Lexi Ventures

Patents are critical to the success of life science companies.

Patent systems serve the public interest by creating an incentive for investors to fund expensive projects that will probably fail but might cure a disease. Patents are a quid pro quo agreement in which an inventor gets a right to monopoly profits for a number of years in exchange for publishing a description of the discovery or invention for others to freely implement later.

There are three main requirements for getting a valid patent.

1. There must be a new invention. Inventors should not be granted a monopoly for anything that a motivated ordinary researcher could have learned to produce by reading prior publications. Researchers can avoid wasting time and money applying for unobtainable patent claims by conducting or hiring a novelty prior art search before preparing a patent application.

2. The invention must be described clearly. Patents contain two parts of primary interest. First is the specification, which is relatively long. It must teach how to make and use the invention. The bar to clarity is quite low compared to journal publications, but the specification must not leave a reader to guess at what formula or sequence works best. Second is the claims, which are supposed to be precise but are normally written in an esoteric style that is confusing to lay readers. The claims define the monopoly. They say what others may not legally do without the inventor’s permission.

3. Only certain kinds of discoveries and inventions may be patented. Most countries’ patent systems forbid patenting certain things, even if they are new discoveries or inventions. These are some examples.

  ● Abstract ideas and mathematical formulas

● Laws of nature

● Naturally occurring substances and organisms

● Humans or the genes that defines them

● Methods of doctors treating patients

Biologists and doctors recognize gray areas in the definitions of what subject matter is patent eligible. The gray areas are where lawyers remain employed.

There are three main phases in the life of a patent: drafting, prosecution, and licensing.

Drafting and filing is first. If all goes well, it is the most difficult and expensive phase. The timing is critical but tricky. For many life science inventions, obtaining a patent requires providing data resulting from experiments. It is generally wise to wait until sufficient experiments are complete to describe the discovery clearly. However, only the first team to file for a patent application on the discovery may obtain the patent. So, it might be  important to act quickly to prepare a patent application. Furthermore, if the invention becomes publicly known, it can no longer be patented in many countries. Investors cannot be trusted to keep the invention secret. Therefore, it might be a good idea to file a patent application before pitching a startup company to venture capital investors. On the other hand, many life science patents produce the greatest revenues late in their lifetime. To stretch the lifetime into the distant future, it might be advantageous to wait as long as nobody else will file for a patent for the same discovery.

The next step is prosecution. This is the process of negotiating with the patent office to turn the patent application into a granted patent. Due to patent office backlogs, prosecution typically begins years after filing. It normally begins with a patent examiner rejecting the claims. 

After that, a patent agent or attorney replies with arguments or amendments. Multiple rounds of negotiation might ensue. Ultimately, either the patent applicant will give up and forgo obtaining a patent or they will obtain a patent that captures a somewhat narrower market than they had initially tried to claim. Though inventors may proceed without professional help, doing so would be extremely foolish.

Finally, after a patent is granted and there appears to be a large market opportunity, the patent owner may wish to approach large companies with the patent. For a strong patent covering a large potential market, large companies will pay fees or royalties for a license to manufacture and sell the claimed invention. Alternatively, large companies might prefer to acquire a small company that owns a valuable patent. Another alternative for a small company is to attempt to build its own business manufacturing products with the invention. The company can use the patent to block others from the market, maintain a monopoly, and grow into a large company.

Sometimes things do not go smoothly. If a company sells a product that the patent owner feels infringes their claims, but the seller sees it differently, there is a dispute. If the patent owner and seller cannot negotiate a settlement of the dispute, the patent owner may file a lawsuit. Litigation is the process of arguing a lawsuit in court. Sellers tend to use three main arguments.

1. The patent claims are invalid for failing one of the requirements of patentability (novelty of invention, clarity of writing, and eligibility of subject matter).

2. Their product is somewhat different from the precise description in the claims.

3. The seller hasn’t actually profited and therefore doesn’t owe any money.

Different countries’ courts handle patent disputes quite differently, but disputes between large life science companies tend to play out in the courts of multiple countries. Those patent lawsuits tend to take many years and cost many millions of dollars. In many cases, the only winners of the lawsuits are the lawyers.

Inventors can minimize the risk of future litigation by doing a novelty type prior art search before writing a patent and then writing it clearly. Makers and sellers of products can minimize the risk of future litigation by doing a freedom to operate (FTO) prior art search before deciding to market a product.

Many business people conceptually associate their patents with their products. That is a dangerous view. Actually, one’s patents relate to blocking others’ potential products. One’s products are endangered by others’ patents. A FTO prior art search informs a company as to whether a supposed new product might infringe somebody else’s patent. Such a search can avoid wasting millions of dollars on blocked product plans.

Ultimately, patents expire. Their owners’ right to set monopoly prices disappears. That is what allows generic products to enter the market. In a competitive free market for equivalent products, prices tend towards the minimal cost of production, and vendors earn no profit. Most types of life science patents in most countries tend to expire on the day 20 years after the covered invention was first disclosed to the patent office. However, under US law, subject to some exceptions, patent terms are extended beyond 20 years for as long as the length of time between when the patent was granted and the regulatory approval process finished. In other words, the longer the FDA takes, the longer the patent monopoly lasts from when the discovery or invention was made.

One final consideration is that patents are country-specific. There is no global patent. This article focuses on US patent law because the US market is the largest for most life science companies. Other prosperous countries have patent systems that follow similar principles. However, there are some critical differences not described here.