Science And The Law Are Equal Partners In IP Practice

Monday, January 23, 2012 - 18:14

The Editor interviews Steven G. Davis, Partner, McCarter & English, LLP.

Editor: Tell our readers about your background and current practice.

Davis: I started out as an organic chemist, having earned a chemistry degree from Swarthmore College and a PhD from Johns Hopkins. I worked in industry for five years before deciding to go to law school at Case Western Reserve in Cleveland. I started practicing law in 1993 at Hamilton, Brook, Smith and Reynolds, spent two years at Eli Lilly and then returned to Hamilton Brook. In 2009, I went to Foley & Lardner and came to McCarter & English in early 2011.

I am a patent attorney and handle preparation and prosecution of patent applications, freedom to operate assessments and due diligence investigations for clients interested to acquire or dispose of assets. The majority of my clients are in the pharmaceutical area, though my technical background enables me to serve clients in all areas of organic chemistry.

Editor: Please talk about McCarter’s life sciences team. Has IP practice in this field become specialized and complex to the point of requiring a PhD?

Davis: As I mentioned, I’m an organic chemist, but our life sciences practice requires expertise in all aspects of biology – a broad term that can include immunology, molecular biology and cell biology, to name a few. We have the capability to manage all those areas from the partner level and also with our associates and support team.

Fundamentally, this practice requires technical and legal expertise, and all of our partners and associates hold advanced technical degrees – 20 have PhDs. While a PhD is not absolutely required, it is very helpful because effective IP representation involves understanding the technology and translating that knowledge to a written patent application. You have to be able to communicate technical information not only to the patent examiner but also potentially to a judge or a jury with very limited scientific knowledge.

The fact that our attorneys have higher technical degrees also adds to our credibility with clients. Our partners can visit clients and speak intelligently with their scientists, which reflects the level at which we operate and gives the client confidence that we understand their technology as well as their legal issues.

Editor: How will the America Invents Act (the Act) affect your practice?

Davis: The Act will make some very important changes to IP law, including the first-to-file provision and post-grant opposition. Under the current system, proving who invented first is sometimes a difficult and complex process; however, in just over a year, the standard will change to first-to-file, and the process will be vastly simplified: the first person to file the application wins the race.

The post-grant opposition process will allow for a nine-month window, after the U.S. Patent Office (PTO) grants the patent, for third parties to oppose the grant. The third-party opposition provision may be a very useful tool for clients in the process of gathering competitive intelligence; when they foresee a potential third-party patent issue, they now have another option for addressing it.

Overall, the Act will have little impact on how I advise clients, though of course I will need to be aware of the new rules. While the first-to-file provision might seem to be a big change, it also harmonizes the U.S. with the rest of the world; in fact, the need to file quickly has always factored into our advice.

Editor: What is the value of a patent portfolio to a larger company as an acquisition target?

Davis: By themselves, patents don’t create value; there has to be an underlying product or a potential product, and the patent protects the innovative part of the product. Assessing the value of an acquisition target’s patent portfolio comes down to a few basic questions: Does the target have a product that will be profitable, and, if yes, is the existing patent protection sufficient?

In many cases – especially in the pharmaceutical industry – a product without good patent protection has no value beyond its attractiveness to the public. There are many examples of potential drugs that, during or even before the clinical testing, seemed promising but never made it to market for lack of patent protections. Such protection is an absolute requirement, and my due diligence always includes assessment of the patent’s ability to keep competitors away for an acceptable period of time.

Editor: Please talk about your specialty in organic chemistry and matters that pertain to the patenting of organic elements.

Davis: Most of my work is with pharmaceutical patents and typically involves small molecules or biologics. Small molecule work is all organic chemistry-related, so my specialty provides an ideal background for speaking with the medicinal chemists who are developing and optimizing the properties of the drug. One of my former clients was developing a next-generation data storage medium – which involves organic chemistry, i.e., polymers – and petroleum and food chemistry also fall under my specialty. While I have worked on biologics, which include protein drugs like insulin, I tend to refer these clients to my colleagues here at McCarter who have a stronger biological background.

Editor: Has globalization changed the patent landscape?

Davis: Thirty or forty years ago, there were fewer markets as compared with today. Today with greater industrialization and the rise of markets in China, India and Brazil, among others, competition can come from anywhere. Many generic pharmaceutical companies are located in India and simply were not part of a patent analysis thirty years ago; thus, the need for – and required scope of – patent protection today is much broader than it was a few decades ago.

Editor: What are the key elements of patent portfolio strategies? Please talk about how they differ with universities, pharmaceutical companies and individual start-ups.

