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Regulatory approvals, intellectual property, branding and trademark in nutraceuticals and functional foods
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Regulatory approvals, intellectual property, branding and trademark in nutraceuticals and functional foods
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Leighton K. Chong, Lawrence J. Udell, Bernard W. Downs Udell Associates, Castro Valley, CA, United States
22.1 INTRODUCTION Intellectual property (IP) can be a relatively mundane topic. However, the information presented in this chapter opens up a variety of creative issues that not only demonstrate how to acquire and position IP (and IP relationships), but how to utilize that IP properly. This information will be practical, innovative, and useful in bridging the gap between the creation and development of IP and successfully marketing it using powerful and protective branding strategies that better insulate the long-term return on investment (ROI). Having been involved in the big, wide world of IP creation, management, and marketing for more than 70 years, the authors offer a unique perspective based on a wealth of successful experiences. How do you transfer to paper diversified experiences in working with inventors and entrepreneurs in a multitude of industries? Let us first explore and understand the values of IP and its relationship to the industry of nutraceuticals. The knowledge of this very special business started many years ago with the inception of “alternative” and complementary medicine, even before it was discussed openly and generally accepted. It is important to understand that IP in this industry does not only encompass what is normally recognized as patents and trademarks. The business of harnessing and commercializing the power of nature relies on the ability to transform nature’s creations into proprietary compounds marketed in the forms of liquids, powders, capsules, tablets, and topicals. The resulting IP is comprised of formulas, methods, and procedures for combining those derivatives in a unique manner into products that have the novel ability and characteristics positively to affect the user. Novel product technologies are derived from the soil and sea and every imaginable plant, insect, reptile, mammal, marine creature, etc. For example: (1) Plants are the source of a Developing New Functional Food and Nutraceutical Products. http://dx.doi.org/10.1016/B978-0-12-802780-6.00022-5 Copyright © 2017 Elsevier Inc. All rights reserved.
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plethora of phytonutrients; (2) various proteins, with therapeutic and analytical benefits, are being isolated from insects; (3) reptiles are a source for a number of novel substances (i.e., antivenom and immune complexes, etc.); (4) mammals contribute a host of therapeutic agents from proteins to undenatured collagen (Bagchi et al., 2002); (5) algae, seaweed, and mussels, and fish and krill oils, etc. offer a host of therapeutic options; (6) glandular extracts provide therapeutic naturopathic interventions; and everything in between. The scientists who are creating these potentially remarkable products are a special group imbued with a lust for finding the secrets that will reduce needless pain and suffering and increase the opportunities to improve health, possibly thrusting themselves into fame and fortune in the process. However, their motivation for discovery is not totally aligned with recognition, but truly enhanced by reaching out to touch the future and the lives of potentially millions of people they will never know. All of the results and motivation are enhanced by the knowledge that their creations will (hopefully) be protected by the existing IP laws that exist in the majority of countries throughout the world along with powerful branding and marketing strategies. This is the primary focus of this chapter. After spending untold millions of dollars in research and development (R&D), the benefits to the researchers and their companies are weighed in the potential value of their inventions and their subsequent transformation into commercial products.
22.2 NUTRACEUTICALS, PATENT RIGHTS, AND BIOPROSPECTING As defined in Wikipedia, “nutraceutical” is a word phrase combination of “nutrition” and “pharmaceutical” and refers to foods, and more generally supplements, intended to have a therapeutically beneficial effect on human health. It can also refer to individual chemicals which are present in common foods (and therefore may be delivered in a nondrug form). Many such nutraceuticals are phytonutrients, which are plant compounds possessing both health protecting and promoting properties. Nutraceuticals are often used in nutrient premixes or nutrient systems in the food and pharmaceutical industries. Nutraceuticals that are in or from foods are also sometimes called “functional foods,” but are probably more accurately identified as components of functional foods. For example, red wine (containing resveratrol) is an antioxidant (Quincozes-Santos et al., 2007) and an anticholesteremic (Pal et al., 2004), broccoli (containing sulforaphane) is a cancer preventive (Dinkova-Kostova et al., 2007), and soy and clover (containing isoflavonoids) are nutraceuticals used to improve arterial health in women (Clarkson, 2002), inhibit undesirable blood vessel formation in tumorous tissues (antiangiogenic) (Fotsis et al., 1993), and possess antitumor effects (Barnes et al., 1996; Wietrzyk, 2007). Except for newly discovered foods, which must be an extremely rare occurrence given the course of human history and foods, all nutraceuticals by definition involve food or food nutrients that are already known to be used by the world’s populations
22.2 Nutraceuticals, patent rights, and bioprospecting
and cultures. Any “discovery” in nutraceuticals then would consist of identifying, isolating, and making a composition containing the active ingredient or nutrient in an already known food substance found to have a previously unknown beneficial effect on human health or formulated with other ingredients in an effective but previously unknown manner and/or for a previously unknown benefit or purpose. Commercial entities commonly seek to obtain IP rights in discoveries and utilize strong branding strategies in order to reap the benefits of their investment of time and resources in research and to incentivize discoverers. Under the IP regimes existing in the world today, the primary form of IP protection for discoveries is to obtain a patent, that is, to obtain a government patent grant for the exclusive right to a discovery. The patent has a limited term, typically 20 years from the first application. But, in seeking to obtain a patent for identifying, isolating, and making a composition of an active ingredient, from an already known food substance, the inventor is only entitled to patent claim coverage of only that contribution found by the inventor to be both “new” and “nonobvious” over all prior public knowledge about the already known food substance. Thus, attempts by food and pharmaceutical companies to secure patents on nutraceuticals will invariably raise tensions between a company’s claim for exclusive patent rights in making a new and nonobvious discovery and the common heritage of the public to continue to access what was already known about foods. The more well known an existing food substance and its benefits are, the less likely is a company’s claim to exclusive rights to a nutraceutical made from the food’s active ingredient to be broadly defined, granted, and/or upheld. Conversely, if a food substance and its benefits are not considered to be widely known, or perhaps are hitherto undocumented, the more likely it will be that a company can obtain broad patent rights in them. Knowledge about a food substance and its benefits are often undocumented when it is known only to a primitive or indigenous people and transmitted only through folklore or sacred practices. The practice of companies conducting research in remote areas for naturally occurring biological substances that may be found to have benefits undocumented or unknown to the world at large is called “bioprospecting.” The ethics, fairness, and potential harm from current practices in biotechnology research are being increasingly questioned as third world governments, indigenous peoples, and ethnic populations worldwide have developed a growing awareness and interest in controlling the use of and sharing the benefits of bioprospecting research. An increasingly complex national and international policy framework arising out of the 1992 World Convention on Biodiversity (CBD) seeks to have companies conduct bioprospecting research under formal agreements entered into with the sovereign governments, indigenous peoples, and local communities who control or occupy the lands on which such research is to be conducted (Convention on Biodiversity [CBD], 2016). Article 15 of the Convention addresses the terms and conditions for access to genetic resources and traditional knowledge, informed consent, and benefit-sharing. It recognizes the sovereignty of states over their natural resources and provides that access to these resources shall be subject to the prior
