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Biotechnology Licensing: Recent IP Developments and Challenges

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Biotechnology Licensing: Recent IP Developments and Challenges

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    1. The Nath Law Group 2007 Biotechnology Licensing: Recent IP Developments and Challenges

    2. The Nath Law Group 2007 License Value = Patent Value The value of a license is related to the value of the licensed patents Patent value arises from the ability to exclude others from practicing your patented subject matter (market exclusivity) Only patent CLAIMS are enforceable Broader claims = broader protection (sometimes) But, overly broad claims might increase difficulty of enforcement Narrower claims = narrower protection Narrow claims are more easily enforceable, BUT often invite competitors to find ways to design-around the claimed invention

    3. The Nath Law Group 2007 Biotechnology License Value The value of a license is related to the value of the licensed patents Biotechnology products require long developmental time Proof of Concept FDA regulatory hurdles Financial challenges Long Development means many opportunities for competitors to design-around claimed biotech products and methods Maintaining patent value by building a patent portfolio that protects the core technology and all possible variations Patent portfolios may increase the value of a single patent by offering defensive protection from design-around competition

    4. The Nath Law Group 2007 Challenges in Biotechnology Licensing Practice Recent changes in the USPTO and US Courts have had a direct impact on patent claim scope and enforceability, making it more difficult to obtain and enforce broader patent claims Accordingly, these changes have a direct effect on the value of the patents being licensed

    5. The Nath Law Group 2007 A Changing USPTO New USPTO Campus in Alexandria Virginia Accelerated hiring of new Examiners Second-Layer Review quality control Patent Academy Changes Examiner re-certification Telecommuting/Remote Sites/Regional Offices Significant USPTO Rule Changes Proposed

    6. The Nath Law Group 2007 USPTO PATENT PROSECUTION STATISTICS

    7. The Nath Law Group 2007 USPTO PATENT PROSECUTION STATISTICS

    8. The Nath Law Group 2007 Increasing Pendency Increasing Abandoned Applications Decreasing Allowance Rate Increased Pressure on Applicants to Narrow Claim Scope to avoid prolonged prosecution Increased internal Pressure at USPTO to change rules in regard to limiting Continuation practice, IDS disclosures, and accelerated Examination

    9. The Nath Law Group 2007 In this environment, what IP management strategies remain available to obtain strong licensable patents with depth of claim coverage?

    10. The Nath Law Group 2007 The USPTO Is Trying To Manage Their Operation More Like a Business Than In Years Past. Applicants Should Develop Good Business Practices With USPTO Examiners

    11. The Nath Law Group 2007 Understand How Examiners are Managed: The Examiner Production System Limited time to complete examination Your application is one of many on the docket 2 counts per disposal 1 count for first office action 1 count for allowance or abandonment After Final Practice / RCEs Restriction / Divisional Examiner Performance Measured and Reviewed Bi-Monthly Performance determines promotions and pay-scale Supervisor performance is linked to Examining Group performance

    12. The Nath Law Group 2007 USPTOs New Mantra: Quality Review! 5 years ago, Examiners were much more independent and able to negotiate amendments, agree to proposals, and allow applications, with minimal oversight. Today, Examiners can no longer allow a case spontaneously based on newly proposed amendments, arguments, or interviews. Examiners now chant their new mantra: A decision for allowance must also be reviewed and approved by their quality review supervisors. Coincidentally, the Allowance Rate has plummeted from 70% to 54% in the past 5 years, while Abandonments increase. Be alert for Examiner-initiated Interviews

    13. The Nath Law Group 2007 Filing With or Without R&D Data?: Effect on Biotech Licensing Opportunities Experimental data is not per se required in a patent application to obtain a valid licensable patent claim There are, however, a variety of situations where data is either vital or is detrimental to obtaining a valid and licensable patent claim How much of your R&D needs to be disclosed? Landmines on both sides: disclosing too little or too much?

