2009 BIOL503 Class 5 Intellectual Property I, Part 5: Intropatent And What Can You Do With One

Intellectual Property I: Introduction to Patents CSUCI 2009 BIOL503 K. Pessin

Intellectual Property I: Introduction to Patents

What is a patent and what can you do with it?

The patent process

How to find and use patent information

Global intellectual property issues

Intellectual Property I: Introduction to Patents http://www.patent.gov.uk/about-history-patent.htm

Latin 'litterae patentes', meaning an open letter. Such letters were used by medieval monarchs to confer rights and privileges. With a royal seal, the letters served as proof of those rights, for all to see.

Letters Patent of William and Mary prescribing regulations for the conduct of business of the East India Company http://www.bl.uk/onlinegallery/themes/histtexts/easindcomplge.html

Intellectual Property I: Introduction to Patents U.S. Patent signed by Thomas Jefferson as President and James Madison as Secretary of State Issued: July 6, 1802, “Improvement in the Machine for Cutting Nails” Inventor: Edward West (c.1757-1827). Said to have sold the rights to one of his nail making machines for the considerable sum of $10,000.

Intellectual Property I: What is a patent and what can you do with it? CSUCI2009 BIOL503 K. Pessin

Patent Rights

Patent Bargain

Legal effect

Patent Litigation

Market Exclusivity

Market Entry (Freedom to operate)

Case Study: CellPro

Intellectual Property I: What is a patent

“ Patent Rights” are the limited rights to the profit from excluding others

Intellectual Property I: What is a patent?

A patent is not the product

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Patent Rights

Patent Bargain

Legal effect

Patent Litigation

Market Exclusivity

Case Study: CellPro

Patent bargain:

Inventor – Fully discloses invention for all the world to see

Government – Limits competition by enforcement of right to exclude others from practicing the invention for a defined time period –

Result: Supercompetitive profits – because of limits to competition

Result: At the end of patent life, everyone can use the invention freely

Intellectual Property I: Patent Requirements, quick overview

Subject Matter

“ Anything under the sun made by man”

New

Can’t take something out of the public and get a patent on it; “novelty”

Useful

More than for further research

Non-obvious

“ Obvious” : May not be quite the same as what is known, but close

Intellectual Property I: Patent Requirements, quick overview

Full disclosure – enablement, written description, best mode

Duty of candor – “material” information

Can file with no data

Enablement vs. obviousness: If you enable invention with no data, is invention obvious? Or if invention is non-obvious, is it enabled?

Intellectual property I: Patent term (US)

Short answer: 20 years from date of filing

Law changed June 8, 1995, used to be 17 years from date of issue

Patent term extensions

FDA delays

PTO delays

http://www.uspto.gov/web/offices/com/iip/patents.htm#CanAndCannotPatent

Intellectual Property I: What is a patent If you disclose your invention to the public, I’ll let you go to court and shut down or get money from any infringing competitors that come along for the next 20 years. Hmmm. Sounds like a good deal. I wonder what could go wrong with that?

Intellectual Property I: What is a patent NO! Hey! This is a good idea! I think I’ll make, use, sell, offer for sale, or import this within the United States during the life of the patent! I could sue you for patent infringement!

Intellectual Property I: What is a patent Good idea. Hey! This is a good idea! I think I’ll design around this and make a totally novel and non obvious innovation! Uh-oh. Let me buy you lunch..

Intellectual Property I: What is a patent OK with me. It’s been 20 years from when this patent was filed. I can now copy the invention. YAY. Uh-oh. Let me buy you dinner

Intellectual Property I: What is a patent?

Patent rights are created by law

“ [T]he right to exclude others from making, using, offering for sale, or selling” the invention in the United States or “importing” the invention into the United States.

35 USC § 271

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The Constitution

The Patent Act of 1952 (35 USC)

The PTO Regulations (37 CFR) and Manual of Patent Examining Procedure (MPEP)

The Case Law of the Supreme Court and Court of Appeals for the Federal Circuit

Federal law: One law for all US

One appellate court: Court of Appeal for the Federal Circuit (“CAFC”)

Created in 1982

“ Forum shopping” and inconsistent interpretation among various circuits

Federal court circuits

Do patents promote innovation?

High prices encourage continued innovation

False upper limit to price: insurance subsidizes consumers

“ . . .The effect of health insurance on drug companies’ revenues— combined with strong patent protection that helps firms maintain higher prices—may sometimes create incentives to invest too much in R&D (from the stand point of the amount of investment that is optimal for society).. . .”

http://www.cbo.gov/ftpdocs/76xx/doc7615/10-02-DrugR-D.pdf CBO, Research and Development in the Pharmaceutical Industry, October 2006

Super-competitive profit encourages invention, R&D investment.

Encourages early disclosure of information.