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informed consent of the contracting party (signatory country) providing such resources. It also provides that access shall be based on mutually agreed terms in order to ensure the sharing of benefits arising from the commercial or other utilization of these genetic resources with the contracting party providing such resources. In 1999, work was begun to operationalize the mandates of the CBD which resulted in the issuance in Apr. 2002 by the CBD Secretariat of the “Bonn Guidelines on Access to Genetic Resources and Benefit Sharing,” which were adopted unanimously by CBD treaty members (BGAGRBS, 2002). The Bonn Guidelines were adopted to assist contracting parties, governments, providers, users, and other stakeholders in developing overall access and benefit-sharing strategies and in identifying the steps involved in the process of obtaining access to genetic resources and benefitsharing. More specifically, the Guidelines are intended to help them when establishing legislative, administrative, or policy measures on access and benefit-sharing and/ or when negotiating contractual arrangements for access and benefit-sharing. While a signatory to the CBD, the USA has in fact not yet ratified the treaty. The US State Department has formed a coordinating agency as the US National Focal Point under the CBD Clearing-House Mechanism (Convention on Biological Diversity [CBD], 2016). For the time being, the US National Focal Point has deferred responsibility to the various national agencies having jurisdiction of regions or lands under federal control in which bioprospecting may be permitted, such as national park lands, federal conservation trust lands, Indian reservations, and so on. If the United States ratifies the CBD Treaty, the US National Focal Point and designated national authorities would have a duty to assist participating parties in bioprospecting negotiations. Furthermore, these authorities would need to advise and assist state agencies (as regional authorities) in the development of policies regulating bioprospecting in compliance with the CBD framework in an effort to ensure the equitable sharing of benefits with all involved parties from the commercialization of these resources. The Bonn Guidelines place great emphasis on the obligation for research users to seek the prior informed consent of bioaccess providers. They also identify the basic requirements for mutually agreeable terms and define the main roles and responsibilities of, and stress the importance of, the substantive involvement of all stakeholders. They also cover other elements such as incentives, accountability, means for verification, and dispute settlement. Finally, they enumerate suggested elements for inclusion in material transfer agreements and provide a suggested checklist for monetary and nonmonetary benefit sharing. The focal point of the ongoing arbitration of rights in bioprospecting has centered on intellectual property rights (IPR) and, specifically, patent rights in discoveries derived from bioprospecting. The Conference of Parties (COP) organized for ongoing negotiations of Contracting Parties under CBD requested the World Intellectual Property Organization (WIPO), an international agency dealing with world intellectual property issues under the auspices of the United Nations, to conduct studies on the interface of IPR protocols with bioprospecting mandates. WIPO formed the Intergovernmental Committee (IGC) on Genetic Resources, Traditional Knowledge and Folklore in 2000 to conduct, among other subjects, studies of the interface of
22.2 Nutraceuticals, patent rights, and bioprospecting
bioprospecting mandates and IPR rights (World Intellectual Property Organization [WIPO], 2016). At least 17 countries are active participants on the WIPO/IGC Committee and many nongovernmental organizations and activist groups have observer status to the Committee’s deliberations. Patents are government-sanctioned grants of exclusive rights to inventors (and their companies) to exploit commercially their new discoveries, mainly through deriving profits from the sale of products based on those discoveries. When discoveries are based on genetic resources or traditional knowledge obtained from bioprospecting, issues arise as to whether the researchers had proper permission to access biological materials in the field, including obtaining the informed consent of the providing party affected, whether they derived their inventions from already known or traditionally known substances or healing practices, whether their use of the biological materials and information was proper, and whether there was an equitable sharing of benefits with the local authorities who permitted access for such research. The WIPO/IGC studies have raised the issue whether the patent systems of participating countries should be changed to implement CBD mandates by requiring disclosure of bioprospecting agreements in patent applications (World Intellectual Property Organization [WIPO], 2016). A majority of IGC members favor imposing an affirmative duty on research companies to state that their research was conducted pursuant to and in legal compliance with a valid bioprospecting agreement, subject to sanctions including patent invalidity if the requirement is not met. More conservative IGC members (such as Japan and the USA) have expressed concern that such a substantive bioprospecting disclosure requirement could have unintended adverse consequences on patent systems and the objectives of rewarding innovation and investment in research. A WIPO draft statement on a bioprospecting disclosure requirement was recently transmitted to the CBD COP in May 2006 (World Intellectual Property Organization [WIPO], 2016). The biotechnology industry in the USA has generally recognized the implications of the developing international framework on bioprospecting under the CBD, and the significant milestone reached by unanimous approval of the Bonn Guidelines for member countries, users, and providers. Although the Bonn Guidelines are not yet legally binding, biotechnology companies have had to weigh the possible losses that might be incurred through research foregone and benefits relinquished and the considerable costs of compliance, against the risks of incurring local protests, possible legal sanctions, loss of public goodwill, and invalidation of patents. Many are concluding that compliance with international mandates on bioprospecting is inevitable, or at least would be good business practice to achieve some degree of compliance with mandates that are likely to become widely adopted. As an example, the Biotechnology Industry Organization (BIO), representing more than 1100 biotechnology companies, academic institutions, state biotechnology centers, and related organizations in 50 US states and 31 other nations, recently adopted its recommended Guidelines on bioprospecting to its members (Guidelines for BIO Members Engaging in Bioprospecting, 2005). The BIO Guidelines identify “best practices” that should be followed by companies engaging in bioprospecting.
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BIO advises its members that the Guidelines provide only a “road map” but that they “have extensive discretion to shape their conduct to meet whatever requirements countries impose with respect to bioprospecting activities.” A member company is not required to follow the Guidelines and those Guidelines are not enforceable against a member company. However, it is conceivable that companies that do not engage in conduct consistent with the Guidelines might be subject to criticism for not following “best practices.” The biotechnology industry thus acknowledges that the proper conduct of bioprospecting activities requires the use of formal bioprospecting agreements with the relevant national and local authorities. US Patent Laws require that an applicant disclose, in any patent application, information known to the applicant that is material to the patentability of the patent claims submitted. The relevant Patent Office Rules, 37 Code of Federal Regulations, state in the pertinent part, as follows: § 1.56 Duty to disclose information material to patentability a. … Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability as defined in this section. The duty to disclose information exists with respect to each pending claim until the claim is cancelled or withdrawn from consideration, or the application becomes abandoned. The duty to disclose all information known to be material to patentability is deemed to be satisfied if all information known to be material to patentability of any claim issued in a patent was cited by the Office or submitted to the Office in the manner prescribed by §§ 1.97(b)–(d) and 1.98. However, no patent will be granted on an application in connection with which fraud on the Office was practiced or attempted or the duty of disclosure was violated through bad faith or intentional misconduct. The Office encourages applicants to carefully examine: b. The closest information over which individuals associated with the filing or prosecution of a patent application believe any pending claim patentably defines, to make sure that any material information contained therein is disclosed to the Office. The applicant’s duty of disclosure under existing US Patent Office rules would require the disclosure of relevant information as to prior uses, traditional knowledge, and/or source materials where relevant to a particular patent application. Likewise, the written description and enablement requirements of the US Patent Laws, Section 112, would require US applicants to identify relevant source materials on which claims to invention are made. However, it is important to keep in mind that biotech discoveries are often made following many steps or levels of extraction, modification, refinement, or synthesis away from a naturally occurring material or traditional remedy or practice product, such that the importance of the initial material investigated may no longer be relevant to the patentability of the invention. Nevertheless,
22.3 Branding, and a hypothetical case scenario
a patent applicant may deem it safer to disclose source materials initially investigated in the patent application or during patent prosecution rather than take the risk of having to litigate the issue later.
