INTELLECTUAL PROPERTY IN DRUG DISCOVERY AND BIOTECHNOLOGY

Transcription

1 INTELLECTUAL PROPERTY IN DRUG DISCOVERY AND BIOTECHNOLOGY 1. OVERVIEW TIMOTHY P. MALONEY RICHARD A. KABA JAMES P. KRUEGER RUDY KRATZ CALISTA J. MITCHELL Fitch, Even, Tabin & Flannery, Chicago IL 1 For following up on specific points, more detail is available in several excellent treatises devoted to intellectual property. See, for example, Donald S. Chisum, Chisum on Patents (2008); Iver P. Cooper, Biotechnology and the Law (2008); Jerome Rosenstock, The Law of Chemical and Pharmaceutical Invention: Patent and Nonpatent Protection (2d ed., 2008); Martin J. Adelman, Patent Law Perspectives (2d ed. 2008); Kenneth J. Burchfiel, Biotechnology and the Federal Circuit (1995); John G. Mills et. al., Patent Law Fundamentals (2008); Stephen P. Ladas, Trademarks and Related Rights: National And International Protection (1975); R. Carl Moy, Moy s Walker on Patents (4th ed., 2008); J. Thomas McCarthy, Trademarks And Unfair Competition (4th ed., 2008); Melvin F. Jager, Trade Secrets Law (2008); Roger M. Milgrim, Milgrim on Trade Secrets (2008). 101 Intellectual property is the branch of law that protects and, indeed, encourages the creation of certain products of the human mind or intellect. This chapter is intended to provide a basic understanding and appreciation of intellectual property law, especially as it relates to patents, trademarks, and trade secrets, in the United States and, to a lesser extent, in the rest of the world. 1 Issues and concerns particularly related to the drug discovery and development process and the general biotechnology industry are emphasized. By making effective use of the legal protection afforded by the intellectual property laws in the United States and elsewhere, the drug developer can protect its investment, enhance the value of the technology being developed, and earn a profit sufficient to allow and encourage further research into improving existing drugs and therapies as well as developing new drugs and therapies. By better understanding these intellectual property laws, the drug developer, together with experienced intellectual property counsel, can develop an effective intellectual property strategy. In this way, new and emerging technologies, as well as new drug discoveries, can be identified, managed, and protected as an integral part of an organization s research and development activities to create a strong intellectual property portfolio. The rewards flowing from the development of a strong intellectual property portfolio can be significant. A patent allows the patent holder to exclude others from making, using, offering for sale, or selling the patented invention during the term of the patent. A carefully crafted intellectual property portfolio (including pending patent applications, issued patents, trademarks, and trade secrets) can also serve many other purposes. It can be used defensively to prevent others from patenting the invention. It can present legitimate barriers to competitors attempting to enter a new field. It can allow time for recouping investments and establishing market position and identity. It can be used to generate revenues through licensing arrangements or outright sales of the patents, trademarks and associated goodwill, or trade secrets. It can be useful in obtaining outside financing or entering into shared research arrangements, joint ventures, or cross-licensing arrangements. In many instances, a startup biotechnology company s only marketable asset may be its intellectual property. A carefully crafted and maintained patent portfolio can be an especially beneficial asset when seeking outside funding or negotiating an agreement with a large, well-established, and well-funded partner. The application of intellectual property law to the field of drug discovery and biotechnology presents unique and challenging issues for the individual researcher, the research organization or company, and the intellectual property counsel. These issues arise mainly because of the fast-developing nature of the drug discovery and biotechnology fields, the enormous investment in time and money required in the current regulatory climate to develop a new drug or treatment process and Burger s Medicinal Chemistry, Drug Discovery, and Development, Seventh Edition, edited by Donald J. Abraham and David P. Rotella Copyright Ó 2010 John Wiley & Sons, Inc.