Discourages inefficiencies of duplicative R&D and costs associated with keeping secrets

Encourages collaborations where information is transparent

Stimulates markets by reward of premium pricing.

http://www.ftc.gov/opa/2003/10/cpreport.htm

Undue market power

In terrorem effects upon innovation

Opportunity costs by diverting resources for defensive patent filing

No real regulation

“ Patent bar” self-interest in making system complex; lack of debate on policy;

PTO, Federal Circuit are in bed with industry, no regulation;

Economic consequences when patents are challenged may result in pulling important goods off the shelf.

“ Patent Rights” are the limited rights to the profit from excluding others

Patent Rights

Patent Bargain

Legal effect

Patent Litigation

Market Exclusivity

Case Study: CellPro

Intellectual Property I: What can you do with a patent?

“ A patent is a license to sue ”

Protects competitive advantage

Negotiation tool

“ Marketing” – PR value

Build partnerships

Attract capital

Enforcement, or threat of enforcement

Abuse

License negotiations or armed robbery?

Intellectual Property I: What can you do with a patent? http://www.ftc.gov/os/2003/10/innovationrptsummary.pdf

Intellectual Property I: What can you do with a patent? http://www.pubpat.org/

Patent remedies

Money

Lost profits; reasonable royalty

Treble Damages if “willful”

Shut-down infringing acts (injunction)

Drugs in the clinic: No infringement if “solely reasonably related” to clinical trials (“Hatch-Waxman”)

Injunction not automatic

Court looks at a variety of factors, including public interest

EBay v Merc Exchange (US Supreme Court 2006)

Patent Rights

Patent Bargain

Legal effect

Patent Litigation

Market Exclusivity

Case Study: CellPro

Intellectual Property I: What can you do with a patent? Now this is a fight!. Denied. Anyway you stole the invention. Hey, you copied my invention!

Litigation bias

Patentee: Litigation is threatening. The patent may be held invalid, and thus monopoly profits or royalties extracted will be lost (thus limiting return on investment)

Accused infringer: Litigation is rewarding. Little to lose; may be better off even if found liable for infringement

Intellectual Property I: What can you do with a patent? J.R. Allison et al., Empirical Evidence on the Validity of Litigated Patents, 26 AIPLAQJ 185 (Summer 1998) I’m presumed valid because the examiner already said so. You aren’t worth the paper you’re printed on! And you aren’t infringed. Appeal that!

Where to sue?

US Patent holder vs. accused infringer: US courts

US Patent holder vs. accused off-shore infringer: International Trade Commission and/or US courts

International patent holder (e.g., Germany) vs. local accused infringer: Local national court (e.g., German court)

You want to rescind someone’s patent:

US Patent office – administrative proceedings (re-examination, prior art)

International patent offices- post grant challenges

How to be a pharmaceutical rip off artist:

Find product with big market, after all, spending $10MM in legal fees for a shot at a $500MM+ market share is a pretty good investment. Try to hire some former execs.

Rip-off clinical trial design and get in the clinic – it’s a safe harbor! Manufacture off-shore, they can’t shut you down there!

Make up some data and file a patent application on the same invention – then claim you invented it first.

Internationally, there’s no duty of candor! So lie your head off and get all kinds of international patents.

When sued, fight in district court – after all, every one knows that the court will hold the patents valid and not infringed

Stonewall, shred your documents, hide your witnesses, and make it as long and painful for the other side as possible

Analysts put a cloud on the stock price -- “Litigation outcome is uncertain” -- heh, their finance group will say it’s worth it to settle just to recover market cap!

When you go to sell, make sure you bake in lots of profits for the docs – a little bribe here and there won’t hurt!

If you’re caught, no harm, no foul – no jail time for that!

“ A man with a briefcase can steal more money than any man with a gun.” Do Not Do This

Patent Rights

Patent Bargain

Legal effect

Patent Litigation

Market Exclusivity

Case Study: CellPro

Intellectual Property I: Market Exclusivity and Market Entry

Market Exclusivity

Premium pricing

How important is your patent to premium pricing?

Market Entry

Barriers to entry

Are third party patents potential threats to your market entry?

You can have product and a business and no patent if you’re a good marketer

Intellectual Property I: Market Exclusivity and Market Entry http://www.lao.ca.gov/2004/cal_facts/2004_calfacts_econ.htm Why patent if you can market to the world’s 6 th largest economy?

Patent ≠ Monopoly

Market power: power to control the price of goods or services in a relevant market

No presumption of market power for patented goods

For illustration only – not the ones in the lawsuit. “ If you want to buy my patented ink jet head, you have to buy my ink, too.”

