Intellectual property: Striking the balance

For many spin-outs and start-ups in the pharmaceutical space, a key step in getting their science into patients is teaming up with a larger pharmaceutical company.

Such larger companies not only bring valuable financing of the expensive drug development process, but also significant expertise in navigating the challenges that lie along the path to patients. In whichever form they take, these collaborations have risks, so how can both parties protect themselves?

The smaller party

Unsurprisingly, as intellectual property (IP) experts, a key focus of our advice to smaller parties looking for, and negotiating with, larger parties is protecting their IP position.

The first step in this is considering what to disclose and when. Inadvertent non-confidential disclosure will damage the prospect of obtaining patent protection to the company’s technology pipeline. However, without some disclosure, how can potential parties be attracted? Thus, the non-confidential package of information released should be designed to illustrate the company’s expertise, without significant details.

Before disclosing confidential information to the larger party, a non-disclosure agreement (NDA) – also called a confidential disclosure agreement (CDA) – is essential. This agreement should look to identify the confidential material being disclosed, who at the larger party is entitled to review the confidential material, what the allowed use is, and how long any confidentiality obligation lasts.

Clearly, an obligation to keep the confidential information confidential must also be set out. The sharing of the smaller party’s privileged information may then happen in several carefully considered stages. In readiness for more extensive disclosure, perhaps in the context of a full due diligence evaluation, the more detailed considerations in an NDA could include deciding who at the larger party can review the different tranches of confidential information.

Such considerations would need to be discussed with the larger party, as being too restrictive would inhibit their ability to effectively review the collaboration opportunity. In addition, thought needs to be given to what happens if no deal is made, which will typically require the return of the confidential information, and an obligation on the larger party not to use it.

However, a step not always considered requires some foresight. Most collaboration agreements will contain a definition of background intellectual property, that is IP existing before the agreement is signed.

Thus, a smaller company can protect its interests by filing on its own inventions before signing a collaboration agreement. These filings should be made carefully, though, as a poor filing strategy could damage any further inventions made – or fleshed out – during the collaboration.

As an example, many smaller companies will often look to save on fees by filing more than one invention in a single patent application – whilst this can be an appropriate approach when starting out, filing such a ‘mixed’ application shortly before entering a collaboration might damage the prospects for future patent filings.

Filing a series of initial patent applications covering different aspects of their technology pipeline tends to be a better strategy. This allows for a careful review of the initial filings during their first 12 months (and before they have become public), which should run concurrently with the initial phase of the collaboration. Hopefully, some of the technology in the initial patent application will be in a position to be progressed further, and the relevant initial filings can be supplemented and proceed to a full patent application. Such applications will be published a year and a half after the initial filing.

However, those technologies which have not worked out – or need further development – can have their relevant initial filings withdrawn. For those technologies which are progressing, but more slowly, the initial patent filings can be refiled, resetting the ‘patenting clock’. Such a ‘withdraw-and-refile’ approach would often be much more in line with the approach of a larger party, although a larger party will often simply delay their initial patent filings until their technologies are further advanced.

The larger party

Some of the considerations set out above are, of course, also relevant to the larger party. Typically, pharmaceutical companies will have numerous projects running, some of which may be in a similar area to the work of the smaller party they are looking to partner with. While the larger party is looking to reach a commercially useful partnership, a key emphasis in preparing for discussions with the smaller party is to protect themselves if no agreement is reached or any collaboration fails in due course.

As discussed, the non-disclosure agreement should identify who at the larger party is entitled to review the confidential material. Ideally, this team should be isolated from anyone in the larger company who is working internally on a similar project – by doing so, this should avoid the risk, and any accusation, of the larger company wrongly making use of the confidential information from the smaller company, especially if no subsequent agreement is reached. Further, keeping the confidential information contained within a small group of individuals makes it easier to return to the smaller party without the need for extensive investigations.

The larger party should have less difficulty in identifying its background intellectual property (if any) when entering into any agreement, as it will have comprehensive policies for recording possible inventions, maintaining its trade secrets, and filing patent applications when needed.

A consideration that arises less often is protecting the brand of the larger company. For a spin-out or start-up, a public announcement that they are collaborating with a well-known larger company can bring a reputational boost. However, if the collaboration fails, how will this be handled?

Having a plan in place for public communications after the end of a collaboration is as important as the plan for such announcements at the start of a collaboration. These should include requirements for approval of the proposed text by both parties, agreeing on how the ongoing collaboration is described, and how any termination is communicated. This final step might include requirements for the smaller party to update their website to reflect the end of the agreement.

Final thoughts

As with all commercial agreements, in looking to forge a collaboration between a smaller and a larger company in the pharmaceutical field, planning for the failure of the collaboration is important to protect both parties. However, planning for success is also necessary.

By employing a well-thought-through patent filing strategy before entering into a collaboration, a smaller company can put themselves in a good position, but also lay the groundwork for a more detailed patent filing strategy as the collaboration progresses, and hopefully pave the way for taking the smaller company’s science into patients.

About the authors

Robert Watson

Robert Watson – Partner, patent attorney, chemistry at Mewburn Ellis

Robert handles patent work in the Mewburn Ellis chemistry team. His work is focused in the pharmaceutical chemistry sector, where he applies his over 25 years’ experience in providing commercially focussed strategic advice. His work spans the product and IP lifecycle, including invention capture, drafting, global prosecution, opposition, and freedom-to-operate.

Andrew Williams

Andrew Williams – Partner, patent attorney, chemistry at Mewburn Ellis

Andrew plays a leading role in Mewburn Ellis’s growing ‘Speciality Pharma’ team. He focuses particularly on supplementary protection certificates (SPCs), patent term extensions (PTEs), regulatory protection, and patent-regulatory listings, as well as commercial and strategic aspects to consider for a medicinal product throughout its development and post-launch phases. This work has involved written and oral proceedings with the European Medicines Agency (EMA) in relation to the EU’s Orphan Drug Exclusivity regime.

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