Graduate School Master of Science in
Intellectual Capital Management Master Degree Project No.2010:122
Supervisor: Boo Edgar and Ulf Petrusson
Personalized Medicine
-a viable option for a biotech company
Magnus Hertler and Thomas Rudback
i
Executivesummary
Thisthesisinvestigatesandanalyzesthepotentialforabiotechstart‐upcompanytouse
personalized medicine based on MSCs. The thesis focuses on four subjects – (1) the
current IP landscape, (2) thepathtomarket, (3) thepossibility togenerateprotection
around the personalized part of the medicine and (4) the commercialization of the
product.
ThepatentlandscapearoundMSCsshowedastablepatentingtrendinthefield,withto
someextentwidepatents.Theanalysis showed, in linewithother investigations, that
theindustryconsistsofseveralsmallactors.Thisindicateslowbarrierstoenterfroma
patentperspective.Theanalysisofthepatentclaimsshowednohomogenoustrendsfor
thefieldaswhole.Sometrendswerehoweveridentifiedwhenbreakingdownthefield
intofurthersubcategories,e.g.procedures.
The path tomarket analyzed different possibilities to solve the scenario of a blocking
paten, e.g. invalidate or invent around. This chapter also addresses different tools to
reachthemarket‐licenses,collaborationsandexemptions.
The third section analyzed different manners to protect an algorithm. The algorithm
represents a good solution to isolate the personal features. The analysis showed that
patentingofferedthebestoptionsforgeneratingprotection,whichinturnrequiredan
investigation of the legal opportunities to protect an algorithm. The legal analysis
showedthattherewheregoodpossibilitiesinboththeUSandEurope.
The last section, commercialization, showed the benefits and challenges of the field
basedonaPorter’sfiveforces.Theanalysisshowedseveralstrengthsandweaknesses
within the chosen field, e.g. several of the input products are commonly used in the
pharmaceuticalindustryandhencearerelativelyeasytogainaccessto.Thechapteralso
addressesbenefitsandchallengesinrelationtoparameterssuchas“smallbiotechstart‐
upvs.bigpharmaceuticalcompany”anddifferentpricingstrategies.
The conclusion that can be drawn is that personalized medicine offers great
opportunitiesforastart‐upbiotechcompany.
ii
TableofContents
Executivesummary................................................................................................. i
Abbreviations ........................................................................................................ v
1.Introduction ....................................................................................................... 11.1Aimofpaper.................................................................................................................................................. 21.2Hypothesis ..................................................................................................................................................... 21.3Researchquestions .................................................................................................................................... 21.4Delimitations ................................................................................................................................................ 21.5Method ............................................................................................................................................................ 31.6Disposition..................................................................................................................................................... 41.7TargetAudience .......................................................................................................................................... 52.Background ........................................................................................................ 62.1PersonalizedMedicine ............................................................................................................................. 62.1.1BenefitsofPersonalizedMedicine ....................................................................................................62.1.2ChallengesofPersonalizedMedicine ..............................................................................................8
2.2Mesenchymalstemcelltherapy ........................................................................................................... 92.2.1Stemcells .....................................................................................................................................................92.2.2Mesenchymalstemcells .....................................................................................................................102.2.3Treatment.................................................................................................................................................122.2.4AdvantagesofMSCs .............................................................................................................................132.2.5Allogeneicvs.AutologousMSCs ......................................................................................................14
3.ThepatentarenaoftheMSC’s ......................................................................... 163.1Thearenas .................................................................................................................................................. 163.1.1Administrativearena ..........................................................................................................................163.1.2Judicialarena..........................................................................................................................................163.1.3Businessarena........................................................................................................................................173.1.4Thethreearenas....................................................................................................................................17
3.2Thepatentlandscape ............................................................................................................................. 173.2.1Previousinvestigationsofthepatentlandscape.....................................................................183.2.2Thecurrentpatentlandscape .........................................................................................................193.2.3Referencepatents..................................................................................................................................203.2.4Claimspace ..............................................................................................................................................20
4.Possiblesolutionstoreachthemarket ............................................................. 224.1Possibilitiesandhinders ...................................................................................................................... 224.1.1Researchoutcome.................................................................................................................................234.1.2Product ......................................................................................................................................................234.1.3Patents .......................................................................................................................................................234.1.4Risks ............................................................................................................................................................234.1.5Blockingpatents....................................................................................................................................23
4.2Licensing...................................................................................................................................................... 254.2.1Inlicensing ..............................................................................................................................................254.2.2Outlicensing ...........................................................................................................................................254.2.3Exclusivelicense ....................................................................................................................................264.2.4Nonexclusivelicense...........................................................................................................................26
iii
4.2.5Solelicense ...............................................................................................................................................264.2.6Crosslicense ............................................................................................................................................264.2.7Compulsorylicense...............................................................................................................................26
4.3Collaboration ............................................................................................................................................. 274.4Exemption................................................................................................................................................... 274.4.1ExtemporaneousExemption ............................................................................................................28
5.Possibilitiestoprotectthepersonalizedaspect ................................................ 315.1Thebestmannertoprotectsoftware ............................................................................................. 315.1.1Patent .........................................................................................................................................................315.1.2TradeSecret ............................................................................................................................................335.1.3Disclosingtheinformation................................................................................................................345.1.4Patentsoffersthelargestbenefits .................................................................................................35
5.2Thepossibilitytopatentanalgorithm ........................................................................................... 355.2.1Thediscussionaroundsoftwarepatent ......................................................................................355.2.2ThelegalstatusinEurope.................................................................................................................365.2.3ThelegalstatusintheUS ..................................................................................................................39
5.3Thebestwaytoconstructanalgorithmprotection ................................................................. 405.3.1Theshortterm .......................................................................................................................................415.3.2Thelongterm.........................................................................................................................................41
6.Thecommercializationofpersonalizedmedicine ............................................. 436.1TheIntellectualvaluestar ................................................................................................................... 436.1.1Claimintellectualproperty...............................................................................................................446.1.2Managehumanresourcesandcultures ......................................................................................446.1.3Shapetheinnovation...........................................................................................................................446.1.4Shapethemarket ..................................................................................................................................446.1.5Shapetheventure .................................................................................................................................456.1.6Createfinancialvaluefromintellectualvalue .........................................................................45
6.2Competitiveadvantage.......................................................................................................................... 456.2.1Porter’sfiveforces ................................................................................................................................456.2.2Advantagesanddisadvantagesofasmallbiotechcompany ............................................47
6.3Pricingstrategy......................................................................................................................................... 496.3.1Totakeoutahigherpriceforpersonalizedmedicinethanfortraditionalmedicine..................................................................................................................................................................................50
7.Conclusion ....................................................................................................... 537.1Background ................................................................................................................................................ 537.2Outcomeofstudy..................................................................................................................................... 547.2.1IPlandscape ............................................................................................................................................547.2.2Possiblesolutionstoreachthemarket........................................................................................557.2.3Possibilitiestoprotectthepersonalizedmedicine .................................................................557.2.4Thecommercializationofpersonalizedmedicine..................................................................56
7.3Thecombinedoutcome......................................................................................................................... 567.3.1Theadministrativearena..................................................................................................................567.3.2Thelegalarena ......................................................................................................................................567.3.3Thebusinessarena ...............................................................................................................................57
7.4Finalreflections........................................................................................................................................ 57
iv
References ........................................................................................................... 58Literature............................................................................................................................................................ 58Articles................................................................................................................................................................. 58Report................................................................................................................................................................... 60Internet................................................................................................................................................................ 61Databases............................................................................................................................................................ 62Legislation .......................................................................................................................................................... 62Caselaw............................................................................................................................................................... 63
AppendixA .......................................................................................................... 64PatentsrelatingtoMSC ................................................................................................................................ 64Patentsrelatingtotreatment..................................................................................................................... 64Patentsrelatingtoprocedures.................................................................................................................. 65AppendixB .......................................................................................................... 66Actorsinthestemcellfield......................................................................................................................... 66
v
Abbreviations
BM–BoneMarrow
CCE–CounterflowCentrifugalElutriation
DNA–DeoxyribonucleicAcid
EPC–EuropeanPatentCouncil
EPO–EuropeanPatentOrganization
ESC–EmbryonicStemCell
IHD–IschemicHeartDisease
IP–IntellectualProperty
IPSC–InducedPluripotentStemCell
IPR–IntellectualPropertyRight
GMO–GeneticallyModifiedOrganism
LV–LeftVentricular
MI–MyocardialInfarction
mRNA–messengerRiboNucleicAcid
MSC–MesenchymalStemCell
PCT–PatentCooperationTreaty
PTO–PatentandTrademarkOffice
SME–SmallandMediumEnterprises
TBA–TechnicalBoardofAppeal
TRIP–TradeRelatedAspectsofIntellectualPropertyRights
UC–UmbilicalCord
USPTO–UnitedStatesPatentandTrademarkOffice
VC–VentureCapital
WARF–WisconsinAlumniResearchFoundation
1
1.IntroductionThe biotech industry is experiencing an interesting time with rapid technical
development, theconvergenceofseveral industriesandchangingof legal frameworks.
There are new innovative steps about stem cell development presented on an almost
dailybasis,where thenext isevenmorespectacular than theprevious,e.g. thecloned
sheepDollythatwasannouncedin19971andthepossibilitytocreatelifeinacellfrom
20102.Thisshowsthepotentialinthefield,andhowfarresearchalreadyhascome.
There is a convergence from several industries, e.g. the agricultural‐, chemical‐ and
pharmaceutical sector, into the life science field. Thismeans that the field stands the
possibilitytobecomethelargestindustryintheworldifthetransactioncontinues.The
movement is motivated by the increasing importance of genetic engineering and the
impactitisexpectedtohaveontheworld,e.g.GMOsandtherapies.3
Thestemcellresearchhasexperiencedregulatorychangesduringthelastyearsinboth
theUS and Europe. The largest change has been in theUS,where GeorgeW. Bush in
2001decidedtore‐regulatethepoliciesapplyingtostemcellresearchanditsfunding.
He decided that US federal dollars were only to be spent on research using existing
approved lines of embryonic stem cells. The law has beenmodified since 2009when
Barack Obama loosened the regulations. A second hindrance in the US and to some
extent for the whole research development has been twoWARF patens covering the
preparationsofprimateandembryonicstemcellsinawidemanner.4TheWARFpatents
havebeen rejected in a recentdecision fromUSPTO5,which shouldopenup the field.
The WARF patents have not been granted in Europe due to a different view on
embryonicstemcells,buttheyhavestillhadaneffectinEuropeduetotheimportance
oftheUSmarket.
In this thesis we have decided to take a closer look on the biotech field and the
developmentsthatareongoingtherein.Inordertonarrowthescopeofourresearchwe
havefocusedonMSCresearchandthedevelopmentofpersonalizedmedicine.
1ScienceMuseum,Internet2Stengård,M(2010),Internet3Enriquez,Jetal.(2000),p.97ff4Bergman,Ketal.(2007),p.1ff5ThemedicalNews(2010),Internet
2
1.1AimofpaperThis paper aims to show the potential and challenges with personalizedmedicine in
relation to stem cells for start‐upbiotech companies. The goal is to clarify interesting
areas inrelationtothechosenfieldtogiveanintroductionintotheindustry.Thedual
educational background of the authors allows the thesis to address a wide scope of
subjectsthatcoverslegal,technicalandcommercialelements.
1.2HypothesisThepreamblehas introduced thecurrentenvironmentofabiotechstart‐upcompany.
Wethinkthatpersonalizedmedicineoffersinterestingpossibilitiestoreachthemarket
for a biotech start‐up and have formulated a hypothesis that we hope to verify or
dismisswiththisthesis.
PersonalizedMSCmedicine offers great opportunities for start‐up biotech companies
basedinEuropetosucceedonthemarket.
1.3ResearchquestionsWehaveindentifiedfourquestionstoallowustoverifyordismissourhypothesis.
• WhatisthecurrentpatentlandscapearoundMSCs?
• Whatisthebestmannertoreachthemarket?
• What is the best manner for a small biotech company to protect the unique
aspectinpersonalizedmedicine?
• What would be the main competitive advantages and benefits for a biotech
companyutilizingpersonalizedmedicine?
• Inwhatwaydoespersonalizedmedicinecreateadvantagesandpossibilitiesof
pricesettingforbiotechcompanies?
1.4DelimitationsThebiotech industry covers severaldifferent application fields, e.g. therapyandGMO.
Theintendedfocusonpersonalizedmedicinemeansthatwewillprimarilyanalyzethe
questionsfromapharmaceutical‐andgenomeindustryperspectiveevenifsomeofthe
materialcanbeusedforthebiotechindustryasawhole.
Thechosenfieldcoversseveralinterestingareas,whichinturnallowforawidevariety
of questions. We have chosen five research questions that are central for the
personalized aspects from a business‐ and IP perspective. Thismeans that the result
mighthavebeendifferentifusinganotherperspective.
3
WehavechosentolimitouranalysistotheEUandtheUS,whichcoveramajorityofkey
countries of development and commercialization. This means that we only have
includedpatentsissuedbyEPOandUSPTO,andregulationsandpraxisfromtheUSand
Europe. There are other important countries, e.g. Japan, China and India that are
relevant, but the limited space in relation to the wide scope did not allow for more
nationstobeincluded.
ThequalitativeanalysisofpatentshasonlyincludedpatentsissuedinEuropetoprove
ordismissthehypothesis.Thismighttosomeextentgiveaninaccuratepicturedueto
thedominanceofUSpatents.However, all solutionsof commercial value shouldhave
beenissuedinEuropeaswellastheUS,andhenceshowifthereareanycentralpatents.
ThereareseveralIPRsthatareinterestingforabiotechcompany,butwehavedecided
toonlyaddressprotectionaround the inventions.One interestingdimension that falls
outside but is relevant for the commercialization of the personalized aspect is for
instancebranding,
Therearedifferentformsofstemcells,butwehaveprimarilyfocusedonmesenchymal
stemcells.Thereasonforthisisdual–(1)MSCshaveseveralpositivetraitsthatmake
theminterestingforfuturedevelopment.(2)Themajorityofthepresentarticlesinthe
fieldfocusonembryonicstemcells.ThisindicatesalowerresearchlevelofMSCs,which
offersagreaterchallengetoexplorethesubject.
1.5Method
Thegoalofthethesisistogiveamultifacetedpictureofpersonalizedmedicineandthe
biotech industry.Thishasresulted inthe inclusionofseveralareasthathavedifferent
requirements and hence resulted in a need for differentmethods. The usedmethods
includeliteratureandarticleanalysis,acasestudyofabiotechstart‐upanddiscussions
withpersonsactiveinthefield,patentsearchesandanalysis,andlegalanalysis.
Wehaveusedliteratureandarticlestoprovideuswithaninsightandunderstandingof
thesubjects.Therelativelyfastdevelopmentinthefieldmeansthatarticleshavebeena
keysourceofinformationforthecurrentstatusinthefield.Thearticleswereidentified
through searches using both proprietary and non‐proprietary search tools, aswell as
directedsearchesof recognizedmagazines in the field.Themainnon‐proprietarywas
Google,whileproprietarydatabasessuchasWebofScienceandSCOPUSwereusedto
gain access to qualitative sources. We also conducted directed searches in Nature,
NatureBiotechnologyandHarvardBusinessReviewtoidentifyrelevantarticlesthatthe
4
searches had missed. The books were identified through searches in Gothenburg
University’slibrarysearchtoolGUNDA,andviareferencesinrelevantarticles.