    14. The Nath Law Group 2007 When Experimental Data Might Be Required Data might be required by the USPTO to show that the claimed invention is enabled and/or has adequate written description in the specification under the patentability requirements of 35 USC 112, first paragraph Such data might be required in an application, especially when the subject matter of the claimed invention is in a new technology area that is not yet well understood or known in the art For example, Examiners often require experimental evidence of a new gene therapy composition or method to show enablement In some instances, the data can be presented after filing to show that the written description is adequate or that the specification enables the claimed invention

    15. The Nath Law Group 2007 When Experimental Data Might Be Detrimental U.S. Patent Examiners are increasingly limiting the enabled scope of claims to the scope of embodiments disclosed in experimental data For example, limiting enablement to one sub-genus of tested compounds; or limiting enablement to one class of diseases related to the in vitro assay data Data can be presented in a declaration post-filing as evidence of enablement Beware, such declarations could be the focus of invalidity attacks if litigation arises

    16. The Nath Law Group 2007 When Experimental Data Might Be Detrimental When not required to meet the patentability requirements of 35 USC 112, first paragraph, data might also provide an unintended road-map to potential competitors regarding which sub-genus or species the Applicant was most interested in studying -Especially if a narrow group of compounds is studied and a large genus is claimed Early disclosure might allow competitors to save much time and effort in understanding what worked better than others, accelerating their design-around opportunities, and potentially devaluing future licensing deals

    17. The Nath Law Group 2007 Licensable Biotechnology Patents: Scorched Earth vs. Limited Disclosure Scorched Earth pursuit of patent containing extremely broad disclosure encompassing all imaginable uses and numerous prophetic embodiments -Advantageous if wish to keep all competition out of one area -Intended to increase defensive posture, and prevent others from obtaining any patents in that particular subject matter since the disclosure will act as wide-ranging prior art -Only your own continuation applications will have a chance at patents -Cost is upfront Limited Disclosure is advantageous in crowded fields, and maximizes validity and freedom to operate potential -Optimizes speed of obtaining the patent -May need other defensive patents to create a diverse and defensive portfolio with attractive licensing potential -Cost is downstream.

    18. The Nath Law Group 2007 Hypothetical Scenario II: Small Biotechnology Company You are a small biotech company that has developed and patented a drug for treatment of rheumatoid arthritis under a cross-licensing agreement with a local University. Your patent also covers a drug for the same treatment that has recently been put on the market by a pharmaceutical company (Pharma). The Pharma drug will be obsolete if and when your drug reaches the market. Your drug is in stage 3 clinical trials. At stage 3, there is a demonstrated likelihood that the drug is safe and effective. About two thirds of drugs in stage 3 clinical trials reach the market, and do so within a reasonable time. Royalties for drugs in wide distribution can run >50%.

    19. The Nath Law Group 2007 Hypothetical Scenario II: Small Biotechnology Company However, there may be a cost of $100 million for activities that will be needed to take the drug from its present status into wide distribution. Your principal scientists on the project have been developed internally and have not shared their knowledge outside the company. They will provide helpful guidance in the future, and are credible information sources useful in a marketing campaign. Your patent filing predates Pharma's activity in this area. You have several defensive patent applications pending where the Examiners are so far only willing to allow narrow claims. Costs of enforcing your patent in litigation against Pharma could start at $10M and easily escalate and last years.