2 102 INTELLECTUAL PROPERTY IN DRUG DISCOVERY AND BIOTECHNOLOGY bring it to the marketplace, and the opportunities derived from the biotechnology revolution to achieve rapid breakthroughs in the health care area with the potential for substantial economic rewards. How the industry meets these challenges, and how the legal system evolves and adapts to this rapidly changing field, will significantly affect the development of the burgeoning biotechnology pharmaceutical industry and the health care system in general. How well individual companies or research organizations protect their intellectual property will determine, to a significant degree, who will survive and prosper. The development of a drug or treatment process from its conception until its introduction in the marketplace generally requires 6 10 years, sometimes even more. This delay is generally due to the time required for research and development, pilot plant studies, scale-up studies, animal studies, clinical studies, obtaining the necessary regulatory approvals (e.g., from the U.S. Food and Drug Administration (FDA)), marketing studies, and so on. A successful drug development program can cost hundreds of millions of dollars. The ability to protect that human and economic investment has become an increasingly important factor in the drug discovery and development process. A business organization, whether a startup company or an established pharmaceutical giant, often cannot justify the necessary investment if their intellectual property cannot be reasonably protected. Without such protection, a so-called free rider could offer the same or very similar drug or treatment process at a significantly lower cost. Without the ability to protect and recover one s investment and earn a profit, drug discovery and development, for all practical purposes, could only be carried out or sponsored by governments or large nonprofit organizations. This would severely limit the number of persons generating new ideas, decrease the number of new drugs entering the marketplace, and increase the time required for the development of new drugs or treatment processes. Intellectual property law that body of law that includes patents, trademarks, trade secrets, and copyrights provides the framework and mechanism by which investment in intellectual property can be protected. The drug discovery process, especially as it has developed in response to federal regulation and the recent biotechnology revolution, faces new and difficult challenges and issues within the field of intellectual property law. The biotechnology pharmaceutical industry must recognize and understand these challenges and issues in order to take advantage of the protection now offered and to be prepared to adapt to modifications that may be made in intellectual property law in the future. It is also important that the biotechnology pharmaceutical industry participate in the ongoing debates and dialogs between society, academic institutes, industry, and government in order to participate in the continued development of suitable government polices, laws, and regulations related to the development and protection of intellectual property. Patents are generally considered the strongest form of protection available for intellectual property and, therefore, should be the cornerstone of the intellectual property protection strategy. An effective patent strategy or program should identify new and emerging technologies and inventions. A significant part of this program is educating researchers and other employees about the ever-increasing importance of protecting intellectual property and providing mechanisms and incentives to encourage them to bring forward their ideas and innovations for appropriate evaluation. The patent strategy should provide a mechanism to evaluate the inventions and determine whether to file a patent application on a given invention and, if so, when and where to file throughout the world. It must also determine whether and when to update pending patent applications when new information and data become available. This will generally require a careful case-by-case evaluation of each invention, including the likelihood of patentability and success in the ongoing research and FDA approval processes. Unfortunately, such decisions must almost always be made without complete data or information and long before concrete assessments and estimates can be made concerning the ultimate technological and economic success of the invention. Drug discovery technology has become increasingly complex and multidisciplinary. It is

3 OVERVIEW 103 increasingly difficult for meaningful research to be carried out by individuals or even small research teams. Rather, large multidisciplinary teams bringing wide-ranging expertise to bear on a given problem are generally needed to stay ahead of the competition. The existence and requirements of such teams may have a significant effect on the patentability of drugs and treatment processes. In addition to being new or novel, a product or process to be patentable must not have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains. 2 Just who is a person of ordinary skill in the drug discovery area? Clearly, a person of ordinary skill in the art of drug discovery is at least a highly skilled individual, probably with an advanced degree. Does that person have a Master s, Ph.D., or medical degree in the field to which the invention is most closely related? Or does that person have advanced-level knowledge in more than one field associated with the invention? If so, in how many fields? Is the person of ordinary skill a single individual or a mythical person having the combined knowledge and skill of a multidisciplinary team where each member possesses ordinary skill in a specific art? These questions remain for the U.S. Patent and Trademark Office (PTO), and ultimately Congress and the courts, to decide and/or modify in order to accommodate and appropriately encourage this rapidly developing scientific area. Drug discovery has accelerated over the past several decades, and will likely continue to do so, due to the continuous and phenomenally rapid advance of the underlying technology as well as the potential benefits that should follow from the biotechnology revolution. The amount of information and data in the literature is enormous and is growing at an increasing rate as evidenced by the successful sequencing of the human genome and other dramatic developments that were unthinkable only a short time ago. What is nonobvious today to one of ordinary skill in the art may well be obvious tomorrow, next week, or next 2 35 U.S.C.A. 103 (West 2001 & Supp. 2008); see also Standard Oil Co. v. Am. Cyanamid Co., 774 F.2d 448, 454 (Fed. Cir. 1985). month. This rapidly expanding body of technical information dramatically increases the pressure to seek patent protection as early as possible oftentimes before the invention is fully developed and its ramifications and significance are fully known. Another unique aspect of the drug discovery industry is that the majority of research is directed toward a relatively limited number of well-known target diseases or disorders (e.g., AIDS, cancer, Alzheimer s disease) and enabling technologies (e.g., receptors) that are useful in drug discovery. Due to the importance of these diseases, disorders, and enabling technologies, and the potentially huge economic rewards, many research groups and organizations have turned their resources toward these relatively few targets. 3 While one hopes that this intense competition will lead to near-term breakthroughs in new drugs, methods of treatment, and cures, the intense competition makes it more difficult to protect inventions made along the way. Also, because of the large number of groups working and filing patent applications in the same or closely related biotechnology research areas, the number of potential invention priority contests in the PTO (i.e., patent interferences; see Section 3.7) is likely to be significantly higher than in other technologies. The increased possibility of interferences in the area of drug discovery and treatment processes contributes to the pressure to file as quickly as possible. Throughout most of the world (with the notable exception of the United States), patents are granted to the first to file rather than the first to invent. In such countries, the failure to file quickly can result in loss of valuable patent rights. And, if others independently make the same invention and obtain a patent, the inventor who files late may be prevented from using the very technology upon which 3 Congress has attempted to alleviate this problem somewhat with the Orphan Drug Act which provides, with some limitations, an exclusive 7-year right to market a drug for treatment of a disease affecting less than 200,000 individuals or for which there is no reasonable expectation that the developmental costs of the drug can be recovered through sales in the United States. 21 U.S.C. 360aa 360ee (2007).

