The financial state of startup biotech companies can vary greatly. Some have tremendous resources because they are subsidiaries of larger companies, and others are living hand to mouth. What is common for all of these companies is the need to structure their intellectual property protection in a way that will help them to protect their products as they go through various phases of development and to identify a saleable product that won't interfere with the rights of others.
The science is certainly an integral part of the company, especially early on, but there is more to developing a startup biotech company than good science. Science steers development of products, but it is how a company positions itself in the marketplace that makes it valuable and interesting to investors.
Startups fare much better by taking a proactive approach to the marketplace so as to make the science and the company more interesting to investors.
Develop initial patent strategy
At the outset, it should be determined whether or not the company or inventors have submitted the invention for publication or plan to present the invention in a talk or abstract. It is best to file a patent application covering the invention prior to any disclosure of the invention; prior disclosure of the invention can drastically reduce the availability of patent protection or destroy it altogether.
At the onset, an IP attorney will seek to determine what the inventors believe is their invention and the novel aspect of the product that they are trying to bring to market. In this process, it is important to identify the bottlenecks that are required to develop the product; for example, the requisite steps that a third party must take in order to obtain the product or practice the method. By pursuing multiple patents containing a variety of claims that focus on these bottlenecks, a company can obtain a strong patent position.
Assess market and IP landscape
Once the original provisional application is on file, the company should follow up with an extensive analysis of the field and prior art to identify their competitors and whether or not their first concept of a product is economically viable. Early on a company needs to analyze the patent literature and other publications to determine: Who is the same market? How many licenses may be necessary in order to place their product in the market?
Not only does a company need to consider their field for this analysis, but also the tools they will use to develop the product. Too often a startup company begins down a path of expensive research to find out only too late that several licenses will be required to practice the invention and the costs for obtaining the licenses reduces the profitability of the product to a point that is no longer economically feasible.
Recalibrate IP strategy
Once a better understanding of the prior art and marketplace is in hand, a company will want to revisit their provisional application from the perspective of how they should change the disclosure and/or add more description in light of this information. The first application may only contain a prototype or a first generation product and a better product has been developed since the filing of the initial provisional application. Also, it may be that the analysis of the prior art or market has revealed that slight modifications are needed.
Many outside law firms run what can be called "patent mills." It's really easy to take a disclosure from an inventor and file an application. The real challenge is trying to build a company and to build value in that company through their intellectual property. We are looking for ways to build value in the patent portfolio to help a company acquire money. It's not just filing on the bare bones disclosure provided by the client. You need to think outside the box and take a look at what the competition is doing and how to better position and protect the product. Sometimes the omission or inclusion of a few words makes a huge difference in the ability to keep a competitor out of the market.
Throughout this process, the company should investigate and monitor competitors' activities. The Internet is a very powerful tool for monitoring a competitor's activities and the environment as the market develops. There are several services that allow searching by keywords, authors' names and technology jargon providing full-text searching capabilities and hit lists by e-mail. These results can be sorted by relevance, and publications of competitors can be identified that may have an impact on their patent strategy.
Armed with this information, the company can better prepare subsequent patent applications to: * Block competitors * Identify roadblocks to product development * Identify partners to form a strategic alliance
Improving investor appeal and company profitability
The sooner a company identifies a niche, develops a product that fulfills a need in this market and obtains patent protection for the bottlenecks of entry into this technology, the easier it will be to: * Obtain financing * Establish a viable biotech company
It has been very apparent over the last few years that investors want to obtain a return on their investment in five to seven years, which means that companies need to have a product they can market very soon. The sooner a company identifies a product and finds a niche that has intellectual property protection, which will not interfere with a third party's rights, the more enticing the investment.
In a nutshell, the sooner a company identifies a niche market, develops a product that fulfills a need in this market, and obtains patent protection for the bottlenecks of entry into this technology, the easier it will be to obtain financing and to establish a viable biotech company. From the beginning, a company needs to identify the market and the product not based on neat science but more on what revenue will the market provide? The company should implement a strategy that addresses the market, keeping in mind that investors will be looking for tangible results along the way.
Furman is a partner and Taylor is an associate with Knobbe Martens Olson & Bear.