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Patenting Issues For Biomedical Start Ups


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Introduction to managing the patent prosecution process for biomedical start-up companies.

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Patenting Issues For Biomedical Start Ups

  1. 1. Patenting Issues for Biomedical Start-ups* Dr. John Bashkin, MBA Copyright John Bashkin 2011 *This summary shall not constitute legal advice.
  2. 2. Introduction <ul><li>Patents are often core assets for biomedical start-up companies </li></ul><ul><li>While key to ensuring long-term success, securing patent protection is an expensive and arcane process </li></ul><ul><li>Common mistakes in handling IP can reduce or destroy the value of a patent portfolio and a company </li></ul><ul><li>Obtaining strong patent protection with limited financial resources makes IP management for startup companies a significant challenge for entrepreneurs </li></ul><ul><li>Here, we outline issues regarding patenting by biomedical start-up companies, describe ways to mitigate costs and offer practical tips to ensure the quality of patent applications </li></ul>
  3. 3. Patents are Core Asset for Biomed Start-ups <ul><li>Innovation is risky, expensive, and time-consuming, but once public may be easy to copy </li></ul><ul><li>Deciding which inventions to patent can be complicated. Factors include: </li></ul><ul><ul><li>Cost </li></ul></ul><ul><ul><li>Enforceability </li></ul></ul><ul><ul><li>Commercial value in the near term </li></ul></ul><ul><li>Reasons for patenting include </li></ul><ul><ul><li>Prevention of copying by others </li></ul></ul><ul><ul><li>Improved likelihood of outside investment </li></ul></ul><ul><ul><li>Potential for licensing revenues </li></ul></ul><ul><ul><li>Improved chances of a liquidity event </li></ul></ul><ul><ul><li>Creation of leverage for a cross-license or other negotiation </li></ul></ul><ul><li>Patents are more important for venture-funded biomedical companies than for software firms, which generally protect IP through copyright and trade secrets [1] </li></ul><ul><li>Patents provide more relative value to start-ups than established firms </li></ul><ul><ul><li>Competitive barriers from manufacturing capability, process trade secrets, mature sales and distribution channels, branding, strategic alliances, and easy access to credit [2] </li></ul></ul>
  4. 4. Patentability <ul><li>Invention must be novel, non-obvious and useful </li></ul><ul><ul><li>KSR v. Teleflex case limited novelty based on combinations of previously known elements </li></ul></ul><ul><ul><ul><li>Important to demonstrate why combination of known elements achieves non-obvious results </li></ul></ul></ul><ul><ul><ul><li>Could be based on clinical data showing efficacy of a drug, drug combination, or device that is unexpected based on the scientific literature </li></ul></ul></ul><ul><ul><li>Example: Simultaneous processing of many previously known biomarkers through a complex algorithm might lead to an unanticipated result </li></ul></ul><ul><li>May seek business method patent as well as utility patent </li></ul><ul><ul><li>What is the business model behind use of the biomarker algorithm? </li></ul></ul><ul><ul><ul><li>Selling a POC system and reagents with biomarker analysis resident on a hand-held device </li></ul></ul></ul><ul><ul><ul><li>Selling a POC/SAP system that transmits data to an analysis server and returns a result </li></ul></ul></ul><ul><ul><li>Business method patents reconsidered in Bilsky v. Kappos, but law remains unsettled </li></ul></ul><ul><li>Recent court decision invalidated patent claims on naturally occurring genes [3] </li></ul><ul><ul><li>Decision is being appealed </li></ul></ul><ul><ul><li>Validity of many issued and pending patents relevant to the biomedical industry in question </li></ul></ul><ul><ul><li>Focus claims on processes and key mutations, not gene sequence (DeCode Genetics approach) </li></ul></ul>
  5. 5. Prior Art <ul><li>Used to deny a patent application based on obviousness </li></ul><ul><li>Found in </li></ul><ul><ul><li>Patents and published patent applications </li></ul></ul><ul><ul><li>Published articles and scientific papers </li></ul></ul><ul><ul><li>Products currently offered for sale </li></ul></ul><ul><li>In U.S., prior art from patents and patent publications can be from anywhere in the world, but prior art from products &quot;for sale and use&quot; must be in the U.S. </li></ul><ul><li>To mitigate the cost of patent application </li></ul><ul><ul><li>Perform thorough prior art search oneself </li></ul></ul><ul><ul><li>Check background and specification sections of prior patents in addition to claims </li></ul></ul><ul><li>Prior art must be disclosed to the USPTO </li></ul><ul><ul><li>Better to deal with the prior art during the initial patent drafting than require significant re-drafting of claims and associated expense </li></ul></ul>
