218 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
10.7 The Special Case Involving Biotechnology Patents
“Life sciences and biotechnology are widely regarded as one of the
most promising frontier technologies for the coming decades.”
11
Research and development in the life sciences is extremely costly and time-
consuming. The pharmaceutical industry provides a good example of the
timescales (8 to 10 years) and funding to bring a drug or biological product
to market. Most biotechnology startups do not have the nancial resources
available to them to survive for that period of time.
The business model of biotech rms often relies heavily on intellectual
property rights, in particular patents, as they are often the most crucial
asset they own in a sector that is extremely research-intensive and with low
imitation costs. Investors in biotech companies are generally well aware of
the centrality of patents and the survival of such companies may very well
depend on their ability to convince investors that they have a solid IP strat-
egy and that risks are reduced to a minimum.
12
Why are patents so important for companies in the biotechnology sectors?
This may be difcult to understand without understanding how the industry
operates. According to Estevan Burrone, a consultant for Europe’s Small and
Medium Enterprises (SME) Division,
13
there are ve major reasons:
1. Biotechnology is probably one of the most research-intensive indus-
tries. Compared with other major industries that also rely on R&D,
such as the chemical industry, where the ratio of R&D expenditure to
total revenues is approximately 5%, or the pharmaceutical industry, for
which the equivalent gure is generally no more than 13%, biotechnol-
ogy companies generally invest between 40% and 50% of their revenues
in R&D. As in any research-based industry, the protection of research
results becomes a major issue.
2. There are generally exorbitant costs for the development of new prod-
ucts and processes, but relatively low costs of imitation. The costs of
performing biotechnology research are to be considered in the context
of the high risks involved in any research project. It is hard to predict
at the outset whether years of research will lead to breakthrough inno-
vations with a great market potential or may simply leave a company
empty-handed with results that are unlikely to bring revenues. Given
the high costs involved in R&D, the relative ease of imitation is an issue
Intellectual Property ◾ 219
that is of great concern. According to the founders of Nordic Biotech,
“the present reality in drug development (…) is that almost any technol-
ogy or compound can rapidly be reverse engineered.
14
” Adequate IP
protection becomes a means to ensure that biotechnology companies
can appropriate their R&D results and reduce the likelihood of imitation
by competitors.
3. Contrary to traditional industries, where there is a clear distinction
between the basic research performed in universities and public sector
R&D institutions on the one hand, and the applied R&D undertaken
by private enterprises on the other, in biotechnology, basic and applied
research are often profoundly inter-linked. Research undertaken in
academic research institutions is often the basis for the establishment of
biotechnology spin-offs. Similarly, biotechnology companies are often
involved in (and are actively patenting) what some consider to be basic
research.
4. The biotechnology industry, in most countries, consists mainly of
recently established SMEs, an important number of which have yet to
take a product to market. In many cases, biotechnology SMEs are estab-
lished based on one or more patents developed within, or in partner-
ship with, public research organizations or universities.
5. Finally, a point that derives from some of the issues discussed previ-
ously is that for some biotech companies intellectual property rights
are actually the nal product. It is not uncommon, in fact, to nd
biotechnology companies that develop innovative inventions, pat-
ent them, and then license them to larger companies that have the
resources to take the product to market. Such companies may actu-
ally never sell a product themselves in the traditional sense, but base
their revenues on their ability to develop, protect, and out-license their
innovations.
In addition, biotechnology patents are a breed unto themselves. For
example, you cannot obtain general patent protection for DNA sequences
of a novel gene in a number of species if you have only sequenced a single
vertebrate or invertebrate example. Description of the species usually does
not allow protection for the genus in patents in the biosciences. In addition,
DNA sequences for which no function has been demonstrated are gener-
ally not considered patentable. Many laws and regulations must be met, as
shown in the following.
15
220 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
10.7.1 Genetic Engineering Patents
Isolated DNA sequences, proteins to which functions have been attributed,
and other metabolites are usually viewed in patent terms as chemical com-
pounds, much like a new organic drug molecule. The unique sequence of
the nucleotides or amino acids that you have uncovered constitutes a novel
biological molecule (much like a novel chemical molecule) and may thus
be patentable. In addition, vectors containing your nucleotide sequence and
cells containing the vector/DNA may also be patented, provided they are
considered new.
