Neurobiology of Disease xxx (2013) xxx–xxx

YNBDI-02996; No. of pages: 7; 4C:

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Neurobiology of Disease

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Review

Managing your patent assets

Mary Catherine Di NunzioMC DINUNZIO PLLC, USA

E-mail address: mcdinunzio@gmail.com.Available online on ScienceDirect (www.sciencedir

0969-9961/$ – see front matter © 2013 Elsevier Inc. All rihttp://dx.doi.org/10.1016/j.nbd.2013.06.015

Please cite this article as: Di Nunzio, M.C., M

a b s t r a c t

a r t i c l e i n f o

Article history:Received 3 June 2013Revised 24 June 2013Accepted 26 June 2013Available online xxxx

Keywords:Intellectual propertyPatentsPatent protectionPatent assets

This article includes tips to manage your patent assets effectively and efficiently. I have provided “real world”examples in the form of case studies to support my advice. My goal is to arm you with sufficient knowledge soas to enable you to devise a patent strategy that suits your company's business and scientific needs.

© 2013 Elsevier Inc. All rights reserved.

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Tip 1: Patent practitioner as board member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Tip 2: Create a legal framework. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

Employment agreements and consultancy agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Invention disclosure forms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Publication policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

Tip 3: Conduct an IP landscape search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Tip 4: Determine if your technology can be protected by a patent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

Product claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Method of use claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Manufacturing claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Research tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

Tip 5: Consider the geographic scope of patent protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Tip 6: You must partner to succeed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

Create your public profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Be prudent but don't be paranoid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Don't reinvent the wheel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Create a negotiation chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0Aim to create a “win-win” dead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

Introduction

If you are reading this journal and, specifically this article, you are ei-ther interested in commercialising your current technology, or you are

ect.com).

ghts reserved.

anaging your patent assets, N

optimistic that – given your scientific acumen – it is just a matter oftime until you have an invention worth commercialising. Given my6000 word limit, I will not be able to share with you all the knowledgeI have garnered during my twenty plus years as a patent practitionerin the pharmaceutical and biotechnology arts. However, my hope isthat after reading this article you will be able to manage your patent as-sets effectively and efficiently and so maximise the opportunities that

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Box 1

Preparing and filing the priority application € 10,000Preparing and filing the PCT international application € 6000Filing of national and regional stage applicationsa,b € 32,000Prosecuting the applications before each of the PatentOfficesc

€ 30,000

Validation fees and translations costs for Europed € 41,000Annuities for years 1 to 20e €

200,000Total costs over the 20 year patent term €

319,000a US, EP, Japan, China, Hong Kong, Canada, Australia, India and Brazil.b Government filing fees, attorney/agent fees and translations.c Prosecution is the term used to describe the interaction between the applicants

for a patent (via their legal representatives) and the various Patent Offices.d Validation in all EP member states.e Every country and region charges annuities during the 20 year patent term. The

United States charges annuities only after the patent application issues as a patentand the total cost of the annuities is approximately € 4180 payable in 3 installments.In contrast the European Patent Office charges a yearly annuity while the patent ap-plication is pending and then yearly annuities are charged by each of the countries inwhich the European Patent is validated. The amount of the annuity varies by country.For example, assuming a patent application is pending before the European PatentOffice for 10 years and then issues, the yearly annuity in Germany for year 11 is €485. The yearly annuity in Germany increases each year with the yearly annuitydue in Year 15 costing € 1070 and the yearly annuity in year 20 costing € 1950. Ac-cordingly, the annuity fees due only in Germany for a 10 year period are currently€ 11,850. Annuities over the lifetime of a Japanese patent are about € 8000.

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await you. And,while I cannot advise you on every situation youwill en-counter, my hope is to arm you with enough knowledge to enable youto ask the right questions when it comes to patents. I have provided“real world” examples in the form of case studies and have hiddenparty names and identifying details in order to protect the naïve, the ig-norant and the ill-advised.

Generally speaking, patents yield value for companies, especiallysmall companies that are trying to distinguish themselves in the mar-ketplace. As with all business decisions, however, there are advantagesand disadvantages associated with preparing, filing, maintaining andenforcing patents.

