intell property issues

04 November 2001

Trevor Cook


The term 'biosciences' has come to cover a multitude of different types of business, employing widely different technologies, providing a wide variety of different types of products or services, and operating under a wide range of different types of business model. As a result no one single approach to intellectual property protection can be said to be appropriate across the board. The correct strategy has to be tailored to fit the technology, the deliverables, and indeed the business plan.

Thus for example one may contrast the different approaches of those businesses in the sector with high entry barriers (such as therapeutics) and ones with lower ones (such as instrumentation, or diagnostics). Both want, and need, strong IP protection, but for their core business the former does not need granted and enforceable rights so quickly as does the latter. A biosciences company whose advisers recognised this was Chiron with its Hepatitis C (HCV) patents, at a time when its core business was in diagnostics for HCV. Not only did it seek patents via the European Patent Office route, but also in some countries of Europe such as the UK also did so by the much quicker, national, route. As a result it got its patent litigation against competitor diagnostics up and running long before the grant of the corresponding European patent, and the favourable decision that it secured under it national patent in the UK gave confidence to other courts in Europe to grant equivalent relief under the European patent once granted, including a 'cross border' injunction extending to several European countries granted by the Dutch court at a time, in the mid-1990's, when such 'pan-European' patent infringement injunctions were more fashionable than they are today.

Thinking about IP strategically

At base IP rights serve to protect, albeit sometimes in a rather indirect way, one's investment in research and development. Not only can they be used to try to ring fence one's core business, but they also provide a type of security which thereby allows risk to be shared with others. However, this does not make it an intelligent IP strategy simply to file and to prosecute patent applications for the sake of it. Patent applications prosecuted beyond their early stages (and often long before they get to grant) are expensive, will almost inevitably tell competitors more than one is comfortable with, and if filed and published too early may compromise one's own opportunity to secure stronger and more commercially valuable patents on future work.

Thus, although filing such applications costs little except in professional fees, and is generally worthwhile, what is of much greater importance is an intelligent appraisal of the value of pursuing an application and of undertaking the scientific work associated with it, as an application can always been withdrawn and will never publish if this is done within 18 months of first filing. Clearly part of that appraisal involves an assessment of the underlying technical value of the invention, and the prospects of obtaining protection of useful scope. However it is vital that such assessment also takes account of the value of the application to one's core business, either currently or in the foreseeable future. Thus it can make much more sense to focus one's patenting activities, even with small incremental innovations which one might never in other circumstances think of as inventions, around one's core business. This not only assists in 'ring fencing' such core businesses against competitors, but also serves to provide such core businesses with more flexibility to develop and freedom to operate in that area in the future.

Thus one wants to avoid the risk, as has for example happened in the pharmaceutical sector, of others building successful business models based on patenting around the area of interest of the first worker in the field and then demanding a share of that first worker's income stream from its exploitation of that area. Such activity can be purely parasitic, but more often reflects a natural attempt to diversify into other promising areas of research. Whatever the motive behind such third party patenting however, it remains a risk against which to guard.

Constraints on use

In addition to being alert to such constraints on one's future development of one's core business, an intelligent IP strategy involves a wider analysis of possible 'freedom to use' issues. This should not be limited to an analysis of the relevant IP of unconnected third parties. Such IP will typically consist of patent applications at the earliest stage which may go on to grant, and indeed are likely to do so, although the granted claims may be of different scope to those found in the application. Indeed such claims are often broadened in prosecution, which makes it especially important to follow carefully the prosecution of any third party patent application that is important to one's core business. One should also be alive to other constraints in terms of connected third party rights - those with whom one has, or has in the past, worked, or with whom one has had some contact. One need only consider the nature of the rights that could have been conferred on a third party by a casual signature of a material transfer agreement ('MTA') in the early stages of the business. Thus some MTAs purport to confer 'reach through' rights to a royalty on the products, broadly defined, of the research the subject of the MTA.

Types of IP relevant to early stage biosciences business

In most areas of bioscience, the most important type of intellectual property is without doubt patents. However it is important not to forget the potential for contribution of other types of intellectual property right, including the more traditional ones. Thus for example if one already has sources of income in terms of offering a service, or a low barrier to entry product, and where the reputation is almost as important as the science, a trade mark can be a valuable adjunct to any more direct protection for the technology. Confidential information protection, backed up by effective confidentiality policies and employment agreements with carefully drawn and enforceable restrictions on the activities of departing staff, is another adjunct all too often overlooked.