Davis: Patent law is constantly undergoing change, which affects how laws are interpreted by the courts and implemented by the PTO, often under pressure from the public and Congress. Changes in the last 10 years have affected the operations of universities, major pharmaceutical companies and start-ups; further, there is substantial criticism of patents as a whole, asserting that this protection allows drug companies to charge high prices and, therefore, should be very difficult to obtain.

My view is that patents are an absolute necessity, and lack of that protection will kill R&D efforts; however, the approval process should be strict enough to reject overly broad or trivial patents that block the development of medicines that benefit the public. The resulting struggle to find the right balance has led to a number of court decisions making it more difficult to patent fundamental inventions, which come from universities and research hospitals. An example might be the discovery of a new protein target leading to the development of a drug that affects how this protein works in the body, and resulting in an effective treatment for diseases like cancer. In the past, patents were granted on a particular target and any resulting drugs that operate at that target, but recent court decisions have made it more difficult to obtain this type of patent.

The new regime makes it difficult for universities to patent their discoveries but is favorable to pharmaceutical companies because patents held by universities tend to block R&D efforts. To my eye, this development strikes the right balance for the public good by allowing for the development of new drugs without burdening the system with unnecessary patents.

First and foremost, a successful pharmaceutical patent portfolio strategy involves protecting products under development. Universities typically operate further upstream and are more interested in protecting general concepts, and while start-ups are somewhere in the middle, patent protection at the development stage is critically important.

Editor: What are “freedom to operate” (FTO) assessments?

Davis: FTO assessments include gathering intelligence on competitor patents, first to avoid infringement and, where infringement exists, to make strategic decisions that include approaching the competitor for a license or challenging the patent’s validity in court. FTO assessments also are useful in targeted due diligence efforts for clients that are ready to invest serious resources but want to ensure their product will not infringe on an existing patent. As such, they are seeking the “freedom to operate” without having to deal with licensing issues or hostile competitors.

Editor: What are some differences between life sciences and the technology sector in terms of IP issues?

Davis: These sectors have very different problems, objectives and patent needs, thus, when Congress considers new patent legislation, their lobbying efforts often pull in opposing directions. For instance, a pharmaceutical company manufactures one product – a drug for which they need one patent. In the technology sector, however, a single product like an IPhone requires many parts and therefore the potential to infringe on an existing patent is far greater. The technology sector is therefore commonly seeking a higher threshold for patentability to reduce the number of potential freedom to operate issues.

FTO assessments are more complex in the technology sector, which supports a stricter patent approval process because of freedom to operate concerns. For legislators, it is not possible to write one set of laws for each sector, so resolution may depend on how the courts and the PTO ultimately interpret the laws and regulations.

Editor: Are patent challenges in the life sciences and technology areas particularly difficult to litigate, given the potential need to educate the judge and jury?

Davis: While I do not litigate cases, McCarter has a highly capable litigation team that can pick up the ball when my clients have litigation issues. My role in prosecuting patent applications – from inception through post-grant processes – requires a good understanding of what happens in litigation, and translating a patent’s technology into plain language will provide significant assistance down the road to the litigators who are enforcing the patent. A well-written application facilitates communications with PTO examiners who often do not have sufficient technical expertise, though in theory they should. My standard practice in training associates is to task them with writing a patent application such that a completely uninitiated person – anyone who might sit on a jury – can understand the underlying technology.

Editor: Please talk about your work with venture capital firms and acquisitions.

Davis: One scenario involves an investor that sees a promising idea and faces a very long-term investment horizon that includes years of research before he or she have a potential product. A shorter-term scenario involves an existing product with companies seeking either to partner or to merge. The latter case includes a well-defined asset, while the former does not.

In both cases, I am usually the second advisor that investors will consult. First, they need an expert to determine if there is value in the investment: Is the idea a good one, and is it likely to develop into a product? If the answer is yes, then it becomes my job to determine the strength of the IP assets.

At this point, given all the research and efforts to date, a negative determination from me is unwelcome news. My role is to assess the strength of the patent portfolio – not merely bless or condemn the portfolio but rather identify the issues – and then provide my clients with solutions so the deal can go forward. This is true whether the client is a venture capital firm or a party in an acquisition. When my client has a product and another company is interested in a partnership, then my job is to defend the IP: explain why it is strong and why the deal should go through.

If we find a problem with a patent, there are procedures with the PTO to correct the problem, even if it is an issued patent, including re-examination or a re-issue. Pending applications can be addressed proactively, and in some cases, we offer suggestions for additional patents to enhance the value of the portfolio.

Please email the interviewee at sdavis@mccarter.com with questions about this interview.