Elaine Levin
Problems Facing Small Biotechs
Elaine Levin, a Partner in the Life Sciences group at the law firm of Preston Gates & Ellis, moderated the Biotech Strategies panel held at Stanford University. Levin is an experienced practitioner in strategic alliances, licensing and corporate partnering.
Although Ms. Levin has a degree in human biology from Stanford, her legal focus is not on the intellectual property side of biotech and life sciences, but on the corporate transaction side. These types of transactions include structuring strategic alliances and joint ventures in order to develop, manufacture, license and distribute products, as well as helping businesses obtain and restructure financing, and advising on M&A of life sciences businesses.
The round table discussion moderated by Ms. Levin focused on the practical issues of how biotech and pharmaceutical companies can structure and use strategic alliances to create value and further their business objectives. Additionally, the panel discussed the broad spectrum of the deals – not just the research and development alliances, but alliances for clinical trials, marketing, distribution, and manufacturing.
Ms. Levin gave an overview of problems facing small biotech companies, explaining that although strategic alliances are used in most industries, they have added significance in the biotech and pharmaceutical arena. On the R&D side, life science companies have long lead times and large development costs to get their drugs and products from the research and development stage to market. Unlike other industries, most drugs undergo many rounds of clinical trials and testing before obtaining the FDA approvals needed to market the product. Most start-up companies do not have the resources to complete this lengthy and costly development process on their own. Thus, they need to partner with other companies to obtain the financial resources and technology licenses required to finish their R&D.
Further, on the distribution side, once the product is developed, most smaller companies do not have the resources for the large-scale commercialization that needs to happen. The distribution channels are controlled by a few large companies that have access to the hospitals, group purchasing organizations, doctors' offices and pharmacies across the country. "This fact," Ms. Levin concluded, "makes it impractical for smaller companies to have their own inside sales forces to try marketing directly into these channels." Therefore, partnering with larger pharmaceutical companies can get them access to these critical distribution channels.
Lawrence Sung
Update on Inventorship/Ownership Considerations and the Research Use Exemption
Lawrence Sung, Ph.D., a new Partner at Preston Gates & Ellis LLP and an adjunct professor at University of Maryland School of Law, provided an update on inventorship/ownership considerations and the common law "research use" exemption. Sung's underlying message of risk assessment imparted ways for large and small companies to navigate patented waters.
Delving into the widely misunderstood research use exemption, Sung noted various empirical surveys indicating that a very high percentage of scientists at academic institutions and companies believed their research activities were immune under the exemption. These findings are ironic given the fact that it has been over a year since the Federal Circuit reiterated the narrow scope of the research use exemption.
The research use exemption dates back to jurisprudence over two centuries old suggesting that certain experimentation with patented articles should not constitute an infringement. This doctrine survived the codification of the patent laws in the 1950s and continues its effect as part of the common law. By contrast, a statutory clinical research use exemption exists under 35 U.S.C. § 271(e)(1), which effectively overruled thye Federal Circuit holding in Roche v. Bolar Pharmaceuticals. Prior to the enactment of § 271 (e)(1), nothing exempted activity such as experimentation relating to the collection and submission of clinical data to the FDA from patent infringement liability.
In Madey v. Duke University, a university claimed immunity under the research exemption, asserting that the use of a former professor's patented technology should be exempt from patent infringement liability. The Federal Circuit held that Duke's activity did not represent mere "acts that are limited to amusement, idle curiosity, and strict philosophical inquiry." The Madey decision was a wake up call for many who mistakenly believed that the common law research exemption was broad enough to cover "noncommericial" activities by academic institutions. After Madey, the question of how researchers can balance patent infringement risks with other commercial priorities became paramount.
Sung explained that there are several permissible, non-infringing actions one can take with regard to patents. "You can certainly study a patent." Taking good ideas away from a patent is not infringement. Testing the very invention for operability, for proof of principle and verification, is also not an infringement. These narrow portions of the research use exemption still remains. "However," Sung points out, "if you do something with the patent, such as use it as a reference standard or innovate beyond it, that will be a problem."
Sung emphasized that despite the narrow applicability of the common law research use exemption, other recognized common law defenses to patent infringement are available to certain actors. For example, federal government researchers are immune from patent infringement liability, with patent owners' only recourse being a claim against the U.S. government under 28 U.S.C. § 1498 for compensation for such use. Similarly, under the Bayh/Dole Act, there are possibilities for "march-in" rights where the federal government reserves the right to allow others to practice patented technology without permission of the patent owner, not only because the technology has not been correctly or appropriately exploited, but possibly also for health, safety, welfare issues or other priorities. In addition, state governments enjoy Eleventh Amendment immunity to patent infringement.
Sung concluded by summing up a main dilemma of early stage technology developers: How can researchers analyze their risk in using potentially patented research tools? "There is not a one-size-fits-all strategy," he commented. In early stage research, it is often impracticable to undertake steps of searching to see whether or not there are patents on the tools, and to make sure that researchers' protocols comport to what patents are available. However, as the research moves further along the continuum, there comes a point where a reevaluation must be done to determine whether there are patent protections that others have garnered.