    20. The Nath Law Group 2007 U.S. Court Decisions Contribute To The Shift In Biotech Licensing Opportunities Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (en banc) For Meaning, Look to the Specification First University of Rochester v. G.D. Searle & Co., 358 F.3d 916 (Fed. Cir. 2004) Reach-Through Claims are Invalid Claim scope must correlate to a specific written description KSR Int'l Co v Teleflex, Inc, 119 Fed.Appx. 282 (Fed Cir 2005), cert granted, 126 S Ct 2965 (2006), (written decision expected March 2007) Is Obviousness under 35 USC 103(a) properly defined by the application of the teach, suggest, motivation standard

    21. The Nath Law Group 2007 U.S. Court Decisions Contribute To The Shift In Biotech Licensing Opportunities Madey v. Duke University, 307 F. 3d 1351 (Fed. Cir. 2002) (No. 02-1007); cert. denied Limits Experimental Use Exception for Universities Integra Lifesciences I, Ltd. V. Merck KGaA, 331 F.3d 860, 866 (Fed. Cir. 2003); No. 03-1237, (U.S. Supreme Court, June 13, 2005) Research Exemption allows competitors to pursue developmental work if related to meeting FDA Requirements

    22. The Nath Law Group 2007 Phillips v. AWH Corp. A clear retreat from the courts dictionary first approach to claim construction Claims must be read in view of the specification and that to a meaning of a disputed claim term, the meaning attributed thereto in the specification is usually dispositive Take home: Content of the specification will be scrutinized for both ambiguity and specificity -If Specific as to claim term, then no need to look elsewhere -If Ambiguous as to claim term, then can look elsewhere

    23. The Nath Law Group 2007 Practical Application of Phillips v. AWH Language in the patent specification should be unambiguously consistent with any technical language provided in the license. Biotechnology R&D, Marketing, and Licensing should all be similarly unambiguous about what precisely is the product that they think they are making, marketing, and licensing.

    24. The Nath Law Group 2007 (Application of Phillips v. AWH continued) Method of Use Claims May be Easier to Obtain but are Worth Less to a Licensee Usually it is easier to incorporate specific characteristics of the method that would distinguish it over the art. (e.g., ranges of temperature, pH, additives, etc). However, depending upon the technology, method of use claims may be more difficult to enforce and obtain monetary remuneration. e.g., a pharmacy supplier may be free to make and sell a composition for one purpose, but individual consumers might feel free to use the composition with your patented method for a second purpose. Who can you sue for damages? At what cost?

    25. The Nath Law Group 2007 Rochester v. Searle Good example of overly broad patent claims Potentially very valuable to a licensee, but later found to be invalid and unenforceable The University of Rochesters inventors had developed an assay for screening non-steroidal compounds that would selectively inhibit the activity of one gene product (COX-2), but not that of another, to provide pain relief without stomach upset While the patent claimed a therapeutic method of treatment using a compound identified by the screen, the patent did not disclose the results of any screens

    26. The Nath Law Group 2007 Practical Application of Rochester v. Searle Licensing strategy: Even though a discovery might arise from a single unique combination of elements, competitors will try to discover new ways to accomplish the same result. Well developed patent estates and licensing strategies try to foresee all the ways a competitor may work around your patents and diminish your market share.

    27. The Nath Law Group 2007 KSR Int'l v. Teleflex US Supreme Court is currently deliberating on the CAFC holding that when combining two or more references in an obviousness finding, there must be a suggestion or motivation to combine the teachings. This teaching-suggestion-motivation test has been applied by the Federal Circuit in hundreds of cases since set out in 1985. This is of particular importance to pharmaceutical and biotechnology research-based companies who are against any change to the test (and might make it difficult to patent known drugs for new uses). A decision is due any day.

    28. The Nath Law Group 2007 Pfizer v. Apotex: A New Balancing Act for the Obviousness Standard? Pfizer, Inc. V. Apotex, Inc., Fed. Cir. March 22, 2007; No. 06-1261, The Court determined Obviousness by balancing an extensive record of facts Evidence seemed to support patentee that the claimed invention was merely obvious to try (usually insufficient to show obviousness) there was inadequate motivation to do so. However, the detailed facts and expert testimony clearly and convincingly suggested that the result might have been reasonably expected and predictable (sufficient to show obviousness, and to overcome the defense that it was merely obvious to try). Invalidating a patent on the basis that it was Obvious has now become a much more viable strategy, especially if expert testimony and evidence can show the claimed subject matter was reasonably predictable. Businesses, especially BioPharm, will need to have a fairly thorough understanding of their claimed inventions, including extensive studies that might needed later to support a showing that their inventive subject matter has unique or unexpected characteristics over mere suggested combinations of the inventive components.