Most legal rights allow the holder of the right to do something. Forexample, the right of freedom of speech allows one to speak freelyand does not allow one to prevent others from speaking freely. By con-trast, a patent provides a negative right in that it allows the patentowner to prevent a third party from practising the claimed invention;a patent does not permit the patent-holder to affirmatively practisethe claimed invention. By way of example, let's assume that CompanyA has been granted a patent for a suitcase and Company B has beengranted a patent for a suitcase with wheels. Company B cannot practiseits invention because each suitcase it sells will infringe the broader pat-ent protection of Company A. However, Company A is also restricted inthat Company A cannot sell a suitcase with wheels or it will infringeCompany's B patent. Nevertheless, both patents are valuable assets inthat they can serve as thebasis for a licensing agreementor collaboration— a concept that I will discuss in greater detail later in this article.

I believe that any advice regarding patents is incomplete without acommon understanding of the costs associatedwith the patent process.It becomes apparent early on that preparing, filing andmaintaining pat-ents are not for theweak of heart or for the poor of pocket. A former col-league of mine said that patent law is the sport of kings since you needan ample treasure chest to play the game well. The minimal costs asso-ciated with filing an initial patent application as a priority documentwould be at least ten thousand Euros. These costs would cover thetime associated with working with the inventors to draft a base pat-ent application comprising no more than fifty pages. In the biotechindustry a fifty- page patent application would in fact be relativelybrief, but I believe it is the best example to discuss here, since itwould be relatively easy to prepare and would not incur additionalfiling fees from patent offices. It is safe to assume that a small compa-ny would not have an in-house patent attorney and therefore wouldrely on a third-party patent firm to prepare, file and maintain its pat-ents. I have listed the average costs incurred over the twenty-yearpatent term in Box 1.

My goal in discussing money earlier is to stress the importance ofviewing a patent as a business decision. Few executives would sign along-term lease or hire a new employee without carefully consideringthe costs associated with that action. However, it never ceases toamaze me that companies will pay to file a priority application and aPCT application without considering that, until these “placeholder” ap-plications are filed in the national and regional stage of the membercountries and regions, they will never mature into a patent.

Most small companies do not have the financial resources or thequality and diversity of work required to hire their own experiencedpatent practitioner. Accordingly, these companies rely on patent firmsto prepare,file andmaintain their patent estate. In theory, this is reason-able, since you are paying for a service that you need but cannot affordto perform in-house. However, you should never lose sight of the factthat there is an inherent conflict of interest that exists between theseparties. As the consumer and bank-roller of these services you need toconsistently question whether the patent firm's services are necessaryand justified and to analyse how the services you are obtaining matchup to your business goals. A companywould not hire a contract researchorganisation to perform an unnecessary or scientifically irrelevantexperiment — their in-house scientists would recognise the futility ofthis service. Yet if you have no experienced patent practitioners on

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your staff, you cannot effectively assess and question the advice the out-side patent attorneys are providing. I am by no means implying that apatent attorney would give you improper advice in order to increasehis fees; I am merely warning that an outside party can never havethe business knowledge and long-term vision required to accuratelycraft your patent strategy. Expecting such professionals to have suchintimate knowledge from the outside looking in would be theequivalent of hiring an external CEO whom you pay by the hour andconsult with intermittently.

Tip 1: Patent practitioner as board member

This is why my first recommendation is that you reserve a seat onyour company board for an experienced patent practitioner. This personwill periodically review the company's patent strategy andpatent estateand insure that these two components are working together. Every lifescience company's board includes individuals with extensive businessand scientific experience. However, with the vastmajority of these com-panies' value residing in their patent estate, I believe that an experi-enced patent practitioner should also be part of this advisory group. Itis less important for a larger company to have an experienced patentpractitioner on its board because it has senior employees with the req-uisite level of knowledge.

Tip 2: Create a legal framework

There are several key “tools” that a companymust have. These “tools”are paper documents which are used to ensure that all employees andconsultants safeguard the company's intellectual property, memorialiseinventions as they occur, establish ownership of such inventions andprovide principles regarding how andwhen inventionswill be publicallydisclosed.