22.3 BRANDING, AND A HYPOTHETICAL CASE SCENARIO 22.3.1 NOW THAT WE HAVE PATENT PROTECTION, WE CAN MARKET OUR NATURAL CREATIONS WITH THE CONFIDENCE THAT THEY ARE COMPLETELY PROTECTED … RIGHT? (NOT QUITE … MORE IS NEEDED!) Great disappointment and potentially huge legal defense expenses await the inventors of patent-protected nutraceutical products and/or technologies if they attempt to take their creations to market in a big way solely on the protective strength of the patents, without establishing powerful identity, branding, and trademark strategies. The key factor here is “in a big way.” Just ask the original IP-based suppliers of products like Cat’s claw, Ginkgo, St John’s wort, Garcinia cambogia, Hoodia, Citrus aurantium, grape seed extracts, chromium nicotinate, noni, mangosteen, and countless others. The evidence-based technology and patent protection are only half the story when it comes to propelling and insulating the market success of a patented nutraceutical product. To complete the equation required for long-term market success, strong branding strategies are a must. The principle seems to be that the greater the market impact and success an invention/creation has, the greater the lure for copycat knockoff suppliers to bring competing products to market. “But I have a patent and am protected,” you might say. The patent provides a basis to defend the invention, not to prevent it from being infringed, although the hope is that patent protection should discourage infringement. But, to savvy knockoff artists, a commercially successful patented product can offer an enormous opportunity for copycat windfall profits, especially if the patent holder is a financially fragile start-up venture … an easy mark. How so? The following is an (oversimplified) example. Suppose you discovered a botanical species (call it “Onlyess importantium”) that was a powerful antioxidant and had a profound effect on turning off chronic inflammation. For the purpose of this illustration, O. importantium has already been sold as a botanical detoxifier since before 1994 (no New Dietary Ingredient approvals by the Food and Drug Administration (FDA) are required). So the species has been commercially available, but for other applications. Further investigation finds that one previously inconspicuous component in O. importantium made the most significant contribution to achieving the greatest therapeutic effect on inflammation; call it an “inflammanoid.” So, you developed a solvent-free extraction method to achieve a 50% concentration of the inflammanoid (and inflammanoid glycosides), which naturally occurs at about 6% of the total composition. When tested, this product had an oxygen radical absorbance capacity (ORAC) value off the charts and turned off the inflammation process like
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a switch, promoting profound and rapid healing (which required conservatively a $250,000 investment in a clinical study). It is sensational. You go through the process of applying for and receiving patents on the extraction method, the novel composition of the 50% inflammanoid, and for its application as an antioxidant and downregulator of (chronic) inflammation (requiring a significant investment as well). Keep in mind that you are still incurring business and research expenses during the period of research, presentations, and publication (hopefully) of the study, prior to its intended market launch. Now, you have to tell the world about your invention. So, you create a new raw material product and call it “AntioxInflam.” In one go-to-market strategy, you contract with an infomercial company to promote AntioxInflam a proprietary source of inflammanoid. The infomercial costs about $200,000 to produce and about $1.5 million per month to run. Plus, you have to invest in manufacturing a few thousand bottles to start and arrange for fulfillment, unless the infomercial company takes care of this. All of this costs money. The infomercial is a success and the phones at the call center are ringing off the hook. Your inventory requirements at the fulfillment center skyrocket. Assuming that you are in strict compliance with FDA and Federal Trade Commission (FTC) guidelines and are making only supportable structure function claims, you are selling 100,000 bottles a month at $34.95 each. You are making a boatload of money and helping an enormous number of people. Life is good! However, you have now jumped high onto everybody’s radar, especially that of opportunistic competitors. Keep in mind that once you make AntioxInflam and O. importantium household names, competitors can enter the market, but don’t need to make any claims at all. They also don’t need to duplicate your extraction methods. They don’t need to infringe on your patents to sell products. They only need to manufacture a reasonable concentrate, extracted the old (noninfringing) way, and supply a very cheap generic/ commodity version of O. importantium (Oi) to as many branded finished product marketers as possible. Recall that these copycat merchants have none of the costs associated with R&D nor creating and building the market. So, eliminate the R&D and market-building costs (that you incurred), factor in the significantly cheaper raw material costs, and even with a product costing a fraction of your original product, these copycat merchants can make a significantly higher profit percentage than you on a much lower suggested manufacturers retail price (SMRP). Again, they only need to supply other finished product companies with their version of the raw material for which no claims need to be made. You already popularized the O. importantium and have an exponentially higher breakeven point than them. They don’t have to do anything except supply the market. And, the more successful and greater your market impact is, the more likely it will be that copycat knockoff merchants will enter the market and achieve success in proportion to your market success. The objective of course, will be for them to appear as much like your original product as possible, but sell for a much less expensive price. Most consumers will purchase the cheaper knockoff version in hopes of receiving similar benefits. Knockoff artists are experts at creating the illusion of quality without actually
22.3 Branding, and a hypothetical case scenario
fulfilling that value promise. This results in ever-increasing numbers of consumers switching from your product to counterfeit versions, cratering your sales and potential for ROI. They also undermine and destroy the credibility of the product (because “it’s not working”). The knockoff counterfeiter just loves your infomercial. And, they will enter the market in increasing numbers as long as the opportunity to sell O. importantium exists. But, the market pie can only be sliced into so many pieces before the ROI potential is destroyed for everyone, including the knockoff artists. They will even put each other out of business in vicious price wars. By the way, purchasing agents of major companies are often paid a bonus based on the amount of money saved in lowering product costs; and most purchasing agents (and executives and investors in profitsensitive public companies) are not scientists with an understanding of analytical chemistry or the differences between different sources of the same raw materials. So, if it looks the same and costs less, chances are the lower-priced product will replace higher-priced versions; and lost consumer confidence is the irrevocable casualty. It has been proposed that this phenomenon played a major role in the nutraceutical market crash of the mid- to late 1990s. This is the very real market threat that can reduce a wonderfully effective patented natural ingredient to a nearly worthless generic commodity. So, the real dilemma regards how long and to what magnitude will you continue to invest in your market-building promotions once competing low-cost counterfeit market predators have a plethora of alternative products blitzing consumers? In this scenario, the answer is not very long. And, now the activities and costs of defending your patents become an excruciating requirement against diminishing sales and profits. In addition, your ability to monitor the influx and potential of patent infringers diminishes against the increasing magnitude of counterfeit product marketers over time. For all the companies that don’t make any claims, there will be some that do. But, as the crowd of competitors gets larger, the ability to identify these violators gets more difficult. And, to further aggravate the situation, your “benefit sharing” partners of the source technologies are becoming increasingly cynical over the sudden reduction in fortunes and don’t understand what has happened, because the product category (all O. importantium products) appears to be gaining in popularity and experiencing explosive growth. Potential suspicion, friction, blame, and retribution by them could inflame things further. So, can this process be averted? Absolutely yes … but how?
