Knowledge Is Power: Commercializing Intellectual Property In The Life Sciences Industry

Thursday, February 1, 2007 - 01:00

The explosion of life sciences-based innovations and increased globalization of the marketplace has heightened the importance of intellectual property ("IP") in business transactions. Effective management of IP is the driving force behind intellectual and commercial success for global life sciences companies.

IP constitutes a prominent feature of mergers and acquisitions, strategic alliances and company valuation. In engaging in these activities, companies must ensure that they protect and leverage the knowledge, core technologies and business methods that add the most value to their business and give their products or services an edge over competition. Indeed, companies that properly leverage their IP portfolios maximize the opportunity to establish proprietary market advantage and develop favorable partnerships and licensing relationships. For example, properly deployed patents can translate into category-leading products, enhanced market shares, high profit margins and even entry into new industries. They may also provide leverage for fundraising from seed and venture investors. The clich holds true: knowledge is power.

I. Capitalizing On IP Assets

The IP Audit

To develop an effective intellectual property strategy and achieve maximum asset realization, one must first conduct an IP audit to evaluate and ascribe value to a company's IP assets. The audit team should be tailored to address the mixed issues of law, technology and business surrounding the company, and comprise, for example, legal counsel, corporate planners, financial accountants, business development executives and senior management. The team should operate together to identify intangible assets that will allow management to create an intellectual property strategy that coincides with the company's goals.

The IP audit should (i) identify the origin of the IP assets and ownership rights in the assets; (ii) identify the scope of any third party IP rights in the assets; (iii) determine company policies for identifying and protecting its IP assets and recommend new policies and procedures to provide more expansive protection for IP created in the future; (iv) identify defects in IP assets and provide recommendations for correcting these defects; and (v) provide mechanisms to preclude potential liability claims for IP that may result from development of a new product or service.

With an understanding of existing IP, a company can then develop and leverage an IP portfolio aligned with its business goals.

Developing And Leveraging An IP Portfolio

Companies should consider utilizing in-house R&D or in-house licensing of technology in various stages of development to develop robust IP portfolios that can be used to enter new markets, block competition, target companies for acquisition, identify areas of unacceptable risk, and tap new sources of revenue. For example, a company seeking to enter a market in a new therapeutic arena may wish to augment a combination of matter-patent portfolio with method-of-use patents in the new prosecution. Alternatively, a company wishing to enter a new geographic market should acquire IP rights to specific geographic territories. Likewise, a company may choose to block competitors from entering similar markets by acquiring all patents in a particular technology arena.

Conversely, IP at various stages of development can be out-licensed to generate immediate revenues through signing fees and milestones, and, for the more advanced product or service, through immediate royalties. Licensing strategies will depend on company business strategy and goals.

In developing its IP portfolio, a company should consider the degree to which its IP objectives are aligned with its business strategy. The company should consider how it can leverage and extract value from its IP and should further define the party(s) in the company responsible for implementation. The company should also consider whether it intends to use its IP portfolio in an offensive or defensive manner.

In addition, the current life science industry trend of biopharma collaboration presents an excellent opportunity for IP maximization. These deals arise when a biotech company, often cash-strapped after initial funding and unable to handle the costs of clinical trials and regulatory approval, will align with big pharma. Pharma brings regulatory, R&D, commercialization and marketing expertise; biotech brings proprietary technology and patent rights.

Evaluating the IP in these collaborations will allow the parties to build necessary protections into the deal. Biotech patent claims may present validity issues, particularly with respect to prior art, written description and enablement issues. Co-commercialization deals require solid manufacturing and packaging IP, as well as the more typical composition and process protections. It should also be confirmed that useful IP rights can be transferred into the collaboration. That is, the party contributing the IP to the collaboration must own or have rights to the IP, be able to use the IP, and have the right to transfer the technology for the field of use and territory of interest.

II. Patent Acquisition Considerations

Patents are only available for those inventions that are useful, novel, and non-obvious. Common problems with life sciences patents relate to lack of utility and failure to describe the invention in a way that allows a person with skill in the invention's field of knowledge to make and use the invention.

Utility

A patent must describe an invention having a specific, credible, and substantial utility. A utility is credible when it is known that the invention is available for the use claimed. And a utility must be specific to the subject matter claimed in the patent, e.g., a claim to DNA as a gene probe would require the disclosure of a specific DNA target. Substantial utility requires that the utility be useful in the "real world" and exclude those that are "throw-away," and trivial, such as the use of DNA as shampoo.

Enablement

The level of disclosure in the patent should be at least enough to teach a person at the relevant skill level how to make and use the invention. The sources of all starting materials used should be disclosed by the specification unless they are readily available.

Written Description

The patent must sufficiently describe the entire invention; for example, a broad genus claim is justified if a representative number of species are described in the patent. "Representativeness" depends on the amount of variability within the genus. A description of the amino acid sequence of a protein will generally support a claim to all the DNA sequences that encode the protein, but not claims to structural variants of proteins and nucleic acids that encode such variants.

III. Other Intellectual Property Asset Considerations

Trademarks

A trademark is a word, name, symbol, device or any combination thereof, which is used to distinguish the goods and services of one entity from the goods and services of others. In addition to trademark protection for logos and brand names, life sciences companies may obtain protection for the shape of the container or package in which a product is sold. They may also obtain protection for trade dress, slogans, scents and sounds. Once this protection is engaged, trademark law prohibits competitors from using a life science company's marks in a way that confuses consumers about the source of a product or service. This safeguard allows companies to project a consistent face to consumers, building valuable business good will. It is therefore wise to protect trademarks vigorously.

Copyrights

A company has a property interest in an original, creative work that is fixed in a tangible medium of expression. For a life sciences company such works typically include advertisements, brochures or other literature describing the products and services of the company, and technical training manuals.

Trade Secrets

A trade secret is any formula, pattern, device, or compilation of information which is used in one's business and which gives the business an opportunity to obtain an advantage over competitors who do not know or use the information. A life sciences company may choose to maintain, for example, a chemical formula as a trade secret rather than disclose it in a patent application. If, however, the trade secret is discovered through proper means, the company may be without recourse.

Other Examples of IP

Other prominent examples of IP relevant to a life sciences company include formulae, shapes and sizes of products, packaging and technology sourcing, proprietary processes, environmental manufacturing techniques, design technology, technical data sheets, proprietary test and evaluation data, product specifications, plant and production facilities and design, pending applications and information disclosures, regulatory filings and approvals, mailing lists, sales knowledge (e.g., cycles and buying preferences), databases and directories, customer information, pricing policies and fee structures, asset management processes, and record keeping and accounting practices.

Conclusion

The importance of IP considerations to the commercialization plans of any life sciences company is too great to ignore. The industry's future leaders will be those who identify their intangible intellectual capital to acquire legal protection and, as a result, tangible dividends in the marketplace.

Leslie Gladstone Restaino is a Member of Sills Cummis Epstein & Gross' Intellectual Property and Corporate Practice Groups. Monique Cofer is an Associate of the Sills Cummis Epstein & Gross P.C.'s Litigation Practice Group. The views and opinions expressed in this article are those of the authors and do not necessarily reflect those of Sills Cummis Epstein & Gross P.C.

Please email the authors at lrestaino@sillscummis.com or mcofer@sillscummis.com with questions about this article.