Magazine Article | May 1, 2009

Building A Strong Patent Estate On A Limited Budget

Source: Life Science Leader

By Daniel A. Wilson

In the beginning, a life science start-up may have many of the necessary components in place for success: exciting technology, a promising market, excellent scientists, and a strong management team. However, obtaining market exclusivity for the company’s proposed product is something that needs to be considered in the early days to attract both investors and potential partners. The question is how to effectively produce this result given the significant cost constraints all companies face, particularly in the current business environment.

1. The First Piece Of Intellectual Property
The first piece of intellectual property relevant to a life sciences company often results from basic research conducted at another institution, for example, at a university or larger company that is not interested in further developing the technology in-house. The owner of the patent application probably drafted it before interacting with the licensee company, so the company’s initial task is to understand how it can intelligently exploit the patent application to protect the company’s market space.

First, the company should consider whether the technology can be distilled to its essence: What is the core discovery or realization that has the potential to create market exclusivity for a product that will be in demand? If the essence of the invention is new, relative to what was known prior to filing the application, it may be possible for the company to protect the broad concept.

Second, the company should consider whether the technology embodies any choke points through which any competitor would have to pass. If so, the company may be able to create effective barriers to entry.

Third, especially in the case of new therapeutic compounds, the company should consider claims focused on particularly important lead compounds or classes of compounds. While the protection may not be especially broad in scope, this more narrow protection may nonetheless keep competitors from following exactly in the footsteps of the company, a situation that may prevent competition when such protection is considered in conjunction with regulatory law.

Fourth, if there is a competitor in the market, the company should consider whether it can use the application to block the competitor from selling its own product. Of course, these considerations are not mutually exclusive. The original application can spawn other related applications that accomplish each of these goals.

2. Intellectual Property’s Role At The Beginning Of A Company’s Life Cycle
While, at the outset, conservation of operating capital may be a primary concern, a company shortchanges the patenting process at its peril.Early in the company’s life cycle, investors (existing and potential) will want to see the beginnings of patent portfolio
development. While, to a certain extent, more patent applications are better, investors are increasingly IP-sophisticated and will not be impressed merely by a large number of applications. They will, however, appreciate a company that has a cogent and effective strategy for patent portfolio development. Moreover, issued patents, as compared to pending patent applications, are especially beneficial. While it is generally true that broader patent coverage is better, it is also true that narrower, focused patent coverage has value. Such narrower patent applications tend to mature sooner into issued patents. While both broad and narrow coverage is important, pursuing both types at once can lead to issued patents early in the company’s life cycle, increasing the company’s perceived value.

Additionally, it takes time for patent applications to mature into issued patents. Looking ahead to later in the company’s life cycle, the initial patent filings are the ones that will first mature into actual patent protection, and once again, later-stage investors and potential partners likely will want to see actual patent protection. If that process is not started in a significant way early in the company’s life, issued patents will not result at the relevant time later in the company’s life.

3. Where To File A Patent Application
The company should consider not only what to protect, but also, where to protect it outside of the United States. The company should probably file applications in such “usual” countries and regions as Canada, Europe, and Japan. The company also should consider wider filings in countries and regions contemplated to be important markets, sites of manufacturing, sites of potential business partners, and sites of competitors. For example, U.S. filings tend to be relatively expensive, so the company must choose locations strategically, both from the perspective of the company’s well-being in the market place as well as the perspective of what investors and potential partners will expect in regard to cost.

4. New Ideas, New Patent Applications
Once the company moves beyond its initial beginnings, more intellectual property likely will be generated. Stick to patenting the core technology first. If the budget allows, once additional core patent applications are filed to protect the new developments, the company can consider filing applications directed to less important aspects of the technology or tangential projects that may occur. Protecting this secondary technology may increase the strength of the wall around the core business as well as, in the case of tangential technology, provide opportunities for generation of a revenue stream or for trade in case of litigation. For example, although certain technology may not be central to the company’s business plan and may provide it with little direct benefit, the technology may very well be important to another company that is willing to license the technology.

Further, in drug and medical device development, the time to clinical approval is long. The term of an issued patent is twenty years from its filing. Some of the initially filed patents may actually have relatively little patent term left once the company (or its successor) has obtained approval to sell its product. Filing patent applications in an ongoing manner on new developments allows the company to cover technology that, potentially, is more directly focused on the commercial product as it evolves and provides patents whose term extend longer into the future than the initially filed patent applications. This situation potentially provides longer market exclusivity.

5. Managing The Cost Of Patent Prosecution
Taking the patenting process seriously can actually reduce costs. During the process, if the company can provide concrete guidance on its market plans and identify its crucial technology, the company’s patent attorney can more effectively create the company’s patent portfolio. If the company can provide substantial written work product exemplary or descriptive of an invention, in addition to oral disclosure, the patent attorney often can be much more efficient, resulting in significant savings to the company. Moreover, there is a learning curve for company employees involved in the patenting process, perhaps for the first time. If the company signals to its employees that the process is important, the employees will focus on their interactions with patent counsel, further enhancing the efficiency of such interactions. Finally, interacting with counsel as the business plan and product evolves will allow counsel not only to suggest new avenues for protection, but also suggest areas where protection is no longer needed and can be discontinued, resulting in substantial savings.

By following this general outline of patent portfolio development, a life sciences company likely will have a patent portfolio relevant to the company’s needs at the appropriate time in that company’s life cycle. Equally importantly, the company will accomplish this result without breaking the bank.

About the Author
Daniel Wilson is Senior Counsel in the Boston office of Goodwin|Procter LLP, where he develops sophisticated patent estates for life sciences clients.