22.3.2 PROTECTING YOUR PATENTS WITH CODED IDENTITIES AND BRANDING … THE RIGHT WAY Not to overstate the obvious, but the traditional role of branding is to establish a value promise that is linked to a unique “branded” trade name (and supposedly a uniquely superior product or service). This certainly sounds simple enough. However, most people view branding in a very one-dimensional way, limited to a consumer product or service label (i.e., Band-Aid). In the nutraceutical, cosmeceutical, functional food,
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and beverage categories, branding can incorporate the value promise/reputation of the company (brand), the finished product (brand), the ingredient (brand), and/or any branded valuations/validations (i.e., Good Housekeeping, ANSI, USP, GRAS, Kosher, Organic, GMP, etc.). This strategy validates the value promise with “layers of branding” representing layers of validation. In this aspect, the most important factor is differentiating the unique identity and therefore the superiority of the product. In regard to where competition is directed (at you), this means beginning with your raw material. So, even the species of O. importantium must now somehow be differentiated from all the other sources. Since you have developed a different product, even though you have trade named the finished raw material (AntioxInflam), you still need to identify that YOUR unique raw material has different or special properties than any of its generic counterparts or else there will be severe market consequences. When research is published (in scientific journals, and industry and lay publications), editors and publishers are most often very reluctant to publish branded trade names for fear of appearing to endorse products and losing the credibility of being unbiased. For this reason, they (at least the respected publications) almost unanimously publish only the generic name of an ingredient. Therefore, consider that when your “independent” research is published, if the benefits of AntioxInflam are attributed only to the O. importantium species, then your potential competitors will be given the most powerful market weapon to use against you … scientific support for Generic O. importantium. And, to any industry or lay publications that revile using branded trade names, attributing the research benefits to just O. importantium bolsters the opportunities for market exploitation with counterfeit products by all of your knockoff competitors. Therefore, you must give your raw material a unique identity in addition to the generic name. One tactic is to assign a product identity or a research code to the material (Ex. XYZ123). Now AntioxInflam is officially a unique XYZ123 form of O. importantium. By the way, this code must appear in the research publications, at least in the “Materials and Methods” section. If publishers and editors refuse to identify the brand name, they will be very reluctant to delete the product identity research code in association with the generic name, which only you have. This tactic is also valuable for creating other branding options when and/or if needed. As an example, if one very large company wants to have an exclusive for a period of time in a specific channel, you have the means to create a separate brand name exclusive to that customer, as long as you link the brand to the XYZ123 research code. This enables that different brand to base the product claims on original validated research. And you have successfully created your own competition, which is a far superior option to having a vicious counterfeit competitor. The more you establish your other patent-protected brands of XYZ123 O. importantium in the market, the more of a disincentive you can create for knockoff products, as the market can appear to be filling up with competitive products, reducing the knockoff profit potential and ROI. Now your science, IP, significant investments, and the product’s ultimate value promise are all better insulated from market piracy.
References
This strategy also applies to multiple ingredient formulas in finished products. Research and patents on finished products increase their market potential exponentially. Up to this time, the vast majority of research and patent protections in the natural products industry has been established by ingredient manufacturers on single ingredients. Research and patents on finished products amount to only a very small fraction of those done on nutraceutical ingredients. Yet, this offers the greatest revenue potential and ROI. There are other effective strategies that improve the potential for long-term success in the nutraceutical industry. However, discussions regarding those methods are more the subject of an advanced marketing course on branding and outside the scope of this chapter. Suffice it to say, this information provides a basic knowledge and guide on how to create a successful strategic agenda for developing, validating, and marketing nutraceutical IP from source to consumer.
22.4 CONCLUSIONS Prior to DSHEA in 1994, the nutritional products industry was characterized more by flash-in-the-pan product popularity that usually lasted at most for about 2 years. These popular products sparked a fad-like following that usually dissipated with the next new product fad. During those years preceding 1994, there was not a very significant incentive to do the kind of research that would reveal a nutritional product’s powerful health correcting and/or promoting properties. The regulations prohibited making just about any kind of important and/or informative claims. So the market opportunities were relatively small and the arsenal of IP was comparatively sparse. Since the passage of DSHEA, the opportunities to do exciting research, develop new product technologies, and obtain important IP are almost endless. We believe that this growing industry will find, through extensive R&D, some remarkable and beneficial new materials that will continue to benefit humankind in ways that will amaze the medical and scientific communities. Furthermore, we expect that in the future, systemic biological premises of nutraceutical technologies and IP will be increasingly administered with and/or in place of conventional “reductionist” single loci pharmacological medicine. The next phase of market growth is dependent on valid scientific research for new product technologies, patents, stronger and more effective branding and trademark strategies in product marketing, and international regulatory compliance.
REFERENCES Bagchi, D., Misner, B., Bagchi, M., Kothari, S.C., Downs, B.W., Preuss, H.G., 2002. Effects of orally administered undenatured type II collagen against arthritic inflammatory diseases: a mechanistic exploration. Int. J. Clin. Pharmacol. Res. 22, 101–110. Barnes, S., Sfakianos, J., Coward, L., Kirk, M., 1996. Soy isoflavonoids and cancer prevention. Underlying biochemical and pharmacological issues. Adv. Exp. Med. Biol. 401, 87–100.
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Bonn Guidelines on Access to Genetic Resources and Benefit Sharing, Secretariat of Convention on Biological Diversity, April 2002. http://www.biodiv.org/doc/publications/cbdbonn-gdls-en.pdf CBD, 2016. National Focal Points, see listing at http://www.biodiv.org/convention/default.shtml Clarkson, T.B., 2002. Soy, soy phytoestrogens and cardiovascular disease. J. Nutr. 132, 566S–569S. Convention on Biological Diversity (CBD), 2016. National Focal Points, see listing at https:// www.cbd.int/doc/lists/nfp-cbd.pdf Dinkova-Kostova, A.T., Fahey, J.W., Wade, K.L., et al., 2007. Induction of the phase 2 response in mouse and human skin by sulforaphane-containing broccoli sprout extracts. Cancer Epidemiol. Biomarkers Prev. 16, 847–851. Fotsis, T., Pepper, M., Adlercreutz, H., et al., 1993. Genistein, a dietary-derived inhibitor of in vitro angiogenesis. Proc. Natl. Acad. Sci. USA 90, 2690–2694. Guidelines for BIO Members Engaging in Bioprospecting, July 2005. http://www.bio.org/ip/ international/200507guide.asp Pal, S., Naissides, M., Mamo, J., 2004. Polyphenolics and fat absorption. Int. J. Obes. Relat. Metab. Disord. 28, 324–326. Quincozes-Santos, A., Andreazza, A.C., Nardin, P., Funchal, C., Goncalves, C.A., Gottfried, C., 2007. Resveratrol attenuates oxidative-induced DNA damage in C6 glioma cells. Neurotoxicology 28, 886–891. Wietrzyk, J., 2007. The influence of isoflavonoids on the antitumor activity of vitamin D3. Postepy. Hig. Med. Dosw. (Online) 61, 253–260. WIPO Technical Study on Disclosure Requirements Concerning Genetic Resources et al., 2016. Documents available at http://www.wipo.int/tk/en/genetic/proposals/index.html#resources World Intellectual Property Organization (WIPO), 2016. Intergovernmental Committee (IGC), Genetic Resources and Intellectual Property, http://www.wipo.int/tk/en/genetic
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Leighton K. Chong, Lawrence J. Udell, Bernard W. Downs Udell Associates, Castro Valley, CA, United States
22.1 INTRODUCTION Intellectual property (IP) can be a relatively mundane topic. However, the information presented in this chapter opens up a variety of creative issues that not only demonstrate how to acquire and position IP (and IP relationships), but how to utilize that IP properly. This information will be practical, innovative, and useful in bridging the gap between the creation and development of IP and successfully marketing it using powerful and protective branding strategies that better insulate the long-term return on investment (ROI). Having been involved in the big, wide world of IP creation, management, and marketing for more than 70 years, the authors offer a unique perspective based on a wealth of successful experiences. How do you transfer to paper diversified experiences in working with inventors and entrepreneurs in a multitude of industries? Let us first explore and understand the values of IP and its relationship to the industry of nutraceuticals. The knowledge of this very special business started many years ago with the inception of “alternative” and complementary medicine, even before it was discussed openly and generally accepted. It is important to understand that IP in this industry does not only encompass what is normally recognized as patents and trademarks. The business of harnessing and commercializing the power of nature relies on the ability to transform nature’s creations into proprietary compounds marketed in the forms of liquids, powders, capsules, tablets, and topicals. The resulting IP is comprised of formulas, methods, and procedures for combining those derivatives in a unique manner into products that have the novel ability and characteristics positively to affect the user. Novel product technologies are derived from the soil and sea and every imaginable plant, insect, reptile, mammal, marine creature, etc. For example: (1) Plants are the source of a Developing New Functional Food and Nutraceutical Products. http://dx.doi.org/10.1016/B978-0-12-802780-6.00022-5 Copyright © 2017 Elsevier Inc. All rights reserved.