4 104 INTELLECTUAL PROPERTY IN DRUG DISCOVERY AND BIOTECHNOLOGY vast sums and significant human resources were spent. The changing pathway for drug discovery also influences the way in which inventors or their assignees interact with the patent system. 4 Historically, drug discovery and development generally was carried out by large pharmaceutical companies. More and more, the basic discovery and initial stages of drug development are being carried out by university research teams and startup or relatively small biotechnology companies. These groups generally do not have the internal economic resources to seek worldwide patent protection or to carry a new drug or therapy through the clinical stages. Outside funding, strategic alliances, or licensing arrangements are usually necessary as the research and development progresses. In seeking funding or other business arrangements, researchers are generally required to disclose at least basic business and/ or technical information. Extreme care should be taken to prevent public disclosure of inventions before the appropriate patent application is filed. The United States has a 1-year grace period in which a patent application can be filed after the first public disclosure, public use, or offer for sale of the subject matter of the invention. In most other countries, however, there is an absolute novelty requirement public disclosure of the subject matter of the invention anywhere in the world prior to filing the patent application will likely preclude foreign patent protection (see Section 2.3). It is critical, therefore, that secrecy be maintained until the initial patent application is filed covering the invention. Once the initial patent application is filed (usually in the country where the invention is made or developed), corresponding applications can be filed within 1 year in most other countries under prevailing international agreements (i.e., the Paris Convention; see Section 5.1) claiming the benefit of the filing date of the initial application. Secrecy may be very difficult to maintain if one is seeking outside funding. Most potential 4 In the United States, patent applications must be filed in the name of the inventors. Inventors may assign their rights in the patent application and any patents that may issue therefrom to third parties (i.e., assignees). 37 C.F.R. 1.41, 1.46 (2008). investors demand significant business and technical details before making the desired investment. To the extent possible, however, the amount of technical information provided should be strictly limited and its use and dissemination carefully controlled. Confidentiality agreements are helpful in maintaining secrecy and are highly recommended when seeking private funding or joint research arrangements. Public funding and offerings, which trigger the disclosure requirements of the securities act, the Securities Exchange Commission (SEC), and state blue sky laws, present even more difficult problems. Public offerings, when possible, should be delayed until patent applications are filed because public disclosure, even if accidental or in violation of a confidentiality agreement, can preclude patent protection in most countries of the world. Once again, there is great pressure for filing patent applications as quickly as possible. The requirements set forth in the patent law and as dictated by procedures for obtaining research funding both in the United States and the rest of the world also strongly encourage filing a patent application covering a new drug or treatment process as soon as possible. In many cases, it may be desirable or even necessary to file the patent application before complete data are available. For example, a patent application covering a protein for which only a partial DNA coding sequence has been determined may be filed in the United States to establish an early priority date for the invention. This would permit such preliminary information to be disclosed with reduced risk of losing valuable patent rights. Once the sequence is complete, a continuation-in-part (CIP) application including the additional data may be filed in the United States (and, if appropriate, the original application abandoned). The new material added in the CIP application receives the priority date of the actual CIP filing date. In some cases, it may be desirable to file several CIP applications as new data and/or discoveries are made. Using such an approach, however, has risks. In the United States a patent application must be enabling, that is, it must provide a written description of the invention, and of the manner and process of making and using

5 PATENT PROTECTION AND STRATEGY U.S.C.A. 112 (West 2001). 6 An export license is generally required to export technology developed in the United States. 35 U.S.C.A 184 (West 2001); 37 C.F.R (2008); see also International Traffic in Arms Regulations, 22 C.F.R (2008); Export Administration Regulations, 15 C.F.R (2008); Assistance to Foreign Atomic Energy Activities Regulations, 10 C.F.R. 810 (2008). Thus, a patent application for an invention made in the United States generally cannot first be filed in another country with a lesser enabling requirement unless the appropriate foreign filing license is obtained. it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same. 5 If a patent application is filed too early (i.e., before sufficient data are available to allow an enabling disclosure), the application may be rejected or any resulting patent may be invalid. In the protein example, if it is determined that a complete DNA sequence is required for enablement, the first filed patent application would not be legally sufficient; the CIP application containing the full sequence, however, would be enabling. One must take into account that the United States generally has a more stringent enablement requirement than many other countries. Thus, in the DNA sequencing example above, a partial sequence may be sufficient in other parts of the world. In such countries, a patent application having only a partial sequence and an earlier filing date may have priority over a second patent application filed by another party where the second application is based on a U.S. application, the filing of which was delayed because the full sequence was not yet complete. 