For life sciences startups, their intellectual property is one of their most valuable assets and therefore must be understood and protected.
Intellectual property, or IP, is an intangible asset that is a product of human thought and intelligence. This describes the technologies that life sciences startups invent and license. There are laws governing intellectual property, which startups must understand and navigate correctly in order to raise funding and legally be able to make a profit from their technology.
Here, we will broadly cover the topic of intellectual property, including:
Intellectual property is a term for non-physical assets that a company owns. Non-physical, or intangible assets are products of human intelligence that have an intrinsic value. Examples of intellectual property include a recipe that a bakery holds for its famous cookies, or the process by which a manufacturer creates a product, or a patented technology licensed by a biotech company. These examples all required an investment of time, labor, and resources to develop the intellectual property, which is one reason why understanding intellectual property is so important.
For biotechnology and medical device companies, among others, intellectual property is one of the main drivers of the company’s value. The technology upon which a life sciences startup is based is intellectual property, so it’s essential for early stage companies to have clear rights to use that property. Because intellectual property is intangible, it has to be clearly defined in order to understand its value and to protect it.
There are different types of intellectual property that can be categorized by how they are protected. Copyrights protect writing, artistic works, and other original forms of expression so that the copyright holder can control how they are used. Trademarks are used to distinguish a product or service on the market from others, such as a logo that is trademarked by a company. The major forms of intellectual property that are used by life sciences companies are patents and trade secrets. Patents are issued by the government and give an inventor the rights to their invention. To do this the inventor must disclose the details of the invention, which is in direct contrast to trade secrets. Trade secrets, as the name suggests, are secrets that are held by the company. They are protected from discovery by outsiders, which prevents them from being replicated by competitors.
A patent is a document that confers the rights to an invention through a governmental body. In the United States that is the US Patent and Trademark Office. It defines a time period for which the patent holder has (usually) the sole right to exclude others from using/profiting from the invention. In the US, patents usually last for 20 years from the date of the application.
Provisional patents were established in 1995 as a method for inventors to file their first patent application for less money. This allows an inventor who may not have much funding yet to secure a filing date sooner than would otherwise be possible. Filing a provisional patent has fewer requirements, but only allows for 12 months before a non-provisional patent must be filed. This year does not count toward the 20-year length of the non-provisional patent.
The types of patents include plant patents, for “anyone who invents or discovers and asexually reproduces any distinct and new variety of plant;” design patents, for “anyone who invents a new, original, and ornamental design for an article of manufacture;” and utility patents, for “anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement thereof.” Thus, most life sciences patents are utility patents.
The requirements for an invention to be patentable include that it is novel, meaning it was not available to the public prior to the filing date of the patent. For this reason, a thorough search must be done of all “prior art” to determine whether the invention is actually new. This is relatively straightforward, but another aspect of patentability is not: Even if an invention is determined to be novel, if it is considered obvious it will not be patentable. This requirement for patenting can be complicated, as it requires that an invention be non-obvious to a person with average skill in the area of the invention. This brings up the question of what is average/ordinary skill in the related area, what is obvious, etc.
Intellectual property protection depends on the type of IP. In the case of a patent, it starts with the patent application. A good patent application is essential for correctly defining the scope, and in a quickly developing technological area, an early application can be important for beating out the competition as whoever has the earlier date has the rights to a successful patent.
Speed and quality are two big drivers of cost, and are two reasons why IP protection can be so expensive. IP attorneys often have not only a law degree, but also a degree in the area of technology they practice in. Thus, these are highly educated professionals that generally cost quite a bit to work with. The initial drafting of the patent and the actual patent litigation (should it become necessary), may also be done by different attorneys, as even these areas of expertise are sufficiently broad to require specific skills.
However, a patent does not actively protect intellectual property--it only confers the right to the inventor to prevent others from using the technology. It is incumbent on the patent holder to actually enforce these rights. Therefore, a small company may hold a patent, but a large firm could plausibly infringe upon this patent and the small one might find itself unable to afford the legal costs to defend it.
This is one of the reasons why companies turn to trade secrets. Whereas a patent spells out publicly exactly what the technology is so it may be defended, a trade secret takes the opposite approach and keeps everything confidential. Thus, protecting a trade secret involves preventing the secret from getting out via company policies, information security, NDA’s, and other such measures.
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Intellectual property strategy is important for all biotech companies, even startups, to consider. In an industry like life sciences where information is highly valuable, the company with the strongest IP strategy may have a big advantage over its competitors. For example, a startup could potentially secure a patent for their technology, but it could involve pieces of someone else’s patented technology as well. Thus, a company could not pursue its own patented technology without receiving permission from the holder of the patent that is blocking them.
IP strategy therefore may involve licensing technology from other companies in order to achieve what is known as “freedom to operate.” However, the patent holder might not be willing to license their technology. If the patent is due to expire soon, you could wait, or you could try to invalidate the patent, but that is expensive and frequently not possible.
Because it can be difficult to achieve freedom to operate if there are blocking patents, one strategy for future IP is to keep track of related patents, both issued and pending, and attempt to invent around them, when possible. Avoiding the issue of blocking patents is not always doable, but by being aware you give yourself the chance to try.
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Other aspects of IP strategy can include the timing of when to apply for future patents, how much to include in a single patent versus splitting a technology into its component parts for different patents, etc. This strategy also requires keeping tabs on what competitors are doing, what is being patented, and the general state of the field. Thus, good IP strategy is also good competitive analysis.
Intellectual property strategy also involves defining a company’s IP, capturing and recording new IP, and determining how to protect that IP, whether via copyright, trademark, patent, or trade secret. Layers of intellectual property protection can assist companies with this, involving leadership awareness of IP, capturing new IP, and more.
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