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European Biopharmaceutical Review

License to Thrill

Biopharmaceutical organisations can use in-licensing to enhance and strengthen their intellectual property (IP), steal a march on their competition and quickly inject some added excitement into the market.

In the increasingly competitive market of biopharmaceutical IP, it’s not always what you’ve got that’s important, but knowing where to get what you need and what to do with it. Patent protection for technologies, products or services can be acquired in three main ways:
  1. File your own patents, either alone or in combination with another party
  2. In-license through third-party patents
  3. Purchase patents
Traditionally, most companies have sought to file their own patents to protect internal technology and acquire full ownership and control over their technology. In-licensing, where companies agree to pay a ‘licence’ fee for the use of another organisation’s patented technology, has tended to be used as a more reactive tool – for example, to avoid potential infringement actions. However,more recently, there has been a move for companies in the biotech and pharmaceutical spheres to adopt a more proactive approach to in-licensing thirdparty patents. In developing their IP strategies, these companies have recognised in-licensing as one of the most efficient and cost-effective routes to seeking out the best technologies and helping them create an exciting, bigger and more immediate impact on the market.

There are a number of benefits to inlicensing. Firstly, it avoids the need for heavy and time-consuming investment in R&D for all products and technologies. Secondly, it enables companies to be more nimble, expanding their product pipeline and taking these products to market quickly.This, in turn, helps increase their market presence and profile, thereby enhancing their reputation. Finally, it can help obtain additional funding by making companies a more attractive proposition for investors.

When to In-license
In deciding whether to file, in-license or purchase, it is important to take into account a number of considerations, including: the levels of existing protection for the product/technology portfolio; the scale and desired timelines of planned technology development; the strength and breadth of the company’s internal capabilities; and competitive pressures and their effect on freedom of action.

If the company decides to file their own patents, this should provide them with the most relevant protection for their products and technologies.Good quality filings, aligned with product development, can be the most costeffective way to protect one’s offerings. However, filing patents can be a slow process, taking many years to move from initial filing through to granted patent. Therefore, where there are gaps in patent protection and quick access to a new technology is required – or when moving into a new technology area where there is a lack of internal competencies – inlicensing or purchasing patent protection may be the best option.

The decision to purchase or in-license a patent is likely to depend on the price of the patent versus the licensing fee, the patent owner’s terms and/or the requirement or desire for exclusivity. If the company is successful in licensing patent protection from a third-party, this will either be in the form of an exclusive or a non-exclusive licence.As an exclusive licensee, one will typically have the right to sue others to protect that exclusivity. As a non-exclusive licensee, however, one may not have the right to sue others as the licence is only a waiver from being sued.

On occasions, a licence may be granted only for a particular aspect of the technology covered in a patent – for example, use of the technology in a specific market segment.Again, in these circumstances, the company may not have the right to sue others if the case falls outside the parameters of the licence’s terms. For this reason, the desire for exclusivity – and the extent of that exclusivity – should be a key consideration at the forefront of licensing discussions.

Market Dynamics
Evolving market conditions certainly appear to be having a positive impact on the frequency, accessibility and ease of in-licensing transactions. Firstly, fierce competition for new technology opportunities and increasingly globalised markets means the majority of technology segments are witnessing the emergence of non-traditional competitors, either from the developing world or from previously unrelated or distant technology areas.Globalised markets are also encouraging the geographic division of R&D as organisations look for more costeffective solutions. Secondly, in response to this competition, the market for innovation and technology transfer is becoming more fluid as increasing numbers of companies are pursuing open innovation strategies, which see them actively seeking access to technologies they do not have in-house and solutions to problems that they may not be able to solve internally.

With innovation markets becoming more fluid and the separation of R&D, companies that trade purely in ideas are starting to surface. In the IP world, those that accumulate patents from others are known either as non-practising entities or by the more derogatory terminology of patent trolls.

Perhaps the largest of these nonpractising entities is Intellectual Ventures, a company that is attempting to create an active market for innovation by purchasing inventions from individual inventors and businesses before combining them into market-specific portfolios, which they then license broadly. The company also employs and partners with talented inventors to work on new inventions that can be out-licensed in the future. Intellectual Ventures has raised more than $5 billion to invest in their vision of an innovation marketplace and, in 2010, they generated $700 million in licensing revenue. To date, the majority of their acquired patents have been in the computing and ICT fields, but a large number of the new inventions that they are filing are now in the healthcare and biopharmaceutical spheres.

Implications of these evolving market conditions include a much more dynamic innovation marketplace, where ideas are bought, sold and licensed more freely. In order to compete in this new marketplace, it is important to bring one’s licensing strategies up-to-date so that you are ready to identify and take advantage of the best in-licensing opportunities.

In-licensing Strategies
Developing an in-licensing strategy should form part of a company’s broader R&D plan. In-licensing strategies should ideally be proactive and led by market, technology and existing patent data.This approach will mean that the company will be among the first to identify external solutions to internal technology gaps or requirements. It should also mean that the right decisions are made about whether to develop technology in-house or to inlicense. By having a clear in-licensing strategy and being responsible in how that strategy is implemented will enhance one’s reputation in the market, and help to ensure that the company is seen as a partner of choice, which could help to secure more favourable licence terms.

A detailed review of a company’s current patent portfolio will help to understand the current level of protection for products and technology. It will also establish how well aligned the company’s patents are with their current products and product development strategies, and where there are gaps in protection.These gaps can be filled by searching for and analysing thirdparty patent applications and data.

On occasion, in-licensing or purchasing an invention can help to add further protection to an internal technology. The combination of internal and in-licensed ideas may achieve critical mass, creating a market-specific portfolio that is more attractive or compelling to potential licensees or investors. In other circumstances, access to thirdparty inventions can help reduce perceived, or actual, litigation risks. Licensing a relevant invention can provide the company with freedom to operate in a particular space or may enhance its negotiating position if faced with an infringement action.

Once it has been decided that there are patents that the company would like to acquire or in-license, it is important to consider whether it is possible to negotiate more cost-effective access to the technology by, for example, exchanging a licence to some of your internal technology.While negotiating a licence to a patent or number of patents, one should also determine whether it is possible to combine the licence with access to complementary trademark licences and technology transfer in order to maximise the value of the deal to the company, as well as provide an extended term to the deal over and above the patent expiration date. In-licensing of patents may occur at any stage of product or technology development, but, in general terms, the earlier a licensing enquiry is initiated, the more favourable the negotiation terms are likely to be. If a licensor knows that urgent access to the patent is required to launch a product or to combat a litigation threat, their terms may not be as competitive as had an earlier, more proactive approach been made.

Ongoing Evaluation
Naturally, as a company’s R&D plan matures and the third-party in-licensing landscape changes, their IP strategy and approach to in-licensing will need to evolve to ensure they still get the best chance of staying ahead of the competition – and maintaining market interest and excitement in the company and what it has to offer.

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Haydn Evans is Vice President of Intellectual Property Outsourcing at CPA Global and manages the company’s European IP outsourcing services. This includes all IP searching, technology landscaping and patent portfolio optimisation services for a range of pharmaceutical and biotechnology customers including multinational corporations and smaller technology organisations in Europe. Previously, Haydn was a Senior Analyst and Strategy Manager for GE Healthcare where he worked in areas such as diagnostics, medical imaging and bioscience technology. He has a Biochemistry degree from the University of Nottingham. Email:
Haydn Evans
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