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plethora of phytonutrients; (2) various proteins, with therapeutic and analytical benefits, are being isolated from insects; (3) reptiles are a source for a number of novel substances (i.e., antivenom and immune complexes, etc.); (4) mammals contribute a host of therapeutic agents from proteins to undenatured collagen (Bagchi et al., 2002); (5) algae, seaweed, and mussels, and fish and krill oils, etc. offer a host of therapeutic options; (6) glandular extracts provide therapeutic naturopathic interventions; and everything in between. The scientists who are creating these potentially remarkable products are a special group imbued with a lust for finding the secrets that will reduce needless pain and suffering and increase the opportunities to improve health, possibly thrusting themselves into fame and fortune in the process. However, their motivation for discovery is not totally aligned with recognition, but truly enhanced by reaching out to touch the future and the lives of potentially millions of people they will never know. All of the results and motivation are enhanced by the knowledge that their creations will (hopefully) be protected by the existing IP laws that exist in the majority of countries throughout the world along with powerful branding and marketing strategies. This is the primary focus of this chapter. After spending untold millions of dollars in research and development (R&D), the benefits to the researchers and their companies are weighed in the potential value of their inventions and their subsequent transformation into commercial products.
22.2 NUTRACEUTICALS, PATENT RIGHTS, AND BIOPROSPECTING As defined in Wikipedia, “nutraceutical” is a word phrase combination of “nutrition” and “pharmaceutical” and refers to foods, and more generally supplements, intended to have a therapeutically beneficial effect on human health. It can also refer to individual chemicals which are present in common foods (and therefore may be delivered in a nondrug form). Many such nutraceuticals are phytonutrients, which are plant compounds possessing both health protecting and promoting properties. Nutraceuticals are often used in nutrient premixes or nutrient systems in the food and pharmaceutical industries. Nutraceuticals that are in or from foods are also sometimes called “functional foods,” but are probably more accurately identified as components of functional foods. For example, red wine (containing resveratrol) is an antioxidant (Quincozes-Santos et al., 2007) and an anticholesteremic (Pal et al., 2004), broccoli (containing sulforaphane) is a cancer preventive (Dinkova-Kostova et al., 2007), and soy and clover (containing isoflavonoids) are nutraceuticals used to improve arterial health in women (Clarkson, 2002), inhibit undesirable blood vessel formation in tumorous tissues (antiangiogenic) (Fotsis et al., 1993), and possess antitumor effects (Barnes et al., 1996; Wietrzyk, 2007). Except for newly discovered foods, which must be an extremely rare occurrence given the course of human history and foods, all nutraceuticals by definition involve food or food nutrients that are already known to be used by the world’s populations
22.2 Nutraceuticals, patent rights, and bioprospecting
and cultures. Any “discovery” in nutraceuticals then would consist of identifying, isolating, and making a composition containing the active ingredient or nutrient in an already known food substance found to have a previously unknown beneficial effect on human health or formulated with other ingredients in an effective but previously unknown manner and/or for a previously unknown benefit or purpose. Commercial entities commonly seek to obtain IP rights in discoveries and utilize strong branding strategies in order to reap the benefits of their investment of time and resources in research and to incentivize discoverers. Under the IP regimes existing in the world today, the primary form of IP protection for discoveries is to obtain a patent, that is, to obtain a government patent grant for the exclusive right to a discovery. The patent has a limited term, typically 20 years from the first application. But, in seeking to obtain a patent for identifying, isolating, and making a composition of an active ingredient, from an already known food substance, the inventor is only entitled to patent claim coverage of only that contribution found by the inventor to be both “new” and “nonobvious” over all prior public knowledge about the already known food substance. Thus, attempts by food and pharmaceutical companies to secure patents on nutraceuticals will invariably raise tensions between a company’s claim for exclusive patent rights in making a new and nonobvious discovery and the common heritage of the public to continue to access what was already known about foods. The more well known an existing food substance and its benefits are, the less likely is a company’s claim to exclusive rights to a nutraceutical made from the food’s active ingredient to be broadly defined, granted, and/or upheld. Conversely, if a food substance and its benefits are not considered to be widely known, or perhaps are hitherto undocumented, the more likely it will be that a company can obtain broad patent rights in them. Knowledge about a food substance and its benefits are often undocumented when it is known only to a primitive or indigenous people and transmitted only through folklore or sacred practices. The practice of companies conducting research in remote areas for naturally occurring biological substances that may be found to have benefits undocumented or unknown to the world at large is called “bioprospecting.” The ethics, fairness, and potential harm from current practices in biotechnology research are being increasingly questioned as third world governments, indigenous peoples, and ethnic populations worldwide have developed a growing awareness and interest in controlling the use of and sharing the benefits of bioprospecting research. An increasingly complex national and international policy framework arising out of the 1992 World Convention on Biodiversity (CBD) seeks to have companies conduct bioprospecting research under formal agreements entered into with the sovereign governments, indigenous peoples, and local communities who control or occupy the lands on which such research is to be conducted (Convention on Biodiversity [CBD], 2016). Article 15 of the Convention addresses the terms and conditions for access to genetic resources and traditional knowledge, informed consent, and benefit-sharing. It recognizes the sovereignty of states over their natural resources and provides that access to these resources shall be subject to the prior
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informed consent of the contracting party (signatory country) providing such resources. It also provides that access shall be based on mutually agreed terms in order to ensure the sharing of benefits arising from the commercial or other utilization of these genetic resources with the contracting party providing such resources. In 1999, work was begun to operationalize the mandates of the CBD which resulted in the issuance in Apr. 2002 by the CBD Secretariat of the “Bonn Guidelines on Access to Genetic Resources and Benefit Sharing,” which were adopted unanimously by CBD treaty members (BGAGRBS, 2002). The Bonn Guidelines were adopted to assist contracting parties, governments, providers, users, and other stakeholders in developing overall access and benefit-sharing strategies and in identifying the steps involved in the process of obtaining access to genetic resources and benefitsharing. More specifically, the Guidelines are intended to help them when establishing legislative, administrative, or policy measures on access and benefit-sharing and/ or when negotiating contractual arrangements for access and benefit-sharing. While a signatory to the CBD, the USA has in fact not yet ratified the treaty. The US State Department has formed a coordinating agency as the US National Focal Point under the CBD Clearing-House Mechanism (Convention on Biological Diversity [CBD], 2016). For the time being, the US National Focal Point has deferred responsibility to the various national agencies having jurisdiction of regions or lands under federal control in which bioprospecting may be permitted, such as national park lands, federal conservation trust lands, Indian reservations, and so on. If the United States ratifies the CBD Treaty, the US National Focal Point and designated national authorities would have a duty to assist participating parties in bioprospecting