Wefollowedabiotechcompanyduringthespring,whichhasallowedustogaininsight
intotherealityofthecurrentindustry.Thishasalsoallowedustogainaccesstopersons
with insight into different areas of the industry ranging from scientists, business
developers topatent lawyers,whichhaspermittedus to test someof our theorieson
persons active in the field. The interactions have included the possibility to sit in on
meetingsandtopartakeindiscussions.
The patent searches have been done using non‐proprietary databases Free Patent
OnlineandEspasnet.ThesearchesincludedtheUSandEuropetoallowagoodcoverage
of themajor patent regions. Initial searcheswere performed by using general search
phrasestoallowtheidentificationofrelevantpatents.Thisallowedforthegenerationof
newkeywordsandmorespecifiedsearchstrings.Weconductedabriefreviewoftitles
andabstractswhentheindividualsearchstringgavelessthan100hitstoallowforthe
identificationof relevantpatenscoveringkeyareas.Wehaveusedaclassification tool
byRobertR.Sachsthatplacesthepatentsinamatrixbyanalyzingtheclaims,inorderto
identifythepatentingtrendsinthefield6.
Wehaveusedlegalmethodwhenrelevanttodeterminethejudicialsituation.Thelegal
method included studies of regulations, praxis and doctrines to allow for a good
understandingofthechosenareas.Whensuitable,theproprietarydatabaseKarnovwas
used.
1.6DispositionThewidescopeofthethesisalsomakestheinvestigatedareasseveral.Thismeansthat
thefocusofthechaptersvariesanddoesnotalwaysmatchinsequence.Thelogiccanbe
foundinthehypothesisandtheresearchquestions.Theflowandconnectionsbetween
the different parts can best be described as in Figure 1, where the conclusion shall
supporthypothesis.
6Sachs(N/A),p1f
5
Figure1theflowchartofthethesisandtheconnectionbetweenthedifferentparts.Thenumbersintheboxcorrespondwiththechapternumber.
Chapter 2, Background, will serve as an introduction to the two central underlying
subjects,personalizedmedicineandmesenchymalstemcelltherapy.
Chapter 3 will show the current patent landscape for MSCs and analyze reference
patentsinthefield.
Chapter4showsthedifferentoptionstotakeanintellectualpropertythelaststeptothe
market,whichisdoneprimarilybyhighlightingbenefitsandchallenges.
Chapter 5 addresses the best manner of protecting the personalized aspect of the
medicine.Thiswillprimarilybedonefromtheperspectiveofanalgorithmencapsulated
insoftware.
Chapter 6 analyzes the commercial benefits and challenges of personalized medicine
whenusedincombinationwithMSCsforabiotechstart‐upcompany.
Chapter7willcombinethepreviouspartstobeabletoshowthatpersonalizedmedicine
offersagreatopportunityforabiotechcompany.
1.7TargetAudienceThe intended audience of this paper are persons that have an understanding of
intellectual property and the structure of the biotech industry. The individual is
interested in the development of personalized medicine in relation to IP and its
commercialization.
6
2.BackgroundTheintentofthischapteristogiveanunderstandingofthetwounderlyingsubjectsof
thethesis,personalizedmedicineandMSCs.Thebroadscopeofthesubjectsmeansthat
only key features will be included, which to some extent will result in a simplified
presentation.
2.1PersonalizedMedicinePersonalizedmedicinehas thepotential of becoming thenext step in the evolutionof
therapies.There isnosingledefinitionofpersonalizedmedicine,andtheutilizationof
the concept varies from the sole use of diagnostic tools to the encompassing of the
wholeprocessasshowninFigure2below.Wehavedecidedtouseadefinitionfromthe
USpresident’sCouncilofAdvisoryonScienceandTechnologyfrom2008,whichcovers
thewholeprocess.
“Personalizedmedicine refers to the tailoring ofmedical treatment to the individual
characteristic of each patient. It does not literary mean the creation of drugs or
medical devices that are unique to a patient but rather the ability to classify
individualsintosubpopulationsthatdifferintheirsusceptibilitytoaparticulardisease
ortheirresponsetoaspecifictreatment.Preventionortherapeuticinterventioncanbe
concentratedonthosewhowillbenefit,sparingexpensesandsideeffectsforthosewho
willnot.”7
Personalizedmedicineemphasisamoreholisticapproachtoaddressingdiseasesanda
more proactive approach to treatment. This should be compared to the traditional
approachofreactive trialanderror that iscurrentlypracticed.Thenewparadigmcan
bestbedescribedasseeninFigure2.
Figure2ParadigmofPersonalizedMedicine8
2.1.1BenefitsofPersonalizedMedicineThere are several benefits with personalized medicine, but the three main can be
defined as – (1) better diagnosis and earlier intervention, (2) more efficient drug
developmentand(3)therapies.
7President’sCouncilofAdvisorsonScienceandTechnology(2008),p.138PersonalizedMedicineCoalition(2010:1),Internet
7
(1) The improvement in diagnosis allows for earlier and with a higher precision the
identificationofadisease.Thisinturnallowsforappropriatemeasurestobetakenwith
potentially lessdiscomfort for thepatient.Togiveanexample,apatient inahigh‐risk
segmentofcontractingadiseasecomes in foratest.Dependingontheresult, thiswill
allowthephysiciantoaddresstheproblemprior toanysymptomshavesurfaced.The
resultwouldbelessdiscomfortandsafertreatmentforthepatient,andlowercostsfor
themedicalsystembyallowingalessinvasiveresponse.9
(2) The current paradigm of treatment development has prevailed over many of the
diseasesthathaveaffectedmankind.However,severalofthediseasesthatremainhave
agreatercomplexity–e.g.diabetes,cancerandAlzheimer’sdisease–whichmeansthat
anewapproachisneededtotacklethechallenges.Themorecomplexdiseasesarenota
resultofasinglegeneorevent,butinsteadacombinationofgeneticsandenvironmental
factors. This means that the individual response to a treatment varies more, which
requiresseveralparameters,
e.g. genetic variations, to be
addressed during the
development to allow for an
efficient treatment. The
current paradigm of
developing medicines
accordingtotheone‐size‐fit‐
allconcepthasnotbeenable
to address the complexity
neededasshowninFigure3.
Thiswillbeakeyareaforthe
personalizedmedicineparadigmwheretheindividualparameterscanbeaddressed.10
(3)With the more efficient diagnostic the physician would be able to identify which
formofthediseaseapatienthas,andsubsequentlywhichmedicineandoptimaldosing
thatwouldgive thebest result for thepatientathand.Thiswouldhave thebenefitof
less adverse events for the patient. The new approach should be compared to the
currentmethod of trial and error with different treatments until the best solution is
9Aspinall,M.G.etal.(2007),p1ff10PersonalizedMedicineCoalition(2009),p4ff
Figure3Thereceptivenesstotraditionalmedicine9
8
found.Thisincreasestheriskforcomplicationsduetoe.g.negativesideeffectsfromthe
medication,andmorediscomfortforthepatient.11
2.1.2ChallengesofPersonalizedMedicineThere are challengeswith the implementation of personalizedmedicine, and the five
maincanbedefinedas–(1)scientificchallenges,(2)economicalparameters,(3)public
opinion,(4)ethicaldimensionand(5)regulatoryissues.
(1)Theideaofpersonalizedmedicineisnotanewconcept,buttheabilitytounderstand
the underlying reasons for diseases have taken a big leap with the development of
technologies that allow for a greater understanding ofmRNA, DNA and proteins. The
current understanding and technical development has allowed for the current
generationofpersonalizedmedicinetoprevail,but therearesomeissuesthatneedto
be addressed to enable a big breakthrough, e.g. further understanding of the
relationshipbetweendifferentgenesandhigherthroughput.12
(2)Theeconomicalchallengesaretodeterminethe“timeaspect”andmotivatethecost
of development. The time aspect is to some extent dependent on the structure of the
medicalsystem,i.e.ifitispaidviathepublicsectororwithprivateinsurances.Aprivate
fundedmedicalsystemisbasedonthenotionoftreatingacurrentdiseasewithahigh
mobility of the customers between different insurance providers. The current system
goes against the preventive approach of personalized medicine, which raises the
question of who shall carry the costs for the treatment of a disease that has not
presenteditself,andpotentiallyneverwill.Thiswillrequireareformationofthesystem
toallowforabreakthroughofpersonalizedmedicine.13
The possibility to derive value for a pharmaceutical company is currently limited in
relation to the costs associated with development. This is a result of the current
compensationsystemsthatpremierthetreatment,whichmakes ithardtoreclaimthe
costsofdevelopmentandlaunchofe.g.diagnostictools.14
(3)Thepublic opinion is currently focusedon the risk for accidents and abuseof the
genome material, and not the possibilities that the treatments can offer. This is
prevalentonallmarkets,butmoreso inEuropewhere theaccidentshaveeroded the
confidentintheindustry.Theresponsibilitycantoalargeextentbeputontheindustry,
11PersonalizedMedicineCoalition(2010:2),Internet12Meyer,J.M.etal.(2002),p434ff13Davis,Jetal.(2010),p2ff14Davis,Jetal.(2010),p2ff
9
which has not addressed the concerns of the public and downplayed critics. This is
howeverbeingaddressedbytheindustrybyemphasizingthebenefitsofthetreatments
andeducatingkeyactors,whichhopefullywillsolvetheproblem.15
(4) The social dimension revolves around the selection of diseases to treat and the
increasedcostsofthetreatments.Thereisariskthattheselectionoftreatmentswillbe
tailoredtofitthepopulationsinthedevelopedworldthatcancarryahighercostatthe
expense of the developing countries. The one‐size‐fit‐all paradigm that currently
prevailsallowsthedevelopmentofmedicinesthatcanhelpeverybodytosomeextent.
Thismightnotbethecasewiththepersonalizedapproachwherethemedicinewillbe
directed towardsa specificgroup.Thecostof thenewproductshaveusuallyahigher
costpertreatment,whichraisestheconcernofwhowillhaveaccess,i.e.ifitwillbecome
aproductfortherich.16
(5) The personalized medicine falls under the legislations of pharmaceutical‐ and
geneticproducts.Thismeansthatthecontrolandrequirementsareextensive,whichput
largedemandsontheindustry.
2.2Mesenchymalstemcelltherapy
Researchandpublishingofreportsaroundstemcellshasgrownenormouslyduringthe
lastdecade.Stemcellresearchhasbecomeoneofthepromisingareasforpersonalized
medicineandthetreatmentofvariousformsofdiseaseandtraumaofthehumanbody.
The knowledge about stem cells is constantly expanding but there are still many
unsolvedissuesregardingtheirstructureanddifferentinfluencesonthehumanbody.
2.2.1Stemcells
Cellsarethebasisofalllife.Stemcellsareonesubcategorythereofandarethefirstcells
formed in thedevelopmentofahumanbeing.17Stemcellsareunspecializedcells that
havethepotentialtoreplicateintoidenticalcellsorgiverisetodifferentiatedcells.The
differentiated cells form themore than200other further specified cellsof thehuman
bodysuchasmuscle‐,redblood‐orbraincells.Aslongasthehost‐bodyisalive,these
cells often serve as a kindof repair system,primarilydividing and replenishingother
cells.18Mammalianstemcellsaredivided into twobroadtypes ‐embryonicstemcells
15Enriquez,R.etal.(2000)p102ff16Smart,A.etal.(2004),p334ff17EversP.,2009,p.1618StemCellInformation(N/A),Internet
10
(ESCs)andnon‐embryonic(somatic/adult)stemcells.ESCsarefoundintheearlystage
ofembryonicdevelopmentwhereasadultstemcellscanbefoundintissuesoftheadult
organism.19 The differentiation capacity of stem cells is divided into their degree of
potency. ESCs are pluripotent and can differentiate into all three germ layers of the
developingembryo,i.e.themesoderm,ectodermandendoderm.Pluripotentadultstem
cellsarerare.Mostadultstemcellsaremultipotentandcandifferentiateintoavariety
ofcells,butwhichhastobeacloselyrelatedfamilyofcells.20
2.2.2Mesenchymalstemcells
Figure4Structureofcellfocus21
Mesenchymalstemcells(MSCs)areapopulationofmultipotentadultstemcells.MSCs
areusuallyextractedfrompatients’bonemarrow(BM)orothertissuesofmesodermal
origin such as fat, joint synovium, dental pulp etc.22, and they can formmultiple cells
suchascartilage,bone,tendonandligaments,fat‐,muscle‐,skin‐andnerve‐cells.MSCs
aresuitableforclinicalapplicationsastheycanbeobtainedinsufficientlargequantities,
theymaintaintheircapacityoveralongtimeduringcultureperiodsaswellastheycan
befrozendownforpreservationwithoutloosingtheirfunction.Amajorobjectofstem
19EversP.,2009,p.1920EversP.,2009,p.2021Bergman,K.etal.(2007),p.1422EversP.,2009,p.28
11
cellresearchistodevelopthemeanstousethemastherawmaterialfortissuesthatare
lackinginthebodyduetodisease.
2.2.2.1Occurrence
Besides theoccurrenceofMSCs inBM,blood and thebrain,23 it
hasrecentlybeensuggestedthatMSCscanbederivedfromother
tissuessuchashumanumbilicalcord(UC),thatcouldbeusedas
an alternative to BM‐derived MSCs.24 MSCs have been isolated
from the Amnion, Placenta, UC blood, periosteum, skeletal
muscles, Synovium and BM. This versatile availability makes
them great candidates for different cell based strategies for e.g.
the regeneration of bone and cartilage damage.25 Animal trials
indicate great potential for the use of MSCs for reconstitution of
humandamagedtissuesuchascartilage,bone,muscleandtendon.26
2.2.2.2MSCFeaturesMSCshavedistinctiveproliferation capacity andmultipledifferentiationpotential and
are therefore suitable for the regeneration of complex impairments. The immune
suppressive and environment modulating characters also enable the control of
inflammation‐ and degradation processes.27MSCs have the ability to home to sites of
tissue damage or inflammation, which has been demonstrated in settings of bone
fracture,cerebralischemiaandtheinfarctedheart.28OneofthekeyfeaturesofMSCsis
theirmigrationandengraftmentpotential,whichhasbeenshownwiththeexampleof
MSCs being able to stay in the BM after a transfer or whereMSCs evenmove to the
affectedarea.29
2.2.2.3SubstitutesCellswithsimilarcharacteristicsasMSCscanbeextractedfromallpost‐natalandextra‐
embryonic tissues such as amniotic membrane and placenta.30 These findings are
thoughttohavepotentialforapplicationintheareaofregenerativemedicine.31
23Kadereit,S.(2005),Internet24MajoreI.etal.,2009,p.125DehneT.etal.200926Kadereit,S.(2005),Internet27DehneT.etal.(2009)28PittingerM.F.,(2004)29DehneT.etal.(2009)30MajoreI.etal.,2009,p.231MajoreI.etal.,2009,p.6
Figure 5 MSCs arrangethemselves aftertransfer to treat theaffacted(green)area
12
Theuseofembryonicstemcellsisoftenethicallyunacceptedduetothedestructionof
fertilized embryos. Induced pluripotent stem cells (IPSCs) are artificially produced
pluripotentstemcellsthatderivefrominducinganexpressionofcertaingenesintonon‐
pluripotentstemcells(oftenadultstemcells).Thesecellsarebelievedtohavethesame
features as ESCs but they still pose significant risk for use in humans due to the
undevelopedresearchstate. Ifsuccessful, thistechnologycouldhavegreatsignificance
forthedevelopmentofregenerativemedicine.32
2.2.3Treatment
2.2.3.1StemcellsResearchwithin this field has had itsmain focus on exploring the possibilities to use
stemcells inregenerativemedicine inorder toreplacebydiseaseor traumadamaged
cells and tissues.33 Treatment and R&D with stem cells has potential in the fields
presented in Figure 6. Bonemarrow transplantswith adult stem cell treatment have
successfully been used for many years to treat leukemia and related bone/blood
cancers.34
Figure6StemcelltreatmentopportunitiesandR&D35
2.2.3.2MSCsMSCs have the capability to differentiate into various cell types and could be an
attractivetherapeuticcelltypetotreatpatientswithforinstanceischemicheartdisease
(IHD). Animal studies and initial clinical trials have shown positive effects on the left
32EversP.,2009,p.3033EversP.,2009,p.3834EversP.,2009,p.3535EversP.,2009,p.40
13
ventricular(LV)function.3615daysafterthemyocardialinfarction,thetransplantation
of MSCs showed positive effects on the infarct size and systolic and diastolic LV
function.37
Incontrasttomanytraditionalmedicaltreatmentsthatonlyaredes‐inflammatoryand
stopthedisease,MSCtreatmentisanti‐inflammatorybutisalsoabletoreproducetissue
andorgansandimprovesrecovery,whichreducesrecurringdiseases.