New types of bioscience business provide new challenges to the intellectual property system. Thus the dust has yet to settle on the intellectual property aspects of the race to patent the genome, but it seems clear that it will be an uphill struggle, at least in Europe, to obtain much in the way of pure sequence patents without specific utility identified other than on the basis of the use of standard computer techniques for determining homologies between sequences. That is not necessarily a reason for not having applied for such patents - others may do so, and the prior rights secured by earlier applications may prove valuable in any ultimate conflict between patent applications. However it should also be recognised that much material is really information, rather than inventions, and that the patent system is poorly suited to the protection of information, as opposed to innovation. In Europe however, in the new sui generis database right, we are fortunate in having a system tailored to protecting information - one which protects collections of information in which there has been a financial investment - from unauthorised extraction and reutilisation, thus providing a strong foundation within Europe of IP for contractual terms and conditions protecting the use of such data.

Transaction pitfalls

Although in many sectors the best business model is to go it alone, the resources required, and the risks involved, in biosciences almost invariably require some sort of partnering. In such cases the risk has to be shared in some way, and it is IP, existing (for a licence) or anticipated (for a collaboration) that provides such security as there is for those sharing in that risk.

Thus the biosciences sector is full of such transactions. These share many features with such transactions in other sectors, and for research and development collaborations in particular, given the uncertainty of the outcome, can present particular problems in terms of establishing ownership of and the right to use any IP emerging from it, as this may be of a wholly different nature to that envisaged at the outset. However even apparently straightforward licensing transactions can give rise to all manner of problems in the biosciences sector, exacerbated by the increased importance in the sector, as compared with others, of IP. Three recent disputes give a flavour of the issues which can become a source of dispute - definition of the licensed product, definition of the licensed rights, and the royalty base.

The principles behind defining the both licensed product and the licensed patent are easily enough articulated. For example with novel chemical entities a patent is likely to cover a family of compounds and it will normally make sense only to license one compound within this family. This approach enables a patentee to split rights between different licensees. Moreover a patent, or a single product, can often have application to quite different product markets. The licensor may have the opportunity to partition product sectors by defining 'fields of use'. Thus a licensor with a patent for a new chemical entity with potential utility as a pharmaceutical could license one company for veterinary medical applications and another for human medical applications. This may also be backed up by a contractual obligation on the part of the licensee not to operate in the other fields the subject of patent. Indeed it may be possible to split IP ever more thinly - thus within the generalised sector of human medicinal applications there may be a multiplicity of different potential therapeutic applications, or there may be different delivery routes.

However biosciences agreements can give rise to especial problems of definition in relation to the licensed product. Thus the dispute between Amgen and Johnson & Johnson a few years back on whether Amgen's modified erythropoietin product (which has recently secured regulatory approval) fell within the scope of the existing agreement between the two, entered into early in Amgen's corporate life, and whereby Johnson & Johnson had been given exclusive rights to Amgen's erythropoietin in Europe, had eventually to be resolved by arbitration, which came out in favour of Amgen.

Neither is defining the licensed rights always simple. Another recent dispute, which on this occasion came before the English courts, was between Eli Lilly and Novo Nordisk as to a licence from the latter to the former of patent rights in the recombinant protein Human Growth Hormone. This had not arisen as part of any technology transfer but rather in the context of an all too common conflict of patent rights in relation to separately developed technologies. Here, Lilly failed to disclose what the nature of their existing process but sought a licence under Novo's US rights once they had seen a published European application of Novo's which covered the process that Lilly were then using. Lilly did not know the precise scope of Novo's US rights and Novo, in error in the midst of a complex patent filing program, listed in the licence a recently abandoned US application which covered what Lilly were doing at the time but failed to identify in it a new application that had replaced it and was the only extant US one that they had. However this application also covered a further process, not used by Lilly at that time, but used by Lilly subsequently. In the subsequent litigation over Lilly's new process it was agreed that the licence should be rectified, but the issue was whether or not there had been any common intent to give Lilly a licence under processes other than the one on which the parties at the time of the negotiation had been concentrating. The Court held that even though both sides had been concentrating on the old process, that did not mean that the licence was limited to it, and so the agreement was rectified to include the new application, and patents granted pursuant to it, without any qualification as to the process which was to be licensed, and as had been urged by Novo.

The royalty base in a licence, and its relation to the rights licensed, and the licensed product, can also give problems. In September 2001 reports circulated of such a dispute which had reached the US Courts between the City of Hope National Medical Centre and Genentech.

