So, you’ve done it. You have left big business or forsaken the dusty halls of academia to launch that start-up of your own. At last, you can turn your ideas into something constructive and tangible. Goodbye to the pettifogging bureaucracy!
But, who is this gray specter at the feast, the dull humourless pedant? It’s the patent attorney, detailing a complex and arcane world, with blood-curdling tales of theconsequences of a failure to pay close attention. Best to just do what he says and pay those eye watering bills … or close your eyes and ignore everything associated with IP.
Despite the complexities of IP, however, the strategic considerations are actually very simple. They boil down to these simple points:
1. You need exclusivity and freedom to operate (FTO).
a) Exclusivity —nobody else can make, use or sell your product. Make sure you get it.
b) FTO — you will suffer if someone else’s patents cover what you do.
2. Patents cost money.
a) There is little value to a patent that doesn’t give you exclusivity.
b) Check you have coverage in the right countries.
c) Invest time and money early on, rather than trying to remedy problems later.
Let’s apply this to the characteristics of a typical start-up or spin-out life sciences company.
Choosing your advisers
Which patent attorney to work with day to day is your decision. Technical competence should be a given. Patents are diverse, driven by the technology skills of the attorney concerned. Don’t hire someone with an electrical engineering degree for your new antibody program. Look for a team and make sure work is done by the person most cost effective to do it. The senior partner may offer great advice when an issue comes up in patent prosecution, but he should not be the person filling in routine patent filing forms. A personal prejudice is for attorneys with industry experience. They are used to drafting patents that are there to be upheld and survive litigation. Their patents tend to be narrowly drafted, robust and focussed on providing exclusivity.
Find an attorney you trust, who you can talk to and feel comfortable with. Communication style is important; some lawyers can give you 12 reasons for and against any course of action, others will deliver a blunt recommendation on a postcard — cheaper, and effective. Business focused, pragmatic attorneys have much to offer. Furthermore, firms with linked skills can also be a great help, for example, offering both non-disclosure agreement and advice on litigation.
The skill is in filing for the right patents. Your venture capitalist may be happy to see an increasing list of patents; it gives the sense that you are making progress. But patents are highly expensive, so focus on a few high value pieces rather than throw money at every patentable opportunity.
As a starter, build a relationship with your attorney; bring them close to your discovery program. They will find it easier to spot your inventions and to time your filings, and advise you on FTO and publication strategy. It is easy to destroy value with an ill-timed publication or disclosure at a conference.
What patent claims?
Not all patents are equal. In life sciences, greatest value comes from a claim to the entity, such as the compound or antibody.
Expense comes when multiple filings are made around a genus. The inventor finds he has a broad genus patent that covers but doesn’t exemplify the entity of interest. Further filings are made to fill this gap. Then some salt forms because they weren’t listed in the original patent. Then, a list of polymorphs is identified. These multiple filings lead to massive expense, but they provide little value over one good compound filing with data, decent boilerplate language and the compound exemplified.
Method of treatment or second medical use style claims can be almost as effective, provided every possible approvable indication is covered. Once one use is not covered, or the patent covering a use expires, off label prescribing will destroy your market.
Process claims give little exclusivity but can be key in terms of generating FTO. Here a publication strategy could be more effective.
The wider the breadth of your patent filing, the greater your patent costs. The absence of cover in key countries can kill the value of your product; IP in others can be of tenuous value. Most important is the USA. Without it, there is unlikely to be a product. Europe and Japan are key regions. Thereafter, Canada, Mexico, Australia, Russia & New Zealand are important territories with south-east Asia, China and India emerging as markets for the future. There is no definitive answer as to which countries to chose, but think hard about your aims and the return from each individual country.
For Europe, there are validation costs as patents must be translated in each country to be enforceable. As this is expensive it is best to validate only in key territories such as UK, France, Germany, Spain, Italy and possibly Netherlands and Sweden. It remains to see how the Unitary patent will affect this.
Due diligence when you acquire assets
On most deals, the seller discloses information, the buyer does its own due diligence, and the agreement between them, and the price, reflect the outcome.
It is crucial to make sure that you are buying what you think you are buying. Checking this will largely be done by the legal team which negotiates the deal on your behalf. The best assistance you can give is to provide the fullest information you can about what it is you are buying.
Ask them to provide you with a checklist of what they need, and give them all the information you can. Ask the team to focus on key points, rather than doing a full report. Which are your important markets? What are your minimum intellectual property requirements? Do you want a particular entity that you think can be taken straight into development or are you looking to take a series of potential leads for a research program to find a suitable candidate for development? Tell them if you are aware of any disputes, and if you are buying knowhow. By narrowing the work the team does to the areas you are interested in, you will save both time and cost.
Preparing to sell on
Now you are on the other side. Know what will be needed for your data room, prepare it yourself as far as you can, then keep the room clear and clean. The buyer wants to know what exclusivity the product has, how long for, and where. An attorney docket management system can produce this as a report in moments. Get the paperwork in order. Are all your assignments complete for a start?
Focus will be on whether the key patents will be granted and upheld. The other side will likely have read through the prosecution history which is available on line. You will need to talk about the challenges of getting the key patents granted. Explain your global prosecution strategy to deal with the repeated objections you are likely to incur. Be ready to answer questions.
Do your own FTO search ahead of time, know what the problems are and explain your strategy to deal with them. This allows the attorney assessing the value of your estate to make a more informed judgement about the strength of your patent portfolio, and hopefully to recommend payment of a high price.
The more you engage with that arcane world of IP, the higher your returns are likely to be.
About the Author
Jason Rutt is Head of Patents at the specialist IP law firm Rouse. Jason joined Rouse in January 2012 from Pfizer where he was Head of their UK patent department.