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 By
Dariush Keyhani M.S., JD.
As
with other technology-based industries, intellectual property is
a key asset of biotech companies. Intellectual property includes
property rights associated with patents, trademarks, copyrights,
trade secrets and other intangibles. Patents are the rights that
generally hold the greatest long-term value and interest for biotech
and biotech start-up companies.
Everything from formulas for new drugs for pain to vaccines for
viruses or new treatments or diagnostics for cancer may be legally
protected through patents.
Patent revenues have increasingly become the driving force behind
the rapid expansion of technology and, particularly, biotechnology-based
companies. Biotech companies usually attempt to recoup their research
and development costs and make profits by creating products that
can be patented, and thereby produced, licensed or sold. Ironically,
even though patents lie at the heart of the biotech business, most
biotech companies fail to develop effective patent strategies.
Reasons for these limitations include companies’ limited understanding
of patents, lack of in-house patent attorneys and the failure of
outside counsel to advise their start-up clients on matters beyond
the scope of drafting and prosecuting individual patents.
Biotech companies typically must spend millions of dollars on product
development before they realize a profit. Financial resources are
often diminished by the cost and risk associated with the development
of biotech products as well as the long waiting periods associated
with overcoming regulatory hurdles. Depending on a product’s
life cycle, trials and FDA approval, the wait period can range from
a couple of years to a decade. Start-ups with limited resources
often have a difficult time surviving beyond the first few years.
To survive to profitability, biotech companies, particularly start-ups,
must leverage their intellectual property. An effective patent strategy
must first identify core technologies, then direct patent and financial
resources toward protecting those key assets.
The company’s patent portfolio must also incorporate strategies
for commercially exploiting the technology through profitable licensing
schemes. A company’s patent strategy must integrate with research
and development to ensure that research focuses on outcomes that
may be protected as intellectual property.
An ideal patent strategy would provide the broadest and strongest
protection for core technology and commercial applications. Biotech
companies must avoid or invent around third-party patents and develop
market niches. In developing effective patent strategies, companies
should focus on areas that can be exploited commercially without
expensive license fees or litigation and avoid unnecessary spending
on patents in areas outside their core focus. They also need to
focus on assets that the company can out-license, trade or exploit
commercially.
One effective patent strategy in the biotech sector involves acquiring
secondary patents or rights to mundane or very basic research discovery
that would otherwise block or lessen the value of core technology.
For example, a biotech company’s valuable patent relates to
a process for detecting hepatitis C in the blood. However, another
party owns a patent or rights to literature suggesting that this
process is more accurate at a certain pH. This second party may
be in a position to block the most effective use of the patented
process. Acquiring this secondary patent early may be less costly
and it may considerably enhance the value of the primary patent.
Another effective patent strategy relates to a careful self evaluation
of basic techniques, research tools, and even routine practices
used in a company or institution’s lab or research facility.
This self-evaluation may turn up knowledge from experience and routine
practice that a particularly valuable technique or process patented
or owned by another party operates more effectively under special
conditions, e.g., in a certain buffering system, or under a certain
temperature or pressure. Applying this basic knowledge to the primary
patent may provide the basis for a strategic secondary patent.
The secondary patent may block out others and the owner of the primary
patent from applying techniques that enhance the value of the primary
patent. The secondary patent may also provide incentive to the owner
of the primary patent and competitors to share technologies by cross-licensing.
Since the ultimate purpose of any good patent strategy is to serve
the Company’s overall business objectives, it must be developed
concurrently with research, development, and investment strategies.
It certainly requires consistent business, technical, and legal
collaboration. In essence, the goals of strategic patent planning
should also include the ability to attract investment capital or
become an attractive acquisition target. Investors are eager to
find companies that have developed sophisticated patent portfolios
based on market research, product demand, and competition.
This article does not represent legal advice or consultation, it
is simply general information. You must consult an attorney for
legal advice on any particular legal question.
Dariush Keyhani* M.S., J.D.
Dariush currently works in the intellectual property and litigation
groups at the law firm of PILLSBURY WINTHROP LLP. Prior to joining
the firm, Dariush completed graduate work in immunology at the University
of Rochester School of Medicine and was the founder and Editor-in-Chief
of the Buffalo Intellectual Property Law Journal at the State University
of New York at Buffalo School of Law. This article was also written
with the assistance of Adam Sand, an associate in the corporate
department of PILLSBURY WINTHROP LLP.
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