TheclinicaluseofMSCshasbegunforvariousdiseasessuchasforinstancecancerand
MI.MSCshaveeitherbeenadministeredintravenouslyinorderforthecellstofindtheir
waytothetargetedareaordirectlyinjectedintotheconcernedarea.Someoftheareas
where MSC treatment could be relevant are MI, cancer, brittle‐bone disease and
glycogenstoragedisease.Someofthesefieldsdonothavemanytherapeuticoptions.
In1999,thefirstuseofBMcellsforcardiomyoplastyinmicewasreported.Autologous
BMcellswereimplantedintheLV3weeksaftercryoinjury.38
2.2.4AdvantagesofMSCs
Many diseases or physical injuries that are treated in the traditional way only
experience improvements in formofpainrelief, reductionofdestructive inflammation
orthestoppageofthecatabolizingeffect.MSCstreatmentontheotherhandoffersthe
same features as before but also repairs the affected areas and rebuilds the tissue,
cartilage and bone. This is done by secreting anti‐inflammatory signal molecules to
surroundingcells,andtherewithreducingtheimmunereaction.
Figure7Wayoftreatment
Asalreadymentioned,cellscanbeextractedfromBM,blood,orUC.Aswefocusonadult
MSCsthisleavesuswiththetwofirst.BMcontainsagreateramountofMSCscompared
toblood,whichmakesiteasiertoexpandthecellstotheamountneededfortreatment.
Ontheotherhand,BMneedstobeextractedsurgicallywithagaugeneedle,whichisa
36GraussR.W.etal.,2008,p.108837GraussR.W.etal.,2008,p.109038PittingerM.F.,2004
14
painful process, whereas blood is easy to get. The Isolation ofMSCs can bemanaged
throughthecounterflowcentrifugalelutriation(CCE).39Thepatient’ssamplecontainsa
mixture of tissue and different cells, out of which RMS distinguishes MSCs through
manual Ficoll separation.Manual Ficoll is a sterile and ready to use density gradient
medium forpurifying lymphocytes40.Thenext step is to expand the isolated cells and
getthemtogrowtotherequiredquantitybeforetheycanbeusedforthetreatmentof
thepatient.
2.2.5Allogeneicvs.AutologousMSCs
There are two options for treating patients with MSCs, either with allogeneic or
autologouscells.Bothoftheoptionshaveadvantageswhereasautologouscellsseemto
bethebetteralternativeintheend,aslongascertainprocesses,suchastheexpansion
ratecanbeimproved.
Thetreatmentwithinashort timeperiod iscrucial fortherecoveryof thepatientand
shouldbewithin5to10daysafteroccurrence,atleastinthecaseofbonemarrowused
forMItreatmentasitshowedbesteffectininfarctsizereductionintheleftventricular.
Thereisstillaneedtofindoutmoreaboutoptimaltreatmenttimeandwhattheeffects
wouldbeifthecellswereinjected14daysafterMIastherearestillissuestobesolved
regardingfasttreatmentpossibilitiesafterinfarctoccurrence41.
2.2.5.1AllogeneicAllogeneicmeansthatthecellsareextractedfromonepersonandinjectedintoanother
person.Thishastheadvantagethatthedonorcanbeselectedinadvanceandthesample
can be tested for geneticmatch and different diseases in order to be available when
neededbyapatient42.Therestillisariskofsideeffectsandcell‐cellreactions,immune
reactions that make the transplant being rejected. Even if allogeneic cells can be
extractedinadvance,thereisstillgreateffortinvolvedastherehastobemadesurethat
thecellswillmatchinordertoavoidanimmunereaction43.
2.2.5.2AutologousTheautologoustreatmentmeansthatcellsareextractedandre‐injectedintothesame
person.Thisremovestheriskofrejectionandincreasestheprobabilityofasuccessful
recovery of the patient. The disadvantage of this process is that the cells have to be
39MajoreI.etal.,2009,p.140AmershamBiosciences(N/A),p.541DunckerD.Jetal(2007),p.142PittingerM.F(2004)43EversP.(2009),p.71
15
takenfromthepatientwhenthedamagealreadyhasoccurred,whichgiveslesstimefor
cell expansion.Neither does it seem clear if the patients produce the right amount of
stem cells of required potency at the time needed.44 Another possibility that would
requirealotofeffortwouldbetoextractcellsinadvanceandstorethemforfutureuse.
Itisdifficulttosaywhichofthetwooptionswouldbethebettersolutionintheend.If
the researchers manage to advance the expansion process of MSCs, the autologous
solution is definitely the first choice. In some caseswhere the disease is treatable by
transplant,autologouscordbloodstemcellscouldnotcurethediseaseasthecellshave
thesamedefect,andthereforeallogeneicstemcellswouldbebetter45.
44PittingerM.F.(2004)45EversP.(2009),p.72
16
3.ThepatentarenaoftheMSCsThischapterhasthepurposeofclarifyingtheenvironmentthatthestart‐upisoperating
infromanIPperspective.Thiswillbedoneinatwostepprocess,thefirstistosetthe
hypothesis in context with the assistance of a theoretical base developed by Ulf
Petrussonandthesecondwillshowthepatentsthatsurroundthecompany.
3.1ThearenasActorswithinthebiotechnology fieldexperiencegreatvalueand importanceof IPand
IPRs for their establishment on themarket. Ulf Petrusson has developed a structural
platform including three arenas, the administrative‐, judicial‐ and business arena that
canbeusedfortheconstructionofIntellectualProperties(IP)andIntellectualProperty
Rights(IPRs).
Figure8:Structuralplatforms
Start‐up companies/entrepreneurs, not depending on which field of work they are
active in,haveto learnhowtodivideandmonitorIPascommunicativeactionswithin
thesethreeinteractingarenas.
3.1.1AdministrativearenaThisarenaisastructurallyorganizedarena,coveringregulationsandpoliciestoinstruct
actors,aswellasstructuralactorssuchaspatentofficesandcourtsofappeal,andalso
including the patent examiner and patent attorney roles. The infrastructure of patent
information that isused in theadministrativeprocedure isan important factor in this
arena.
3.1.2JudicialarenaThe judicial arena is where the law is applied, and is in many ways the structural
fundamentofstates.Thisarenaisofgreatimportancewhenitcomestotheconstruction
of IPRs as legal tools and the use thereof. Therefore judges, prosecutors and defense
lawyersplayasignificantrole in thisarena.Thepracticalapplication forcompanies is
17
thedocumentationoflegislationandearliercourtcases,whichformthecommunicative
basisforfutureproceduresandsourceofinformation.
3.1.3BusinessarenaThebusinessarenaisprobablythemostimportantofthesethreearenaswhenlookedat
from an entrepreneurial perspective. It is the underlying conglomerated platform of
markets, innovation systems, firms and commercial relations,which are sophisticated
entrepreneurialchallengesforstart‐upbusinessestodesign,constructandreconstruct.
3.1.4ThethreearenasEntrepreneurs are dependent on existing business as a structural platform, which is
superjacent to the supporting administrative and judicial platforms. Both the
administrativeandjudicialarenasareimportantfortheintegrationofthecompanyinto
the legal systems. These often have national focuswhereas the business arena in the
knowledge‐oriented sphere often is internationally oriented. Companies often want
their business to be internationally recognized, whereas the supporting arenas and
people involved thereinsuchaspatent lawyersandattorneysoftenarespecializedon
the national arena. Legal professionals often lack insight and communication skills to
apply in the business arena, which makes it important for entrepreneurs to select
experts. The governing of the communication with patent attorneys, patent lawyers,
patent examiners and judges for the handling of IP and IPRs in the business arena is
crucialfortheentrepreneurialprocessandsuccess.46
3.2ThepatentlandscapeThere has been a discussion about if there is a patent thicket47, also known as anti‐
commons, covering the stem cell field. This in a field that many argue to be very
susceptible to the problem as patent offices previously allowed patents containing
broadclaimsonearlyinventions.
The fourmain challengeswith a patent thicket are – (1) the possibility to hinder the
pathtothemarketduetoblockingpatents,(2)hinderingfreedomtooperateduringthe
development‐ and commercialization phases due to several overlapping patents, (3)
limiting available capital for financingdue to thehigh risk in relation to thepotential
profits,and(4)thehighcostsofgainingaccesstoprotectedsolutionsduetocompiling
46PetrussonU.(2004),p.104ff47Apatentthickethasbeendefinedasa“densewebofoverlappingintellectualpropertyrightsthatacompanymusthackitswaythroughinordertoactuallycommercializenewtechnology.
18
royalty payments and the related transaction costs. This has the potential risk of
slowingdown,orevenhindering,thedevelopmentofthefield.48,49
Bessenetal.arguethatthereisaproblemwith“fuzzy”claims,i.e.theclaimsarevague,
inthebiotechsphere.Thefuzzyclaimsarearesultofthepatentoffices,andinthenext
stepthecourts,allowingpatentingofprematureinventions.Thisresultsinproblemsfor
theactorsinthefieldtodeterminethescopeofthepatent,andhenceiftheyareatrisk
ofinfringingontheprotection.Theconsequenceofthismightbethatinvestorsbecome
reluctanttoinvestduetothehighrisksofinfringing.50
3.2.1PreviousinvestigationsofthepatentlandscapeThereareanumberof investigationsof thestemcellpatent landscapes intheUS.The
investigations,e.g.Bergmanetal.51,Rohrbaugh52andKonskietal53,havecoveredstem
cells in general and/or directed towards ESC, using both quantitative and qualitative
methods.Thethreereportsshowanextensivepatentlandscape,butthattherestillare
possibilitiestofindnewareastodevelopandexplore.
The studies found to some extent similar results, e.g. they all touched upon the
importance ofWARF’s ESC patents and its influence on themarket. Rohrbaugh had a
qualitative approach to the landscape analysis, and reached the conclusion that the
WARF patents did not hinder the development of stem cells but could hinder the
commercialphase.
BothBergmanetal.andKonskietal.usedquantitativemethods toanalyze thepatent
landscape around stem cells. Both investigations showed the equal division of key
patentsbetweenthepublic‐andprivatesector,andtheimportanceofWARF.Bergman
et al presented a more complete picture in relation to the other two. Bergman et al
presentedthatthemajorityofthestemcellpatentswhereissuedbyUSPTO,PCT,orEPO
in 2007. This they argued, did not necessarymean that the allocation of researchers,
companiesand innovationshad thesamedispersion,butmight instead imply that the
inventors and owners of the patented innovations considered these markets to be
centraltoprotectthetechnology.54Bergmanetalshowedfurtherthattheownershipof
theUSpatentswasdividedbetweenseveral actors, andnosingle companyaccounted
48Bergman,K.etal.(2007),p.41949Clark,D.J.(2008),p.969f50Golin,M.(2008),p.16451Bermang,K.(2007)52Rorbaugh,M.L.(2006)53Konski,A.F.(2009)54Bergman,K.etal.(2007),p.420
19
formore than3%ownership. Theholders of thepatentswere often small companies
withspecializationwithinstemcellresearch.55
3.2.2ThecurrentpatentlandscapeThe quantitative analysis of the patent landscape around MSCs showed a field
containing a complex structure. The analysis presented, to some extent, patents
containing wide and general claims. This, depending on the intended focus of the
personalized medicine,
might cause challenges by
covering key elements for
the start‐up. The patent
search56showed3357issued
patents in the US and 1581
patents for Europe, which
shows the dominating
position of the US. The
investigation did not reveal
anydominantpatentsinline
with the WARF patents for
ESCintheMSCfield.
The timeline allows for a
good overview of the development in the field and shows the commercial novelty in
1990and1991.TheEuropeanpatentactivityhasasshownastable trendsince1998,
whichindicatesthatthereisstillagoodpossibilityinthefield.
The timeline for theUSshowsabigspike in2001.This isa resultofUSPTOchanging
their publication standard to coincide with the majority of the world, i.e. to publish
patentapplicationswithin18monthsof filling.Thisaffectedallpatents filedasof the
29thNovember2000andhenceexplainstheabnormalresultinthetimeline.57
55Bergman,K.etal.(2007),p.42156Thesearchwasconductedwithawidestringtocatchallrelevantpatents–mesenchym*ANDstem*ANDcell*(May2010)57USPTO(2000),Internet
Figure9thegraphpresenttheMSCpatentsinEuropeandUSAduring the period of 1990 to 2009. The search gave 4131, ofwhich2805stemfromUSAand1325inEuropean.
20
3.2.3ReferencepatentsThereferencepatents58havebeenselectedduetobeingrepresentativefortheMSCfield
byclaimingkeyelements.ThepatentsareallissuedinEuropetoshowthepresentstate
intheregion,whichtosomeextentdiffersfromtheAmerican.Thisduetoadifferencein
theviewonthescopeofstemcellrelatedpatents.
Theuseofnon‐proprietarypatentdatabasesmeansthatthelevelofobjectivityhasbeen
lowercomparedtoiftheselectionhadbeendoneusinge.g.citationsand/orclustering.
However,itdoesserveasagoodinsightintotheMSCfieldandallowsforananalysisof
theclaimspacethatcanshowthepatentingstrategyinthefield.Thereferencepatens
can be found in Appendix A where they have been divided into classes – MSCs,
treatmentandprocedures–togiveaneasieroverviewofthedevelopment.
The conclusions that can be drawn from the patent analysis is the strong position of
Osiris in the field, but it is in no manner dominant. This coincides with other
investigations,e.g.Bergmanetal,whichshowsOsirisasastrongactorinotherstemcell
areas. Several of the reference patents have a relatively fresh publication date. This
indicatesthatthesectorisstillverymuchinadevelopmentstage.Thereisadominance
of company owning of the reference patents. Universities are only involved in two of
them.Thiscanofcoursebearesultofuniversityspinoffs,buttheresults indicatethe
maturityofthesector.