Many such disputes are resolved by arbitration and so rarely, unless one or other party publicises the outcome, come to light. This is particularly so of disputes in relation to collaborative research, in those not infrequent cases where the most useful outcome of the research is something wholly different to what the parties had envisaged, and provided for in the agreement, at the outset.

IP and therapeutics

Therapeutics, not unfairly given the still 'hit or miss' nature of the drug discovery and development process, provide the widest rage of opportunities in terms of intellectual property protection. Patents are of course the most significant protection here, but the therapeutic sector is blessed with other forms of protection, independent of patents, which can prove in practice just as important, but which only kick into action as a therapeutic secures a regulatory approval.

One such right, automatically available for any new active substance which secures a marketing authorisation anywhere in the European Community, is regulatory data protection, which in most of the Community for all medicinal products and for all of the Community for authorisations secured throughout the European Medicines Evaluation Agency (as authorisations for true biotechnology products, such as proteins or monoclonal antibodies, must be, and other new active substance authorisations may, at the applicant's option, be) confers 10 years protection after the first marketing authorisation in the Community for the clinical data filed in support of that authorisation. This means that a second applicant for an authorisation for the same product must itself undertake similar clinical trial work unless it is prepared to wait the 10 years before it can obtain an abridged application. Only very few, determined, second applicants are prepared to take that investment for what will be, almost by definition, a generic product. Indeed, since the availability of the abridged application route is dependant on a demonstration of 'essential similarity' as between the originator product and that for which an abridged application is sought and since, unlike small molecules, there is no accepted standard of 'essential similarity' in relation to biotechnology products such as proteins, the de facto protection of the initial clinical work is at present even longer.

The most recent extra type of protection available in Europe is that of orphan drug protection, which the USA and Japan have already had for some time, and is available for products for niche markets, which have the additional benefit for early stage companies of having a lower barrier to entry for them in terms of their more favourable risk- benefit ratio and the inevitably small clinical trial sample size. The European Medicines Evaluation Agency has recently authorised the first two 'orphan drugs' in Europe to two biotech companies - one old and one newer (Transkaryotic Therapies and Genzyme), for each of their alpha galactosidase enzyme products for the treatment of Fabry's disease. As these each had before such authorisation been designated as orphan drugs, given the small number of patients suffering from this condition, this authorisation confers on each of them 10 years market exclusivity against any 'similar' product for the same indication.

Parallelling these new types of right, which in effect protect the taking of a therapeutic to market, rather than its original discovery, patent protection has now become much more complex in the area of therapeutics than once it used to be. Although the 'holy grail' of therapeutic patenting remains a product patent on a new active substance with therapeutic utility, such patents can provide little protection against competitors coming up with 'me -too' compounds, a process that has been speeded up yet further by the availability of combinatorial chemistry techniques and high throughput screening. This is because one cannot draw the claims of such patents so broadly as to cover all potential 'me -too' products that one speculates might have activity, whilst at the same time providing the degree of accurate prediction as to the activity of such other potential 'me-too' products that is required by the patent laws. Other approaches, based on an improved understanding of the pharmacology and mechanism of disease, such as 'target' patents and 'field of use' patents, have problems all of their own. Indeed 'use' patents, tied to specific indications, and which have become common, face a high hurdle as to inventive step in the light of the sort of speculation which can find its way into research papers and yet could never form the basis of a patent application itself. This augurs ill for the 'patient population' patents which are likely to emerge from pharmacogenomic research.


Despite such problems no other aspect of biosciences has had the IP protection lavished on it that therapeutics has enjoyed or offers such a potential range of IP protection. But in no other area of biosciences are the costs so high, the rewards so delayed and the path to the market so uncertain. The aim of early stage IP is to look to the future to ensure that such rewards, if they come, are not, once received, stolen, and that there is some way in which to share them, so as to support the cost, delay and uncertainty of that particular business model. But the same principles still apply, even if less strongly, to the less uncertain business models that populate the rest of the biosciences sector.

The importance of IP to the biosciences sector can hardly be overemphasised. However to all those businesses within that sector, and even within the one business, different types of IP have different uses and values, and differing types of IP may assume differing importance. Thus the full value of a business's IP can only be realised by constant and informed monitoring, in the light of changing technical and competitive developments, and in the light of one's developing business aims, one's own IP portfolio and the IP related activities of competitors, and by the intelligent management and application of such IP, whether in transactions or in the disputes which are so hard to avoid in this sector.

First published in techMARK mediscienceTM manual 2001.

Important - The information in this article is provided subject to the disclaimer. The law may have changed since first publication and the reader is cautioned accordingly.