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The biotechnology industry has finally moved beyond the dreams of scientists to focus on actual products and services entering the marketplace. That translates into actual work for outside counsel. And not just intellectual property lawyers, although they’re still crucial. Biotech firms also need counsel experienced in joint ventures and licensing. Even litigators are sometimes viewed as a necessary evil. In the Washington, D.C., area, the biotech industry has a very strong presence — especially along the I-270 corridor in Maryland’s Montgomery County. So we brought together four local corporate counsel to discuss how in-house and outside lawyers can work together in this expanding industry. Panelists for the June 6 roundtable were: � George Barker, senior vice president and general counsel, Martek Biosciences Corp. � Geoffrey Karny, sector patent counsel, Genetic Therapy Inc. � Thomas Seoh, senior vice president, general counsel, and secretary, Guilford Pharmaceuticals Inc.; and � Werten Bellamy Jr., group counsel, Celera Genomics Inc. � Stacey Levy, McCormick Group Inc. The roundtable, sponsored by Washington, D.C.’s Covington & Burling, was moderated by Legal Times Editor at Large Jonathan Groner. Editors at Legal Times selected the panelists, chose the questions, and edited the following transcript. Jonathan Groner: An important topic that lurks out there for biotechnology companies is patent litigation. Many in-house people have told me over the years that litigation is highly disfavored because it tends to be costly, rather than being something that adds to the bottom line. It is not something that most startup companies ever want to be involved in, and it is probably not something most large companies want to be involved in. Do you agree with that assessment?

George Barker: I have a one-word response to that: Amen. Groner: Litigation is not what you want? Barker: Fortunately, Martek is not involved in any litigation. But in my former capacity as chief legal officer of a health care organization, we were involved in one piece of litigation with a physician, and it was an extremely draining, negative, and expensive experience. To avoid litigation, to my mind, is an absolute key. I do not think it does anybody any good.

Geoffrey Karny: I will take a slightly different perspective. I would agree that litigation is a major problem with regard to cost, and even more importantly, as you are indicating, with regard to time and hassle and draining senior management time and focus. But in the biotech field I think there are times — and here I am speaking not from personal experience, luckily, but from having been in the field 20 years — that litigation makes sense. I think it is a cost-benefit judgment, for example, to enforce a patent. If we are talking about a huge market, such as Amgen’s market for EPO [Erythropoietin], unfortunately, a couple of million dollars is well-spent to protect a $1-billion-a-year market. You have to make those judgments, and you have to go down that road. I think some of the smaller biotech companies have been forced down that road, where it is essentially bet-the-farm or bet-the-company litigation. They have one product, and they have to protect it. Or they have one product, and somebody else thinks that it is infringing their patent. Groner: Is there, in general, a problem that people might infringe patents, trample on your intellectual property almost knowingly, and then hope that you do not go after them because it is too hard to prove, or the expenses will be too high, or you are too small, or all of the above? Do you see a sort of lack of respect for IP, or even a strategic decision to engage in very dicey behavior with respect to IP?

Thomas Seoh: Well, there is a sense of that out there. In the Cellpro litigation with Baxter Healthcare Corporation and Johns Hopkins University [in which Cellpro was found to have infringed stem cell selection patents], the judge made some unkind comments about Cellpro. And so there may be a sense out there that there are people who just go ahead and walk over the patent, and consider it something to work out commercially afterwards. In our particular case, we have been lucky. We are working in the area of innovative pharmaceuticals, and we are typically at the forefront of the technology, and we are building our patent estate. We do not have competitors who are out there with products on the market that are infringing, so it would not make sense to bring litigation now. If any of our product candidates make it downstream, we may have some very big wars in five years. Obviously, that is a situation for a new product company. I think for research tool kit companies, you could have litigation now. Groner: Are any of you thinking of the long run in terms of using your IP portfolio as, itself, a consistent source of revenue? Barker: The concept that we have is that the IP lies, as I mentioned earlier, at the very heart of our business and, in effect, we want to operate more or less as a general contractor. We want to use our IP, in terms of going backwards, [by] working with manufacturers to produce our product. Moving forward, we want to work on the licensing structures related to the consumers who use our product. Underlying all of this activity is our IP, which we want to leverage to the fullest extent possible. Groner: Geoff, do you have any of that going on? Karny: To some degree. Our primary focus is on IP for protecting our technology and our products, so we tend to weed out from our IP portfolio patent applications that are no longer relevant to a research program. For example, we may have shifted focus and closed down a research program. In theory, we like the idea of trying to outlicense IP that we are not using, but in practice I have found that it tends to be a resource issue. You need to have enough people in the legal and the business development functions to make outlicensing happen on a consistent basis. For pieces here and there, we are just not doing it. For a large chunk, we will. Novartis [Genetic Therapy's parent company] closed down a sister company in Palo Alto [Calif.] called Systemics about two years ago. It was a cell therapy company, and I am involved in the outlicensing of its IP. It is a substantial block of IP. So, except for a situation like that, we are generally not going to be trying to outlicense bits and pieces of our technology. Groner: For a project like that, would you want to use outside counsel if you were short-staffed in both the business and legal side in-house? Karny: Yes, it makes a lot of sense. I would have liked to have gotten outside counsel involved in that project, but, at this point, I have the “privilege” of finishing it up. Groner: How many people are in your legal department, Geoff? Karny: It is a very small department. It is myself and two other people. We are looking for another attorney. Groner: What would be the No. 1 qualification for that attorney you are looking for, in terms of background? Karny: It would be somebody who had biotech prosecution experience, and preferably some transactional and counseling experience — or at least a desire to get more involved with transactions and counseling. Prosecution would be the core function, but a substantial part of the work would be well beyond prosecution. Groner: That person would not have to have a Ph.D.? Karny: No. It would be nice, but it is certainly not a necessity.