3.2.4ClaimspaceThe analysis of the
patent claims, the
placement in the
matrix and the
implication thereof
arebasedonamethod
byRobertSachs59.The
analysis did not show
any homogenous
trendsintheMSCfield
as a whole. However,
58 The patents have been indentified in during the quantitative analysis as described in themethod.59Sachs,R(N/A)
Figure10Claimspaceshowingthethreefields–stemcells,diseasesandprocedures
21
sometrendswereidentifiedwhenbreakingdownthefiledintosubcategories.Theclaim
matrix,Figure10,showsthepositioningofthereferencepatentsusingthesamedivision
asabovein3.2.2.
Allofthestemcellpatentscanbefoundinfield“B”,whichmeansthattheyhavenarrow
functionality. This indicates, according to the theory that the inventions are
improvements of existing technology and allow the holder to have a relatively strong
position. The construction of the claims allows out‐licensing to complementary
companies by having a wide scope, which is positive if there is a need to access the
protectedtechnologies.
Thetheoryregardingastrongpositionneedtobesetinrelationtotheexistenceofearly
andfuzzyclaims,whichmeansthatthisconclusionisnotfullyapplicableonthebiotech
industry.
Theothertwoclasseshavealesshomogenouspattern,whichmakesithardertodraw
anyconclusions.Themajorityofthepatentsthatarefocusedonaddressingdiseasescan
be found in field “C”. This shows that they are constructed to be in line with the
companies intended use, and hence leave little opportunity to license‐in at an early
stage.This isalsonormallyapatent format that isobtainedearly inadevelopment to
give the holder a defendable position. The tool patents aremainly found in field “B”,
whichhasbeenexplainedinrelationtothestemcellpatents.
Theresultrelatingtothediseasepatentswasexpectedduetothenatureofthecategory
oftreatingillness.However,itdoesindicateamoredefensivestrategyinthefield,which
canshowaninclinationtoenforcepatents.
22
4.PossiblesolutionstoreachthemarketAsforallcompaniestherearedifferentpossibilitiesofreachingthemarketforaBiotech
companyfocusingonMSCresearchandthedevelopmentofmedicaltherapies.Thebest
strategy for reaching the market depends on the company’s business plan and
intentions of how to commercialize the company’s assets and underlying resources,
such as the innovativeness of the product, patents, market size, production capacity,
competitors, the legal regulations etc. If the companies do not possess the requiring
investment possibilities to set up their own R&D, an option is to acquire knowledge
contractually. This could be in the form of acquiring technology through for instance
licensing agreements, buying companies or establishing alliances such as joint
ventures.60
For any of the alternatives, if it is to commercialize research outcome, manufacture
products, sell patents or to license the IP, a lot of external factors need to be
incorporated. These factors can to some extent vary between different regions, e.g.
Europe and the US, and range from market demand of different cultures and their
certainpreferencesandregionalregulationstoalreadyexistingcompetitors.
The development and competition on the market and the future developmental
potentialleadtothequestionofwhichwouldbethebeststrategytoreachthemarket.
Whatarethecommercializationoptionsandwhichpathwouldbethemostprofitable?
These decisions are dependent on if blocking patents exist, on the novelty of the
inventionandonthepossibilitytogenerateIPR’s.Forstart‐upcompaniesthisprocessis
morecrucialthanforanyothercompany,asthiswillbeoneofthefoundationsfortheir
futurebusiness.This is tosomeextentalso true for largerandestablishedcompanies,
buttheymighthavethepossibilitytofallbackonpreviousbusinessesorcouldstandup
againstpotentiallawsuits,whichmakesthemlesssensitive.
4.1PossibilitiesandhindersThissectionwillpresentaselectionofstepsfromthedevelopmenttocommercialization
ofaproduct that theactorneeds to thinkaboutwhenapproaching themarket,and in
the next stage the possibilities to maximize the opportunities via using the tools of
licensing,collaborationsandexemptions.
60Granstrand,O(2000),s.119f.
23
4.1.1ResearchoutcomeThe company can decide to only focus on research and leave the development of
productstootheractors.Thiswouldmeanthattheresearchissold,orlicensed,toother
development actors engaged inproduct development andmanufacturing. In this case,
theaimwouldprobablybetokeeptherighttousetheprocessforfurtherresearch.This
would be a good alternative for companies not interested, or lack the resources, to
developthewholemanufacturing.
4.1.2ProductAcommonalternativeistouseresearchtodevelopaproductandsellitonthemarket.
Thetimefromresearchtoproductlaunchcanbeverylongdependingoniftheproduct
is classified as a medical product and needs to go through tests and verification
processesbeforebeingallowedtobesoldonthemarketor ifaproduct launchcanbe
carriedoutwithoutfurtherapproval.
4.1.3PatentsIfaBiotechstart‐uphaspatenteda technologyorprocess theywillnotneed for their
productdevelopmentandthattheydonotintendtouseinthefuture,theycoulde.g.sell
thepatent,giventhatthepatentcannotbeusedagainstthem.Forsecurityreasonsthe
patent can be sold with reservation to being allowed to use the patented solution
themselves.Thisisagoodwayofcreatingincomewithresearchoutcomethatcannotbe
usedforproperdevelopmentandotherwisewouldbeleftbehind.
4.1.4RisksTherisksrelatedtothemarketapproachareseveral,bothforaproduct launchorthe
commercialization of the generated IP. There might be no demand for the kind of
product/IP that the biotech company offers; unnecessary product features, a too high
price or that substitute products exist that offer satisfying features can be reasons
therefore.Another risk is blockingpatents that couldhinder the commercializationof
theproduct.
4.1.5BlockingpatentsIfthemarketandcompetitoranalysisshowsexistingblockingpatentsthereisnoneed
to give up, but tomake awell thought through decision onwhich is the bestway to
circumventblockingpatentsandhowtousethemforownprofits?
4.1.5.1InvalidateIncasethatthepatent is toobroadformulatedorthepatentexaminersmissedouton
already existing innovations or informationwas disclosed before patenting, there is a
24
possibilityofinvalidatinganalreadyapprovedpatent.
4.1.5.2InventaroundInventing around can be relevant if R&Dwill not be too resource demanding and the
benefitthereofoutrangescosts.
4.1.5.3Bargaining‐acquisition,license,crosslicenseTheacquisitionofblockingpatentsprovidedbyotheractorscouldbeapossibleoption
for a small biotech company, whereas larger actors even might acquire whole
companiestogetaccesstotheirIP.Thismightbeanexpensiveoptionforakeypatent
andhencenot aviableoption for a start‐up,butmightbe theonly alternative togain
access.To licensespecific IPfortheuse inownproductionortocross‐licensearealso
viableoptionsthatwillbeaddressedbelow.
4.1.5.4Ignore/infringeThese options stand in close relation to the development stage of the invention. A
companywith a finished productmight bewilling to take higher risks than others. A
quiteradicalalternativeistoignoreexistingpatentsandinfringeagainstthem,butthis
willalsocarryahigher liability if theownerenforces theright.Thisstrategymightbe
choseniftheIPisnotverycloserelatedandaninfringementmightnotbediscovered.
Another possibility, which might not be relevant for a small biotech company, is to
intentionally infringeagainstpatentsofsmallactors.Thesemightbeafraidofgoingto
courtagainstbigactorsandcouldprobablynotaffordtopayexpensivelegalfees.This
optionmightberelevant foractors thatarenot interested in investingmore timeand
moneyoninventingaroundthepatentedtechnology.
4.1.5.5WaitThelastandverypassiveoptionistowaitouttheexpirationdateofthepatent,whichin
somecasescouldbeverytimeintensiveandgiveotheractorsaheadstarttomarket.
4.1.5.6RecommendedpathThe most relevant option for small biotech start‐ups to get around blocking patents
seems to be the acquisition, licensing‐in, cross‐licensing or inventing around the said
patents, or to collaboratewithother actors.Acquisitionwouldbe relevant in the case
thattheownerofthepatentseesnovalueinthepatentandcannotmakeuseofitand
the patent therefore could be acquired to a goodprice. Inventing around could be an
optionifitisnecessaryinalimitedaspectandneededresourcesarereasonable.
25
Thecreationof IPandespeciallypatentsplaysagreatrole for thesemarketapproach
alternatives.ItisimportanttohaveawellthoughtthroughIPstrategythatgoesinline
withthecompany’sbusinessplan.It isalsocrucialtomakeeverybodyinthecompany
understand the importance of IP and that company internal information or research
outcomecannotbedisclosedinordertosecurethenoveltyaspect.
ThinkabouttheIPstrategyandhowtoprotecttheinventionsbeforegoingintomarket!
4.2LicensingIt is in theory possible to gain access to all patented technology, but this would be
problematic in termsof timeandmoney.Theoption is to license thekeypatent.This
wouldbechallengingdue to the fuzzy‐andoverlappingclaims.Thecostof licensinga
patentisrelativelylow,inaverage1percentorlessofproductrevenue,buttheproblem
couldbetheneedtoaccessseveralpatentstoallowfreedomtooperate.61
4.2.1In‐licensingLicensing‐inisoftenusedwhencompaniesneedaccesstocomplementarytechnologies
orproductionmethodstodeveloptheirownproducts.Theymighthaveaccesstosome
butnotallnecessarytechnologiesortheyhaveinventedacertaindevicethatgoeswith
already existing technologies. In‐licensing is a goodway to save in onR&Dcosts. The
advantage with this alternative is that companies do not have to develop the whole
research process and they can bargain the prices and the period of licensing. When
licensing, there is no/less need of own research spending and therefore reduces big
investmentrequirement.62Problemscanarisewhentheotheractorisnotwillingtoout‐
license. This couldmake the construction of the intended product impossible or very
difficult/costintensive.Thealternativetointentionallyinfringeagainstthepatentcould
alsobemoreriskyasattentionalreadyisaimedatthem.
4.2.2Out‐licensingLicensing‐outIPcanbedoneindifferentways,e.g.withanexclusive,non‐exclusiveor
solelicense.Thechosenoptiondependsonthestrengthoftheparticipatingparties,the
intended use and of course the business model of the proprietor. The process of
licensing‐outcanoccurwhentheproprietoroftheIPdoesnotneedtheexclusiveright
to use the patent and/or he sees licensing as a part to create more income for the
company.Licensingcancreateincomefrombothinitialpaymentandroyalties.Risksare
61Jaffe,Aetal.(2007),p6462Granstrand,O(2000),s.81
26
reducedbycontractualregulations.Ifthefocusofthecompanyisinanotherfieldthan
the licensee’s, respectable income can be generated from amarket that never would
havebeenconsideredotherwise.
4.2.3ExclusivelicenseExclusive licenses give the licensor the right to use thepatented technology for alone
usage. The advantage therewith is the possibility to be the only actor using the
invention,butthereforealsothepricecouldbethereafter.
4.2.4Non‐exclusivelicenseAnon‐exclusivelicensemeansthatotherscouldlicensethesamepatentandbothwould
beallowedtomakeuseofit.Thisisagoodalternativeifthepatentedtechnologydoes
notconstituteacrucialandinnovativepartofthenewinventionorifthethirdpartyis
activeinanotherfieldofinterest.
4.2.5SolelicenseA sole license gives the original patent holder the right to use the invention, but not
exclusively, andhe is not allowed todeed licenses to other companies.This is a good
alternativeinordertostillbeabletousethepatentedsolutionbutkeepcompetitionon
a lowlevel. Incomegeneratedfromthissolutionisrelatively lowerthanitwouldhave
beenforanexclusivelicense.
4.2.6Cross‐licenseCross‐licensecanbeusedindifferentforms,e.g.patentand/orknow‐how,toexchange
access to technologies between two or several actors. The extent of the use of cross‐
licenses in the biotech industry differs between sources. Gozzo argues that cross‐
licensing is especially common in the medical and chemical industry63. However,
according to Jaffe et al. this is not commonly used in the biotech industry, which he
thinks is strange considering the set‐up of the industry64. Cross‐licensing is a good
option to gain access to technologywhenother resources are scares and allows for a
fasterdevelopment.
4.2.7CompulsorylicenseIf theproprietorofapatenthasnotmadereasonableuseof thepatentwithin3years
afterpatentgrantingor4yearsafterfilingofthepatent,otheractorscangettherightto
getacompulsory license forareasonableprice. Ifanactorwants touse the invention
commerciallyhemayget a compulsory license if it is ofparticular importance for the
63Gozzo,G(1998),p10964Jaffe,Betal.(2007),p67
27
public.These licensesareonlygiventhoseactorsthatarethoughttohavepotentialof
makingacceptableuseof the inventionandcanbeassignedbyauthorizedauthorities
dependingonnationalregulations.65
4.3CollaborationCollaborations are a necessary mean for a lot o start‐up companies and so also for
biotech companies. Collaborations do not necessarily have to be in relation to the
exchangeofIPorresearch,butcanalsobeinformofcomplimentaryknowledgesuchas
marketingcompetenceifthisdoesnotexistinthecompanyitself.66Duetothesmallsize
ofmanycompanies,theymaynothavetheneededresourcesofpossibilitieswithinthe
company to handle all issues by themselves. In such cases it can be of great value to
collaboratewithdifferentkindsofactorstoexchangeknowhowinthedifferentfields.
Anothertypeofcollaborationcanbefoundinsocalledpatentpools,wheretwoormore
patent owners agree to license their patents to each other or third parties. The
advantageforbiotechcompaniesisthesharingofknowledgeandtheincreasedeffecton
research.Therisksrelatedtothesecollaborationsandsharingofresearchprogressare
the loss of potential competitive advantage and being guided into certain
market/research fields and loosing creativity. The main cause for the existence of
strategic alliances seems to be the possibility to share risks because certain research
failsandwouldcausehighcostsforasingleactor.Anotherreasonisthecomplimentary
effectthatpushesdevelopment,evenifcompanyproperstrategiesarerestrained.67
Thereareseveralbigpharmaceuticalcompaniesthathavestartedtocollaborateinearly
statedevelopment,suchasforinstanceGSK,AstraZenecaandRoche,whoseintentionis
to co‐develop stem cell‐derived hepatocytes for use in ADMET68 studies. Another
collaborationhasbeen identifiedbetweenPfizer andCellartis forvalidationofhuman
EScell‐basedmodelsforreproductivetoxicologyscreens.69
4.4ExemptionThetwofirstoptionsrequirea levelof interactionwiththecounterpart,whilethe last
option, patent exemption, can be used as a sole solution to allow access to patented
technologies.ThisisprimarilyanoptionthatcanbeusedinEurope,astheintroduction
belowwillshow,duetotherestrictiveapproachintheUS.
65LevinL.etal.(2006),p.7966Terao,J(2005),p.5367Terao,J(2005),p.5368ADMET=Adsorption,Distribution,Metabolism,ExcretionandToxicity69EversP.,2009,p.60
28
TheUShasaveryrestrictiveapproachtotheuseofpatentexemptions,witha limited
experimentaluseastheonlyoption.Thepossibilitytousetheexperimentalexemption
wasfirstestablishedinWhittemorevs.Cutter70 inarelativelyrestrictivemanner.This
was furthermore limited in Madey vs. Duke71 to the level of practically non‐existing.