6 This chapter will present a discussion of provisional and utility patents, trademarks, and trade secrets and emphasizes their use in protecting intellectual property in the drug discovery and biotechnology areas. Other forms of intellectual property protection will be mentioned briefly. This chapter cannot, of course, provide the reader with sufficient detail to allow him or her to protect drug-related technology effectively and comprehensively. Moreover, intellectual property laws and regulations can change significantly and rapidly. 7 It is imperative to obtain competent legal counsel specializing in the area of intellectual property and technology transfer, preferably counsel with the appropriate drug research and biotechnology experience, as early in the research and development process as possible. This chapter should enable the reader to communicate and interact more effectively with counsel as they jointly fashion, within the ongoing research and development process, the appropriate legal protection for the particular technology. 2. PATENT PROTECTION AND STRATEGY The U.S. Constitution provides that Congress shall have [the] power... [t]o promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries. 8 In exercising that power, Congress has established a system for granting utility patents, 9 design patents, and plant patents. Utility patents protect the structural and functional aspects of products or processes and are granted for a term ending twenty years from the earliest nonprovisional filing date of the utility application for which 7 Indeed, as this goes to press, significant changes to patent laws and regulations are being considered. Where appropriate in this chapter, we mention and briefly discuss some of the major proposals under consideration and how they might impact intellectual property law. Biotechnology and related industries should not only should remain aware of such proposed changes but also participate in the debates and discussions concerning how intellectual property laws and regulations may be changed in the future to assist, encourage, and/or control future technological growth and development for the benefit of mankind. 8 U.S. Const. art. I, 8, cl Applicants can also file a provisional application that is described in more detail in Section 3.4. Such a provisional application cannot be converted into a utility patent application or mature into a utility patent. A utility patent application can be filed within 1 year of the provisional application and claim benefit of the provisional application filing date; such a utility patent application can, of course, mature into a utility patent.

6 106 INTELLECTUAL PROPERTY IN DRUG DISCOVERY AND BIOTECHNOLOGY 10 If the utility application is based on an international application (i.e., an application filed under the Patent Cooperation Treaty (PCT); See Section 5), the patent term is calculated from the filing date of the international application. The term international application does not include national or regional applications filed in other countries (i.e., applications filed in a national or regional patent office, such as the Japanese Patent Office or European Patent Office, respectively). 11 Under the current U.S. law, almost all patent applications are published eighteen months after the filing date (generally well before any patent issues). Thus, the applicant generally only obtains an opportunity to seek such legal protection in exchange for disclosing the invention. The right to exclude others only begins after the patent, if any, actually issues. Potential infringers will generally be discouraged from using the invention disclosed in the pending application since any investment made would be at risk when and if a patent is obtained. The applicant can generally keep the application pending in the PTO for a considerable period of time using continuation applications in order to extend this period of uncertainty. benefit is claimed. Design patents protect the ornamental design or aspect of an article of manufacture and are granted for a term of fourteen years from issuance. Plant patents grant the right to exclude others from reproducing, selling, or using an asexually reproduced plant variety for a term of twenty years from the initial filing date. Certain sexually reproduced plant varieties can be protected under the Plant Variety Protection Act (as amended in 1994) for a term of twenty years from issuance; plant variety certificates under this program are issued by the U.S. Department of Agriculture. Although design and plant patents can, in some cases, be an important part of a company s patent portfolio, this chapter will concentrate on utility patents. Utility patents (hereinafter patents ) are generally considered the strongest form of legal protection for intellectual property. They grant the patent holder a legal monopoly on the invention, effective on the actual issue date, and running for twenty years after the filing date of the earliest nonprovisional U.S. or international application relied upon. 10 During the term of the patent, the patent holder can prevent others from making, using, offering for sale, or selling the patented invention in the United States or importing the patented invention into the United States. In exchange for this limited right to exclude, the patentee must fully disclose the invention to the public; at the end of the patent term, the invention is dedicated to the public. 