wishes to secure patent protection. As of February 1, 2013, there are 146 member states of the Patent Cooperation Treaty. Accordingly, at the thirty-month date, the patent owner could choose to pursue patent protection in all or none of these countries. The cost of pursuing patent protection varies from country to country. In addition, some countries – for example, China, Japan and Brazil – require that the patent application be translated into the local language. This is the point in the patent lifecycle when the costs are high. Therefore, it is imperative to consider in which countries patent protection should be sought. One should consider both i) the likelihood of obtaining a granted patent covering the invention and ii) the likelihood of eventually enforcing that patent in the local court system, bearing in mind that patent laws and patent practices do tend to change over time. As discussed above, one should not file a second medicinal use patent in India or Argentina, since their local patent laws currently prohibit the patenting of such an invention. One should also consider the business case behind the invention. It would not be necessary to obtain patent protection for an invention covering a new anti-malarial drug in the United States or Europe, since there is no market in those geographies for this type of drug. However, one would want to secure patent protection in India and other parts of Asia. Tip 6: You must partner to succeed The path to success for almost all life sciences companies is via partnership arrangements. Large pharmaceutical companies partner with (or acquire) small companies in order to gain scientific expertise or products, while smaller companies partner with larger companies in order to obtain scientific expertise or the money needed to advance their development candidates through the clinical trial process. As a small company, it's more than likely your primary asset will be your scientific expertise. Create your public profile I recommend that companies always have their corporate and patent documents in perfect order. Before the advent of the Internet and the free and abundant information that flows from it, if a company wanted to investigate another company it had to invest considerable time and effort in the process. Previously, the file history for a US patent was only available after the patent application issued as a patent – this correlates to an average of five years after the patent application was filed – and only by requesting the official file history from the United States Patent and Trademark Office. In contrast, today the file history of a patent application is freely and readily available after the patent application publishes– eighteen months after the earliest priority date. By using the “Public Pair” portal of the United States Patent and Trademark Office (USPTO) (www.uspto.gov) a third party can review the correspondence between the USPTO and the owner of a patent application and obtain information regarding the assignment history. It is now commonplace for companies thinking of partnering, licensing or acquiring another company to complete a base level of due diligence on the third-party company without the third party's knowledge or assistance in the process. The annual JP Morgan Healthcare conference, held in San Francisco every January, features presentations from hundreds of companies, both public and private. Business development groups from large companies, investor groups and venture funds attend this event. Suffice it to say that most of the companies attending this conference have done their due diligence before ever arriving in San Francisco and have identified key companies that they wish to investigate further. For this reason, I recommend that all companies have their patent portfolio in perfect order at all times. It would be a shame to miss an opportunity without even knowing you were being considered.
Please cite this article as: Di Nunzio, M.C., Managing your patent assets, Neurobiol. Dis. (2013), http://dx.doi.org/10.1016/j.nbd.2013.06.015
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The financial information available regarding privately-held companies is substantially less than the information available for publicallyheld companies. However, one can still piece together a “story” about a privately-held company using public information. For example, most privately-held companies have a website which lists the names of the company's executives, the company's area of scientific expertise, and provides details regarding recent partnerships or licensing agreements. This information may be used to search the websites of various patent offices in order to cobble together some basic patent information about the company. One could also cross-check the partnering and licensing information against the websites and public documents of the other party to the transaction. For example if a privately-held company states on its website that it has entered into a research collaboration with a publically-held company, additional information regarding that transaction may be available on the website of the publically-held company or in the financial filings of the publically-held company via the website of the U.S. Securities and Exchange Commission (www.sec. gov). All of the information above could be obtained free of charge and unbeknownst to the “target” company. • Case in point I worked on a transaction in which a pharmaceutical company was considering acquiring either a specific product of a small privatelyheld biotech company or the biotech company itself. Considerable information was gathered and analysed by the pharmaceutical company using public databases. Online searches were conducted at the United States Patent Office (www.uspto.gov) and the European Patent Office (www.epo.org) to assess the patent rights surrounding the product. Online searches were also conducted at the U.S. Food and Drug Administration (www.fda.gov) and the European Medicines Agency (www. ema.europa.eu) in order to assess the data exclusivity of the product. Limited financial information was available given that the company was privately held. However, the market share of the product was estimated based on the information available. The pharmaceutical company concluded that the product would be subject to generic competition as soon as the data protection expired and therefore decided not to pursue the deal further. It is interesting to note, though, how much information could be obtained and what conclusions could be drawn without even engaging with the target company.