Employment agreements and consultancy agreements

Every employment agreement and consultancy agreement must in-clude provisions safeguarding the company's intellectual property.

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These provisions would confirm that all inventions are owned by thecompany and that an individual will not disclose any confidential infor-mation without the company's prior approval.

Invention disclosure forms

The invention disclosure form (1) provides a brief summary ofthe invention, (2) lists the individuals whowere involved in bringingthe invention to fruition, and (3) includes notebook references andlinks to databases where supporting documentation can be found.A separate form should be made for each invention. These formsshould be made contemporaneously and maintained in a safe place.These forms are crucial in scientific collaborations since they docu-ment the scientific contribution of each of the parties.

• Case in pointSome time ago I was advising a small biotech company that was ina research collaboration with a large pharmaceutical company. Theemployees of the small biotech believed that they were the soleinventors of the resulting patent. Unfortunately, the employees ofthe small biotech were lax in record-keeping and did not accurate-ly document their scientific input. In contrast, one of the employeesof the large pharmaceutical company took detailed notes duringevery meeting. Unfortunately, for the small biotech, he subsequentlytook credit for all of the scientific ideas that were presented duringthe meeting, irrespective of his actual contribution. The resulting dis-pute became amatter of “he said” versus “she said” and the small bio-tech had no evidence to support its case. This situation would havebeen avoided had the inventors at the small biotech company pre-pared invention disclosure forms before disclosing any of its ideas tothe other company. Even if the scientist from the large company hadbehaved in the same manner, his claims would have been refutedwhen the small biotech company showed that the ideas werememorialised in a document that existed prior to the meeting be-tween the companies.

Assignments

Patent ownership differs dramatically from the ownership ofreal property and establishing ownership of patent rights is pivotalto securing downstream funding. Patent ownership rights differfrom the ownership of other property rights in that each owner ofthe patent is entitled to enforce and practise the full scope of thepatent. By way of contrast, if two people jointly own a house, theowners must agree to whom they are going to sell the house. Eachparty does not own the entire right to sell the property. However,co-owners of a patent may each sell their rights to the patent, inde-pendent of the other owner's wishes. Ownership of a patent resideswith the inventor(s) of the patent unless a legal obligation exists toassign the patent to a third party. As discussed above, in order to in-sure that all inventions that occur in the workplace are owned bythe company, it is recommended that all employees execute em-ployment agreements on their first day of work. It is common injoint research agreements that any resulting inventions are co-owned between the parties because it is assumed that both partieswill contribute to the research process. The rule of thumb is that ifa company funds research it should ensure that any patents predi-cated on that research are owned by the company.

An assignment should be recorded for each patent applicationwhen the application is filed. The assignment informs third partiesof the true owner of the patent application and must be executedby each of the inventors of the patent application. Companies thenrecord the assignment of the patent from the inventor(s) to the com-pany in those jurisdictions in which patent protection is beingsought. While an assignment need not always be recorded to be le-gally enforceable, the recordation of the assignment informs third

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parties – including future partners and licensees – of any ownershipclaims surrounding the patent. Smaller companies tend to be less dil-igent in recording such assignments, which I find perplexing.

• Case in pointWhile working at a law firm in New York City, I was tasked withreviewing the patent estate of a small biotech company that a venturefundwas considering purchasing. The first thing I notedwas that noneof the assignments were recorded, so without further investigation itwould have appeared that the company had no ownership rights tothe patents and that the patents were still owned by the inventorsthemselves. I later discovered that the reason why the assignmentshad not been recorded was because they had never been executed.Until the patent ownership was perfected, the venture fund wouldnot close the deal. Each inventor eventually assigned their rights tothe company and the ownership was perfected. This transactionproceeded with great speed, since the three inventors were also thesole owners of the biotech company, but if, say, there had been afourth inventor who was not going to benefit financially from thesale of the company, he/she might have been motivated to stall thetransaction by refusing to assign the patent without additional com-pensation. This inventor's actions would not be warranted if the in-ventor had an affirmative duty to assign the patents to the companyby virtue of an existing employment agreement. However, when abuyer is knocking at the door, most companies would rather closethe deal quickly, even if that means spendingmore money in the pro-cess. For this reason alone, it is imperative that companies require in-ventors to execute assignments contemporaneously with the patentfilings.

