UK: HL's Guide To Making Your Biotech IP Investable

At the core of any biotech company is an innovative piece of science which is believed will lead to new and beneficial healthcare products. The company's Directors and advisors use their scientific insight and business acumen to push these new healthcare products along the road towards market. Often the innovation has provided one or more new drug candidates which the biotech company moves along the stages of R&D towards (hopefully) having a new blockbuster drug on the market, or is aimed at earlier or better detection of disease and the biotech company works to validate and refine the sensitivity and selectivity of the diagnostic tests.

To make it worthwhile spending time and money developing a new healthcare product, there needs to be an exclusive market, at least for a few years, during which the product can be sold at a price which enables re-couping the investment and making a profit. Therefore, aside from the company's key individuals, the core of any biotech company is the innovative piece of science and the intellectual property (IP) – usually patents – protecting it.

In this comprehensive guide, we will provide useful tips for creating and maintaining a patent portfolio that genuinely provides a biotech company with the hoped-for IP position and helps makes it an attractive choice for investors.

The guide covers the key aspects of making your biotech IP investable:

  • Building a robust and investable patent portfolio
  • Ensuring your IP is ready for due diligence
  • The impact of other people's IP on you
  • Patenting problems specific to the biotech and healthcare sector

Building a robust and investable patent portfolio

When are you ready to file a new patent application?

This is a difficult balancing act between, on the one hand, ensuring you file before any competitors working in the same space as you so you get the earliest priority date, and on the other hand, waiting until such time as there's enough evidence available to put into the new patent specification to show that the new healthcare product really works as claimed. Waiting too long means a competitor can get in before you and take the lead or exclude you from that technology space. However, filing too soon could mean there's not enough evidence to confirm that the new healthcare product actually works, or actually works for all of the applications claimed, which could be a problem.

Clearly a patent application for a new drug is filed years before clinical trials are performed, which are the true test of whether the drug works. Therefore a key test is whether it is plausible that the new drug works and whether it is plausible that the new drug works in all of the ways claimed. What might be "enough" evidence depends on both the nature of the invention and the scope of claims to be pursued. As an example, this was one of the issues grappled with in the recent high profile dispute between Actavis and Warner-Lambert relating to the drug pregabalin. The patent in question claimed treating neuropathic pain generally which was construed to encompass all types of neuropathic pain. Whereas, the patent specification was found to have evidence which only confirmed the usefulness of pregabalin for treating peripheral neuropathic pain, and not central neuropathic pain and therefore this was not evidence for treating (all types of) neuropathic pain.

What should your patent filing and prosecution strategy be?

A standard approach is to file the first patent application wherever the inventors are based, followed within 12 months by a priority claiming international (PCT) patent application.

Then wait until the end of the international phase before seeking patent protection in the countries/regions of interest. This standard approach can provide what's required, but there's no need to follow this exact route if you can achieve a better position by doing something different. Identifying the best strategy will involve an awareness of what's helpful at different stages for the business and an awareness of what's possible before different patent offices.

Some patent offices, like the United States Patent and Trademark Office (USPTO), may do very little with a new patent application within the first year of filing, whilst others offer more information. The UK Intellectual Property Office (UKIPO), for example, can provide a search and initial examination report well within the 12 month priority period. Analysis of this information can help shape subsequent patent prosecution strategy such as modification of the claim structure or description of the application and give some understanding of the likely final patent scope. Therefore, filing first, or early, with the UKIPO might be useful regardless of where inventors or a company is based. As a note of caution, however, it is necessary to take into account any national patent laws dictating that inventions made in that country and/or by citizens with that nationality must be first filed with their national patent office or that a foreign filing licence is obtained. Since biotech and healthcare inventions often result from international collaboration, the interplay of these provisions needs to be built into the first filing decision.

Once a new patent application is filed, how should you run patent prosecution?

This depends on when you need granted patents and/or when you need a strong indication that patent protection will be obtained and what the scope of that protection might be. If you need to maintain exclusivity by having or enforcing IP, then granted patents are key and many patent offices offer mechanisms for accelerating patent prosecution. Whilst the requirements, costs and effectiveness of these different mechanisms varies, it could be valuable for core patents. Conversely, there can be reasons to want to slow down patent prosecution or delay certain stages. Such reasons include insufficient information to make certain decisions or a need to defer certain costs. However, such delay means third parties like potential investors don't have the comfort of knowing the technology is patented. A good solution can involve blending together patent prosecution options, for example, to get rapid grant of a patent in one country – confirming patentability and achievable scope of protection, whilst the corresponding patents in other countries progress more slowly. Alternatively, you could take steps to get an early official indication from a patent office that the technology is patentable in the form of a positive opinion on an international patent application.

