Start-ups in life sciences – optimising IP value
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Patents and other intellectual property are increasingly important in life sciences and key drivers in market dynamics. In some life sciences market segments, the market exclusivity afforded by a patent is vital. In other segments, patent licensing occurs frequently and adds value to both licensee and licensor. Established commercial players know how to utilise these dynamics and intellectual property may assist a deal or provide a bargaining chip in a difficult negotiation.
As a start-up company, when resources are limited and funding is uncertain, it may be difficult – though not impossible – to fully access valuable and versatile intellectual property. Money is important, but so too is a well thought-through IP strategy.
This chapter looks at the basic considerations that will assist a life sciences start-up to efficiently utilise the value of its IP assets.
The life sciences market is divided into three segments, where the bases for product development and product cycles vary and call for different use of the exclusive rights afforded by registered and un-registered IP rights:
- Pharmaceuticals – each new product is the result of expensive and extended product development (involving a significant level of risk);
- Biotech – kits and assays build on brand new technology in an area where technical progress is made on a daily basis; and
- Medical devices – each product may comprise elements from areas as diverse as chemistry, electronics, basic mechanics and information or communication technology.
Intellectual property, especially in the form of patents, is an important driver in each area, but in quite different ways. Before considering what to claim in a patent, where the owner of new technology is operating must be assessed.
The pharmaceutical segment builds on exclusivity afforded by strong patent claims. A blockbuster patent will protect an active substance, including some variations in chemical structure. Towards the end of the patent’s lifetime (in a pharmaceutical product), supplementary protection certificates (SPCs) are available. If the pharmaceutical product is successful, an SPC will be applied for even if its duration is short, as this will reflect the commercial importance of each day. Any intellectual property will have been supplemented with additional formulation patents and design registrations will be used where possible to protect the look of packaging or dispensing formats. A successful pharmaceutical product will be protected by trademarks, the importance and value of which will grow with each sale. It is common to litigate a patent infringer in each region where the IP rights are valid in order to obtain an injunction.
The biotech segment includes kits and assays based on molecular biology, as well as relatively simple medical devices (eg, point-of-care devices). Compared to pharmaceuticals, biotech is the ‘wild west’. Though seemingly simple, a tag or antibody may be immensely valuable thanks to its versatility and broad applicability. In such case, the patent may be worth a fortune to its owner, thanks to an active out-licensing strategy rather than to sole use, as even a small royalty each time a tag is used will build income beyond what a single company would normally achieve from product sales. Consequently, it is not unusual that the production and sale of a biotech product includes a business model where more than one royalty is included. As product cycles tend to be shorter, the model where such elements are in-licensed should provide flexibility allowing for change. Patents are frequently licensed and enforced before a court to force a resistant commercial party into an agreement. Thus, patent litigation is selective and often pursued to clarify parties’ legal positions rather than to obtain a final decision.
The medical device segment includes large and complicated products that require a number of technically different functionalities. For a successful product, the key feature must be ‘best in class’, whether it is an ultrasound machine or a high-accuracy test. The evaluation will be automatic and controlled by an algorithm affording fast results in a clever way. The end user of a marketed device will require an appealing interface with a straightforward and good-looking display, reliable operation and easily changed consumables – all functionalities which represent a plurality of patenting possibilities. However, to keep the cost of goods down, it is unlikely that all the functionalities will be manufactured by the technology owner. Elements should be separated out to provide the product with a business edge. The product can be licensed, but what gives that product an edge to succeed commercially is unique to the owner. This results in a market dynamic where interchangeable elements are licensed and certain unique selling points remain exclusive. Development times in this segment are not insignificant, although they are shorter than in pharmaceuticals. To get the return of investment back, some years of exclusivity are usually required, resulting in an IP dynamic where certain patents are heavily litigated and others are licensed with little fuss. Expensive development will discourage competitors from developing ‘me too’ products for launch in countries without patent protection. Patent families are therefore often limited to key countries. To make the complex IP landscape manageable, commercial players have developed cross-licensing models allowing access to certain functionalities, but not to others. Such a deal will be open only to parties that can bring their own IP portfolios, which the other parties will find attractive or need to access for the freedom to operate.
It is not easy to decide what to claim in a patent. A recent study showed that the number one reason for start-up failure is lack of product market. It is therefore advisable to clarify either the market for the product or the product for the market.