Publication policy

It is also recommended that the company have a publication pol-icy in place and that all relevant parties be advised of the policy. Apublication policy does not forbid publication, it merely governsthe timing of any resulting publications. A typical policy would re-quire that all proposed publications, speeches and posters bepresented to management and/or patent counsel at least thirtydays prior to submission. This time window allows the company tocompare the content of the proposed publicationwith the company'sexisting patent filings and determine if any new patent applicationsshould be filed prior to the publication. The safest course of action isalways to file a patent application covering the invention prior to apublic disclosure of the invention. I would go one step further andrecommend that a patent application be filed prior to any disclosureof the invention, even if the disclosure is made pursuant to a confi-dentiality agreement.

Tip 3: Conduct an IP landscape search

Few people invent the wheel. Nearly every invention is an im-provement over an existing technology. Accordingly, in order for acompany to ascertain the value of its technology, it is imperativethat the company compare its technology to existing options. Thefirst step in this assessment is to conduct a landscape search. A land-scape search is conducted by reviewing publications, published pat-ent applications and granted patents. The goal of the landscapesearch is to set the search parameters as broad as possible so thatyou can ascertain the level of scientific knowledge that exists thusfar and then compare the differences between your proposed inven-tion and the base level of knowledge. You need to characterise the“differences” between your technology and the existing technologyso that you can assess the value and patentability of any such differ-ences. There are patent law firms that will conduct these searches foryou but I do not believe that it is necessary to use an outside vendor.Most companies are intimately aware of their competitors and of

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academic institutions that are conducting similar research programmesand, at a minimum, could focus the landscape search on these entities.

Tip 4: Determine if your technology can be protected by a patent

After you have determined how your technology differs from theexisting technology you must consider whether those differences arepatentable. To be patentable, an invention must be both novel and notan obvious variation of the prior art. Determiningwhether an inventionis non-obvious can be a difficult undertaking, since the “rules” for mak-ing this determination differ slightly from jurisdiction to jurisdiction.However, it is easy to conclude if something is novel, for to be “novel”the invention needs to be new. Once you have concluded that an inven-tion is patentable, youmust then considerwhether the invention can beprotected via the patent system.

Life science companies typically attempt to develop products or ser-vices along several primary avenues: therapeutics, diagnostics and plat-form technologies (e.g., research techniques or drug developmenttechniques). Some of these avenues are more amenable to patent pro-tection than others. Patents can be lengthy and complicated documents,but the most important section of the patent is the claims. The claimsare easy to identify in the patent because the final section of everygranted patent concludeswith a listing of the claims. A claim in a patentprovides the elements that must be present in order for the patentowner to have a claim of infringement against a third party. In otherwords, it sets the boundaries of the patent protection that will be con-ferred, just as the deed to a plot of land sets the boundaries of thelandowner's title.

Product claims

Technological improvements in the life sciences tend to fall into fourgeneral categories: products, methods of treatment, processes of manu-facture and research tools.

It goes without saying that if the company is developing a prod-uct, the company must secure patent protection on that product,otherwise all the company's research and development effortswould be free for the taking by third parties. Product patents are typ-ically easier to enforce than other types of patents because it is easyto identify the third party selling the infringing product. A pharma-ceutical product can be adequately protected by a single patent tothe active pharmaceutical ingredient. This is because the active phar-maceutical ingredient is the essential element in the product and anyproduct lacking the active pharmaceutical ingredient would not bevaluable to the consumer. This is a key distinction between pharma-ceutical products and other consumer goods.