  6. 6. Freedom to Operation (FTO) <ul><li>Patentability and freedom to operate (FTO) often confused </li></ul><ul><li>Patent doesn’t grant inventor right to use invention; excludes others from practicing </li></ul><ul><ul><li>Possible to get patent on extension of prior invention, but be blocked from practicing </li></ul></ul><ul><ul><li>FTO search helps determine if a patent application infringes on previous issued patent </li></ul></ul><ul><ul><ul><li>If claims of prior patents read on the new invention </li></ul></ul></ul><ul><ul><ul><li>If prior patents currently valid or expired </li></ul></ul></ul><ul><ul><ul><li>Which countries are covered by international filings </li></ul></ul></ul><ul><ul><ul><li>Scope of claim coverage </li></ul></ul></ul><ul><ul><ul><li>Whether previous patents vulnerable to a finding of invalidity </li></ul></ul></ul><ul><ul><ul><li>Whether previous patents are available for licensing </li></ul></ul></ul><ul><ul><li>May wish to examine documentation trail of a relevant prior patent (file wrapper) </li></ul></ul><ul><li>FTO opinions expensive </li></ul><ul><ul><li>Carry the burden of liability for issuing law firm </li></ul></ul><ul><ul><li>Early stage companies usually forgo formal opinions due to cost </li></ul></ul><ul><ul><ul><li>Due diligence with investors and board members to establish confidence in FTO </li></ul></ul></ul><ul><ul><ul><li>Forgoing services of law firm and cost carries risk relevant material may be overlooked </li></ul></ul></ul>
  7. 7. Provisional Patents <ul><li>Used to establish early priority date for invention </li></ul><ul><ul><li>Avoids loss of patent rights from public disclosures </li></ul></ul><ul><li>Not reviewed by USPTO </li></ul><ul><li>Expire after 12 months </li></ul><ul><ul><li>Must convert to full patent application or lose priority date </li></ul></ul><ul><li>Low cost and easy to file </li></ul><ul><ul><li>Claims not required </li></ul></ul><ul><ul><li>Filing fee with USPTO is <$200 </li></ul></ul>
  8. 8. Issues with Provisional Patents <ul><li>Starts the one year window for filing patent application </li></ul><ul><ul><li>If prospects of obtaining data to demonstrate novelty or having funds available for a full application are uncertain, then inventor risks losing the priority date established with the provisional by not filing patent application on time </li></ul></ul><ul><li>Provisional patent must fully support the claims of the subsequent patent application(s) in order to establish the early filing date </li></ul><ul><ul><li>Satisfy utility patent requirements of written description, enablement, and best mode </li></ul></ul><ul><li>If provisional patent is filed when technology is immature, the provisional may become less relevant to the invention as ultimately conceived </li></ul><ul><ul><li>Company may lose the priority date benefit of the provisional </li></ul></ul><ul><ul><li>Better strategy may be to keep an invention proprietary as a trade secret until a well-crafted provisional or full patent application can be prepared </li></ul></ul>
  9. 9. Patent Prosecution Cost <ul><li>Cost of filing for a patent in US generally estimated as $10,000-30,000 </li></ul><ul><li>Recent survey found that the actual cost for startup companies averages $38,000 [1] </li></ul><ul><ul><li>Use outside rather than in-house counsel for patent prosecution </li></ul></ul><ul><ul><li>Difficult to tracking and manage the cost </li></ul></ul><ul><li>Might be assumed that costs mitigated by having inventors draft initial claims </li></ul><ul><ul><li>May be helpful to the patent attorney </li></ul></ul><ul><ul><li>May also take more time for a lawyer to revise a poorly drafted set of claims than start from scratch </li></ul></ul>
  10. 10. Steps to Mitigate Patenting Cost 1 <ul><li>Collect all of documentation relevant to invention prior to initiation of patent prosecution </li></ul><ul><li>Ensure that research notebooks are well maintained with dates for entries and co-signatures on pages related to inventions </li></ul><ul><li>Perform due diligence on prior public disclosures through scientific publications, conference presentations, or meetings with potential strategic partners – particularly if the invention is the result of work in an academic institution </li></ul><ul><li>Use experienced patent agent rather than a patent lawyer. A patent agent can fully represent clients before the USPTO for patent prosecution but billing rates tend to be lower than for patent lawyers </li></ul><ul><li>Pick a patent lawyer with specific domain expertise in the area of the invention, while also ensuring that there are no conflicts of interest from other clients </li></ul><ul><li>Perform prior art searching for patentability and FTO yourself </li></ul><ul><ul><li>Use legal team to answer questions on specific pieces of prior art </li></ul></ul>