However,theUSSupremeCourtexpandedtheconceptoftheexperimentalexemptionin
Merek vs. Integra72 to allow the use of patented solutions as a part of pre‐clinical
experiments.73 The conclusion that can be made is that it is not possible to use the
exemptionasanoptiontoreachthemarketintheUS.
TheuseofexemptionsismoreextensiveinEurope,anditistoalargeextentcodifiedin
thelegalacts.Thereisa largeconfirmativeintheformulationofthepatentexemption
onthekeymarketsinEurope(pleaseseetheselectedmarketbelowinFigure11),with
the exception of Austria and Switzerland that do not have the same set‐up. The
conformitiesdotosomeextentallowforgeneralconclusiontobeanalogizedfromone
markettoanother.
The exemptions have the benefit of enabling access to protected solutions in a legal
manner,buthaveatthesametimelargerestrictionsonwhatisallowed.Theresearch‐
andextemporaneousexemptionsarethetwooptionsthatofferpossiblesolutionsfora
biotech company to utilize patented solutions. The first option allows for research
experiments on a patented solution, and might offer an opportunity during the
developmentofthenewproducts.However,thescopemeansthatitcannotbeusedfor
commercialization andhence a leverage tool. The secondoption, the extemporaneous
exemption,offerssomeinterestingoptionsaswillbepresentedinthenextsection.
4.4.1ExtemporaneousExemptionTheextemporaneousexemption74offersaninterestingoptionforabiotechcompanyto
allow the legaluseofpatentedmedical solutionsbyadjusting theirbusinessmodel to
fall under the clause. The extemporaneous clause was constructed prior to the
introduction of cell therapy with a different intended use, as presented below. The
investigationdidnotidentifyanypraxiswiththesuggestedusethatcouldhaveguided
the analysis. The limited use of the clause also means that the available doctrine is
70Whittemorevs.Cutter,29Fed.Cas.1120(C.C.D.Mass1813)71Madeyvs.DukeUniversity,307F.3d1351,1362(Fed.Cir.2002)72MereckKGaAvs.IntegraLifesciencesI,Ltd,545U.S.1993(2005)73Palombi(2006),p2ff74Theexemptionhasdifferenttitlesinthejurisdictions,butwehavechosentousethetitleintheUnitedKingdomsinceitallowsforagoodexplanation.
29
restricted,andtheliteraturethatisavailablehastoalargedegreeadifferentemphasis
thanthesuggesteduse.
The extemporaneous clause – Preparations in a pharmacy of
medicinesunderadoctor'sprescriptioninindividualcasesoractions
withdrugsthathavebeentreatedinsuchcases.75
Theextemporaneous clausehas a similar formulation in the investigated jurisdictions
(selectedcountriesareshowninFigure11),whichallowsthepresentationofonetoact
asthetemplatefortheothercountries.
Theclausewascreatedtoprotectthepharmacies’personalfromtheriskofcommitting
patent infringementwhiledoing theirwork.The extemporaneous clause allows for a
pharmaceuticaltobepreparedaccordingtoanindividualprescription.Thismeansthat
itisnotallowedtopreparetheproductinadvanceandkeepitinstockandinthenext
stepsellthemedicine.76,77
The extemporaneous
clause can be found in
most of the European
countries, as shown in
Figure 11. This provides
the possibility to make
use of the exemption on
severalmarkets.
The exemption allows a
biotechcompanytoshape
the business model in a
manner where the MSCs
are prepared as a
personalized medicine in
accordance with the
physician’s instruction,
andthroughthiscircumventthepatentprotectionthatmightexistforthelaststepof
75ThepresentedclauseistakenfromSweden,whichhasthebenefitofbeingbasedoncivillawandhenceallowforaneasyinsight.SwedishPatentAct–1967:837‐§3Sec3(5)76SwedishgovernmentBill–1977/78:177Jacobsson,M.etal(1980),p114f
Figure 11 The countries in Europe that have theextemporaneousexemption.
30
theprocess.Theprocesscanbeseenintwodifferentmanners.Thefirstisthatallthe
stepsofpreparing theproductshouldbeviewedasoneprocess, i.e. fromisolationto
preparation. This would mean that the exemption is not applicable, due to only
covering the last step. The second option is to view the process as individual steps,
which would mean that the exemption is applicable. This argument is stronger
consideringthestructureoftheproductionwheretheindividualstepsareaprocessin
itself,andhenceshouldnotbeconsideredasone.Thefinalstepcouldbeconsideredan
infringement depending on the patent protection, but this should fall under the
exemption,undertheconditionthatitfulfillstheprerequisite.
There is a discussion in thedoctrine if it shouldbepossible to circumvent thepatent
protectionwith the exemptionwhen the intent is commercialization. This theymean
goesagainst the intentof theclauseandshouldhencenotbeallowed.The intent is to
protect action that is sporadic, improvised and medical need, and hence not
commercialization.78
Theunclear legal statusof the clausemeans that itwouldbea risk touse it as a sole
meantoreachthemarket.Thismeansthatitwouldbebetterusedasaleveragetoolfor
alicenseorcollaboration,andonlyusedifthenegotiationdoesnothasapositiveresult.
The concept of adjusting the businessmodel wouldmost likelymean that the action
wouldfallundertheprerequisiteoftheclause,butthequestionisifitisinlinewiththe
intent.Thefactthatitdoesnotgoagainsttheformulationoftheclauseshouldgivesome
guidance,butthisneedstobeaddressedbythecourtstogiveadefiniteanswer.
78Domeij,B(2000),p228
31
5.PossibilitiestoprotectthepersonalizedaspectThe question that will be addressed in this chapter is the possibility to patent the
personalizedfeatureofthemedicine.Thisfeatureisofcourseaproductoftheintended
technical solution, e.g. abiologicalmarkeroranalgorithm79.Thebiomarkerhas some
interesting opportunities, but the algorithm offers more possibilities to generate
protectionbyhavingamoregeneraluse.Thismeansthatthepatentingofanalgorithm
poses amore interesting question. An algorithm as such is normally encapsulated in
software, and the software will hence be the focus of this chapter. The choice of
patenting software presents some challenges when it comes to generate protection
aroundtheintellectualpropertybutitalsooffersomeinterestingopportunities,aswill
beshownbelow.
5.1ThebestmannertoprotectsoftwareThebestmannertoprotectsoftwareisaproductofseveralparameters–e.g.durationof
protection,cost,geographicalcoverandresourcedemands.Thehypothesismeansthat
thecostandtheresourcedemandsaretheinitialkeyfactors,butofcourse,thisdoesnot
maketheotherfactorsirrelevantinacomparison.Thismeanse.g.thatthescopeofthe
protectionneedstobebalancedagainstthecost.
Theprotectionalsoneedstoreflectthecompany’sinternalcapabilities,e.g.competence
aboutIPRs,andexternalfactorse.g.otherIPRs,andtheintendeduse.Thepresumption
inthischapteristhatIPRknowledgeislowandtheresourcesarelimitedduetobeinga
start‐up.Theexternal factors isnormally lessclear forastart‐upsince theremightbe
severalprotections inthepipe‐lineandthebestuse isnotclarifiedduetoacontinues
development.
The three options that will be addressed are (1) patent, (2) trade secret and (3)
disclosingofinformation80.IPRshavealimitedutilitytofunctionasasingleentity,and
needs to be supportedby thebusinessmodel. The intellectual property rightswill be
addressedinanisolatedwaytogiveaneasierunderstanding.
5.1.1PatentThepossibilitytopatentsoftwareofferssomeinterestingopportunitiesandchallenges.
The respect forpatentsdiffersbetweendifferent industries,whichhave an impact on
79Analgorithmisasystematicprocedurethatproduces,inafinitenumberofsteps,theanswertoaquestionorthesolutionofaproblem.80Disclosingdoesnotgenerateanydirectprotection,butallowstheuseofcopyright.This isofcourseundertheconditionthattheobjectisusedoutsideofthecompany
32
the value for the protection. The respect for patent is low in the software‐ and
computing industry due to the normal use of the rights as a defensive weapon.
Meanwhile, as the right has a central role in thehigh‐tech industries, e.g. biotech and
medicaldevice,whichresultinahigherrespectfortheprotection.Thisisaresultofthe
highercostofproductdevelopmentandhencethevalueofthepatent,whichresultina
higherpropensitytoenforcetheright.81
The central role of patents for the biotech industry means that there should be no
reasontosuspectthatthiswillbelessforpatentsrelatingtosoftware.Thiswilltosome
extentbedependentifwhichindustrythatwillleadthedevelopmentoftheproducts,i.e.
thebiotechorsoftware. Theunlikelyscenario that thesoftwareclaims thespacewill
mostlikelyresultinalowervalueforthepatents.
5.1.1.1BenefitswithpatentingThekeybenefitswithapatent,orapendingpatent,are:(1)apatentallowsforadefined
technicalsolutionthatcanbedisplayedforaventurecapitalisttoattractcapital82.(2)A
patent,at least intheory,grantexclusiveright fortheuse.This,aspresentedabove, is
dependentonhow the industryhandles the softwarepatents. (3)There canalsobea
marketing value due to the credence the public has in the patent system. (4) The
possibilitytogenerateroyaltiesinthescenarioofalicenseopportunity.(5)Thepatent
systemallowsforahigh flexibilitybyallowinganapplicationtobewithdrawnand/or
modifiedtofitthedevelopmentofthecompany.
(6) One patent might have a limited value but a patent portfolio can be used as a
defensivetooltobalanceotheractorsaswellasgainingaccess,orcreate,apatentpool.
5.1.1.2ChallengeswithpatentingThekeychallengeswithpatentingsoftwarecanbesummarizedasfollow.(1)Patenting
processtakesalongtime;onaveragethreeyearbutitisnotuncommonwithcloserto
fiveyearsformorecomplexpatents.(2)Itmightbehardtodefinethekeyfeaturesinan
early stage in the development and hence what is central to protect. (3) A patent
requires information to be disclosed, which opens for the possibility of somebody
reengineerthesolution.
(4)Thecostofpatentsisrelativelyhigh,rangingfromUS$50.000to100.000overthe
lifetimeofthepatentsintheUS.Thismightsumsthatarehardforacompanytocarry.83
81Myhrvold,N(2010),p4582Blonder,G(2005),p383Blonder,G(2005),p1
33
TheapplicationcostforcoveringallEPOcountriescanreachUS$30.000fora30‐page
patent.Thisamountcanbeloweredbyonlyfocusingonprotectionforthekeymarkets,
whichwouldputlessconstraintonthestart‐up.84
(5) Few venture‐capital‐backed companies have the resources necessary to defend a
patent in the scenario of infringement. This is due to the high cost, e.g. a casewith a
compensation for damage of 1 million cost on average $US 300.000 to 750.000 to
litigate85. (6)Thepatentapplicationrequiresa resourcedemandingprocess, e.g.prior
artinvestigationsanddrafting.
5.1.1.3TheuseofPatentTherearechallengesconnectedwithpatenting,evenifitispossibletomitigateseveral
of them. The cost can be reduced in the initial phase by a good patent strategy that
allowsforthepostponingofexpenses.However,thisrequirethecompanytoprioritize
whatsolutionstoprotect,andonwhichmarketstoapplyfor,toenablethebestuseof
theavailableresources.Thepossibilitytousetheprioritydatesfromanationalpatent
means that the major costs can be delayed for some time, which allows a better
understandingoftheneedsandacquiringmorecapital.
Thelongprocessingtimecanbespeededupinsomecountries,e.g.UnitedKingdom,but
itstilltakesalongertimecomparedtotheoptions.Thefasteroptiononlyrequiresthat
applicantcanmotivatewhythereisaneedtoohurrytheprocess.
Thereisadevelopingmarketforpatent litigationinsurance,whichtosomeextentcan
increase the possibility for a start‐up to enforce a patent. However, this option is
currently limited in geographical scope, come at a relatively high cost, and with a
numberadisclosures86.
5.1.2TradeSecretTradesecretcanbeusedaspossiblemannertoprotectthesoftware,butitwillrequire
thattheprogramislocatedonacontrolledservertofulfilltherequirementsofthelaw
orinaccessibleinsomeothersimilarmanner.
5.1.2.1BenefitswithtradesecretThekeybenefitswithusingtradesecretareseveral.(1)Tradesecrethasnolimitintime
orgeographical area. (2)Therearenocostsof acquire theprotection. (3)There isno
requirementtodiscloseanyoftheinformation,andhencemakesitharderforotherto
84Bassett,R(2000),p57785JaffaA.etal.(2007),p6886Simensky,Metal.(1999),sec22:4
34
reproducetheresults.(4)Theonlyrequirementontheprotectedinformationisthatit
hasacommercialvalue.(5)Thereisapossibilitytocommercializetheinformatione.g.
vialicense.ThisisaccordingtoBernitzcommonlydoneinseveralindustries.87
5.1.2.2ChallengeswithtradesecretThekeychallengeswithusing tradesecret for softwarecanbe summarizedas follow.
(1) Itdoesnotawardanexclusiveright,whichmightbeproblematic ifsomebodyelse
inventthesamefunctionandpatentit.Thiswouldmeanthattheoriginaluserfallunder
theprioruseright88,whichcontainsseverallimitations.(2)Tradesecretofferalimited
protectionduetorequiringacriminal‐ornegligentacthasbeencommittedtocomeinto
force.(3)Itrequirestechnicalsolutionstoprotectthesoftwaretofallinsidethescopeof
theprotection,i.e.theinformationneedstobecontrolled.(4)Theinformationishardto
control,evenifthistosomeextentcanbemitigatedthroughcontractualmeans.89
5.1.2.3TheuseofTradesecretTradesecretoffers,ingeneral,agoodpossibilityforastart‐upduetothelowcostand
requirements on other resources. However, it is hard o protect a software when the
intentistodistributethematerial,whichmakesitunsuitable.Itmighthoweverstillbe
interestingiftheintendeduseistoplacethesoftwareonacontrolledserver.
5.1.3DisclosingtheinformationThethirdviableoptionistodisclosetheinformationtodestroythenovelty.Thiscanbe
doneintwomanners–(1)eitherviausingtheinvention,whichprotectthesoftwareby
meansofcopyright,or(2)todisclosetheinformationinamannerthatdestroynovelty
but does not spread the information. The second option allows some interesting
possibilities,butbasicallyhasthesametechnicalchallengesastradesecretinrelationto
software when it comes to commercialization. This means that only option 1 will be
takenintoconsideration.
5.1.3.1BenefitswithdisclosingtheinformationThekeybenefitswithdisclosingtheinformationareseveral.(1)Ithasthesamebenefits
oftradesecretsinrelationtogeographicalarea,timeandresources.(2)Thedisclosure
destroysthenoveltyandhencethepatentability forothers. (3)Theoptionsallows for
thecommercialuseoftheproductundertheprotectionofcopyright.
87Bernitz,Uetal(2007),p317ff88Prioruseright–theusediffersbetweendifferentcountries,butcanbesummarizedasameanofmitigatingtheeffectoffirsttofilesystem.89Bernitz,Uetal(2007),p317ff
35
5.1.2.2ChallengeswithdisclosingtheinformationThe two key challenges can be summarized as. (1) The main mean of protection is
copyright, which are associated with several limitations. (2) There is no manner of
controllingtheinformationbeyondthesourcecode.