Method of use claims

A patent directed to a method of use would recite the use of com-pound X to treat disease Y. These patents also tend to be easy to enforcebecause the product insert for a pharmaceutical product will list the in-dications for which the product can be used. Accordingly, a companyshould always pursue claims to the medical use(s) of a compound.The only exception to this rule would be if a company invents a “newuse” for an “old compound”. These types of claim are often referred toas “second medicinal use claims”. Some countries such as India andArgentina deem second medical use claims not patentable. Obviously,a company should not waste its time or money filing such claims inthese jurisdictions. Even if patent protection is allowed – which it is inmost countries – these claims can be difficult to obtain and difficult toenforce. Let us consider aspirin, for example. Decades ago it was discov-ered that taking an aspirin a day could lower a patient's risk of having astroke. This was an amazing invention, but a patent covering this break-through was not pursued. Why? The reason is two-fold. First, a claim tothis newusewould be impossible to obtain: individuals had been taking

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aspirin for decades prior to this invention and it is reasonable to assumethat some patients took an aspirin a day. Patent law would concludethat the newusewas inherent in the priormethod of treatment. The pa-tient does not have to appreciate the medical benefit that a product isproviding. Unbeknownst to him, a patient who had a headache a daymight have prevented himself from suffering a stroke. Assuming thatpatent protection could be obtained for the new use, it would be impos-sible to prove infringement. People take aspirin daily for a multitude ofailments— headache, fever, soremuscles; howwould the patent ownerprove in court that an individual took the aspirin for stroke prevention –

the claimed use – versus any other of the permitted uses? The companycould have prevented its competitors from listing this new use on theproduct leaflets that accompany aspirin, but there would still be thethreat of “off-label” use by consumers.

Manufacturing claims

Patent protectionmay also be obtained for the process ofmanufactur-ing the active pharmaceutical ingredient, but further evaluation is neces-sary to determine if such protection is valuable. In order for a processpatent to be valuable, the patent ownermust be able to prove that the in-fringer used the patented process – as opposed to another chemical pro-cess – tomake the compound. Accordingly, a patented processwhich lefta “chemical fingerprint” in the end product would be easier to enforce,since a chemical analysis of the end product would prove whether theproduct had been made using the patented process. A process may bepatentable – novel and not obvious – and, even economically beneficial,but, because the resulting patent would be difficult to enforce, it may bebetter to maintain the process as a trade secret. Alternatively, you couldpublish certain (but not all) aspects of the process with the goal ofpreventing a third party from patenting the process in the future.However, publishing the process makes it free to use, so if youwere hoping to secure a business advantage by performing the pro-cess on behalf of third parties you would want to publish sufficientinformation to generate interest in your process, but not enough in-formation to enable third parties to perform the process. This balancecould easily be obtained by publishing certain aspects of the inventionon your website. You could be very vague about the underlying science,but wax poetic about the benefits the process provides— low cost, highyield, low environmental impact, etc.

• Case in pointThe burden of proving patent infringement falls on the patent ownerwhen enforcing a process patent. In other words, the patentee mustprove that the third party is using the patented process. Years ago Ireviewed a process which involved the fine-tuning of temperaturevariables in a widely used commercial process. While the process in-creased the product yields dramatically, it would have been extremelydifficult to detect infringement of the new process because the baseprocess was widely used and the end products of the infringing andnon-infringing processes were identical. It was decided to maintainthe new process as a trade secret and consider performing it forthird parties on a fee-for-service basis.

Research tools

The fourth category I will discuss is research tools. A research tool isany product or process that will never be supplied directly to con-sumers, but which will be used to discover the end consumer product.Common research tools include receptors, assays, screening methods,peptides, in vivo animal models, and processes that mimic biologicalmechanisms of action. By and large, research tools are patentable; how-ever, the scope of the patent protection obtained and the issues sur-rounding enforcement of these patents often make their end valuequestionable. In the late 1980s and throughout the 1990s, if a companyisolated a receptor it could obtain a US patent that covered the isolated

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receptor and any receptor that exhibited a certain percentage of homol-ogy to that receptor. In essence, these claims were broad enough tocover both the initial receptor that was cloned and all species orthologsof that receptor. However, in 2000, the US Patent and Trademark Officeissued guidelines that restricted the scope of these types of patent. TheUS Patent Office stated that only the specific species that was clonedcould be patented and it limited the scope of the resulting patent claimsto that very receptor. This reduced the value of these patents, sincetherewere a plethora of non-infringing activities thatwould be allowed.For example, a third party would not infringe a patent claim coveringthe human dopamine D2 receptor by using a species ortholog of thereceptor.