negotiations. Furthermore, these authorities would need to advise and assist state agencies (as regional authorities) in the development of policies regulating bioprospecting in compliance with the CBD framework in an effort to ensure the equitable sharing of benefits with all involved parties from the commercialization of these resources. The Bonn Guidelines place great emphasis on the obligation for research users to seek the prior informed consent of bioaccess providers. They also identify the basic requirements for mutually agreeable terms and define the main roles and responsibilities of, and stress the importance of, the substantive involvement of all stakeholders. They also cover other elements such as incentives, accountability, means for verification, and dispute settlement. Finally, they enumerate suggested elements for inclusion in material transfer agreements and provide a suggested checklist for monetary and nonmonetary benefit sharing. The focal point of the ongoing arbitration of rights in bioprospecting has centered on intellectual property rights (IPR) and, specifically, patent rights in discoveries derived from bioprospecting. The Conference of Parties (COP) organized for ongoing negotiations of Contracting Parties under CBD requested the World Intellectual Property Organization (WIPO), an international agency dealing with world intellectual property issues under the auspices of the United Nations, to conduct studies on the interface of IPR protocols with bioprospecting mandates. WIPO formed the Intergovernmental Committee (IGC) on Genetic Resources, Traditional Knowledge and Folklore in 2000 to conduct, among other subjects, studies of the interface of
22.2 Nutraceuticals, patent rights, and bioprospecting
bioprospecting mandates and IPR rights (World Intellectual Property Organization [WIPO], 2016). At least 17 countries are active participants on the WIPO/IGC Committee and many nongovernmental organizations and activist groups have observer status to the Committee’s deliberations. Patents are government-sanctioned grants of exclusive rights to inventors (and their companies) to exploit commercially their new discoveries, mainly through deriving profits from the sale of products based on those discoveries. When discoveries are based on genetic resources or traditional knowledge obtained from bioprospecting, issues arise as to whether the researchers had proper permission to access biological materials in the field, including obtaining the informed consent of the providing party affected, whether they derived their inventions from already known or traditionally known substances or healing practices, whether their use of the biological materials and information was proper, and whether there was an equitable sharing of benefits with the local authorities who permitted access for such research. The WIPO/IGC studies have raised the issue whether the patent systems of participating countries should be changed to implement CBD mandates by requiring disclosure of bioprospecting agreements in patent applications (World Intellectual Property Organization [WIPO], 2016). A majority of IGC members favor imposing an affirmative duty on research companies to state that their research was conducted pursuant to and in legal compliance with a valid bioprospecting agreement, subject to sanctions including patent invalidity if the requirement is not met. More conservative IGC members (such as Japan and the USA) have expressed concern that such a substantive bioprospecting disclosure requirement could have unintended adverse consequences on patent systems and the objectives of rewarding innovation and investment in research. A WIPO draft statement on a bioprospecting disclosure requirement was recently transmitted to the CBD COP in May 2006 (World Intellectual Property Organization [WIPO], 2016). The biotechnology industry in the USA has generally recognized the implications of the developing international framework on bioprospecting under the CBD, and the significant milestone reached by unanimous approval of the Bonn Guidelines for member countries, users, and providers. Although the Bonn Guidelines are not yet legally binding, biotechnology companies have had to weigh the possible losses that might be incurred through research foregone and benefits relinquished and the considerable costs of compliance, against the risks of incurring local protests, possible legal sanctions, loss of public goodwill, and invalidation of patents. Many are concluding that compliance with international mandates on bioprospecting is inevitable, or at least would be good business practice to achieve some degree of compliance with mandates that are likely to become widely adopted. As an example, the Biotechnology Industry Organization (BIO), representing more than 1100 biotechnology companies, academic institutions, state biotechnology centers, and related organizations in 50 US states and 31 other nations, recently adopted its recommended Guidelines on bioprospecting to its members (Guidelines for BIO Members Engaging in Bioprospecting, 2005). The BIO Guidelines identify “best practices” that should be followed by companies engaging in bioprospecting.
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BIO advises its members that the Guidelines provide only a “road map” but that they “have extensive discretion to shape their conduct to meet whatever requirements countries impose with respect to bioprospecting activities.” A member company is not required to follow the Guidelines and those Guidelines are not enforceable against a member company. However, it is conceivable that companies that do not engage in conduct consistent with the Guidelines might be subject to criticism for not following “best practices.” The biotechnology industry thus acknowledges that the proper conduct of bioprospecting activities requires the use of formal bioprospecting agreements with the relevant national and local authorities. US Patent Laws require that an applicant disclose, in any patent application, information known to the applicant that is material to the patentability of the patent claims submitted. The relevant Patent Office Rules, 37 Code of Federal Regulations, state in the pertinent part, as follows: § 1.56 Duty to disclose information material to patentability a. … Each individual associated with the filing and prosecution of a patent application has a duty of candor and good faith in dealing with the Office, which includes a duty to disclose to the Office all information known to that individual to be material to patentability as defined in this section. The duty to disclose information exists with respect to each pending claim until the claim is cancelled or withdrawn from consideration, or the application becomes abandoned. The duty to disclose all information known to be material to patentability is deemed to be satisfied if all information known to be material to patentability of any claim issued in a patent was cited by the Office or submitted to the Office in the manner prescribed by §§ 1.97(b)–(d) and 1.98. However, no patent will be granted on an application in connection with which fraud on the Office was practiced or attempted or the duty of disclosure was violated through bad faith or intentional misconduct. The Office encourages applicants to carefully examine: b. The closest information over which individuals associated with the filing or prosecution of a patent application believe any pending claim patentably defines, to make sure that any material information contained therein is disclosed to the Office. The applicant’s duty of disclosure under existing US Patent Office rules would require the disclosure of relevant information as to prior uses, traditional knowledge, and/or source materials where relevant to a particular patent application. Likewise, the written description and enablement requirements of the US Patent Laws, Section 112, would require US applicants to identify relevant source materials on which claims to invention are made. However, it is important to keep in mind that biotech discoveries are often made following many steps or levels of extraction, modification, refinement, or synthesis away from a naturally occurring material or traditional remedy or practice product, such that the importance of the initial material investigated may no longer be relevant to the patentability of the invention. Nevertheless,
22.3 Branding, and a hypothetical case scenario
a patent applicant may deem it safer to disclose source materials initially investigated in the patent application or during patent prosecution rather than take the risk of having to litigate the issue later.