5.1.4PatentsoffersthelargestbenefitsThere are benefits with all the option, and the choice needs to reflect the business
model.The technical challenges in relationwith softwaremeans that trade secretwill
notbeaviableoptionduetotherequirementtoprotecttheinformation.Disclosingthe
information allows for similar benefits as trade secret, and also allows for the
distributionofthesoftwarebutstillofferalimitedprotection.Thepatentoffersthebest
prospect by allowing the best protection and opportunities. However, there are legal
limitations with patenting software that needs to be investigated prior to making a
conclusiverecommendation.
5.2ThepossibilitytopatentanalgorithmThepossibilitytopatentsoftwareisnotaneasyquestion.Therearesoftwarepatentsin
Europe even if this goes against EPC due to an extensive interpretation by EPO. The
possibilityhaspreviouslybeenclearinUSA,buthasrecentlybeenlimitedasaresultof
newpraxis.
5.2.1ThediscussionaroundsoftwarepatentIt is not possible to discus the legal framework around softwarepatentswithout first
havingashort introductiontothecurrentdebateonthesubject.Theproargumentbe
summarized as that there are no different between hardware‐ and software patents
since they both protect an idea.Meanwhile, themain con arguments are that patents
hinder economical development in the software industry and that it is an intangible
concept.
Theprosidearguesthatthereisnodifferencebetweenprotectinganideathatrelatesto
hardwareorsoftwarewhenitcomestopatent.Theunderlyingreasonwiththesystem
istocreateaneconomicincentiveanddispersionofknowledgeandthereshouldhence
be no obstacles against software patents. The pro side also holds that the current
problem in the field is not due to the patents but instead the inability of the patent
officestounderstandtothetechnicalfield.Thishasresultedinthegrantingofpatents
thatdoesnotfulfillthecriteria’sofnoveltyandnon‐obviousness90.
90Graham,P(2006),Internet
36
The economical argument of the con side is based on the structure of the software
industry,whichconsiststoalargedegreeofSME,especiallyinEurope.Thismeansthat
the costs of patenting will put an additional economical constraint on the individual
company with limited additional protection and hence slow the development. The
patent trend in the industrywill also further increase the patent inflation,whichwill
decrease the freedom to operate and further decrease the value of an individual
patent.91
5.2.2ThelegalstatusinEuropeThe legal situation in Europe is currently not clear regarding software. There is an
explicit ban92 against patenting in EPC, but this has not stopped EPO from allowing
patentswith software as the key feature. EPO does not allow patents on software or
sourcecodedirectly,buttheyhaveinsteadcloakeditinan“apparatus”thatimplementa
claimedmethod, i.e.analgorithm. It isnot thealgorithmassuchthatcanbepatented,
butinsteadtheeffectthatthesoftware/algorithmgenerates.
There is a difference to the scope of patentability at the different regional actors in
Europe.Theparliamenthasthemostrestrictiveviewanddoesnotwanttoallowforany
softwarepatents.Boththecommissionandcouncilarepositivetosoftwarepatents,but
todifferentdegrees,asshowninFigure12.93
Therearearguments forbothpositions.EPO ‘sposition isbasedonarticle2794 in the
TRIP agreement95, which states that that all technical fields should be available for
patenting.Thecounterargument,whichtheEuropeanparliamentused,isthatsoftware
isnota technical fieldbutrathershouldbeconsideredan intellectualproperty.There
arenorightandwronginthismatter,whichshouldleavesituptothepolicymakersto
decide.96EPOTBAhasaddressedtheissueonanumberofoccasions,andaselectionwill
bepresentedbelow.
91Pellegrinin,F(N/A),p1092EuropeanPatentConventionArt52(2)–Thefollowinginparticularshallnotberegardedasinventions within the meaning of paragraph 1: […] (c) schemes, rules and methods forperformingmentalacts,playinggamesordoingbusiness,andprogramsforcomputers;93Pellegrini(N/A),p10f94Art27(1)Subject to theprovisionsofparagraphs2and3,patentsshallbeavailable foranyinventions,whetherproductsorprocesses,inallfieldsoftechnology,providedthattheyarenew,involveaninventivestepandarecapableofindustrialapplication.[…]95TheTRIPSAgreementisAnnex1CoftheMarrakeshAgreementEstablishingtheWorldTradeOrganization,signedinMarrakesh,Moroccoon15April1994.96Pellegrinin,F(N/A),p5
37
5.2.2.1CasesfromEPOVICOM97 – created the foundation for patentability of software‐based inventions. The
caseconcluded threeaspects. (1)Thecentralaspect isnot if theunderlying invention
relates toamathematicalprocessas such,but if theclaimsaredirected toa technical
process.(2)Aknowncomputerrunninganewprogramcannotbeconsideredthestate
of the art. (3) A technical process that is carried out under the control of a program
shouldnotberegardedasacomputerprogram.Theconclusionthatcanbedrawisthat
thetechnicalprocessisthecentralaspectwhendeterminingpatentability.
Koch and Sterlez X‐ray Apparatus98 – concluded that a mix of technical and non‐
technicalfeaturescouldbepatented.Thecasealsoconcludedthatitwasnotcentralto
considerthetechnicalandnon‐technicalforpatentability,thekeywasthattheinvention
relatedtoatechnicalsolution.
IBM Computer Program99 and IBM Program Product100 – stated that a computer
programthatitisabletogenerateatechnicaleffectthatgoesbeyondthenormalresult
duringtheinteractionbetweenhardwareandsoftwareispatentable.
AuctionMethod/Hitachi101–theboardconcludedthatamethod,e.g.software,involving
technicalmeansshouldbeconsideredaninvention.Thecasealsostatedthatamethod
97T208/8498T26/8699T1173/97100T935/97101T258/03
Figure12thereadifferenceinthescopeofpatentabilitybetweentheEuropeanactors.
38
intended to circumvent a technical problem instead of solving it by a technicalmean
doesnotcontributetotechnicalcharacterandishencetopatentable.
David Bainbridge summarized the current position from EPO regarding software
patentsas:
“(1) Determine the technical problem which the invention seeks to
overcome. (2) Look at the solution to that problem encapsulated in the
invention.(3)Ifitsolvestheproblembyatechnicalmanesitispatentableif
thosemeansarenew,inventiveandcapableofindustrialapplication.(4)If
itdoesnot solve theproblemby technicalmeans that it isnotpatentable.
For example, itmayuseormodifymatter excludedunder52(2), beingno
morethananautomationofnontechnicalactivity.However,theuseofsuch
matter designed to be particular suitable for computerimplementation
may, arguably, posses a technical character and, if so, the other
requirementsforpatentabilityshouldbetested.”102
There are good opportunities to patent software in Europe as the praxis and the
existenceofpatentsshow.Thecentralissuetodeterminepatentabilityisifthesolution
producesatechnicaleffect.
5.2.2.2ThegeneralEuropeanlegalsituationThe final decision regarding the software patents in Europe iswith the EC court, and
national courtsof themembercountries103.Therehasbeennocase in theECcourt to
guide the subject, but there are on the national level. One example is a case104 from
SwedenwheretheCourtupheldapatentthatcombinedsoftwareandhardware inline
withEPO’sdecision.
TherehasalsobeenacasefromUnitedKingdomthatmightgiveanindicationofwhere
Europeisheading,oratleastthecurrentstateonanationallevel.TheUnitedKingdom
hadpreviouslyrequiredsoftwaretoeitherproduceanewaffectoutsidethecomputer
or solve a problem in the operational issue of the computer to allow patentability105.
This was changed in the Symbian case106 where the court rejected the previous
102Bainbridge,D(2007),p.413103ECcourtand thenational courtsare innomannerboundbe thedecisionsoriginating fromEPO.However,itisnotuncommonthatEPOhasanindicativerolefortheotherauthorities.104RÅ1990ref84105Cole,Paul(2008),p1106EWCACiv1066–SymbianLimitedandComptrollergeneralofpatents
39
approach, and argued that the correct way was to look if there where a technical
contribution,e.g.anincreaseinreliabilityorspeed,todeterminepatentability.
5.2.2.3PatentabilityinEuropeThe insight that can be drawn from the current situation is that there are good
possibility to patent software in Europe, as shown from EPO, UK and Sweden. It is
possible to patent the software, however, the safest path would be to patent it in
combinationwithhardware.Thiscombinationseemstobeacceptedtoalargerdegree,
whichshouldallowformoresecurityinthescenarioofahigherlevelofrestrictiveness
towardsoftwarepatensinthefuture.
It can of course be discussedwhether it is right that EPO goes against thewill of the
people's representative in the European parliament. However, EPO is not directly
subordinated EU and hence has the freedom to operate within there sphere of
responsibility.Thequestionwhetheritisrightorwrongputaside,itisanavailabletool
thatshouldbeusedwhenitoffersthebestsolution.
5.2.3ThelegalstatusintheUSThepossibilitytopatenthasastrongerlegalfoundationintheUScomparedtoEurope,
but there is a movement toward a more restrictive approach. There is no explicit
exemption in conformitywith the European; the right is instead derived from theUS
patent act that has a relative wide scope107. The possibility to patent software was
establishedinthepatent‐eligibilitytrilogy108thatestablishedthescopeofpatentability.
Thiswasfollowedbyahandfulofcasesthatexpandedthescopeofpatentabilityuntilit
reachedthewidestscopewithStateStreetcase,asdescribedbelow.Thishaslatelybeen
limited in In re Bilski toward a stance closer to the one established by the patent
eligibilitytrilogy.
ThereisthepossibilitytofileforaprovisionalpatentinUSA,whichallowsforanearly
prioritydatebutwithoutimitatingtheapplicationprocess.Theprovisionalapplication
never becomes public, and is automatically abandoned one year after filling, which
meansthattherealapplicationneedstobyfilledwithinthistimetoallowfortheearly
prioritydate.
107 35 U.S.C. 101 Inventions patentable. ‐ Whoever invents or discovers any new and usefulprocess,machine,manufacture,or compositionofmatter,oranynewanduseful improvementthereof,mayobtainapatenttherefore,subjecttotheconditionsandrequirementsofthistitle.108ThetrilogyincludesGottschalkvs.Benson,O’Reillyvs.MorseandParkervs.Flook
40
5.2.3.1RelevantlegalcasesinUSAState Street vs. Signature Financial Group109 expanded the opportunity to patent an
algorithm.Thecaseestablishedthatinventionsthatinvolvedapracticalapplicationthat
produced a useful concrete and tangible result could be patentable. This wide scope
meantthateventheresultofanalgorithmcouldbepatented.
InInreBilski110theUSSupremeCourtoverturnedthewidescopeestablishedinState
Street case and returned to the machine‐or‐transformation test that had been
articulatedinthepatent‐eligibilitytrilogy.Thetestcanbepresentedasconsistingoftwo
partstodeterminepatentability–(1)istiedtoaparticularmachineorapparatus,or(2)
transformaparticulararticleintoadifferentstateorthing.
TheimpactofreBilskionthepatentability isnotclarifiedatthistime,andthere isan
uncertainty on the impact that itwill have on existing and future software patents. A
possible benefit of the court returning to a previous patentability test, machine‐or‐
transformation,mightbethattheopportunitytouseoldpraxistoclarifyuncertainties.
However, this isnotcertainbasedon the interpretations in theBilskicase111.There is
also additional material to assist in the interpretation of the case. USPTO’s board of
PatentAppealsand Interferencehasspecified thatageneral‐purposecomputerasnot
being a particular machine, and hence not possible to patent in combination with a
software112.Thishasnotbeentriedorreferredtoinacourtatthistime,butcanprovide
someguidancewhendeterminingthepatentabilityscope.
5.2.3.2PatentabilityinUSAThe movement toward a more restrictive approach regarding patentability in USA
meansthataprecautiousapproach isrecommendable.Thisshouldmeanthat thebest
pathtopatentinUSAwouldbeincombinationwithaspecifichardwareandusetheunit
hasanadd‐ontoallotherfunctionsthatcanariseduringthedevelopment.
5.3ThebestwaytoconstructanalgorithmprotectionThebestpathistopatentthesoftware,i.e.thealgorithm,intheshort‐term.Meanwhile,
thelong‐termbenefitsarehardertoomenaboutduethelegaluncertainty.Thesoftware
canbepatentedincombinationwithhardwaretocoveragainstchangesandtoallowfor
the possibility to retain protection on several markets. This could be complemented
withapatentthatincludesa“generic”hardware,notageneral‐purposecomputer,and
109149F.3d1368110545F.3d943,88U.S.P.Q.2d1385(Fed.Cir2008)111Hulse,R(2009),p2112USPTOBoardofPatentsAppealanInterference–Appeal2008‐1495/6
41
thesoftware.Thesecondapproachwouldhaveahigherriskexposureduetothe legal
situation, but would have larger benefits due to cover a larger scope that allow the
possibilitytobeusedasbothadefensivetoolandbetterpositiontogenerateroyalties.
Thechoiceofpatentapproachisdependentontheintendeduse.Thefirstoptionisthe
better solution if it is only intended to be used in combination with proprietary
technology in a defined field, and royalties is secondary. Thiswould allow a stronger
positionandonlycontrolthefieldoffocus.Thesecondoptionhasawiderscopewhich
wouldbebeneficial ifthecompanyhasactivatesinseveralfieldand/orhasabusiness
model of licensing out the technology. This would also enable the possibility of
divisionalpatents.
Therecommendedinitialcountrytoapplyinisdependentonthedevelopmentstageof
the technology and the perceived maturity level in the industry. The provisional
application in theUSoffers a goodpossibility to generate anearlyprotection, but the
nature of the inventions normally means that the scope is known at the time of the
neededprotection.ThismeanthatUnitedKingdomwouldbeagoodoptiondueto–(1)
thewidescopeofpatentabilityforsoftware,(2)requiretheapplicationtobewrittenin
EnglishwhicheasetheexpansionoftheprotectiontoothercountriesinEurope,and(3)
theyhavearelativelyefficientsystemthatallowsforaspeedierprocessifneeded.
5.3.1Theshort‐termThe short‐term benefits are severalwith the options to patent the software. The key
benefitsaretheincreasedflexibilityandtheclearlydefinedscopeoftheinventions.The
flexibility relates to the possibility to keep all possibilities open, i.e. the option to
withdraw the application during the first 18 months and to change the scope of the
patent. This allows the modification of the patent to reflect the current need of the
company and legal situation. The defined scope of the patents allows to possibility to
attractVCcapital.
The current changing situation makes it more important to use competent personal
whenwriting thepatentapplicationdueto the increasingcomplexity in the field.This
alsoallowsforanincreasedoffreedomtooperateinalaterstagewhenthecompany’s
needsarebetterdefined,duetothemoreproficientapplicationfromaprofessional.
5.3.2Thelong‐termThe long‐term benefits relate less to the single patent, andmore to the capability to
createaportfolio.Alargevaluecreatedbyasinglepatentwouldrequirethescenarioof
a key patent, which would but no bet very likely considering the problem to create
42
generic patents in the field. The benefits of a portfolio, as introduces above, are the
possibilitytouseitasadefensivetoolandallowingtoaccessproprietarytechnologies
withcross‐licensing.
Thelaststepistotakethetheoryintoactionandformulatethepatent,butthisisonly
thefirstphaseinthelifeoftheIPofupholding,protectingandmonitoring.