Another problem plaguing research tool patents is that research canbe conducted anywhere and it is not economically feasible for a compa-ny to obtain patent protection in every country of the world. For exam-ple, when biotech companies were obtaining US patents on receptorsand screening methods, contract research organisations that providedscreening services were established in jurisdictions where patent pro-tection either did not exist or was not enforced. Investigators wishingto obtain screening data for a particular compound would merely sendthe compound outside the United States for analysis.

The majority of inventions originating in university laboratories andsmall biotechnology companies may be characterised as “researchtools” since these discoveries do not cover a specific product or methodof treatment, butmay further scientific progress in a certain field. Beforeyou decide to patent these types of invention, I think you should careful-ly assess the scope of the patent youwill be granted andwhether or notyou will be able to enforce the patent.

• Case in pointIsolating and characterising the histamine family of receptors wasan enormous achievement and yielded substantial scientificgains. However, these discoveries were not ideally suited for pat-ent protection. Why? The answer is two-fold: patentability andenforceability. First, the granted claims of such patents were ulti-mately restricted by the US Patent and Trademark Office to theexact sequence of the receptor. If one isolated the human H2 recep-tor, the resulting patent would be limited to this exact species. Acompetitor that used the H2 mouse receptor for its researchwould not infringe the patent. However, the high homologyamong receptor species strongly suggests that, for example, themouse receptor may yield a similar result scientifically. Secondly,unlike end consumer products where a company can predict inwhich markets it wants to sell its goods, research can be performedanywhere; a company wanting to use a research tool patent wouldmerely conduct its research in a country where patent protectioneither was not sought or could never be obtained. This is why inthe 1990s most screening companies were located outside theUnited States.

As discussed earlier in connection with process patents, obtainingpatents on research tools can – and often does – raise the scientific pro-file of a company or research organisation. Many of the companies thatwere unable to enforce their receptor patents used these patents to fuelcommercial interest in their companies, thereby enabling the compa-nies to secure collaborations and licensing deals. As we will discussshortly, partnering is key in the life science industry and patents canbe used as a means to attract partners.

Tip 5: Consider the geographic scope of patent protection

Patents are granted and enforced on a country-by-country basis. Thetypical filing scheme for a patent is to first file a priority application inthe country in which the invention originated and then, at the one-year anniversary of the filing date of the priority application, to file aPatent Cooperation Treaty patent application (PCT patent application).A PCT patent application is merely a placeholder and can never result

Please cite this article as: Di Nunzio, M.C., Managing your patent assets, N

in a granted patent. Thirty (30)months after the filing date of the prior-ity application the patent owner must decide in which countries and/orregions it wishes to secure patent protection. As of February 1, 2013,there are 146 member states of the Patent Cooperation Treaty. Accord-ingly, at the thirty-month date, the patent owner could choose to pursuepatent protection in all or none of these countries. The cost of pursuingpatent protection varies from country to country. In addition, somecountries – for example, China, Japan and Brazil – require that the pat-ent application be translated into the local language. This is the pointin the patent lifecycle when the costs are high. Therefore, it is impera-tive to consider in which countries patent protection should be sought.One should consider both i) the likelihood of obtaining a granted patentcovering the invention and ii) the likelihood of eventually enforcing thatpatent in the local court system, bearing in mind that patent laws andpatent practices do tend to change over time. As discussed above, oneshould not file a second medicinal use patent in India or Argentina,since their local patent laws currently prohibit the patenting of suchan invention. One should also consider the business case behind the in-vention. It would not be necessary to obtain patent protection for an in-vention covering a new anti-malarial drug in the United States orEurope, since there is no market in those geographies for this type ofdrug. However, one would want to secure patent protection in Indiaand other parts of Asia.

