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special to the national law journal Thomas C. Meyers is a partner in the patent and intellectual property practice group at Boston’s Testa, Hurwitz & Thibeault. His practice concentrates on advising clients in all areas of intellectual property law, with particular emphasis on biotechnology and chemical patent prosecution, licensing, interference and opposition proceedings. He may be reached at [email protected]. Powerful new technologies, such as combinatorial chemistry, three-dimensional modeling and high-throughput arrays, have largely supplanted the old trial-and-error methods for drug discovery. A number of these new technologies have formed the basis for so-called tools companies, whose aim is to enable rapid and effective drug discovery. The typical tools company initially focuses on techniques arising from new discoveries about the mechanism of action of a disease or some new aspect of a cellular pathway involved in disease etiology. Exit strategies generally focus on acquisition by big pharmaceuticals or by strategic mergers. As institutional investors have become more circumspect in their investment decisions, many of these small drug discovery companies have found it difficult to raise sufficient capital to support ongoing business objectives. Drug discovery is a lengthy and expensive process, and most small drug discovery companies do not have the resources, financial or otherwise, to develop a drug that is ready for clinical testing. In the meantime, however, those same companies are continuing to develop technologies that they believe will lead to rapid and effective identification of lead compounds for clinical evaluation. Most companies see the necessity to patent their core technologies. If they do not patent their technologies they risk that other, better funded and equipped companies will simply adopt the technologies without recourse to the discovering company. Also, it is almost impossible to attract partners and collaborators without significant patent protection. Most drug discovery companies must also disclose significant aspects of their technologies to attract interest from partners and collaborators. Typically, this is done under confidentiality. A confidentiality agreement requires a party receiving confidential information to keep the information from third parties and to refrain from using the information for any purpose other than to evaluate the proposed business relationship. However, most confidentiality agreements contain an exception for public disclosures of confidential information that are made by the disclosing party or for public-domain disclosures that are made without fault of the receiving party under the agreement. Drug discovery dilemma The problem facing small drug discovery companies is that they can keep their technology secret if they do not file patent applications, but then they lose the significant value added by obtaining patents. If they choose to patent, which most companies do, their patent applications will publish 18 months after filing. The typical patent does not issue before publication. Thus, the companies are in the unenviable position of having disclosed to the public their best technology, and the best way of practicing that technology, before the time at which an enforceable right exists. This is a particular problem in drug discovery because the ultimate commercial value is in the drug that will be discovered, and not in the technology used to make the discovery. Thus, a third party can take technology disclosed in a drug discovery patent application, use the technology to find a lead candidate before a patent issues and cease using the technology once the patent does issue. The value is created for the third party upon discovery of a potential drug. It is therefore possible to avoid infringement altogether while, at the same time, reaping the benefits of the patented technology without recourse to the patent owner. Recent patent legislation attempted to address this problem. The American Inventors Protection Act of 1999 provides that a patent application filed in the United States after Nov. 29, 2000, will be published 18 months after its priority filing date. It is possible for the applicant to obtain damages based upon the issued patent from an infringer starting on the date of publication. The new legislation requires, however, that the alleged infringer be put on actual notice of the published patent application and that the claims that issue in the patent be substantially identical to those that were published. In reality, it is rare that both of those things happen. Claims often change in significant ways during prosecution, and it is difficult to identify at publication those who will be judged to have been infringers once the patent issues (even if the claims do not change appreciably). A start-up drug discovery company that has developed a tool that it believes is the best, fastest or most efficient way to identify lead compounds will likely file a patent application claiming its methods. Unless the company opts not to file its application in foreign countries, its application will publish 18 months after filing. (If an applicant agrees, upon filing of its U.S. application, not to file the application in any foreign jurisdiction, the applicant can obtain a waiver of publication of its application in the United States. See 35 U.S.C. 122(b)(2)(B).) In addition, the filing of a patent application often leads to more relaxed controls over disclosure to third parties. This leads back to the problem that other, better funded and equipped companies are essentially free to use the start-ups’ technology before the issuance of a patent. In the area of drug discovery, this means that the start-up technology may be used to discover a lead compound before an enforceable right against infringers exists. Thus, the drug lead will have been discovered thanks to the use of the start-up’s discovery tools without ever infringing a patent. If the lead develops into a viable drug candidate, it could mean millions, or even billions, of dollars to the drug company and nothing to the start-up without whose technology the drug would not have been found. A start-up drug discovery company that can avoid these problems has the advantage of controlling its technology. This leads to better opportunities for financing, collaborations and licensing revenue. A key, then, to success in the drug discovery business centers around obtaining either strategic patents directed at broad conceptual areas of drug discovery, or narrower strategic patents around specific devices and methods that are essential to implementation of the broad technology and that issue quickly. Strategic patents Obtaining broad patent protection requires an understanding of what competitors will need to utilize the technology in question. Typically, this requires a focus not on the technology itself, but on the business applications of the technology. Patents that cover only incremental improvements in technology rarely provide the kind of broad barriers to entry that are provided by patents covering incremental business or commercial improvements. Thus, a first answer for the small drug discovery company is to identify broad strategic categories that can be protected. For example, if a company has designed a drug discovery tool for use in a particular type of sample, the company could determine if patents can be obtained that would exclude others from using the sample in the way that the company is using it rather than attempting to patent the tool itself. Such strategic patents would broadly cover the use and/or preparation of the sample. They may provide the same incentives that tool patents provide for competitors to use the technology, but typically, such patents will disclose less about specific tools and assays than would be disclosed in a very specific tools application. Regardless of whether broad protection is possible, companies still may wish to patent particular tools that they think add significant value. The best strategy may be to file on devices or aspects of methods that have the best opportunity for quick allowance. Rapid allowance and issuance will have the best chance of providing an actual deterrent. Aggressive prosecution To that end, companies that aggressively prosecute their patent applications will be at an advantage. Specifically, this means prosecuting over the telephone starting when a patent examiner has been assigned to the case. Thus, instead of waiting for a first official communication from the patent examiner, it may be wise immediately to begin negotiating claim language with the goal of rapid allowance of a first case. Additional cases may then be filed in an effort to build significant barrier protection around a tool or method that has been identified as being important. Finally, companies seeking rapid allowance of a patent before patent publication should avoid filing provisional applications, which exist for one year and are not examined. Small drug discovery companies, therefore, must take a unique approach to patenting their technologies if they wish to avoid exposing such technologies to use by a third party before the existence of an enforceable right. One key is to look for broad protection that may have a chilling effect on third parties wishing to take advantage of published, but not patented, technologies. It may also be difficult for a third party to stop using the patented technology after the initial drug discovery phase because what is patented is broadly applicable to the third party’s activities. Another key is to tie patents to the business activities of potential competitors. Strategic patenting around incremental business opportunities always beats patenting incremental technology improvements. Finally, the company should seek rapid prosecution and allowance in order to maximize the chance that a patent will issue before any third party using the technology finds a potential lead compound. The difficulties for a small drug discovery company in protecting its intellectual property and preventing free-riding can be mitigated by aggressive and strategic patenting. The key issues are patenting the correct subject matter and rapidly prosecuting patent applications through the U.S. Patent and Trademark Office. While these strategies may not provide complete comfort to potential investors and partners, they will place the drug discovery company in the best position to secure and protect its intellectual assets.

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