22.3 BRANDING, AND A HYPOTHETICAL CASE SCENARIO 22.3.1 NOW THAT WE HAVE PATENT PROTECTION, WE CAN MARKET OUR NATURAL CREATIONS WITH THE CONFIDENCE THAT THEY ARE COMPLETELY PROTECTED … RIGHT? (NOT QUITE … MORE IS NEEDED!) Great disappointment and potentially huge legal defense expenses await the inventors of patent-protected nutraceutical products and/or technologies if they attempt to take their creations to market in a big way solely on the protective strength of the patents, without establishing powerful identity, branding, and trademark strategies. The key factor here is “in a big way.” Just ask the original IP-based suppliers of products like Cat’s claw, Ginkgo, St John’s wort, Garcinia cambogia, Hoodia, Citrus aurantium, grape seed extracts, chromium nicotinate, noni, mangosteen, and countless others. The evidence-based technology and patent protection are only half the story when it comes to propelling and insulating the market success of a patented nutraceutical product. To complete the equation required for long-term market success, strong branding strategies are a must. The principle seems to be that the greater the market impact and success an invention/creation has, the greater the lure for copycat knockoff suppliers to bring competing products to market. “But I have a patent and am protected,” you might say. The patent provides a basis to defend the invention, not to prevent it from being infringed, although the hope is that patent protection should discourage infringement. But, to savvy knockoff artists, a commercially successful patented product can offer an enormous opportunity for copycat windfall profits, especially if the patent holder is a financially fragile start-up venture … an easy mark. How so? The following is an (oversimplified) example. Suppose you discovered a botanical species (call it “Onlyess importantium”) that was a powerful antioxidant and had a profound effect on turning off chronic inflammation. For the purpose of this illustration, O. importantium has already been sold as a botanical detoxifier since before 1994 (no New Dietary Ingredient approvals by the Food and Drug Administration (FDA) are required). So the species has been commercially available, but for other applications. Further investigation finds that one previously inconspicuous component in O. importantium made the most significant contribution to achieving the greatest therapeutic effect on inflammation; call it an “inflammanoid.” So, you developed a solvent-free extraction method to achieve a 50% concentration of the inflammanoid (and inflammanoid glycosides), which naturally occurs at about 6% of the total composition. When tested, this product had an oxygen radical absorbance capacity (ORAC) value off the charts and turned off the inflammation process like
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a switch, promoting profound and rapid healing (which required conservatively a $250,000 investment in a clinical study). It is sensational. You go through the process of applying for and receiving patents on the extraction method, the novel composition of the 50% inflammanoid, and for its application as an antioxidant and downregulator of (chronic) inflammation (requiring a significant investment as well). Keep in mind that you are still incurring business and research expenses during the period of research, presentations, and publication (hopefully) of the study, prior to its intended market launch. Now, you have to tell the world about your invention. So, you create a new raw material product and call it “AntioxInflam.” In one go-to-market strategy, you contract with an infomercial company to promote AntioxInflam a proprietary source of inflammanoid. The infomercial costs about $200,000 to produce and about $1.5 million per month to run. Plus, you have to invest in manufacturing a few thousand bottles to start and arrange for fulfillment, unless the infomercial company takes care of this. All of this costs money. The infomercial is a success and the phones at the call center are ringing off the hook. Your inventory requirements at the fulfillment center skyrocket. Assuming that you are in strict compliance with FDA and Federal Trade Commission (FTC) guidelines and are making only supportable structure function claims, you are selling 100,000 bottles a month at $34.95 each. You are making a boatload of money and helping an enormous number of people. Life is good! However, you have now jumped high onto everybody’s radar, especially that of opportunistic competitors. Keep in mind that once you make AntioxInflam and O. importantium household names, competitors can enter the market, but don’t need to make any claims at all. They also don’t need to duplicate your extraction methods. They don’t need to infringe on your patents to sell products. They only need to manufacture a reasonable concentrate, extracted the old (noninfringing) way, and supply a very cheap generic/ commodity version of O. importantium (Oi) to as many branded finished product marketers as possible. Recall that these copycat merchants have none of the costs associated with R&D nor creating and building the market. So, eliminate the R&D and market-building costs (that you incurred), factor in the significantly cheaper raw material costs, and even with a product costing a fraction of your original product, these copycat merchants can make a significantly higher profit percentage than you on a much lower suggested manufacturers retail price (SMRP). Again, they only need to supply other finished product companies with their version of the raw material for which no claims need to be made. You already popularized the O. importantium and have an exponentially higher breakeven point than them. They don’t have to do anything except supply the market. And, the more successful and greater your market impact is, the more likely it will be that copycat knockoff merchants will enter the market and achieve success in proportion to your market success. The objective of course, will be for them to appear as much like your original product as possible, but sell for a much less expensive price. Most consumers will purchase the cheaper knockoff version in hopes of receiving similar benefits. Knockoff artists are experts at creating the illusion of quality without actually
22.3 Branding, and a hypothetical case scenario
fulfilling that value promise. This results in ever-increasing numbers of consumers switching from your product to counterfeit versions, cratering your sales and potential for ROI. They also undermine and destroy the credibility of the product (because “it’s not working”). The knockoff counterfeiter just loves your infomercial. And, they will enter the market in increasing numbers as long as the opportunity to sell O. importantium exists. But, the market pie can only be sliced into so many pieces before the ROI potential is destroyed for everyone, including the knockoff artists. They will even put each other out of business in vicious price wars. By the way, purchasing agents of major companies are often paid a bonus based on the amount of money saved in lowering product costs; and most purchasing agents (and executives and investors in profitsensitive public companies) are not scientists with an understanding of analytical chemistry or the differences between different sources of the same raw materials. So, if it looks the same and costs less, chances are the lower-priced product will replace higher-priced versions; and lost consumer confidence is the irrevocable casualty. It has been proposed that this phenomenon played a major role in the nutraceutical market crash of the mid- to late 1990s. This is the very real market threat that can reduce a wonderfully effective patented natural ingredient to a nearly worthless generic commodity. So, the real dilemma regards how long and to what magnitude will you continue to invest in your market-building promotions once competing low-cost counterfeit market predators have a plethora of alternative products blitzing consumers? In this scenario, the answer is not very long. And, now the activities and costs of defending your patents become an excruciating requirement against diminishing sales and profits. In addition, your ability to monitor the influx and potential of patent infringers diminishes against the increasing magnitude of counterfeit product marketers over time. For all the companies that don’t make any claims, there will be some that do. But, as the crowd of competitors gets larger, the ability to identify these violators gets more difficult. And, to further aggravate the situation, your “benefit sharing” partners of the source technologies are becoming increasingly cynical over the sudden reduction in fortunes and don’t understand what has happened, because the product category (all O. importantium products) appears to be gaining in popularity and experiencing explosive growth. Potential suspicion, friction, blame, and retribution by them could inflame things further. So, can this process be averted? Absolutely yes … but how?