Tip 6: You must partner to succeed

The path to success for almost all life sciences companies is via part-nership arrangements. Large pharmaceutical companies partner with(or acquire) small companies in order to gain scientific expertise orproducts, while smaller companies partner with larger companies inorder to obtain scientific expertise or the money needed to advancetheir development candidates through the clinical trial process. As asmall company, it's more than likely your primary asset will be your sci-entific expertise.

Create your public profile

I recommend that companies always have their corporate and pat-ent documents in perfect order. Before the advent of the Internet andthe free and abundant information that flows from it, if a companywanted to investigate another company it had to invest considerabletime and effort in the process. Previously, the file history for a US patentwas only available after the patent application issued as a patent – thiscorrelates to an average of five years after the patent application wasfiled – and only by requesting the official file history from the UnitedStates Patent and Trademark Office. In contrast, today the file historyof a patent application is freely and readily available after the patent ap-plication publishes– eighteen months after the earliest priority date. Byusing the “Public Pair” portal of the United States Patent and TrademarkOffice (USPTO) (www.uspto.gov) a third party can review the corre-spondence between the USPTO and the owner of a patent applicationand obtain information regarding the assignment history. It is now com-monplace for companies thinking of partnering, licensing or acquiringanother company to complete a base level of due diligence on thethird-party company without the third party's knowledge or assistancein the process. The annual JPMorganHealthcare conference, held in SanFrancisco every January, features presentations from hundreds of com-panies, both public and private. Business development groups fromlarge companies, investor groups and venture funds attend this event.Suffice it to say that most of the companies attending this conferencehave done their due diligence before ever arriving in San Franciscoand have identified key companies that theywish to investigate further.For this reason, I recommend that all companies have their patent port-folio in perfect order at all times. It would be a shame to miss an oppor-tunity without even knowing you were being considered.

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The financial information available regarding privately-held compa-nies is substantially less than the information available for publically-held companies. However, one can still piece together a “story” abouta privately-held company using public information. For example, mostprivately-held companies have a website which lists the names of thecompany's executives, the company's area of scientific expertise, andprovides details regarding recent partnerships or licensing agreements.This information may be used to search the websites of various patentoffices in order to cobble together some basic patent informationabout the company. One could also cross-check the partnering and li-censing information against the websites and public documents of theother party to the transaction. For example if a privately-held companystates on its website that it has entered into a research collaborationwith a publically-held company, additional information regarding thattransactionmay be available on thewebsite of the publically-held com-pany or in the financial filings of the publically-held company via thewebsite of the U.S. Securities and Exchange Commission (www.sec.gov). All of the information above could be obtained free of chargeand unbeknownst to the “target” company.

• Case in pointI worked on a transaction in which a pharmaceutical company wasconsidering acquiring either a specific product of a small privately-held biotech company or the biotech company itself. Considerable in-formationwas gathered and analysed by the pharmaceutical companyusing public databases. Online searches were conducted at the UnitedStates Patent Office (www.uspto.gov) and the European Patent Office(www.epo.org) to assess the patent rights surrounding the product.Online searcheswere also conducted at theU.S. Food andDrugAdmin-istration (www.fda.gov) and the European Medicines Agency (www.ema.europa.eu) in order to assess the data exclusivity of the product.Limited financial information was available given that the companywas privately held. However, the market share of the product was es-timated based on the information available. The pharmaceutical com-pany concluded that the product would be subject to genericcompetition as soon as the data protection expired and therefore de-cided not to pursue the deal further. It is interesting to note, though,how much information could be obtained and what conclusionscould be drawn without even engaging with the target company.

Be prudent but don't be paranoid

By and large theft of confidential information is relatively rare. Thatbeing said, I would recommend that initially you only share non-confidential information with potential partners. The reason for this isthat you will probably have initial partnership talks with many compa-nies and only a few of these talks will mature beyond the first meeting.It is easier for you to manage these talks by limiting your disclosure toonly non-confidential information. It is interesting to note that manylarge pharmaceutical companies will ask you to limit the initial meetingto non-confidential information so as to protect them of being accusedof misappropriating your information at a later date.