As you can see it is possible to drive your patenting strategy in a variety of ways depending on requirements and there is no such thing as a one size fits all solution.

Is your IP ready for due diligence?

Now we understand the basics of building a robust patent portfolio, so it is important to consider how to make your patent portfolio ready for external review or due diligence. The rigour and detail of IP due diligence varies across the life of a biotech company, varying with the size of investment sought (and IP awareness of the investigator), culminating in detailed considerations when assets are to be bought by "big pharma" – who are very IP savvy.

Nevertheless common themes run across all due diligence exercises. It is worth being mindful of getting and keeping your IP portfolio in good order from the outset, even if the due diligence to be performed is minimal, because in my experience any "issues" tend to magnify and become more costly to fix with the passage of time. To get a patent portfolio that is valuable, it needs to be grown and adapted in a way that aligns with the business plan.

Do your patents actually cover your healthcare product?

When prosecuting or critically reviewing a family of patents and patent applications, the first and most important question to consider is whether or not those patents cover the product or method they are supposed to cover. This might sound obvious, but often a patent application is drafted and first filed at the start of an R&D project and it may be several years later that a lead drug candidate is identified and optimised or a diagnostic test is validated. Furthermore, pregrant interaction between a patent examiner and a biotech company's patent attorney can take a few years.

Good communication between those managing the IP and the R&D team should prevent divergence and help keep the patent protection aligned with the drug development. Furthermore, that good communication should help spot when the drug development programme has produced a refinement or incremental step which is itself a patentable invention. This could create a new layer of patent protection to strengthen a patent portfolio and, as such a new patent filing occurs later in time, potentially extend the duration of patent coverage.

As an early biotech company is often many years away from obtaining marketing approval for a new healthcare product, the issue of Supplementary Protection Certificates (SPCs) in Europe (or Patent Term Extensions (PTEs) for the US) can be forgotten about. However, it is best not to completely ignore this issue since such extension of exclusivity will become important later on and to review the claim structure with a view to SPC requirements.

Where do you have patent protection?

There's no such thing as a world patent. Patents are territorial meaning they provide rights in a specific geographical area which is often just one country. Since patents are territorial rights, another consideration for a biotech company's patent portfolio is where to seek patent protection. This means determining issues including the geographical prevalence of a particular disease and the willingness of healthcare systems to pay for the healthcare product being developed and where potential generic competitors have manufacturing plants.

Whilst there are mechanisms to delay final decisions and costs associated with filing patent applications in all countries of interest, due to the nature of the healthcare industry, decisions about where to seek patent protection often need to be taken years before a product is ready for market. It is wise to keep your options open (assuming budgets allow) if a final decision cannot be made because you can't go back and "add a country" to a patent family at a late stage.

Clearly, your patent protection for a new healthcare product should at least cover all the major markets. Consequently, there could be country selection differences between different patent filing programmes for different types of healthcare products. Having articulated reasons for the selection of territorial scope of patent protection in each patent family helps decision making internally and provides ready answers to any questions on this topic.

What is the likelihood that patents will be granted?

Seeking patent protection takes time. Therefore, due diligence associated with initial funding rounds on an early stage biotech company might be performed before any patents are granted. The question then becomes what reassurance can be offered to show that granted patents can be expected?

In most situations, it is worth anticipating this question so that a positive answer is readily available. A good solution is to accelerate the prosecution of at least one patent before a well-respected patent office that performs substantive search and examination to achieve a granted patent. This will give a good idea of the scope of patent protection that might be expected. A number of patent offices offer accelerated prosecution programmes and the UK Intellectual property office (UKIPO) can offer a relatively low cost, rapid and high quality service. If that patent portfolio is at an earlier stage, obtaining a positive opinion on your international patent application can be useful.

Who owns your IP?

In most cases the lack of clarity of who owns the IP comes from not completing all paperwork because it was considered a low priority compared with the myriad of other pulls on time and resources. However, since you can be sure that ownership will be examined, to be ready for due diligence, the chain of title for each patent family of your patent portfolio should be clearly documented all the way from the original inventors to your company. Trying to fill in gaps in a chain of title during a due diligence process can cause delays since key individuals may have moved on and could be harder to contact and/or they may now see an opportunity to make money, if significant investment is being considered.

As well as having a completely documented chain of title, the correct ownership of each patent or patent application should be recorded with the relevant national patent offices.

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