11 Patent protection is limited geographically. For the most part, a U.S. patent does not provide legal protection from, or prevent, an act occurring outside the United States (and its territories and possessions) although that same act would fall within the scope of patent protection if carried out in the United States (the one exception is discussed in Section 4.1). The same is generally true for other countries. Thus, a comprehensive patent strategy should take into account the possibility of obtaining patent protection in all countries where an invention will be exploited (i.e., sold, manufactured, or used). The U.S. patent system is designed to protect new and nonobvious products and processes. It protects the application of ideas and laws of nature; it does not protect the ideas or laws of nature themselves. Thus, Einstein s equation E ¼ mc 2 would not have been patentable, even though Einstein or others might have obtained patent protection for a nuclear power plant, a nuclear rocket engine, or the myriad other products and processes derived from this basic principle. The idea or basic principle itself is available for all to use and develop. In the United States, the 20-year term 12 of a patent is measured from its earliest nonprovisional filing date for which benefit is claimed. 13 Largely because of the time involved in the FDA approval process and associated clinical trials, a considerable portion of the patent term can elapse before a patented 12 The United States has adopted a 20-year patent term for all applications filed on or after June 8, Prior to this time, the patent term was 17 years as measured from the actual issue date. For patents issuing fromapplications filed before June 8, 1995, the patent term is the longer of 17 years from the issue date or 20 years from the U.S. or international filing date. The 20-year term is discussed in more detail in Section Claiming priority from provisional applications or foreign applications does not begin the patent term.

7 PATENT PROTECTION AND STRATEGY 107 drug can be sold in the marketplace. Thus, the period effectively available for the drug developer to recoup its investment and earn a profit can be considerably shorter than the 20-year patent term. Since the early 1980s, Congress has taken a number of steps to significantly strengthen and improve the patent system. These steps include adding a reexamination process, 14 authorizing the formation of the U.S. Court of Appeals for the Federal Circuit to hear appeals from the PTO and in patent infringement cases, and providing for the extension and/or adjustment of the patent term for certain drug-related inventions and for certain delays in the PTO. Patent term may be extended and/or adjusted for qualifying patents which claim a product, method of using the product, or method of manufacturing the product in order to compensate for certain, but not all, delays in the FDA regulatory and approval process and/or in the PTO patenting process. 15 Patent term may also be extended for qualifying drugs, medical devices, food additives, and methods primarily us[ing] recombinant DNA technology in the manufacture of the product. 16 The patent term may be extended using FDA-related delays only if the approval of the first commercial use of the patented product occurs during the original patent term and the FDA-related extension is applied for within 60 days of the approval. Due to the limited time in which to apply for the FDArelated extension, it is important that patent counsel be informed when approval of a drug or medical device is granted, so that the application for term extension can be filed within the required time period. The patent term extension process is jointly administered by the PTO and the FDA. The PTO determines whether a patent qualifies for the FDA-related extension, and the FDA determines the allowable extension term. As for adjustments based on PTO delays, the PTO determines the allowable adjustment of patent term (see Section 2.4). 14 The reexamination process was modified in 1999 thereby allowing a larger role to third parties in the process. See Section U.S.C.A. 156(a)(5)(A) (West 2001) U.S.C.A. 156(a)(5)(B) (West 2001) Global Patent Strategy Pharmaceutical and other high-technology industries are increasingly global in nature. More and more, competition in global markets requires effective global protection for intellectual property. As barriers to trade decrease and the legal mechanisms for protecting intellectual property are strengthened around the world, such protection will become even more important. It is an important part of any drug discovery organization s intellectual property strategy to determine how best to protect its intellectual property throughout its global market. The simplest strategy would be to file patent applications for each invention in each and every country having a patent system. Such a strategy could, of course, be prohibitively expensive and, in most cases, not costeffective. A cost-benefit analysis should be applied to each particular invention. It is essential to evaluate the market potential of the invention around the world and the ability to control that market based on patent protection and enforcement mechanisms available in key countries. For countries with interrelated markets, it may be possible to protect technology effectively in one country with a patent in another. 17 Appropriate technical, business, marketing, and legal personnel should be involved in the decision-making process so that all relevant factors can be considered in determining whether to file a patent application on a given invention, and if so, when and where to file. The relevant factors will, of course, vary from case to case, as will their relative importance. For example, a startup company interested in developing a single drug or family of drugs may have a strong interest in obtaining as comprehensive patent coverage as possible. Unfortunately, such a startup company may not have the resources necessary to seek such comprehensive patent coverage. A pioneer in- 17 For example, assume a product is protected by a U.S. patent but not by Canadian or Mexican patents. A competitor would be less inclined to make and offer the product in Canada or Mexico where it is not protected if they are not free to import the product into the United States.