If the parties wish to continue the discussions it will be necessary foryou to share confidential information. Today this information is primar-ily shared between the parties via on-line data sites. Data sharing sitesare ideal since it is easy to track exactly what information was sharedand who had access to such information. In the event that you do notuse a data-sharing site, you will need to stamp as confidential eachpiece of paper that you share with the other side and to keep a detailedlog of exactly what information was shared.

Don't reinvent the wheel

The chances are that the company with which you will end uppartnering is a company that has partnered with someone else previ-ously. Accordingly, I recommend that you rely on the systems they

Please cite this article as: Di Nunzio, M.C., Managing your patent assets, N

have already established to move the deal forward. The first step in se-curing a partnership deal is to agree on the key terms. These key termsalways includefinancial obligations, but usually also include intellectualproperty provisions, ownership rights and the desired outcome of thebusiness arrangement. These key terms are usually set forth in a termsheet and discussed with the other party. After these key terms havebeen agreed upon, the next step is to memorialise the negotiations ina contract. Many small companies agree to prepare the initial contractbecause they believe that they can control the underlying businessdeal by controlling the contract. In my opinion, this is a huge waste oftime and resources. Most small companies will not have a lawyer onstaff and therefore will have to pay a law firm to draft the contract.Upwards of 80% of any contract is standard “boilerplate” material.Accordingly, I recommend that you rely on the other party to generatethe contract and that you merely provide comments and changes tothe document. This allows you to get the most value for your money be-cause your lawyer's attention is now focused on the key termsof the deal.

Create a negotiation chart

In order to proceed quickly and efficiently during the contract nego-tiations, I recommend that you create a negotiation chart. The negotia-tion chart will include the following categories; Must-Haves, Nice toHaves and Not Necessaries. By deciding upfront on the deal terms thatyou cannot forgo, you will be able to quickly assess whether a negotia-tion is worth continuing or whether the resulting deal will never pro-vide value to your company. Completing the remainder of thenegotiation chart will allow you to proceed quickly through the negoti-ations, since you will not waste time discussing terms that are not rele-vant to the business case.

Aim to create a “win-win” dead

Ultimately, your goal should be to obtain a “win-win” deal for bothparties. If either party feels that they have been taken advantage of dur-ing the negotiation process theywill be less committed to the deal's suc-cess. Partnership agreements tend to span years and it is important forboth companies to feel committed to the deal, so that the deal canmain-tain the momentum it needs to yield a successful result.

Conclusion

I hope that I have succeeded in educating you on the essentials of thepatent process and the pitfalls to which novices are prey. The costs ofpreparing, filing, maintaining and enforcing patents are high. This iswhy it is imperative to treat your patent estate as you would anyother business asset. You should consistently evaluate the patents inyour portfolio and make informed decisions about the role that eachpatent plays in your organisation. If a specific patent is no longer rele-vant to your business you should either abandon the patent to savemoney or try to out-license the patent to a third party in order to recov-er your costs.

It is the quality, not the quantity, of the patents that is important. It isfar more valuable to have a limited number of patents that further yourcompany's business strategy than to have numerous patents and patentapplications that are not on point. In the infancy of the biotech industry,biotech investors were somewhat naïve in the sense that they wouldoften assign a higher monetary value to companies that had a large pat-ent estate.

I observed thismyself whenworking for a small boutique lawfirm inNewYork City. Our biotech clientswouldwant us to notify themas soonas a patent issued so that they could issue a press release noting thattheir patent estate had increased, albeit by just one patent. There wasno mention in the press release regarding the invention that was thesubject of the patent application or the scope of the issued claims

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covering the invention. The sole premise of the patent release was thatthe company's patent estate had increased by one.

The base level of knowledge regarding intellectual property has in-creased exponentially in the last 20 years. Investors are no longer valu-ing companies based solely on the number of patents in the company's

Please cite this article as: Di Nunzio, M.C., Managing your patent assets, N

portfolio. While companies still issue press releases surrounding the is-suance of a patent, today the press release would stress the value of thepatent to the company's business plan and how the company is plan-ning to use this asset to its strategic advantage. The days of quantityover quality have passed.

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