Werten Bellamy Jr.: My bias with respect to the appropriate portfolio of skill sets is really slanted in the direction of people who have practiced in the spaces where your corporation is trying to go. I am not sure that any of our law departments are the optimal training environment for attorneys. I think we have business leaders who have some very real short-term and midterm objectives that have to be realized, and they expect that you have the substantive horsepower to deliver in the short term and midterm. Consequently, I am very much interested in lawyers who bring to us a set of rich experiences that, in the very short term, we can capitalize on. Groner: Could you be more specific about the set of rich experiences? What kind of experience do you have in mind that is not industry-specific, but useful? Bellamy: Well, I will use our group as an example. Of the seven attorneys in my group, three have extensive software licensing experience, which is critical to our bioinformatics business. The remaining four attorneys, including myself, have a biotechnology and/or pharmaceutical background. This range of expertise — from the conventional biotech and pharmaceutical experience to intensive [information technology] experience — is a critical asset for what we are doing at Celera. What is important to me is that we have all of the spaces covered by people who are the best at what they do. As we grow, our legal team will increasingly focus on seeking to attract attorneys who are in the pharmaceutical company space or the biotechnology company space, who can bring forward some of those experiences to Celera. Stacey Levy: I am in the Baltimore area, but in the patent business we have been advising clients on whether or not to look to opening in Montgomery County, in and around the biotech space and the National Institutes of Health. With regard to getting to know your counsel and not relying on a glossy Web page or brochure, a la Northern Virginia, how important is it to you folks to have your counsel have offices in the Montgomery County area? Or is your preference that, as long as you all can get here by a plane or Metro or a cab, we don’t care how you get here? Barker: My reaction to that is, given the electronic world in which we live, you can communicate so readily by e-mail or by phone. However, I would say being a plane ride away probably would not work. A cab ride or a Metro ride is fine. Bellamy: I have found lawyers to be incredibly resourceful in finding a way to you. The reality is that our business activities are global, not local. Consequently, I feel most comfortable with counsel who are similarly oriented: that they will go where the opportunity is presented. More important, I am interested in having the best legal expertise that is available to me, and I am not going to handicap someone because they do not reside locally. I think the reality is we are competing for the best service providers available. Karny: Can I just take a little bit of a counterview? I guess the question is: Are these guys billing for travel time? I am being somewhat facetious, and in the scheme of things it is a trivial amount. But if somebody is hopping on a plane and billing me for all of that travel time, it does not sit well with me. On the other hand, is it critical to have a local office? Absolutely not. All things considered, it may be nice. Ultimately, I would have to agree with all my colleagues who say, look, you want to go to wherever the good people are. It would be nice if they were closer, rather than farther. Maybe there is a difference in billing rates. If the rents are lower in Montgomery County, are the billing rates lower? Probably not. Maybe that is being a little naive. Personally, I tend to like things a little more local. I do not need to have somebody in Montgomery County. If they have an office that has critical mass that can serve my needs, that is fine. All things being equal, it is preferable. I certainly do not see the need, particularly in the IP area, to hire somebody outside of the Washington area. There is an excellent IP bar here, a lot of talent. I see no reason to go elsewhere absent, perhaps, some unusual circumstances like very special litigation. Bellamy: Very few of the larger firms are strictly local any more. Many of these D.C.-based firms now have offices in several other cities and clearly leverage their national presence and attorney resources. Levy: That is what I mean. Bellamy: Many law firms characterize their life sciences practice as a national practice with expertise resident in multiple offices. Such firms pledge seamless service from their life sciences team. That is part of the marketing dynamic that I am respectful of, and I think a lot of firms have figured out how to make it work. At the end of the day, we work in organizations. If you look at the scope of search among client constituents, it is global. Our corporations comb the world for the very best scientists and business professionals to support our objectives. I feel the same way about our legal resources. As managing attorneys, we should not self-select ourselves out of the broad universe of talent. I am just mirroring what I see in the client group that I am responsible for supporting. They have cast their net broadly for the best. I, in turn, must cast my net broadly for the best attorneys I can find. All photos by Stacey Cramp.

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