8 108 INTELLECTUAL PROPERTY IN DRUG DISCOVERY AND BIOTECHNOLOGY vention (i.e., one which breaks new ground or provides an important technical breakthrough and will likely dominate a particular industry segment) generally warrants wider patent protection than an invention that provides only an incremental improvement in an existing technology. Patent protection around the world is further discussed in Section 5. Improvements of previously patented inventions deserve special consideration in developing a patent strategy. Patents covering even relatively minor improvements can be important elements in expanding and extending protection of a basic technology. If the inventor or assignee of the improved invention is also the holder of the patent of the basic invention, there are generally two options. The improvement can be kept as either a trade secret or patented. Although a trade secret potentially has an unlimited lifetime (i.e., until secrecy is lost), the actual lifetime is likely to be much shorter, especially in the drug industry where detailed FDA disclosures are required. However, if the improvement is only an obvious variation of a basic invention, reliance upon trade secret law may be the only option. Generally, patent protection of the improvement is the preferred option. A patent for an improved drug or process may allow for additional patent protection for commercially significant embodiments past the term of the basic patent on the original invention. Obtaining such improvement patents will also make it more difficult for competitors to penetrate or expand into a market. Driving stakes in the ground in the form of improvement patents all around the basic or core invention makes it more difficult for any potential competitor to carve out a niche in the market. In most cases where the developer of the improvement does not hold the patent on the basic or core invention, keeping the improvement as a trade secret is not a realistic option unless the patent covering the basic invention is due to expire in a relatively short time. Therefore, seeking patent protection is generally the best option. Assume the basic drug X is protected by a patent held by Company A and that Competitor B develops and patents a significantly improved drug formulation Y containing drug X. Company A can continue to market drug X but cannot offer drug formulation Y. Competitor B cannot offer either drug X alone or in the form of formulation Y. 18 Competitor B may wish simply to license the improvement to Company A and collect revenues through a license. Or Competitor B can use its patent position on formulation Y as leverage in seeking access to the market. In many cases, Company A and Competitor B will agree to cross-license each other so that each can offer the improved formulation Y. Thus, for a competitor seeking to enter a market otherwise closed by another s patent, improvement patents can provide valuable leverage. Several differences between the U.S. patent law and the patent law of almost every other country also significantly affect patent strategy, especially the determination of when to file a patent application in the United States. Some of the most important of these include the rules for determining priority and the requirement of absolute novelty essentially everywhere except the United States. These differences 19 are discussed below First to Invent Versus First to File In our world of rapidly advancing technology, and particularly for very active research areas such as drug discovery and biotechnology, investigators at varying locations are often working in the same general area, often on the same specific research topic, and frequently discover essentially the same invention within a very short time of each other. Thus, the issue often arises as to which of two (or more) inventors is entitled to a patent on a contemporaneously discovered invention. U.S. patent law establishing entitlement to a patent in the case of essentially simulta- 18 It is important to understand that a patent does not give the patentee an affirmative right to practice the claimed invention. Other patents may prevent the patentee from practicing his or her own invention. 19 The best mode requirement is another unique feature of the U.S. patent system. Under U.S. law, an inventor must disclose the best mode of making and using the invention in the patent application as of the filing date. This requirement is discussed further in Section

9 PATENT PROTECTION AND STRATEGY 109 neous invention is different from the law of substantially all other countries throughout the world. Nearly all countries award the patent to the first party who files a patent application (i.e., the first-to-file rule). 20 The United States, however, continues to follow the first-to-invent rule, although there has been, and continues to be, significant debate regarding the need for international harmonization of substantive patent law by changing U.S. patent law to the first-to-file system. 21 Under the current first-to-invent system, the first to invent is generally entitled to the patent even though he or she was not the first to file a patent application. Thus, it is possible that one party (i.e., the first to invent) who loses the race to the PTO may be entitled to patent protection in the United States while another party (i.e., the first to file) may be entitled to patent protection for the same invention in most other countries. This possibility increases the incentive for a party to file a patent application covering the invention as quickly as possible. The PTO, on discovering that two or more parties have copending patent applications or a patent application and a recently issued patent claiming the same invention, may set up an interference proceeding to determine which party is the first inventor of the subject matter. Such a determination is not straightforward. In an attempt to make the procedure as predictable as possible, a great number of rules (both substantive and procedural) have been adopted by the PTO to govern the proceedings and the gathering of the evidence 20 Generally, most countries provide an exception to the first-to-file rule in cases of derivation (i.e., where the first to file, who is not actually an inventor, learns of the invention from the actual inventor who files second). 