Safeguarding the Value of Patent Assets

Corporate IP is a business tool. It is not an end in itself, to be framed and displayed on the office wall or the company website. Much like an investment portfolio, an IP portfolio must be designed to meet specific objectives—financing, market entry, acquisition, etc.—and be regularly revised as conditions change. Early planning and continued diligence by executives and their IP counsel are required to ensure that patent strategies are aligned with and advance core business objectives. Ultimately, this maximizes IP and corporate value. Creating a patent strategy is particularly critical to emerging and mid-sized biotechnology companies, as patents are a primary consideration for Big Pharma as it looks to find new sources of innovation and fill the new product pipeline.

There is no "one-size-fits-all" patent strategy. An optimal strategy is uniquely tailored to the company's specific products, its business and financial positions, and the competitive and regulatory landscape. The strategy should, however, be comprehensive. It should be reflected in the patent claims sought to protect the expected products and address potential sources of competition. The strategy should be invoked when planning the timing and content of each patent application, and actively applied so as to ensure freedom to practice.

Claiming to protect

While broad claims to a genus covering a lead NCE or method of treatment are obviously valuable, prosecution of such claims may be both slow and expensive. The delay and cost may deter investors, and diminish chances of corporate survival to a timely exit. Focusing (at least initially) on narrow claims covering the NCE and its anticipated FDA indication may result in faster allowance. The narrow claims may in fact be stronger and, given complementary regulatory requirements, have all the scope needed to protect against generic competition. Even though this strategy has consequences, such as revealing to competitors the lead compound and its uses, obtaining assertable claims earlier in the company's lifecycle may be critical for its success and ultimate valuation of the asset.

On the flip side, it is critical to not make the claims too narrow. Claims that can be easily designed around may be of little value. For instance, if a product or process works at various pHs or with different ingredients—even if less preferred—the claims should not be limited to a single embodiment. In some instances, such as biologics, the patent claims may need to be both broad—to ward off innovator competition from trying to mine the same rock—and narrow—to keep copycat competition at bay.

Claiming to compete

Patents can also advance business strategies by limiting competitor's opportunities or generating licensing revenue. For instance, by evaluating where competitors are likely to go—or must go—for commercial development, it may be possible to draft claims that block their path or raise their costs. Similarly, non-core technology, especially if already described in a well-written patent application, might be crafted into novel and non-obvious claims covering tools, methods, products, and services others may need or want to license. These strategies involve additional costs, but the potential benefits of deterring competitors or generating licensing revenues make them important to consider.

Drafting to anticipate and adapt

A good strategy, without a good patent application, is not enough. The patent application should try to account for the unknown future, including the unpredictability of the patent laws and technology, with alternatives and fallback positions. While it is axiomatic that a broader disclosure supports broader claims, the content and timing of a patent application are also strategic decisions that must be evaluated in view and in support of business needs and objectives.

For example, while we cannot predict how the law will settle as to whether isolated DNA will be considered "patentable subject matter," we can predict that the law will continue to evolve. Similarly, we can anticipate that technology will continue to advance, the market will change, and the methods of today will be supplanted by new methods of tomorrow. The initial drafting of a patent application is an investment in the future, and should be prepared based on a strategic analysis of the current state of the technology, market, and law, and their potential for change in the future.

Similarly, the assessment of when to file is a key strategic decision, made even more important by the United States' switch to a "first-to-file" patenting standard effective March 16, 2013. We can, for example, contrast the early-filed application containing a narrow disclosure and a single example with the later-filed application containing numerous examples, each including results from functional assays. The latter may support broader claims and be favored by the patent attorney, but the former may be absolutely necessary to advance other business objectives, such as needed public disclosure to attract investment. The decision on what and when to file is best made when the technology, business objectives, and competitive market are considered together.

Removing IP roadblocks

In the zeal to invent, one might overlook the fact that patents provide only the right to exclude others from practicing the claimed invention; they do not provide the right to practice one's own invention. Without "freedom to practice," even the best technology and patents may have no commercial value. Indeed, freedom to practice analysis is a key consideration investors typically check as part of their due diligence.

All is not lost, however, where a blocking patent calls into question your freedom to practice. One might, for example, license the technology from a willing licensor, such as a university. Or, if the potential blocking issue is recognized early enough in development, the intended product might be redesigned.

Blocking patents also can be removed (or limited) by offensive strategies in the US patent office (PTO) or federal district court. To facilitate third party challenges, recently expanded PTO procedures allow third parties to submit information and arguments relevant to patentability before and after a patent issues. Some of the procedures to challenge another's patent or application may be used anonymously and others allow for extensive participation in the PTO's patentability evaluation. While the statistical chances of wholly or partially invalidating a patent with post-issuance PTO procedures are high, factors such as cost, timing, anonymity, type of information, and estoppel must be considered when evaluating which procedure to use. Importantly, each challenge procedure has time limits on when it can be used, meaning that companies must remain continuously diligent and vigilant in tracking and evaluating competitor's patents and pending applications.

Strategy: a process, not a conclusion

Consider a company founded on antibody discovery. Ideally, its patents should protect the specific catalog of antibodies and their uses, and also analogous "me too" antibodies a competitor may develop. But suppose the business plan is modified to include diagnostic services? Or suppose a competitor gets a patent that blocks use of the lead antibodies? How can these changes be captured and addressed?

The antibody company should conduct a regular IP maintenance plan, as is done with one's investment portfolio. The IP maintenance plan involves regularly revisiting and updating patent strategies to adapt to changes in business objectives, the competitive landscape, and other market pressures. The plan also incorporates routine due diligence analyses (freedom to operate and right to exclude) before critical milestones, such as transactions or launch of a new product. Where necessary and possible, the company's own patents and applications can be re-targeted to cover the new business objectives, and third party patents can be considered (and dealt with) before it is too late.

Although there is no "one-size-fits-all" approach to how a patent portfolio should be designed, the process of strategically aligning (and re-aligning) IP to advance specific business goals is a universal approach to adding and maintaining corporate value.

Mary Henninger, PhD, is an attorney in Finnegan's Atlanta office. She can be reached at Mary.Henninger@Finnegan.com. Mark Feldstein, PhD, is a partner in Finnegan's Washington, DC office. He can be reached at Mark.Feldstein@Finnegan.com.