43
6.ThecommercializationofpersonalizedmedicineInthissection,thehypothesissaying:“thepricesettingopportunitiesforasmallbiotech
companyfocusingonpersonalizedmedicine,aremuchgreatercomparedtotraditional
biotechcompanies”,willbeanalyzed.
Themainfocusonthispartwillbeonthepossibilityforasmallbiotechactoroffering
personalizedmedicinetostandupagainstthebigpharmaceuticalcompaniesandtobe
able to setaproductprice thatexceedsmarketpricesof traditionalproductsandstill
getthemarketsharetheyaimfor.
6.1TheIntellectualvaluestar
Figure13TheIntellectualValueStar113
In his book “Intellectual Property and Entrepreneurship” Petrusson describes the
intellectualvaluestaranditsinfluenceonmakingthefirmbecomeastructuralplatform
for the creation of material value, artistic value and moral value from which then
financialcapitalcanbeextracted.114Thestarsymbolizestheactivitiesforvaluecreation
andshowsthattheincludedprocessesareparallel,interactiveandinterdependent.The
starisdividedintosixcategories,whichwillbetheunderlyingbasisforthefirstpartof
thecommercialanalysis.Thestepssymbolizedby thesix categoriesare important for
113PetrussonU.(2004),p.249114PetrussonU.(2004),p.250
44
thecreationofasuccessfulintellectualfirmstructureinordertocontinueandmoveon
withthemarketapproach.
6.1.1ClaimintellectualpropertyThebasisofbiotechcompaniesandtheirinnovativeapproachistodevelopinventions
and to commercialize them in the best manner. Their success is dependent on their
abilitytocontroltheinventionandtheunderlyingIP.Thereforeitiscrucialforthefirm
to claim intellectual property and to set up assisting structures and strategies. For
biotechcompaniesitisofgreatimportancetohaveIPprotection,astheirresearchand
productdevelopmentoftenareverycostintensivebutreverseengineeringcanbedone
quiteeasily.ThecompanyshouldtrytoclaimtheIPinthewaythatit isvaluableeven
forfutureuseinbothinternalprojectsaswellasforexternaluse.
6.1.2ManagehumanresourcesandculturesItisimportanttotakeadvantageoftheresourcesandculturesthatareavailablewithin
thecompany.Anyhow,itisnecessarytohavestructuresandguidelinesinordertomake
the IP development within the firm successful and to allow for development of the
company.Itiscrucialthateverybodyinthecompanyknowsabouthowtoapproachand
handle business secrets and innovative information so as not to disclose valuable
information that couldmake control over assetsdisappear.Another aspectwithin the
company is tomanage internal intellectualcapital. Theemploymentandcaringabout
employees is of great importance as this creates good working spirit and the
innovativeness of biotech firms and the employment of skilled people is of great
importance.
6.1.3ShapetheinnovationContinuingonthefirsttwoaspects,thefirm’sinnovationhastobeshapedinordertofit
intothemarketandsatisfycustomers’demands.Averyimportantfactoristoadjustand
constructinnovationsinawaythattheycanbeprotectedbythecompanies’IPanddo
notobstructorinfringeagainstotherproducts.
6.1.4ShapethemarketAnother important step in the development and commercialization process of
companies is the creation of product demand, product recognition, brand awareness,
marketingstrategiesandstructuresonhow toapproach themarketandhow tosolve
issuessuchaschoiceofmarketandlogistics.Thesesaspectscanbevaluabletolookinto
ataveryearlystagetobeabletoprepareandreactoncertainsituations.Hurdlessuch
asfinancialdistress,prolongationofexpectedtimetoproductlaunch,uncertaintieswith
retailers,etc.canalwaysoccur.
45
6.1.5Shapetheventure
Within the company there is also great potential of intellectual value creation. The
designing of incentive structures that nurture the creation of innovative ideas and
productsisanimportantvariableforthegenerationofIPandsuccessfulproducts.
6.1.6CreatefinancialvaluefromintellectualvalueWith the creation of these structures and the platform‐like firm, there will be high
potential in creating and extracting financial value from the whole process. The
developmentofarecognizedandwell‐brandedfirmandtheproductappreciationonthe
marketwillleadthecompanytosuccessandincreasefinancialincome.Theincreasein
intellectualvaluewillalsoleadtoincreasedfinancialvalue.
OneaspectthatPetrussonalsotalksabout inhisbookis thatwehaveto learnhowto
put value to intellectual property in order to use IP for loans and credit, as
securitization,etc.115.Asbynow,IPisnotusedforaccountingpurposesortocalculate
thebookvalueofcompanies.IPisonlyincludedwhendeterminingthemarketvalueofa
companywhenlookingatitscommercialpotentialanditsvalueincomparisontoother
actors. This is likely to change in the future as companies as for instance RPX
CorporationandAlliedSecurityTrusthavebuiltuptheirbusinessaroundIPanddonot
havemanyphysicalbelongingsthatareofactualvalue.
6.2Competitiveadvantage“Competitiveadvantagegrowsoutofvalueafirmisabletocreatefor itsbuyers
thatexceedsthefirm'scostofcreatingit.Valueiswhatbuyersarewillingtopay,
and superior value stems from offering lower prices than competitors for
equivalent benefits or providing unique benefits thatmore than offset a higher
price. There are two basic types of competitive advantage: cost leadership and
differentiation.”116
6.2.1Porter’sfiveforcesThe model constructed by Michael Porter is often described as too static in an
increasingly fast changingworld. Themodel consists of Porter’smain ideas regarding
competitiveadvantage.117Anyway,thePorter’sFiveForcesmodelservesasagoodbasis
for the analysis of a company’s potential on the market and as a checklist of what
115PetrussonU.(2004),p.251116Porter,M(1985),p.3117StanfordUniversity(N/A),p.2
46
hurdles there canbe.The industry’s attractiveness isdeterminedby the sophisticated
understandingandrulesofcompetitioncreatethecompetitivestrategy118.
Figure14Porter'sFiveForces119120,121,
Competitive advantage can be seen as to being created through new and innovative
ideas/productsthatarebroughttothemarketinordertocompeteintheindustry.The
competitive advantages shifts at times where competitors are unwilling or unable to
respond or just fail to respond to the changing circumstances122. In industries were
economiesof scaleplayagreat roleandbigactorsare involved inmarketperception,
firstmover advantage can be of great importance in order to get a head start and to
distinguishfromtherest.
Someofthemosttypicalcausesofshiftincompetitiveadvantageare:
118StanfordUniversity(N/A),p.2119EversP.,(2009)120Businessballs(N/A),Internet121QuickMBA(N/A),Internet122StanfordUniversity(N/A),p.3
47
‐ Newtechnologies
‐ Neworshiftingbuyerneeds
‐ Theemergenceofanewindustrysegment
‐ Shiftinginputcostsoravailability
‐ Changesingovernmentregulations123
Inthelifescienceindustryaswellasonthebiotechmarketforstemcellresearchand
products,competition isgreatandit isdifficult foracompanytogeneratecompetitive
advantage within this cluster of innovative and competent industry actors. In the
followingpart, an analysis of a small biotech company ismade that is doing research
andcommercializingresultswithinMSCsandpersonalizedmedicine.
6.2.2Advantagesanddisadvantagesofasmallbiotechcompany
This sectionwill based on Porters five forces address the pro’s and con’s for a small
biotechcompanythatisactivewithinMSCtreatmentandpersonalizedmedicine.
6.2.2.1Smallbiotechstart‐upvs.BigpharmaceuticalcompanyAdvantages:
‐ Flexibilityandabilitytomakequickchangesandtoadapttomarketneeds
‐ Fasterhandlingtimeswithinthecompanyduetolessdecisionsteps
‐ Evenasmallnichemarketcanbeprofitableandworthanapproach
‐ Easiertomakeunnoticedmovessuchastogeneratefirstmoveradvantage
‐ Smallcompaniescanoftenmovetheirresearchfocusfasterastheydonotneed
togothroughthesameamountofentitiesandswitchingcostsarenotashighas
forbig companies.Big actors canon theotherhandoften realizeprojects at a
higher pace when actually started due to increased investment potential and
resources.
‐ Lessfixedcosts
Disadvantages:
‐ Notlikelytohaveeconomiesofscale
‐ Dependentonsuccessoffirstproductlaunch
‐ Productorcompanybrandingisnotverydeveloped
‐ Aunknowncompanyhastobuildtrust
‐ Marketanddistributionstructuresarepoordevelopedornon‐existing
123StanfordUniversity(N/A),p.3
48
‐ Small companies can have difficulties in being spontaneous as they often are
dependentononeproject.Bigpharmaceuticalcompaniescanontheotherside
beriskaverseduetohighcompetitiononthemarketandthehighcostsrelated
toresearch.
‐ DifficultiesinsecuringIPfrombigactors,asitishardtogenerateenoughmoney
forbiglawsuits.
6.2.2.2PersonalizedMSCmedicinevs.TraditionalmedicineAdvantages:
‐ Quality;Improveslifeexpectancy
‐ Impact; Restoring tissue and re‐building the body to regain usual capacity
insteadofonlytreatingsymptoms,reductionofrelapserisk
‐ Patients; Safe treatment, comfort of having especially adaptedmedicine to the
individual’sconditions
‐ Healthsystem;Lessrelapse,noproductionlossdueto illordeadpeople,often
shortertreatmenttime
‐ Production:Thereisnoneedtokeepstockoffinalizedproductsaseverysingle
product ismanufacturedondemand,whereas traditionalmedicinesarestored
inshopstobeavailableofshelf.
‐ Opportunity costs: Are lower due to regenerative features and decreased
relapsingrisk.
Disadvantages
‐ Ethics:Somepeoplestillhaveethicalissueswithstemcellresearch,
‐ Costs:higherinitialtreatmentcosts,butduetoitsregenerativefeaturesthetotal
costsmaybecomelesscomparedtotraditionalmedicinethatmightbeneededover
alongperiodoftime.
6.2.2.3AutologousMSCsvs.AllogeneicMSCsAdvantages:
‐ Safe,noside‐effectslikeallergiesorrejections
‐ Psychologicaladvantagesforpatientstogettheirowncellsback
‐ Cheaper,duetoensuringofmatchingofcellstoavoidimmunereaction124
Disadvantages:
124EvansP(2009),page71
49
‐ Longertimetilltreatmentduetoexpansionprocess
‐ Riskofpatientnotdevelopingenoughcellsatthetimeneeded
"Itisincrediblyarrogantforacompanytobelievethatitcandeliverthesamesort
of product/service that its rivals do and actually do better for very long. It is
extremelydangeroustobetontheincompetenceofyourcompetitors"125
Porter’s saying above should be kept inmindwhen thinking about the importance to
createcompetitiveadvantageforthecompanyanditsproducts.
Abiotechcompanythatcandeploymostofthefeaturesdescribedabovecouldgenerate
great competitive advantage on the market. A company that is able to combine the
advantages of each category, such as being agile on themarket andmake use of first
mover advantage could have great impact on the market. The first mover advantage
couldhavegreateffectswhenenteringamarket/nichemarketandattractingabigpart
ofthepotentialcustomers/patients.Ifthecompanysucceedstotieenoughcustomersto
its product before competitors get the chance to enter the market, there will be no
incentivestodosoasthebarriersofentrywillbetohighandthepotentialgainingtoo
low. Besides the firstmover advantage, a company that commercializes personalized
medicine that is adjusting the treatment uniquely to the patient with help of an
algorithmandatthesametimeprotectstheIPoftheinnovationhasgreatpotentialto
succeedon themarket.Of course there are other factorswithin the company such as
management,marketing and other business related issues that also have to be taken
into consideration but having such a great product facilitates success. If the company
hassucceededtoprotectoneofitsinventionswithinthepersonalizedmedicinemarket,
thereisgreatpotentialof furthersuccessduetocorrelationofmethodsandprocesses
usedwithinthemedicalfield.
6.3Pricingstrategy
Whenapproachingthemarketwithanewproductthereisalwaysthedecisiontomake,
whichpricetoset.Therearedifferentpricingstrategiesthatcanhelptosetapricethat
will maximize income but there are only a few that might be of relevancy for a
innovativecompanygoingintothebiotechmarket.Someofthesestrategiesare:
125About.com:HomeBusiness(N/A),Internet
50
‐ Premiumpricing uses ahighpricewhen there exist a significant competitive
advantageandtheproductisreallyuniqueonthemarket.
‐ Penetration pricing is used to gain market share and therefore the price is
initiallyverylowbutincreaseswhentheaimedmarketshareisreached.
‐ Priceskimming startsoutwithahighprice inorder to lower thepricewhen
moreactorsapproachthemarketandthereducedpriceisneedtokeepmarket
share.
‐ Product line pricing is used where there are several products and a
combinationofthemwouldleadtoareducedpackageprice.126
‐ QALYpricesettingisanoptionthatputsthepriceofthetreatmentinrelation
to life expectancy and increased quality of life due to the treatment, which is
describedin6.3.1.127
Thenthereisthequestionofhowtogettheprice.Alsohereexistdifferentpossibilities.
Theserangefromsettingthepriceasamultiplicationofapercentageoftheproduction
costs,adjust thepricetocompetitorspricesortoset thepriceaccordingtocustomers
payment possibilities and demand. Customer’s demand and payment possibilities of
course has to be taken into consideration for all pricingmodels but theremight be a
possibilityofapproachingdifferentmarketsegmentswithdifferentcapacities.
6.3.1TotakeoutahigherpriceforpersonalizedmedicinethanfortraditionalmedicineFor a young and small biotech company that offers innovative and unique medical
products,manyofthevariablesdescribedaboveareofgreatimportanceandneedtobe
considered when deciding about how to go forward when setting a price on the
products.
Another aspect thatmightbe interesting to include in thepricing strategy is “quality‐
adjustedlifeyear”(QALY).QALYisamethodthattakesthequantityandqualityof life
generatedbyhealthcare interventions intoaccountandevaluates thebenefits that the
patientexperiencesinformofhealth‐relatedqualityoflifeandsurvival.Thisisdoneby
considering the variablesmobility, pain/discomfort, self‐care, anxiety/depression and
usualactivities,andassigningeachofthemascorethatindicatestheperceivedvaluefor
oneyear.1QALY,whichisthehighest,indicatesonyearofperfectlife.Oisequivalentof
being dead,whereas somehealth states are considered beingworse than being dead.
126MarketingTeachers(N/A),Internet127PhillipsC.(2009),p.5
51
Thereareevendiscussionsaboutsettingthepriceoftreatmentsinrelationtoperceived
QALY.128
In this casewe assume the product to be a personalizedmedicine based on autologous
MSCsandadjustedtoeachpatientspersonalspecificationswiththehelpofanalgorithm.A
product for the treatmentof thisdiseaseor injury is highlydemandedand thepotential
marketisgreat.ThereisclaimedIPforthenovelpartsoftheproductanditsdevelopment.