have already established to move the deal forward. The first step in securing a partnership deal is to agree on the key terms. These key terms always include financial obligations, but usually also include intellectual property provisions, ownership rights and the desired outcome of the business arrangement. These key terms are usually set forth in a term sheet and discussed with the other party. After these key terms have been agreed upon, the next step is to memorialise the negotiations in a contract. Many small companies agree to prepare the initial contract because they believe that they can control the underlying business deal by controlling the contract. In my opinion, this is a huge waste of time and resources. Most small companies will not have a lawyer on staff and therefore will have to pay a law firm to draft the contract. Upwards of 80% of any contract is standard “boilerplate” material. Accordingly, I recommend that you rely on the other party to generate the contract and that you merely provide comments and changes to the document. This allows you to get the most value for your money because your lawyer's attention is now focused on the key terms of the deal. Create a negotiation chart In order to proceed quickly and efficiently during the contract negotiations, I recommend that you create a negotiation chart. The negotiation chart will include the following categories; Must-Haves, Nice to Haves and Not Necessaries. By deciding upfront on the deal terms that you cannot forgo, you will be able to quickly assess whether a negotiation is worth continuing or whether the resulting deal will never provide value to your company. Completing the remainder of the negotiation chart will allow you to proceed quickly through the negotiations, since you will not waste time discussing terms that are not relevant to the business case. Aim to create a “win-win” dead Ultimately, your goal should be to obtain a “win-win” deal for both parties. If either party feels that they have been taken advantage of during the negotiation process they will be less committed to the deal's success. Partnership agreements tend to span years and it is important for both companies to feel committed to the deal, so that the deal can maintain the momentum it needs to yield a successful result.
Be prudent but don't be paranoid Conclusion By and large theft of confidential information is relatively rare. That being said, I would recommend that initially you only share nonconfidential information with potential partners. The reason for this is that you will probably have initial partnership talks with many companies and only a few of these talks will mature beyond the first meeting. It is easier for you to manage these talks by limiting your disclosure to only non-confidential information. It is interesting to note that many large pharmaceutical companies will ask you to limit the initial meeting to non-confidential information so as to protect them of being accused of misappropriating your information at a later date. If the parties wish to continue the discussions it will be necessary for you to share confidential information. Today this information is primarily shared between the parties via on-line data sites. Data sharing sites are ideal since it is easy to track exactly what information was shared and who had access to such information. In the event that you do not use a data-sharing site, you will need to stamp as confidential each piece of paper that you share with the other side and to keep a detailed log of exactly what information was shared. Don't reinvent the wheel The chances are that the company with which you will end up partnering is a company that has partnered with someone else previously. Accordingly, I recommend that you rely on the systems they
I hope that I have succeeded in educating you on the essentials of the patent process and the pitfalls to which novices are prey. The costs of preparing, filing, maintaining and enforcing patents are high. This is why it is imperative to treat your patent estate as you would any other business asset. You should consistently evaluate the patents in your portfolio and make informed decisions about the role that each patent plays in your organisation. If a specific patent is no longer relevant to your business you should either abandon the patent to save money or try to out-license the patent to a third party in order to recover your costs. It is the quality, not the quantity, of the patents that is important. It is far more valuable to have a limited number of patents that further your company's business strategy than to have numerous patents and patent applications that are not on point. In the infancy of the biotech industry, biotech investors were somewhat naïve in the sense that they would often assign a higher monetary value to companies that had a large patent estate. I observed this myself when working for a small boutique law firm in New York City. Our biotech clients would want us to notify them as soon as a patent issued so that they could issue a press release noting that their patent estate had increased, albeit by just one patent. There was no mention in the press release regarding the invention that was the subject of the patent application or the scope of the issued claims
Please cite this article as: Di Nunzio, M.C., Managing your patent assets, Neurobiol. Dis. (2013), http://dx.doi.org/10.1016/j.nbd.2013.06.015
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covering the invention. The sole premise of the patent release was that the company's patent estate had increased by one. The base level of knowledge regarding intellectual property has increased exponentially in the last 20 years. Investors are no longer valuing companies based solely on the number of patents in the company's
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portfolio. While companies still issue press releases surrounding the issuance of a patent, today the press release would stress the value of the patent to the company's business plan and how the company is planning to use this asset to its strategic advantage. The days of quantity over quality have passed.
Please cite this article as: Di Nunzio, M.C., Managing your patent assets, Neurobiol. Dis. (2013), http://dx.doi.org/10.1016/j.nbd.2013.06.015