22.3.2 PROTECTING YOUR PATENTS WITH CODED IDENTITIES AND BRANDING … THE RIGHT WAY Not to overstate the obvious, but the traditional role of branding is to establish a value promise that is linked to a unique “branded” trade name (and supposedly a uniquely superior product or service). This certainly sounds simple enough. However, most people view branding in a very one-dimensional way, limited to a consumer product or service label (i.e., Band-Aid). In the nutraceutical, cosmeceutical, functional food,
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and beverage categories, branding can incorporate the value promise/reputation of the company (brand), the finished product (brand), the ingredient (brand), and/or any branded valuations/validations (i.e., Good Housekeeping, ANSI, USP, GRAS, Kosher, Organic, GMP, etc.). This strategy validates the value promise with “layers of branding” representing layers of validation. In this aspect, the most important factor is differentiating the unique identity and therefore the superiority of the product. In regard to where competition is directed (at you), this means beginning with your raw material. So, even the species of O. importantium must now somehow be differentiated from all the other sources. Since you have developed a different product, even though you have trade named the finished raw material (AntioxInflam), you still need to identify that YOUR unique raw material has different or special properties than any of its generic counterparts or else there will be severe market consequences. When research is published (in scientific journals, and industry and lay publications), editors and publishers are most often very reluctant to publish branded trade names for fear of appearing to endorse products and losing the credibility of being unbiased. For this reason, they (at least the respected publications) almost unanimously publish only the generic name of an ingredient. Therefore, consider that when your “independent” research is published, if the benefits of AntioxInflam are attributed only to the O. importantium species, then your potential competitors will be given the most powerful market weapon to use against you … scientific support for Generic O. importantium. And, to any industry or lay publications that revile using branded trade names, attributing the research benefits to just O. importantium bolsters the opportunities for market exploitation with counterfeit products by all of your knockoff competitors. Therefore, you must give your raw material a unique identity in addition to the generic name. One tactic is to assign a product identity or a research code to the material (Ex. XYZ123). Now AntioxInflam is officially a unique XYZ123 form of O. importantium. By the way, this code must appear in the research publications, at least in the “Materials and Methods” section. If publishers and editors refuse to identify the brand name, they will be very reluctant to delete the product identity research code in association with the generic name, which only you have. This tactic is also valuable for creating other branding options when and/or if needed. As an example, if one very large company wants to have an exclusive for a period of time in a specific channel, you have the means to create a separate brand name exclusive to that customer, as long as you link the brand to the XYZ123 research code. This enables that different brand to base the product claims on original validated research. And you have successfully created your own competition, which is a far superior option to having a vicious counterfeit competitor. The more you establish your other patent-protected brands of XYZ123 O. importantium in the market, the more of a disincentive you can create for knockoff products, as the market can appear to be filling up with competitive products, reducing the knockoff profit potential and ROI. Now your science, IP, significant investments, and the product’s ultimate value promise are all better insulated from market piracy.
References
This strategy also applies to multiple ingredient formulas in finished products. Research and patents on finished products increase their market potential exponentially. Up to this time, the vast majority of research and patent protections in the natural products industry has been established by ingredient manufacturers on single ingredients. Research and patents on finished products amount to only a very small fraction of those done on nutraceutical ingredients. Yet, this offers the greatest revenue potential and ROI. There are other effective strategies that improve the potential for long-term success in the nutraceutical industry. However, discussions regarding those methods are more the subject of an advanced marketing course on branding and outside the scope of this chapter. Suffice it to say, this information provides a basic knowledge and guide on how to create a successful strategic agenda for developing, validating, and marketing nutraceutical IP from source to consumer.
22.4 CONCLUSIONS Prior to DSHEA in 1994, the nutritional products industry was characterized more by flash-in-the-pan product popularity that usually lasted at most for about 2 years. These popular products sparked a fad-like following that usually dissipated with the next new product fad. During those years preceding 1994, there was not a very significant incentive to do the kind of research that would reveal a nutritional product’s powerful health correcting and/or promoting properties. The regulations prohibited making just about any kind of important and/or informative claims. So the market opportunities were relatively small and the arsenal of IP was comparatively sparse. Since the passage of DSHEA, the opportunities to do exciting research, develop new product technologies, and obtain important IP are almost endless. We believe that this growing industry will find, through extensive R&D, some remarkable and beneficial new materials that will continue to benefit humankind in ways that will amaze the medical and scientific communities. Furthermore, we expect that in the future, systemic biological premises of nutraceutical technologies and IP will be increasingly administered with and/or in place of conventional “reductionist” single loci pharmacological medicine. The next phase of market growth is dependent on valid scientific research for new product technologies, patents, stronger and more effective branding and trademark strategies in product marketing, and international regulatory compliance.
REFERENCES Bagchi, D., Misner, B., Bagchi, M., Kothari, S.C., Downs, B.W., Preuss, H.G., 2002. Effects of orally administered undenatured type II collagen against arthritic inflammatory diseases: a mechanistic exploration. Int. J. Clin. Pharmacol. Res. 22, 101–110. Barnes, S., Sfakianos, J., Coward, L., Kirk, M., 1996. Soy isoflavonoids and cancer prevention. Underlying biochemical and pharmacological issues. Adv. Exp. Med. Biol. 401, 87–100.
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Bonn Guidelines on Access to Genetic Resources and Benefit Sharing, Secretariat of Convention on Biological Diversity, April 2002. http://www.biodiv.org/doc/publications/cbdbonn-gdls-en.pdf CBD, 2016. National Focal Points, see listing at http://www.biodiv.org/convention/default.shtml Clarkson, T.B., 2002. Soy, soy phytoestrogens and cardiovascular disease. J. Nutr. 132, 566S–569S. Convention on Biological Diversity (CBD), 2016. National Focal Points, see listing at https:// www.cbd.int/doc/lists/nfp-cbd.pdf Dinkova-Kostova, A.T., Fahey, J.W., Wade, K.L., et al., 2007. Induction of the phase 2 response in mouse and human skin by sulforaphane-containing broccoli sprout extracts. Cancer Epidemiol. Biomarkers Prev. 16, 847–851. Fotsis, T., Pepper, M., Adlercreutz, H., et al., 1993. Genistein, a dietary-derived inhibitor of in vitro angiogenesis. Proc. Natl. Acad. Sci. USA 90, 2690–2694. Guidelines for BIO Members Engaging in Bioprospecting, July 2005. http://www.bio.org/ip/ international/200507guide.asp Pal, S., Naissides, M., Mamo, J., 2004. Polyphenolics and fat absorption. Int. J. Obes. Relat. Metab. Disord. 28, 324–326. Quincozes-Santos, A., Andreazza, A.C., Nardin, P., Funchal, C., Goncalves, C.A., Gottfried, C., 2007. Resveratrol attenuates oxidative-induced DNA damage in C6 glioma cells. Neurotoxicology 28, 886–891. Wietrzyk, J., 2007. The influence of isoflavonoids on the antitumor activity of vitamin D3. Postepy. Hig. Med. Dosw. (Online) 61, 253–260. WIPO Technical Study on Disclosure Requirements Concerning Genetic Resources et al., 2016. Documents available at http://www.wipo.int/tk/en/genetic/proposals/index.html#resources World Intellectual Property Organization (WIPO), 2016. Intergovernmental Committee (IGC), Genetic Resources and Intellectual Property, http://www.wipo.int/tk/en/genetic