Investors judge a biotechnology company on the basis of its patent portfolio, and companies are advised to ensure that it is watertight.
A strong patent position is not only an important goal for a successful biotechnology business, but also the primary asset by which a company will be valued during all stages of its development. Therefore, a patent portfolio must be as well designed and solidly constructed from the outset as all other aspects of the business.
Patently protected
Imagine that a company scientist has discovered a vaccine against the infamous West Nile virus. What then stands between the company and a financial windfall is the daunting obstacle of obtaining US Food and Drug Administration (FDA) approval and costly clinical trials, and a comprehensive marketing plan. Undoubtedly, this is a time to attract investors, but it should not be the point at which a company starts to think about intellectual property law! Investors will assess the risks associated with a new venture through a process called “due diligence”, and a company should have already covered its bases thoroughly.
Alone, technology is of no value to a company if it cannot comfortably convince its potential investors that it owns the rights to the technology, and that the technology will not infringe the patent rights of others.
Obtaining patent grants
A patent is granted in the United States for new, useful, and nonobvious inventions that can be described as articles of manufacture, machines, processes, compositions of matter, and improvements. Patents have been granted for a wide variety of biological inventions involving microorganisms, vectors or cloning vehicles, DNA and RNA, proteins, monoclonal antibodies and hybridomas, isolated antigens and vaccine compositions, methods for isolating or purifying biological materials, methods for cloning or producing protein, methods for diagnosis, methods of treatment and use, transgenic animals and plants, and screening methods.
Patents protect against imitation and independent development of an invention. Therefore, a patent grants the holder the right to exclude others from practicing the claimed invention, but not the right to commercialize or practice the claimed invention, with the exception of obtaining regulatory approval. The distinction is critical, helping companies to avoid potential liability for infringing the patents of others.
In the United States, the term of a patent is currently 20 years from the earliest date of filing. (The term is optionally 17 years from the issue date if the patent was issued before June 8, 1995 or issued from an application filed before that date.) To obtain a US patent, a company must file an application that adequately describes and claims the invention, and must disclose what the inventor considers to be the best mode of practicing the invention at the time that the application is filed. Patent applications are examined at the US Patent and Trademark Office (USPTO) by examiners with specialized technical backgrounds. Inventions are not simply registered with the USPTO, but also inspected by them.
You can be sure that investors will do likewise. Laying the proper foundation for a strong patent position requires that a company must establish, document, and secure its IP rights before the invention, that is, the commercial product, has been made. The company must also recognize its IP assets and obtain the appropriate form of protection. A company should therefore be able to answer satisfactorily the following questions.
Do you have a record of inventorship? If the scientist who made the discovery did not keep dated and witnessed records from its date of conception through to the demonstration of the invention (technically called “reduction to practice”), then scientists at other companies working on the same product may be able to establish that they were the first to invent (see “Policies and practices”).
Can you prove ownership of the invention? If the scientist who made the discovery did not assign the invention over to a company, and has no prior agreement with the company to assign such inventions, then the company may not have rights (“title”) to the invention.
Have you conducted searches on a product's patentability or validity? A company needs to consider publications that pre-date its patent application to determine whether the invention is nonobvious and has not previously been described by others (see “Policies and practices”).
Have you conducted any clearance searches? There may already be patents or published patent applications covering the proposed product. These patents may currently, or in the future, contain claims that describe the proposed product. Investors certainly will require this search before entering into a business deal (see “Policies and practices”).
Will your patent infringe that of others? If the proposed product or process is claimed in the patents of others, then the product manufacture and sale may be halted in the future and a company could be subject to damages for patent infringement. If a company examines this early enough, it can either redirect its development efforts toward an alternative, noninfringing design, or obtain a competent “opinion of counsel”. Opinion of counsel is a legal analysis explaining why the proposed product would not infringe a valid patent owned by another.
What patent protection do you have for the proposed product? If a patent application is not filed before the invention is disclosed to the public, then most industrialized countries outside of the United States will preclude the rights to a patent (and see later).
Do your patents permit others to design alternative products with only minimal modification? If a company has not disclosed and claimed in its patents (or patent applications) the broadest features of the invention—such as the varied characteristics of, or alternative designs of, the invention—then the patent protection obtained may not adequately prevent others from using either the invention or key aspects of it. This potentially opens the door to immediate direct competition.
Have you obtained necessary licenses or legal clearance? If there is any possibility that the product may infringe the patents of others, investors will want to know if the company has obtained licenses from those patent owners or clearance to proceed based on opinions of counsel.
Avoiding obstacles
Potential bars to obtaining a US patent include publications that disclose the invention more than one year before the filing date, or sales or offers of sale of the invention more than a year before the date of patent filing. Outside the United States, including Europe, any prior publication about the invention may bar a patent being granted in that territory. Foreign patent applications can be filed up to one year after a US patent application has been filed under certain conventions and treaties. These patent applications then receive a “priority” date of filing, which is the date that the application was first filed in the US. Delaying foreign filing helps to postpone the additional, substantial costs usually associated with filing patent applications in foreign countries, until a company is more confident that the patent in the claimed invention vis a vis prior applications after an initial assessment by the USPTO.
While details about an invention should not be published or publicly disclosed before a patent application is filed to preserve foreign patent rights, records of the invention should be kept contemporaneously to prove ownership of the invention in the US. In the US, patents are awarded to the “first to invent” the claimed subject matter. That means if another individual has filed for a patent application for the same invention at around the same time, an “interference” may be declared either between two pending patent applications or a pending application and an issued patent. An interference proceeding will then determine which party has the earlier date of invention. The European patent system, on the other hand, awards patents to the first filed patent application that claims patentable subject matter, which is not necessarily the party that was first to invent it.
In order to establish a date of invention earlier than the filing date, the conception of the invention must be corroborated, and diligent “reduction to practice” must be shown (see “Policies and practices”). If this is not carried out, another party who conceives of the invention later but meets the requirement of diligence through the “reduction to practice” will win the interference and consequently the rights to the invention.
With planning and attention to detail, a solid foundation can be laid on which to build a patent portfolio worthwhile to the investors sharing the company's vision of the future.
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Praiss, D. Creating a winning patent portfolio. Nat Biotechnol 19 (Suppl 6), BE5–BE7 (2001). https://doi.org/10.1038/89426
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DOI: https://doi.org/10.1038/89426