Patent protection – what to claim
To optimise the value of an invention as an asset, it is advisable to consider the following:
- Why do you patent?
- What can you patent?
- What should you patent?
The first question is generally answered once a business model is identified – that is, where the technology or product can succeed and how the intellectual property will be used to create commercial advantages.
The second question is linked to the invention or technology itself and an experienced attorney will assist in drafting a patent application. A novel composition will be claimed with its method of manufacture and at least one use. A method of measuring a parameter will be claimed in suitable contexts – these are the legal possibilities of obtaining maximum scope of patent claims.
The third question is answered by combining the market segment with the business model. For example, if a patent is needed because an out-licensing company is set up, it may be worth considering filing a separate patent application for each use in order to facilitate future agreements. If there are budget restraints or a patent attorney advises of future possibilities for the invention, it may suffice to ensure that every feasible application is kept in a separate claim of the patent application. Further, if the intellectual property is patented for sale in a commercial setting, it will be necessary to have broad claims that can be beefed up by the buyer and to consider what a large player in that market segment would want out of the intellectual property. If a patent is sought to ensure strong market exclusivity, detailed claims on the prototype product are necessary to prevent competition from taking the market share with products that fall outside the scope by broader claims and methods of use.
If the answers to the second and third questions are compared there is unlikely to be a gap. Nevertheless, a gap may be an opportunity to increase revenue from the patent at a small or minimal added expense:
- Ask a patent attorney what can be legally filed with a reasonable expectation of success for an invention at its current stage of development.
- Ask yourself and the commercial team what should be filed in order to be a success in the envisaged market area to meet a market need.
A good way to kick off such a discussion is by organising a brainstorming session around a set of claims which have been drafted to define what could be potentially protected, considering the technical advances in view of prior art. Market experts and technology should be brought in to assist in identifying what a competitor would do if it saw such claims granted. Solutions should be identified in consultation with a patent attorney regarding how to cover planned patent applications with consideration of the following points:
- Consider seeking to protect technical details not already tested.
- Aspects of the technology not within the scope of the business plan may be realised.
- Aspects of the original claims may turn out to be of less interest, either because of low-market interest or low performance.
Considering these strategic points will allow a technology owner to come back to the patent claim drafting with improved knowledge. Such insight may affect how the market and revenue streams are viewed and will ensure that the start-up’s position is stronger as a result of a more solid base for IP decisions – the first step towards optimising the IP value of the original invention will have been taken. It is advisable to test decisions regularly to discover what more can be done.
Using such a strategy in a patent claim drafting and including market facts and a business goal should assist in avoiding a start-up failure as the products will have a market and the IP protection that supports the products’ value.
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Annika Kilander began her IP career in private practice in the early 1990s and has since spent more than 10 years as an industry leader of the global IP department of GE Healthcare’s life science division. Apart from the general aspects of patent drafting and prosecution, her experience includes business-driven use of intellectual property, such as due diligence in acquisitions and before entry into collaborations; in and out-licensing; and third-party issues such as infringement analyses and validity assessments. Ms Kilander has also successfully and proactively driven the generation of new intellectual property through joint efforts from market representatives and research and development, often with clear monetisation in view.
In addition to being a patent attorney in private practice for more than 15 years, Camilla Lidén has also worked with Karolinska Institutet Innovations AB, a company which exploits life sciences research by evaluating and verifying projects with commercial potential. At Brann, Ms Lidén provides strategic IP advice, focusing on medium-sized innovative research companies, filing and prosecuting global patent portfolios, performing due diligence and freedom-to-operate analyses, filing and prosecuting applications for supplementary protection certificates and providing general IP advice. Her main areas of expertise include pharmaceutical compositions, vaccine products, microbiology, genetic engineering, molecular biology, microbiology, biochemistry and immunology.
Gerald Pettersson has been a patent attorney at Brann since 2017. He began his career as a patent attorney in 1998 and has worked at various patent offices and the patent department at Uppsala University’s commercialisation support unit. Mr Pettersson works proactively with his clients to maximise the commercial value of their global IP rights. He drafts and manages patent applications, particularly within the chemistry and life sciences field (eg, chemistry, biochemistry, molecular biology, biotechnology, immunology, diagnostics, pharmaceuticals, food and medical technology). He conducts patentability studies, freedom-to-operate investigations, due diligence surveys for investments or acquisitions and provides advice on patent strategies, oppositions, infringement and validity.