    29. The Nath Law Group 2007 Duke v. Madey: University Experiments Might Not Be Exempt Under the Experimental Use Exception In the past, universities and other research institutions had generally been able to escape infringement liability for research activities in the United States under the experimental use exception. Developed in common law, this defence to patent infringement arose to protect activities done for amusement, to satisfy curiosity, or for strictly philosophical reasons. In 1988, Duke built an addition to its physics building in order to house Madey's lab with equipment that practice the subject matter disclosed and claimed in two patents owned by Madey. After Madey left Duke, Duke continued to use and practice the claimed subject matter. Madey then sued Duke for patent infringement. In 2002, the CAFC took the experimental use defence away from most universities when it concluded in Duke v. Madey that the defence is very narrow and should be strictly limited to accused activities having no bearing on the alleged infringers legitimate business. A universities legitimate business objectives (eg by educating students, enlightening faculty, luring research grants and enhancing the schools reputations) are not covered by the experimental use exception.

    30. The Nath Law Group 2007 Practical Application of Duke v. Madey Universities need to look closely at how any patented technology is used, even if solely for educational purposes, and ensure that appropriate language in licenses and/or contracts reflect the agreed upon intentions of both parties. If Universities feel the need to maintain rights in a patented/licensed technology for certain educational purposes, then those rights and examples thereof should be incorporated in the licensing agreements. For businesses, Universities are partners and neighbours. Good relations with community neighbours can add much value downstream for personnel, funding sources, and business networks. Universities are major players in biotechnology licensing, and the absence of forethought in license deals might inadvertently make your business look like an enemy of education and further partnership.

    31. The Nath Law Group 2007 Integra Lifesciences v. Merck Integra sued Merck and Scripps for infringement related to methods for contacting cells with tripeptides of the sequence Arg-Gly-Asp to promote cell adhesion, inhibit cell proliferation, and selectively detach malignant cells, amongst other claimed results. As a defence to infringement, Merck raised the research exemption under 35 U.S.C. 271(e)(1) (the 271(e)(1) exemption) for its developmental work from 1995 to 1996. The Court held that the exemption applies [a]t least where a drug maker has a reasonable basis for believing that a patented compound may work, through a particular biological process, to produce a particular physiological effect, and used the compound in research that, if successful, would be appropriate to include in a submission to the FDA [because] that use is reasonable related to the development and submission of information under Federal law. The Court, however, left other practical questions unanswered, such as whether the exemption applies when a researcher used the patented compound without having a reasonable basis for believing that it would produce an intended physiological effect.

    32. The Nath Law Group 2007 SanDisk v. STMicroelectronics: Strategic Use of Warning Letters SanDisk v. STMicroelectronics (Fed Circuit 2007) March 26, 2007 Common practice for a patentee/licensor to send a letter pointing out patents that might have similar scope to the addressed partys patent. Implication might be: lets make a deal or stay out of our way, depending on the language. Court held that when the intent is ambiguous, the addressed party can receive a declaratory judgment that the sender is improperly threatening an infringement suit. Declaratory judgment can bar the sender from pursuing any further infringement matter involving the same controversy. Implied Warning letters will transform into invitations to licensing discussions. Not too monumental for the Hi-tech arts where stacking patents has been the norm. Big shift in risk management for the Biotech sector where delay or a big stick is usually a friend of biotech business development. Biotech business will have to conduct due diligence at an earlier stage, especially when competing patents are identified. Biotech will need to find ways to cross-license that preserve the profitable exclusive markets.

    33. The Nath Law Group 2007

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