TheadvantagesofapersonalizedMSCproductcomparedtoexistingproducts:
‐ MSCbasedproductsdonotonlytreatsymptomsbutalsorestoredamagedtissue
inordertoregainpreviousfunctionality
‐ Thereislowriskofsideeffectsrelatedtotheautologousaspect
‐ Theriskofrelapseisverysmall
‐ IncreasedQALY
‐ The product is freshly produced and adjusted to the patient’s needs and not
manufactureasaofftheshelfproduct
Evenifthemarketisquitebigandtherearemanycompaniesfightingformarketshares,
the owning of IPRs for the product and the underlying productionmethodswill be a
barrierforotheractorstocircumvent,especiallyconcerningpatentsortheinventingof
totally different products. Also if current studies have developed cells out of only
chemical products which is claimed to have the potential of being used for medical
treatmentinthefutureastheresearcherCraigVenterandhiscolleagueshavemanaged
tobuildanexact copyof a cellsDNA,which is supposed tohaveexpectedphenotypic
propertiesandiscapableofcontinuousself‐replication129.
ThecombinationofproductfeaturesthatareprotectedbyIPRsandbeingtheonlyactor
on themarket offering this kindofproduct theprice settingoptions are great.As the
demandforthiskindofproductishighandthevolumeofpeoplehavinginterestinthis
kind of treatment exceeds a start‐up’s capacity due to limited manufacturing and
distribution facilities in the starting period, the initial market approach could be
focusingonanichemarketwithpeoplehavinghigh income.Theywouldbewilling to
pay a bit higher price than common in order to experience the great increase in
treatment outcomeand gainedquality of life. Therefore thepremiumpricing strategy
couldbeappliedforthepricesettingofthisproduct.
128PhillipsC.(2009),p.5129GibsonD.G.etal.(2010),p.1
52
For a future setting, where competitors might have the possibility to offer similar
treatments, there isstillapossibility tomoveoverto thepriceskimmingstrategyand
adjustthepricetocompetitorsinordertokeepmarketshare.
Anadditionalpricingpossibilitywouldbetoadjustthepriceaccordingtotheamountof
expansionsthatisneededtogetenoughcellsforthepricetobeadjustedtoeachpatient
inthewaythetreatmentis.
53
7.ConclusionTheaimofthethesishasbeentopresentandclarifythebenefitsandchallengesofusing
personalized medicine for a start‐up company in the biotech sector. The scope was
delimited to the genetic sector in general, andMSC in particular, due to the growing
importancepersonalizedmedicineinthisarea.
Thehypothesisthathasbeentheguidinglightinthethesis:
Personalized medicine offers great opportunities for start‐up biotech
companiesbasedinEuropetosucceedonthemarket.
Thehypothesisallowsforawideselectionofsubjectstoinvestigate,butthescopewas
limited to the relation between IP and its current landscape, protection and
commercialization.Thisresultedinfourquestionsthathavebeenansweredduringthe
thesis.
• WhatisthecurrentpatentlandscapearoundMSCs?
• Whatisthebestmannerofreachingthemarket?
• Whatisthebestmannertoprotecttheuniqueaspectinpersonalizedmedicine
forasmallbiotechcompany?
• What would be the main competitive advantage and benefits for a biotech
companyutilizingpersonalizedmedicine?
• Inwhatwaydoespersonalizedmedicinecreateadvantagesandpossibilitiesof
pricesettingforbiotechcompanies?
The conclusionwill recap thekeyouttakes from thedifferent chapters chosen for the
structureof thethesis, inordertobeabletoshowtheaggregatedbenefitsthatcanbe
gained from personalized MSC treatment. The theory and analysis together with the
conclusion drawn thereof allows for interesting insight in the biotech field but also
opensupforfurtherresearchandpossibleinvestigationareas.
7.1Background
ThepresentedbackgroundshowsthepotentialofpersonalizedmedicineandMSCsand
actsasafoundationtobuildthethesison.
The holistic approach of personalizedmedicine offers several benefits for the patient
andthebiotech industry.Thepersonalizedaspectoffersearlierdiagnosispossibilities,
more proficient therapies and efficient development of new treatments. The two first
54
parametersofferabetterproduct to thepatients,while the lastallowsthe industry to
have a higher success rate and addressmore advanced diseases. There are of course
alsochallengesthatneedtobeaddressed.Thefourkeyfactorsare;scientificchallenges,
economical parameters, public opinion and the ethical dimension. The scientific and
economicalchallengesarebecominglessprominentastheacceptanceanddevelopment
progress.
Stemcelltreatmenthasshowntohavegreatpotentialforregenerativetherapyandthe
treatmentof for instanceParkinson’sorheartdisease.Researchwithindifferent fields
andapplicationareashasalreadybeenongoing for some timeandknowledgearound
stemcellsandtheirpotentialisgrowingfast.SoisalsoR&Daroundpotentialtreatments
withMSCsandadultstemcellswithembryonicstemcellfeatures.Asbynow,itseems
as if autologous MSC treatment could have great potential on the market for
regenerativetherapiesasitshowsthatadultstemcellshaveregenerativefeatures,but
incontrasttosomeotheralternativecells,withoutbeingrejectedorriskofsideeffects.
A successful treatment with autologous MSCs presumes that it will be possible to
expandMSCsinasufficientpacetotreatpatientswithinthenecessarytimeperiod.
7.2Outcomeofstudy
7.2.1IPlandscape
The three arenas that open the chapter allow understanding of the context that the
start‐upoperates in, andshow that thekeyarena for the start‐up, in this stage, is the
commercial arena. The commercial arena often has an international focus in the
knowledge sphere,whichmeans that there are special requirements on the company
andthemultinationalscopeofinvestigationsthatneedtobeconductedinthefollowing
sections.
The patent landscape around stem cells is susceptible to patent tickets due to the
existence of patents that are broad, fuzzy and approved at an early stage. The
quantitative and qualitative investigation into the patent landscape around MSCs
showedthatthereisastablepatenttrendinthefieldandthattherestill isfreedomto
operate.Thisinvestigationtogetherwithotherinvestigationsshowedthattheindustry
consistsofseveralsmallactors,whichindicateparametersoflowbarrierstoenter.
Theanalysisoftheclaimsintheanalysisdidnotshowanyhomogenoustrendsforthe
field as a whole, but it was possible to identify trends when breaking it down into
smallersections.
55
7.2.2Possiblesolutionstoreachthemarket
The possibilities for a small biotech company to set its foot onto the market are
combinedwithanumberoffactorsandbaseontheintentionsofthecompanythatcan
be put in connection to the company’s business plan.When focusing on personalized
autologousMSCtreatment,ownresearchwillprobablybethebasisoftheproductbut
can also be combined with in‐licensed technologies or collaborations. Preferably the
companyhascreatedIParoundtheproductinordertoreducetheriskscombinedwith
aproductlaunch.
Ifnotallaspectshavebeenpossibletoprotectandothercompanieskeeptherightsto
needed IP, the opportunitymay exist tomake use of an exemption in the patent law,
stating that preparations of medicines in a pharmacy that are conducted under a
doctor’s prescription are allowed and therewith give a possibility to circumvent the
blockingpatents.Ifthereisapossibilityofintroducingtheproductasamedicalproduct
and hence avoiding to be stuck in years of test processes for receiving allowance to
enterthemarketitshouldbeinvestigated.Analternativemarketapproachthatcanbe
used in combination with a product launch is the out‐licensing of the IP to bigger
pharmaceuticalactorsthathavemoreandfasterpossibilitiestoreachthebigmarket.
7.2.3Possibilitiestoprotectthepersonalizedmedicine
Thischapteraddressesthepossibilitytoprotectthepersonalizedaspectofthemedicine
in the form of an algorithm encapsulated in software. All the available options, i.e.
patents,tradesecretsanddisclosingtheinformation,offerinterestingalternatives,but
patents showed to havemost benefits. This motivated an investigation into the legal
requirementsforpatentsinEuropeandtheUS.
The two investigated areas offered the possibility to patent software and hence the
algorithm. The legal situation in both regions is in transition. The patenting trend in
Europe tends towards being quite liberal, but the legal situation is unclear due to
differences in opinions of the decision‐making authorities regarding the extent of the
patentability.ThesituationintheUSistheotherwayroundasthetrendismovingfrom
averyliberalpositiontowardsamorerestrictiveposition.
The best patent strategywould be to patent the software in combinationwith a non‐
generichardware toallowasafeposition in thecase that thesituationbecomesmore
restrict. Inadditionit isworthcomplementingthisnon‐generichardwarewithamore
generichardwarepatentsincethiswouldhavelargerbenefits,butmightnotbeupheld
56
if the situation becomes more restrict. This of course needs to be adapted to the
intendedusetothecompany.
7.2.4Thecommercializationofpersonalizedmedicine
The commercialization of personalized medicine is dependent on the company’s
strategy,itsstructure,andthecompetitiveadvantagesoftheproduct.Duringthewhole
innovation process the company needs to have the claiming of IP together with its
innovative ideas in focus. A unique product offering personalized treatment with the
patient’sownMSCs thatgives them thepossibility to regain lostmedical functionality
andatthesametimebeingasaferalternativetoexistingproducts,willincombination
with the IPRs connected to the innovation create great opportunities for a biotech
company. If all necessary features of the aimed product are in place and relevant
substitutestotheirproductarenotavailable,thecompanyhasthepossibilitytoreacha
market and use a premium pricing strategy. People will be willing to pay for the
increased value they experience from this kind of treatment. The focus of the initial
phase of the product launch may need to be reduced to a niche markets as a small
biotechcompanydoesnothavetheresourcesorcapacitiestoservethewholemarket.
7.3Thecombinedoutcome
Thebackgroundshowedgoodpotentialinthesector,whichstrengthensthehypothesis
andmotivatedthecontinuationoftheinvestigationandtheconnectedanalysis.
7.3.1Theadministrativearena
The administrative arena showed the current patent landscape, which indicated for
good opportunities in the chosen field. It also showed that there are possibilities to
patentthepersonalizedaspectintheformofsoftware.Thismeansthatthereisagood
opportunitytogenerateprotection,whichisofgreatimportanceinthebiotechindustry.
There are large regulative demands on a biotech company in general, and genome in
particular.Thishasbeeninvestigatedinothercontexts,andshowednolargerobstacles
thatwouldcreateanyhinders.
7.3.2Thelegalarena
The legalarenahasnotpresentedanything thatwouldbeanobstacle forprovingour
hypothesis.
57
7.3.3Thebusinessarena
Thebusinessarenahasshowedseveralpositive traits.Severalof themaregeneral for
thewholesector,buttheanalysisalsoshowedsometraitsthataremorespecificforthe
chosensectorandhencestrengthenthehypothesis.Thegoodpossibilitiestogeneratea
control position via the patent allow for a good starting position, which in turn is
strengthenedbythepossibilitiestoreachthemarket.Thenichemarketsincombination
withfirstmover’sadvantageandalackofdominatingactorsallowforagoodpositionto
enterthemarketandgivesagoodpositiontoclaimtheneededspace.Theabilitytooffer
acompetitiveproductdirectedtowardsaproblemthatisnotsufficientlyaddressedwill
allowaovercomingoftheproblemfacingthegenomeandpersonalizedmedicine.This
will inturnalsoallowforcoveringthedevelopmentcostsbypermittingtheextraction
ofahigherprice.
7.4Finalreflections
ThehypothesishasbeenproventoupholdfromanIPperspectiveasshowninthemain
body and highlighted in the thesis. All the chosen areas of focus have shown
opportunitiesandobstacles,butnonethatcannotbeovercome.
WerecommendabiotechcompanyintheMSCfieldtoaimforthepersonalizedfielddue
tothepossibilitiesthatcanbegainedinthecommercializationaspect,whicharehigher
in comparison to a traditional path. The IPR’s are to a large extent the same, but
personalizedmedicineoffersanadditionallevelwiththepersonalizationaspect.
There are some areas that would be interesting to investigate in order to make a
comprehensive recommendation. The first would be to look into the scientific
perspectivetoindentifyinwhichmedicalapplicationthattheconcept,i.e.personalized
medicine based on MSCs, would have the largest potential from a commercial and
scientificaspect.Thesecondperspectivewouldbetoanalyzethepricestrategy,i.e.the
level of premium price and if the concept offers additional benefits as for instance
personalized pricing. The third perspective thatwould be interesting to investigate is
thecommercial landscapetogiveamoreholisticperspectiveofthepotential.Afourth
interesting field to do further investigation in would be to analyze how the different
countriesrelatetopersonalizedmedicineandthepaymentthereof,e.g.insurancesand
socialwelfare.
58
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AppendixA
PatentsrelatingtoMSC
1 EP0592521 MonoclonalAntibodiesSpecificforMarrow‐DerivedMesenchymalCells
OsirisTherapeuticsInc
Apr23,1992
2 EP1028737 HumanMesenchymalstemcellsfromperipheralblood
OsirisTherapeutics
Jun1,1998
3 EP1082410 HumanCD45+and/orFibroblast+MesenchymalStemCells
OsirisTherapeuticsInc
Dec2,1999
4 WO2006037649 IdentificationandInsolationofMultipotentcellsfromnon‐osteochondralmesenchymaltissue
Cellerix Apr13,2006
5 EP1361267 Mesenchymalstemcellsandtheiruse
Caplan&Haynesmith
Nov12,2003
6 EP1812558 IdentificationandIsolationofMultipotentCellsFromNon‐OsteochondralMesencymalTissue
CellerixS.L Aug1,2007
7 EP1970446 NuclearReprogrammingFactor KyotoUniversity
Apr7,2010
Patentsrelatingtotreatment
1 EP2105138 Regenerationandaugmentationofboneusingmesenchymalstemcells
OsirisTherapeutics,Inc.
Apr17,1997
2 EP1059929 Isolatedstromalcellsfosuseinthetreatmentofdiseasesofthecentralnervoussystem
MCPHahnemannUniversityPhiladelphia
Feb24,1999
3 EP1572071 JointRepairusingMesenchymalStemCells
MacroporeBiosurgeryINC
Nov1,2001
4 WO2005093044 Mesenchymalstemcellsandusestherefor
OsirisTherapeutics,Inc.
Oct6,2005
5 EP1978977 MesenchymalStemCellIsolationandTransplantationMethodandSystemtobeusedinaClinicalSetting
ChristopherCenteno
Aug2,2007
65
6 EP2110431 Cartilageregenerationusinghumanmesenchymalstemcells
OsirisTherapeuticsInc&CaseWesternUniversity
Oct21,2009
7 EP2123747 Mesenchymalstemcellsforuseintreatingapulmonarydiseaseorinreducingscartissue
OsirisTherapeutics,Inc.
Nov25,2009
Patentsrelatingtoprocedures
1 EP0874991 Methodofselectingapopulationorsubpopulationofasampleutilizingparticleandgravitysedimentation
CoulterInternationalCorp
May11,1996
2 EP0869838 MagneticSeparationApparatus MiltenyiBiotechInc
Jun4,1996
3 EP1144026 Bloodseparationsystemparticularlyforconcentratinghematopieticstemcells
Biosafe Dec24,1996
4 EP1893253 Integratedsystemforcollecting,processingandtransplantingcellsubsets,includingadultstemcells,forregenerativemedicine
Biosafe Mar26,2003
5 EP1745125 CellCultureEnvironmentsfortheserum‐freeExpansionofMesenchymalStemCells
Becton,DickinsonandCompany
Jan24,2007
6 WO2009142770 Compositionsandmethodsforgeneratingmusculosketaltissue
TheRegentsoftheUniofCali
May22,2009
7 WO2009072003 Sampleprocesssingsystemsandmethods
MiltenyiBiotecGMBH
Jun11,2009
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