21 There have been several attempts over the years to pass legislation that would change the U.S. patent system to a first-to-file system. The most recent attempt was the Patent Reform Act of 2009 (H.R and S. 515). The Patent Reform Act of 2009 was introduced in both the House and Senate in March of The draft legislation is substantially similar to that of the Patent Reform Act of 2007 (with some exceptions) but it is too soon to speculate whether these bills will be passed and in what form at the time of this writing. necessary to establish the facts surrounding the making of the invention by each party. These rules give the party who was the first to file (the senior party) substantive and procedural advantages that significantly increase the senior party s chances of prevailing in the interference proceeding. Generally, in the United States, the party who is first to reduce an invention to practice is given priority and awarded the patent, unless another party who reduced the invention to practice at a later date can prove that he or she was the first to conceive the invention and worked diligently to reduce it to practice from a time prior to the other party s date of conception. 22 Reduction to practice may be an actual reduction to practice (physically making or carrying out the invention) or a constructive reduction to practice (filing a patent application). Therefore, in the United States, at least in theory, the filing date of a U.S. patent application may not control the outcome of the priority contest between parties who each actually reduced the invention to practice. As just noted, however, the party who files first has certain practical advantages in the interference proceedings. Currently, there is considerable interest in the world community for the United States to harmonize its laws with the rest of the industrialized world and adopt the first-to-file system. Although efforts have been made in the United States to adopt the first-to-file rule, there has been considerable resistance to such a change. Should the United States adopt such a rule, it will likely insist that other major industrial countries enact changes in their laws to favor true international protection of patentable subject matter. The adoption of such a first-to-file rule in the United States may have only a relatively small practical effect on the drug discovery field, especially for large corporate entities and others involved in the global marketplace, since they already have significant incentives to file patent applications as quickly as possible. The adoption of the first-to-file rule in the United States would initially appear to have a significant effect on individual inventors or small organizations who may be interested almost U.S.C.A. 102(g) (West 2001).

10 110 INTELLECTUAL PROPERTY IN DRUG DISCOVERY AND BIOTECHNOLOGY entirely in the U.S. market or who do not have adequate resources for quickly developing inventions or filing patent applications. However, such individuals and small organizations are generally at a significant disadvantage in any interference proceeding simply because of the cost involved. Such individual inventors and small organizations may not, therefore, be as deeply affected in a practical sense by a first-to-file rule as one might first imagine Absolute Novelty In most countries, a public disclosure of an invention prior to filing a patent application precludes obtaining patent protection for the invention. This is in contrast to the United States, where an applicant has 1 year after publication, public use, or offer of sale of the subject matter of the invention in which to file a patent application. The effect of such a public disclosure is the same whether it is made by the inventor or by another. 23 Thus, if patent protection outside the United States is desired, a patent application must be filed in at least one Paris Convention country (see Section 5.1) before the public disclosure, followed by the filing of the corresponding applications in other countries within 1 year of the filing date. Public disclosure within the convention year does not adversely affect any later filed applications filed within the convention year. Valuable patent rights can be lost because of early disclosure of the patentable technology. Such loss can be especially damaging to an organization involved in drug discovery because of the global market for drugs and drug-related technologies. Because of required public disclosure related to the FDA approval process, the patent rights associated with drug discovery are especially at risk 23 A notable exception to this general rule is found in Canada. Generally, an inventor has a 1-year grace period from the date of public disclosure in which to file a Canadian application if the public disclosure is made by the inventor or by a person who obtained the information from the inventor. There is no grace period (i.e., absolute novelty applies) if the disclosure is made by someone other than the inventor who did not obtain the information from the inventor. Patents Throughout the World (Thomson/ West eds. 2008). through premature disclosure. Disclosure of technical information should be closely monitored and controlled as part of a comprehensive intellectual property program. All employees, including research, medical, technical, and business personnel, should be carefully educated in regard to the confidential nature of technical information and the consequences of premature disclosure. 24 An essential component of such a program is an evaluation procedure for all articles, abstracts, seminars, or presentations prior to actual submission and/or presentation. In addition to preventing premature disclosures, such an evaluation program can aid in educating personnel on the importance of protecting confidential information. An intellectual property committee responsible for reviewing and approving all disclosures containing technical information, including FDA submissions, is highly recommended. In cases where disclosure is a potential problem, the committee should, if possible, delay publication until the appropriate patent applications are filed. To avoid delays in FDA submissions and scientific or technical publications, such submissions or publications should be reviewed by the committee as early as possible, to allow for sufficient time to prepare and file any necessary patent applications. 25 Due to the importance of FDA submissions and the amount of technical data involved, it may be highly desirable to have at least one individual responsible for FDA matters included on the committee to insure proper coordination between the functions. The need for monitoring and controlling technical information does not end with the filing of the initial patent application. Disclosures relating to an invention claimed in an earlier patent application may also contain 24 Since an offer of sale of the invention is considered a public disclosure in the United States, an ongoing educational program for sales personnel is recommended. 25 The FDA submission will generally not be released to the public by the FDA upon receipt. Rather, at some later time, the FDA may make the information publicly available. However, one should not rely on the FDA delaying disclosure if valuable patent rights are at stake. See Section 7.5.