  11. 11. Steps to Mitigate Patenting Cost 2 <ul><li>Manage your legal team </li></ul><ul><ul><li>Ask closed-ended rather than open-ended questions </li></ul></ul><ul><ul><li>Make clear the level of effort in hours or cost that you have budgeted for any particular activity </li></ul></ul><ul><li>Prioritize patent applications for multiple inventions </li></ul><ul><li>Limit filing fees </li></ul><ul><ul><li>Filing fees increase with more than 20 total claims, 3 independent and 20 dependent </li></ul></ul><ul><ul><li>Use mechanisms such as Continuations in Part as finances allow and a technology is developed </li></ul></ul><ul><li>Be organized, interactive, and responsive to your patent prosecution team </li></ul><ul><ul><li>Accelerate the drafting process and reduce draft iterations </li></ul></ul><ul><li>File a PCT application to secure international priority dates but limit countries you file in </li></ul><ul><ul><li>Japan is an attractive commercial market for a technology and an important country to file in </li></ul></ul><ul><ul><li>But, English-Japanese translation costs and filing costs for Japan can be very high </li></ul></ul><ul><li>Writing a patent application often begins with the figures. Figures that clearly describe the invention can help a patent lawyer to understand the invention and efficiently begin the process of constructing claims </li></ul>
  12. 12. Art of Drafting Claims <ul><li>Crafting well-constructed claims takes time to learn </li></ul><ul><ul><li>Through writing and being mentored on many patent applications </li></ul></ul><ul><ul><li>Responding to office actions </li></ul></ul><ul><li>Ensure that claims include all of the elements necessary to describe the invention </li></ul><ul><ul><li>If an element is missing, the patent may be either not allowed or vulnerable to invalidity </li></ul></ul><ul><li>Think about the invention from the point of view of competition </li></ul><ul><ul><li>Ask how a competitor might respond to the claims or try to circumvent the patent </li></ul></ul><ul><ul><li>Devise claims or specification language that prevent such responses </li></ul></ul><ul><li>Ensure that relationships between the elements of the invention are described correctly </li></ul><ul><ul><li>Is A really connected to B, which is in turn connected to C? </li></ul></ul><ul><li>The underlying science of an invention as described in claims or specification must be correct </li></ul><ul><ul><li>Claims should not read like a textbook or be overly detailed; can lead to overly narrow claims </li></ul></ul><ul><li>An inventor must understand all of the claims </li></ul><ul><ul><li>Important part of the declaration inventor signs prior to submission of patent application </li></ul></ul><ul><ul><li>Don’t dismiss claims as patent legalese; insist your patent lawyer explain each claim in detail </li></ul></ul><ul><li>Avoid terms in claims that impart absolutes, such as “never” or “always” </li></ul>
  13. 13. Conclusions <ul><li>Intellectual property protected by patents, patent applications, and provisional patents form the core asset for early stage companies, and for biomedical companies in particular </li></ul><ul><li>Without assets associated with mature firms, patents form a disproportionate percentage of the value of young companies </li></ul><ul><li>The cost of obtaining patents can be a significant barrier to startup companies, yet such protection is generally necessary as a business development tool for financing, establishing credibility, and extracting negotiating leverage with strategic partners </li></ul><ul><li>Thorough preparation, education, proper oversight of outside counsel, and judicious use of provisional patents, can mitigate the cost of patent protection and enhance the value of their firm both through the acquisition of a patent as a tangible asset and through the demonstration of managerial effectiveness and capital efficiency </li></ul>
  14. 14. References <ul><li>[1] Graham, Stuart J. H., Merges, Robert P., Samuelson, Pamela and Sichelman, Ted M., High Technology Entrepreneurs and the Patent System: Results of the 2008 Berkeley Patent Survey (June 30, 2009). Berkeley Technology Law Journal, Vol. 24, No. 4, pp. 255-327, 2009; CELS 2009 4th Annual Conference on Empirical Legal Studies Paper. Available at SSRN: </li></ul><ul><li>  </li></ul><ul><li>[2] Scott Shane, Technological Opportunities and New Firm Creation, 47 MGMT. SCI. 205, 209 (2001) </li></ul><ul><li>  </li></ul><ul><li>[3] Myriad Genetics opinion: </li></ul>Contact: