Andy Updegrove

1. What Can we Learn from Open
Source and Open Standards?
September 1, 2015
Andrew Updegrove
Gesmer Updegrove LLP
andrew.updegrove@gesmer.com

2. What does Traditional Pharma
Look Like?
All R&D costs borne by one company
All risk borne by one company
All patent rights held as long as possible by
one company

3. What do Traditional Pharma
Results look like?
Limited number of new drugs per year
Limited number of diseases/conditions addressed
Delayed sharing of research and results
Ongoing consolidation due to costs
Limited distribution
Marketing is profits-driven (regardless of efficacy)

4. What do Open Standards and
Open Source Look like?
Very broad, global collaboration
Voluntary participation
Voluntary sharing of burdens
Voluntary sharing of valuable intellectual
property
Voluntary uptake of deliverables

5. What do Open Source and Open
Standards Results Look Like?
Thousands of new efforts launched every year
Ubiquitous global adoption
Lowest cost implementation
Springboard for new businesses
Proliferation of platforms for innovation
Immediate, or rapid disclosure of results

6. Why does this happen?

7. Because the participants trust
the system and believe in the
rewards

8. Rewards Credibility
Open Standards and Open Source Build
Ecosystems
Diverse examples of the economic benefits of
network effects (railways,
telecommunications, Internet, Wi-Fi, etc.)
Networks are much easier to create
collaboratively than proprietarily
Lower strategic risk, more predictability

9. Level Playing Fields
Rules ensure that all have an equal
opportunity to benefit
In open standards, it’s open admissions,
strict IPR policies, and RAND implementation
In open source, it’s open participation and
licensing rules that assure equal ability to
implement
In open standards, it’s consensus rules
In open source, it’s meritocracy

10. Intellectual Property
Each approach has found a way to deal with
intellectual property that is acceptable to
the IP owner
In standards, “Necessary Claims” will be
available to all on RAND terms, and indirect
benefits exceed direct benefits to IP owners
In open source, IP owners have ample
opportunity to monetize IP, dramatically
lower R&D, and dramatically lower strategic
risk

11. Common Goals
Everyone benefits from the same success
In open standards, the wider the uptake, the
wider the marketplace and the more certain
the rewards
In open source, the more successful the
project, the more prestige for the
developers, and the more customers for the
sponsors

12. What are the Lessons for Us?
Success depends on:
Appropriateness of domain (not every
development type needs broad collaboration)
Credibility of outcomes (will network effects,
or similar drivers result)
Governance systems that ensure a level
playing field
IPR rules that are acceptable and effective
to the industry in question
Willingness of target participants to embrace
approach

13. Key Lessons
All domains are different – while the high level
principles must be applied, each domain will
require a unique implementation of the open
model
The art in designing an open model is to make it
want to default to success
In order to default to success, all key stakeholder
groups must be identified and provided with an
often unique valuable proposition
The model must lead naturally to rapid
implementation by the same participants

14. R&D Through Availability in the
Field
Who are the stakeholders in the resulting
network effect ecosystem?
Government health agencies
Foundations
Research Labs
Production facilities
Test vendors
Distributors
NGOs active in the field
Others?

15. How to Address the Clinical Gap?
Form a non-profit investment fund
Applies a triage approach to funding, from
infectious diseases (I) to high-profit margin drugs
(III) and funds all types
No royalties on I, modest on II, and industry-
standard royalties on III
All royalties are reinvested
Exclusive licenses scale by tier as well (0 for I, 2
years for III, five years for III); generic thereafter

16. Fund Governance and Funding
Balanced board of directors that includes
representatives of all stakeholders, but controlled by
non-commercial Directors
Advisory Boards from certain classes of stakeholders
(Pharma, Government, Foundation, Manufacturers)
Initially funded by government, Foundations and
Pharmas (who thereby become eligible to become
licensees)
Also accepts “targeted” funding for specific projects in
any tier

18. Questions?