11 PATENT PROTECTION AND STRATEGY 111 information concerning new inventions or improvements of the earlier claimed invention that may be the subject of later filed applications. In addition, control of the disclosure of inventions contained in a patent application may allow for filing patent applications in countries requiring absolute novelty after expiration of the convention year, should that become necessary or desirable. Failures to file such applications within the convention year may be intentional (i.e., too expensive or perceived lack of technical merit) or accidental. If funds become available, technical merit is established, or the accident is discovered, applications can be filed after the convention year if there has not been a public disclosure. Any applicationfiledaftertheconventionyear, however, cannot rely on the earlier priority date; its effective filing date will be the actual filing date in the specific country. Loss of the priority date can besignificantsinceadditionalprior art may be available against the application Patent Term Over the past years, the U.S. patent law has been significantly changed in order, at least in part, to conform it to various international trade negotiations and agreements The Uruguay Round Agreements Act of 1994, Pub. L. No , 108 Stat (codified as amended in scattered portions of 35 U.S.C.) (2000) U.S.C.A. 154(a)(2) (West 2008). The end of the patent term under the 17- or 20-year term can be advanced by failure to pay maintenance fees or by a terminal disclaimer. The end of the patent term can be extended in some case by the patent term extension and patent term adjustment provisions. 28 By not claiming benefit of the earlier filed application in a later filed application, the shortening of the patent term can be avoided. This strategy is not generally recommended since events occurring between filing dates of the earlier application and the later filed application could bar the granting of a valid patent. In many cases, the patentee may not become aware of such events until the time he or she attempts to enforce the patent. This strategy could be used, however, in the case of a continuation-inpart application where the newly claimed subject matter depends only on the newly added subject matter included in the continuation-in-part application and is patentably distinct from the subject matter disclosed in the earlier filed application. One major change in the U.S. law resulting from this so-called patent harmonization process involves moving from a fixed patent term beginning at the issue date and ending 17 years thereafter to a nonfixed patent term (the so-called 20-year term) beginning at the issue date of the patent and ending 20 years from the earliest nonprovisional U.S. or international filing date relied upon. 27 Thus, all patents resulting from new applications, continuation applications, continuation-in-part applications, and divisional applications filed on or after June , have a 20- year term. If an applicant claims the benefit of an earlier U.S. application filing date, the earliest application filing date relied upon will control and set the 20-year term running. 28 Further, an international application filed under the Patent Cooperation Treaty (PCT) and designating the United States has the effect of a national application regularly filed in the PTO, so that the filing date of such an international application would be used for the purpose of calculating the 20-year term. The filing dates for national or regional applications in other countries or provisional applications in the United States do not start the clock running on the 20-year term; the 20-year term is measured from the filing date of the regular U.S. application. 29 The old 17-year patent term and the new 20-year patent term are illustrated in Fig. 1. As can be easily seen, if the period between the earliest filing date and the actual issue date is greater than 3 years, the 20-year term will generally provide a shorter term of patent protection since such protection only begins on the actual issue date. The effective shortening of the patent term will be especially significant in cases where one or more continuation type applications are required before a patent based on these applications actually issues. For example, assume an application is filed on January , followed by a continuation application filed on January (at which 29 Patents in force on June 8, 1995 and patents resulting from applications filed before June 8, 1995 will have the longer of 17- or 20-year terms. The patent term will be reset for patents in force on June 8, 1995 which had a pendency period of less than 3 years. 35 U.S.C. 154(c)(1) (West 2001).