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Patents – In the DNA of the Bioscience Industry

Patents – In the DNA of the Bioscience Industry

A patent is essentially a negotiated contract between the patent owner and the government.  In exchange for disclosing a patentable invention to the public, which may benefit the public by providing the basis for further innovation, the patent owner is granted the right to exclude others from practicing that invention for the term of the patent, which is typically 20 years from the date the patent application is filed.  If a third party uses technology claimed in the patent without permission from the owner, the patent owner may sue the infringer, and, if successful, may stop the infringer from continuing to use the technology, and may be able to receive damages, such as lost profits or a reasonable royalty.  Patents and business strategies that utilize them play a crucial role in the development and growth of bioscience companies. 

Importance of Patents for Biotech

Patents are important for biotechnology companies for several reasons.  Biotechnology is probably one of the most research-intensive industries. Compared with other major industries that also rely on research and development (R&D), biotechnology companies generally invest a significantly higher proportion of their revenues in R&D.  The research in living systems is complex, expensive, and time-consuming, involving a great deal of repeated experiments and trial-and-error.  Years of research may lead to breakthrough innovations with great market potential or may simply leave a company empty-handed with results that are unlikely to bring revenues.  Long product-development cycles make for a capital-intensive business.  Biotechnology companies often require large infusions of capital to establish their venture and to validate their technology and products.  One can easily see then why the protection of research results is of major importance.

Furthermore, while the costs for the development of new products and processes are generally very high, the costs of imitation are comparatively very low.  Many developments can be readily reverse-engineered.  Patent protection provides a means to reduce the likelihood of imitation by competitors.

Many companies operating within the biotechnology industry are young companies that have not yet brought a product to market.  Many of these companies are established on the basis of one or more patents on technology developed within the company itself or within, or in partnership with, public research organizations or universities.  Because of extremely high R&D costs and limited revenue during the years of product development, many companies must partner with larger firms to complete product development.  So, for some companies, patents and other intellectual property rights are actually the final product.  It is not uncommon for companies to develop inventions, patent them, and then license them to larger companies that have the resources to take the product to market.  Such companies may never sell a product in the traditional sense but base their revenues on their ability to develop, protect, and license inventions, and perhaps be acquired by larger companies.

In order to maneuver and succeed in the highly competitive bioscience industry, many companies acquire interests in other companies that have the necessary expertise to allow entry to new markets, and even partner with former competitors.

In a very practical sense, patents are business assets with the potential to significantly and positively affect the valuation of a company as well as to establish royalty streams. Especially for those in the bioscience industry, companies may monetize patents by selling them or licensing them to establish a royalty stream before directly manufacturing or selling a product. A group of such patents, or patent portfolio, may also enhance the price of a company being acquired by another company since any potential buyer would likely also be purchasing the patent rights.


What is Patentable?

A key issue for a biotechnology company is what types of inventions can be patented.  The answer to this question is complex and varies by country. As is the case with any emerging technological field, biotechnology has brought new challenges for the world’s patent systems.  In many countries, legislation, court decisions, and patent office guidelines have sought to clarify what can or cannot be patented in the life sciences.

On June 13, 2013, the U.S. Supreme Court decided Association for Molecular Pathology v. Myriad Technologies, Inc., one of several significant patent cases this past year.  The Myriad case involved several patents (owned or co-owned by the University of Utah Research Foundation and exclusively licensed by Myriad) containing claims covering isolated DNA, complementary DNA, and methods related to the BRCA1 and BRCA2 tumor suppressor genes.  Mutations (alterations) in the isolated BRCA1 and BRCA2 gene sequences claimed in the patents were correlated with a likelihood of breast and ovarian cancer.  In its unanimous decision, the Supreme Court ruled that certain claims were invalid because they directly covered naturally occurring DNA isolated from nature (the cells of a patient). “We hold that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated,” wrote Justice Clarence Thomas.  However, the Court also held that, while isolated naturally-occurring DNA is not patentable, synthesized versions of DNA (e.g., complementary DNA (cDNA)) and the methods for identifying DNA are patentable.  cDNA is a form of DNA created in a laboratory that contains the same protein-coding information found in a segment of natural DNA (exons), but without portions within the natural DNA segment that do not encode proteins (introns).

Many in the biotech industry breathed a collective sigh of relief at this decision, in view of the concern that the Supreme Court could have rejected all DNA-related patents.  Nonetheless, the decision does overturn decades of legal precedent establishing that isolated DNA falls within the legal definition of a patentable “composition of matter.”

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Diversity to Weather Adversity

The biotechnology industry has been expending huge resources on the identification and isolation of DNA and other biological material, contributing to breakthrough medical treatments over the last 30 years.  Prior to the Myriad decision, the law seemed straightforward, allowing patents for “anything under the sun that is made by man,” as articulated in a Supreme Court decision over thirty years ago.  However, the question of what is “man-made” appears to be less clear than once thought.  Myriad says its work in isolating the BRCA genes from their genetic environment created something man-made and patentable.  The Supreme Court disagreed.

For now, the long-term ramifications of the Myriad decision are uncertain, for both patented innovations in this space of the biotechnology industry and for the huge number of people who benefit from these and other lifesaving medical technologies today.  Fortunately for Myriad, the company established several layers of patent protection around the sequencing of the BRCA 1 and BRCA 2 genes, the relevant mutations, and genetic diagnostic tests predictive of breast and ovarian cancer risk.  Genetic engineering tools based on the normal and mutated gene sequences, and methods of using the genes in diagnostic tests were patented.  Thus, not only did Myriad patent the isolated genetic material itself, which was fundamental to this innovation, but ultimately deemed unpatentable, they also obtained a family of patents to protect the innovations and the business.  Just as a well-diversified portfolio of stocks protects investors from shifts in the stock market, a well-diversified and carefully crafted portfolio of patent claims can protect a company against a “myriad” of challenges down the road.


Saliwanchik, Lloyd & Eisenschenk is an intellectual property boutique firm that focuses on procurement and licensing of domestic and foreign patents and trademarks.  It has a vibrant practice in the life sciences and engineering, and is widely recognized as a pioneer and leader in the area of biotechnology and pharmaceutical patent law.  The firm’s founder, Roman Saliwanchik, successfully represented clients in several landmark appellate cases that helped shape biotechnology patent law. Firm clients include local companies such as Axogen and Pasteuria Bioscience, as well as international companies such as LG, Microsoft, DowAgrosciences, and Merck Serono, and many prestigious universities, such as the University of Florida, the University of South Florida, Oxford University, and the University of Hong Kong.  The firm assists members of the local and worldwide innovation community in developing strategic IP plans and securing domestic and international patent and trademark protection. 

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