Intellectual Property I: Market Exclusivity and Market Entry $375 Million 20 year patent term $750 Million $0 Time  $1 Billion $1 Billion = Exclusive market (patent) $750 MM market size if price competition forces product price down (generic) $375 MM each for 2-player market (generic) Patent vs. Generic Oversimplified

Intellectual Property I: Market Exclusivity and Market Entry http://www.nytimes.com/2005/12/23/business/23epo.html?ex=1165467600&en=2d14a0930a7515c9&ei=5070

Example: IP strategy when new target is discovered

Patent application 1: Novel compounds

File fast, add in vitro data, in vivo animal data later

Patent application 2: Preferred formulations

IND data

Patent application 3, 4, 5 etc.: Defensive

In silico rational drug design (knock-offs)

Novel uses

Patent application … 6: Second generation

Novel pro-drugs, sustained release, combinations

Intellectual Property I: Market Exclusivity and Market Entry IND/Phase I Pre-clinical Phase IIa/b/Phase III Approval/Launch IP Valuation New molecules Formulation 1 Formulation 2 Analogs, Design-arounds New uses 2 nd generation molecule Competitor filing

Intellectual Property I: Market Exclusivity and Market Entry Patent expiration Patent expiration Pipeline 

Regulatory laws

“ Marketing exclusivity”, e.g., orphan drug, pediatric use

“ Data exclusivity”

5 years (NCE) or 3 years (new use)

Example: Animal insulins banned

Other exclusive rights

Licenses, source of supply, pre-clinical models, trade secrets

Caveats:

Competition laws

Temporary solution

IP rights can be transferred

By field of use

By geographic field

By time period

Maintain exclusivity in each market to keep premium pricing

Cancer –ex US Cancer -US Diagnostics/Research Kidneys –world wide Animal/Vet Neuro Stem cell Exploratory with grant back

Goal = Premium pricing

Patents ≠ monopoly

Combine with marketing and data exclusivity

Combine with other exclusive rights

Licensing

Even in fields of use, maintain exclusivity to keep premium pricing

Good science makes good products

Patent Rights

Patent Bargain

Legal effect

Patent Litigation

Market Exclusivity

Case Study: CellPro

Barriers to entry

Legal barrier: Third party patents

Governmental barrier: Regulatory environment/trade restrictions

Competitive barriers

Limited upside: pricing environment

Excessive downside: costs

Product can’t compete on the merits

Freedom to Operate

Compare your product to third party patents

When: Ongoing

“ design around”, license, litigate

What you can do about third parties

Third party royalty reduction

Afraid of commitment?

Right of last refusal = right to match price

Patent on genus

Patent on species

Species are commercially competitive

All cyclic compounds Esterified Cyclic compounds

Problems : Industry gridlock due to patent blocking situations

In terrorem effect

Defensive “chits” – trading purposes

Free-floating anxiety

Avoid setting up royalty scheme

Possible solutions

Post-grant challenges (Re-exam, opposition)

Contract

Patent Rights

Patent Bargain

Legal effect

Patent Litigation

Market Exclusivity

Case Study: CellPro

Intellectual Property I: Market Exclusivity and Market Entry Story time

Intellectual Property I: Patents, market entry The Story of CellPro

Intellectual Property I: Patents, market entry Once upon a time , in a Federal Courthouse in Wilmington, Delaware, there was a patent litigation.

Intellectual Property I: Patents, market entry http://www.baxter.com/products/oncology/cellular_therapy/index.html The Story of Cell Pro

Intellectual Property I: Patents, market entry CellPro asked Baxter nicely, “Would you please share the CD34+ antibody patent with us?” There was a company called CellPro. It wanted market entry into the CD34+ antibody market for stem cell separation. But, Johns Hopkins owned a patent to CD34+ antibodies and stem cell isolation. Baxter licensed the patent from Johns Hopkins. The Story of Cell Pro

Intellectual Property I: Patents, market entry Baxter said, “ OK, CellPro, pay us a big royalty” CellPro said, “ No way, we have an opinion of counsel the JHU patents are no good .” The Court said, “ CellPro, your opinion of counsel is no good, the patents are valid and you infringe. Treble damages for a hokey opinion. Plus, shut down your infringing business.” CellPro cried, “ Bayh-Dole! We want march in rights because this was a government invention and this is an emergency.” . CellPro

Intellectual Property I: Patents, market entry http://www.nih.gov/icd/od/foia/cellpro/pdfs/foia_cellpro36order.pdf CellPro

Intellectual Property I: Patents, market entry http://www.nih.gov/icd/od/foia/cellpro/pdfs/foia_cellpro39.pdf CellPro

Intellectual Property I: Patents, market entry CellPro Amazon.com Cancer is a terrorist, driving us mad with feelings of hopelessness and despair. One man, faced with lymphatic cancer and a poor prognosis, had the unique opportunity to influence not just the course of his treatment, but the research guiding that treatment. Patient Number One tells the story of Rick Murdock, former CEO of CellPro, a Seattle biotech company specializing in cell separation--as it would happen, a vital component of his treatment and eventual cure. Written by Murdock and David Fisher, the book is both an intensely personal look at the day-to-day hardships of living with cancer and a thrilling legal story. While he was battling his disease, Murdock had to fight the giant Baxter medical-products corporation over an application of patent law that would have killed CellPro just as surely as cancer has killed so many people over the years. As the struggle for his company becomes intertwined with his fight for life, every moment takes on heightened significance; the simplest acts, like driving to the doctor with his wife and reading research reports at work, become crucial, even life-giving. Filled with unique insights into living with cancer and the dawn of the biotech era, Patient Number One is a powerful record of its time. --Rob Lightner

Intellectual Property I: Patents, market entry CellPro