10.7.2 Microbiological Sciences Patents
Genetically modied organisms used in such processes may be eligible for
patent protection. In addition, new microbes that you have isolated, puried,
and cultured are generally considered patentable, provided they can fulll
the usefulness patent requirements.
10.7.3 Plant and Animal Sciences Patents
According to the patent laws of several countries, you cannot obtain bio-
technological patent protection for plant or animal varieties, or essentially
biological processes for the production of plants or animals. The U.S. is the
exception to this and issues so-called Plant Patents. Similarly, biotech patent
claims to animals obtained by traditional breeding methods are not allowable
at most patent ofces, but a genetically modied animal is considered patent-
able in the U.K., Europe, and the U.S. There is currently no equivalent in the
animal sciences eld to the protection offered by Plant Breeders’ Rights.
16
10.7.4 Pharmaceutical and Chemical Sciences Patents
Novel puried chemical or pharmaceutical compounds are patentable, as
well as their pharmaceutically acceptable isomers and salts. Crude extracts
in which a compound is enriched may also be patentable, depending on the
level of enrichment relative to the natural, unfractionated state. Importantly,
novel pharmaceutical carriers may also be patented. Patent protection may
also be obtained for pharmaceutical compositions containing your novel
pharmaceutical compound.
Intellectual Property ◾ 221
10.7.5 Medical Sciences Patents
Due to the medical patent restriction on methods of treatment, diagnosis, or
surgery mentioned previously, surgical techniques are specically excluded
from patent protection in these regions. However, instruments for use in
surgery, diagnosis, or therapy may be patented. In addition, diagnosis based
upon a sample obtained from the body is allowable and should, accordingly,
be limited to in vitro applications in a patent application.
10.7.6 Microorganisms and Sufciency of Description
In the complex eld of biotechnology, it is not always possible to fully
describe a microorganism in terms of physical, chemical, and genetic char-
acteristics in a patent specication. The Budapest Treaty
17
provides a solu-
tion to this patent problem—patent applicants may deposit a sample of the
organism (as claimed in the patent specication) at a recognized patent
depository and in doing so may overcome patent examiners’ arguments as
regards insufciency of description of the microorganism in the biotech pat-
ent application. The deposit number of the sample must be reected in the
patent specication and the deposit must have been made before or at the
time of ling the patent application.
10.8 Practical Advice to Entrepreneurs/Inventors
“I’m not going to buy my kids an encyclopedia. Let them walk to
school like I did.” —Yogi Berra
Patents do not merely protect inventions against imitators; they can also be
used to block a competitor’s technical progress. Thus, they are an integral
part in your competitive advantage armamentarium.
These exclusive rights allow owners of intellectual property to benet
from the property they have created, providing a nancial incentive for the
creation of an investment in intellectual property, and, in the case of patents,
attract investment capital.
The founder/entrepreneur needs to be aware of the time required to
“prosecute” a patent, as shown in Figure10.5.
222 ◾ The Guide to Entrepreneurship: How to Create Wealth for Your Company
10.8.1 Who Is the “Inventor” in Your Company?
“Are you a starter or a nisher?”
Are you THE inventor? How about the other members of your team that
helped you? Aren’t they also considered inventors? Did not other mem-
bers help you in “reduction to practice”? A “reduction to practice” is the
embodiment of the concept of an invention by producing a physical
incarnation of the invention. We offer four examples of reduction to prac-
tice:(1) for an item of manufacture, by providing a prototype or model of
the invention; (2) for a method, by performing the procedure and experi-
mentally conrming the results; (3) for a composition of matter, by synthe-
sizing or otherwise producing the invention; or (4) by the very act of ling
a patent application (also known as constructive reduction to practice).
18
10.8.2 Conception
Conception is the cornerstone to determine inventorship.
Conception is the “formation in the mind of the inventor, of a denite and
permanent idea of the complete and operative invention, as it is hereafter to
be applied in practice.”
19
Unless a person participates in the conception of
Patents are Not a Sprint;
they are a Marathon
Time (months)
12
18
30–36 36–48
Provisional
application
Publication
National
Phase
entry
Patent
granted
US Utility
PCT
application
Figure 10.5 Patents are not a sprint—Being awarded a patent usually takes several
years.
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